Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Consumer Protection and Commerce, to which was referred S.B. No. 3193, S.D. 2, H.D. 1, 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, which imposed maximum pre-tax wholesale and retail gasoline prices on the sale of gasoline in the State.

Your Committee finds that Act 77 established a baseline price for regular unleaded gasoline by taking an average of the spot price for regular unleaded gasoline in the Los Angeles, San Francisco, and Pacific Northwest markets. To this baseline price were added certain adjustment factors, including a location adjustment factor, a market margin adjustment factor, a neighbor island location adjustment factor, and a neighbor island marketing factor, which resulted in the maximum pre-tax wholesale gasoline price. To this maximum pre-tax wholesale gasoline price was added a retail marketing margin factor to arrive at the maximum pre-tax retail gasoline price.

For reasons set forth in section 1 of this measure, this measure:

Your Committee received testimony in opposition to this measure from the Department of Business, Economic Development, and Tourism based on empirical, technical, and analytic evidence contained in the September 2003 report, mandated by Act 77. Testimony in opposition was also received from Aloha Petroleum, Ltd., Tesoro Hawaii Corporation, Western States Petroleum Association, Chamber of Commerce of Hawaii, Hawaii Island Portuguese Chamber of Commerce, and Hawaii Transportation Association.

Five jobbers and nineteen retail gas dealers submitted testimony in opposition, expressing concern for their businesses and livelihoods. A number of individuals, including employees of the petroleum industry, submitted testimony in opposition to this measure.

Testimony in support of this measure was received from the Hawaii Government Employees Association, Advocates for Consumer Rights, and three individuals.

The Public Utilities Commission expressed concern with this measure, although it supports section 10 of this measure, which requires a report from the Public Utilities Commission recommending the number of new staff positions, the costs of the new positions, and other anticipated costs required for the implementation and operation of Chapter 486H, Hawaii Revised Statutes, twenty days before the convening of the Regular Session of 2005.

Your Committee finds that a more readily available and appropriate baseline for gasoline prices, rather that the national weighted average spot price for selected unleaded gasoline, would be the national unweighted average spot price of all regular unleaded gasoline as reported by the Oil Price Information Service. Further, by removing the baseline from the West Coast average spot price to a national weighted average spot price, the amounts stated in this measure for the location adjustment factor, the neighbor island location adjustment factor, the mid-grade adjustment factor, and the premium adjustment factor may require further adjustment.

Your Committee further finds that, since the Auditor is to undertake a study to determine the most appropriate baseline for determining the maximum pre-tax wholesale gasoline price and the most appropriate location, market margin, neighbor island location and marketing margin, mid-grade, and premium adjustment factors, the imposition of the gasoline price limits on July 1, 2004, may not be advisable.

Your Committee is informed that the requirement that at least eighty-five per cent of all gasoline sold in the State by January 1, 2006, contain ten per cent ethanol by volume, is set forth in another measure under consideration in this House.

Finally, your Committee believes that the legislative task force to be established pursuant to section 8 of this measure to investigate the petroleum industry and its operations and impacts on the islands of Kauai, Maui, Molokai, Lanai, and Hawaii should be composed of legislators from those islands.

Accordingly, your Committee has amended this measure by:

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