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The Honolulu Advertiser
Posted on: Wednesday, January 25, 2006

Democrats join call to repeal gas cap law

By Sean Hao and Dan Nakaso
Advertiser Staff Writers

Senate leaders yesterday sought changes in the state's gasoline price cap law that could shave retail prices by as much as 16 cents a gallon. Other lawmakers called for repeal of the cap.

The controversial gas cap, the nation's only limit on prices at the pump, took effect in September with mixed results.

The statewide average retail price of $2.88 a gallon for regular yesterday was still the highest in the nation.

"I don't think they should have the gas cap," said Jana Yanagisako, 22, of Hawai'i Kai. "It just doesn't seem to be working."

The law was championed by Democrats in response to years of consumer frustration with gas prices that seemed to be higher than Mainland prices and resistant to movements in the oil market.

Yesterday 12 Democrats in the House joined Republican lawmakers and Gov. Linda Lingle in pushing for a repeal of the law.

Democratic leaders in the Senate, however, said they expect the repeal to fail and they want to amend the law to make it more effective.

Sen. Ron Menor, D-17th (Mili-lani, Waipi'o), an architect of the price cap law, said that if the proposed amendments are adopted they would "have the effect of lowering the ceiling and thereby requiring the oil companies to drop their prices. ... Hawai'i's consumers could save up to 16 cents per gallon on gasoline when these changes go into effect."

Menor, Senate President Robert Bunda, D-22nd (North Shore, Wahiawa), and other senators proposed changing the complex formula that's used to set maximum wholesale prices and lowering the excise tax on gasoline. The state does not regulate retail prices.

Other proposed changes discussed yesterday included adding the Singapore market to the three Mainland markets Los Angeles, Gulf Coast and New York now used as a benchmark for Hawai'i's price cap. The cap, which is adjusted weekly, would be based on the average price in the three lowest markets, with prices from the fourth market thrown out of the average.

That should lower price volatility and reduce prices, Menor said. He also wants to make changes that would attempt to ensure that Neighbor Island wholesalers and jobbers, who deliver gas to gas stations, get a fair share of industry profits.

Senate leaders said they expect the House to adopt bills calling for similar adjustments to the cap.

Oil industry officials have opposed the gas cap from the beginning, and any changes to the law won't alter their position.

"We would still oppose the price cap law," said Melissa Pavlicek, a spokeswoman for the Western States Petroleum Association, which represents ChevronTexaco, Shell Oil and Tesoro Petroleum. "I can't imagine that tinkering with it will affect the underlying consensus by experts against this."

Any changes to the cap would require Lingle's signature. Lingle opposes price caps in favor of deregulation and increased oil industry oversight.

Bunda declined to speculate on whether the Legislature would be able to override a Lingle veto of the changes.

Rep. Kirk Caldwell, D-24th (Manoa), was one of the 12 Democrats who sponsored the House bill to repeal the gas cap. Caldwell said he favors deregulation and tougher antitrust laws and increased reliance on alternative fuels as a means of lowering prices. The state should not be trying to regulate gasoline prices, he said.

"There's no way you can anticipate every scenario in a free market system and we're playing with that now," Caldwell said. "We're sticking our fingers in the gears and something is going to pop out someplace."

Caldwell said he thought the chances for the repeal to pass are "kind of good."

Despite the repeal effort, Menor said most lawmakers favor keeping caps in place.

"Obviously this is a difficult issue and supporters would not claim there is unanimous support," Menor said. "Nevertheless I remain confident there is still majority support in the Legislature for this."

Some Hawai'i motorists who support the gas cap would be happy with any changes that lead to lower gas prices.

"I want them to get prices lower," said Erasmus Ntiri, 62, of Wahiawa. "But if they can't do anything about getting prices down, they should leave it alone before getting rid of the (gas) cap."

Reach Sean Hao at shao@honoluluadvertiser.com and Dan Nakaso at dnakaso@honoluluadvertiser.com.