Posted on: Saturday, January 22, 2005
Consulting firm works for state PUC, Chevron
By Sean Hao
Advertiser Staff Writer
A consultant hired to help implement the state's gasoline price cap law said yesterday that a separate contract with a division of ChevronTexaco does not represent a conflict of interest.
Fairfax, Va.-based ICF Consulting was hired Nov. 30 to help the Public Utilities Commission figure out how best to put the caps into place this September. Among other things ICF will review a formula that caps wholesale gasoline prices and will gather information from Hawai'i's two refineries, which are owned by ChevronTexaco Corp. and Tesoro Petroleum Corp.
ICF, which will receive about $121,000 from the state, also is conducting environmental impact assessments for a West African pipeline being built by a different division of ChevronTexaco. ICF also developed a resettlement plan for a separate ChevronTexaco oil field in Nigeria. ICF did not disclose the value of the work being done for ChevronTexaco, but said that just 1 percent of its $140 million in revenues came from the oil industry.
Like many energy consulting firms, ICF works for both industry clients and government agencies. Last week ICF said it has multiple procedures in place to avoid the possibility of conflicts of interests, which may include having different divisions or individuals work on different projects or working closely with clients to disclose any potential issues.
"We also provide a confidential channel for our employees to voice concerns if they feel that our strict code of ethics is not being followed," the company said in a written statement. "You won't survive long in our business if your analytical procedures lack rigor or are seen as influenced by anything other than professional analysis."
Passed in 2002 and amended last year, Hawai'i's gasoline price cap is to take effect Sept. 1. The controversial law is the only one of its kind in the nation and is billed as a solution to Hawai'i's high gasoline prices.
Under the law a complex formula will cap the wholesale price of gasoline on O'ahu and Neighbor Islands. The price-cap formula will be based on spot prices in several markets across the nation, but does not set a ceiling on what retailers can charge.
Kris Nakagawa, chief legal counsel for the PUC, said ICF was hired in part because of its experience and familiarity with the oil industry.
"This is a new experience for us too, so we're just looking for people who know the industry and can help and assist us," he said. "I don't think you can go out and get somebody without knowledge."
ICF is expected to review various aspects of the price cap and advise the state in a report likely due in March.
The ICF report would follow a previous $250,000 study conducted by Irvine, Calif.-based Stillwater Associates. The study, which found the ceilings could result in higher, more volatile prices at the pump and possible shortages, has been heavily criticized by price cap proponents.
Because of the connection between ICF and ChevronTexaco the new report may come under greater scrutiny.
"We were concerned there'd be something like that," said Frank Young, a member of consumer advocacy group Citizens Against Gasoline Price Gouging and a price cap proponent.
Young said such associations are probably unavoidable, but do raise concerns.
"It's difficult because you can have the experience and everything else," he said. "But then you can say 'maybe I can get a big contract with Chevron, if I shut my mouth.' "
Under its contract with the PUC, ICF said its role is only to provide an assessment of the price cap mechanisms.
"How those regulations are shaped and implemented is for the Hawai'i Legislature to decide, not ICF Consulting," the company said. "Our primary role is to analyze methods by which the commission can implement the required legislation consistent with the commission's goals of achieving competitive market pricing for wholesale gasoline supply."
Including the $121,000 deal with ICF, the PUC has budgeted a total of $337,000 through June 30 to put the cap in place. The annual cost of enforcing the cap, which includes money for four additional employees, is estimated at $322,000, the PUC said.
Part of the impetus for the cap was public frustration over Hawai'i's high gasoline prices. Oil companies operating in the state maintain gasoline prices remain high because of the cost of doing business in Hawai'i and the state's high taxes.
Other commonly cited factors include the state's geographic isolation, lack of wholesale-level competition and relatively small market.
As of yesterday, Hawai'i had the highest average price of gasoline in the nation.
The average price for a gallon of gasoline statewide yesterday was $2.424, about 2 cents below a record set Nov. 16 of last year, according to AAA travel club. The national average was $1.835 for a gallon of regular, which was down nearly 22 cents from a record set May 26.
Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.
