FINAL REPORT - International Joint Commission

The Plan Formulation and Evaluation Group added all of these quantitative measures to the Board Room
and addressed the underlying “explanation” in a series of presentations to the Study Board. Ultimately, the
Plan Formulation and Evaluation Group determined that some damages could not be eliminated without
foregoing benefits to other interests. For example, Ontario coastal damages could not be reduced much
further from Plan 1958-DD, even with plans like OntRip3 that created large losses to other stakeholders.
The deviations from Plan 1958-D had reduced the maximum lake elevations that would have been
experienced to date by over a meter (about four feet), saving hundreds of millions of dollars in property
damage. Further reductions in lake levels and impacts would threaten downstream properties, and reduce
hydropower and boating benefits.
FINAL REPORT
The Study Board’s panel of economic advisors suggested defining “the size of the interest and the region”
in terms of economic surplus, the difference between the value of a good or service and the cost to
produce it. Economic surplus is a standard measure in public policy analysis because it measures the
value to society rather than benefits to a particular firm or group, but it is relatively new for International
Joint Commission studies. For this reason (and the fact that a number of the economic studies were
undertaken relatively late in the study process), different approaches were used so the reasonable
estimates could be developed in the time available. Many of the issues surrounding the estimation of the
baseline figures can be found in Annex 2 and in the Plan Formulation and Evaluation Group Report (Werick
and Leger, 2005).
With those caveats, the experts developed estimates of the value of the affected interests and activities,
always applying the concept of economic surplus, but arriving at it in different ways. The different
approaches to estimating economic surplus are summarized below and explained in more detail in the
Technical Work Group Summaries in Annex 2.
Baseline Economics
“Baseline economics” was the phrase used by the Study Board to refer to the estimated economic surplus,
or value to society, of each of the economic activities impacted by regulation. The economic advisors were
asked to determine a common concept for measuring the baseline magnitude of an activity. The economic
advisors stated that reasonable baselines were:
a. Recreational boating: Willingness to pay for boating multiplied by the number of trips taken by boaters
under Plan 1958-DD. Use net economic value as measured in 2002 as a surrogate.
b. Coastal erosion: A value for shoreline buildings in annualized terms using a 3.6% depreciation of the
shoreline building and shore protection, representing an annual loss of investment irrespective of
regulation plan.
c. Hydroelectric power: The economic value to society of the electricity produced, taking into account
representative market values and operating costs at the Moses-Saunders and Beauharnois-Cedars
hydroelectric plants on the St. Lawrence River and the Moses-Beck hydroelectric plant on the Niagara
River, which are affected by Lake Ontario flows and levels.
d. Commercial navigation: Estimated net revenues under Plan 1958-DD.
e. Municipal, industrial and domestic water uses. Not necessary because the plans all have the same impact.
f. Environment: The interest is not developing an economic performance indicator so an economic
baseline is not needed for context.
These baseline economic numbers produced are rough but consistently conceived estimates of the scale of
each economic activity. They are meant as planning level estimates only for the sole purpose of providing
some context for the net benefit results. They are used as the denominator when considering the percent
damage to the interest where the numerator is the relative impact for each performance indicator compared
to Plan 1958-DD shown in Table 6. Table 7 puts the economic damages into context by showing the
percent damage to an interest relative to the economic baseline estimated for that interest.
Options for Managing Lake Ontario and St. Lawrence River Water Levels and Flows
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