Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committees on Energy and Environmental Protection and Consumer Protection and Commerce, to which was referred H.B. No. 1770 entitled:

beg leave to report as follows:

The purpose of this bill is to protect Hawaii's consumers by bringing oil companies under the regulatory jurisdiction of the Public Utilities Commission (PUC), which will facilitate access to oil pricing information and require a justification for gasoline prices.

The Hawaii Renewable Energy Alliance and one concerned individual testified in support of this bill. Testimony in opposition was submitted by the Department of Business, Economic Development, and Tourism, Consumer Advocate, and one concerned individual. PUC commented on the bill.

Your Committees find that the price of gasoline in Hawaii has remained artificially high in comparison to gasoline prices on the mainland. Further, the wholesale price of crude oil to refineries in Hawaii has remained constant while in other markets the price of the same crude oil has experienced a 50 percent drop. Your Committees find that a disturbingly disproportionate amount of oil company profits come from Hawaii's small, but captive market.

Although your Committees are proponents of a free market, your Committees feel that the interests of Hawaii consumers cannot be adequately protected under current market conditions. It is the intent of your Committees to regulate oil companies as public utilities that fall under the purview of the PUC, as a means of gathering more information on the oil companies' rate setting policies. This will ensure that Hawaii's consumers are not being charged excessively for gasoline.

Your Committees recognize that at this time, many questions remain unanswered with regards to this proposed measure. However, your Committees believe that until the terms of the settlement of the antitrust suit Anzai v. Chevron are disclosed to the public, and more information is made available about the most effective methods of lowering excessive gasoline prices, this bill should remain alive as a means to gather pertinent information on the rate setting practices of the oil industry.

Your Committees have amended this measure by:

As affirmed by the records of votes of the members of your Committees on Energy and Environmental Protection and Consumer Protection and Commerce that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 1770, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 1770, H.D. 1, and be referred to the Committee on Finance.