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OJJ33Q 18 "Measurement of willingness to pay for water supply or electric power may, however, be difficult or impossible. The proposed principles and standards suggest the cost of the most likely alternative means of obtaining an equivalent output can be used to approximate total value when the willingness to pay method cannot be used. "Under Senate Document 97, the cost of the most likely alternative for equivalent water supply or hydropower production is used consistently to evaluate water supply and hydropower benefits from a specific project. As employed under Senate Document 97, this evaluation method has severe deficiencies and continuation under the proposed principles and standards is undesirable. " .................. ... .,........... .,. " " a more explicit set of guidelines for use of alternative cost must be included in Section III B of the proposed principles and standards (pages 24153 to 24155). The proposed guidelines do state it must be a real alternative that could and would likely be undertaken in the absence of the proposed project. "The proposed principles must also include guidelines to insure that federal agencies will provide adequate evidence that the alternative is a viable one and would be undertaken in the absence of the proposed program. Without this assurance, the use of alternative cost may be spurious and result in misappro- priation of public money,. " ~~**** "Discussion of the appropriate discount rate in Section IV D of the proposed principles and standards presents all the correct arguments and reasons for equating the discount rate to the oppor- tunity cost of federal investment--then reaches the wrong conclusion. "The discount rate is not the proper vehicle for incorpora- tion of a subsidy to water resource projects. If a clear decision is made to subsidize water resource projects for a specific re- gion, this decision should be implemented through the 'regional development objective,' not through a discount rate.