Fattening Gas Prices

As fuel prices flamed up during the energy crisis, Government officials repeatedly denied allegations that part of the increase was due to overcharging by some oil and gas companies. Those denials are no longer being made so vehemently. In recent months, legal action has been taken against several major oil firms in New York, Indiana and elsewhere, charging them with illegally restraining competition for profit--an accusation that the companies deny. Also, the Federal Energy Administration conceded that between January and May it failed to plug a loophole in its oil-allocation program, enabling some petroleum companies to increase their bills by up to $300 million. Now the Federal Power Commission, which regulates natural-gas prices, has been charged with improperly granting increases. Worse, the authorizations were made while the top FPC officials held securities in companies that the agency supervises.

These charges against the FPC --characterized by Democratic Congressman John Moss of California as "one of the most powerful indictments of a federal regulatory agency within memory"--were contained in a study released last week by the General Accounting Office, the congressional watchdog agency. GAO investigators concentrated their fire on the manner in which the FPC acted under a regulation in effect since 1970. It is designed to increase supplies by permitting producers to sell gas at higher than regulated rates for 60 days. Allowing firms to go on selling high-priced gas beyond the 60-day period would require a change in the regulation. Yet the FPC, without making such a revision, granted 96 extensions through the end of last year. Some of them allowed unregulated prices for as long as 300 days, enabling one unnamed producer to add more than $800,000 to his profits in a six-month period.

Many extensions were granted in closed executive sessions of the agency's five commissioners, all of whom are on record as favoring at least some deregulation of natural gas. Furthermore, the GAO notes, during one full year no minutes at all were made of FPC meetings.

FPC Chairman John Nassikas has been called to answer the GAO charges before a meeting this week of the House Permanent Subcommittee on Investigations. Nassikas argues that, faced with the possibility of gas shortages, his agency had the right to waive some requirements as an emergency measure. The GAO insists that accepting that argument would "make a sham" of the regulatory process. Moreover, the GAO estimates that of the $3.3 billion in increases that were collected, only one-third went to producers to increase gas supplies, which was the purpose of the move. The rest went to pipeline companies.

FPC officials admit that the agency was remiss in not having all its high officials make full financial disclosures. That step, the GAO says, would have revealed that 19 of the agency's 125 top employees held stock in gas-producing firms under FPC jurisdiction, including Exxon, Texaco and Tenneco. Moreover, seven of these officials were administrative-law judges who preside over cases that come before the FPC, and in at least one case, a judge apparently presided over a hearing involving a company in which he held stock.

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