Legislators did, however, modify the bill in an effort to placate low-cost distributors.
The bill, sponsored by Sen. Charles R. Hawkins, R-19th, sets a minimum gasoline price by an “average posted terminal price” based on the Oil Price Information Service, or OPIS. Changes to the bill included allowing for any lower costs achieved outside the OPIS system andmore flexible enforcement of rules in a setup similar to milk prices are regulated.
The reworked bill is the same but “in different clothing,” said Mike Cortez, general counsel for Sheetz Inc., after giving testimony before a standing-room-only committee meeting. “Make no mistake about it. Senate Bill 458 will raise the price of gasoline for your constituents,” he said.
“We’re not setting a price on anything,” Hawkins said.He said the added changes to the billwould allow Wawa and Sheetz to not be penalized if they can purchase gasoline more cheaply.The aim of the bill is to preventunfair predatory pricing by large discount chains. Critics believe such pricing drives out”mom and pop” independent chains. It is a safeguard that has been passed by 20 other states, Hawkins said.
In response, Cortez said the OPIS cost standards do not reflect his company’s purchasing methods. Sheetz does not buy at the “terminal” where independent stations purchase gasoline, rather it uses complicated cost-cutting methods including off-rack and contract purchasing, hedging, and swapping arrangements “that have nothing to do with OPIS,” he said.
“We do not sell below cost. It may happen on occasion but it is extremely difficult for us to determine cost,” Cortez said.
The fear that Wawa and Sheetz could take over markets is unrealistic, he said. Gas stations operate in a fierce market, one that low-cost distributors are not capable of overtaking, especially in Virginia where Sheetz and Wawa make up only 4.8 percent and 2.25 percent, respectively, of total sales, he said.
Virginia already has antitrust laws that prevent predatory pricing, said former Virginia Attorney General Anthony F. Troy, testifying against the bill. Antitrust laws preserve competition, not competitors, somethingTroy said Hawkins’ bill would do.
In the 8-5 committee vote, Northern Virginia’s delegation on the committee was split 2-1 in favor of the bill. Sen. Charles J. Colgan, D-29th, and Sen. John H. Chichester, R-28th, voted in favor of the bill, while Sen. Warren E. Barry, R-37th, voted against it.
Sen. Richard L. Saslaw, D-35th, did not vote because of a conflict of interest: He owns and operates gas stations in Fairfax.
The bill now goes to the Senate floor.
If the billmakes it to the House, Delegate Harry J. Parrish, R-50th, is a co-patron ofthe bill.Parrish is a co-owner of Manassas Ice and Fuel Co. (Mifco) which has a gas station in Old Town Manassas. Parrish said Monday that it would not be a conflict of interest for him to vote on the bill because it does not affect his business individually.
Each legislator needs to determine whether they have a personal interest that disqualifies them from voting on a related bill, said Amigo Wade, an attorney in the General Assembly’s Legislative Services. “It’s up to each legislator, and they have to practice good judgment.”
Parrish said he supports the bill because if artificially low prices in Prince William drive out independent stations, that could harm consumers with fewer choices.
“I think the reason we have had lower prices is what amounts to a price war between Wawa, Sheetz and Crown, and then some of the major oil companies have given allowances to the dealers to try and meet that price war,” Parrish said, “which has lowered prices that have not been given in Fairfax.”
Staff writer Chris Newman can be reached in Richmond at (804) 649-8710.