The Department of Energy Should Improve Its Management of Oil Overcharge Funds

RCED-85-46: Published: Feb 14, 1985. Publicly Released: Mar 11, 1985.

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Pursuant to a congressional request, GAO examined the adequacy of the Department of Energy (DOE) Economic Regulatory Administration's (ERA) management of funds distributed to states resulting from the collection of overcharges found in audits of oil companies' compliance with regulations controlling the allocation and pricing of crude oil and refined petroleum products.

GAO found that ERA chose to resolve alleged violations by negotiating settlements with the oil companies and, where the parties injured by overcharges were not identifiable, the oil companies were to make the payments either to an escrow account at the U.S. Treasury or directly to the individual states where the companies did business. DOE redistributes the escrow account funds through: (1) regulations that establish procedures for determining the proper recipients; and (2) section 155 of P.L. 97-377, which provides for the direct distribution of funds to the states for use in four energy conservation programs and the Low-Income Home Energy Assistance Program. GAO found that DOE could improve its management of these funds in: (1) the states' use of interest earned on the funds; (2) the states' proposals to demonstrate energy conservation techniques; and (3) ERA computation of the states' shares of the funds. GAO also found that some states, which received direct payments as a result of direct settlements between ERA and the oil companies, may not be using their refunds for restitution to the injured parties. However, DOE maintained that it has the authority to take any action necessary to eliminate or compensate for a violation of its petroleum regulations, including approval of direct payments to the states, instead of referring such matters to the Office of Hearings and Appeals.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: GAO found that, in determining the individual states' shares of the recent $2.1 billion Exxon refund, DOE used the most recent and representative refined petroleum product consumption data available.

    Recommendation: The Secretary of Energy should have the Administrator, ERA, use the most representative petroleum product consumption data in calculating states' shares of future oil overcharge refunds made in accordance with section 155 provisions.

    Agency Affected: Department of Energy

  2. Status: Closed - Implemented

    Comments: DOE corrected computational errors made in calculating states' and territories' shares of section 155 funds. Between July 1986 and July 1987, it collected overpayments from 4 jurisdictions and disbursed funds to 52 jurisdictions that were underpaid. As a result, the distribution more closely follows the intent of section 155.

    Recommendation: The Secretary of Energy should have the Administrator, ERA, implement the plans to correct the errors made in calculating the states' shares of section 155 funds by adjusting the states' future shares of oil overcharge refunds.

    Agency Affected: Department of Energy

  3. Status: Closed - Not Implemented

    Comments: DOE believes that action is not needed in the management of section 155 funds because such funds are governed by a specific conservation program's regulations. DOE did, however, state that, independent of overcharge fund disbursements, these regulations are continually reviewed to determine whether modifications are needed to ensure that they are consistent with DOE policy.

    Recommendation: To improve DOE management of both section 155 funds and any other funds, which may be distributed under section 155 procedures, the Secretary of Energy should develop criteria for states to use in determining what documentation is needed to justify energy conservation demonstration projects.

    Agency Affected: Department of Energy

  4. Status: Closed - Implemented

    Comments: DOE officials told GAO that letters were sent to all of the 56 states and territories involved informing them, among other things, that interest must be used only for the authorized conservation programs and asking the states to report on any interest earned and certify that it was used appropriately. According to officials, all of the 56 states agreed to comply with the requirements.

    Recommendation: To improve DOE management of both the section 155 funds and any other funds, which may be distributed under section 155 procedures, the Secretary of Energy should require the states to report on the interest earned on section 155 funds and certify that it is used for authorized energy conservation programs.

    Agency Affected: Department of Energy

  5. Status: Closed - Not Implemented

    Comments: This was a proposed recommendation which was deleted before the final issuance of this report.

    Recommendation: To provide adequate assurance that the injured parties receive the benefit of the oil overcharge refunds, the Secretary of Energy should comply with DOE mandatory procedures to identify injured parties.

    Agency Affected: Department of Energy

 

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