The Hells Canyon Case 143 



public works projects/" we first evaluate the comparative efficiency 

 of the alternate plans on the assumption that the conventional rate 

 of 2.5 per cent applies." 



A second question involves selecting the appropriate estimate of 

 construction costs for each plan from among the several estimates 

 presented by expert witnesses during the public hearings preceding 

 the issuance of the license. For the High Dam, we accept the con- 

 struction costs appropriate to the design standards traditionally 

 reflected in structures of the Bureau of Reclamation and other 

 federal agencies; for the three dams, we accept estimates appro- 

 priate to the design standards of the private utility. Although the 

 private standards are considerably lower than those employed by 

 the federal agencies,^^ they were judged by the FPC staff to be 

 adequate.^^ Accordingly, the company's relatively lower estimates 

 of construction costs are taken to reflect an appropriate response to 

 economic considerations. In both cases, however, the estimates of 

 the two parties were adjusted by the FPC staff to achieve com- 

 parability in terms of estimated unit costs for like items employed 

 in construction.^* 



The relevant cost data are given as annual average equivalents 

 for the two plans in Table 20 on the assumption that the projects 

 would be operated within the context of an integrated system 

 design. Annual costs of the Hells Canyon High Dam ($15.9 

 million) are shown to exceed the corresponding costs for the three 

 low dams (|9.5 million) by approximately $6.4 million. 



'" Discussion of the interest rate used for project evaluation is usually related 

 to the rate at which the federal government can borrow in the open market. 

 Since the risk associated with lending to the federal government is reduced by 

 the taxing authority of the government, such a lower rate of interest in order- 

 ing investment opportunities results in a higher rate of investment, and a 

 greater deferment of consumption, thus effecting an income redistribution 

 toward the future. 



"This is the rate, incidentally, that was actually employed in the analysis 

 of alternative Hells Canyon plans. FPC, Hearings, op. cit. 



"FPC, Exhibits, op. cit., No. 186, pp. 25a-26. 



" The fact that one of Idaho Power Company's coffer dams subsequently 

 washed out, while the Middle Snake was at flood stage, docs not necessarily 

 contradict the FPC staff's judgment. It has been implied I)y the former FPC 

 chairman to have resulted from a departure from standards, by Idaho Power 

 Company. 



"FPC, Staff Brief, op. cit., Appendix B, pp. 18-24 and Table 14. 



