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Part 4: Forecasting the demand for drinking water

Local authorities: Planning to meet the forecast demand for drinking water.

4.1
In this Part, we discuss:

4.2
We expected the eight local authorities to have effective methods for forecasting the demand for drinking water that:

  • used relevant information and showed an understanding of the main factors that influence demand;
  • stated assumptions about factors that might affect future water demand;
  • identified and documented risks associated with the forecasts; and
  • were appropriate to the size of the community being supplied.3

Our overall findings

4.3
Five local authorities used a forecasting method that would be considered the minimum in terms of industry standards. This may be enough for local authorities with very little growth, or those operating well within the capacity of their water supplies. However, it is problematic for local authorities needing to build or upgrade infrastructure, or facing restrictions on access to water. The forecasting method could result in infrastructure that is not the right size for the community's needs. Local authorities risk under-spending or over-spending, and could put more pressure on water sources than is necessary.

4.4
The ability of some of the local authorities to prepare reliable forecasts was limited by the quality of information they had on factors that influence the demand for water, particularly information about water use.

4.5
Few of the local authorities dealt explicitly with uncertainty in their forecasts. We did not see many instances of forecast verification or peer review.

Information used to forecast demand

The ability of five of the local authorities to prepare reliable forecasts was limited by the quality of information they had, particularly information about water use.

4.6
The main factors that can influence future demand for drinking water are set out in Figure 4. To forecast demand, a local authority needs information about these factors relevant to its particular district. The extent to which these factors are relevant to an individual local authority depends on the nature of its water consumers. For example, some local authorities do not have a large industrial sector, while others supply rural water schemes.

Figure 4
Main factors influencing the future demand for drinking water

Changes (increases or decreases) in water use as a result of:
  • weather patterns (for example, seasonal drought);
  • water supply performance efficiency (for example, reducing leakage);
  • usage efficiency;
  • charging and tariffs;
  • expansion of water supplies to unserviced areas;
  • population and dwelling growth;
  • industrial development; and
  • rural development.
Changes (increases or decreases) to levels of service as a result of:
  • community expectations and consumer preferences (for example, wanting higher or lower water quality or water pressure);
  • drinking water standards and other relevant legislation; and
  • public and environmental health requirements.

4.7
Our analysis showed that the main sources of information the local authorities used to understand the factors affecting demand were:

  • historical water use data;
  • population growth estimates provided by Statistics New Zealand;
  • household dwelling growth derived from building and resource consent numbers;
  • research into growth expectations in the industrial and commercial sectors; and
  • research into growth expectations in the rural sector (only two of the local authorities supply large rural drinking water systems).

4.8
Three of the local authorities had detailed information (Tauranga City Council, Tasman District Council, and Nelson City Council) that enabled more reliable demand forecasting. That is, they had detailed sets of data on all of the relevant matters covered in paragraph 4.2 and in Figure 4. For example, Tauranga City Council had analysed its water use data sufficiently to confirm that the main factor influencing an increase in water use was a lack of rain on preceding days, particularly during summer.

4.9
Five of the selected local authorities had incomplete data sets (Central Otago District Council, Christchurch City Council, Kapiti Coast District Council, South Taranaki District Council, and Opotiki District Council). In our view, this creates doubt about the reliability of the forecasting. A common limitation was incomplete asset management information (for example, incomplete asset registers and incomplete information about the condition of assets).

4.10
Another limitation was the use of water production data as a proxy for water use (Central Otago District Council, Christchurch City Council, Kapiti Coast District Council, and South Taranaki District Council). The likely outcome of this is an over-estimation of demand, mainly because leaks are not accounted for. All four local authorities were taking steps to improve their data.

4.11
Our finding about data limitations is generally consistent with other research on this matter. An industry-led initiative, the Ingenium Water Information Management Steering Group, has been set up to improve water data.

4.12
The types of information that the local authorities used are discussed further in the next sections.

Measuring how much drinking water is used

4.13
The eight local authorities used different methods for measuring how much drinking water was used. Four measured water use at the point of production (the volume of treated water produced) and used this as a proxy for water use. The other four measured drinking water use at the point of consumption (that is, on individual properties using data from water meters). This provided more accurate data on actual water use.

4.14
All eight local authorities had information on peak and average daily demand for drinking water (see Figure 5). This information is important because it indicates the size of the water supply infrastructure required and the amount of water needed. Peak per person water use varied among the local authorities but reached as high as 4000 litres per person per day in one Central Otago water supply. Central Otago District Council attributed this to high demand for irrigating gardens during summer in an area with very low summer rainfall. Average daily demand also varied widely among the eight local authorities.

Figure 5
Average and peak drinking water consumption per person per day for the eight local authorities

Local authority Household water meters? Average drinking water consumption (litres per person per day) Peak drinking water consumption (litres per person per day)
South Taranaki District Council No 408 (excluding farms)

888 (including farms)
426 (excluding farms)

1016 (including farms)
Kapiti Coast District Council No 404-763, depending on the supply 662-1478, depending on the supply
Central Otago District Council Some* 228-1169, depending on the supply Up to 4000
Nelson City Council Yes 180 (residential only)

500 (all users)
775 (all users)
Christchurch City Council Yes 435 **
Tasman District Council Yes 250-375 for larger supplies***

125-250 for smaller supplies***
**
Opotiki District Council Yes 300 **
Tauranga City Council Yes 198 (residential only)

270 (all users)
500 (all users)

Note: Each local authority collects water use data in different ways, so comparisons need to be made with caution.
* Some supplies are partially metered.
** Data not included here because it was not calculated in litres per person per day and therefore was not comparable.
*** Excludes system leakage.

Growth expectations

4.15
All of the eight local authorities had population forecasts based on population growth estimates provided by Statistics New Zealand. Statistics New Zealand provides high, medium, and low population growth scenarios at five-year intervals up to 2031. Generally, the local authorities based their forecasting on a scenario of medium growth. We consider this reasonable. The exception was Opotiki District Council, which based its forecasting on the high-growth scenario despite a recent decline in population growth.

4.16
Some of the eight local authorities commissioned research to better understand the likely population growth in their districts, such as where growth was likely to occur and the potential implications for infrastructure (see Figure 6). We support this approach, especially for those local authorities facing relatively high rates of population growth, because it enables the local authorities to test the appropriateness of the scenarios from Statistics New Zealand.

Figure 6
Tasman District Council's growth demand and supply model 2008

During 2008, Tasman District Council prepared a growth model to support its 2009-19 LTCCP. The Council divided the district into 17 settlement areas, because the district has a number of dispersed communities that are quite distinct from each other.

Using geographic information systems software, existing land use in the 17 areas was mapped and land available for development was identified. This established the "supply" of land available. Data on settlement form, existing infrastructure and services, productivity of land, hazards, and the sensitivity of the environment were added.

Estimates of residential population growth were added to establish "demand". The Council adopted population projections consistent with the medium-growth scenarios provided by Statistics New Zealand for all areas except Motueka and Richmond, where a high-growth scenario was used. The Council used consultants to research estimated growth in industrial, commercial, and retail activities, and therefore the likely demand for business land.

This information was used to model and map the supply and demand of land available for development, and where it could or should occur.

For drinking water, the 17 settlement areas were further divided into 258 development areas. Combined with existing water use data, the growth model was used to forecast water demand in the district for the next 10 years.

4.17
Five of the eight local authorities also incorporated information on predicted growth in household numbers (Kapiti Coast District Council, Nelson City Council, South Taranaki District Council, Tauranga City Council, and Tasman District Council). This information can be important because new connections to the water supply affect the level of demand.

4.18
Those local authorities with large commercial or industrial sectors had prepared growth predictions for those sectors (Tauranga City Council and Nelson City Council).

4.19
Of the eight local authorities, only South Taranaki District Council and Tasman District Council had rural water schemes of a significant size. South Taranaki District Council has carried out some useful research to help it form predictions about increased water demand and growth in the rural sector.

Demand forecast risks and assumptions

We found little documented evidence that forecasts were verified or checked using historical data to confirm their reliability. The eight local authorities had outlined the assumptions associated with their forecasts.

4.20
The eight local authorities had outlined the assumptions associated with their forecasts for drinking water. Some used a limited set of assumptions. For example, they used only estimated population growth and projected water use. Others used a more detailed set of assumptions.

4.21
We saw very little evidence that the eight local authorities verified their forecasts or checked their forecasts using historical data (that is, put historical data through the forecasting model to see whether the resulting forecast is close to actual current water use). We also saw little evidence that forecasts were peer reviewed.

4.22
Only Tauranga City Council provided evidence of some verification of its forecasts. The Smart Growth programme4 provides for regular and timely monitoring and review to ensure that actual growth circumstances are evaluated, and that the strategy is modified when necessary. It aims to ensure that planning decisions are based on the best information.

Methods used to calculate demand forecasts

Three of the eight local authorities relied on forecasts based solely on a linear relationship between population growth and historical water use. Two used forecasts that used additional information on factors influencing demand. Three had forecasts using yet more detailed analysis of demand factors and more accurate data about actual water consumption.

4.23
Demand forecasts can vary from simple linear trends (for example, assuming a direct linear relationship between water use and population growth) to regression models based on historical trends in a number of factors that may influence demand. Given the different circumstances of local authorities, a range of forecast methods is acceptable. For example, a linear trend method would be acceptable for a small local authority with an abundant water source. However, a large local authority or one with supply issues would need to use a more sophisticated approach.

4.24
Three of the eight local authorities (Central Otago District Council, Christchurch City Council, and Opotiki District Council) used demand forecasts based on an assumed linear relationship between predicted population growth and historical water production. However, Christchurch City Council has a strategy for improving the sophistication of its forecasting. It has prepared a demand forecasting model that it will use in future.

4.25
Two of the eight local authorities (Kapiti Coast District Council and South Taranaki District Council) used a linear model but showed a more complex understanding of demand factors. For example, they had identified more demand factors, analysed water consumption patterns for different sectors, and improved the quality of their data as a result of research. These local authorities were not yet able to model the potential effect of any strategies on future demand.

4.26
Three of the eight local authorities (Nelson City Council, Tasman District Council, and Tauranga City Council) had prepared forecasts that used more detailed analysis of demand factors and more accurate data about water use (because all households have water meters). Nelson City Council and Tauranga City Council have a modelling capacity that enables them to examine the potential effect of any strategies on future demand.

4.27
Figure 7 summarises the results of the forecasts prepared by the eight local authorities. It shows the forecast increased demand in terms of the additional amount of water likely to be needed (expressed as a percentage increase on current consumption).

Figure 7
Increased demand for drinking water forecast by the eight local authorities

Local authority Current water production (base = 0) 2015 forecast 2020 forecast 2025 forecast 2050 forecast
Additional water needed (%) Additional water needed (%) Additional water needed (%) Additional water needed (%)
Central Otago District Council 30 45 Not forecast Not forecast
Kapiti Coast District Council 10 35 50 Not forecast
Tauranga City Council 20 30 45 Not forecast
Tasman District Council 15 25 35 Not forecast
Christchurch City Council 10 15 20 40
Opotiki District Council 5 10 Not forecast Not forecast
Nelson City Council Not forecast 5 10 (5)
South Taranaki District Council (10)* 0 5 Not forecast

Note: Figures are based on our approximation of the forecast demand and rounded to the nearest 5%.
* This figure is based on an assumption that demand management strategies will be effective.

Effectiveness of forecasting

Five of the eight local authorities used demand forecasting that would be considered the minimum in terms of industry standards. This is problematic for local authorities needing to build new infrastructure or facing restrictions on their access to water. They could spend money on infrastructure that is not the right size for their needs, and could put more pressure on water sources than they need to.

4.28
Five of the eight local authorities used demand forecasting that does not fully meet the core asset management planning criteria in the International Infrastructure Management Manual (2006) (see Figure 8). This would be considered the minimum in terms of industry standards. In our view, the other three local authorities are at an intermediate level because they have met the core criteria but not all of the advanced criteria.

Figure 8
Comparing the asset management planning of the eight local authorities with the criteria set out in the International Infrastructure Management Manual (2006)

Local authority Size* Core asset management planning criteria Advanced asset management planning criteria
10-year demand forecasts using latest growth forecasts Demand management strategies and demand drivers are understood and documented Demand forecasts include analysis of different factors comprising demand Sensitivity of asset development (capital works) programmes to demand changes are understood
Opotiki District Council 1 Yes ** No No
Central Otago District Council 2 Yes Partly No No
Christchurch City Council 6 Yes Partly No No
South Taranaki District Council 3 Yes Partly Partly No
Kapiti Coast District Council 4 Yes Partly Partly No
Tasman District Council 4 Yes Partly Yes No
Nelson City Council 4 Yes Yes Yes Partly
Tauranga City Council 5 Yes Yes Yes Partly

* We devised these size groups to help with the 2006 LTCCP audit process. We used six variables. Three relate to external constraints (population, rates to median income, and population to area) and three relate to internal constraints (full-time equivalent staff, debt to equity, and other council income). Broadly, 1 indicates a small local authority and 6 indicates a large local authority.

** There was not enough data available for us to form a view.

4.29
There was some correlation between the size of the local authority and how detailed its forecasting was. With the exception of Christchurch City Council, the larger local authorities had more sophisticated forecasts.

4.30
However, the context in which the eight local authorities operated also seemed to be a strong influence on how detailed their forecasting was.

4.31
Unsurprisingly, those local authorities that have experienced population growth for some time and/or were operating near the capacity of their drinking water supplies (for example, Tauranga City Council and Tasman District Council) have prepared a more complex analysis of the variables they need to consider.

4.32
Those local authorities with low rates of population growth and/or operating well within the capacity of their drinking water supplies (for example, with access to abundant water), such as Opotiki District Council and Christchurch City Council, did not have highly detailed forecasts. They had taken into account only predicted population growth and historical water consumption and assumed a linear relationship between the two. These local authorities estimated that they had enough supply capacity and water sources to accommodate more future growth than was predicted, by a large margin.

4.33
Four of the local authorities used water production data as a proxy for water use (South Taranaki District Council, Central Otago District Council, Kapiti Coast District Council, and Christchurch City Council). Estimating water use in this way is likely to produce water demand forecasts that are higher than actual demand, because the forecasts include water lost to leaks before reaching consumers as well as the water that is actually used. These local authorities did not take into account any possible water savings (through leak detection and repair, system efficiencies, or conservation).

4.34
This approach may be acceptable for local authorities that have very little growth or are operating well within the capacity of their supply systems (for example, Opotiki District Council or Christchurch City Council). The underlying assumption is that current water use will continue and there is little risk of running out of water in the circumstances outlined above.

4.35
However, relying on a high estimate may result in infrastructure that is larger than it needs to be. This places an additional and unnecessary financial burden on ratepayers. It may also mean that more pressure is put on water sources than there needs to be. This approach is more problematic for local authorities needing to upgrade existing infrastructure or build new infrastructure, or facing restrictions on their access to water (such as South Taranaki District Council, Central Otago District Council, and Kapiti Coast District Council).

Recommendation 1
We recommend that local authorities use accurate and up-to-date information to prepare drinking water demand forecasts to reduce the risk of under- or over-investing in water supply infrastructure. In particular, this needs to include accurate and up-to-date information on water consumption.
Recommendation 2
We recommend that local authorities verify the reliability of drinking water demand forecasts to reduce the risk of under- or over-investing in water supply infrastructure.

3: We used the International Infrastructure Management Manual (2006) for guidance when we set these expectations. (National Asset Management Steering (NAMS) Group, Association of Local Government Engineering NZ Inc (INGENIUM) (2006) 3rd edition (Version 3.0), Wellington.

4: The Smart Growth programme (led by Environment Bay of Plenty, Tauranga City Council, Western Bay of Plenty District Council, and t ngata whenua) facilitates integration between district planning and infrastructure provision to manage growth in the Western Bay of Plenty district.

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Report details

Local authorities: Planning to meet the forecast demand for drinking water

ISBN 978-0-478-32635-2