BILL ANALYSIS                                                                                                                                                                                                              1





                SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                               DEBRA BOWEN, CHAIRWOMAN
          

          AB 2685 -  Oropeza                                Hearing Date:   
          June 22, 2004              A
          As Amended:         June 10, 2004            FISCAL       B

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                                      DESCRIPTION
           
           This bill  makes numerous findings and declarations, including:

           Californians use more than 18 billion gallons of motor vehicle  
            fuel a year.
           Gasoline demand will increase by 1.6% a year and diesel demand  
            will increase 2.4% annually until 2020.
           California refineries are operating at near capacity and  
            California is importing more transportation fuel every year.
           California gasoline prices are among the highest in the  
            country;

           This bill  requires the Governor to launch a public education  
          campaign about reducing demand for gasoline and diesel fuel.   
          The campaign shall include, but not be limited to, information  
          about tire inflation, auto maintenance, public transit,  
          carpooling, and motor vehicle route planning.

                                      BACKGROUND
           
          Concern over high gasoline and diesel prices has recurred for  
          many years.  California experienced gasoline and diesel price  
          spikes in 1996 ($1.50/gal), 1999 ($1.60/gal), 2000 ($1.80/gal)  
          and, once again, in 2004 ($2.20/gal).  Each price spike results  
          in investigations and new ideas, though no California  
          investigation has found criminal activity.  The gas price spikes  
          in 2000 led to several new ideas and analyses.  Ultimately the  
          new ideas (building a pipeline to Texas and creating a state-run  
          gasoline reserve) were found to be unworkable.  One analysis was  
          a joint agency report by the California Energy Commission (CEC)  











          and California Air Resources Board (CARB) on reducing  
          California's petroleum fuel dependence ("Reducing California's  
          Petroleum Dependence," August 2003, P600-03-005F).  

          The report concluded California's demand for gasoline and diesel  
          fuel will grow far more quickly than will the supply from  
          California's refineries.  From near self-sufficiency in 2000,  
          the report forecasts that 25% of California's on-road fuel will  
          come from out-of-state sources by 2010.  Based on an analysis of  
          options that are currently feasible and economical, the report's  
          first recommendation is that California adopt a policy to reduce  
          gasoline and diesel fuel demand to 15% below 2003 demand levels  
          by 2020, and to maintain that level thereafter.  A number of  
          options are suggested for meeting the goal, including using more  
          fuel efficient replacement tires, improving private vehicle  
          maintenance, doubling the fuel efficiency of light duty  
          vehicles, using natural gas-derived fuels as blending agents in  
          diesel fuel, and implementing fuel cell-powered vehicles.  The  
          second recommendation is that the Governor and Legislature  
          should work with the California Congressional delegation and  
          other states to double the national fuel economy standards.   
          Lastly, the report recommends establishing a goal of increasing  
          the use of non-petroleum fuels to 20% of on-road fuel  
          consumption by 2020 and 30% by 2030.

          According to an American Automobile Report, California had the  
          highest price for self-serve regular gasoline in the 50 states  
          in May 2004.  The six states with the highest gasoline prices  
          are, in descending order, California, Nevada, Oregon, Hawaii,  
          Washington and Arizona, all western states.

          The effect of high gasoline prices on automobile sales isn't  
          clear.  The 55 miles-per-gallon Toyota Prius hybrid is the  
          hottest selling car in the United States, based on how quickly  
          the car sells.  Large Internet-based automobile purchasing sites  
          observe interest in sport-utility vehicles (SUVs) is down, while  
          interest in smaller, more fuel-efficient cars is up.  However,  
          General Motors indicates May will be its biggest month ever for  
          SUV sales and Toyota notes that gasoline prices have had no  
          effect on SUV sales.

          Though it's small consolation, while California gasoline prices  
          are high, they pale in comparison to other countries.  British  
          gasoline prices approach $7 per gallon, while gas prices in  










          Japan are near $4 per gallon.

                                       COMMENTS

          1.Hasn't The Governor Already Done This?   On May 26, 2004 the  
            Governor announced a program called "Flex Your Power at the  
            Pump," a derivative of the very successful "Flex Your Power"  
            energy campaign of 2001 and 2002.  The new campaign is a  
            public education effort aimed at state employees, business  
            leaders, and government officials, noting Californians can  
            save up to 15% percent on fuel costs by:

                 Keeping tires inflated to the recommended pressure. 
                 Using the air conditioning selectively. 
                 Observing posted speed limits.  
                 Accelerating smoothly and braking gradually.
                 Properly maintaining vehicles by replacing air and oil  
               filters as recommended. 
                 Minimizing the amount of time a vehicle idles.

            This measure calls on the Governor to add information on  
            buying low-rolling-resistance tires, and using public transit,  
            bicycling, walking, carpooling, and careful motor vehicle  
            route planning to the public education campaign.  Given that  
            the Governor has already unveiled his program,  the author and  
            committee may wish to consider  whether it would be more  
            efficient to simply ask the Governor to expand his existing  
            program, rather than to put a new advertising program into  
            statute.

           1.Is Success Likely?   The "Flex Your Power" campaign was never  
            placed into statute by the Legislature or former Governor  
            Davis, yet it was highly successful due largely to a massive  
            paid radio, television, and print campaign coupled with  
            countless unpaid articles and stories confirming the  
            electricity emergency.  While there have been plenty of news  
            stories about the high price of gasoline, without a paid media  
            campaign or news stories about an actual gasoline "emergency,"  
            it's difficult to see how a public education campaign, even  
            when it is placed into statute, can be successful.

           2.Related Legislation  .  AB 1468 (Kehoe), which is on the  
            committee's agenda today, is a much broader measure, allowing  
            the CEC and CARB to create a public education campaign and  










            requiring them jointly adopt and implement measures to reduce  
            the projected growth of gasoline use between 2010 and 2020.
                                           
                                     PRIOR VOTES
           
          Assembly Floor                     (77-1)*
          Assembly Appropriations            (16-5)*
          Assembly Natural Resources Committee                            
          (10-0)*
          Assembly Utilities and Commerce Committee                       
          (12-0)*

          *Votes on a prior, unrelated version of the bill.

                                       POSITIONS
           
          Sponsor:
           
          Author

           Support:
           
          None on file

           Oppose:
           
          None on file



          








          Randy Chinn 
          AB 2685 Analysis
          Hearing Date:  June 22, 2004