Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection and Housing, to which was referred S.B. No. 3193 entitled:

begs leave to report as follows:

The purpose of this measure is to amend certain provisions of Act 77, Sessions Laws of Hawaii 2002, relating to the imposition of limits on the pre-tax wholesale and retail prices of regular unleaded gasoline in the State. In 2002, the Legislature found that the gasoline market in Hawaii was dominated by an uncompetitive oligopoly. Major oil producers were realizing profit margins in the State that were much higher than those in other regional markets on the Mainland. The end result was that consumers in Hawaii were consistently paying the highest gasoline prices in the Nation.

Your Committee on Commerce, Consumer Protection, and Housing finds that the situation remains unchanged. Hawaii's gasoline consumers continue to pay the highest gasoline prices in the country, without any acceptable justification, while gasoline prices have fallen considerably on the Mainland. Accordingly, strong and effective measures are needed to bring relief to Hawaii's consumers from high gasoline prices. Meanwhile, the petroleum industry and critics of Act 77 have failed to offer any effective and meaningful alternatives to Act 77 or to the contents of this measure.

While continuing to support the intent and content of Act 77, your Committee believes that Act 77 can be improved upon and made more effective in reaching its goal of lower gasoline prices. Act 77 imposed limits on the price of gasoline using a benchmark based on the average spot pipeline daily prices for regular unleaded gasoline in the markets of Los Angeles, San Francisco, and the Pacific Northwest. However, your Committee finds that these regional markets may be too volatile and not an appropriate basis for determining maximum gasoline prices for Hawaii.

Your Committee further finds that it may be appropriate to extend the gasoline price limits to mid-grade and premium gasoline and to diesel fuel. Further, due to the small size and unusual characteristics of the gasoline markets of Molokai and Lanai, gasoline price limits may not be appropriate for those markets at this time.

This measure:

Your Committee received testimony in favor of this measure from seven individual gasoline consumers and representatives of Citizens Against Gasoline Price Gouging and Advocates for Consumer Rights, Hawaii Government Employees' Association, Hotel Employees and Restaurant Employees Local 5, AFL-CIO, and Hawaii Alliance for Retired Americans. Also, testimony in favor of this measure was received from a retail gasoline dealer on the island of Maui.

Your Committee received testimony in opposition to this measure from the Department of Business, Economic Development, and Tourism, the Chamber of Commerce of Hawaii, Tesoro Hawaii Corporation, Aloha Petroleum, Ltd., Western States Petroleum Association, Hawaii Petroleum, Inc., Maui Petroleum, Inc., Hawaii Island Portuguese Chamber of Commerce, International Brotherhood of Electrical Workers, and two gasoline jobbers, as well as from several retail gasoline dealers.

The Public Utilities Commission expressed some concerns regarding this measure.

Your Committee is mindful of the concerns raised in response to this measure and is especially cognizant of the concerns raised by some retail dealers, including several Neighbor Island retail dealers. Your Committee will attempt to address these concerns as the measure is further considered.

Your Committee has amended this measure by making some technical nonsubstantive changes for purposes of clarity and consistency.

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