BILL ANALYSIS Ó
AB 2066
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Date of Hearing: April 12, 2016
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Rudy Salas, Chair
AB 2066
(Lackey) - As Amended March 14, 2016
SUBJECT: Service stations: petroleum supply and pricing.
SUMMARY: Requires every motor fuel service station to display
the average per-gallon cost of gasoline and diesel fuel, as
annually calculated by the California Energy Commission (CEC),
across the industry of refiners producing transportation fuels
as a result of their compliance with a market-based compliance
mechanism adopted by the California Air Resources Board (CARB)
pursuant to the California Global Warming Solutions Act of 2006.
EXISTING LAW:
1)Defines "service station" as any establishment which offers
for sale or sells gasoline or other motor vehicle fuel to the
public. (Business and Professions Code (BPC) § 13650)
2)Requires every service station in this state to display, at a
conspicuous place on, at, or near the dispensing apparatus or
at or near the point of sale, at least one clearly visible
sign showing a list of applicable state and federal fuel taxes
per gallon of motor vehicle fuel sold from the dispensing
apparatus. (BPC § 13651)
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3)Prohibits a person from selling at retail to the general
public, any motor vehicle fuel from any place of business in
this state unless there is displayed on the dispensing
apparatus in a conspicuous place at least one sign or price
indicator showing the total price per gallon, liter, or other
unit of measurement adopted pursuant to BPC § 12107, 13404, or
13404.5 of all motor vehicle fuel sold. The total price per
gallon, liter, or other unit of measurement shall include
applicable fuel taxes and all sales taxes. (BPC § 13470)
4)Requires that petroleum price signs include "the total price
per gallon or liter including all taxes" (BPC § 13532(a)).
5)Defines "market-based compliance mechanism" as either of the
following: (1) a system of market-based declining annual
aggregate emissions limitations for sources or categories of
sources that emit greenhouse gases (GHGs) or (2) GHG emissions
exchanges, banking, credits, and other transactions, governed
by rules and protocols established by the CARB, that result in
the same greenhouse gas emission reduction, over the same time
period, as direct compliance with a greenhouse gas emission
limit or emission reduction measure adopted by the CARB, as
specified. (HSC § 35805)
6)Authorizes the CARB to adopt market-based compliance
mechanisms to ensure compliance with its regulations, as
specified. (HSC § 38570)
7)Requires the CEC to gather, analyze, and interpret the
information relating to the supply and price of petroleum
products, with particular emphasis on motor vehicle fuels.
(Public Resources Code (PRC) § 25356)
THIS BILL:
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8)Requires the CEC to calculate the average per-gallon cost of
gasoline and diesel fuel across the industry of refiners
producing transportation fuels as a result of their compliance
with a market-based compliance mechanism adopted by the CARB
pursuant to HSC § 38570.
9)Requires every service station to display the average
per-gallon cost of gasoline and diesel fuel, as calculated by
the CEC.
FISCAL EFFECT: Unknown. This bill is keyed fiscal by the
Legislative Counsel.
COMMENTS:
Purpose. This bill is sponsored by the author. According to
the author, this bill "would require the [CEC] to calculate an
estimate of the cost per gallon added to fuel prices for
complying with the Cap and Trade program, and fuel stations
would add this estimate to current signs that display federal
and state fuel taxes. Californians have a right to know when
they are paying several billion dollars in higher prices to
support government programs, and this disclosure is most
appropriately made directly where they purchase their fuel."
Background. In 2006, the Legislature passed and Governor
Schwarzenegger signed AB 32 (Nunez), Chapter 488, Statutes of
2006, the Global Warming Solutions Act of 2006, which set the
2020 GHG emissions reduction goal into law. The goal of AB 32
was to return California to 1990 levels of GHG by 2020. Among
other things, AB 32 authorized the CARB to utilize a
market-based compliance mechanism to meet the goal.
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The market-based compliance mechanism developed and adopted was
the Cap-and-Trade program. According to the CARB, the
Cap-and-Trade program is a key element in California's climate
plan. The program is designed to provide covered entities the
flexibility to seek out and implement the lowest-cost options to
reduce emissions. It sets a statewide limit on sources
responsible for 85% of California's GHG emissions and
establishes a price signal needed to drive long-term investment
in cleaner fuels and more efficient use of energy.
In practice, the program utilizes market forces to drive carbon
producers to compete with each other to purchase a finite number
of permits to release carbon into the atmosphere (or California
Carbon Allowances, CCAs)-including carbon released as a result
of refining and burning motor fuel. As the program decreases
the supply of free and tradable CCAs, the covered entities
either pay more for CCAs or look to other energy sources.
The CARB reports that the program covers about 450 entities.
The program went into effect for electric utilities and large
industrial facilities in 2013 and expanded to cover distributors
of transportation, natural gas, and other fuels in 2015.
Fuel Service Station Disclosures. Existing law requires several
disclosures to the fuel consumer. For example, service stations
must display a list of applicable state and federal fuel taxes
per gallon of motor vehicle fuel sold from the dispensing
apparatus, the actual total price per gallon with taxes,
distinctions based on cash or credit payment, and the name,
brand, trademark, or trade name of the product, or grade or
brand name designation.
The primary purpose for the disclosures is consumer protection.
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Most of the disclosure requirements fall under the BPC's weights
and measures laws, which apply to businesses that sell goods to
consumers, such as those utilizing point-of-sale systems
(electronic price and check-out systems). The laws ensure that
goods are measured accurately, ensuring that consumers get what
they pay for and deterring false advertising. For example, by
separating out the costs of taxes and service fees, consumers
are made aware of the price as charged by the retailer or seller
and therefore able to make an informed decision as to whether
the goods are overpriced.
Cap and Trade Costs to Consumers. As noted above, the
Cap-and-Trade program began covering distributors of motor and
other fuels in 2015. The Cap-and-Trade program applies to all
entities in the fuel distribution line, from extraction to
distribution, that meet specified GHG emission thresholds or
opt-in (Title 17 California Code of Regulations §§ 95811-95814).
Because some covered entities may absorb more or less
compliance costs than others, the amount that gets passed
through to consumers at a fuel service station is unclear. This
bill will require the CEC to calculate the costs that covered
entities pass through.
Currently, the CEC does not calculate the costs passed through
to consumers. As a part of its mandate under PRC § 25356, the
CEC collects and analyzes gasoline supply and pricing trends.
However, because the CEC does not track credit transactions
between covered entities in the distribution chain, it does not
calculate the costs to entities. In prior presentations on
retail gasoline prices, the CEC has relied on estimates from the
Oil Price Information Service (OPIS), a private petroleum
pricing and news information company.
OPIS is able to utilize proprietary CCA trade data to estimate a
daily price for the impact of Cap-and-Trade regulations on
gasoline and diesel fuel delivered at wholesale fuel racks.
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However, because the trade data is proprietary, it is unclear
whether the estimates are independently verifiable.
Prior Related Legislation. AB 2656 (Jones) of 2014 would have
required each motor fuel transaction in this state to contain
specified information regarding the estimated cost of compliance
with any market-based compliance mechanism adopted by the CARB.
NOTE: This bill was held in the Assembly Appropriations
Committee.
AB 32 (Nunez), Chapter 488, Statutes of 2006, enacts the Global
Warming Solutions Act of 2006, which creates a statewide
greenhouse gas emission limit that would reduce emissions by 25%
by 2020.
POLICY ISSUES FOR CONSIDERATION:
Posting of Estimates. This bill will require fuel service
stations to post an estimate of the potential CAR cost passed
through to consumers. As opposed to taxes, which are calculated
as a flat per-gallon fee or a percentage, an estimate is a rough
calculation that involves some amount of approximation. OPIS's
CAR assessments are estimates because they involve normalizing
several available values into one that would evenly apply at the
wholesale rack. According to OPIS, there is no single industry
standard for passing fees along. While information and
transparency are helpful for consumers, an estimate might
provide an incomplete picture.
IMPLEMENTATION ISSUE:
As noted above, the CEC does not perform its own calculations of
the costs of the Cap-and-Trade program. Currently the CEC
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relies on OPIS estimates. As written, the bill would require
the CEC to perform the estimates. However, because the CEC does
not track independent transactions between distributors, it does
not perform the estimates. Therefore, the author may wish to
amend the bill to direct the Legislative Analyst's Office or
other entities to create the estimates.
AMENDMENTS:
The author should make the following amendment:
1)Page 4, in line 6, after "Commission," insert:
in consultation with the Legislative Analyst's Office,
REGISTERED SUPPORT:
Howard Jarvis Taxpayers Association
REGISTERED OPPOSITION:
None on file.
Analysis Prepared by:Vincent Chee / B. & P. / (916) 319-3301
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