19.5.5 Ceiling Allocation (or Priority of Use) Method
To some extent, in a water multi-purpose project, the different purposes are in
competition with each other to use the water resource or storage space. For optimum
use, the different purposes should be active at different periods (hydropower at peak
demand hours, probably daily, irrigation during dry periods, etc). Thus, all of these
purposes cannot be optimally served.
If some of the functions are served proportionately more than others, the priority
of use method will give special consideration to such priorities. The priority of use
method assigns the specific cost entirely to the individual purpose and assigns the
remaining joint costs to project purposes in a descending order of priority. Thus, the
top priority purpose is charged with joint costs equal to the lesser of two amounts,
namely:
(a) the benefits minus specific costs assigned to that purpose, or
(b) the cost of the most economical alternative minus specific costs assigned to that
purpose.
Whatever remains as joint costs are then allocated in the same manner to the other
functions in order of priority. In this way, the higher priority functions are assigned
the maximum allocation represented by alternative joint cost for these purposes,
thereby relieving the lower priorities from sharing the joint costs.
19.5.6 Equal Apportionment Method
In this method, the joint cost is distributed equally among the different purposes
served by multi-purpose project. It is based on an arbitrary assumption that an equal
portion of the joint cost is reasonably chargeable to each of the purposes.
19.5.7 Separable Costs – Remaining Benefit Method (SCRB
Method)
The basic principle of distribution in this method is the same as in the alternative
justifiable cost method. It may, however, be said to be a refined form of that method
in so far as the concept of specific cost for each use or purpose is replaced by the
concept of separable cost. The separable cost for each purpose is subtracted from the
justifiable cost and the remainder which is really the ‘remaining alternative costs’ is
termed, in this method, as the ‘remaining benefits’ for the purpose. The joint cost
(which in this case represents the difference between the entire project cost and the
sum of separable costs) is, then, distributed in the ratio of remaining benefits for each
purpose/function. When the separable cost for all purposes/functions consists of
19.5 Brief Description of Each Method
547
To some extent, in a water multi-purpose project, the different purposes are in
competition with each other to use the water resource or storage space. For optimum
use, the different purposes should be active at different periods (hydropower at peak
demand hours, probably daily, irrigation during dry periods, etc). Thus, all of these
purposes cannot be optimally served.
If some of the functions are served proportionately more than others, the priority
of use method will give special consideration to such priorities. The priority of use
method assigns the specific cost entirely to the individual purpose and assigns the
remaining joint costs to project purposes in a descending order of priority. Thus, the
top priority purpose is charged with joint costs equal to the lesser of two amounts,
namely:
(a) the benefits minus specific costs assigned to that purpose, or
(b) the cost of the most economical alternative minus specific costs assigned to that
purpose.
Whatever remains as joint costs are then allocated in the same manner to the other
functions in order of priority. In this way, the higher priority functions are assigned
the maximum allocation represented by alternative joint cost for these purposes,
thereby relieving the lower priorities from sharing the joint costs.
19.5.6 Equal Apportionment Method
In this method, the joint cost is distributed equally among the different purposes
served by multi-purpose project. It is based on an arbitrary assumption that an equal
portion of the joint cost is reasonably chargeable to each of the purposes.
19.5.7 Separable Costs – Remaining Benefit Method (SCRB
Method)
The basic principle of distribution in this method is the same as in the alternative
justifiable cost method. It may, however, be said to be a refined form of that method
in so far as the concept of specific cost for each use or purpose is replaced by the
concept of separable cost. The separable cost for each purpose is subtracted from the
justifiable cost and the remainder which is really the ‘remaining alternative costs’ is
termed, in this method, as the ‘remaining benefits’ for the purpose. The joint cost
(which in this case represents the difference between the entire project cost and the
sum of separable costs) is, then, distributed in the ratio of remaining benefits for each
purpose/function. When the separable cost for all purposes/functions consists of
19.5 Brief Description of Each Method
547