| Washington State House of Representatives |
BILL ANALYSIS |
| Transportation Committee | |
HB 2746
This analysis was prepared by non-partisan legislative staff for the use of legislative members in
their deliberations. This analysis is not a part of the legislation nor does it constitute a
statement of legislative intent.
Brief Description: Concerning the purchasing of fuel by agencies performing the metropolitan transportation function.
Sponsors: Representatives Jarrett, Morris and McIntire.
Brief Summary of Bill |
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Hearing Date: 1/21/08
Staff: Kathryn Leathers (786-7114).
Background:
Metropolitan Municipal Corporations
Metropolitan municipal corporations (Metros) are special purpose districts authorized to provide
public transportation services as well as other essential public services, including water supply,
sewage treatment, and garbage disposal. Metros may be formed in any area of the state
containing two or more cities, one of which must have a population of at least 10,000. In
addition, any county with a population of 210,000 or more in which a Metro has been established
may, by ordinance or resolution, assume the rights, powers, and obligations of the existing
Metro. Currently, the only established Metro is King County Metro Transit (King County
Metro).
King County Metro provides three services that use large amounts of fuel: bus, paratransit, and
vanpool. King County Metro typically purchases diesel and gasoline at market price on a daily
basis. Metros do not have specific authority to buy into the futures market. In a metro's
biennial budget process, fuel quantities are estimated based on the miles of operation and
efficiency of the fleets in each of the services, and service levels are projected several years in the
future. On average, King County Metro purchases 11 million gallons of fuel per year. The cost
per gallon is based primarily on estimates using the futures market for diesel and gasoline, and is
adjusted based on multiple factors, including for variance in the local market and delivery and
other local costs.
Strategies to Reduce Fuel Costs
In 2005, the Legislature directed the Department of General Administration (Department) to
explore and implement strategies designed to reduce the overall cost of fuel and to mitigate the
impact of market fluctuations and pressure on both short-term and long-term fuel costs. The
Department was also directed to submit an annual report to the fiscal committees of the
Legislature to include an update on its efforts to implement such strategies and recommendations
for improving or continuing the fuel cost mitigation program. In its 2007 report, the Department
made several recommendations, including the recommendations that the Governor and
Legislature establish a long-term hedging program and that the state and King County Metro
conduct a fuel hedging pilot project for biodiesel.
"Hedging" is the practice of eliminating the range of probable energy costs over a future time
period by locking in the price today for future needs. Hedging assumes the risk that the market
price may drop below the locked-in price, but provides the benefit of budget certainty. There are
costs and fees associated with implementing a fuel hedging program, and agencies that are high-volume purchasers of fuel are more likely to benefit from a hedging program than agencies that
are not high-volume purchasers.
Summary of Bill:
Metropolitan municipal corporations (Metros) and counties that have assumed the rights and
responsibilities of a Metro are authorized to explore and implement strategies designed to reduce
the overall cost of fuel and to mitigate the impact of market fluctuations and pressure on fuel
costs, including such strategies as hedging, futures contracts, and option contracts.
Appropriation: None.
Fiscal Note: Not requested.
Effective Date: The bill takes effect 90 days after adjournment of session in which bill is passed.