210 MULTIPLE PURPOSE RIVER DEVELOPMENT 



service charges by some considerable margin. Thus, while the 

 interest rate as such can be less because of the reduction of risks for 

 the investor, actual power charges to customers will be greater than 

 those necessary only to return costs. In our illustration, although 

 we employed a rate of 2.85 per cent appropriate to revenue bonds 

 of public bodies during 1955,^° we assumed that the resulting debt 

 service charges would have to be earned one and a half times to 

 enable so favorable a rate in the actual disposition of the revenue 

 bonds. 



To a significant extent, however, the private undertaking will 

 follow a more conservative policy with respect to depreciation. And 

 this will increase the accounting costs that appear in the annual 

 charges to power customers. Even so, the resulting differences are 

 only partially accounted for by the money costs given for capital 

 charges and undistributed profits added to surplus in Table 38. 

 The differences in annual money costs are $143,441 more for the 

 nonfederal public undertaking than for the federal; $364,961 more 

 for the private than for the federal, and $221,520 more for the 

 private than for the nonfederal public undertaking. 



The remaining part of the difference is accounted for by taxes, 

 as given in Table 38. Money costs account for less than a quarter 

 of the difference in facilities under federal and private operation, 

 whereas differences in taxes account for over three-quarters of the 

 total. In the case of the nonfederal public and the private opera- 

 tion, less than 20 per cent of the total differences in costs is attrib- 

 utable to money costs, and more than 80 per cent to tax liabilities. 

 As between federal and nonfederal public operation, the somewhat 

 higher cost under the local public operation is accounted for much 

 more nearly equally by the differences in money costs and tax 

 liabilities. 



We have earlier sought to show that in an economy where 

 markets were perfectly competitive and market organization suffi- 

 ciently comprehensive to preclude anything of economic value 

 from being enjoyed except through the intermediary of the market, 

 no such differences in accounting costs could arise, given facilities 

 of identical characteristics.'^^ In the actual world, of course, the 



^"See Board of Governors, Federal Reserve System, Federal Reserve Bulletin, 

 March 1956, p. 253. 



" This, of course, does not hold for facilities of inherently different characteris- 

 tics. The costs of TVA power, for example, abstracting from problems of interest 



