Salem learns locked-in rate not exactly locked in
SALEM — Residents in the city’s gas aggregation program paid more than expected for both February and March after supplier Volunteer Energy increased the locked-in rate without warning.
“It was a shock to all of us at city hall,” Mayor John Berlin said.
Under the new two-year contract with Volunteer Energy, the city had agreed to a locked-in rate of 41 cents per one hundred cubic feet (Ccf) for the natural gas aggregation program, which allows the city to gain buying power by banding everyone together to buy gas from a certified supplier, such as Volunteer Energy.
The new price was to go into effect with the February billing cycle, so when Berlin received his gas bill, he was surprised to see the rate was 49 cents per Ccf. In March, it shot up even higher, to 57 cents per Ccf. He asked city Service/Safety Director Joe Cappuzzello to check with the supplier and with AMPO Inc., who represented the city’s interests in the program.
Bottom line, the 8-cent increase which Volunteer Energy attributed to an unexpected increase in their transmission cost will likely remain in place. The additional 9-cent increase in March, which was attributed to the polar vortex that hit Texas, will be taken off now and the money overpaid will be refunded to customers, possibly by July.
“There doesn’t appear to be any recourse,” Berlin said, except that residents can shop around if they want.
He said the ongoing rate for the program is expected to be 49 cents per Ccf.
Terry Leach, of AMPO, Inc., and John Einstein, general counsel for Volunteer Energy, both addressed counsel and apologized for not notifying the city about the price hikes or some clauses added to the final contract, which apparently gave the company the ability to pass costs onto the customer if the company’s costs to provide the service increased unexpectedly.
Einstein explained that the transmission fee his company pays to bring the gas to Ohio was increased by 80 percent, even though the increase had just been proposed in July and the case hasn’t even made it through the regulatory process for approval. His company has no choice but to pay the cost while challenging the increase. He admitted that additional cost was passed on to the customers without proper notice.
During the polar vortex, he said Volunteer Energy was forced to pay spot market prices for the gas, which were 7,000 percent higher than what they had been paying. If something’s economically devastating, they don’t have to necessarily deliver, but Einstein said they have no choice. They can’t cut off their customers, so they spread a portion of the cost to the users and heard an uproar from the communities they serve.
Leach reported that AMPO filed a default of contract on the city’s behalf over the polar vortex fee and Einstein said Volunteer decided to refund customers for 100 percent of that charge from the March bill.
Berlin, Cappuzzello and city Law Director Brooke Zellers all took the company and AMPO to task over changes to the contract, especially to the rate and the added language allowing costs to pass through to the customers for anything adverse that happens.
Berlin said the email to the city when the contract was finalized said that the only changes were to the term (two years), the start date and the rate, which was set at 41 cents per Ccf. Zellers said “we all felt a little blind-sided.”
“We weren’t notified and our citizens weren’t notified,” Cappuzzello said.
Councilwoman Cyndi Baronzzi Dickey said citizens had the ability to opt out, but did not know about this change in rate at the time. According to Leach, they can still opt out at anytime. City Treasurer K. Bret Apple asked if it would be any better with someone else, since those same transmission costs may be hitting other suppliers.
Leach said customers can shop around, but also noted that some other companies have a high cancellation fee if a customer drops out.
Councilman Jake Gano reminded residents that they do have a choice with both gas and electric, saying in some cases they can save money. He urged them to read all the terms of service and know what they’re getting into when shopping around and comparing rates.