Ensuring Gasoline Pump Accuracy and Consumer Confidence in a Changing Market Written by: Patrick Vanasse For: Industry Canada, Office of Consumer Affairs September 2003 Ensuring Gasoline Pump Accuracy and Consumer Confidence in a Changing Market Acknowledgments This research project was coordinated by Geneviève Reed, Head of the Research and Representation Service, and conducted by Patrick Vanasse, who wrote the report. Option consommateurs wishes to thank Industry Canada for its financial support for this research project. The reproduction of this report is permitted provided that the source is credited. However, the reproduction of this report or any reference to its contents for purposes of publicity or profit is strictly prohibited. Legal Deposit Bibliothèque nationale du Québec National Library of Canada ISBN: 2–921588–57–9 Option consommateurs 2120, rue Sherbrooke est, bur. 604 Montreal, Quebec H2K 1C3 Telephone: (514) 598-7288 Fax: (514) 598-8511 E-mail: [email protected] Report of Option consommateurs 2 Ensuring Gasoline Pump Accuracy and Consumer Confidence in a Changing Market EXECUTIVE SUMMARY The purpose of this policy paper is to express the position of Option consommateurs on the strategic direction of Measurement Canada in conjunction with the Retail Petroleum Trade Sector Review (RPTSR). In this sector review, Option consommateurs’s concern is to ensure that gas pump accuracy and consumer confidence are preserved through suitable regulation of the industry by Measurement Canada. In 1999, Measurement Canada embarked on a process of reviewing the scope of its intervention in trade measurement. In all, 39 trade sectors will be reviewed by 2013 to establish a level of intervention that allows for optimal use of the agency’s resources, adaptation to technological and market changes, and consumer protection. The trade sector reviews will consult industry and consumer stakeholders as well as other interest groups in determining the changes to be made to the agency’s intervention. Some of these reviews directly affect consumers, since they concern sectors in which a measured quantity of a product is sold directly to them. Option consommateurs has an interest in these reviews; it participated in the Electricity Trade Sector Review in 2001 and in the Natural Gas Trade Sector Review and the Retail Food Trade Sector Review in 2002. This year, Option consommateurs is participating in the Water Trade Sector Review and the RPTSR. Measurement Canada’s involvement in the retail petroleum sector is multifaceted, and changes are in the offing with a view to making its intervention more effective and filling certain gaps. Measurement Canada is considering certain possibilities and wants to consult stakeholders on them. First, Measurement Canada plans to expand the delegation of certain of its activities to third parties through its Accreditation Program. In particular, Measurement Canada intends to use this program for maintenance and calibration of measurement standards, approval of new pump types, initial pump inspection and periodic re-inspection. Second, this trade sector review is designed to fill gaps in the agency’s intervention; specifically, the unregulated status of pump service companies and the significant decline in its periodic inspection activities. A comparison between Canadian and U.S. regulatory practices for retail gasoline trade measurement leads us to make certain observations. First, U.S. regulations differ from those of Canada in their decentralized jurisdictionality. While in Canada, a central national agency is responsible for developing and enforcing regulations, this responsibility is shared in the United States among the federal, state and, in some cases, county levels. This situation leads to a sharing of the resources necessary to the enforcement of metrological standards. In Canada, resource sharing is accomplished through the Accreditation Program, under which private Report of Option consommateurs 3 Ensuring Gasoline Pump Accuracy and Consumer Confidence in a Changing Market entities carry out some tasks of the federal agency. In the United States, the sharing of responsibilities with the states and counties greatly diminishes the need to contract out to the private sector, though this is done for aspects such as traceability and manufacturing of measurement standards. At first sight, decentralization might seem like an attractive solution to Measurement Canada’s problems of resource cutbacks, since it keeps responsibility for weights and measures regulation in the hands of the government. But another effect of decentralization in the United States is to cause disparities among the states, a problem the federal government tries to alleviate by adopting national standards (NIST Handbook 44, Weights and Measures Law, Registration of Service Agencies, National Type Evaluation Program, Handbook 130) and encouraging states to adopt them as well. This problem has not been completely resolved because some states have not adopted the current, or any, NIST standards — some are up to eight years behind — while others adopt their own versions of these standards. Our study of California and Florida clearly illustrates these interstate differences. Another important difference between the two countries has to do with their policies on contracting to the private sector. Measurement Canada, through the Accreditation Program, makes considerable use of private entities to handle some of its workload and responsibilities. In the United States, this practice is not used for initial and periodic inspection. The states we studied carry out these tasks themselves, and reports from previous years (electricity and natural gas) do not indicate that a situation like the one existing in Canada has ever existed there. However, the National Conference on Weights and Measures (NCWM) is allowed to certify private laboratories to conduct type approvals. Apart from their different regulatory frameworks and Measurement Canada’s broader use of accreditation, our comparison between the United States and Canada reveals similarities in the areas of type approvals, development of metrological standards, traceability of measurement standards, initial inspection and complaint handling. However, there are further important differences between the two countries in the area of periodic inspection and supervision of pump service companies. The two states we studied inspect pumps regularly, and California goes as far as to require annual inspection. In terms of supervision of service companies (including those servicing gas pumps), the United States has adopted a national standard (NIST Handbook 130) and 40 states have relevant requirements (which may differ from NIST). The two states studied have laid down clear requirements for gas pump service companies as regards the use of certified measurement standards, knowledge of state requirements, and the obligation to report work done to the competent weights and measures authority. Our focus group participants stated their belief that weights and measures accuracy is regulated in Canada, but very few of them could name the regulatory body responsible. When they learned Report of Option consommateurs 4 Ensuring Gasoline Pump Accuracy and Consumer Confidence in a Changing Market that Measurement Canada is the body in question, most of the participants felt reassured, though some doubted Measurement Canada’s capacity to fulfil these functions. On the whole, the participants trusted the accuracy of gas pumps, particularly those owned by the large oil companies which, they assumed, want to protect their reputation. On the other hand, they feared that small independent stations might attempt to commit fraud, or that they might skimp on pump inspections to save money. The participants did not know whether or not gas pumps are currently regulated and inspected; they would like them to be inspected at random so as to detect foul play and negligence. The participants were concerned by the 20% rate of non- compliance, which they see as justifying Measurement Canada’s intervention. They did find it reassuring that errors detected were generally less than 1% and were not skewed in favour of the vendors or the consumers, though a few participants remained concerned. The participants also expressed their opinion that all pump types be approved by Measurement Canada, that all new pumps be inspected before being put into service, that Measurement Canada continue to conduct spot inspections of pumps, and that the agency establish regulations requiring service stations to inspect and recalibrate their pumps regularly. Most participants were quite open to the idea of Measurement Canada’s accrediting other entities to perform mandatory initial and periodic pump inspection. In that case, Measurement Canada’s role would be to make random inspections in order to verify that the periodic inspections are being carried out. Finally, the participants agreed that there should be an accreditation process for companies and technicians maintaining and calibrating gas pumps. The results of the Canada-wide survey led to the following observations. Initially, consumers had high confidence in gas pump accuracy, but this was more intuitive than based on facts, since a non-negligible proportion did not believe that a government agency regulates these devices. When they learned that periodic inspection of gas pumps is not mandatory, the majority stated that this situation diminished their confidence in the pumps’