Customers Express Confusion Over “Locking In” Propane Prices

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Grand Rapids, Mich. — (March 21, 2014) As the Michigan Attorney General’s Office continues its investigation into possible propane price gouging in Michigan involving Ferrellgas, customers have come to us asking how they can lock in a rate.

A Kalamazoo County woman who wanted to remain anonymous is one of the 65 customers of Ferrellgas/Best Propane included in the attorney general’s investigation and petition for a subpoena.

“It was very sickening,” said the Galesburg mom.

Her propane fill costs rose 116% from December to January for the same amount of propane.

The bill said $670.55 in December, then totaled $1,452.50 in January.

And surprisingly, her prices weren’t even the top of the line.

In the subpoena issued by the attorney general’s office, officials said the highest average prices this winter were around $3.76 a gallon, that served as their benchmark.

The A.G. reported that for some customers prices in Michigan hit $7.31, $8.40 and even $8.89 a gallon.

A man in Saranac was one of the customers that was charged approximately $7.31 a gallon for propane.

His bill to fill his tank from a Ferrellgas office in Lowell was nearly $2,570.

Ferrellgas issued a statement blaming wholesale price increases and supply constraints this winter as the cause of high prices.

The company denied any wrongdoing.

Spokesperson Scott Brockelmeyer said, “Fortunately there were many Ferrell gas customers in Michigan who entered into pricing contracts with our company prior to the heating season and, as a result, were not exposed to higher retail propane prices.”

However, our Kalamazoo County customer said a “locked in price” wasn’t something that Ferrellgas was advertising.

She said, “I asked, you know, ‘How somebody would go about doing this?’. The response was, ‘Well, we usually send out  a mailer saying that the time, the open time frame, for locking a price is coming up. But we didn`t do that this year’. I asked, ‘why’? They just said they didn`t get a lot of responses from customers, so they just stopped doing that.”

“I`m not quite sure how you would lock in a price.”

She isn’t the only customer that has told us that they’re confused.

Fox 17 has fielded a number of questions from viewers asking how you lock in a rate.

The spokesperson for the Michigan Oil and Gas Association says the issue is that every company is different.

“I’m guessing there’s 10 to 30 different ways that West Michigan places are offering their pricing,” said Joe Ross.

Ross said some of the common offerings include a balanced billing plan that stretches over a few months.

Some companies also allow you to buy the equivalent of a full tank in the summer at lower prices, then have it delivered later.

Ross said the difference in options is why the gas association advises customers to shop around.

The Saranac customer who paid around $2,570.00 for his tank has already switched providers.

The Kalamazoo County woman is doing the same.

“When we started calling around to other gas companies, we found that the price per gallon was at least 2-dollars cheaper,” she said.

FOX 17 reached out to Ferrellgas to explain how a customer might lock in a price with them.  They issued this response:

Thousands of Ferrellgas customers across the country participate in what we call our FerrellSecure plan. This includes the approximately 15,000 customers in Michigan who participated in the program this past winter. Ferrellgas honored each and every one of the commitments we made to these customers.

Through our FerrellSecure plan, residential propane users may either lock in a price per gallon with us or agree to a price cap or price ceiling, which allows them pay a price that fluctuates with the market up to that price cap. For explanatory purposes, a customer could lock in at $2 per gallon for a fixed number of gallons and for a fixed period of time. Or, a customer could agree to a price cap of $2.25 per gallon (also for a fixed number of gallons and for a fixed period of time) and, depending on the daily market price at the time of delivery during the contract period, pay a price per gallon that is either below that cap or no higher than that cap.

Customers may contract with us at any time. Historically, it’s more advantageous to consumers to enter into a buying agreement with us during the spring or early summer.

This was the response from Ferrellgas regarding the attorney general’s investigation:

“Ferrellgas denies there have been any violations of the Consumer Protection Act.”

“The sudden wholesale price increases, supply constraints and logistics challenges faced by the propane industry this winter were unprecedented and were particularly severe in the state of Michigan.”

“As a result, propane providers had no choice but to pass those additional costs onto their customers.”

“Fortunately there were many Ferrell gas customers in Michigan who entered into pricing contracts with our company prior to the heating season and, as a result, were not exposed to higher retail propane prices.”

— Scott Brockelmeyer, Ferrellgas


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