Daily Archives: July 20, 2009

PSA: Bad customer service from Budget car rental

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Lynne Kiesling

We interrupt our regular discussion of economics for a public service announcement: I’ve been having a horrendous customer service experience with Budget car rental. Briefly, the re-routing of my flight to Collegiate Triathlon Nationals, due to inclement weather in Dallas, meant that I had to re-reserve the rental car, and the Expedia agent assured me that I would be paying the same rate, or one even lower. However, when we got to Midland and were rushing to get to the meeting with the team two hours away in Lubbock, the Budget desk agent failed to point out that the rate she was quoting would result in a charge that was more than $500 higher than what I had been quoted over the phone, and through my initial reservation.

I have written to Budget twice, to no avail, so now I am invoking the power of reputation networks to encourage you not to give Budget your business. It’s a competitive industry, one that should be grounded in customer service, so you have many market options. I have never been treated as shabbily in any customer experience as I have been by Budget. I don’t want them to profit from their poor behavior, and I don’t want any of you to be treated as poorly in a market transaction as Budget has treated me in this one. Take your business elsewhere.

The text of the letter I sent to them is below the cut.

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Nine months after the zone pricing ban in New York…

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Michael Giberson

New York banned “zone pricing” of gasoline as of last November. In the news:

(Henrietta, N.Y.) – Nine months after a state law banning zone pricing for gas went into effect, drivers can still find about a 20 cent per gallon disparity in price depending on where they buy it.

For example, gas at the Kwik Fill in Henrietta is $2.51 a gallon–18 cents less than at the Kwik Fill in Greece. …

New York State Senator Jim Alesi (R), of Fairport, wrote that law. He suspects wholesale suppliers and he’s already proposed an amendment to include them in a new law.

“We have to include the wholesalers in this, because as long as the wholesalers are not included in this then they can still engage in zone pricing,” he said.

Not sure what Sen. Alesi is talking about. According to the text of the law, it only applies to wholesalers. (To wit: “No wholesaler shall engage in zone pricing with respect to any motor fuel of like grade or quality.”)

Zone pricing has been discussed extensively here in the past (click to see posts). As previously noted, zone pricing is the practice of gasoline wholesalers setting prices for sale to gasoline retailers by area, based upon a projected ability of the area to support higher or lower prices. While practices vary by wholesaler, typically incomes in the area and the level of competition between retailers would be taken into account as wholesales select the price it wishes to charge.

Opponents of the practice, typically those gasoline retailers facing higher than average wholesale prices, claim that zone prices cause higher prices for consumers. Economic analysis tends to support the view that zone pricing raises some retail prices and reduces others, with no clear negative impact on consumer welfare. To the extent a zone pricing ban would affect prices, it would be expected to raise prices in lower-income areas and reduce prices in higher-income areas.

For this reason a zone pricing ban is sometimes considered “consumer protection for the affluent.”

Punishing gasoline customers for non-existent ‘price gouging’ by New Jersy station

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Michael Giberson

First, the news:

Washington Township, N.J., gas station ordered temporarily closed for price gouging

A judge on Monday [July 13] ordered the temporary closing of a Washington Township, N.J., gas station after the owners pleaded guilty to price gouging.

Express Fuel on Route 31 North, south of Washington, will reopen on Monday. The judge also ordered the station’s owners to pay a $1,500 fine and court costs.

An investigation by the Warren County Department of Weights & Measures revealed the station owners violated a rule permitting only one price change within a 24-hour period.

On June 19, the price for regular gas changed three times within a few hours. At 11:03 a.m. that day, the price was $2.43.9 a gallon. The price went down to $2.39.9 at 11:24 a.m. and up to $2.41.9 at 2:10 p.m.

Weights and Measures Superintendent Michael Santos said typically the price changes are all upward or all downward. He said the changes reflect competition among gas stations.

Santos speculated the Express Fuel price went down and back up that day because the owners realized they mistakenly lowered the price more than they needed to.

The gas station is closed all week.

This stupidity momentarily rendered me speechless.

During that moment, I looked up some associated data. All of the prices mentioned in the article were about 10 to 15 cents below the average price in the state at the time (about $2.56/gallon mid-June according to AAA’s Fuel Gauge Report). So this is not “price gouging” in the normal English-language meaning of the term, not even close.

Nonetheless, more than one price change in a day is apparently a violation of somebody’s rule. Pending revision of the rule to something more sensible, there was a technical violation of the rule. Fine. Stupid rule, as this case illustrates, but a violation is a violation.

But why impose a penalty on the station that also penalizes gasoline customers in the area by giving them one fewer station to shop at for a week?

Clearly the court-ordered shutdown of the station for a week will harm consumers many times more than the harm, if any, from the station changing its price twice in a day.

What’s so funny about generating power from onion juice?

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Michael Giberson

In the news, many stories about the debut of a power system at Gills Onion that will produce electricity from onion-based biogas. The topic seems to have spurred extra effort to insert jokes into headlines (Don’t cry for me, California; Energy, layer by layer; From The Onion … No, Not That One), but the technology is pretty cool.

At the food processing plant about 35 to 40 percent of the onion – tops, skins, edges – were leftover by-products, mostly used for composting the onsite vegetable fields. In the new power system, the leftover onions are pressed to separate the juice, the juice processed into biogas and the biogas fed into fuel cells to generate power on-site. An article in Distributed Generation describes some of the details of the processes. Video story here via the Boston Globe.

The company spent about $10 million to build a 600 kw power plant. Some of the money they’ll get back through incentives from the local electric utility supporting self-generation, so I suspect there is a California state subsidy behind it somewhere.  The plant is expected to reduce the company’s electric bill by $700,000 annually and save $400,000 in waste disposal costs.  The company expects a six-year payback period on their investment.

Offshore wind power and data center?

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Michael Giberson

A reader points out a news release by Baryonyx Corp. announcing its success in a recent Texas lease offer for two offshore wind concessions. Baryonyx intends not only to build the offshore wind power plants but also to co-locate a high-reliability data center with the wind farms.

File the idea as “just so crazy it might work.” At first wind farms and data centers seem like strange bedfellows. Wind farms offer variable power and data centers demand reliable power. But at least part of the idea is that by co-locating a large load with wind power, it can reduce the need for significant transmission upgrades to accompany the wind farm.

I suppose the power system issue is whether the net load at the point that the project connects to the grid is more or less variable with the data center added to the wind farm than without it. If the data center power usage is positively correlated with wind farm output, then the answer is yes. My first guess would be a negative correlation, but I don’t know much about data center load profiles and haven’t looked at any data.

(The press release makes an odd claim about providing “indigenous low-carbon energy to offset imported energy.”  Wind power in Texas tends to offset natural gas and coal consumption, and while a small amount of natural gas is imported, most of it comes from Canada. Well, press releases are not known for the rigor of their claims.)