STAND. COM. REP. NO. 2076

Honolulu, Hawaii

RE:    S.B. No. 2986

Honorable Shan S. Tsutsui

President of the Senate

Twenty-Sixth State Legislature

Regular Session of 2012

State of Hawaii

Sir:

     Your Committee on Energy and Environment, to which was referred S.B. No. 2986 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose and intent of this measure is to make permanent the taxation rate for the liquid fuel naptha, which is sold for use in electric power generation.

     Your Committee received testimony in support of this measure from the Public Utilities Commission and Kauai Island Utility Cooperative.  Your Committee received comments on this measure from the Tax Foundation of Hawaii.

     The Kauai Island Utility Cooperative testified that if the current naptha fuel tax rate of two cents per gallon of naptha is allowed to sunset on December 31, 2012, the default state and County of Kauai fuel tax rates would apply.  The cooperative also testified that the higher tax rate would result in a tax liability that would be passed on to Kauai Island Utility Cooperative members, whose energy bills would increase by approximately seven percent.  Your Committee finds that this potential increase in energy costs would not be in the best interests of the public.

     Your Committee notes that no testimony was received on two other changes proposed by this measure.  The first change would make permanent the definition of "power-generating facility" in section 243-1, Hawaii Revised Statutes; the second change would repeal the retroactive effect of the naptha fuel tax rate established by Act 103, Session Laws of Hawaii 2007, as amended by Act 198, Session Laws of Hawaii 2009.  Your Committee notes that the proposed repeal of the retroactive effect of the naptha fuel tax rate should be further discussed if your Committee on Ways and Means chooses to hear this measure.

     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 S.B. No. 2986 and recommends that it pass Second Reading 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