Posted on: Saturday, April 9, 2005

Foes of price cap dealt new setback

By Sean Hao
Advertiser Staff Writer

An attempt to kill the state's new gasoline price cap law failed to pass a state Senate committee yesterday, though the issue is expected to come up again during conference committee hearings later this month.

The Ways and Means Committee turned down a provision that would give Gov. Linda Lingle the ability to kill the law capping wholesale gasoline prices, which is set to take effect this September.

Lingle, who opposes price controls, has said she won't implement the price caps, if given the option.

The Democrat-controlled Legislature passed the price cap bill last year by a wide margin. Nonetheless, recent maneuvering to give Lingle authority not to implement price caps shows that some Democrats are divided over whether the law is a good idea.

The House passed the gas-capikilling measure last month but Senate Consumer Protection and Housing Committee Chairman Ron Menor, D-17th (Mililani, Waipi'o), refused to schedule a hearing on the bill.

That prompted some Democrat senators to try to insert similar language into a separate bill that calls for more monitoring of the oil industry.

To add the language to House Bill 863, the Senate Ways and Means Committee needed the permission of Menor, an architect of the price cap law. Menor refused.

The issue likely will be raised again during conference committee hearings between the House and Senate, said Ways and Means Chairman Brian Taniguchi, D-10th (Manoa, McCully).

The provision in question appears to be gaining acceptance among Democrats because it puts responsibility for implementing the controversial law onto Lingle.

"The House bill was really a political ploy to pass the buck to the governor," Menor said yesterday. "The passage of that kind of legislation would effectively kill it."

Price cap proponents contend the law will provide consumers with relief from high gasoline prices, in part by tying wholesale prices more closely to up-and-down movements in crude-oil costs. Meanwhile, economists and a state consultant warn that the law could result in higher prices and shortages.

Lingle would prefer that price caps be repealed, said Ted Liu, director of the Department of Business, Economic Development and Tourism. "The governor has consistently taken the position that heavy-handed government intervention such as price caps on gasoline is not a good idea," Liu said.

The debate over the price cap comes while gasoline prices keep hitting new highs. The average price for regular gasoline on O'ahu hit a high of $2.399 a gallon, according to yesterday's AAA Daily Fuel Gauge Report.

Hawai'i's high gasoline prices are blamed on the market's small size, geographic isolation, high taxes and lack of competition. The price cap law will prevent wholesalers on O'ahu from charging more than 22 cents above the five-day average spot price for regular gasoline in Los Angeles, the Gulf Coast and New York. That formula is still subject to change by the state Public Utilities Commission.

A recent analysis by The Advertiser shows the price cap could have saved O'ahu drivers 5 cents a gallon, or $11 million, on regular gasoline last year, assuming retailers maintained a 12-cent margin. However, there's no guarantee that consumers would save money under the law, which does not cap what retailers can charge.

Calculated by the same method, the price of regular gasoline on O'ahu yesterday could have been $2.56 a gallon — or about 16 cents higher than current average prices — if the wholesale price cap were in effect. That's because Mainland prices have spiked in recent weeks. Hawai'i's gasoline prices have been slower to rise and fall than prices on the Mainland in recent years.

Senate Minority Leader Fred Hemmings, R-25th (Kailua, Waimanalo, Hawai'i Kai), yesterday criticized the legislative process that allowed Menor to block the provision giving Lingle the option not to implement price caps.

"That's a problem with the system, but there's a bigger problem with this," he said.

"The gas cap was foolhardy legislation from the get-go."

"They implemented a gas cap which they're now finding out may blow up in their face because gas prices they're indexed to are higher in other jurisdictions."

Menor denied that he was alone in opposing efforts by Republicans and some Democrats to kill the price cap law.

"This is a democratic process," he said. "No one legislator can bottle up legislation.

"I'm confident that I continue to have the support of the majority of my colleagues in the Senate. I think, at the end of the day, the price cap will stand and be implemented in September."

Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.