Gasoline distribution companies, lobbyists and gas station owners who have benefited from lower wholesale prices warned members of the General Law Committee that the proposed law fails to understand the economics of gasoline sales, and that restricting distributors from offering rebates to certain [image-nocss] stations would drive many out of business.
Jack Palmer, owner of A&P CITGO in Stamford, Conn., said the law might result in higher wholesale prices for his independent station, which runs at a smaller margin of profit because he owns the equipment and property.
Palmer was one of several station owners from around the state who lobbied against abolishing zone pricing, a practice in which oil companies charge different wholesale prices to stations in different geographical zones. Critics say it creates much higher prices at the pump in Fairfield County.
"I'm a retailer whose ability to succeed relies on his ability to meet the competition," Palmer told the newspaper. "Please consider me and others who would be put out of business."
Zone pricing opponents asked the committee to consider the fairness of charging higher prices to some owners, particularly in Fairfield County, where gasoline prices outpace the rest of the state.
Michael Fox, president of the Gasoline & Automotive Service Dealers of America, told the committee that zone pricing creates a competitive disadvantage for most stations in Connecticut. Those who receive the discounts from dealers very often undersell their competition and still make a large profit, Fox said, making it easier to see why some owners would turn out to stump for the distributors.
"What they're doing is not wrong," Fox told the paper. "They are just telling you that what the oil company is doing is helping them, but that help only lasts so long."
The bill introduced by the General Law Committee is supported by State Representative William Tong (D) and Attorney General Richard Blumenthal, who testified the practice increases gasoline prices in Fairfield County 30 cents to 70 cents a gallon, creating an unfair burden for residents and station owners.
Distributors and oil companies have balked at sharing pricing information and sales records that would verify their claims that wholesale pricing discrepancies aren't imbalanced, Blumenthal said. "We've focused on this issue for years to prohibit what is gas companies dividing our state into different geographical zones and choosing those where the most profit can be garnered regardless of market conditions," he added.
Besides requiring equal pricing, the bill would require distributors to offer discounts and rebates on equal terms to all customers, and maintain detailed wholesale and retail sale records for five years. The bill provides dealers an allowance to raise prices in response to "abnormal" market shocks related to hurricanes and other drops in supply.
New Haven station owner Norman Pearson told the committee how discounts allowed him to survive in a competitive area. State Rep. Jim Shapiro (D), chairman of the committee, replied that unequal prices create disadvantage to many owners. "It seems that other gas stations are subsidizing each other," Shapiro said. "You have to rob at least four other Peters to pay that Paul."
Distributors said the price structure is fine, and defended their prerogative to sell at a discount to some and not others.
The discounts and rebates are based on whether a station is in a competitive area, Mark Dagesse, vice president of lessee rates for Alliance Energy of Branford, a gasoline supplier, told the paper. "Why should a dealer who doesn't own his property, tanks, pumps, buildings and any environmental liability get the same wholesale price as somehow who owns their own location?" he said.
Robert Bassman, a Washington, D.C., attorney and lobbyist who appeared on behalf of the Independent Connecticut Petroleum Association, said the wholesale breaks help those owners in the most competitive areas. "What other business in America do you have the government setting your prices?" he told the Post.
Outside the hearing room, Tong said Fairfield County station owners have suffered for years under zone pricing, paying what appears to be a premium based on a perception of affluence.
"What we're talking about is gasoline prices," he told the paper. "The prices paid in Fairfield County by gas station owners and some other parts of the state are way too high to be justified by the costs of transportation, which are minor."
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