Ever wonder why gasoline is cheaper at one station than another even though the two gas-n-go's are located in the same town or even on the same block?
It might be the result of predatory pricing, some station owners told the Legislature's Business, Labor and Economic Development Interim Committee Wednesday.And they want lawmakers to do something about it.
In its final meeting before the legislative session convenes next year, the committee debated the merits of two proposals addressing the fate of the state's Motor Fuel Marketing Act.
The act was intended to level the playing field for fuel retailers, many of whom claimed they were being driven out of business by companies that sold fuel at artificially low prices. It has been on the books for nearly two decades but has been difficult to enforce, Rep. Parley Hellewell, R-Orem, said Wednesday.
So Hellewell and Rep. David Zolman, R-Taylorsville, each submitted a proposal for consideration. Diametrically different, Hellewell's aims to follow the existing act's framework while clarifying technical terminology and eliminating points of confusion.
At the crux of his proposal was the elimination of a provision allowing retailers to sell fuel for up to 6 percent below their "cost." The definition of cost varied from retailer to retailer, taking into account factors such as merchandise sales at the stores or stations, "pay at the pump" technology and the cost of the actual fuel.
Hellewell recommended the 6 percent cushion be eliminated. Instead, he proposed that retailers only be allowed to sell fuel at cost, based on their actual purchase invoices.
Zolman, along with Rep. Katherine Bryson, R-Orem, instead proposed to repeal the act altogether. It originally was passed to challenge the quasi-monopoly practices of oil giants Phillips 66 and Exxon, Bryson said. Today, only Phillips 66 sells its product in Utah.
"I think we can look at this and say that the purpose of the Motor Fuel Marketing Act was and has been accomplished. Such acts now need to be looked at and repealed," she said.
Bryson said it was improper for the Legislature to set prices, and she encouraged her colleagues to "preserve the free market and let the market dictate" the price of gas in Utah. Existing unfair practices laws are sufficient to regulate the industry, she said.
Paul Ashton, executive director of the Petroleum Retailers Association and longtime supporter of improved legislation, said it was unfair for large corporations to be allowed to sell gas at lower prices because they subsidize those losses with other product sales.
But Brad Call, vice president of marketing for Maverik Country Stores, said retailers should not be allowed to hide behind legislation in order to stay in business.
"In the marketplace, you've got to be lean, and you've got to be hungry," Call said. "We've got to figure out a way to compete with new competition or we simply do not belong in this business."
The interim committee opted not to take action on either proposal, opening the door for a full debate during the legislative session. If both bills are passed and signed into law by the governor, the bill to repeal the current act would take precedence, according to committee chairman Rep. Bill Hickman, R-St. George.
The fuel debate -- which has come and gone in several prior sessions -- headlined this year's summer interim. Though committee members generally characterized the interim as "productive," some said they wished more had been done.
"We have left a lot of work yet to be done," said Rep. Patrice Arent, D-Salt Lake County. "Issues that are important that will need to be reviewed during the session. I had hoped we could have accomplished more during the interim, but there are a number of complicated issues we had to consider.
"It would have been nice to have resolved the issue of the Motor Fuel Marketing Act that we reviewed today," Arent said. "Unfortunately, there are a lot of considerations that we just did not have time to review carefully."