V The Hells Canyon Case: 



COMPARATIVE EFFICIENCY OF ALTERNA 

 TIVE APPROACHES TO DEVELOPMENT 



The Hells Canyon case, among water resource development proj- 

 ects, is one in which the project services are predominantly market- 

 able, and even those which are not can be evaluated by conven- 

 tional benefit-cost techniques. 



In this chapter, we examine the alternatives open for the develop- 

 ment of the Hells Canyon Reach of the Snake River. We begin by 

 reviewing the main features of the plan of development recently 

 undertaken under license from the Federal Power Commission by 

 the Idaho Power Company. To provide the bases for comparative 

 analyses, we also describe the federal plan of development for Hells 

 Canyon within the context of the comprehensive plan of develop- 

 ment for the system made up of the Columbia River and its tribu- 

 taries. We then analyze the comparative efficiency of the two plans 

 of development. 



From this analysis, we conclude that neither plan appears to be 

 the most efficient economically — that the full range of meaningful 

 alternatives has not received serious consideration, and that a plan 

 of development that would be more efficient than the one licensed 

 was not required of Idaho Power Company by the FPC. Trying 

 to discover by means of economic analysis why the economically 

 most efficient plan was not undertaken voluntarily by the regulated 

 private monopolist, we find that a large part of the problem can 

 be traced to indivisibility, direct interdependence, and nonmarket- 

 able output. We then attempt a crude approximation of the sum 

 of the divergences between private and social product, and consider 



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