STAND. COM. REP. NO. 1559-26

Honolulu, Hawaii

, 2026

RE: S.B. No. 2694

S.D. 2

H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Madame:

Your Committee on Transportation, to which was referred S.B. No. 2694, S.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO WATER CARRIERS,"

begs leave to report as follows:

The purpose of this measure is to:

(1) Authorize the Public Utilities Commission to establish automatic adjustment mechanisms to address economic factors sua sponte or on application by a water carrier;

(2) Require the Public Utilities Commission to establish a water carrier inflationary cost index automatic adjustment mechanism; and

(3) Authorize the Public Utilities Commission to waive or exempt any water carrier from any requirement under the Hawaii Water Carrier Act.

Your Committee received testimony in support of this measure from the Department of Transportation; Department of Agriculture and Biosecurity; one member of the Maui County Council; Re-use Hawaiʻi; Hawaiʻi Harbors Users Group; Matson Navigation Company, Inc.; Hawaii Pilots Association; Maui Hotel & Lodging Association; Young Brothers, LLC; The Maritime Group; Central Pacific Youth Athletic Club/Tough Man Hawaii; Big Island Motors; and six individuals. Your Committee received testimony in opposition to this measure from ABC Stores; Maui Chamber of Commerce; Valley Isle Enterprises, Ltd; Hawaiʻi Restaurant Association; Hawaii Food Industry Association; Malolo Hospitality; Grassroot Institute of Hawaii; Maui Brewing Co.; Hawaiʻi Island Chamber of Commerce; Construction Industry of Maui; Maui Printing Company; West Maui Taxpayers' Association; Japanese Chamber of Commerce & Industry of Hawaii; Kona-Kohala Chamber of Commerce; Hawaiʻi Farmers Union United; and three individuals. Your Committee received comments on this measure from the Department of Commerce and Consumer Affairs; Public Utilities Commission; AARP Hawaiʻi; Local Food Coalition; Hone Heke Corporation dba Expeditions; and one individual.

Your Committee finds that water carriers in Hawaii face ongoing economic pressures, including inflation, rising operational costs, and regulatory lag associated with traditional rate case proceedings, which can create challenges for providers and ratepayers. Your Committee further finds that certain ratemaking practices may result in inequitable cost burdens and reduced transparency in how rates are determined. These concerns underscore the need for clear statutory guidance to ensure that regulatory decisions are fair, consistent, and protect consumers from disproportionate rate impacts. Accordingly, the Public Utilities Commission should be prohibited from allowing, making decisions regarding, or establishing rules that permit cross-subsidization among regulated water carriers.

Your Committee has amended this measure by deleting its contents and inserting language that:

(1) Prohibits the Public Utilities Commission from allowing, making decisions, and establishing rules regarding cross-subsidization on water carriers;

(2) Changes the effective date to July 1, 3000, to encourage further discussion; and

(3) Makes technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.

As affirmed by the record of votes of the members of your Committee on Transportation that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2694, S.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2694, S.D. 2, H.D. 1, and be referred to your Committee on Consumer Protection & Commerce.

Respectfully submitted on behalf of the members of the Committee on Transportation,

____________________________

DARIUS KILA, Chair