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PA Bulletin, Doc. No. 03-855



Fuel Cost Recovery Surcharge

[33 Pa.B. 2240]

Public Meeting held
April 17, 2003

Commissioners Present: Glen R. Thomas, Chairperson; Robert K. Bloom, Vice Chairperson; Aaron Wilson, Jr.; Terrance J. Fitzpatrick; Kim Pizzingrilli

Creation of Fuel Cost Recovery Surcharge Special Permission 28207


By the Commission:

   Tristate Household Goods Tariff Conference, Inc., (Tristate) a tariff publishing agency, represents approximately 275 PUC household goods carriers. See 52 Pa. Code § 23.121. On February 11, 2003, Tristate filed with the Commission a request to change the current rates for its membership in order to implement a Fuel Cost Recovery Surcharge as a result of increasing fuel costs incurred by its members. Tristate seeks permission to temporarily increase, for a period of 1 year, the rates applicable to moves over 40 miles (weight and distance) and to moves that are 40 miles or less (hourly) by the use of the proposed Fuel Cost Recovery Surcharge.

   In support of its proposed surcharge, Tristate has submitted data from its members establishing that fuel prices have increased an average 44% per gallon from March 2002. Diesel prices have risen from $1.355 in March of 2002, to a current $1.949 in March of 2003, as reported by Diesel Prices Weekly and the Federal Energy Information Administration. In addition, the Federal Department of Transportation has responded to escalating fuel costs for interstate household goods carriers by approving a fuel surcharge on a sliding scale. The Federal fuel surcharge became effective May 15, 2000, and continues in effect.

   Tristate proposes a multifaceted formula for calculating the fuel cost recovery surcharge. The formula attempts to approximate the amount of fuel used on a particular trip and multiplies that amount by the increased cost of fuel, allowing the carrier to recover only the additional fuel charges incurred. The formula includes the following constant factors: (1) base price per gallon of fuel1; (2) average vehicle fuel consumption of 5 miles per gallon; and (3) a terminal factor which allows the carrier to recover the additional cost of fuel used in traveling to and from the carrier's terminal to the origin point of the move. The formula also includes one variable factor, the current month's diesel fuel price.2

   Moves of 40 miles or less will be divided into four categories according to average mileage: 5 mile average for trips ranging from 1 to 10 miles, 15 mile average for trips ranging from 10 to 20 miles, 25 mile average for trips ranging from 20 to 30 miles and 35 mile average for trips ranging from 30 to 40 miles. An example calculation for an 8 mile move is as follows3:

Origin of move to destination 8 miles =  5 miles average
Terminal factor =  40 miles
Total miles =  45 miles
Average miles per gallon =  5
Fuel used =  9 gallons
DOE current Fuel Price as of 3/17/03 =  $1.949
Base fuel Price =  $1.267
Fuel price difference =  $ .682
Gallons × Fuel price difference =  9 × .682 = $6.14

   Moves of more than 40 miles will be calculated using actual mileage from the move's origin to destination and return. An example calculation for a 100 mile move is as follows:

Origin of move to destination =  100 miles
Empty Return (dest. to origin) =  100 miles
Terminal factor =  40 miles
Total miles =  240 miles
Average miles per gallon =  5
Fuel used =  48 gallons
DOE current Fuel Price as of 3/17/03 =  $1.949
Base fuel Price =  $1.267
Fuel price difference =  $ .682
Gallons × Fuel price difference =  48 × .682 =

   Under 66 Pa.C.S. § 1301, the Commission is required to ensure that all rates charged by a public utility are just and reasonable. In the case of common carriers, the Commission has traditionally examined the operating ratio to determine the propriety of a rate increase. 66 Pa.C.S. § 1311(d); 52 Pa. Code §§ 23.63--23.67. Based on the surcharge formula proposed by Tristate, a household goods carrier is permitted to recoup fuel expenses based on reasonable approximation of its increased fuel costs. By using an indexing system, the surcharge adjusts to rising or falling fuel prices. The methodology also limits the fuel surcharge to the fuel cost component of the overall charge. In this fashion, the increased revenues will approximate each carrier's increased expenses and, as such, will serve to maintain any operating ratios that were deemed reasonable in prior rate filings. While we recognize the approval of the proposed surcharge may unduly benefit those carriers which have recently received rate increases, we are mindful that cost justification across all segments of the industry is not required to implement a fuel surcharge. We also need to bear in mind our obligation to address an industry-wide problem ''without creating a chaotic rate structure impossible to manage or police.'' Emergency Fuel Surcharge, 47 Pa.P.U.C. 389, 391 (1974).

   Based on our review, it appears that the Fuel Cost Recovery proposal is an appropriate means to address this regulatory problem and that its implementation will result in just and reasonable rates. In order to prevent financial hardship it is imperative that household goods carriers in this Commonwealth be afforded an opportunity to temporarily adjust rates to offset escalating fuel expenditures using the proposed Fuel Cost Recovery Surcharge and, accordingly, we shall allow the proposed surcharge to become effective. Therefore,

   It Is Ordered That:

   1.  Tristate members rendering service under authority of this Commission shall charge a Fuel Cost Recovery Surcharge on transportation provided for over 40 mile charges and for 40 mile or less hourly charge in accordance with all other tariff rules of this Commission. The Fuel Cost Recovery Surcharge is to become effective immediately.

   2.  The Fuel Cost Recovery Surcharge shall be in effect for 1 year to April 17, 2004, unless changed, cancelled or extended by the Commission.

   3.  Copies of this order shall be served by the Secretary to the Office of Consumer Advocate and the Office of Small Business Advocate. The Secretary shall forward this Order to the Pennsylvania Bulletin for publication.

   4.  Each carrier shall post a copy of this Order at its place of business in a conspicuous place. In addition, each carrier shall include the surcharge as a separate line item of the Estimate of Charges provided to prospective shippers.

   5.  The rates collected pursuant to the Fuel Cost Recovery Surcharge are subject to refund in the event that any formal complaints are filed, within 30 days of the date of publication of this Order, and are successful in challenging the surcharge.


1 The proposed base price is $1.267, which was the price of a gallon of diesel fuel according to the Department of Energy report of Retail On-Highway Diesel Prices for the Central Atlantic Region as of February 15, 2002. Tristate proposes this as a base price since fuel prices have steadily increased from that date.

2 This figure is determined by the Department of Energy's report of Retail On-Highway Diesel Prices for the Central Atlantic Region. The current month's diesel fuel price will be effective beginning the 15th day of each month through the 14th day of the subsequent month.

3 All fuel surcharges shall be calculated and provided to the customer as part of the Estimate of Charges.


[Pa.B. Doc. No. 03-855. Filed for public inspection May 2, 2003, 9:00 a.m.]

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