Proposed Implementation of Special Refund Procedures

DEPARTMENT OF ENERGY

Proposed Implementation of Special Refund Procedures

AGENCY: Office of Hearings and Appeals, Department of Energy.

ACTION: Notice of proposed implementation of Special Refund Procedures.

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SUMMARY: The Office of Hearings and Appeals (OHA) of the Department of

Energy (DOE) announces the proposed procedures for the disbursement of

$75,638.48, plus accrued interest, in refined petroleum product

violation amounts obtained pursuant to an April 10, 1985 Modified

Remedial Order issued to Mockabee Gas & Fuel Co., Case No. VEF-0001

(Mockabee). The OHA has tentatively determined that the funds obtained

from Mockabee, plus accrued interest, will be distributed to customers

who purchased No. 2 heating oil or kerosene from Mockabee during the

period of November 1, 1973 through December 31, 1975.

DATES AND ADDRESSES: Comments must be filed in duplicate within 30 days

of publication of this notice in the Federal Register, and should be

addressed to the Office of Hearings and Appeals, 1000 Independence

Avenue, S.W., Washington, DC 20585. All comments should be marked with

the reference number VEF-0001.

FOR FURTHER INFORMATION CONTACT: Thomas O. Mann, Deputy Director, Roger

Klurfeld, Assistant Director,Office of Hearings and Appeals, 1000

Independence Avenue, S.W., Washington, DC 20585, (202) 586-2094 (Mann);

586-2383 (Klurfeld).

SUPPLEMENTARY INFORMATION: In accordance with 10 CFR 205.282(b), notice

is hereby given of the issuance of the Proposed Decision and Order set

out below. The Proposed Decision and Order sets forth the procedures

that the DOE has tentatively formulated to distribute a total of

$75,638.48, plus accrued interest, obtained by the DOE pursuant to the

April 10, 1985 Modified Remedial Order issued to Mockabee. In the

Modified Remedial Order, the DOE found that, during the period from

November 1, 1973 through December 31, 1975, Mockabee sold No. 2 heating

oil and kerosene in excess of the maximum lawful selling price.

The OHA has proposed to distribute the funds obtained from Mockabee

in two stages. In the first stage, we will accept claims from

identifiable purchasers of covered products from Mockabee who may have

been injured by the overcharges. The specific requirements which an

applicant must meet in order to receive a refund are set out in Section

III of the Proposed Decision. Claimants who meet these specific

requirements will be eligible to receive refunds based on the number of

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gallons of covered product which they purchased from Mockabee.

If any funds remain after valid claims are paid in the first stage,

they may be used for indirect restitution in accordance with the

provisions of the Petroleum Overcharge Distribution and Restitution Act

of 1986 (PODRA), 15 U.S.C. 4501-07. Applications for Refund should not

be filed at this time. Appropriate public notice will be provided prior

to acceptance of claims.

Any member of the public may submit written comments regarding the

proposed refund procedures. Commenting parties are requested to provide

two copies of their submissions. Comments must be submitted within 30

days of publication of this notice. All comments received in this

proceeding will be available for public inspection between the hours of

1 p.m. and 5 p.m., Monday through Friday, except federal holidays, in

the Public Reference Room of the Office of Hearings and Appeals,

located in Room 1E-234, 1000 Independence Ave., S.W., Washington, DC

20585.

Dated: January 11, 1995.

Richard W. Dugan,

Acting Director, Office of Hearings and Appeals.

Name of Firm: Mockabee Gas & Fuel Co.

Date of Filing: October 18, 1994.

Case Number: VEF-0001.

On October 18, 1994, the Economic Regulatory Administration (ERA)

of the Department of Energy (DOE) filed a Petition for the

Implementation of Special Refund Procedures with the Office of Hearings

and Appeals (OHA) to distribute $75,638.48, plus accrued interest,

which Mockabee Gas & Fuel Co. (Mockabee) remitted to the DOE pursuant

to a Modified Remedial Order (MRO) issued by the OHA on April 10, 1985.

In accordance with the provisions of the procedural regulations found

at 10 CFR Part 205, subpart V (subpart V), the ERA requests in its

Petition that the OHA establish special procedures to make refunds in

order to remedy the effects of the regulatory violations set forth in

the MRO. This Proposed Decision and Order sets forth the OHA's plan to

distribute these funds.

I. Background

During the period relevant to this proceeding, Mockabee was a

retailer of No. 2 heating oil, kerosene, diesel fuel, and motor

gasoline in Upper Marlboro, Maryland. On December 18, 1974, the Federal

Energy Administration (FEA) issued a Notice of Probable Violation to

Mockabee. On January 28, 1975, the FEA issued a Remedial Order (RO) to

Mockabee, finding that Mockabee had overcharged purchasers of No. 2

heating oil and kerosene. A further investigation disclosed additional

overcharges other than those cited in the RO, and on December 22, 1976,

the FEA rescinded the RO and issued a Revised Remedial Order requiring

Mockabee to roll back prices to compensate consumers who were

overcharged by Mockabee.

Mockabee failed to comply with the Revised Remedial Order. On April

10, 1985, the ERA1 issued a Modified Remedial Order which

rescinded the price rollbacks it had ordered Mockabee to make. Instead,

the MRO required Mockabee to pay to the DOE $29,583.08 in assessed

overcharges, and an additional $46,071.46 in interest due. On September

30, 1985, Mockabee appealed the MRO to the OHA, which denied the Appeal

on December 19, 1985. Mockabee Gas & Fuel Co., 13 DOE para.83,059

(1985). Mockabee has since remitted $75,638.48 in compliance with the

MRO, which is now available for distribution through Subpart V.

\1\Under the DOE Organization Act, 42 U.S.C. 7151, et seq., and

Executive Order 12009, 42 Fed. Reg. 46367 (September 25, 1977), all

functions vested by law in the FEA were transferred to and vested in

the DOE. Within the DOE, the ERA was delegated the authority to

investigate violations of applicable regulations and to seek

compliance of those regulations.

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II. Jurisdiction and Authority

The Subpart V regulations set forth general guidelines which may be

used by the OHA in formulating and implementing a plan for the

distribution of funds received as a result of an enforcement

proceeding. The DOE policy is to use the Subpart V process to

distribute such funds. For a more detailed discussion of Subpart V and

the authority of the OHA to fashion procedures to distribute refunds,

see Petroleum Overcharge Distribution and Restitution Act of 1986

(PODRA), 15 U.S.C. 4501 et seq.; Office of Enforcement, 9 DOE

para.82,508 (1981); Office of Enforcement, 8 DOE para.82,597 (1981).

We have considered ERA's Petition that we implement a Subpart V

proceeding with respect to the funds remitted by Mockabee and have

determined that such a proceeding is appropriate. This Proposed

Decision and Order sets forth the OHA's tentative plan to distribute

this fund. We intend to publicize our proposal and solicit comments

from interested parties before taking the actions set forth in this

Proposed Decision and Order. Comments regarding the tentative

distribution process set forth in this Proposed Decision and Order

should be filed with the OHA within 30 days of its publication in the

Federal Register.

III. Proposed Refund Procedures

We propose to implement a two-stage refund procedure for

distribution of the monies remitted by Mockabee (the Mockabee fund) by

which purchasers of No. 2 heating oil and kerosene from Mockabee during

the period covered by the MRO may submit Applications for Refund in the

initial stage. From our experience with Subpart V proceedings, we

expect that applicants generally will be limited to ultimate consumers

(``end users''). Therefore, we do not anticipate that it will be

necessary to employ the injury presumptions that we have used in past

proceedings in evaluating applications submitted by refiners,

resellers, and retailers.2

\2\If a refiner, reseller, or retailer should file an

application in this refund proceeding, however, we will utilize the

standards and appropriate presumptions established in previous

proceedings. See, e.g., Stark's Shell Service, 23 DOE para.85,017

(1993); Shell Oil Co., 18 DOE para.85,492 (1989).

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A. First Stage Refund Procedures

In order to receive a refund, each claimant will be required to

submit a schedule of its monthly purchases of No. 2 heating oil or

kerosene from Mockabee during the period covered by the MRO--November

1, 1973 through December 31, 1975. Our experience also indicates that

the use of certain presumptions permits claimants to participate in the

refund process without incurring inordinate expense and ensures that

refund claims are evaluated in the most efficient manner possible. See,

e.g., Marathon Petroleum Co., 14 DOE para.85,269 (1986) (Marathon).

Presumptions in refund cases are specifically authorized by the

applicable Subpart V regulations at 10 C.F.R. Sec. 205.282(e).

Accordingly, we propose to adopt the presumptions set forth below.

1. Calculation of Refunds

First, we will adopt a presumption that the overcharges were

dispersed equally over all of Mockabee's sales of products covered by

the MRO during the period covered by the MRO. See Permian Corp., 23 DOE

para.85,034 (1993). In accordance with this presumption, refunds are

made on a pro-rata or volumetric basis.3 In the absence of

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better information, a volumetric refund is appropriate because the DOE

price regulations generally required a regulated firm to account for

increased costs on a firm-wide basis in determining prices.

\3\If an individual claimant believes that it was injured by

more than its volumetric share, it may elect to forgo this

presumption and file a refund application based upon a claim that it

suffered a disproportionate share of Mockabee's overcharges. See,

e.g., Mobil Oil Corp./Atchison, Topeka and Santa Fe Railroad Co., 20

DOE para.85,788 (1990); Mobil Oil Corp./Marine Corps Exchange

Service, 17 DOE para.85,714 (1988). Such a claim will be granted if

the claimant makes a persuasive showing that it was ``overcharged''

by a specific amount, and that it absorbed those overcharges. See

Panhandle Eastern Pipeline Co./Western Petroleum Co., 19 DOE

para.85,705 (1989). To the degree that a claimant makes this

showing, it will receive an above-volumetric refund.

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Under the volumetric approach, a claimant's ``allocable share'' of

the Mockabee fund is equal to the number of gallons of covered product

purchased from Mockabee during the period covered by the MRO times the

per gallon refund amount. In the present case, the per gallon refund is

$0.0612. We derived this figure by dividing the monies remitted by

Mockabee ($75,638.48) by the total volume of covered products sold by

Mockabee from November 1, 1973 through December 31, 1975 (1,236,132

gallons). A claimant that establishes its eligibility for a refund will

receive all or a portion of its allocable share plus a pro-rata share

of accrued interest.4

\4\As in previous cases, we propose to establish a minimum

refund amount of $15. In this proceeding, any potential claimant

purchasing less than 245 gallons of covered product from Mockabee

would have an allocable share of less than $15. We have found

through our experience that the cost of processing claims in which

refund amounts of less than $15 are sought outweighs the benefits of

restitution in those instances. See Exxon Corp., 17 DOE para.85,590

(1988).

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In addition to the volumetric presumption, we also propose to adopt

a presumption regarding injury for end-users.

2. End Users

In accordance with prior Subpart V proceedings, we propose to adopt

the presumption that an end user or ultimate consumer of covered

products purchased from Mockabee whose business is unrelated to the

petroleum industry was injured by the overcharges resolved by the MRO.

See, e.g., Texas Oil and Gas Corp., 12 DOE para.85,069 at 88,209

(1984). Unlike regulated firms in the petroleum industry, members of

this group generally were not required to keep records which justified

selling price increases by reference to cost increases. Consequently,

analysis of the impact of the overcharges on the final price of goods

and services produced by members of this group would go beyond the

scope of the refund proceeding. Id. We therefore propose that the end-

users of covered products purchased from Mockabee need only document

their purchase volumes from Mockabee during the period covered by the

MRO to make a sufficient showing that they were injured by the

overcharges.

B. Refund Applications Filed by Representatives

We propose to adopt the standard OHA procedures relating to refund

applications filed on behalf of applicants by ``representatives,''

including refund filing services, consulting firms, accountants, and

attorneys. See, e.g., Stark's Shell Service, 23 DOE para.85,017 (1993);

Texaco, Inc., 20 DOE para.85,147 (1990); Shell Oil Co., 18 DOE

para.85,492 (1989). We will also require strict compliance with the

filing requirements as specified in 10 CFR 205.283, particularly the

requirement that applications and the accompanying certification

statement be signed by the applicant.

The OHA reiterates its policy to closely scrutinize applications

filed by filing services. Applications submitted by a filing service

should contain all of the information indicated in the final Decision

and Order in this proceeding.

C. Distribution of Funds Remaining After First Stage

We propose that any funds that remain after all first stage claims

have been decided be distributed in accordance with the provisions of

the Petroleum Overcharge Distribution and Restitution Act of 1986

(PODRA), 15 U.S.C. 4501-07. The PODRA requires that the Secretary of

Energy determine annually the amount of oil overcharge funds that will

not be required to refund monies to injured parties in Subpart V

proceedings and make those funds available to state governments for use

in four energy conservation programs. The Secretary has delegated these

responsibilities to the OHA, and any funds in the Mockabee fund that

the OHA determines will not be needed to effect direct restitution to

injured customers will be distributed in accordance with the provisions

of the PODRA.

It is therefore ordered that: the monies remitted to the Department

of Energy by Mockabee Gas & Fuel Oil Co. pursuant to the Modified

Remedial Order issued on April 10, 1985, will be distributed in

accordance with the foregoing Decision.

[FR Doc. 95-1356 Filed 1-18-95; 8:45 am]

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