Storage Reallocation Issues in Federal Multipurpose Reservoirs
Farmer, Michael C.
McMahon, George F.
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The U.S. Army Corps of Engineers (Corps) operates Lakes Lanier and Allatoona, two large multipurpose reservoirs in the metropolitan Atlanta area. Releases from these dams regulate the greatest share of draws to meet municipal and industrial uses in the region. These dams also produce hydroelectric power, provide flood control, and elevate lake levels to enable recreational use by visitors from within and outside the region, as well as by nearby residents. The Lanier and Allatoona reservoirs were originally designed primarily for power and flood control, albeit with significant attention leveled to municipal and instream flow water uses. Because these dams were developed to provide maximum National Economic Development (NED) benefits, there have historically been no charges assessed to any other use except hydropower. With the advent of costsharing in the 1980s, new additional uses of storage that reduced hydropower benefits were expected to reimburse the federal treasury for benefits foregone, either directly or by purchasing the equivalent amount of storage reallocated from hydropower_ to the new uses. The separable and jointuse costs of storage allocated to hydropower have historically been recaptured through charges to the power customers. Joint-use costs are average costs of facilities serving multiple uses, assessed in proportion to the benefits remaining after separable costs. The concern of this paper is twofold: First, the costsharing rules that allocate expenses in the initial formulation of a project often fail to remain equitable once demands for water and storage change. Second, where demands have changed, reallocating storage behind the dam along lines traditionally followed by the Corps may fail to capture the true costs and benefits of resources currently allocated to marginal uses in comparison to storage that, if reallocated, might better serve the new uses. One such example may be storage currently allocated to hydropower-of diminishing utility in a deregulated market with abundant and 51 inexpensive thermal substitutes-which might be far more valuable when reallocated to uses for which no good substitutes are available, such as municipal water supply. This paper explores institutional impediments to storage reallocation in multipurpose federal reservoirs to achieve their highest and best uses. In initial dam design, the Corps details a list of the benefits of multiple-use coordination. The size of the project is allowed to expand as long as adding another use continues to make it cheaper for evecyone involved to participate. Known as 'subadditive costs' or 'returns to scale,' project size is determined so that it would be more expensive for any individual use to go-it-alone to meet its . needs than for all to collectively participate in a multipleuse project. This principle guides the Corps in establishing project size as well as recovering the costs of construction, operation, and maintenance. The Corps' objective in establishing 'fair' charges for access to these services is to assure that evecy use benefits from participation above any independent, go-it-alone strategy. The fairness objective is relatively easy to assure if the size of the project is chosen such that it initially conforms to a cost-efficient scale. In time, however, uses of storage may shift from those originally contemplated, in which case competitive pressures are exerted to convert storage historically used to supply original demands that have become less valuable to new demands that are becoming more valuable. It is just this sort evolution of demands that has launched the current Georgia, Alabama and Florida water conflict - ostensibly over the reallocation of storage in federal reservoirs in the Apalachicola-ChattahoocheeFlint (ACF) and Alabama-Coosa-Tallapoosa (ACT) River Basins. The use and potential reallocation of storage in Lakes Lanier and Allatoona lies at the heart of this conflict.