North Andover Eagle Tribune - 8 Aug 08

Prof. Robert B. Laughlin
Department of Physics
Stanford University, Stanford, CA 94305
(Copied 30 Oct 09)

Waste Haulers Raise Fuel Surcharge as Prices Rise

By Jarret Bencks
August 7, 2008

Rising Fuel Surcharges
Date Diesel Fuel Cost
(per gallon)
Fuel Surcharge
(percent of bill)
January 2007 $2.40 7.25
August 2007 $2.85 9.5
January 2008 $3.28 11.65
August 2008 $4.50 17.75
Source: Waste Management Inc.

When diesel cost $2.40 a gallon last year, waste transportation companies charged customers half as much as they do today to cover their fuel expenses.

Fuel surcharges - a percentage assessed on top of the regular bill to cover the added costs of gasoline or diesel - are a common practice in the waste disposal industry.

When the nationwide average for diesel was $2.40 a gallon in January 2007, Waste Management Inc., the state's biggest waste transportation company, imposed a fuel surcharge of 7.25 percent on private customers' weekly bills.

With last week's average for diesel at $4.50 a gallon, WMI's fuel surcharge added 17.75 percent to all nonmunicipal customers' bills.

The initial cost to rent a Waste Management 30-yard, open-top container in Rockingham County is $485 a month for the first month and $435 per month thereafter. The fuel surcharge, and an environmental surcharge - a flat rate of 4.2 percent - are added to that. The surcharges would total $106.45, or 21.95 percent, for the first month's bill.

The fee, first put in place in 2005, is used to cover fuel costs and nothing more, said Lynn Brown, a Waste Management spokeswoman. Some of the company's trucks receive as little as three miles per gallon, making fuel a major expense, Brown said.

She added that the company has predetermined percentages for the surcharge, depending on the price of diesel fuel.

"The good news is when gas prices go down, the percentage goes down," Brown said.

When diesel prices were at their highest in June - at $4.75 a gallon - the company's fuel surcharge was almost 2 percent higher than it is today.

Casella Waste Systems has a similar structure for its surcharges, according to Joe Fusco, company vice president. Casella adjusts its fuel charge on a monthly basis, depending on the national average cost of diesel fuel, Fusco said.

"This is probably the most volatile part of providing these services," he said.

Fusco did not provide specific numbers. But a bill for June showed a 19.55 percent fuel/environmental fee on top of other charges.

Fuel surcharges are highest for Dumpsters rented by individuals or small businesses. Most waste companies offer different rates to municipal transfer stations, but some town transfer stations are still paying more to transport their trash than planned because of the increase in diesel prices over the last few years.

When the town of Derry agreed to a six-year contract with Maine Energy of Biddeford, Maine, in 2005, it was based on a diesel fuel cost of $1.50 a gallon. With diesel prices about $3 per gallon higher now, Derry pays an additional $190 per load - on top of the initial transportation cost of $288 per load, said Mike Fowler, director of public works. The town transports about 500 loads a year, totaling about $100,000 in fuel surcharges.

Town officials weren't expecting such high fuel fees when they agreed to the contract, but were aware of the company's fuel surcharge and the way it worked, Fowler said.

"It's fair for the town and the company," he said.

Derry has seen hauling costs go up 5 percent to 8 percent a year due to the rise in diesel costs, Fowler said. But total tonnage of disposal has gone down annually and closed the gap on transportation costs. The town hauled about 11,000 tons of trash in 2004, compared to 9,500 tons last year.

"Conservation is the best way to beat the rising costs," Fowler said.

Salem's transfer station agreed to a fixed annual rate per gallon to cover fuel costs with Casella to handle its waste transportation. Setting the rate at the beginning of the year makes fiscal planning easier for the town, according to Jane Savastano, Salem's finance director. This year, the rate is $4.01 per gallon, 50 cents a gallon less than the current national average.

And Casella operates a waste center in Salem, making transportation a short drive.

Even though Derry's trash has to be taken to Maine to be processed, Fowler said a favorable rate for disposal, which is the highest cost when it comes to getting rid of waste, makes it worth it.