STAND. COM. REP. NO. 946

Honolulu, Hawaii

RE:    H.B. No. 370

       H.D. 2

       S.D. 1

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fifth State Legislature

Regular Session of 2009

State of Hawaii

Madam:

     Your Committee on Energy and Environment, to which was referred H.B. No. 370, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this measure is to revert the license tax on liquid fuels back to one cent per gallon for diesel oil used in electric power generation by a power-generating facility regulated by the Public Utilities Commission.

     Testimony in support of this measure was submitted by one private organization.  Testimony in opposition to this measure was submitted by two state departments.  Comments were on this measure were submitted by one private organization.  Written testimony presented to your Committee may be reviewed on the Legislature's website.

     Your Committee finds that Act 209, Session Laws of Hawaii 2007 (Act 209), increased the tax on diesel fuel from one cent to two cents per gallon, regardless of use.  Your Committee believes that the Legislature, in passing Act 209, did not intend to impact electrical power generating facilities with this tax increase.  Therefore, the reversion to the one cent rate is appropriate.

     Your Committee also finds that, while the measure will have an impact on the State Highway Fund, it is important that the State move forward to provide fairness to electricity customers across the State.  For example, Kauai Island Utility Cooperative (KIUC) currently generates approximately one-half of its annual production of electricity using diesel oil.  The additional one cent tax annually adds about $150,000 to its costs, which are passed to KIUC ratepayers.

     Your Committee has amended this measure by:

     (1)  Changing the effective date of the measure from July 1, 2020, to July 1, 2009; and

     (2)  Making nonsubstantive, technical changes for consistency and style.

     As affirmed by the record of votes of the members of your Committee on Energy and Environment that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 370, H.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 370, H.D. 2, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Energy and Environment,

____________________________

MIKE GABBARD, Chair