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 Energy Surcharges Attract Criticism for Philadelphia Hotels

By Jake Wagman, The Philadelphia Inquirer
Knight Ridder/Tribune Business News 

Aug. 6--Beware of California's latest export. 

Not the in-line skate, the California sushi roll, or Planet of the Apes. 

The new invader from the West Coast is the energy surcharge. 

It started at a handful of hotels in San Diego last year, just as electricity prices in the Golden State started to rise. But energy surcharges have now reached Philadelphia-area hotels. And other businesses, such as restaurants and exterminators, have jumped on the bandwagon. 

Some experts say conditions here don't merit the fees. Gasoline prices in Pennsylvania and New Jersey have declined this year. Electricity rates in both states have increased, but not nearly as much as in California. 

"These are temporary charges, put in to partially recoup the large increases in the cost of energy we have experienced," Roger Conner, a spokesman for Marriott International, said last month. Customers are notified of the charges by signs at the front desk and when they make reservations, he added. "We will start removing them very shortly, as soon as energy prices start to go down." 

Hotel energy surcharges have led to at least two lawsuits -- cases in California and Florida say customers were not informed of the charges until they checked out -- and have caught the attention of the New Jersey Attorney General's Office. 

"It is something we are gathering information on," said Ronald George, a spokesman for the office's Division of Consumer Affairs. He would not elaborate on which hotels the state was investigating or why. "We are looking into whether it's legal or sufficient at this time." 

Some of the local hotels with surcharges are the Philadelphia Airport Marriott, the Westin Philadelphia, the Holiday Inn near Veterans Stadium, and the Valley Forge Scanticon Hotel & Conference Center. Some of New Jersey's Hilton and Wyndham hotels have added energy charges of $2 to $3 per night. 

"I think in some places it is justified," said Howard Reichmuth, an engineer from Oregon who was staying at the Sheraton Rittenhouse Square last week. He also recently stayed in California, where commercial energy prices have gone up 41 percent since last year. 

During the same period in Pennsylvania, prices have gone up 22 percent. 

"Here, I think, they are just catching hold of a plausible way to charge more," Reichmuth said. 

The Sheraton Rittenhouse adds a charge of $2.09 per night for energy, a cost its chief operating officer, Chris Papas, said was "a temporary thing, not part of our room rate, and will be removed when energy costs are back in line." 

Michael A. Crew, director of Rutgers University's Center for Research in Regulated Industries, said he doubted the legitimacy of the extra energy charges. 

"They are offensive and misleading," he said. "I have not seen justification for any of them." 

For instance, in New Jersey, the average price of commercial energy in March, the most recent month for which figures are available, was 9 cents a kilowatt hour. That was up a half-cent from a year earlier. 

At that rate, a $3 surcharge would buy 33 kilowatt hours of electricity, enough to illuminate a 100-watt incandescent bulb 10 hours a day for a month. 

If a guest stays for five days, the $15 in surcharges would be enough to air-condition a small home for a week. 

"Remember, the surcharge is supposed to cover only the increase in the price, not the entire price," said Crew, who is also editor of the Journal of Regulatory Economics. "If they want to raise their rates, they are free to do so, but don't pretend it's because energy increased in price." 

Limousine driver Jay Karloff, who spends a lot of time at Center City hotels shuttling passengers, said he felt slighted as well. Because his metered rates are regulated by the city, Karloff was not allowed to add a gasoline charge even when rising fuel prices were eating at his profits. 

"I was getting hit with $1.70 for a gallon, and I couldn't do anything about it," he said. "But these hotels can add a 3 percent energy charge." 

Hotels are not the only ones charging extra for energy. 

The University of Maine decided last month that it would charge students $2 extra per credit hour for energy costs, and the Terminix pest-control company has added a $1 fuel surcharge. 

An official from Terminix, which has 88 locations in New Jersey and Pennsylvania, said the charge had been added because of the amount of driving exterminators do. 

The surcharge appears to be negotiable, though. 

"We are not going to lose a customer over this," company vice president Steve Good said. "If a customer refuses to pay it, we will credit their account." 

Chi-Chi's, the Mexican restaurant chain, had an energy surcharge of 25 cents per entree at its nine area locations last month. Company vice president Robert T. Trebing Jr. would not say why the charge was levied July 1 and then lifted at the end of the month, saying only, "We had it and we removed it, and that's our position." 

United Parcel Service added a fuel surcharge of 1.25 percent of the delivery costs last August, and Federal Express raised its year-old fuel surcharge in April, charging 4 percent of the delivery. Most major airlines started tacking on up to $20 in fuel surcharges at the beginning of last year. 

"Is it real or is it just a way of raising prices? It all depends on the business," said Frederic Murphy, a professor at Temple University's Fox School of Business and Management. "Airlines, yes, they burn a lot of fuel flying you across the ocean." 

But at hotels, where energy is less than 5 percent the total cost, he said, "it's more the psychology: `Yes, we raised the price, but it is not our fault.' " 

Cass Volpert of Louisville, Ky., was staying at the Sheraton Society Hill last week and paying $2.50 a night extra for energy charges. 

"Surcharging anything, I think, is a cheat," she said. "Why don't they just say up front I am going to get charged more?" 

-----To see more of The Philadelphia Inquirer, or to subscribe to the newspaper, go to http://www.philly.com

(c) 2001, The Philadelphia Inquirer. Distributed by Knight Ridder/Tribune Business News. FDX, UPS, 


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