The Carter administration is preparing a complex set of changes in federal energy regulations that could lower heat and power prices for East Coast consumers by a much as half a billion dollars a year at the expense of the rest of the country.
The changes would increase price subsidies for Eastern refiners and oil importers. The increased subsidy would be paid directly lby refiners elsewhere, and presumably passed on to those refiners' coustomers.
Energy Secretary James R. Schlesinger promised a group of senators and staff aides from Eastern states last week that the changes would be proposed "quickly" - perhaps this week.
East Coast members of Congress, including House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.), have been pressuring the administration for months to change the subsidy rules. Schlesinger, in turn, has been working to win Eastern support for the administration's beleaguered energy legislation.
Thus some members and lobbyists were quick to see Schlesinger's new commitment as a deal to win votes for the energy bills. As further evidence of political, motivation, they noted that Schlesinger had also discussed with Rep. John Dingell, a Michigan Democrat who is influential on energy matters, an addition to the new rules that would give similar price subsidies to Michigan oil importers.
An official at the Energy Department said the timing of Schlesinger's promise was not political. "We had to do this because the New England refiners have to know soon what price they'll pay for oil next winter," said the official, who said department regulations require that he remain anonymous.
If Schlesinger did hope for political gain from his promise to the Eastern legislators he also incurred political [WORD ILLEGIBLE] from other regions were furious about the proposed changes.
Among them was Sen. J. Bennett Johnston (D-La.), a leading spokesman for domestic oil producers. "They want Johnston's help on their energy bill," said an aide to the senator. "But this isn't going to make him more likely to work with Schlesinger on anything."
Johnston told Schlesinger Thursday night that the proposed rules changes, which would make it cheaper for the East Coast to buy imported oil, would undermine the administration's efforts to enchance deomestic production.
Analysts at the Energy Department disputed that, but they admitted that no one is sure what the precise impact of the new rules would be.
The changes Schlesinger has promised would affect the government's "entitlements" program, a pricing mechanism that is generally conceded to be unusually complicated, even in the complex world of energy regulation.
"Entitlements" were created to deal with price disparities created by the government's oil pricing rules.
Under federal regulations, domestic oil is considerably cheaper than imported oil. Since the East uses much more imported oil than the rest of the country, Eastern consumers have been paying more for oil than consumers in other regions.
The "entitlements" regulations force refiners using the cheaper domestic oil to pay subsidies ("entitlements") to refiners, utilities, and industries in the East to offset the higher price of imported fuel.
These subsidies have held down the price of oil used in the East, although prices are still about $1.40 higher for each barrel of fuel. At the same time, the subsidies have created a disincentive for domestic refiners to ship oil to East Coast markets. That has increased the East's dependence on imports.
The changes Schlesinger promised last week would more than triple the subsidy Eastern refiners now receive on each barrel of imported residual fuel oil. The subsidy would be offset somewhat by an import fee.
Schlesinger also said he would double the current subsidy for domestic residual oil shipped to East Coast markets.
Energy Department analysts say the result of all this would be a reduction in oil prices in the East and an increase in shipments of oil from the Western U.S. to the East.
If everything worked as the Energy Department plans it, the new changes would please everybody.
Easterners would get lower prices, and Western oil producers would have a profitable new market. The plan might then reduce the current glut of residual oil on the West Coast, which has been an embarrassment to administration spokesmen who keep talking about oil shortages.
But some members of Congress said Schlesinger's plan could not work. They said the new changes would not eliminate the disincentive on domestic sales to Eastern markets. And they warned that foreign oil suppliers would raise their prices to soak up the new subsidies.
If that occurred, neither West Coast producers nor East Coast consumers would gain much under the new rules. Instead, members of the Organization of Petroleum Exporting Countries would be the big winners.
Whatever the economic impact of the new rules, there was no question about one political result of Schlesinger's promise: it made a lot of East Coast members of Congress happy.
The New England Congressional Caucus praised the administration's move, saying it could save consumers from Maine to Florida about $500 million annually in heat and power bills.
But it was not clear whether the changes would swing Eastern votes on the energy bills. Rep. Toby Moffett (D-Conn.), a strong critic of the administration's energy package, said he welcomed the new regulations but considered them "completely separate" from the pending legislation.