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Monday, July 30, 2001

Energy costs dip, but surcharges don't


Most companies say add-ons will stay for time being

By Anya Rao
Enquirer Contributor

        Gasoline and natural gas prices have fallen from their heights of earlier this year. Yet some Tristate companies — from garbage haulers to pizza makers to laundries — are still asking consumers to pay for the previous months of high energy costs through surcharges.

        Phil Verleger, an energy economist and consultant from California, said the charges are probably in effect because of a lag time between when businesses shell out money for higher energy bills and when they can recover those costs.

        Mr. Verleger said energy prices should continue to go down for a few months.

        “But it's hard to say how far they will go,” he said.

        The surcharges, however, haven't stuck everywhere.

        The Crowne Plaza hotel downtown imposed, then ditched, a daily energy surcharge of $2.50 a room. The hotel's January energy costs were almost twice as much as the bills in the same month the year before.

        The Crowne Plaza took in an additional $7,000 to $10,000 for each month the surcharge was in effect. That barely made a dent in huge energy bills, said Greg

        Kaylor, a hotel spokesman.

        The hotel dropped the surcharge because of customers' reactions and a “red flag” raised by litigation related to similar fees at a California hotel. In the future, high energy costs might just be adjusted the old-fashioned way — by raising room rates — instead of adding a separate fee, Mr. Kaylor said.

        Hundreds of other hotels and motels nationally added such surcharges. Some national hotel chains, such as Hilton and Marriott, are deciding whether to drop them.

        A look at some Tristate businesses where surcharges are still in effect:
       

Rumpke Consolidated Inc.
               The trash hauler, smarting from higher fuel costs for its trucks, added a 2 percent fuel surcharge to most services in February.

        Even with the added revenue from the surcharge, Rumpke's fuel costs for 2001 are over budget by $2.5 million, said Amanda Wilson, a spokeswoman for Rumpke. There are no immediate plans to remove the extra charge.

        “The surcharge is continuing. As winter approaches, our fuel costs are going to increase,” Ms. Wilson said.

        Rumpke added the surcharge instead of raising general prices, so it would have the option of removing the charge in the future, based on gasoline prices, Ms. Wilson said.
       

Loveland Cleaners
               Growing bills for operating clothes dryers powered by natural gas led the cleaner and coin laundry on Loveland-Madeira Road to raise prices. Since the change three months ago, customers using the coin laundry have been paying a quarter for 7 1/2 minutes of drying time instead of the previous 10 minutes.

        Gas bills from this spring tripled from what they had averaged in the past, vice president Steve Flaim said. Last month's bill showed a decline, but the amount was still high. This is the first time the coin laundry has changed prices because of climbing gas bills, he said.
       

LaRosa's
               The restaurant chain added a quarter to its delivery fee May 28, raising it to $1.50. But the increase was only partly because of fuel costs.

        “It was more of the overall expense that it takes to deliver,” said Pete Buscani, of LaRosa's marketing department. “Delivery fees were $1.25 for seven years, and costs have gone up.”
       

Metro
               The bus service in Southwest Ohio might increase some longer-distance fares if City Council approves the proposal. The increase is needed because of its costs during the last year, said Sallie Hilvers, Metro's director of public affairs.

        Metro's fuel budget this year was $2.7 million, but it will exceed that by as much as $500,000.

        The proposed increase would add a quarter or 30 cents to fares on routes that are more than 20 miles each way, such as routes to Paramount's Kings Island and West Chester.
       

United Parcel Service
               Like other delivery services, UPS tacked on a 1.25 percent fuel surcharge for all shipments worldwide. The surcharge, which began in August, is almost a year old, and there are no immediate plans to discontinue it, said Steve Holmes, a spokesman for UPS.

        Fuel costs for UPS climbed from $700 million in 1999 to $900 million in 2000.

        “We are used to price fluctuation,” Mr. Holmes said. “But this situation is unique because the high prices have sustained.”

        Gasoline prices will need to go down and stay down before the surcharge can be lifted, he said. This is UPS' first fuel charge in 20 years.
       

Taxi companies
               Taxicab companies in Cincinnati received a boost from City Council in May. After 10 years with the same fares, council approved an increase in cab fares that partly resulted from gasoline prices, said Jack Taylor, operations manager for Skyline Taxi company.

        Skyline Taxi raised its rates from $1.20 to $1.60 for every mile. The initial fee charged to get into a cab stayed at $2.

        Mr. Taylor said he thinks the increase hurt business because people don't want to pay the higher rates.

        “We were just getting riders back since the April riots” when the rate increase went into effect, he said. Business has dropped 60 percent since January, Mr. Taylor said.
       

Delta Air Lines
               In January 2000, Delta Air Lines imposed a $10 surcharge each way to offset a variety of costs, including higher jet fuel prices, a policy mirrored by most major U.S. carriers. That charge was boosted to $20 each way in September 2000 — and was for normal fares only, not added to sale fares.

        Company spokeswoman Cindi Kurczewski said there were no immediate plans to eliminate the charge.

        Jet fuel is Delta's second-largest cost behind labor. But the airline, which operates its second-largest hub at Cincinnati/Northern Kentucky International Airport, offsets some of the cost through a “hedging program,” which allows it to contract to buy fuel at a certain price before the product is needed. In the second quarter of this year, the airline “hedged” 68 percent of its fuel at an average price of 68 cents a gallon.

        The unhedged fuel cost 82.5 cents, although overall usage was down 8.1 percent because of the 89-day Comair pilots strike and the use of more fuel-efficient airplanes, Ms. Kurczewski said.

       Staff writer James Pilcher contributed to this report.
       

       



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