[Federal Register Volume 59, Number 167 (Tuesday, August 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21373]


[[Page Unknown]]

[Federal Register: August 30, 1994]


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DEPARTMENT OF ENERGY
Office of Hearings and Appeals

 

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 disbursement of 
$100,697.87, plus accrued interest, in refined petroleum product 
violation amounts obtained by the DOE pursuant to a June 21, 1982 
Remedial Order issued to Beacon Bay Enterprises, Inc. (Beacon Bay), 
Case No. LEF-0074. The OHA has tentatively determined that the funds 
obtained from Beacon Bay, plus accrued interest, will be distributed to 
customers who purchased gasoline from Beacon Bay during the period 
August 1, 1979 through March 31, 1980.

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, Department of Energy, 
1000 Independence Avenue, SW, Washington, DC 20585. All comments should 
display a reference to case number LEF-0074.

FOR FURTHER INFORMATION CONTACT: Thomas O. Mann, Deputy Director, Roger 
Klurfeld, Assistant Director, Office of Hearings and Appeals, 1000 
Independence Avenue, S.W. Washington, D.C. 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 to eligible 
claimants $100,697.87, plus accrued interest, obtained by the DOE 
pursuant to a June 21, 1982 Remedial Order. In the Remedial Order, the 
DOE found that, during the period August 1, 1979 through March 31, 
1980, Beacon Bay had sold motor gasoline at prices in excess of the 
maximum lawful selling price, in violation of Federal petroleum price 
regulations.
    The OHA has tentatively determined to distribute the funds obtained 
from Beacon Bay in two stages. In the first stage, we will accept 
claims from identifiable purchasers of gasoline from Beacon Bay who may 
have been injured by overcharges. The specific requirements which an 
applicant must meet in order to receive a refund are set out in Section 
IV of the Proposed Decision. Claimants who meet these specific 
requirements will be eligible to receive refunds based on the number of 
gallons of gasoline which they purchased from Beacon Bay.
    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 the 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 
in the Federal Register and should be sent to the address set forth at 
the beginning 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, D.C. 20585.

    Dated: August 19, 1994.
George B. Breznay
Director, Office of Hearings and Appeals.

Proposed Decision and Order of the Department of Energy

Implementation of Special Refund Procedures

    Name of Firm: Beacon Bay Enterprises, Inc.
    Date of Filing: July 20, 1993.
    Case Number: LEF-0074.
    On July 20, 1993, 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 the funds which Beacon Bay Enterprises, Inc. 
(Beacon Bay) remitted to the DOE pursuant to a June 21, 1982 Remedial 
Order. Beacon Bay has remitted $100,697.87 pursuant to the order, to 
which $3,131.82 in interest has accrued as of July 31, 1994. In 
accordance with the provisions of the procedural regulations 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 regulatory violations set forth in the Remedial Order. 
This Proposed Decision and Order sets forth the OHA's plan to 
distribute these funds.

I. Background

    During the period relevant to this proceeding, Beacon Bay operated 
11 retail service stations in Southern California. The ERA issued a 
Proposed Remedial Order (PRO) to Beacon Bay on July 29, 1980. The PRO 
alleged that, during the period August 1, 1979, through March 31, 1980, 
Beacon Bay sold motor gasoline at prices in excess of the maximum 
lawful selling price, in violation of Federal petroleum price 
regulations. The DOE amended the PRO and issued a Final Remedial Order 
on June 21, 1982, after considering Beacon Bay's objections to the PRO. 
Beacon Bay Enterprises, 9 DOE  83,039 (1982). On August 23, 1982, 
Beacon Bay appealed the DOE's Final Remedial Order to the Federal 
Energy Regulatory Commission (FERC). The FERC issued a Proposed Order, 
on November 15, 1982, Beacon Bay Enterprises, 21 FERC  62,295 (1982), 
and an Order, on January 25, 1983, Beacon Bay Enterprises, 22 FERC  
61,059 (1983) the two of which affirmed and adopted the DOE's Final 
Remedial Order. Beacon Bay has since remitted $100,697.87 to the DOE, 
in compliance with the Remedial Order, which is now available (the 
Beacon Bay Remedial Order fund) for distribution through Subpart V.

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, 15 
U.S.C. Secs. 4501 et seq., Office of Enforcement, 9 DOE  82,508 
(1981); Office of Enforcement, 8 DOE  82,597 (1981) (Vickers).
    We have considered the ERA's Petition that we implement a Subpart V 
proceeding with respect to the Beacon Bay Remedial Order fund 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 proposed in this 
Decision. 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 Beacon Bay Remedial Order fund. In the first stage, 
purchasers of gasoline from Beacon Bay during the period covered by the 
Remedial Order may submit Applications for Refund. From our experience 
with Subpart V proceedings, we expect that potential applicants 
generally will fall into the following categories: (i) end-users; (ii) 
regulated entities, such as cooperatives; and (iii) resellers and 
retailers.
    A. Claims Based Upon Overcharges. In order to receive a refund, 
each claimant will be required to submit a schedule of its monthly 
purchases of gasoline from Beacon Bay during the period covered by the 
Remedial Order--August 1979 through March 1980. If the gasoline was not 
purchased directly from Beacon Bay, the claimant must establish that 
the gasoline originated with Beacon Bay. Additionally, a reseller or 
retailer claimant, except one who chooses to utilize the injury 
presumptions set forth below, will be required to make a detailed 
showing that it was injured by Beacon Bay's overcharges. This showing 
will generally consist of two distinct elements. First, a reseller or 
retailer claimant will be required to show that it had ``banks'' of 
unrecouped increased product costs in excess of the refund 
claimed.1 Second, because a showing of banked costs alone is not 
sufficient to establish injury, a claimant must additionally provide 
evidence that market conditions precluded it from increasing its prices 
to pass through the additional costs associated with the overcharges. 
See Vaqueros Energy Corp./Hutches Oil Co. Inc., 11 DOE  85,070 at 
88,105 (1983). Such a showing could consist of a demonstration that a 
firm suffered a competitive disadvantage as a result of its purchases 
from Beacon Bay. See National Helium Co./Atlantic Richfield Corp., 11 
DOE  85,257 (1984), aff'd sub nom. Atlantic Richfield Co. v. DOE, 618 
F. Supp. 1199 (D. Del. 1985).
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    \1\Claimants who have previously relied upon their banked costs 
in order to obtain refunds in other special refund proceedings 
should subtract those refunds from any cost banks submitted in this 
refund proceeding. See Husky Oil Co./Metro Oil Products, Inc., 16 
DOE  85,090, at 88,179 (1987). Additionally, a claimant attempting 
to show injury may not receive a refund for any month in which it 
has a negative accumulated cost bank(for gasoline) or for any prior 
month. See Standard Oil Co. (Indiana)/Suburban Propane Gas Corp., 13 
DOE  85,030, at 88,082 (1985). If a claimant no longer has records 
showing its banked costs, the OHA may use its discretion to permit 
the claimant to approximate those cost banks. See, e.g., Gulf Oil 
Corp./Sturdy Oil Co., 15 DOE  85,187 (1986).
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    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  85,269 (1986) (Marathon). Presumptions in 
refund cases are specifically authorized by the applicable Subpart V 
regulations at 10 C.F.R. 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 in all of Beacon Bay's sales of 
gasoline during the period covered by the Remedial Order. In accordance 
with this presumption, refunds are made on a pro-rata or volumetric 
basis.2 In the absence of 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 its prices.
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    \2\If an individual claimant believes that it was injured by 
more than its volumetric share, it may elect to forego this 
presumption and file a refund application based upon a claim that it 
suffered a disproportionate share of Beacon Bay's overcharges. See, 
e.g., Mobil Oil Corp./Atchison, Topeka and Santa Fe Railroad Co., 20 
DOE  85,788 (1990); Mobil Oil Corp./Marine Corps Exchange Service, 
17 DOE  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  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 Remedial Order fund is equal to the number of gallons purchased 
from Beacon Bay during the period covered by the Remedial Order times 
the per gallon refund amount. In the present case, the per gallon 
refund amount is $0.0690. We derived this figure by dividing the amount 
of the Remedial Order fund, $100,697.87, by 1,460,321 gallons, the 
volume of gasoline which Beacon Bay sold from August 1, 1979, through 
March 31, 1980. 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 the accrued interest.3
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    \3\As in previous cases, we propose to establish a minimum 
refund amount of $15. In this proceeding, any potential claimant 
purchasing less than 211 gallons of gasoline from Beacon Bay would 
have an allocable share of less than $15. We have found through our 
experience that the cost of processing claims in which refunds for 
amounts less than $15 are sought outweighs the benefits of 
restitution in those instances. See Exxon Corp., 17 DOE  85,590, at 
89,150 (1988) (Exxon).
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    In addition to the volumetric presumption, we also propose to adopt 
a number of presumptions regarding injury for claimants in each 
category listed below.
    2. End-Users. In accordance with prior Subpart V proceedings, we 
propose to adopt the presumption that an end-user or ultimate consumer 
of gasoline purchased from Beacon Bay whose business is unrelated to 
the petroleum industry was injured by the overcharges resolved by the 
Remedial Order. See, e.g., Texas Oil and Gas Corp., 12 DOE  85,069 at 
88,209 (1984) (TOGCO). Unlike regulated firms in the petroleum 
industry, members of this group generally were not subject to price 
controls during the period covered by the Remedial Order, and 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 prices of goods and services produced by 
members of this group would be beyond the scope of the refund 
proceeding. Id. We therefore propose that the end-users of gasoline 
purchased from Beacon Bay need only document their purchase volumes 
from Beacon Bay during the period covered by the Remedial Order to make 
a sufficient showing that they were injured by the overcharges.
    3. Regulated Firms and Cooperatives. We further propose that, in 
order to receive a full volumetric refund, a claimant whose prices for 
goods and services are regulated by a governmental agency, i.e. a 
public utility, or an agricultural cooperative which is required by its 
charter to pass through cost savings to its member-purchasers, need 
only submit documentation of purchases used by itself or, in the case 
of a cooperative, sold to its members. However, a regulated firm or a 
cooperative will also be required to certify that it will pass any 
refund received through to its customers or member-customers, provide 
us with a full explanation of how it plans to accomplish the 
restitution, and certify that it will notify the appropriate regulatory 
body or membership group of the receipt of the refund. See Marathon, 14 
DOE at 88,514-15. This requirement is based upon the presumption that, 
with respect to a regulated firm, any overcharges would have been 
routinely passed through to its customers. Similarly, any refunds 
received should be passed through to its customers. With respect to a 
cooperative, in general, the cooperative agreement which controls its 
business operations would ensure that the overcharges, and similarly 
refunds, would be passed through to its member-customers. Accordingly, 
these firms will not be required to make a detailed demonstration of 
injury.4
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    \4\A cooperative's purchases of gasoline from Beacon Bay which 
were resold to non-members will be treated in a manner consistent 
with purchases made by other resellers. See Total Petroleum, Inc./
Farmers Petroleum Cooperative, Inc., 19 DOE  85,215 (1989).
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    4. Resellers and Retailers. a. Small Claims Presumption. We propose 
to adopt a ``small claims'' presumption that a firm which resold 
gasoline purchased from Beacon Bay and requests a small refund was 
injured by the overcharges. Under the small claims presumption, a 
reseller or retailer seeking a refund of $5,000 or less, exclusive of 
interest, will not be required to submit evidence of injury beyond 
documentation of the volume of gasoline it purchased from Beacon Bay 
during the period covered by the Remedial Order. See TOGCO, 12 DOE at 
88,210. This presumption is based on the fact that there may be 
considerable expense involved in gathering the types of data necessary 
to support a detailed claim of injury; for small claims the expense 
might possibly exceed the potential refund. Consequently, failure to 
allow simplified refund procedures for small claims could deprive 
injured parties of their opportunity to obtain a refund. Furthermore, 
use of the small claims presumption is desirable in that it allows the 
OHA to process the large number of routine refund claims expected in an 
efficient manner.5
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    \5\In order to qualify for a refund under the small claims 
presumption, a reseller or retailer must have purchased less than 
72,471 gallons of gasoline from Beacon Bay during the settlement 
agreement period.
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    b. Mid-Level Claim Presumption. In addition, a reseller or retailer 
claimant whose allocable share of the refund pool exceeds $5,000, 
excluding interest, may elect to receive as its refund either $5,000 or 
40 percent of its allocable share.6 The use of this presumption 
reflects our conviction that these larger, mid-level claimants were 
likely to have experienced some injury as a result of the overcharges. 
See Marathon, 14 DOE at 88,515. In some prior special refund 
proceedings, we have performed detailed analyses in order to determine 
product-specific levels of injury. See, e.g., Getty Oil Co., 15 DOE  
85,064 (1986). However, in Gulf Oil Corp., 16 DOE  85,381 at 88,737 
(1987), we determined that based upon the available data, it was more 
accurate and efficient to adopt a single presumptive level of injury of 
40 percent for all mid-level claimants, regardless of the refined 
product that they purchased, based upon the results of our analyses in 
prior proceedings. We believe that approach generally to be sound, and 
we therefore propose to adopt a 40 percent presumptive level of injury 
for all mid-level claimants in this proceeding. Consequently, an 
applicant in this group will only be required to provide documentation 
of its purchase volumes of gasoline from Beacon Bay during the Remedial 
Order period in order to be eligible to receive a refund of 40 percent 
of its total allocable share or $5,000, whichever is greater.7
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    \6\Under the mid-level presumption, a claimant which purchased 
between 72,471 gallons and 181,177 gallons of gasoline from Beacon 
Bay would be eligible to receive a principal refund, exclusive of 
interest, of $5,000. A claimant purchasing more than 181,177 gallons 
of petroleum products would be eligible for a principal refund equal 
to 40 percent of its allocable share.
    \7\A claimant who attempts to make a detailed showing of injury 
in order to obtain 100 percent of its allocable share but, instead, 
provides evidence that leads us to conclude that it passed through 
all of the overcharges, or that it was injured in an amount less 
than the presumed level refund, may not necessarily receive a full 
presumption-based refund. Instead, such a claimant may receive a 
refund which reflects the level of injury established in its 
application.
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    c. Spot Purchasers. We propose to adopt a rebuttable presumption 
that a reseller or retailer that made only spot purchases from Beacon 
Bay did not suffer injury as a result of those purchases. As we have 
previously stated, spot purchasers generally had considerable 
discretion as to the timing and location of their purchases, and 
therefore would not have made spot market purchases from a firm at 
increased prices unless they were able to pass through the full amount 
of the firm's selling price to their own customers. See, e.g., 
Vaqueros, 8 DOE at 85,396-97. Accordingly, a spot purchaser claimant 
must submit specific and detailed evidence to rebut the spot purchaser 
presumption and to establish the extent to which it was injured as a 
result of its spot purchases from Beacon Bay.8
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    \8\In prior proceedings, we have stated that refunds will be 
approved for spot purchasers who demonstrated that: (1) they made 
the spot purchases for the purpose of ensuring a supply for their 
base period customers rather than in anticipation of financial 
advantage as a result of those purchases, and (2) they were forced 
by market conditions to resell the product at a loss that was not 
subsequently recouped through the draw down of banks. See, e.g., 
Texaco Inc., 20 DOE 85,147 at 88,321 (1990); Quaker State Oil 
Refining Corp./Certified Gasoline Co., 14 DOE 85,465 (1986).
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    B. Refund Applications Filed by Representatives. In addition, we 
propose to adopt the following procedures relating to refund 
applications filed on behalf of applicants by ``representatives,'' 
including refund filing services, consulting firms, accountants, and 
attorneys. See Texaco Inc., 20 DOE 85,147 (1990). Each such filing 
service shall, contemporaneously with its first filing in the Beacon 
Bay proceeding, submit a statement indicating its qualifications for 
representing refund applicants and containing a detailed description of 
the solicitation practices and application procedures that it has used 
and plans to use.9 This statement should contain the following 
information:10
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    \9\This statement should be submitted under separate cover and 
reference the Beacon Bay refund proceeding, Case No. LEF-0074.
    \1\0This information with regard to some filing services has 
already been requested and received by this Office. Therefore, any 
filing service that has had more than 10 Applications for Refund 
approved before the issuance of this Proposed Decision and Order 
need not submit this information if it has already done so in 
another proceeding. Instead, such a filing service need only include 
a copy of the previous submission(s) responsive to items (1)-(5) and 
provide an update if its response to any of these questions has 
changed since it first submitted its information. However, in light 
of the importance of this information, it is prudent for all filing 
services to review their practices and inform the OHA of any 
alterations or improvements that may have been made.
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    (1) A description of the procedures used to solicit refund 
applications in the Beacon Bay proceeding and copies of any 
solicitation materials mailed to prospective Beacon Bay applicants;
    (2) A description of how the filing service obtains authorization 
from its clients to act as their representative, including copies of 
any type of authorization form signed by refund applicants;
    (3) A description of how the filing service obtains and verifies 
the information contained in refund applications;
    (4) A description of the procedures used to forward refunds to its 
clients;
    (5) A description of the procedures used to prevent and check for 
duplicate filings.
    Upon receipt of this information, we may suggest alteration of a 
filing service's procedures if they do not conform to the procedural 
requirements of 10 C.F.R. Part 205 and this proceeding.
    Second, we will require strict compliance with the filing 
requirements as specified in 10 C.F.R. Sec. 205.283, particularly the 
requirement that applications and the accompanying certification 
statement be signed by the applicant.
    Third, in any case where an application has been signed and dated 
before the issuance of the final Decision and Order in this proceeding, 
we will require a certification statement, signed and dated by the 
applicant after the date of the issuance of the final Decision and 
Order. This certification should state that the applicant has not filed 
and will not file any other Application for Refund in the Beacon Bay 
proceeding and that, after having been provided a copy of the final 
Decision and Order, it still authorizes that filing service to 
represent it.
    Fourth, we will require from each representative a statement 
certifying that it maintains a separate escrow account at a bank or 
other financial institution for the deposit of all refunds received on 
behalf of applicants, and that its normal business practice is to 
deposit all Subpart V refund checks in that account within two business 
days of receipt and to disburse refunds to applicants within 30 
calendar days thereafter. Unless such certification is received by the 
OHA, all refund checks approved will be made payable solely to the 
applicant. Representatives who have not previously submitted an escrow 
certification form to the OHA may obtain a copy of the appropriate form 
by contacting:

Marcia B. Carlson, HG-13, Chief, Docket & Publications Branch, Office 
of Hearings and Appeals, Department of Energy, Washington, D.C. 20585.

    Finally, 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. Secs. 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 Beacon Bay Remedial 
Order 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 refund amount remitted to the Department of Energy by Beacon 
Bay Enterprises, Inc. pursuant to the Remedial Order issued on June 21, 
1982, will be distributed in accordance with the foregoing Decision.

[FR Doc. 94-21373 Filed 8-28-94; 8:45 am]
BILLING CODE 6450-01-P