BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Adam B. Schiff, Chairman
1999-2000 Regular Session
SB 476 S
Senator Chesbro B
As Introduced
Hearing Date: May 18, 1999 4
Civil Code 7
DLM:jt 6
SUBJECT
Liquid Propane Pricing: Mobilehome Parks
DESCRIPTION
This bill would cap the price a mobilehome park manager may
charge mobilehome park residents for liquid propane to 110
percent of the actual price paid, when the residents can
only purchase their propane from the park management.
(This analysis reflects author's amendments to be offered
in Committee.)
BACKGROUND
Propane is to mobilehomes as natural gas is to traditional
homes, yet while the retail price of natural gas is
regulated; the retail price of propane is not. According to
a 1993 Public Utilities Commission (PUC) report estimate,
propane is used at approximately 1,200 mobilehome parks
within California. At about 700 of these parks, management
does not offer liquid propane service and
the residents own or rent their own storage tanks. This
bill would address the other 500 mobilehome parks that
operate multi-customer systems.
According to the PUC report, these parks have pipes running
from a central tank to each mobilehome. Safety regulations
and high density make it difficult for individual residents
to develop an alternative to purchasing propane from the
manager. Often park rules and regulations prohibit tenants
(more)
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Page 2
from having individual propane tanks. Therefore,
individuals are dependent upon the park management for
their fuel supply. The PUC study documented great
variability in prices ($0.95 to $1.84) charged by the
managers. In a recent Sacramento Bee article, one
parkowner stated that a 125 percent markup "was about
right."
This issue has generated much legislation over the years,
most recently with
AB 2016 (Brown) of last session. All attempts to cap
profits in the sale of propane in mobilehome parks have
passed the Legislature only to be vetoed by
then-Governor Wilson, reflecting perhaps a basic policy
disagreement over what constitutes a reasonable charge for
propane prices in a monopoly setting.
CHANGES TO EXISTING LAW
Existing law prohibits mobilehome park managers from
charging residents fees other than rent, utilities, and
incidental reasonable charges for services actually
rendered, but permits them to bill residents separately for
utility services, including liquid propane service, if the
rental agreement does not include such service.
This bill would:
Prohibit the management of a mobilehome park from
charging mobilehome owners and tenants more than 110
percent of the actual price paid.
Require mobile home park management to post the actual
price paid by management for liquid propane sold by it.
Only apply if the mobilehome park management does not
permit the purchase of liquid propane butane for use in
the park from any other source.
COMMENT
1. Stated need and support
"SB 476 would bring reasonable regulation to the price
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which park owners may charge park residents for liquid
propane gas (LPG) in mobilehome parks. Although other
forms of utilities are regulated by statute and/or by the
Public Utilities Commission, there is no regulation
whatsoever as to what park owners may charge for LPG.
This total lack of regulation has resulted in excessive
charges by some park owners, which have placed some
seniors on limited incomes in an extremely vulnerable
financial position. These homeowners are totally
dependent on LPG to cook their food and to heat their
homes," says the bill's sponsor, the Golden State
Mobilehome Owner's League. The author adds that the sale
of propane to captive residents should not be allowed to
be a profit center for mobilehome park owners. The
percent figure contained in SB 476 is not scientifically
based, admits the author, but he states that he has
attempted to acquire actual cost data from park owners
without success.
2. To profit, or not to profit, that is the question
This bill would declare as a Legislative finding that
"Mobilehome park owners have a right to sell liquid
propane butane to their tenants at a price which reflects
a reasonable profit." Under the Mobilehome Residency
Law, parkowners may only charge residents fees for rent,
utilities, and incidental reasonable charges for services
actually rendered. The question of whether the
allowable charges for utilities includes "profit" has
been the subject of a long and heated debate, which has
taken place in many forums.
In the legislative arena, three prior bills have passed
that would have capped propane prices. These bills were
intended to stop propane "price gouging" by parkowners.
AB 2016 (Brown) of 1998 would have allowed for a 10
percent profit, plus any costs associated with providing
and maintaining liquid gas service. Then-Governor Wilson
vetoed that measure, because he believed 10 percent
profit was insufficient. AB 1165 (Waters) of 1989 and SB
413 (Thompson) of 1991 would have capped propane prices
at 110 percent of the wholesale price. Both of these
bills were vetoed based on, among other concerns, the
governor's position that the 10 percent markup was
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inadequate and did not include a reasonable profit.
In the judicial arena, an appellate court initially
allowed the parkowners to make a profit in the case of
Boicourt v. Kona Kai Mobilehome Park (1995 2d Dist.) 38
Cal. App. 4th 757 (ordered depub.), where the court held
that "where a gas company services a master meter for an
entire mobilehome park and the park owner in turn
provides and maintains individually metered service to
the mobilehomes, the owner is authorized to charge each
tenant the same rate which would be applicable if the
user were receiving gas directly from the gas
company--even though that would mean that the parkowner
would realize a profit." The Supreme Court ordered this
case depublished, the effect of which is that this
opinion may not be cited or relied on as precedent.
(California Rule of Court 977.) The act of depublication
would suggest that the holding of the Boicourt case is
one which the Supreme Court does not support.
In the Public Utilities Commission context, the
commission deregulated the provision of liquid propane
gas, finding "There is no need for the Commission to
regulate the rates and quality of service of the propane
industry" as "the industry appears to be quite
competitive.?" However, a study conducted by the
Commission reports, "There is a potential for owners of
mobilehome parks to overcharge their captive customers."
(Report to the Legislature on Propane Service, Rates and
Safety, 1993, PUC.) In preparing the report, the PUC
took testimony from both parkowners and residents on the
subject of propane rates in mobilehome parks. The PUC
recommends, in light of this situation, "a preferred
approach to any legislation in this area would be to
limit park owners to charging only the actual costs for
their purchased propane but allow them to collect a
separate monthly charge for the cost of maintaining their
distribution system." Id. The suggested PUC approach
would be consistent with another aspect of the MRL, which
addresses local utilities, (e.g. water, sewer and
garbage). In this regard the act does not allow for a
profit, but rather only allows a "pass through" of the
city and county fees assessed by the local agency to the
residents.
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3. Author's amendments
The author will amend his bill to expressly exclude
RV parks from the coverage of this bill. RV parks are
subject to their own legislative scheme, the
"Recreational Vehicle Park Occupancy Law." This
amendment will make it clear that the bill's provisions
only apply to mobilehome parks covered under the
Mobilehome Residency Law.
The author will also amend the bill to clarify that it
will not affect Civil Code Section 798.31, the Mobilehome
Residency Law provisions which allow the costs of
services rendered to be charged to tenants. This change
comes in response to concerns expressed by the propane
industry, that the bill would handicap a parkowner's
existing ability to "pass through" the charges for
services actually provided in making capitol
improvements, such a maintenance of gas lines, under
Civil Code Section 798.31.
That section declares that homeowner shall not be charged
a fee for other than rent, utilities, and incidental
reasonable charges for services actually rendered. As
interpreted by the Dill's decision, the costs of capitol
improvement projects may be charged to the tenants. As
the court stated, "At issue in this case is whether a
mobilehome park owner may charge resident mobilehome
owners for the cost of capital improvements as a
variable-expense item supplemental to a fixed base rent.
We hold that nothing in Civil Code Section 798.31
precludes this practice, capital expenses being a
traditional component of rent and there being nothing in
the statutory language expressing a concern with the way
rent itself is structured."
Dills v. Redwood Associates (1994) 28 Cal. App. 4th 888.)
4. Lone remaining opposition
While the above-referenced amendment has addressed the
concerns of the majority of the propane industry
opposition, one company Western Propane Gas Association,
remains opposed to the bill. This opposition is based
upon a concern that the ten percent profit margin is not
sufficient to allow maintenance of the liquid propane
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delivery systems. It would seem that this opposition is
addressed by the author's amendment detailed above.
5. Prior related bills and veto messages
AB 2016 (Brown) of 1998, would have prohibited managers
or owners of mobilehome parks from charging residents
more than the actual price paid by the management for
liquid propane butane, plus the cost of procuring the
liquid propane and operating, maintaining, and improving
the liquid propane distribution system. AB 2016 was
vetoed, with then-Governor Wilson saying, "This bill will
have the unintended consequence of increasing costs for
mobilehome park residents. Price controls that eliminate
any reasonable profit will cause park operators to
increase rents and other types of charges, further
distorting the housing market. In addition to
eliminating any reasonable profit, the bill does not
allow the park owner to recover the capital invested in
building the distribution system. This may cause park
owners to stop providing distribution services, thus
forcing park residents to rely on more expensive
alternatives."
Two other bills were passed that would also have capped
propane prices at 110 percent of the wholesale price: AB
1165 (Waters) of 1989 and SB 413 (Thompson) of 1991. The
governor vetoed each of these bills as well, based in
part on an assertion that adequate profits should be
allowed for providing propane fuel in mobilehome parks.
5. Current pending related legislation: AB 479 (Wiggins)
AB 479 would provide that park management shall maintain
existing
physical improvements with the money obtained from rent.
The bill would prohibit additional fees from being
imposed on residents for the purpose of maintaining
existing park facilities. AB 479 is currently in the
Assembly Housing and Community Development Committee.
Support: Western Center on Law and Poverty; American
Association of Retired Persons (AARP); Santa Clara
County Council on Aging; California Senior
Legislature; El Dorado County Commission on Aging;
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Area Agency on Aging, Humboldt and Del Norte
Counties; numerous individuals
Opposition: Western Propane Gas Association
HISTORY
Source: Golden State Mobilehome Owners League
Related Pending Legislation: AB 476 (Wiggins) pending
before the Assembly Housing and
Community Development Committee.
Prior Legislation: AB 2016 (Brown) of 1998, vetoed
AB 1165 (Waters) of 1989, vetoed
SB 413 (Thompson) of 1991, vetoed
Prior Vote: Senate Energy, Utilities and Communications
Committee (6-0)
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