Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Energy and Environmental Protection, to which was referred S.B. No. 3193, S.D. 2, entitled:

begs leave to report as follows:

The purpose of this measure is to make certain amendments to Act 77, Session Laws of Hawaii 2002, that imposed maximum pre-tax wholesale and retail prices on regular unleaded gasoline sold in the State, which take effect on July 1, 2004.

Specifically, your Committee finds that this measure:

Your Committee received testimony in opposition to this measure from the Department of Business, Economic Development, and Tourism, Aloha Petroleum, Ltd., Chevron Hawaii, Tesoro Hawaii Corporation, and the Western States Petroleum Association. Also offering testimony in opposition were three jobbers, eleven retail gasoline dealers, and several individuals. The Public Utilities Commission expressed some concerns with this measure

Your Committee received testimony in favor of this measure from the Advocates for Consumer Rights and five individuals.

While your Committee is in agreement that the West Coast markets may be too volatile for establishing a baseline gasoline price and that a national weighted average spot price of selected unleaded gasoline, as reported by the Oil Price Information Service, may be more appropriate, your Committee feels that the Auditor should be directed to address the question as to what may be the most appropriate method of determining the baseline price of unleaded gasoline. The Auditor should further address whether there may be more appropriate methods for establishing and adjusting the location adjustment factor, the marketing margin factor, the Neighbor Island location and marketing factors, the mid-grade adjustment factor, and the premium adjustment factor.

Your Committee finds that a basis for the imposition of price limits for diesel fuel has not been established. The Auditor should be directed to address this issue along with reviewing the need for price limits on the retail sale of gasoline. For these and other reasons, your Committee believes that the imposition of the gasoline price limits should be delayed until July 1, 2005.

Your Committee also believes that, due to the lack of adequate highway access in the district of Hana on the island of Maui, the Hana district should not be subject to the imposition of gasoline price limits.

Your Committee further finds that Act 77 gave the responsibility of collecting and analyzing data received from the petroleum industry and performing periodic audits of the petroleum industry to the Department of Business, Economic Development, and Tourism. However, your Committee believes that the responsibility of collecting and analyzing this data and performing periodic audits correctly belongs to the Auditor.

Your Committee further believes that, in fairness to gasoline retailers, no seller of gasoline products to retailers should be permitted to discriminate and offer a lower price or discounts or provide an uneven supply in time of shortage to any favored retailer.

Your committee further finds that in Act 257, Session Laws of 1997, the Department of Business, Economic Development, and Tourism was directed to adopt rules pursuant to Chapter 91, Hawaii Revised Statutes, requiring that gasoline sold in the State contain ten per cent ethanol by volume. However, no time constraint was imposed and, to date, no rules implementing the requirement of the inclusion of ethanol in gasoline have been adopted.

Finally, your Committee finds that the petroleum industry and its operations on the islands of Kauai, Maui, Molokai, Lanai, and Hawaii differ from its operations on Oahu, thereby warranting a special legislative task force to study the petroleum industry, its infrastructure, facilities, and operations on the Neighbor Islands and the resultant impact on gasoline consumers on those islands.

Accordingly, your Committee has amended this measure by:

As affirmed by the record of votes of the members of your Committee on Energy and Environmental Protection that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 3193, S.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 3193, S.D. 2, H.D. 1, and be referred to the Committee on Consumer Protection and Commerce.