Suburban Propane and UGI Corp: Customers Complain of Price Gouging, Posing Regulatory Risk Amid State and Federal Calls to Examine Consumer Energy Costs

Published on Jan 11, 2022

Residential customers of Suburban Propane (SPH) and UGI Corp. (UGI) subsidiary AmeriGas in 15 states described sharply rising propane prices as fall turned to winter, leading to significant duress in some customers’ everyday lives, according to a review of online complaints and interviews with the complaining customers.

With federal and state law enforcers looking for ways to fight inflationary prices, the companies’ conduct could invite regulatory action from federal agencies like the FTC and state Attorneys General, experts told The Capitol Forum.

The high prices charged by the companies have come alongside other alleged practices—including delayed service causing home damage, aggressive sales tactics, and reneging on fixed-price contracts—which taken together, may risk running afoul of federal and state consumer protection laws, the sources further explained.

At the federal level, the FTC—currently under White House direction to examine high consumer prices in the energy sector—could utilize the FTC Act to address unfair or deceptive practices, one legal expert said.

And at the state level, Attorneys General are similarly examining whether propane retailers are using inflation as a pretext to engage in predatory pricing practices, one legal source told The Capitol Forum. State Attorneys General could also bring enforcement actions via emergency orders prohibiting price gouging, sources said.

One comment reviewed by The Capitol Forum reported prices as high as 42% over the average statewide market price. Many customers experienced markups in the 20-40% range, with only one reporting a mere 11% markup, according to additional Capitol Forum customer interviews.

Suburban did not respond to requests for comment. AmeriGas stated that “Customer satisfaction is our highest priority and resolving these [complaints] would be of top priority.” The company added that “We are confident as an organization that we are operating fairly. Unfortunately, we are not able to speak to specific customers” (read the company’s full comment here).

Currently, propane provides heat for five percent of U.S. households, a necessity in large chunks of rural America disconnected from the electric grid. UGI subsidiary AmeriGas and Suburban Propane rank as the first and third largest volumetric propane retailer in the U.S., respectively (consumer complaints have yet to significantly identify Ferrellgas (FGPR), the second-largest distributor).

Consumers in eight states express dismay over Suburban’s high prices. In Connecticut, Alabama, New Mexico, Oregon and four other states, Suburban’s customers pointed to higher propane prices in recent weeks. Customers said the company offered sparse or misleading explanations about the price increases, or in some instances, applied pressure tactics to keep them from leaving for competitors and shipped propane without customer knowledge or permission.

Brandan Blanck of Fabius, New York, another northeast customer, is a case in point. His family has had to make his higher bills work amid cold weather.

“I’ve had Suburban for a little over two years now and they never offer an explanation as to why the price is so high,” Blanck said, deciding he will part ways with the company.

Suburban charged Blanck’s family $4.50 per gallon, 26 percent more per gallon than the average price of retail propane in New York at the time of the interview, according to EIA data.

“My first gut reaction was, ‘Do I put it on a credit card and pay it over time?’ Not many people want to shell out $1,000 home heating bills when you still need gas in your car to get to work, to put food on the table to feed your kids, and to get clothes on your kids’ backs,” Blanck said.

Another New York resident from Watertown wrote on that, after asking the company to halt propane deliveries, Suburban shipped 200 gallons of the fuel to the resident’s home unannounced, charging $5.77 per gallon, on December 20.

The commenter wrote that “they are gouging because of the pandemic and the NY AG needs to look into them for shady business dealings.” The price offered to the customer equated to 42 percent above the average residential propane price in New York as of January 3, according to EIA data.

And in Pennsylvania, a former Suburban customer said the company used “scare tactics” in an attempt to convince him not to leave the company after charging $1 per gallon more than a local competitor.

The customer, Eric Thomas, explained that Suburban “started talking about how they are a national provider” and to “be careful on who you go with.” He ultimately switched to the local propane retailer, Heller’s Gas.

Multiple other customers—charged a range of $4.51 per gallon to $5.89 per gallon in states ranging from Alabama, South Carolina, New Mexico, and Oregon—also pledged to terminate their service with Suburban.

The Capitol Forum has previously reported that Suburban has engaged in allegedly deceptive marketing practices and raised customer prices with little explanation in multiple states, while also utilizing allegedly abusive collections practices. The practices have yielded consumer complaints filed with the FTC, Ohio Attorney General, Better Business Bureau, and an ongoing federal class-action lawsuit.

AmeriGas customers in seven states experience high prices, some defying fixed-priced contracts. In Missouri, Virginia, Nevada, Washington and elsewhere, AmeriGas customers also faced high propane prices in recent weeks. Some of those complaints, according to Capitol Forum interviews and online comments, expressed concerns about alleged broken fixed-price contracts.

Bishop, California’s Emilee Mulleen was among the complainants, providing The Capitol Forum with a copy of her December monthly bill from AmeriGas showing a charge of $5 per gallon.

“I can’t imagine making minimum wage like a lot of people in this area, with most jobs in tourism, and having to heat your house when it’s in the teens at night like it’s been lately,” Mulleen told The Capitol Forum, noting that everyone in the building pays the $5 per gallon price. She added that, to conserve energy in the winter and save money, she sleeps with indoor temperatures of 60°F.

In the Rockies in mid-December, Debbie Tolaney—a resident of Montezuma, Colorado—experienced a fixed-contract pricing dispute with AmeriGas accompanied by a prolonged service delay.

Tolaney told The Capitol Forum she received verbal notice of additional charges of 20 cents per gallon more than the initial fill fee contract—which she shared with The Capitol Forum—that she had signed in the aftermath of a pipe bursting due to cold temperatures. The rupture, occurring due to a lack of heating, has caused $21,000 worth of home damage—with repair work still ongoing—after AmeriGas allegedly failed to refill her tank in a timely matter as part of the automatic refill program.

The price increases have had tangible day-to-day impacts on some customers’ quality of life.

Facing tough economic times and raising two young kids, Amelia Barrales—a Dixon, Montana resident—said her children did not receive any Christmas gifts this year due to the cost of heating their home, in an interview with The Capitol Forum.

Barrales’ bill has increased by more than 150 percent from December 2020 to December 2021, according to her monthly bills which she shared with The Capitol Forum, and currently sits at 28 percent above the EIA documented average price for residential propane consumers (as of January 3 prices).

As someone who cannot currently enter the workforce because she needs to be at home to provide daycare for the youngest child and living services for the older child who is disabled, Barrales said she has looked to switch companies, but to no avail.

“I’ve been searching. No one else delivers out here,” she said. “We’re just waiting for another company to start delivering out here and there are a lot of people, including me, that are going to switch as soon as we get another option.”

And in Kentucky, Richard Bawol of Mayfield—the town at the epicenter of the historic tornado killing 22 of its residents—alleged that AmeriGas first offered a flat monthly fee of $79 per month, but ultimately charged far more when his family received the first bill, “a bill for almost $300.” The price difference was stark: instead of 55 cents per gallon, Bawol’s family paid $2.25 per gallon for the propane and complained to the company that he felt “duped,” he told The Capitol Forum.

Bawol, whose home sits a mile from the worst of the tornado damage, paid the bill which he shared with The Capitol Forum, though not without consequences.

“We’re not rich people and we live pretty much month to month,” he said, adding that, “the more prices of everything keep going up, the more it’s crunching down on us.”

Bawol’s kids and grandkids also went without Christmas gifts as a cost-cutting measure, which he said made him “livid.” He said he has since cancelled service from AmeriGas.

Experts say high prices could risk regulatory action under FTC Act. Regulatory and legal experts who spoke to The Capitol Forum said unusually high prices during a time of economic inflation, as well as weather-related and COVID-triggered emergency orders, could pique regulators’ interest and spark action.

The high residential propane prices and accompanying consumer complaints come amidst a November 17 request from the White House, instructing the FTC to “examine what is happening with oil and gas markets” and to “bring all of the [FTC’s] tools to bear if you uncover any wrongdoing.”

“For the companies involved, I think it’s a burden on them and you never want the FTC rummaging through your information,” Jeffrey Amato, a partner at Winston & Strawn LLP who works within the firm’s antitrust/competition and complex commercial litigation practices, told The Capitol Forum. “I think, probably the federal government’s just trying to do everything they can to see what’s the root cause of the high prices.”

Amato specifically stated that some have argued the FTC has Section Five authority under the FTC Act “to pursue those types of activities as unfair methods of competition or unfair or deceptive acts or practices.”

Tyson Slocum, Director of the Energy Program for the nonprofit public interest group Public Citizen, further suggested additional specific steps he thought the FTC could take in its examination.

“I think that there are some great opportunities here for the FTC to be proactive providing more detailed public reporting of who the major players are in the propane market,” Slocum told The Capitol Forum. “And engaging in a top to bottom investigation to determine whether or not there’s anti-competitive practices in the industry.”

Legal expert says states could act on consumer protection laws, or price gouging statutes, and are considering both. Clayton Friedman, an attorney and partner at the firm Crowell & Moring LLP who leads its state attorneys general practice and oversees its FTC and CFPB litigation, told The Capitol Forum that multiple Attorneys General and Assistant Attorneys General have also expressed interest in answering a similar question: “’Is inflation actually inflation, or is it being used as a tool to get more money?”

“I have definitely heard some rumblings” and “in the last four or five months I have [fielded] more questions” from state contacts, said Friedman, who formerly worked as Director of Consumer Protection within the Missouri Office of the Attorney General.

Friedman added that the prices of energy commodities like propane could “really come under focus” by regulators under unfair and deceptive practices statutes. Complaints like those tracked down by The Capitol Forum likely mean state authorities could already be on alert from consumers and thus primed to take regulatory action, Friedman said.

One state, in fact, has already acted on the issue.

New Mexico takes action under deceptive practices law, part of a broader probe. On December 14, New Mexico Attorney General Hector Balderas announced the opening of an investigation of the “increased cost and reduced availability of propane for personal use in homes” throughout the state.

As part of that ongoing investigation, Balderas brought a lawsuit against a propane retailer under the state’s Uniform Deceptive Trade Practices Act.

Suburban has previously been the subject of state-level unfair and deceptive trade practices complaints and settlements in Alabama and Vermont, as previously reported by The Capitol Forum. AmeriGas has also faced similar legal complaints twice in the past seven years in Michigan and a settlement in one of those cases, with another remaining pending.

Emergency laws have stimulated bipartisan regulatory action, could apply to retail propane. State-level emergency orders related to the pandemic—currently in place in 28 states—also have anti-price gouging clauses, offering an additional lever to regulators looking to stem high residential propane prices, experts said. Thirty-nine states have emergency declaration statutes in place for deployment, according to the law firm Proskauer Rose LLP, most of which have anti-price gouging sections within them.

Emergency orders have triggered action by Attorneys General on both sides of the aisle to combat price gouging and protect consumers in recent years (i.e., Democratic AGs in North Carolina, California, and New York and Republican AGs in Florida, Texas, and West Virginia).

Governors could also issue emergency orders for issues beyond the COVID-19 public health crisis, Crowell & Moring’s Friedman explained.

“It’s also triggered a lot in the cases of regional emergencies, typically tied to weather,” he detailed. “For example, in all the states that were hit by the tornadoes, declarations of emergency were [issued].”

Among the states seeing propane consumer complaints arise reviewed by The Capitol Forum, California, Oregon, and Pennsylvania have emergency declaration laws utilizing a percentage standard barring price increases 10, 15, and 20 percent above the merchant’s price prior to the market disruption sparking the emergency declaration, respectively.

Connecticut and Kentucky, for their part, have outright bans on price increases during periods of emergency declarations. And Missouri, New York, Virginia, South Carolina, and Alabama all utilize statutory language barring “unconscionable” price increases during emergencies.

“I don’t think that there’s any doubt that price gouging is fairly common during emergencies,” Bernie Horn—Senior Director for Policy and Communications for the Public Leadership Institute, a progressive nonprofit group which has a model anti-price gouging law it distributes to legislators—told The Capitol Forum. “And it just gets tamped down by these kinds of laws.”