AG: Propane firm gouging customers

Ambrose Nowacki, a 73-year-old retiree from Detroit Lakes, Minn., got so mad about the prices Ferrellgas was charging him for the propane that heats his home that he and a friend got a tractor, ripped out his fuel tank last year and dumped it back in the company's yard.

"If I had to hire a wrecker, I was going to do it," Nowacki said. "I wasn't going to pay those people another nickel."

Nowacki and other Ferrellgas customers told their stories Friday at the State Capitol as Minnesota Attorney General Lori Swanson announced she was suing the national propane supplier, accusing it of gouging and deceiving Minnesota customers.

Swanson accuses Ferrellgas of charging excessive prices -- sometimes double the average retail price in the state -- as well as hefty fees for customers who don't keep their tanks filled, all without proper disclosure, according to a 19-page complaint filed Friday in Ramsey County District Court. In one example in the complaint, on Feb. 14, 2008, Ferrellgas charged customers in Wadena, Minn., $4.39 a gallon for propane, more than double the reported state average that day of $2.13 and nearly 80 percent higher than the statewide high price of $2.46.

The state wants Ferrellgas to stop the alleged practice, pay civil penalties for violating state consumer protection statutes and repay customers who were affected.

Ferrellgas spokesman Jim Saladin said that the company's business practices are "ethical and legal" and that its prices are competitive "or we wouldn't be in business."

Ferrellgas Partners is a publicly traded propane supplier in Overland Park, Kan., with about $2 billion in annual sales. It's one of the largest propane dealers in Minnesota, where propane is a popular fuel in rural areas for heating homes. Ferrellgas also sells propane in the small "Blue Rhino" cylinders that people use to fire up their back-yard grills. The company said it has about 50,000 residential and business customers in the state, not including Blue Rhino sales.

In an unusual move, Ferrellgas made a preemptive strike against the state's lawsuit, filing its own lawsuit Wednesday against the attorney general in Ramsey County District Court. The company said it filed the lawsuit to avoid being "strong-armed into an onerous settlement agreement."

In a statement Friday, Saladin said: "We believe that the attorney general's office is attempting to impose unfair and burdensome requirements on Ferrellgas that would effectively regulate virtually every aspect of Ferrellgas' business dealings with Minnesota consumers, place Ferrellgas at a competitive disadvantage, and interfere with Ferrellgas' ability to deliver propane to thousands of Minnesota consumers on the terms that these customers prefer and expect."

Not everyone thinks those terms were clearly spelled out.

Swanson said customers began filing complaints about Ferrellgas pricing practices with her office in 2007. She said she doesn't know how many people may have been affected. The propane industry is basically unregulated, she said, and buyers need to know that it's a "buyer beware" system.

She advised consumers to shop around with competitors, and to check current prices at the state Commerce Department's website. She also said that Ferrellgas has been "gobbling up" smaller competitors.

Roger Leider, executive director of the Minnesota Propane Gas Association in Princeton, Minn., declined to comment on the lawsuit. He said there's "a couple hundred companies" that supply propane in Minnesota.

"There's a lot of choice," Leider said.