260 MULTIPLE PURPOSE RIVER DEVELOPMENT 



GAINS FROM LOCAL PRIVATE DEVELOPMENT 



Look, finally, at the distribution of gains on the assumption that 

 the project's reimbursable feature is undertaken as a private ven- 

 ture. At first thought, there appear to be no gains whose distribu- 

 tion commands our attention, for the annual operating costs of 

 the private electric utility would exceed corresponding costs for a 

 federal or nonfederal public venture. We did not treat as losses to 

 anyone the increased power bills consumers of privately developed 

 power would be constrained to pay.^^ We therefore are not per- 

 mitted in this case to argue that those whose tax liabilities would 

 be reduced by virtue of the equivalent increased public revenues 

 obtained from the private utility would be the gainers. 



Our analysis of the distribution of gains from private financing 

 of the reimbursable feature would be complete, except for the fact 

 that the private utility may take advantage of the accelerated tax 

 write-off privilege. Since private electric utilities in the Northwest 

 have participated in the accelerated amortization program in the 

 recent past, and additional requests for comparable treatment are 

 pending,^6 it is useful to analyze the regional locus of gains 

 associated with this policy. 



In Chapter VII, we discovered that certification of 70 per cent 

 of a $23 million investment in facilities for rapid amortization 

 increases tax liabilities of the general taxpayers by about $250,000 

 annually, and we alluded to the regional incidence of the shifted 

 tax liabilities. Moreover, we determined that the shift in tax 

 burden did not represent a gain to the power consumers of the 

 private electric utilities, but rather to the owners of the equity 

 shares in the utility enterprise. 



The distribution of common stock ownership by regions (given 



*= Our approach has been to treat the difference in annual operating costs 

 between public and private development as a gain to consumers of public 

 power, and the unmet portion of the opportunity costs and shifted tax liabilities 

 as losses to others. We could have inverted the approach to consider the annual 

 difference in operating costs between public and private development as losses 

 to consumers of private power and the reduced federal tax liabilities, consequent 

 on private development, as gains to the general public. Since we chose the 

 former approach, however, we cannot now consider the reduction in general 

 federal tax liabilities as gains to others. 



^Pacific Power and Light Company, Annual Report, 1955, p. 10. 



