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Propane: Causes of Price Volatility, Potential Consumer Options, and Opportunities to Improve Consumer Information and Federal Oversight

GAO-03-762 Published: Jun 27, 2003. Publicly Released: Jul 28, 2003.
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Highlights

More than 4.6 million residential households in the U.S., many with low incomes, rely on propane to heat their homes. Unfortunately, propane prices have been subject to major price spikes in two of the last three winters. Responding to congressional concern caused by these price spikes, GAO undertook a study to address the (1) factors that affect residential propane price volatility, (2) options available to propane consumers to mitigate price volatility, and (3) federal role in the propane market.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Commerce The Secretary of Commerce should direct the department to complete its required reports analyzing changes in propane prices and examining the effects of PERC's operation.
Closed – Implemented
In a letter dated June 12, 2003 commenting on the GAO Report (see appendix III of GAO-03-762), the Secretary of Commerce stated that he had directed Commerce staff to prepare reports in 2003, analyzing changes in propane prices and examining the effects of PERC's operations and related developments on propane consumers. The Secretary also stated in the letter that he directed hereafter that similar reports be regularly prepared according to reporting cycles established in the Act.
Department of Energy The Secretary of Energy should provide more active oversight of PERC, specifically in its review of PERC's annual budget plan to better position the department to make recommendations regarding appropriate PERC programs and activities as called for in the Propane Education and Research Act of 1996.
Closed – Not Implemented
The Office of Fossil Fuels, under the Department of Energy, was responsible for responding to this recommendation in reviewing GAO's draft report. In summary, as noted in the report, they do not agree with the recommendation because they believe the Act conveys oversight responsibilities on the Department of Commerce, not the Department of Energy. Therefore, they do not see a more active PERC oversight role for the Department. EIA, speaking for the Department in its November 20, 2003 response, in accordance with section 720 of title 31, United States Code, reiterated its non-concurrence with this recommendation. However, EIA also recognized confusion over what agency is ultimately responsible for oversight of various activities within PERC.
Department of Energy The Secretary of Energy should direct the Administrator of EIA to study the potential cost and benefits of continuing to improve EIA's propane market information. Consideration should be given to improving information for residential consumers regarding prices and different purchasing options as well as continuing to address industry concerns regarding inventory data.
Closed – Implemented
EIA has considered the cost and benefits of improving EIA's propane market information and has made proposals to improve such information. Specifically, in light of limited available resources, EIA has suggested that the potential exists for some level of additional funding for the enhancement of propane data collection efforts by EIA through the Propane Education and Research Council Act of 1996 (PERC). The source of funds could be garnered from PERC to provide the types of propane market information enhancements outlined in the GAO report. EIA has studied and considered the costs and benefits.

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Topics

Consumer protectionPrices and pricingEnergy costsEnergy demandFuel pricesPropane gasPrice regulationNatural gasCrude oilConsumers