Water Managers

For all the responsibilities a water manager has, the primary input is precipitation. The CAP forecast helps water managers anticipate risk and make operational decisions. With an accurate water year precipitation forecast, state reservoirs can be more effectively managed. Monthly precipitation updates and reservoir status can assist in positioning resources ahead of time to enable a more informed level of water management, in both drought and flood.

With the lead time provided by the November forecast release, there is ample time to effectively:

• Negotiate water transfer contracts;
• Manage land fallowing programs;
• Complete environmental compliance and permitting activities;
• Mitigate risk by securing necessary resources before a crisis; and
• Strategically implement public outreach campaigns months in advance.

Agriculture

With an accurate forecast of total water year precipitation, Individual Growers can:

• Anticipate how many acres are to be planted;
• Determine which crops to plant for the expected water allocation;
• Select appropriate crop insurance coverage levels;
• Know whether or not to defer revenue until the next tax year;
• Make informed equipment purchasing decisions (e.g. Will new equipment sit idle and lose a year of warranty?); and
• Feel confident about making infrastructure investments in something like a groundwater well.

Commodity Commissions can create strategic communications to maintain favorable public perception and instill trust while maintaining an informed position in discussions with water agencies.

Co-ops and Fertilizer Companies can know how best to manage fertilizer, chemical, and herbicide inventory. Product formulations based on expected precipitation can enhance crop growth and reduce waste.

Mill operators can anticipate how tight the supply market will be and amass or sell stock accordingly.

Utilities

The CAP forecast helps California utilities comply with the state’s renewable energy targets and manage their portfolio of renewables more effectively. Clean energy sources including wind, solar, and hydropower are inherently weather-dependent. An accurate seasonal prediction can be a critical input into:

• Strategic planning
• Investment and financial decisions
• Operations and maintenance activities

Hydropower reservoir management, specifically water storage release, can be improved with accurate forecasts of seasonal water demand downstream. Production and curtailment schedules can be planned with greater accuracy and over longer timeframes.

Renewable energy business and finance decisions can be improved when utilities can calculate power production potential, risk of disruption and damage from storms, anticipate rainfall runoff and seasonal water flows, all of which are precipitation-dependent. If a utility is expecting above normal precipitation in the wet season, they can anticipate the associated increase in energy demands and position themselves to utilize more hydropower and less solar generation capacity.

Retail

Precipitation plays a major role in product prices and consumer choices. With an accurate seasonal precipitation forecast, retailers can anticipate fluctuations in California produce and be the first to secure alternative sourcing in a year of decreased produce supply due to precipitation extremes. Knowing the precipitation forecast allows for the purchasing of inventory at lower prices and in appropriate quantities based on precipitation-related consumer preferences. Promotions can be planned around what consumers will be facing weather-wise in the upcoming year. Excessive precipitation can disrupt transportation networks, inflate costs, and delay the delivery of goods to grocery stores.

Banks/Insurance

Weather-related natural disasters cost insurance companies billions of dollars each year. In California, precipitation-related disasters account for a large percentage of insurance claims. Additionally, financial institutions assume more risk in their lending portfolios in years of precipitation extremes. Accurate seasonal precipitation guidance is a key input to help financial institutions and insurance companies best determine how to manage and offset risk.

• Pricing adjustments can be made to offset risk based on the likelihood of extreme weather events;
• Alternative risk transfer products can be bought or sold;
• New contract terms can be written; and
• Ag insurers can anticipate policy volume for preventive planting, crop-yield, and crop-revenue insurance.