Cap on gas prices sought
By Frank Cho
Advertiser Staff Writer
A legislative backlash is mounting against Hawai'i's oil industry as several leading critics of the state's decision to settle its $2 billion lawsuit against the oil companies are calling for an investigation of the settlement and said they would introduce legislation that would cap the state's high gasoline prices.
Key lawmakers are introducing or supporting legislation that would, among other things, cap how much oil companies can charge dealers for the gasoline they supply. Another proposed bill would introduce fines of up to $10,000 per day against oil companies who violate state laws.
Some legislators said they may also try to reject the state's reported $20 million settlement with the oil companies that even Gov. Ben Cayetano has called disappointing.
"I know there are many people who feel the settlement may have shortchanged consumers in this case," said state Sen. Ron Menor, D-Waipahu-Crestview-Mililani, the chairman of the Senate's commerce, consumer protection and housing committee. "We are researching whether the Legislature would have any authority to reject the settlement if it is deemed unsatisfactory."
It's unclear how much, if any, authority the Legislature has in regulating gasoline prices, experts say. The proposals will likely face opposition from some legislators and the oil industry, which tend to view state price controls as ineffective.
They point to Hawai'i's electricity industry, which under state regulation, still has some of the highest rates in the country.
"Measures such as price restrictions oftentimes do not have any net benefit to consumers," said Nathan Hokama, spokesman for Tesoro Hawaii, which operates the bigger of the state's two oil refineries.
At Chevron, the state's second refiner and leading supplier of gasoline to the retail market, said it also would oppose any bills that would restrict prices.
"Fundamentally, we disagree with price controls," said Albert Chee, a spokesman for Chevron Hawaii. "I can't comment on the specifics of the proposed legislation until we have had a chance to review it."
The state attorney general has investigated the oil industry three times in the past 10 years for its retail gasoline pricing practices and in 1998 filed an antitrust lawsuit against several companies alleging they conspired to keep prices artificially high. But the state attorney general decided to settle the case for about $20 million — 1 percent of the $2 billion in damages the state claimed as part of its suit — just before it was to go to trial, legislators said.
"I think after the litigation, I really think that we have to start looking at ways the state can control or somehow have some oversight of gasoline prices," said state Rep. Kenneth Hiraki, D-Downtown-Ala Moana, and chairman of the house's consumer protection and commerce committee.
Menor said he plans to hold hearings in the next couple of weeks and call Anzai and Spencer Hosie, who led the state's legal team, to answer questions about why the state was forced to settle and what will happen to the settlement money. Hiraki has also said he wants to hold similar hearings.
"We are considering setting up our own investigation. With the settlement, some people are very anxious," Hiraki said.
State Attorney General Earl Anzai said he welcomed any legislative inquiry.
"I will fully participate in any legislative inquiry because this whole gasoline price issue is very important. The more light shed on this matter the better," Anzai said, but he declined to discuss specifics of the state's settlement.
Legislators said they may look at the roughly $6.8 million in attorney fees and expenses already paid to outside lawyers hired by the the state. The state is expected to pay another $4.4 million plus a still undisclosed amount for expenses that have been filed under seal with the court, state officials said.
For years, Hawai'i has consistently ranked as one of the most expensive places in the country to buy gasoline. During the litigation, oil company lawyers said a lack of competition and not Hawai'i's high costs kept gasoline prices high.
State Rep. Paul Whalen, D-D-Kona-Ka'u, along with Hiraki, is proposing a bill that would tie the wholesale price of gasoline to the average price of a barrel of oil multiplied by 3.5 cents.
For example, if the average price of a barrel of oil was $20 and then multiplied by 3.5 cents, dealers would be paying about 70 cents a gallon, That is about 36 percent lower than the $1.10 the oil companies now charge dealers. After adding taxes and margins for dealer profits, the pump price to consumer would be about $1.25 a gallon compared to nearly $2 a gallon many Hawai'i drivers have been paying.
"It's a very simple bill. It's fair to all parties, and it will push down our gas prices by 60 cents a gallon," Whalen said. But whether such a measure has enough support is not clear yet.
Terry Nui Yoshinaga, D-Moi'li'ili-McCully-Pawa'a, said the state should force the oil companies to provide more information about gasoline pricing before setting price caps.
