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The Honolulu Advertiser
Posted on: Thursday, April 25, 2002

Governor warns of Capitol inaction

By Kevin Dayton
Advertiser Capitol Bureau Chief

Gov. Ben Cayetano's calculation is that lawmakers have a few days left to "hit a couple of home runs" for consumers with bills that would cap gas prices and regulate health insurance premiums.

But both measures are clearly in trouble, and Cayetano yesterday urged House and Senate leaders to press ahead with each of them as the 2002 Legislature reaches its final days. He suggested there may be consequences if lawmakers fail, and warned he will veto any effort to "whitewash" the issues by ordering up studies or passing ineffective solutions.

"There are some issues which I think are so clear that it's going to be difficult for the consumers, the paying public, to understand why nothing was done," Cayetano said at a press conference to discuss gasoline price caps and health insurance regulation.

"I would hope that they would take these steps because these would be milestone steps for what otherwise might be kind of a dreary legislative session," Cayetano said.

All bills are supposed to be in their final forms by midnight tomorrow.

State Attorney General Earl Anzai said there is no economic reason for Hawai'i consumers to be paying the highest gas prices in the nation before taxes, and warned consumers and lawmakers not to be "fooled and manipulated by big oil."

He said that since December, with the Legislature in session, local gas prices declined while prices have gone up all across the nation along with the cost of crude oil.

"There's no reason to believe that just because gas prices are low today, that they're going to stay low," Anzai said.

Ken G. Smith, marketing manager for Chevron in Hawai'i, said prices have actually increased since the start of the year, but that the increases were "dampened" by increased competition from discounters such as Costco. That competition demonstrated the market is working, Smith said.

Lawmakers heard opposition to the administration's proposal for gas price controls from small dealers, Costco, Chevron, Tesoro Hawaii and others at a public hearing yesterday on a proposed new draft of the bill.

Faye Kurren, president of Tesoro Hawaii, said the administration's proposal for price caps uses an arbitrary formula and does not assure the oil companies or wholesalers a reasonable rate of return.

The price caps would tend to favor companies with more stations that could achieve economies of scale, which would have a better chance of surviving and being profitable.

Tom Malone, president and chief executive officer of Aloha Petroleum Ltd., said in the past three years Aloha's return on investment was negative 3 percent.

"This price cap would potentially make things very, very difficult for Aloha and its continuing operations," because the administration bill would tie prices to an index of West Coast prices, which have no bearing on costs in Hawai'i or the Hawai'i gasoline market, Malone said.

The House-Senate conference committee considering the gas cap measure, Senate Bill 2179, took no action last night.

Price control bills have so far stalled in the Senate, where a number of key senators, including Senate President Robert Bunda and Senate Commerce and Consumer Protection Chairman Ron Menor, have expressed doubts about the proposal. Menor has said he believes that consumers are paying too much, but said the state may need to spend more time studying the best way to fix the problem.

Menor, D-18th (Mililani, Waipahu, Crestview), and others have worried the state might be sued if it attempts to cap prices, but Cayetano urged lawmakers to press ahead.

"I would say to the Senate president, let us take that risk," Cayetano said. "Let us go forward and try to do something for the people of this state and the consumers of this state, and if there (is) litigation, as there probably will be, then let the courts decide. What is his alternative, that's what I'd like to know. To do nothing?"

Another House-Senate conference committee is scheduled to meet today on House Bill 1761, which would give the state insurance commissioner authority over health insurance rates.

House Speaker Calvin Say, D-18th (Palolo, St. Louis, Kaimuki), has expressed doubts about the bill, which would allow the state insurance commissioner to review and reject health insurance rates if they are found to be too high, too low or discriminatory.

Say said the proposal may have to wait for the state insurance commissioner's office to complete a study of HMSA.

HMSA officials have said no state has the sort of regulation the Cayetano administration is proposing and that it could actually cause health insurance rates to increase.

Cayetano said his proposal is a reasonable effort to regulate a market that he said suffers from too little competition.

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