BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1612|
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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
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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
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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
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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
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