”Overview”

The impetus for Act 77, Session Laws of Hawaii (SLH) 2002, came from the Legislature’s findings that there is a need to ensure lower gasoline prices for Hawaii’s consumers and that Hawaii’s consumers continue to pay a large premium at the pump. The 2002 Legislature also found that affirmative action is necessary to address the uncompetitive market, and that this action requires a multi-pronged response.

As mandated by Act 77, the State of Hawaii, Department of Business, Economic Development, and Tourism (DBEDT) was required to conduct an expert comprehensive, empirical examination of Hawaii’s petroleum market and policy analysis of the efficacy and appropriateness of the Act 77 price cap mechanisms and other relevant provisions.

Among the Act’s several major provisions, the gasoline price caps are scheduled for implementation on July 1, 2004. In the interim preceding imposing the caps, the Legislature requested this report, including proposed implementing legislation to achieve competitive pricing of gasoline in Hawaii.

The primary goals of the study were to:

*Review and analyze unsealed documents in Anzai v. Chevron, et al., and other relevant publicly available reports and references (State’s gasoline antitrust litigation settled 4/30/02);

*Gather and analyze empirical data to determine whether the Oil Price Information Service (OPIS) index or other appropriate benchmarks are applicable to Hawaii’s markets;

*Review options available to the Legislature, including wholesale and retail gasoline price caps and the potential effects of imposing price caps;

*Analyze the Petroleum Commissioner’s responsibilities and functions under Act 77, and provide an assessment of the staffing and resources required to implement the law; and

*Submit a final report of findings and recommendations to the Legislature, including proposed implementing legislation, as appropriate.

Act 77, SLH 2002 also allocated $250,000 to the DBEDT to assess alternative policies and other options available to the State of Hawaii aimed at achieving fair and reasonable gasoline pricing for Hawaii’s consumers.

The development of this report proceeded from the signing of Act 77 into law on May 31, 2002. Through a rigorous, nationwide, procurement process, which included advertisements in the Wall Street Journal, Stillwater Associates, LLC was selected. Stillwater Associates, whose credentials include extensive industry expertise and experience with the California Energy Commission, began work on November 1, 2002.

Additionally, the bipartisan National Conference of State Legislatures, which is considered an objective, and uniquely qualified resource to help state legislatures identify and analyze relevant policy options, joined the study. DBEDT also contacted the U.S. Federal Trade Commission (FTC) early in the process to determine relevancy of its work and possible interest in data sharing and other cooperation with Hawaii on the Act 77 project. The FTC is the federal

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Hawaii Reporter is an award-winning, independent Hawaii-based news and opinion journal founded in 2001 and launched in February 2002. The journal's staff have won a number of top awards from the Society of Professional Journalists, including the top investigative news reporting awards, business reporting awards, government reporting awards, and online news reporting awards.