Bill allows gas price increase in emergency

As posted on March 22, 2010 on www.ajc.com

By James Salzer

Less than two years after hurricanes brought a run on gas, the state Senate has passed legislation letting station owners charge much higher prices as soon as an emergency is declared.

Officials with the Governor’s Office of Consumer Affairs worry the measure, if it becomes law in its current form, would make it tough to prosecute a gas station for price gouging.

“I think it would be very difficult to determine that price gouging had occurred,” said Bill Cloud, spokesman for the office. “I don’t know that we would have confidence in saying that, as the bill exists right now, we would be able to define, or describe or enforce price gouging as it relates to petroleum products.”

The bill was originally meant to give the governor more flexibility in deciding which products would fall under gouging laws during an emergency. For instance, if an emergency involved damage to homes but not a disruption in the flow of gas, gouging laws could apply to plywood or building materials and not fuel.

However the bill, which was backed by Gov. Sonny Perdue, was rewritten by the Senate Agriculture and Consumer Affairs Committee to allow stations, in an emergency, to charge for gas what they decide it will cost to replenish the fuel they have on site.

Say a station bought gas for $2 a gallon, and was initially selling it for $2.10 a gallon. Under the bill, the station could immediately raise prices to $4 a gallon in an emergency if that’s what they determine the price would be to re-fill their tanks once the fuel is gone.

Under current state law, stations are prohibited from making greater profits once the governor designates an emergency.

Governor’s office opposed

Jim Tudor, a longtime lobbyist for the convenience store industry who worked on the bill, said it’s only fair to let stations charge what it would cost to replenish their gas because they have to pay for the fuel up front when it’s gone.

“In order for small retailers to generate funds to replenish their inventory, the replacement cost has to be taken into consideration, as it has been in other states,” Tudor said.

The governor’s office objects to the change and is working with lawmakers and lobbyists to rewrite the Senate bill. The language allowing the higher prices may be removed from the bill before the House votes on it. But consumer advocates will watch to make sure it doesn’t reappear when it goes to a conference committee late in the session. That’s when many deals are quietly made.

State watchdogs received about 2,100 complaints of price-gouging in 2008 when Gulf Coast hurricanes wreaked havoc on fuel supplies.

The Governor’s Office of Consumer Affairs determined more than 100 stations and other businesses gouged customers. Those businesses agreed to pay Georgia tens of thousands of dollars in fines and offer refunds to victims for overcharges. The Atlanta Journal-Constitution last year found that few drivers got refunds.

The original Senate Bill 237 offered Perdue the flexibility in emergencies that he requested. But Bert Brantley, the governor’s spokesman, barely recognized the bill when he saw what had passed.

“The new language doesn’t achieve what we set out to do,” he said. “Our worry is, what we’ve seen in the past is that consumers get hit on both ends.

“They get hit on the way up and they get hit on the way down. They pay more when they (station owners) anticipate gas going up, and they pay more when prices start to go down because they are paying for what they (stations) bought.”

Pointing to plywood

The Senate bill was sponsored by veteran lawmaker Jeff Mullis (R-Chickamauga), who said it “wasn’t my intention” to allow stations to immediately charge the higher price to replenish their inventory.

He said it was redone in the Senate committee.

“I hope they change that,” Mullis said.

The committee’s chairman, John Bulloch (R-Ochlocknee), said the change was made because in an emergency, retailers of other products, such as plywood, are allowed to charge the higher prices immediately.

That’s the same argument made by Tudor, the convenience store lobbyist.

“Right now the state allows, during the state of emergency, for replacement cost pricing for plywood, which is a very volatile product,” Tudor said. “What we have attempted to show the state is that motor fuels is even more volatile.”