One bill designed to hold down prices passes, the other fails

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Associated Press State & Local Wire

SACRAMENTO: Oil companies got a split decision Tuesday on two bills that supporters said would inject more competition into California’s gasoline market and help hold down the highest motor vehicle fuel prices in the country.

The Assembly Business and Professions Committee rejected a bill by Assemblywoman Christine Kehoe, D-San Diego, that would allow service stations owned by oil company franchisees to shop around for their gasoline supplies.

But the Senate Energy, Utilities and Communications Committee approved a bill by Sen. Bill Morrow, R-Oceanside, that would bar oil companies from, in effect, charging different wholesale prices to company-owned stations and franchisees in the same area.

The Western States Petroleum Association, whose members include British Petroleum, Chevron/Texaco, ExxonMobil and Shell Oil, opposed both bills, arguing they would have the opposite effect.

Kehoe’s bill would allow oil company franchisees, which make up 70 percent of the service stations in California, to buy gas directly from the oil company or from a wholesaler that sells the company’s products.

Dennis DeCota, executive director of the California Service Station and Automotive Repair Association, which represents 620 station operators, said the bill would prevent oil companies from fixing prices by zones and instead allow franchisees to buy the cheapest available fuel produced by their oil company.

“How do you compete as a retailer when your own franchiser is selling gas so much cheaper in a different (nearby) zone in order to control the market?” he asked.

But Eloy Garcia, a lobbyist for the Western States Petroleum Association, said the bill would actually boost prices and probably disrupt “the entire gasoline distribution system.”

“We believe it will be a logistical nightmare,” he said. “If you want to disrupt the delivery of fuel you look at something like an open supply regulatory structure.”

Morrow’s bill would bar oil companies from charging a franchisee more for gasoline than the “imputed wholesale price” for gas at a company-owned station supplied by trucks from the same loading terminal.

It also would bar an oil company from buying up independent stations after Jan. 1, 2005 and trying to set or influence retail prices at stations not owned by the company.

“This bill would help me compete on a more level playing field,” said DeCota, who testified for both bills. “My members are being forced out of business. We cannot stand the tide” of company-owned stations.

But Garcia said the bill would discourage oil companies from signing up more franchisees.

“You are saying to the company if you invest in this site, buy the land and build the station you will never get that back,” he said. “I think that’s a disincentive for a greater number of franchisees.”

Kehoe’s bill failed on a 3-3 vote with several lawmakers abstaining. Morrow’s bill was approved, 5-2. It now moves to the Senate Rules Committee.

Besides the Western States Petroleum Association, the bills were opposed by the California Chamber of Commerce, California Manufacturers & Technology Association and some station operators.

Besides DeCota’s group, supporters included the Automotive Repair Association, the California Small Business Association and two consumer groups, the Foundation for Taxpayer & Consumer Rights and the Utility Consumers’ Action Network.


On the Net: Read the bills, AB146 and SB304, at or

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