BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 1612| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 445-6614 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 1612 Author: Chesbro (D) Amended: 5/15/00 Vote: 21 SENATE ENERGY, U.&C. COMMITTEE : 9-0, 5/9/00 AYES: Bowen, Alarcon, Brulte, Hughes, Kelley, Mountjoy, Murray, Solis, Vasconcellos NOT VOTING: Peace, Speier SUBJECT : Mobilehome parks: liquified petroleum gas SOURCE : Golden State Mobilehome Owners League DIGEST : This bill extends the current law limitation on the price that mobilehome parks may charge tenants for propane to cases where laws or regulations prohibit tenants from installing their own propane tanks. ANALYSIS : Current law limits the price that mobilehome parks may charge tenants for propane to 110 percent 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 percent price limitation to cases where federal, state or local laws or regulations prohibits tenants from installing their own propane tanks. Background CONTINUED SB 1612 Page 2 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 percent 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 percent 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 percent 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 percent price cap even though the tenant has no real option to buy propane from another source. Comments SB 1612 Page 3 Last year's SB 476 (Chesbro), (Chapter 326, Statutes of 1999) to cap propane charges by mobilehome park owners at 110 percent 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 bill, 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. 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 percent, 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. 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 percent 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 SB 1612 Page 4 owner, but he or she may not be enjoying the benefits envisioned by last year's 110 percent price cap either. FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 5/15/00) Golden State Mobilehome Owners League, Inc. (source) OPPOSITION : (Verified 5/15/00) Western Manufactured Housing Communities Association ARGUMENTS IN SUPPORT : See "Comment" section. ARGUMENTS IN OPPOSITION : See "Comment" section. NC:cm 5/12/00 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****