BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 448 (Leno) - Energy: petroleum supply and pricing.
Amended: May 6, 2013 Policy Vote: EU&C 6-4, T&H 8-3
Urgency: No Mandate: No
Hearing Date: May 23, 2013 Consultant: Marie Liu
SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Bill Summary: SB 448 would require, upon legislative
appropriation of funds for this purpose, the California Energy
Commission (CEC) to investigate suspected gasoline and diesel
price manipulation and make recommendations to the Legislature
on how to limit price volatility.
Fiscal Impact:
One-time initial cost pressures of $150,000 on the General
Fund for the CEC to establish the definition for fuel market
manipulation and to develop the analytical methodology to
identify signs of fuel price manipulation.
Ongoing annual cost pressures of $450,000 on the General
Fund for 4 PYs at the CEC to obtain, manage, and analyze
data for signs of fuel pricing manipulation and for required
reporting to the Legislature.
Background: The Petroleum Industry Information Reporting Act of
1980 requires the CEC to monitor gasoline pricing and report on
price volatility (PRC �25350 et seq.). Specifically �25356
requires the CEC to gather, analyze, and interpret data from
refiners, major marketers, oil transporters, major oil storers,
and major oil producers for issues including: (1) the nature,
cause, and extent of any petroleum products shortage; (2)
significant changes in prices for petroleum products and the
reason for those changes; (3) the profits of the industry as a
whole; and (5) the emerging trends related to supply, demand,
and conservation of petroleum and petroleum products.
Federal law prohibits market manipulation of crude oil gasoline,
petroleum, or natural gas.
Proposed Law: This bill would require the CEC to establish a
definition for fuel price market manipulation, identify the data
SB 448 (Leno)
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necessary to determine whether fuel price manipulation is
occurring, and establish an analytical methodology that would
identify when fuel price manipulation is occurring. This bill
would then require the CEC to collect and analyze that data
identify suspected fuel price manipulation.
The CEC would also be required to develop legislative
recommendations to limit price volatility and comparative price
increase in the California fuel market as part of an existing
biennial report to the Legislature.
These requirements would only become operative once the
Legislature appropriates moneys from royalty payments from oil
and gas leases on public lands for this purpose.
Staff Comments: The author's intent is to give California the
necessary tools to ensure that major oil companies are not
violating the law against market manipulation. Staff notes that
the CEC does not have the authority to take action if they do
identify market price manipulation. Rather they would pass on
information to the state Attorney General or the Federal Trade
Commission, which is charged with enforcing the federal laws
against market manipulation.
The CEC would require one PY at approximately $150,000 to first
establish a definition for fuel market manipulation, identify
the data necessary to determine whether manipulation is
occurring, and establish the analytical methodology to make that
determination. After this initial work is completed, the CEC
would require 4 PYs at approximately $450,000 to do the market
manipulation analysis. The workload associated with the required
Legislative report would be covered by these same PYs.
It is unclear whether the CEC currently collects the necessary
data for a market manipulation analysis. Should the CEC need
additional data, the CEC will likely contract out data
collection services at an initial cost of $500,000 and ongoing
future costs in of $350,000.
Revenues from oil and gas leases on public lands are deposited
in the General Fund. Should the CEC be made an appropriation
from these revenues to fund the activities required in this
bill, that appropriation would result in a loss to the General
Fund
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Staff notes that since the bill would only require the CEC to
implement its provisions once it receives implementation
funding, this bill would result in cost pressures to the General
Fund.
Proposed Author Amendments: Delete the requirement for the CEC
to define market manipulation, specify that the CEC is to use
existing data, and clarify that every market transaction does
not need to be analyzed.