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MTA getting gouged on bus fuel by Sprague Energy Corp.


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MTA getting gouged on bus fuel by Sprague Energy Corp.



September 22nd 2008



Sprague Energy Corp. fuel barge


The MTA's bus fuel costs are skyrocketing by $26 million - more than triple what the cash-strapped authority paid last year - after it got caught in a no-win contract negotiation, the Daily News has learned.


Not a single company had submitted bids to supply fuel to city bus depots by the Aug. 21 deadline, leaving only three weeks until the existing contract expired, according to a Metropolitan Transportation Authority staff summary obtained by The News.


Faced with the possibility of running out of fuel, the MTA asked Sprague Energy Corp., its existing supplier, to agree to a contract extension.


Sprague, of New Hampshire, saw an opportunity.


The company demanded that the MTA more than triple its pay rate - and commit to buying a full year's supply of the hard-to-get fuel, according to the summary of a contract signed by Sprague and the MTA subsidiary, NYC Transit.


"Sprague, while agreeing to continue to supply the product, insisted upon revisions to the terms of the contract that are quite onerous," the summary states.


MTA buses run on a rare fuel that must be specially refined: ultralow-sulfur kerosene No. 1. There are no pipelines to carry it, so it has to be shipped by barge and then distributed by tanker trucks.


The increased costs are mainly for the delivery and storage of the fuel, and largely unrelated to the price of oil.


The trouble began when transit execs mistakenly expected that multiple firms would vie for the job of supplying the MTA with its bus fuel - work Sprague has done since 2000.


"The decision of suppliers not to bid on this lucrative contract left us in a situation where, to secure an uninterrupted supply of fuel for our continued operations, we had to exercise this very costly option," NYC Transit spokesman Paul Fleuranges said yesterday.


In the end, Sprague increased its per-gallon fee, known as the "fixed differential," to about 73 cents, up from about 21 cents.


The one-year $206.6 million deal gives Sprague $36.5 million in differential payments - up from $10.6 million last year.


This price spike comes as the MTA is already bracing for a massive projected budget gap next year that administrators say will force them to raise fares and tolls.


Over the next year, the MTA will test another fuel - ultralow-sulfur diesel No. 2 - that is used by many other transit agencies and is easier and cheaper to transport.


The goal, Fleuranges said, is "to ensure that this never happens again."

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