Consumers paid an estimated $54.9 million more over five months, according to the analysis. The author of the law, however, says it is saving drivers money.
A NEW state study suggests an average household might have paid up to $65 more for gasoline in Hawaii from September through January as a result of the state's wholesale gasoline price caps.
The analysis prepared by the Department of Business, Economic Development and Tourism attempts to determine what gas prices would have been without the price caps, which took effect Sept. 1, the same day oil and gas prices nationwide began climbing to record highs following Hurricane Katrina's landfall in the Gulf Coast.
It estimates that consumers paid $54.9 million more for all grades of gasoline over the five-month span.
$65. That is how much more an average driver in Hawaii paid for gasoline from Sept. 1, 2005, through Jan. 31 because of the gas cap, according to a state analysis obtained by the Star-Bulletin
But in the Legislature's continued debate over whether to save or scrap the nation's only price controls on gasoline, whether the gas cap is helping or hurting depends on who you ask.
Senate Consumer Protection Chairman Ron Menor, the chief author of the price cap law, remained firm in his belief that the law has saved consumers money, but said he had not seen the DBEDT study.
Menor (D, Mililani) released his own analysis last week supporting the conclusion that the regulations have kept prices lower than they would have been without caps.
He cited escalating costs of diesel fuel -- which is not regulated under Hawaii's law -- as evidence, noting that Hawaii gasoline prices have followed a nationwide trend and come down about 26 percent since their post-Katrina highs. Meanwhile, state diesel prices have only come down about 5 percent, compared with a 21 percent drop nationally.
"This data strongly supports the contention that our gas pricing regulation has been working, because gas prices would be even higher if we did
not have regulation in place," Menor said.
His conclusions were supported by Tim Hamilton, a petroleum industry consultant who has studied Hawaii's market.
The dueling analyses come as House and Senate lawmakers complete work on all of their respective bills before exchanging proposals for further debate and crafting.
The fate of the gas cap will likely come down to the final days of session, as the House moves to suspend and ultimately repeal the law while the Senate pushes to make amendments aimed at bringing down the price ceilings.
Menor contends his amendments could amount to savings of 16 cents a gallon. Based on 2005 statewide gasoline consumption of about 438 million gallons, the total annual savings is estimated to be $68.3 million.
"The fact that our law is working does not mean that it cannot be strengthened and improved," Menor said.
DBEDT, however, paints a starkly different picture.
The analysis was prepared for House lawmakers and released by DBEDT after an inquiry by the Star-Bulletin. It studied market data from January 2002 through August 2005 to try and determine future trends. DBEDT noted that the analysis and its methodology were reviewed by three "well-respected" local economists who found no fatal flaws in the study.
Over the five-month period, consumers spent an average of 27 cents more per gallon for regular unleaded, amounting to a total added cost of $43 million for that grade of gasoline, according to the study. The added costs for mid-grade and premium brought the overall total to $54.9 million.
The added cost per gallon over five months amounts to about $64.80, based on figures from the Energy Information Administration that show the average household vehicle consumes about 12 gallons per week.
Such figures are why House lawmakers have reversed their position on the gas cap and now want to suspend the law in favor of strict oversight measures, said Rep. Kirk Caldwell, who along with Transportation Chairman Joe Souki has been among the main House members seeking a repeal.
"We feel: Time out now," said Caldwell (D, Manoa). "It's been in for six months and we get an uncomfortable feeling it may not be having the impact that we want it to have."
House leaders add they lack the confidence in the Public Utilities Commission to enforce the law as the Legislature intended, and want to see whether oversight and transparency measures have the desired effect of bringing down prices.
While Menor also has criticized the PUC's implementation, he does not feel that ending the price cap is the solution.
Menor previously said he would not hold a hearing on any repeal measure that came over from the House, but when asked about it last week said he would "keep an open mind." He added that he strongly supports the Senate's amendments and is hopeful his House counterparts will also be open to hearing them.
The House proposal calls for the adoption of oversight measures that would force oil companies to turn over specific data that would allow the PUC to determine whether their pricing practices are fair.
Critics note that such measures have been studied in the past, but have been thwarted by oil companies' resistance to turn over such data for competitive reasons.
Such resistance led to the state's price-fixing lawsuit against oil companies in the 1990s, settled in 2002. The information learned by the Attorney General's office under former Gov. Ben Cayetano was used as the impetus for enacting the price cap law.
Whether the price caps were the right answer is up for debate.
The DBEDT findings back arguments made by critics.
Jack Suyderhoud, a business economics professor at the University of Hawaii, contends the price caps have only introduced volatility to a traditionally stable market.
"The Legislature was warned that this type of pricing regulation is enormously difficult," Suyderhoud said. "The industry and market forces are just too complicated to regulate with simplistic formulas."
Paul Brewbaker, chief economist for Bank of Hawaii, agreed, saying most analyses and studies he's seen since the price caps took effect have reached the same general conclusion.
"The basic result here," Brewbaker said, "is that the gas cap screwed us after the hurricane in ways that can't possibly be made up until a long time later, by whatever benefit may or may not have arisen as a result of the presence of the cap."
Supporters insist the higher prices are the result of flawed implementation by the PUC, arguing that the commission has not used its authority to enforce the law as the Legislature intended.
PUC Chairman Carlito Caliboso acknowledged that the agency has not enforced the law with the intent of bringing down prices, but in accordance with its written intent. The law states that it is not meant to guarantee lower prices, but to ensure competitive market conditions similar to the mainland.
"What was divulged by the PUC chairman was beyond belief," said George Fox, of the consumer advocate group Kokua Council. "Every choice made by the PUC that affected the price of gasoline was made to maximize the price to consumers as well as the oil company's profit."
Menor noted that his proposed amendments are based on recommendations made by ICF Consulting, the firm hired by the PUC to assist in implementing the law, and criticized the PUC for not adopting the changes sooner.
Caliboso said the commission has refrained from making arbitrary changes based on weekly market conditions to maintain stability and prevent any of the dire consequences predicted by some analysts.
"If we were to try to manipulate prices from week to week, day to day, based on what we think prices should be," Caliboso said, "that would probably be worse, because then the public and everybody else would get the impression that we're trying to manipulate prices based on whatever standards we thought were too high or too low."
Does he think Hawaii is better off with the price caps?
"I've asked myself that same question," Caliboso said. "The caps have been in effect since September 1st, and there have been some big events that have happened to affect the index in that time.
"It's really impossible to tell."
JAMM AQUINO / JAQUINO@STARBULLETIN.COM
SENATOR SEEKS AMENDMENTS TO LOWER CAPS
A look at some of the main amendments to the state's gasoline price cap law being proposed by Consumer Protection Chairman Ron Menor (D, Mililani). The amendments are aimed at bringing down the price ceilings:
» Add Singapore to the three mainland markets that are currently used to determine the baseline price for the state's price caps. Menor says Singapore is a sensible market to add because it is the most likely place where gasoline would be imported if needed.
» Discard the highest of the four markets in calculating the average each week. This would eliminate temporary price spikes in one market from affecting Hawaii's price cap, Menor said.
» Eliminate the 4-cent location adjustment factor added to the price ceilings. The added cost is accounted for in other fixed costs included in the cap formula, Menor said.
» Reduce the 18-cent marketing margin by 4 cents. A lower charge would more accurately reflect mainland margins, Menor said.