Demand Management

Demand management is the purposeful and beneficial manipulation of the level and timing of water usage. Demand management deploys various techniques for conserving water and improving the efficient use of water by end users. Improvements to economic efficiency are achieved whenever the total benefits of a measure are outweighed by the total costs of implementation. Demand management evolved in the context of least-cost or integrated resource planning, which balanced supply and demand management considerations. Managing demand can complement or supplant traditional and emerging supply-management options for water utilities.

Demand management involves measures that promote the efficient use of water, including load management and load reduction or conservation. Water conservation also can be understood as the economically and/or socially beneficial reduction of water withdrawals, water use, or water waste. Conservation can forestall future supply-capacity needs; it can be implemented on the supply side as well as the demand side; and it can consist of both temporary measures used during emergencies and permanent measures used to improve long-term efficiency. Reductions in water usage can be beneficial to both water utilities and wastewater utilities in terms of flow reduction.

Demand management or strategic load management complements supply management because controlling the level and timing of demand can improve overall efficiency of system operations and help eliminate, reduce, or defer the need for an investment in new capacity by the water utility. Reductions in peak and off-peak demand affect the total capacity requirements of the utility system and thus the total cost of providing water service.

All demand management activities that decrease the demand for utility services tend to affect supply management since existing system capacity is released for other customers and other uses. That is, the freed or redirected utility capacity can be compared to that provided by more traditional means. Thus, the benefits of demand management can be measured in terms of avoided costs, or the incremental savings associated with not having to produce additional units of water or water service. Avoided cost can be used to compare demand management and supply management options and encourage utilities to seek out least-cost alternatives for meeting future water needs.

Although demand management should not be equated with drought management, the experience of water utilities and customers in implementing efficiency practices can be beneficial during periods of water shortage. Some of the basic demand management techniques can be accelerated during supply emergencies or droughts.

A sign warns residents that they may no longer water their lawns because of drought conditions. Lack of rain in conjunction with high temperatures can lead communities and even states to enact water-use restrictions in an attempt to control water demand.
A sign warns residents that they may no longer water their lawns because of drought conditions. Lack of rain in conjunction with high temperatures can lead communities and even states to enact water-use restrictions in an attempt to control water demand.

Water Demand

Several factors influence the residential and nonresidential demand for water. In the aggregate, per capita water demand is very stable. Residential water usage is largely a function of basic demographics, particularly household size, property size, and income. Nonresidential water varies substantially according to type of industry. The production of some goods (such as food and beverages, paper products, and microchips) is highly water intensive.

The demand for water, like the demand for other goods and services, can be represented by a downward-sloping curve where price is represented on the y-axis and quantity demanded on the x -axis, as shown in the figure below. However, compared with many other goods and services, water demand is relatively price inelastic; that is, changes in price generally do not induce large changes in water use. Nonresidential (large-volume) water use and outdoor residential water use (such as summer lawn watering) are generally more price responsive than indoor water use.

Demand Management

Tools and Techniques

Demand management techniques include conservation-oriented pricing, water-fixture plumbing standards and retrofitting, water-efficient landscaping, changes in water-use practices, and public education. Combining demand and management measures can prove to be effective. For example, a public education program can enhance the effectiveness of a conservationoriented rate structure.

Despite water's relative price inelasticity, price is considered an essential tool of demand management because it sends customers an essential signal about the value of water. Water metering is a basic demand management measure because it allows the utility to charge a variable price (that is, a per unit rate) so that a customer's bill varies with the level of water usage. Some methods of rate design are particularly efficiency oriented. These include increasing-block rates (where unit rates are increased at higher levels of usage), seasonal rates (where unit rates are higher during peak usage periods), and water budget and excess-use rates (where unit rates are higher for usage above a specified level).

Utility Programs

Some demand management measures can be implemented by consumers on their own, while others can be implemented through utility-sponsored programs. High water and energy prices can induce customers to invest in water-efficient fixtures and appliances as well as to change water-use behavior. Utility programs can help consumers provide more informed choices as well as provide specific incentives for engaging in demand management. Some programs have helped utilities reduce operating costs (water, energy, and chemicals) and postpone or avoid capital costs (treatment plants and other facilities). Both water and wastewater systems can benefit from utilitysponsored demand management programs.

Utility demand management programs can range from very passive to very active. Passive approaches include the distribution of educational materials and low-cost conservation devices (such as leak detection tablets and faucet aerators). More active methods include water audits and rebates to households that purchase replace fixtures (such as toilets). An even more active approach is for the water utility to directly perform onsite retrofits. Program elements can be designed specifically for the needs of residential and nonresidential customers. Utilities can work directly with large-volume users in identifying methods for reducing or shifting loads.

Program design and implementation are critical to the success of a conservation program.

Attention must be paid to the characteristics, needs, and preferences of water users. Utilities can partner with other local utilities, government agencies, or community groups. A pilot program can be useful for developing an effective program. Utilities often collect data throughout the course of implementation in order to assess program effectiveness. The program can be refined over time to ensure that program goals are met.


Janice A. Beecher


Baumann, Duane D., John J. Boland, and W. Michael Hanemann. Urban Water Demand Management and Planning. New York: McGraw-Hill, 1998.

Billings, R. Bruce, and C. Vaughn Jones. Forecasting Urban Water Demand. Denver, CO: American Water Works Association, 1996.

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