BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
SB 1265 (Hueso) - State vehicle fleet: minimum fuel economy
standards.
Amended: April 21, 2014 Policy Vote: GO 10-0
Urgency: No Mandate: No
Hearing Date: May 5, 2014 Consultant: Mark McKenzie
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 1265 would require the minimum fuel economy
standards for the purchase of specified state fleet vehicles to
include hybrid vehicles. These standards are established by the
Department of General Services (DGS), in consultation with the
State Energy Resources Conservation and Development Commission
(CEC), for the purchase of passenger vehicles and light-duty
trucks for the state fleet.
Fiscal Impact:
Unknown, significant cost pressures, likely in the hundreds
of thousands to low millions, to the extent that fuel
economy standards are raised to a level that necessitates
the purchase of more hybrid vehicles in the state fleet.
The initial higher contract cost of hybrid vehicles may be
almost totally mitigated over a seven-year lifecycle cost
analysis that includes fuel, maintenance, and repair costs.
Actual increased purchase costs would vary for individual
departments, depending on the mix of demand for particular
vehicle classes, and whether a department is able to absorb
the cost in existing budgets for vehicle purchases. See
staff comments below.
Minor and absorbable costs to DGS and CEC to update the
minimum fuel economy standards to include hybrid vehicles.
Background: Existing law, AB 236 (Lieu), Chap 593/2007),
establishes goals to achieve a 10 percent reduction or
replacement of the use of petroleum products in the state
vehicle fleet by January 1, 2012, and a 20 percent reduction or
replacement of petroleum use by January 2, 2020 (when compared
to baseline consumption in 2003). As of January 2, 2012, the
state fleet reduced petroleum consumption by 13 percent through
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a number of strategies, including elimination of nearly 3,400 of
the oldest and most fuel-inefficient passenger vehicles,
reducing vehicle miles traveled by eliminating 2,121 home
storage permits, and managing metrics and data on the state
fleet. In addition, Governor Brown issued executive orders in
2011 and 2012, calling for the elimination of non-essential
fleet vehicles and home storage permits, and calling for
increases in the number of zero-emission vehicles purchased
through the normal course of fleet replacement.
Existing law, AB 2264 (Pavley), Chap 767/2006, requires DGS, in
consultation with the CEC, to establish a minimum fuel economy
standard that exceeds the standard as it existed on January 1,
2007 for the purchase of passenger vehicles and light-duty
trucks for the state fleet that are powered by internal
combustion engines utilizing fossil fuels. All new state fleet
vehicle purchases powered by petroleum-based fuels, except
emergency vehicles and those designed to accommodate disabled
persons, must meet these minimum fuel economy standards. The
current standards established by DGS are 27.5 mpg for passenger
vehicles and 22.2 mpg for light-duty trucks.
Proposed Law: SB 1265 would require DGS, in consultation with
the CEC, to establish minimum fuel economy standards for the
purchase of passenger vehicles and light-duty trucks in the
state fleet that include vehicles powered by more than one
source, such as hybrids, in addition to petroleum-powered
vehicles. The bill would also require all hybrid vehicles
purchased for the state fleet to meet these standards, in
addition to the applicability of those standards for purchases
of petroleum-powered vehicles. The minimum fuel economy
standards and requirements for new fleet vehicle purchases would
not apply to plug-in electric hybrids.
Staff Comments: DGS indicates that the reduction of the state
fleet size and the purchase of more fuel efficient and
zero-emission vehicles has enabled the state to meet the 2012
goal of reducing the consumption of petroleum by over 10
percent, but additional strategies are needed to meet the
petroleum usage target of 20 percent reductions by 2020. There
are currently 1,324 light-duty passenger vehicles in the state
fleet that must meet the current fuel economy standards. This
bill would allow nearly 900 hybrid passenger vehicles to also be
included. The average state fleet economy improves from 24.4
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mpg to approximately 32 mpg if the current population of hybrid
vehicles is included. DGS intends to raise the standards to
exceed this baseline in the near future to encourage state
departments to purchase more hybrid vehicles for the state
fleet, where appropriate while still meeting each department's
practical needs. At this time, it is not feasible to raise the
standards for trucks, sport utility vehicles, or vans as
available hybrid technologies are not cost-effective for these
vehicle classes.
DGS has provided lifecycle cost analysis data that compares the
initial contract costs to the projected fuel, maintenance, and
repair costs over a seven year period for several classes of
passenger vehicles. This information indicates that, although
the initial purchase price of hybrids exceeds gasoline-powered
vehicles by an average of almost $6,500 over four classes of
vehicles, the average lifecycle costs of a hybrid over seven
years are almost negligible (only about $400 more than the costs
for comparable gasoline vehicles). The differential between
hybrid and gas vehicles varies significantly depending on the
class of vehicle. For example, in the compact sedan class, the
contract cost of a hybrid is $6,552 higher than a gas powered
vehicle, but the seven-year lifecycle cost is only $510 higher.
In the full-sized sedan class, however, the initial cost of a
hybrid is $4,475 higher than a gas powered equivalent, while the
seven-year lifecycle costs are $3,738 higher for the hybrid. As
such, increased fleet vehicle purchasing costs for an individual
department, as well as the seven-year lifecycle costs, would
depend greatly on the mix of demand for specific vehicle
classes.
Staff assumes that departments would initially attempt to adjust
fleet vehicle purchases to fit within existing resources. To
the extent that the fuel economy standards are raised to a level
that necessitates the purchase of more hybrid vehicles, initial
fleet vehicle purchase costs would increase. While actual costs
would depend on the mix of vehicle classes purchased, using the
average aggregate data provided by DGS, for every 100 hybrid
vehicles purchased, initial fleet vehicle purchase costs would
increase by approximately $650,000. The average aggregate
lifecycle cost differential between hybrids and gasoline powered
vehicles over seven years is only $39,800 for every 100 hybrid
vehicles purchased, but depending on the class of vehicle, the
life cycle cost differential can be as high as $374,000. Staff
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notes that DGS purchased about 300 hybrid passenger vehicles in
2013. The impact of this bill on demand for hybrid fleet
vehicle purchases is indeterminable at this time.