Case # 2 – Water Over the Falls [ref.]
The Situation
The Federal Energy Regulatory Commission faced a licensing decision where one important issue was how much water the utility company should allow to flow over the falls at a recreation area. Increasing the flow over the falls would result in less hydropower generated, but more water for recreation. The previous license required only a minimum instream flow of 50 cubic feet per second, which reduced the flow over the falls to a trickle.
The Application
A contingent valuation survey was developed to determine how much visitors to the falls would be willing to pay for increased overflow levels. The survey instrument included pictures of the falls at four different flow levels and a series of valuation questions. It was mailed to a sample of previous visitors to the site. The key survey questions asked how much individuals would pay to visit the falls with each of the four flow levels depicted in the photos, and how many times they would visit each year at the four different flow levels.
Results
Since both visitation and value per day were sensitive to flow, a statistical analysis of the survey results was used to estimate a total recreation benefit function. Using this function, the economic value of additional flows in each month was calculated, and compared to the economic value of the foregone hydropower required to allow the additional flows. The resulting optimum flow level during the summer months, when visitation was high, was calculated as 500 cubic feet per second, which was ten times larger then the existing minimum instream flow.
Case # 3 – Glen Canyon Dam [ref.]
The Situation
One of the highest profile uses of the contingent valuation method in water resources management involved the re-regulation of Glen Canyon dam. In the early 1980’s it
became clear that continued operation of the dam to provide peak-load power was adversely affecting the downstream ecosystem in the Grand Canyon, and significantly reducing the quality of recreational rafting. The valuation question of concern was how much recreational rafting was worth, compared to the market value of the peak-load power supply.