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 2 6 8 5 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