Joint mitigation of supply and financial risk in regional water supply management under uncertainty

Abstract

Municipal water utilities are tasked with providing reliable, safe, and affordable drinking water for over 250 million Americans. Accomplishing this can be costly and complicated. In 2017, over $110 billion of public funding alone was spent to maintain United States drinking water infrastructure. Changes in climate, land use, and water demand introduce uncertainty in water availability. Growing variability in supply and demand impacts water supply reliability, increasing volatility of water utility costs and revenues, generating financial risk that disrupts utility operations and raises customer water rates. Water utilities have a range of tools for jointly managing supply and financial risks, including building new supply infrastructure, implementing water use restrictions during droughts, and cooperatively managing infrastructure through inter-utility agreements. To navigate supply and demand uncertainties and provide reliable, affordable water service, it is key for utilities to identify actions and decision-making rules that work effectively under a wide range of future conditions, taking greater advantage of available tools. However, no research in the water supply management and planning field to this point has applied dynamic adaptive management modeling to explore utility hydrologic vulnerability and the financial impacts of regional inter-utility agreements, nor developed adaptive financial modeling to quantify utility budgetary responses to water supply planning decisions. This dissertation employs a novel, integrated supply and financial risk modeling approach to address outstanding questions faced by water utilities, specifically: (1) How vulnerable are utilities to climate and land-use landcover change uncertainty, and how can mitigation action influence their vulnerability? (2) Can inter-utility cooperation help mitigate supply and/or financial risk? (3) How robust are regional inter-utility agreements under uncertainty? (4) How can utilities financially adapt to meet water demands? Results of this work demonstrate: (a) how utility decision-making can mitigate (and sometimes exacerbate) climate and land use change impacts on water availability; (b) the financial benefits and drawbacks of inter-utility regional cooperation, relative to independent utility operation; and (c) the adaptive capacity of water utility budgets to finance water supply infrastructure expansion under uncertainty in demand growth and climate. Addressing these questions highlights the opportunities water utilities have to ensure reliable future water service.Doctor of Philosoph