No Benefit To Motorists In A ‘Hot Fuel’ Fix, State Panel Says
March 12, 2009
Sacramento, CA — Amid allegations of conflict of interest, the five
members of the California Energy Commission voted unanimously Wednesday
to tell lawmakers there was no benefit to fixing service station pumps
to end an inequity that may be costing Californians millions of dollars
a year.
The commission’s report on the so-called hot-fuel phenomenon concludes
that the "societal" cost of forcing all gas stations to upgrade their
pumps outweighs the benefits to drivers of compensating for fuel
expansion as temperatures rise.
Consumer advocates and attorneys argue that motorists are being
shortchanged every time they buy gas or diesel that’s hotter than 60
degrees and expands in volume when purchased. They want pumps to be
equipped with automatic temperature controls that would provide buyers
with the same amount of fuel whether the gasoline or diesel in the
underground tank is hot or cold.
Activists also charge that the vote was tainted because the lead
commissioner on the case, James Boyd, is married to an executive vice
president of the Western States Petroleum Assn., an oil industry group
in Sacramento.
Santa Monica-based Consumer Watchdog says documents it recently
obtained under the California Public Records Act suggest that Boyd used
his influence to manipulate findings in a staff draft report so they
might favor some oil companies.
Three prominent Western States members — Chevron Corp., BP America
Inc. and Valero Energy Corp. — operate stations, but the overwhelming
bulk of retail gasoline sales are made by convenience stores or
independent owners. A spokesman for Western States declined to comment
on the hot-fuel issue or the vote.
"The conflict is plain," said Judy Dugan, research director for
Consumer Watchdog. The group is asking the Legislature and the office
of Gov. Arnold Schwarzenegger to look into the circumstances
surrounding the vote.
Boyd and his fellow commissioners rejected the accusations. Boyd, who
has been on the commission for seven years and spent 15 years as chief
executive of the California Air Resources Board, "has been a dogged
advocate of reducing our use of oil in the state of California," said
commission Chairwoman Linda Douglas, a leading California
environmentalist.
Additionally, an energy commission lawyer cited a letter from the state
ethics monitor, the Fair Political Practices Commission, concluding
that Boyd didn’t have a conflict and didn’t need to recuse himself from
voting on the hot-fuel report.
The commission’s study is the first comprehensive look at the hot-fuel
controversy in the country. Currently, only Hawaii requires service
stations to install automatic temperature compensation devices on
pumps, while Canadian retailers voluntarily use the equipment to make
sure they don’t provide extra energy to customers when the fuel
contracts in the 90% of the country that has long and frigid winters.
Allowing purchasers to get a temperature-adjusted gallon of fuel could
bring them a financial windfall, at least in theory, commission staff
reported. The extra gasoline and diesel could be worth an estimated
$437 million a year, Project Manager Gordon Schremp said.
But motorists are unlikely to pocket the money because nearly all
retailers would be expected to protect their profit by raising prices,
he cautioned. Others dispute that contention.
Nevertheless, installing the temperature compensation devices could
create a small benefit to motorists, about $258,000 a year, by creating
more price transparency that would allow consumers to better compare
prices among competing retailers, Schremp said. That would be more than
offset by up to $127 million to upgrade pumps as well as continuing
maintenance costs.
"The cost-benefit analysis concludes that the results are negative or a
net cost to society under all the options examined," Schremp’s report
said. Consumers might pay less than a quarter of a cent more per gallon
if the costs of the pump retrofits are passed through by retailers. Any
action to require new pumps would fall to the Legislature and
Schwarzenegger.
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