BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 1612 - Chesbro Hearing
Date: May 9, 2000 S
As Amended: March 27, 2000 Non-FISCAL B
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DESCRIPTION
Current law limits the price that mobilehome parks may
charge tenants for propane to 110% of the price paid by the
mobilehome park if the park doesn't allow tenants to buy
propane from other vendors.
This bill extends the current law 110% price limitation to
cases where state or local laws or regulations prohibits
tenants from installing their own propane tanks.
BACKGROUND
Propane is used by mobilehome owners for heating and while
it's to mobilehomes what natural gas is to traditional
homes, the retail price of natural gas is regulated but the
retail price of propane isn't.
A 1993 study by the California Public Utilities Commission
(CPUC) estimated that about 40% of the state's
approximately 1,200 mobilehome parks operated
multi-customer heating systems, allowing residents to
purchase propane only from the park owner. Most of the
mobilehome parks using propane are located in rural areas,
while urban and suburban parks tend to use natural gas
supplied by the natural gas utility which is then
mastermetered by the mobilhome park. For these residents,
the price of natural gas is regulated.
Last year, the Legislature enacted SB 476 (Chesbro),
(Chapter 326, Statutes of 1999) in an attempt to cap the
amount a mobilehome tenant could be charged for propane in
certain instances. The theory behind the bill was that if
the propane market was a monopoly (the tenant could only
buy propane from the park owner), then the price would be
capped at 110% of the acquisition price. However, if
tenants could purchase propane from an alternative source,
then the regulation would be unnecessary because the threat
of competition would keep prices down.
This bill attempts to close what could be considered a
loophole in the statute. Current law frees the mobilehome
park from the 110% price cap if the park permits tenants to
purchase propane from others. While some mobilehome parks
give tenants the right to purchase propane from others,
some tenants don't have the ability to exercise that right
because local or state safety regulations preclude tenants
from installing the individual propane tanks. For example,
some mobilehome parks have a three-foot-setback
requirement, but state law requires propane tanks to be
installed not closer than 10 feet to structures or property
lines. Consequently, the mobilehome park is freed from the
110% price cap even though the tenant has no real option to
buy propane from another source.
KEY QUESTIONS
1.Will this bill serve to close a loophole in the law or
will it merely move a problem from one place to another?
2.Would a better solution be to simply regulate the retail
price of propone much in the same way the retail price of
natural gas is regulated?
COMMENTS
1) Price Gouging . Last year's SB 476 (Chesbro), (Chapter
326, Statutes of 1999) to cap propane charges by
mobilehome park owners at 110% of their purchase price
was predicated on the assertion that some park owners
were gouging their captive audience of tenants who had no
ability to buy propane elsewhere.
Like last year's measure, this year's bill is sponsored
by the Golden State Mobilehome Owners League (GSMOL),
which views this year's effort as a technical cleanup to
last year's bill to remedy the situation where - because
of state or local regulations - tenants can't buy or
install their own propone tanks even though, technically,
there is competition in the marketplace.
2) Is A Change Premature? The Western Manufactured Housing
Communities Association (WMA) opposes the bill, arguing
it's premature to change a law that's only been in effect
for less than five months. WMA argues that like last
year's bill, this measure fails to address the problem of
price fluctuations in the unregulated propane industry.
Since both measures permit park owners to recover the
cost of the propane plus 10%, it's unclear how park
owners are impacted by propane price fluctuations.
WMA believes SB 476 has driven some mobilehome parks to
abandon propane service, leaving tenants to fend for
themselves. GSMOL disagrees with that assessment,
pointing out that Title 25 of the California Code of
Administrative Regulations prevents mobilehome parks from
simply abandoning propane service.
3) Closing A Loophole Or Simply Moving It? While service
may not have been abandoned, there is some evidence that
last year's bill may have encouraged mobilehome parks to
get out of the retail propane business by selling the
business to propane distributors. The terms and 110%
price cap from last year's bill - and this year's bill -
only apply to mobilehome park owners, not to propane
distributors.
So, if the business has truly moved from the park owner
to the propane distributor, a mobilehome tenant may not
be getting "gouged" for propane service by the mobilehome
park owner, but he or she may not be enjoying the
benefits envisioned by last year's 110% price cap either.
4) Technically Speaking . The author may wish to consider
adopting the following technical amendments:
a) Page 2, Line 26, should also include federal law in
the exemption.
b) Page 2, Line 29 should read "liquified petroleum
gas supply tanks"
POSITIONS
Sponsor:
Golden State Mobilehome Owners League, Inc.
Support:
None on file.
Oppose:
Western Manufactured Housing Communities Association
Randy Chinn
SB 1612 Analysis
Hearing Date: May 9, 2000