Foundation Says Legislation, AB868, Will Delay or Prevent Fair Sales of Gasoline

Santa Monica, CA — The Foundation for Taxpayer and Consumer Rights today asked Gov. Arnold Schwarzenegger to veto a bill now on his desk that would delay any remedy to the “hot fuel” rip-off of California consumers and mire the decision in politics. The nonprofit, nonpartisan foundation sent a detailed letter to the governor outlining the deceptions and faults of the legislation, AB868 by Asm. Mike Davis.
(See full letter here.)

“This legislation, billed by Asm. Davis and Assembly Speaker Fabian Núñez as a consumer protection, is in fact the opposite of consumer-friendly. The measure was written and supported by the California Independent Oil Marketers Association, an industry lobbying group,” said the letter.

The bill is deceptively titled as “Gasoline Dispensing, Weights and Measures.” As the letter notes, the state’s own weights and measures experts were apparently not consulted about the bill. Nor was consumer input solicited.

The issue involves well-understood science. The letter says: “California’s estimated year-round average fuel temperature at the pump is 75 degrees Fahrenheit, according to a 2002-2004 federal study. California drivers thus lose 1% on each purchase to fuel expansion, when compared to a gallon at the national temperature standard of 60 degrees. At 90 degrees, a common gasoline temperature in the summer driving season, the loss is 2%, according to the National Conference on Weights and Measures and the National Institute of Standards and Technology.”

The total yearly cost to California drivers of buying fuel hotter than 60 degrees is estimated at $450 million dollars. FTCR has called for California to encourage installation of gasoline pump equipment that would compensate for expansion of hot fuel, always giving drivers a fair gallon’s worth of energy.

The letter includes a list of specific reasons for vetoing AB868 (see below).

“The bottom line of our opposition is that the measure calls for politically tinged studies that will delay or block any resolution and add nothing to the science of hot fuel,” said Judy Dugan, research director of FTCR and its OilWatchdog.org project. “The Davis bill punts the issue to the California Energy Commission, which has no oversight role in retail fuel sales and no expertise in the matter. An ‘advisory committee’ that must be built from scratch will only further delay and muddy the process.”

The letter’s specific objections include:

– California’s own Division of Measurement Standards is more than halfway through a year-long confirmational study of the state’s gasoline temperatures. AB868 would take the results of the study out of the hands of the state’s weights and measures experts and bury them in a political process that will certainly delay and may prevent the sale of gasoline adjusted for temperature. The facts of the study will not require additional “study” and interpretation. The numbers are what they are. In addition, the California Energy Commission will be required to study effects of temperature on alternative fuels, which will repeat work already done or in progress by state and national weights and measures bodies. This is an unnecessary burden on the California budget.

– The measurement standards agency has already stated that there is no legal barrier to the sale of temperature-adjusted gasoline in California and has certified American-made temperature-adjusting pump equipment for California use. AB868 is a direct repudiation of the state regulators’ action. It could undo the agency’s work by putting temperature adjustment on indefinite hold or, in recommendations to the Legislature, disallowing temperature adjustment at the pump. These are the outcomes desired by the oil marketing lobby as well as by the major integrated oil companies, in statements before the House Domestic Policy subcommittee.

– The Division of Measurement Standards, in conjunction with the National Council on Weights and Measures, is well along in the process of developing national standards for the retail sale of temperature-adjusted gasoline. At a special meeting in Chicago Aug. 27 and 28, NCWM experts indicated it was likely that standards long in place in Canada could be largely transferable to U.S. sales. The process should be in the hands of the California DMS and national NCWM, not of a politically appointed committee.

– National and regional weights and measures officials are finding that installation costs of temperature measuring equipment for retail sale will be a fraction of the $4,000 per pump that oil companies and gasoline marketers assert. This is especially true if the change occurs as part of regular equipment upgrades, which occur in roughly 8-year cycles. The cost of phasing in temperature adjustment should not be estimated by a committee that lacks technical expertise and is under political pressure.

– Temperature adjustment is not a recently discovered issue requiring study. Weights and measures officials long ago developed the standards for wholesale and other bulk transactions to be temperature adjusted. Temperature adjusted sales are seen as the only fair transaction method at the wholesale level. This issue does not require reinvention by a new state body or committee. The only point of such extended study would be to delay or prevent the introduction of temperature-compensated retail sales.

– A study of “costs and benefits” may not account for fundamental fairness and is an opening for lobbyists’ exaggerations. Consumers have no way of knowing the temperature of gasoline they are buying, and the business incentive is for wholesalers to deliver and retailers to sell the warmest possible fuel. The CEC, which the bill instructs to conduct this study, has no experience in overseeing retail sale of motor fuels. Its appointment of an “advisory group” for this study will increase the politicization of the outcome.

Political interference in government regulatory processes discredits and embarrasses legitimate government agencies. This recently happened when the Federal Trade Commission, using arguments that could not have come from weights and measures officials, issued an “opinion letter” Aug. 28 on fuel temperature adjustment that underestimated the loss to consumers by more than 90%. The National Institute of Standards and Technology issued the rebuttal data that slammed this politically motivated cost-benefit opinion. FTC chairwoman Deborah Majoras was forced to apologize and rescind the letter.

“Gov. Schwarzenegger has an opportunity to stand up for science-based public policy and for the interests of the state’s consumers by vetoing this bill,” said Jamie Court, president of FTCR. “By signing it, he would ingratiate himself with industry lobbies at the expense of a reasonably paced fix for a consumer rip-off that can be fixed simply by encouraging the retail sale of temperature-adjusted gasoline.”

Click here for more information on the science and effects of hot fuel.

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OilWatchdog.org is a project of the Foundation for Taxpayer and Consumer Rights, a nonprofit, nonpartisan consumer watchdog organization. Its websites are www.OilWatchdog.org and www.ConsumerWatchdog.org.