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Panel advances proposal to tweak fuel price cap Amendments would change 2002 law scheduled to take effect July 1; Hawaii only state legislating gasoline prices B.J. Reyes Associated Press Writer
A move by the Hawaii Senate’s money committee to modify the state’s one-of-a-kind gasoline price cap drew harsh criticism from the chamber’s top Republican, who accused Majority Democrats of playing election year politics.
The proposal advanced March 3 by the Ways and Means Committee tweaks the price cap before it takes effect July 1 by extending it to cover all grades of gasoline, including diesel, and basing it on a national average of prices.
It still faces final approval by the full Senate before being sent to the House, where a similar measure died in committee after lawmakers were unable to agree on changes to the 2002 law.
Hawaii Senate Minority Leader Fred Hemmings, R-Lanikai-Waimanalo, called the proposal a “hoax” and accused Democrats of trying to appease angry consumers with a law that may ultimately be proven unconstitutional.
“This is simply another opportunity,” Hemmings said, “to try to single out one group in the free market system and demonize them for political gain in this coming election, knowing full well that if they pass this law that this will not be tested constitutionally until well after the election.” Hawaii only state regulating gasoline prices Democrats who supported the measure countered that constituents have been gouged at the pump for too long.
“Consumers in our state clearly feel that they’re being ripped off,” said Sen. Gary Hooser, D-Kauai-Niihau. “I hear it from my constituents every single day and they, quite frankly, would like us to do something about it.
“I think this is a good faith effort to seek a solution.”
Hawaii remains the only state with a law allowing regulation of gasoline prices.
The law passed two years ago sets a maximum price for wholesale and retail regular, unleaded gasoline based on an average of prices in Los Angeles, San Francisco and the Pacific Northwest. It also caps profit margins on retail gas at 16 cents per gallon.
The amended proposal sets a maximum price for all grades of gasoline sold at the wholesale level only and removes the retail profit margin limits. It also ties the maximum price to an average of prices nationwide and exempts gasoline sold on Molokai and Lanai because of their unique markets. Opponents argue that Hawaii’s high taxes and barriers to entry, such as geography, all contribute to the high cost of gasoline in the islands. Owners of small gas stations, mostly on neighbor islands, also have testified that low profit margins would force them out of business. Law found unconstitutional Hemmings said U.S. District Judge Susan Oki Mollway supported that argument in her 2002 ruling which said the state’s 1997 law placing rent caps on dealer-run gas stations was unconstitutional because it unfairly infringed on the company’s ability to use its property.
That law, which was never enforced because of the legal challenge, also aimed to bring down the cost of gasoline. Mollway said it would have had the opposite effect because oil companies likely would have raised wholesale gasoline prices to make up for reduced rental income.
The amended price cap proposal passed out of Ways and Means by a vote of 9-4, with two members absent. Majority Sens. Lorraine Inouye, D-Hilo-Honokaa, and Cal Kawamoto, D-Waipahu, sided with Hemmings and Sen. Sam Slom, R-Diamond Head-Hawaii Kai.
Inouye said she felt the measure would drive up costs on neighbor islands because it doesn’t take into account the added costs associated with delivering gasoline to small, remote gas stations. Kawamoto said he feared the measure would force “jobbers” — middlemen who buy gasoline at wholesale prices and sell to stations — to leave the market altogether.
“If they walk, we have no competition in the gasoline market,” Kawamoto said.
The bill faces an uncertain future in the House, where a proposal to tie the price cap to a national average and further delay its start date never made it out of committee.
House Consumer Protection Chairman Ken Hiraki said March 3 he hadn’t seen the Senate’s latest version.
“I know some of the (House) members had concerns about the retail cap because that sort of affects the mom and pop stations, so I’d like to take a look at it,” said Hiraki, D-Kakaako-Downtown. “This might be a way to alleviate their concerns, but at the same time we want to make sure we pass a bill that will stand constitutional muster.” 2002 law would take effect July 1 If no new measure is passed this year, the 2002 law would take effect on July 1 as scheduled. It includes a provision that the governor can withhold enforcement if it is determined that the cap would negatively affect the economy. Gov. Linda Lingle opposes a price cap but has said in recent months that she would not stand in the law’s way.
The national average retail gasoline price was $1.75 per gallon, according to the most recent Lundberg Survey released Feb. 29. On March 3 the average price for regular, unleaded in Honolulu was $2.02 per gallon, according to AAA. The average was $2.22 in Hilo on the Big Island and $2.33 in Wailuku on Maui.
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