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The Honolulu Advertiser
Posted on: Wednesday, April 24, 2002

2004 cap on gas prices proposed

 •  Maui gas dealers skeptical about price cap plan

By Kevin Dayton
Advertiser Capitol Bureau Chief

In the final days of the legislative session, House leaders have launched a new initiative to cap Hawai'i gasoline prices starting in 2004, arguing such a law may bring about gas price reductions even before the price controls take effect.

House members said they are attempting to gather support for their proposal in the Senate, where bills to cap gas prices have have stalled so far this year. Gov. Ben Cayetano also supports gas price controls, and scheduled a press conference for today to urge lawmakers to act to curb gas prices.

The new House proposal would require the state Public Utilities Commission to set maximum wholesale and retail gas prices beginning in 2004.

Delaying the effective date of the bill will give state officials time to further study the market and the effect of price controls, and permits lawmakers to fine-tune the new law in 2003 and 2004 if need be, said House Energy and Environmental Protection Chairman Hermina Morita.

In political terms, the new House proposal is an attempt to salvage gasoline price control legislation at a time when consumers are especially interested in the issue. The state settled its $2 billion antitrust lawsuit against the oil companies earlier this year for $22 million, an agreement that disappointed many consumers who believe they pay to much for gasoline.

That public interest and the fact that this is an election year provided extra momentum for gas price control bills. Price control supporters know they may lose that advantage next year, and also know Cayetano, who supports price controls, leaves office this year.

Albert Chee, public and government affairs manager for Chevron Hawaii, said the House plan is one of a half-dozen that have been floated in recent days, including one by the attorney general that is scheduled for a public hearing this afternoon.

Attorney General Earl Anzai's proposal is to cap gasoline prices in Hawai'i, tying them to prevailing gasoline prices along the West Coast. Anzai has predicted that would save Hawai'i drivers an average of 16 cents per gallon.

"There seems to be a lot of confusion and no consensus about what to do, which is the breeding ground for error," Chee said. "Certainly we're concerned that this ill-conceived price cap legislation will have unintended consequences in the marketplace, and provides one more example of the deteriorating business climate in Hawai'i, and another reason why companies will not risk investing in Hawai'i."

Chee said price controls tend to bar newcomers from entering the market and pressure existing companies to leave the state, meaning consumers will be left with fewer choices in a market that can't guarantee a reliable fuel supply.

"Inevitably, price caps lead to shortages and gas lines," Chee said.

Senate Commerce, Consumer Protection & Housing Chairman Ron Menor said he agrees that consumers are paying too much for gasoline, but believes lawmakers need to take more time to figure out the best way to curb gas prices.

Menor, D-18th (Waipi'o Gentry, Wahiawa), said he is "open" to the House proposal, but contends the state needs to move carefully to ensure any new law can stand up to any court challenges by the oil companies. He said it might be too late for the House proposal, which he called "rather complex and far-reaching."

"My position has been that there's no point in the Legislature passing out flawed gas pricing legislation just to say we did something in an election year, only to have the law overturned in court," he said.

Morita, D-12th (East Maui, North Kaua'i), said she believes passing a law that takes effect years from now will have a more immediate effect on the local market, much as the lawsuit did.

"As soon as the lawsuit was filed, gas prices did drop a little," she said. "And we think, with the vigilance of monitoring the oil companies, that the consumers will realize lower prices that way while we're pursuing this measure."

The next two years will be used to hire experts to scrutinize the local market, study records from the state's antitrust lawsuit over gas prices and gather more current pricing information, Morita said. That data should help avoid any "unintended consequences" of the new price control scheme, she said.

"The first step is to look at the reporting, deal with the empirical data, and review the court documents, and if (price controls) are the right step to do, then that will kick in," Morita said. "We just feel that there has to be that vigilance, that hammer out there to get something done."

Reach Kevin Dayton at kdayton@honoluluadvertiser.com or 525-8070.