Department of Energy Needs To Develop Better Guidance for Settling Oil Overcharge Cases With Long-Term Payment Provisions

Gao ID: RCED-85-120 August 13, 1985

GAO reviewed the Department of Energy's (DOE) Economic Regulatory Administration (ERA) audits of oil companies to ensure that they comply with federal petroleum pricing regulations. When an oil company is found to have overcharged for petroleum products, DOE negotiates a settlement agreement with the company that provides for payments by the company to the government. Pursuant to a congressional request, GAO reviewed agreements that provided for long-term repayment periods to: (1) determine whether DOE had adequate justification for negotiating long-term settlements; and (2) calculate the amount of interest on settlement agreements for which DOE had only specified the total settlement amount.

GAO found that: (1) while ERA has the authority to settle oil overcharge cases, it has not issued procedures or guidelines to ensure that its regional offices adequately analyze oil companies' financial conditions before reaching settlement agreements; (2) for 8 of the 10 long-term settlement agreements reviewed, ERA had not adequately documented financial analyses used in negotiating settlement agreements; and (3) it was difficult to obtain information about the poorly documented agreements because a number of officials involved in negotiating the agreements had left ERA. In addition, GAO found that: (1) the total settlement amount for 20 settlements that did not specify interest amounts was $41.6 million and included interest charges totalling $16.8 million; and (2) by not separating interest charges from settlement amounts, DOE overstated the amounts it had accepted as resolution of the alleged pricing violations.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: John W. Sprague Team: General Accounting Office: Resources, Community, and Economic Development Division Phone: (202) 512-7783


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