California Energy Board Seeks To Put Remedy for ‘Hot Fuel’ Ripoff in Deep Freeze — Group Calls for Immediate Fix
Draft Report Accepts Industry Call for Ban on Temperature-Compensating Device, Denies Consumers Would Benefit From Any Remedy
Consumer Watchdog, in a letter to the CEC, said that if it does not
call for a technical solution, it must “recommend adoption of a
cost-free but less accurate solution–a statewide reference temperature
of 71 degrees. This would require no equipment and little regulatory
adjustment. It would offer less benefit to consumers in warmer parts of
the state, and be a greater cost burden on retailers in colder parts of
the state. But by recommending an outright ban on adjustment at the
pump, you leave yourselves no other option. To keep ‘hot fuel’ sales in
place is, as your own study confirms, patently unfair to consumers.”
The CEC draft unfortunately concedes to industry lobbyists’ demands by
calling for an outright ban on the voluntary sale of fuel that is
adjusted by volume to compensate for higher temperatures in the state,
said the nonprofit, nonpartisan Consumer Watchdog. The report also
accepts the industry assertion that consumers would not benefit from
any correction because retailers would simply raise prices to recoup
all costs, even though this is the least likely outcome in a
competitive market.
In the letter sent yesterday to the energy commission, Consumer
Watchdog research director Judy Dugan says, “You prove there is a
pick-pocket at the gas pump, then ask that he be required to keep his
hand in our wallets indefinitely.”
The CEC draft, following a year-long process, fully acknowledges that
consumers suffer an annual loss in the hundreds of millions of dollars
statewide. When the temperature of gasoline rises above 60 degrees,
gasoline expands but gas pumps don’t account for the bigger volume, so
consumers receive less energy per gallon than they should. Gasoline
averages over 70 degrees in California, higher in summer and in the
south. The energy loss to consumers averages a few cents a gallon, but
reaches up to a dime a gallon when gasoline prices are high and
temperatures are warmer.
Click here to see more background on hot fuel.
Click here to see the CEC draft report.
“The report’s conclusions often appear at odds with the professional
work over the past year by energy commission staff,” said Dugan. “The
report acknowledges that there is no way for consumers to know the
temperature of the fuel they are buying, so they can’t determine what
gas station offers the true best value. Yet the value of fixing that
imbalance is ignored.”
In its letter to the CEC, Consumer Watchdog protests recommendations that appear at odds with the report’s factual findings. (Click here to see the letter.)
The letter says:
“[T]he report does not recommend a corrective measure, denies that
consumers would benefit from any remedy and, most shockingly, calls for
legislation that would prevent retailers from voluntarily selling
gasoline in the fairest manner.
“Consumer Watchdog objects strongly to the following conclusions in the report:
– That the state’s Division of Measurement Standards (DMS) “lack[s]
adequate regulatory structure” and “consumer protection” (pp. 89, 90
and 123) to oversee voluntary temperature compensation of motor fuel by
retailers. DMS officials, during our many meetings at the CEC, made it
clear that the had long experience with regulated temperature
compensation of other fuel, such as propane, and the legal tools to
easily manage it with motor fuels. The DMS has long been a regulatory
voice in favor of fuel temperature compensation.
– That the state Legislature should pass a law prohibiting any
voluntary fuel temperature compensation, because of the supposed
inability of the DMS to oversee and regulate it. (pp. 90, 123.) Your
recommendation, a wholesale acceptance of the fuel industry’s argument,
is a humiliating slap at the state’s own professional and experienced
experts, who are confident that they have the tools already to do the
job.
– That no matter what method might be used to compensate for “hot
fuel,” retailers will raise the price of gasoline or other items to
recoup any lost profit and the consumer benefit “would be therefore be
(sic) zero.” (p. 88 and various). Yet you offer no proof of that
assertion. It is just as likely that competition would force retailers
to absorb some or all of the cost; that oil refiners would adjust their
prices to retailers slightly downward; and that major oil companies
would help branded stations absorb physical conversion costs.”
Consumer Watchdog also noted in the letter that “While your
recommendation implies that the legislative ban could be removed if the
DMS developed ‘sufficient’ standards, the vagueness of the word
“sufficient” would likely keep the ban in place indefinitely. Such a
law would fulfill the petroleum industry’s every wish regarding
temperature compensation of fuel. We have little doubt that once such a
law is in place, no state regulatory proposal will be deemed
‘sufficient’ to allow removal of the ban.
Pumps that adjust the volume of gasoline for temperature are already voluntarily in use in Canada. As a story today in the San Francisco Chronicle noted:
“Those pumps are widely used in Canada, where long and frigid winters
otherwise would cost oil companies money. And in the United States, the
oil industry adjusts for temperature throughout its supply chain as
gasoline is piped from refineries to distribution centers and trucked
to gas stations. Only at the final step – the driver buying gas – is no
adjustment made.”
Yet unlike in Canada, the U.S. oil and fuel industries reject the idea
that what’s fair for them is fair for consumers, said Consumer
Watchdog. At the very least, it said, gasoline should be sold in the
state at the statewide average “reference temperature” until broader
adjustments to gas pumps can be agreed on.
“Consumers are sick of being governed on behalf of the oil industry at
the national level, and don’t want lobbyists writing their laws at any
level,” said Dugan. Yet the CEC recommendation that temperature
adjusting pumps be banned indefinitely until some universal solution
comes along is part of the lobbyist wish list. California, instead of
dragging its feet, should be in the lead on giving a fair deal to
drivers.”
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Consumer Watchdog is a nonprofit, nonpartisan consumer rights organization.
For more information, see: www.ConsumerWatchdog.org or www.OilWatchdog.org