BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 448|
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THIRD READING
Bill No: SB 448
Author: Leno (D)
Amended: 5/24/13
Vote: 21
SENATE ENERGY, UTILITIES & COMMUNICATIONS COMM. : 6-4, 4/16/13
AYES: Padilla, Corbett, De Le�n, DeSaulnier, Hill, Wolk
NOES: Fuller, Cannella, Knight, Wright
NO VOTE RECORDED: Pavley
SENATE TRANSPORTATION & HOUSING COMMITTEE : 8-3, 4/30/13
AYES: DeSaulnier, Beall, Galgiani, Hueso, Lara, Liu, Pavley,
Roth
NOES: Gaines, Cannella, Wyland
SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/23/13
AYES: De Le�n, Hill, Lara, Padilla, Steinberg
NOES: Walters, Gaines
SUBJECT : Energy: petroleum supply and pricing
SOURCE : Author
DIGEST : This bill requires the California Energy Commission
(CEC) to investigate suspected motor vehicle fuel price
manipulation and make recommendations to the Legislature on how
to limit motor vehicle fuel price volatility.
ANALYSIS : Existing federal law prohibits market manipulation
of crude oil gasoline, petroleum, or natural gas.
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Existing state law:
1. Mandates the CEC to monitor gasoline pricing throughout the
state and report on price volatility under the Petroleum
Industry Information Reporting Act of 1980 (PIIRA).
2. Requires the CEC, each quarter, to report to the Legislature
and Governor a summary, an analysis, and an interpretation of
this information. In addition, the CEC must prepare a
biennial assessment of the information it receives from oil
refiners and marketers and include that information in the
Integrated Energy Policy Report, a statutorily-required
document that forecasts energy supply and demand and
evaluates current energy issues facing the state.
3. Deposits revenues from oil and gas leases on public lands
into the General Fund.
This bill:
1. Requires the CEC to build on the analysis it must perform
pursuant to the PIIRA by:
A. Identifying data currently collected or developed by
the CEC necessary to determine whether such manipulation
is occurring, including data on production, emissions,
operations, sales volumes, and price for individual
producers, as well as market wide pricing data.
B. Establishing an analytical methodology to evaluate
whether fuel price manipulation is occurring at the
producer, importer and bulk trader level analysis, and
market wide.
C Analyzing the data and investigating for suspected
price manipulation at both the individual business and
producer levels.
2. Directs the CEC to work with the Air Resources Board and
other relevant state agencies to include in its biennial
assessment required under PIIRA a report on further
legislative recommendations to limit the amount of price
volatility and comparative price increase in the California
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motor vehicle fuel market. The report must include an
evaluation of strategies that increase fuel storage, leverage
the state's purchasing power relative to its own fleet, and
increase timely imports of fuels during price swings.
3. Allows the CEC to implement its provisions upon appropriation
by the Legislature from monies collected as royalty payments
from specified oil and gas leases on public lands.
4. Specifies that there is no requirement for the CEC to make
final findings or determinations that market manipulation has
occurred or is occurring.
Background
Recent spikes in gasoline and diesel prices have renewed
concerns regarding potential market manipulation by gas
companies. In 2012, two gasoline price spikes were blamed in
media reports on oil refinery issues that occurred prior to the
spikes. The BP Cherry Point refinery had a fire on February 17,
2012. Subsequently, in May 2012, gasoline prices rose by about
15 cents per gallon. Another refinery fire, this time at the
Chevron Richmond facility occurred on August 6, 2012. It, along
with an electrical outage at Exxon's Torrance refinery on
October 1 2012, was reportedly linked to a 50 cent per gallon
price spike in October 2012. The October spike sent gas prices
to near record levels. To alleviate costs, Governor Brown
issued an order allowing the winter-blend gasoline to be sold
early in the state.
On November 15, 2012, the author held an informational hearing
under the Select Committee on Bay Area Transportation which
discussed California oil refineries, gasoline supply, market
power, and gas price volatility. At the hearing, testimony was
heard from the CEC, the Western States Petroleum Association,
Severin Borenstein (Director of UC Energy Institute), and Robert
McCullough (McCullough Research).
A report by the UC Energy Institute from 2004 examined fuel
price volatility and market power. The report examined the
importation, refinement, and storage of fuel and the potential
for firms to exercise market power. Results of the study showed
that the exercise of market power could be used to explain price
volatility, but that volatility was also consistent with
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competitive markets. The report highlighted the difficulty in
determining if fluctuations in the market are a result of
competitive forces or market manipulation.
Another report by McCullough Research showed that the price
spikes occurred while crude oil prices were declining, and
inventories were increasing. This report raised suspicions
about market manipulation by oil companies.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
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.
SUPPORT : (Verified 5/24/13)
Asian Pacific Environmental Networks
Communities for a Better Environment
Consumer Action
Consumer Federation of California
Consumers Union
Environmental Defense Fund
Greenlining Institute
Sierra Club California
The Greenlining Institute
United Steel Workers, District 12
OPPOSITION : (Verified 5/24/13)
Western States Petroleum Association
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ARGUMENTS IN SUPPORT : According to the author's office this
bill is aimed at ensuring all Californians are not paying more
at the pump because of illegal price manipulation, and further
aims to ensure the state is on a longer term path to decreased
gas prices. The author's office argues that federal statutes
that are intended to prevent market manipulation are
insufficient, because they do not have regulatory standards or
methodologies by which to judge the acts, practices, or courses
of business, including whether concentration of market power or
price setting constitutes an illegal practice. The Office
established by this bill addresses these inadequacies.
ARGUMENTS IN OPPOSITION : Western States Petroleum Association
writes, "This expanded authority would be funded by moneys
collected from royalty payments to California from oil and gas
leases, diverting money from the general fund. This bill is
duplicative of existing authority of the California Attorney
General, U.S. Department of Justice and the Federal Trade
Commission. All of these entities can investigate and monitor
anti-competitive activities."
JGAL:nld 5/25/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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