Summary: GAO reviewed the complex evaluation, forecasting, and analysis system developed by the Federal Energy Administration (FEA) and used in preparing the November 1974 Project Independence report.
Under severe time constraints, FEA developed an innovative framework for analyzing the complex and interdependent sectors of the U.S. energy system. Nonetheless, the 1974 Project Independence System (PIES-74) contained serious problems. The major problems were; (1) the approach used in the development of oil and natural gas supply estimates; (2) the development of energy price elasticities; (3) the approach used to relate energy and economic forecasts; (4) the static nature of PIES-74; and (5) the incomplete assessment of environmental, economic, and international impacts. GAO found that, while sensitivity testing was conducted on some parts of PIES-74 and FEA stated that some parts of PIES-74 were validated, no systematic validation or sensitivity testing program was conducted on the entire system. In addition, although FEA stated that it conducted extensive verification of PIES-74, this effort was not documented.
