March 18, 2009

Noting that a new law that was supposed to keep residents in certain communities from paying more than others at the gasoline pump isn’t working, County Executive Andy Spano is asking the Attorney General’s office to use its powers and investigate the “unlawful and discriminatory practice” of zone pricing.

In a March 17 letter asking Andrew Cuomo to take action, Spano stated that zone pricing continues to occur in certain areas in Westchester, despite the enactment of state legislation that was supposed to ban the practice.  He cited apparent violations of the Gasoline Zone Pricing law and included survey data from the Department of Consumer Protection that shows how gas prices in Bedford, Croton, Katonah, Rye and Somers continue to run as much as 30 cents higher than the average.

Two years ago Spano called on the state legislature to prohibit petroleum wholesalers from charging higher prices to gas station owners in certain geographic areas. A new state-wide law went into effect in November 2008 but doesn’t seem to have changed much, Spano said.

“Despite our best efforts and this new legislation that clearly bans such practices, zone pricing continues to be a problem in portions of Westchester,” Spano said. “I’m confident the Attorney General’s office will agree this is an issue that needs to be addressed. Those who flaunt the law need to see that they will be held accountable and if necessary, required to pay civil penalties as well as restitution to aggrieved consumers.”

 Zone pricing occurs when oil companies charge higher wholesale prices to gas station owners in certain geographic areas.  The higher wholesale prices are then passed along to consumers at the gas pump. The Westchester analysis found five areas in the county where it appears zone pricing is a factor in prices: Bedford, Croton, Katonah, Rye and Somers. In each of these areas, prices have been significantly above the county average. As noted in the Memorandum in Support of the legislation, “the result of zone pricing is higher prices at the pump for individuals who are assumed to be able to pay more.”

According to Spano’s letter, “In these difficult financial times, government has an even greater responsibility to ensure that all of our residents are treated fairly when it comes to purchasing fuel – or anything else, for that matter. Residents of one jurisdiction should not have to pay more for the same commodity as residents of a neighboring jurisdiction for no justifiable reason.”

The Westchester County Department of Consumer Protection has been conducting regular surveys of gasoline prices in the county for years. The data compiled makes it clear that zone pricing has consistently occurred in Bedford, Croton, Katonah, Rye and Somers. The most recent survey, conducted earlier this month, shows that retail prices in those areas continue to be 12 to 30 cents higher than the national average.

It should be noted that the state law bars zone pricing at the wholesale level, while the data compiled by the county shows higher retail prices in certain areas. Nonetheless, the existence of consistently higher retail prices in specific locations strongly suggests that zone pricing is taking place at the wholesale level.

Assemblyman Adam Bradley said he was pleased to be able to pass legislation prohibiting the practice of zone pricing.

“This practice is a discriminatory tactic used to inflate profits at the expense of consumers,” he said. “It is important that all government officials protect consumers from artificially inflated costs for vital products such as gasoline.”

Assemblyman Richard Brodsky, who put forth the original bill, also said he was deeply involved in the issue, sponsoring legislation to prohibit zone pricing for many years.

“It’s nothing more than a discriminatory marketing practice that hurts New Yorkers,” Brodsky said.

County Legislator Michael Kaplowitz, a long-time advocate of a ban on zone pricing and author of the resolution passed by the county Board of Legislators, said he’s all for beefing up enforcement and welcomes an investigation by the Attorney General.

“This law will potentially save consumers significant dollars when purchasing a critical product,” Kaplowitz said.