EXHIBIT 7-A

UPDATE OF COMMERCIAL WATER USE FACTORS FOR THE MONTEREY PENINSULA WATER MANAGEMENT DISTRICT

Draft

April 2, 2004

BACKGROUND

The Monterey Peninsula Water Management District issues water permits for new businesses, and updates permits if an existing business changes to a different type of business. The water use permits are based on projected water use, and the water use projections are used by the District in managing its limited water resources.

The practice of estimating water use for specific business types began in 1985 based on regional averages, or benchmarks for commercial water use. About half of the 1985 water use factors were updated in 1988, and in 1992 an in-depth survey was conducted, which resulted in water use benchmarks for 45 distinct commercial categories. The 1992 survey obtained information from telephone surveys and a review of water consumption records. In most cases, there were between two and five years of consumption history available.

Since the 1992 survey, plumbing standards have changed, the State Water Resources Control Board mandated a 20 percent reduction in water use from the Carmel River (the source of nearly all water for the Peninsula), and California-American Water (provider for most of the Peninsula) has promoted implementation of Best Management Practices throughout its service area. The net result has been an improvement in water use efficiency among commercial customers.

In January 2004, the District Board of Directors received a recommendation that the commercial water use factors be updated as soon as possible to facilitate accurate estimates of current and future water use.

SCOPING ISSUES AND CONCERNS

The items listed below influence the amount of effort that would be required to update the commercial water use factors.

• The District maintains a database of water use permits. This database contains square footage of building space and occasionally other pertinent information for each permitted establishment. These data may be used to normalize water use records to a water use per square foot, or other measure, to establish benchmarks for comparisons. The majority of water use permits are for offices and retail establishments. Some of the permit information may be outdated. Permit data on categories other than offices and retail may be limited. The District has extensive information on residential care facilities as a result of extensive inspections required for these facilities.

• California-American Water (Cal-Am) is the water provider for about 95 percent of the area regulated by the District. Water billing records would have to be obtained from Cal-Am in order to update the water use benchmarks.

• The value of a commercial establishment is often determined by its permitted water use. Commercial establishments with high historic (i.e., permitted) water use such as beauty parlors, laundromats, and restaurants are often purchased for the value of the permitted water use. The establishment is demolished or renovated for alternative uses, allowing the owner to transfer the remaining permitted water use to other locations for other commercial uses. Business owners and managers may be concerned that updated water use coefficients may reduce their permitted water use. There may be a reluctance to provide information that would result in reduced permits.

• Outdoor water use patterns may be unique to the “fog belt” microclimate of the peninsula. Water use factors from other regions may not be appropriate, or acceptable, for use in the Monterey Peninsula.

• While the majority of commercial establishments are offices and retail businesses, there are also high water-using commercial sectors to be included. The District has established a priority listing of commercial categories for which the water use factors should be updated including:

1. Office

2. Retail

3. Motels - Different classes

4. Restaurant - Difference classes

5. Auto uses

6. Medical (not hospital or surgery center)

7. Dental

8. Warehouse/Storage

9. Dry Cleaning (cleaning facility, not drop off)

10. Gas Stations/convenience stores

11. Spas (Day Spa: Include hair, nails, pedicure, massage, and other wet treatments)

12. Veterinary

13. Schools (primary, secondary, colleges??)

14. Child Care (family in-home and dedicated facility)

15. Residential Care (Assisted Living, Skilled Nursing)

· There is a vast set of distinct commercial activities that affect water demand. Past studies have documented the wide variance in water use within a given commercial category. Thus, there is a need to identify characteristics that differentiate levels of water use within a given category. For example, some hotels offer in-room hot tubs/jacuzzis and thus may have much higher water consumption than otherwise comparable facilities with similar occupancy patterns.

· There is a need to establish a “best set” of indicators (e.g., square footage, occupancy, number of customers, etc.) that will allow District staff to assign the most appropriate water use factor to new or re-permitted business.

· Traditional statistical sampling procedures can prescribe a recommended sample size based on the total number of establishments in a category and judgments about acceptable error. Some categories may a small number of establishments, in which case all establishments could be sampled. On the other hand, depending upon the characteristics of each category, the prescribed sample size may be prohibitively large.

· The current application of water use factors assumes that the average water use for a given category is applicable to new establishments. That is, the factors are derived as the average water use for the surveyed establishments and permits for new establishments assume that the water use in the new establishment will mimic the average value. However, water use in a new establishment may not follow the average value due to unique characteristics of that establishment, such as efficient water recycling that would lower water use, or excessive fixtures that would increase water use. Thus, there is a need to develop a process to more accurately predict an establishment’s water use and to design a protocol for both assigning water use values and updating existing data as new establishments enter the pool of information.

RECOMMENDATIONS

An update of the commercial water use factors requires an analysis of historical billing (water consumption) data in conjunction with site-specific (establishment-level) information on factors that affect the average rate of water use. The following tasks would need to be performed to update the water use factors for selected commercial categories and develop a benchmarking tool that can be use by the District staff in estimating establishment-level water use.

Task 1. Obtain Water Billing Records

The California-American Water Company would need to provide a database of all current customer account records for the selected commercial categories. This would include account information such as account holder name, service address, and at least a 12-month billing history including meter read dates and consumption.

A review and analysis of establishment-level billing data by categories should be conducted. For each customer category, the number of establishments, average annual and season water use, and the range of water use should be determined. A percentile or concentration curve analysis will be developed for each customer category. See figure 1 for an example of a concentration curve. In this example, about 50 percent of the cumulative water use is accounted for by the top 5 percent of accounts. This analysis will determine the homogeneity of water use within the category, or the dominance of a few large water-using customers. In this example, the top 10 percent of accounts should be surveyed to account for large water users along with a sampling from the remainder of the accounts. The pattern of water use in each customer category will be investigated to determine the variability of water use and needed sample sizes in order to calculate average water use factors within a specified confidence limit. Based upon calculated sample sizes, the database of current accounts for each commercial category could be used to develop a target sample for the collection of establishment level site characteristics.

Task 2. Collect Establishment Characteristics

Site-specific information should focus on unique characteristics that account for the low/high water use patterns. A data collection questionnaire should be developed to record information such as: size/scale of facility (square footage, number of rooms, number of meals served, etc), hours of operation, number of employees, irrigation systems and timing, irrigated areas, type of landscape, number and age of plumbing fixtures (toilets, urinals, faucets, showers, tubs), presence and type of specialized water using equipment (cooling towers, ice makers, swimming pools, hot tubs, etc.), and characteristics of the facility (kitchen, bar, on-site laundry, photo processing, etc.). The data collection questionnaire can be developed from survey forms used in nonresidential water audit studies.

Generally, there are three types of survey methods (1) mail surveys, (2) telephone surveys, and (3) personal interviews/field surveys. Each of the methods has comparative strengths and weaknesses with regard to administrative costs, data quality, and obtaining a representative sample. Ideally, the site-specific information would be collected during on-site inspections of the selected facilities. Less optimally, the data could be collected with mail surveys or telephone interviews. The District may be asked to provide a letter of cooperation to encourage participation in the survey and assure that current water use permits will not be modified as a result the information provided.

Task 3. Conduct Data Analysis

The combination of establishment site information and the water use records would be used to develop a set of water use benchmarks and indicators for each customer category. An analysis of variance would be conducted to show the range of normalized water use in each category. The development of percentile values, means, medians, etc. will help gauge the extent to which statistical modeling may help explain variance in normalized water use, or if the use of another normalizing factor is sufficient to reduce the range of outcomes.

Whereas the current set of commercial water use factors are based on a single criterion for each commercial category (e.g., square footage, number of seats, number of rooms, etc.), the water use benchmarks could be modeled statistically to permit the District staff to incorporate establishment characteristics (indicators) in determining a most likely level of water use. For example, benchmarks for car washes could be adjusted to account for: self-service (yes or no), 24-hour operation (yes or no), customized service (yes or no), use of recycled water (yes or no) and type of equipment used.

Task 4. Develop a Benchmarking Tool

The category benchmarks and indicators will be set up in a electronic format (e.g., Excel, Access, or other software application) to facilitate the use of the benchmarking models. Results of the benchmark and indicator classification process for each customer category will be tested with a sample of existing establishments.

Task 5. Provide Documentation and Guidance in Use of the Benchmarking Tool

A report will be prepared documenting the data analysis and resulting commercial category benchmarks and indicators. Use of the benchmarks and indicators will be demonstrated to District staff.

It will be recommended that the commercial water use permit application and database be updated to include indicator information for each commercial establishment. Information on existing establishments could be updated at point of sale, or remodeling.

ESTIMATED COST OF EFFORT

The effort required to update the commercial water use factors can vary depending upon:

· The number of categories evaluated

· The number of establishments evaluated

· The methodology used to collect establishment level data

A full-scale analysis of water use factors for the commercial sector may be data intensive and costly. Therefore, two approaches are offered for consideration by the District.

Option to Use Existing Data

It is proposed that the current commercial water use factors could be updated using current billing records and existing information such as the available square footage (or number of seats, etc.) data in the existing permit database. This option limits the data collection effort and also limits the depth of data to be used. The result would be a simple update of the water use factors. This option could be completed for approximately $125,000 and in about 5 months.

Option to Collect Data and Develop a Benchmarking Tool

It is proposed that the recommended work effort described above could be completed for approximately $300,000 with a limit of 200 on-site surveys, to be completed in about 12 months.

One alternative would be to fund this effort in phases. That is, upon completion of the recommended Task 1, an evaluation of the number of recommended site surveys per category would be developed. Further negotiations of work effort and project costs would be contingent upon the determination of sample size and sampling methods.

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