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No benefit to motorists in a 'hot fuel' fix, state panel says

California Energy Commission says the costs of compensating for gasoline temperature would outweigh the gains in fuel volume.

March 12, 2009|Marc Lifsher

SACRAMENTO — 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.

For The Record
Los Angeles Times Friday, March 13, 2009 Home Edition Main News Part A Page 4 National Desk 1 inches; 32 words Type of Material: Correction
Gas station pumps: A story in Business on Thursday about a California Energy Commission report on the so-called hot-fuel phenomenon said the panel's chairwoman was Linda Douglas. Her name is Karen Douglas.

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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marc.lifsher@latimes.com

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