FTC head feels heat over hot fuel misstatement

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The Kansas City Star (Missouri)

KANSAS CITY, MO — The head of the Federal Trade Commission is facing questions about her use of incorrect information underplaying the effect of hot fuel on consumers.

Deborah Platt Majoras, the FTC’s chairwoman, writing to a congressman from California, questioned whether the effect of hot fuel on individual consumers was significant enough for the FTC to consider the practice deceptive.

The effect, she said, was “very small.”

But that conclusion was based on information in the letter that a 20-degree difference in temperature would result in the volume of a 20-gallon fill-up fluctuating by just 6 tablespoons.

In fact, that measurement underplayed the effect by more than 90 percent, according to figures from the National Institute of Standards and Technology. The actual effect of that much temperature fluctuation is more than a quart for a 20-gallon tank.

The House Domestic Policy Subcommittee, in a letter sent Friday to the FTC, said the magnitude of the error raised serious questions about the opinions expressed in the Majoras letter. The subcommittee’s letter concluded by echoing Majoras’s suggestion in her letter that Congress gather more facts about hot fuel before considering reform proposals.

“It would have been wise for the FTC to heed its own advice,” wrote Rep. Dennis Kucinich, the subcommittee’s chairman.

A spokesman for the FTC said the agency, which regulates many issues affecting the oil industry, was reviewing the data in the letter sent by Majoras and would not comment until that review was completed.

Majoras’ misstatement goes to the heart of the hot fuel issue.

Fuel expands and contracts depending on temperature. At the longtime industry standard of 60 degrees, the 231-cubic-inch U.S. gallon puts out a certain amount of energy. But fuel is often sold at much higher temperatures, causing the fuel to expand and the amount of energy to decline for each gallon dispensed.

Fuel temperatures during the summer can exceed 100 degrees in many states.

At other stages in the fuel-delivery chain, the industry routinely adjusts volume for temperature change using the 60-degree industry standard. But retail pumps in America make no adjustment for changes in the volume caused by temperature, so consumers get only 231 cubic inches per gallon, regardless of temperature.

In a series of stories beginning last year, The Kansas City Star estimated that hot fuel cost consumers an estimated $2.3 billion annually.

The appointment of Majoras as FTC chairman in 2004 raised concerns at the time because of her previous work as a private attorney for Chevron Corp. The FTC typically is the agency that investigates allegations of manipulation of gas prices.

The federal agency, however, routinely dismisses such allegations as unfounded. It has opposed a federal gas-price gouging law, and last month released a study that it had found no evidence of manipulation causing gas price spikes during summer 2006.

The FTC’s hot fuel letter was seen by some as the latest evidence that the agency routinely sides with industry, this time without even a formal study.

“A letter like this seals the reputation of the FTC as the defense department for Big Oil,” said Judy Dugan, research director for The Foundation for Taxpayer & Consumer Rights.

Rep. Darrell Issa, a California Republican, on July 13 wrote Majoras soliciting the views of the FTC or its staff on the desirability of legislation to fix hot fuel. Issa, an opponent of a fix, said he or his staff could provide additional information if it would be of use to the FTC. It was unclear whether additional information was provided.

Majoras responded in a letter dated Aug. 28, although it was not released by Issa until Thursday. In a news release, Issa said that while Democrats were saying hot fuel was a massive fraud, the FTC had concluded that a fill-up with 80-degree fuel would affect the volume by only 6 tablespoons of fuel.

“While pursuing hot fuels, Democrats have fudged numbers,” Issa said in a prepared statement.

A spokesman for Issa said Friday that he would wait for a third party to judge the accuracy of the information in the FTC letter.

Much of the Majoras letter hinged on its example of the 20-gallon fill-up and its effect of only 6 tablespoons. The effect would have to be substantial for the FTC to intervene, according to the letter, and fixing the problem might not be justified if the benefit was found to be so small.

The reference to 6 tablespoons came from discussions between FTC staff and state weights-and-measures officials, according to the letter.

The chairman of the National Conference on Weights and Measures, a group that represents state weights and measures departments, could not be reached Friday.

A few state officials said they had not provided the information and had been trying unsuccessfully to find out who did.

The subcommittee, which found out about the letter on Thursday, made an inquiry about its accuracy to the National Institute of Standards and Technology. The response, on the same day, was that the effect, instead of 6 tablespoons, was 0.276 gallons — or a little more than a quart.

Kucinich said the FTC letter would be part of the subcommittee’s ongoing investigation of hot fuel.

“I hereby request a briefing from you at your earliest opportunity to discuss the basis for the opinions you have expressed in your letter,” he said in his letter to Majoras.

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