Gas cap opponents urge
House to repeal law

Lawmakers begin the process
of tweaking the legislation that
is due to take effect on July 1

Hawaii's unique gasoline price cap law is flawed and won't work, no matter how long lawmakers study the issue, gas station owners and others told House lawmakers in urging them to repeal the 2002 act altogether before it takes effect.

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"If it worked, I guess all the other states would have a gas cap, but they don't," said Bob Dixson, owner of Dixson 76 Service on the Big Island.

Two House committees began the process yesterday of tweaking the price cap to address concerns raised in the two years since Hawaii became the first state to regulate gasoline costs for consumers.

The cap is scheduled to go into effect on July 1.

The proposal heard yesterday would push back the start date to July 1, 2005, on Oahu, and July 1, 2007 on Kauai, Maui and the Big Island, to further address concerns raised by neighbor island residents.

It also would extend the price cap to cover midgrade and premium gasoline, not just regular unleaded.

Lawmakers also want to change the law to peg the price cap to a national average of gasoline prices, rather than on an average of prices in West Coast markets as the law is written now.

The original formula embarrassed gas cap supporters last year when West Coast prices briefly went above Hawaii's price. Critics said if the gas cap had been in effect, it would have driven up the Hawaii price.

Neighbor island gas station owners argued against the price cap, saying fixed costs are already high and the price cap would make it nearly impossible to make even a small profit.

"The cap law does not take into account the numerous expenses such as rent, payroll, insurance, costs of goods, not to mention taxes," Dixson said. "I want the freedom to run my business without more government interference."

Supporters of the law say Hawaii consumers have been gouged at the pump long enough, noting research that indicates large oil companies such as Chevron make as much as 23 percent of their profits in Hawaii, even though the islands are only 3 percent of their market.

"Any more delay, I think, is just going to mean more damage to consumers to the tune of hundreds of millions of dollars," said George Young, a representative for the group Citizens Against Gasoline Price Gouging.

Gov. Linda Lingle opposes price caps but has indicated she won't stand in the law's way.

Ted Liu, director of the state Department of Business, Economic Development & Tourism, repeated the Lingle administration's opposition to the price cap to lawmakers yesterday.

"While the price cap mechanism could be improved, historically and in practice, price caps have been demonstrated to be ineffective, risky, costly to administer and open to manipulation," he said.

He cited recommendations made by a consultant group hired by the state to study the law as required by the 2002 law.

Stillwater Associates LLC recommended repeal of the law and creation of more transparency on the system of pricing gasoline at the wholesale and retail levels, which has been "found to be more effective at preventing excess profit taking than gasoline price controls."

The House Committees on Energy & Environmental Protection and Consumer Protection & Commerce put off a decision on the bill until next week. Senate lawmakers are working on their own, similar amendments to the 2002 law.

According to auto club AAA, the average price of regular, self-serve unleaded gas in Honolulu was $1.991 per gallon yesterday. The average was $2.109 per gallon in Hilo and $2.359 per gallon in Wailuku.


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