270 MULTIPLE PURPOSE RIVER DEVELOPMENT 



the same enterprise unit and hence provide incentive for develop- 

 ing the most efficient amount of storage capacity for power genera- 

 tion. In the Coosa system, the only storage site developed by a 

 fiscally independent party is one in the headwaters of the 

 stream. This one is developed by the federal government, which 

 can assess charges to recover costs for the benefits provided parties 

 downstream. 



Under many circumstances, however, some means for compen- 

 sating the private developer of storage for useful downstream 

 regulation would be needed to meet the conditions of efficient 

 development of storage capacity under private auspices. To accom- 

 plish this change where the federal government owns and operates 

 downstream facilities would require amendment of the Federal 

 Power Act. In view of the long tradition that hydroelectric poten- 

 tial is public property and a private developer should render 

 incidental benefits to the public for the privilege of developing a 

 power site, such a change may not be considered appropriate or 

 desirable in light of legal equity or higher criteria. 



A closely related problem is that of realizing the benefits of inte- 

 grated system operation. In our general analysis, we have presented 

 data indicating that the value of output from co-ordinated oper- 

 ation of all the reservoirs of a system can be higher than the output 

 resulting from operation of each reservoir as though it were a 

 physically independent unit. Accordingly, when more than one 

 management unit is involved in developing and operating a river 

 system, institutional arrangements must be provided to ensure 

 co-ordinated operation of reservoirs if efficiency objectives are to 

 be realized. We have not investigated in any systematic fashion 

 what arrangements can realize such unified management, short of 

 integrating all facilities under a single management unit. In the 

 Coosa River case, the degree of integration under single manage- 

 ment approached the ideal for meeting the conditions essential to 

 providing incentives for co-ordinated reservoir operations. In the 

 Hells Canyon case, however, there appears to be little evidence to 

 suggest that such unified management would be attained under 

 present plans. 



Finally, where nonmarketable project services — such as flood 

 control, pollution abatement, and salinity repulsion — can be eco- 

 nomically justified, efficiency criteria would require that these be 

 provided to maximize the value of the returns from development 



