Conclusions and Policy Implications 269 



rates which Idaho Power Company could not meet profitably. An 

 efficient scale of development of this reach of river as a private 

 venture could be undertaken only with the assistance of a public 

 subsidy. For example, the federal government might have arranged 

 to purchase power which was surplus to the Idaho Power system 

 from the more efficient plan at rates which would compensate Idaho 

 Power Company, and resell the energy at competitive rates in the 

 Northwest power pool. The net effect of such action could be to 

 assure economically efficient development under private manage- 

 ment, financed in part by general tax revenues, with income redis- 

 tributive consequences somewhat similar to those occurring under 

 public development. 



Another problem in achieving efficient development employing 

 both public and private institutions involves the direct interdepen- 

 dence of power production at hydroelectric plants along a stream. 

 Under existing law, which considers hydroelectric potential as 

 public property, a private developer of upstream storage is not 

 entitled to compensation for benefits provided federal power plants 

 downstream. Accordingly, no incentive exists for a private devel- 

 oper to incur the additional costs essential to developing an 

 economically justified amount of storage capacity, viewing the 

 hydraulic system in its entirety, if the benefits from the added 

 storage escape appropriation by him. 



Our study of Hells Canyon showed that the added prime power 

 at downstream plants owned by the federal government, which 

 would have resulted from the more efficient scale of development, 

 did not represent any incentive for a private developer to provide 

 the added storage capacity required — or to operate the reservoirs 

 consistent with maximizing system output. The added output 

 would accrue to the installations of the federal government which, 

 in terms of the existing legal framework, receives such benefits as 

 a form of quid pro quo in exchange for granting a private party 

 the privilege of developing a public asset. In the case of the pro- 

 posed development of the Coosa River under private auspices, 

 direct interdependence among power-producing plants along the 

 stream constituted no problem, because the whole of the hydro- 

 electric potential would be integrated physically and economically 

 into a single system. Any benefits to downstream installations from 

 regulation provided by upstream developments would accrue to 



