Government of the Virgin Islands of the United States of America Department of Licensing and Consumer Affairs www.dlca.vi.gov H. Nathalie Hodge Commissioner Testimony Before the 36th Legislature of the Virgin Islands Hon. Milton E. Potter, Senate President Committee of the Whole March 4, 2025 Serving Businesses & Assisting, Educating and Protecting Consumers” Golden Rock Shopping Center 3000 Estate Golden Rock, Suite 9 St. Croix, VI 00820-4311 Telephone: 340.713.3522 Administrative Complex “The Battery” St. John, VI 00830 Telephone: 340.727.3303 Property & Procurement Building 8201 Subbase, Suite 1 St. Thomas, VI 00802-5826 Telephone: 340.714.3522 Testimony before Committee of the Whole March 4, 2025 2 Good Morning, Honorable Senate President Potter, Esteemed Senators, 1 Distinguished Members of the 36th Legislature, and the Listening and Viewing Audience. 2 I am Commissioner H. Nathalie Hodge. Today, I am joined by Assistant Commissioner 3 Horace Graham, General Counsel, Geraldine P. Vaval, and Wilbur Francis, Director of 4 Enforcement. Thank you for the opportunity given to provide testimony on behalf of the 5 Department of Licensing and Consumer Affairs (DLCA) regarding the broader economic 6 pressures affecting the cost of living in the Virgin Islands, in particular, high gas prices. 7 As the agency responsible for consumer protection and business regulation, DLCA 8 plays a critical role in ensuring market transparency, conveying price trends, and enforcing 9 laws that safeguard residents against unfair pricing and deceptive trade practices. Today, I 10 will present our insights into the economic pressures resulting from the pricing of retail 11 fuel in the territory, the DLCA’s current market efforts, and policy considerations aimed at 12 enhancing affordability and economic stability for Virgin Islanders. 13 14 Enforcement of Consumer Protection Laws 15 DLCA enforces a variety of laws aimed at safeguarding consumer rights. These 16 include, but are not limited to: 17 1. The Consumer Protection Law. The Consumer Protection Law safeguard 18 consumers against unfair and deceptive trade practices that could mislead or harm 19 consumers. It establishes standards for fair trade, requiring businesses to operate 20 with integrity. DLCA enforces compliance through investigations, legal action, and 21 consumer education, ensuring businesses remain accountable and consumers can 22 make informed decisions. 23 Testimony before Committee of the Whole March 4, 2025 3 2. The Price Control Act. The Price Control Act is a critical regulation designed to 24 protect consumers from deceptive business practices such as fraudulent contracts, 25 hidden fees, and misleading marketing tactics. It prohibits businesses from 26 imposing unfair terms on customers and ensures transparency in transactions. 27 DLCA enforces compliance by investigating consumer complaints, taking action 28 against violators, and promoting fair competition. Additionally, DLCA provides 29 public reports, such as the retail fuel survey and St. Croix Rack Rates, to enhance 30 pricing transparency in critical sectors. 31 3. Unfair Trade Practices Law. This regulation protects consumers from deceptive 32 business practices such as fraudulent contracts, hidden fees, and misleading 33 marketing tactics. It prohibits businesses from imposing unfair terms on customers 34 and ensures transparency in transactions. DLCA enforces compliance by 35 investigating consumer complaints, taking action against violators, and promoting 36 fair competition. Additionally, DLCA provides public reports, such as the retail 37 fuel survey and St. Croix Rack Rates, to enhance pricing transparency in critical 38 sectors. 39 4. Truth in Pricing Rules and Regulations. The Truth in Pricing Rules and 40 Regulations mandates businesses to provide clear and accurate pricing information, 41 ensuring that consumers are not misled by hidden fees or deceptive advertising. 42 Retailers must display correct prices on shelves, menus, and promotional materials. 43 DLCA enforces these rules through inspections, advertisement reviews, and 44 responses to consumer complaints, helping to uphold fair and honest commercial 45 practices. 46 Testimony before Committee of the Whole March 4, 2025 4 Through weekly routine inspections, compliance audits, and investigative 47 operations, DLCA’s Consumer Affairs Division actively monitors the marketplace to 48 detect and deter violations of consumer protection laws. These enforcement actions 49 help identify businesses engaging in fraudulent practices, price manipulation, or non- 50 compliance with regulatory standards. Regular oversight ensures that businesses adhere 51 to fair trade principles, fostering a competitive and ethical economic environment. 52 Lastly, DLCA publishes a weekly fuel price report, reflecting real-time prices of 53 retail fuel at all retail locations and the wholesale price at the Rack in the St. Croix District. 54 While this tool provides valuable transparency, as with other consumer goods, it is not a 55 formal economic analysis of inflation trends. Those seeking long-term price trend data 56 should refer to the Bureau of Economic Research (BER), which conducts in-depth cost-of- 57 living analyses. 58 59 DLCA’s Role in Price Monitoring 60 There is often confusion regarding DLCA’s responsibilities in tracking fuel prices. 61 While DLCA publishes a weekly fuel report to provide a snapshot of current prices for 62 retail rates for regular, premium, and diesel fuel in the territory. The Fuel Report offers 63 real-time pricing insights but is not designed for tracking trends over significant periods. 64 Consumers looking for comprehensive cost-of-living data should refer to the Bureau of 65 Economic Research (BER), which conducts formal economic assessments. 66 The purpose of the DLCA’s fuel survey is to provide transparency in pricing and 67 to inform consumers of the cost of fuel throughout the territory. We understand that much 68 Testimony before Committee of the Whole March 4, 2025 5 of the frustration comes from the price disparity between districts, and although the 69 logistics of getting fuel feel like they should be similar, it's important to note that currently 70 most of the fuel sold in the St. Croix District is held in the terminal on Island, while St. 71 Thomas/St. John rely on smaller shipments that arrive much more frequently. 72 For those seeking Consumer Price Index information or motor vehicle fuel price 73 information that represents economic trends over time, the BER is the designated agency 74 responsible for compiling such data. BER conducts structured analyses that account for 75 inflation, cost-of-living changes, and other economic indicators that impact the financial 76 well-being of consumers in the Virgin Islands. These reports offer a reliable measure of 77 economic trends and help track long-term price changes. 78 It is crucial for consumers to understand the purpose of DLCA’s fuel survey, which 79 is to inform the public and make other retailers aware of the price of fuel available around 80 the territory. While DLCA remains committed to consumer advocacy and price 81 transparency, its role does not extend to producing long-term economic data, CPI reports 82 or establishing the retail price of fuel. 83 84 Fuel Costs 85 DLCA remains committed to its mission of ensuring fair business practices, 86 consumer protection, and pricing transparency. However, our functions are clearly defined, 87 and any inquiries or concerns that fall outside DLCA’s jurisdiction, including establishing 88 profit margins without a price freeze order in place or a study to ensure that a “fair profit 89 margin” is permitted, or providing economic analysis over significant periods of time, are 90 appropriately redirected to the relevant agencies. 91 Testimony before Committee of the Whole March 4, 2025 6 However, in order to promote transparency and improve communication, several 92 members of our DLCA team met with industry leaders in the retail fuel distribution world, 93 including Sol Petroleum and TotalEnergies. These meetings were held October 4, 2024, 94 and February 6, 2025, respectively. The meetings were productive and encouraging and 95 the information that was obtained will be summarized below. This is not an exhaustive list 96 of everything discussed but captures the tone and intent of the meeting. 97 98 Meeting with Sol Petroleum 99 As previously discussed, DLCA does not have the authority to regulate the price of 100 fuel at the rack beyond the terms outlined in the agreement to operate at the Ocean Point 101 Terminal, formerly the Limetree Bay Rack. It is important to note that the current pricing 102 formula does not account for additional fees such as delivery costs or business expenses. 103 Additionally, the relationships between local businesses and fuel suppliers can 104 significantly influence the rates paid by individual businesses. 105 Though the potential risks associated with publishing wholesale (Rack) rates for 106 SOL Petroleum without doing the same for other companies engaged in the fuel trade in 107 the territory was emphasized, SOL Petroleum agreed to the publishing of rack rates which 108 only supports their commitment to transparency. Even though such a practice could 109 negatively impact the profitability of local businesses and inadvertently encourage retailers 110 to import fuel rather than purchasing from the local rack operator, it was determined that 111 public trust and transparency outweighed the risks. 112 SOL Petroleum's ongoing partnership and commitment to supporting the territory’s 113 fuel distribution is a major benefit to our fuel market. The price disparity between STX and 114 Testimony before Committee of the Whole March 4, 2025 7 STT/STJ underscores the impact, and with a planned expansion into the St. Thomas district 115 soon, residents and visitors of St. Thomas/St. John can expect increased market 116 competition, likely leading to a positive effect on fuel prices. 117 118 Meeting with Total Energies 119 In our February 5, 2025 discussion with TotalEnergies, one of the main distributors 120 of fuel in the St. Thomas District, we covered several subjects related to the current state 121 of the fuel industry in the Territory and the price differences between St. Thomas/St. John 122 and the St. Croix markets. This meeting highlighted the stable, but higher cost of fuel in 123 St. Thomas compared to the stable and lower cost of fuel in St. Croix, which is a direct 124 result of a bi-weekly price-setting model and supply chain constraints. Unlike the 125 continental U.S., where fuel prices fluctuate frequently, St. Thomas operates on a 126 structured schedule that smooths out price volatility, ensuring consumers do not experience 127 extreme fluctuations. While there are only two major distributors, TotalEnergies and Puma, 128 independent gas stations help maintain competition by choosing suppliers based on pricing, 129 which prevents a monopoly in price control. 130 In St. Thomas we do not have clear insight into the pricing inputs that shape the 131 fees that are paid at the pump. Compared to St. Croix, where Sol Petroleum provides 132 detailed pricing data, St. Thomas has a significant transparency gap. The lack of accessible 133 data adds to the public’s distrust, leading to assumptions that higher prices result from 134 excessive profit margins. To address this, TotalEnergies has committed to discussing the 135 possibility of sharing more detailed breakdowns of pricing components, including supply 136 chain costs, transportation fees, and operational expenses. 137 Testimony before Committee of the Whole March 4, 2025 8 In addition to pricing, the discussion also covered external factors that impact fuel 138 availability and cost. Seasonal tourism affects fuel demand, with peak consumption in the 139 winter months and lower usage in the summer. During hurricane season, TotalEnergies 140 increases fuel stock on the island to prevent shortages, ensuring continuity in case of 141 extreme weather events. While these fluctuations affect supply logistics, they do not 142 significantly alter pricing strategies due to the structured bi-weekly pricing model. 143 Through continued collaboration, both parties aim to provide clarity on fuel pricing 144 while maintaining stable supply and fair pricing for consumers. While focused on St. 145 Thomas fuel pricing, the discussion covered supply chains, competition, regulations, and 146 pricing transparency. Insights from TotalEnergies will inform territory-wide investigations 147 and price monitoring, reinforcing DLCA’s commitment to public transparency. 148 149 Thank you for the opportunity to testify on this important issue. We recognize fuel 150 prices are a major concern for businesses, consumers, and utilities. DLCA remains 151 committed to fair business practices, consumer protection, and price transparency. Our 152 discussions with SOL Petroleum and TotalEnergies were just the beginning of a broader 153 effort to collaborate with distributors, stakeholders, and this body to enhance the consumer 154 experience. Moving forward, our commitment to transparency and insights from the 155 ongoing Cost-of-Living Analysis will help us better understand the industry and build 156 public trust. 157 We appreciate the support of Governor Albert Bryan Jr., the Bryan/Roach 158 Administration and the Legislature in these efforts and stand ready to provide any 159 additional information necessary to advance consumer rights in the U.S. Virgin Islands. 160 Testimony before Committee of the Whole March 4, 2025 9 Thank you for the opportunity to testify before the Committee of the Whole today. We are 161 happy to answer any questions you may have. 162