BILL ANALYSIS                                                                                                                                                                                                    



                                                                       


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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

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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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