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The Honolulu Advertiser
Posted on: Wednesday, February 15, 2006

House sours on gas cap

By Sean Hao and Greg Wiles
Advertiser Staff Writers

House lawmakers will likely vote to repeal Hawai'i's controversial gas cap law.

A measure that would suspend the law on July 1 breezed through three House committees yesterday and has the support of the House majority leader. The bill could face a tougher test in the Senate where backing for the gas cap is strongest.

Hawai'i adopted the nation's only price controls on gasoline in September and the results have been mixed.

The law only caps wholesale prices, and a state study released earlier this month showed that retail gasoline prices haven't fallen as quickly as wholesale prices. Futhermore, the cap hasn't done much to restrain oil company profits. Tesoro Petroleum Corp. said last week it had its most profitable quarter in at least three years under the price caps.

Some consumers would welcome a repeal of the cap.

"It's not working," said Joe Rosa, a retired state employee in Lihu'e. "I don't think anybody liked it."

Rosa said he didn't like the pricing volatility and the games that gasoline stations and drivers played. People would wait until Monday when a new cap took effect to buy gasoline if prices were going down, or fill up on Sunday if prices were going up.

"When you put these limits on it, it messes up the economics of it," said Alexander LeBon, a University of Hawai'i student in Kailua. "If you let the market be, it should work out for the best."

In addition to suspending the gas cap, House Bill 3115 would boost oversight and monitoring of the state's oil industry. Oil companies will have to disclose crude oil costs and sources, refinery operating expenses, marketing and distribution expenses, and corporate overhead expenses, under the proposal.

House Majority Leader Marcus Oshiro, D-39th (Wahiawa), said he now supports suspending the cap in favor of stepped-up reporting by the oil industry.

The bill would compel the state to stop enforcing the cap on July 1, and completely repeal the cap at the end of 2007.

"It's a suspension, but it's also being cautious," Oshiro said. "I think it's important to have the gas cap provision readily available should transparency not provide fair gas prices to consumers."

Yesterday the repeal bill passed the Energy & Environmental Protection Committee (nine votes yes, none opposed, one excused); the Committee on Consumer Protection & Commerce (10 yes, none opposed, one excused); and the Committee on Judiciary (10 yes, none opposed). The bill now goes to the House finance committee.

The oil industry, which has opposed the gas cap from the beginning, yesterday welcomed a possible suspension of the price restrictions. "I think it's a positive step in the right direction," said Melissa Pavlicek, a spokeswoman for the Western States Petroleum Association, which represents Chevron, Shell Oil and Tesoro Petroleum.

Since the price cap took effect, prices have been more volatile and geographically disparate. The law was designed to link Hawai'i's historically stable but high prices to Mainland prices.

Next Monday, gasoline prices could fall 17 cents a gallon, according to Advertiser calculations. That would be the lowest price cap level since early January. The state will officially set next week's caps today.

Gov. Linda Lingle has said she favors more transparency among oil companies instead of a price cap.

However, it's not clear if the bill to repeal the cap will reach Lingle's desk in its current form.

Last year the House passed a bill that would have essentially killed the price cap law, but it failed in the Senate.

This year Senate leaders have said they favor amending the law to possibly lower gasoline prices by as much as 16 cents a gallon.

"I would oppose any bill that would suspend our gasoline price cap legislation, especially since the law has provided a benefit to consumers in terms of generating price savings over a period of time," said Sen. Ron Menor, D-17th (Mililani, Waipi'o), an architect of the price cap law. "I view the House position as a change in course that could be viewed by the public as flip-flopping and placating the interests of the oil industry.

"I hope they'll reconsider their position and keep in mind the changes we're proposing."

Reach Sean Hao at shao@honoluluadvertiser.com and Greg Wiles at gwiles@honoluluadvertiser.com.