UT: UTA Skips Fuel Hedging, May Cost $3.6 Million

"The ability to hedge our diesel fuel was readily available on the market," Bower said. "There's volatility of fuel prices, but based on market conditions from last year, it was a decision our finance staff made because they saw the benefits by the end of this second year." The story is similar for the Phoenix Public Transit Department. The agency is two years into a three-year agreement to hedge its natural gas, which fuels about 47 percent of its vehicles, said spokeswoman Marie Chapple.

Yo-yo prices Under its fuel surcharge program, UTA raises fares when fuel costs surpass $4 per gallon, in dollar increments. Single-ride adult cash fares increase by 25 cents and day passes rise by 50 cents. The UTA re-evaluates purchase prices every three months. The adult, student and minor monthly passes increase by $8 and the senior monthly pass will go by up $4. A surcharge typically generates about $600,000 per quarter. When prices retreat, the agency must alter fares once again, creating a yo-yo effect.

Ride options have also decreased. Since August 2009, when oil and product prices rebounded from the commodity crash, the UTA cut 3.5 percent of weekday service and 9 percent of weekend services. Along with the surcharge, the UTA will begin using 10 buses that operate on compressed natural gas next year, an addition to the diesel and diesel hybrids that the agency currently uses, Montague said. Until now, the UTA shied away from using natural gas-fueled vehicles because Utah road conditions, terrain and refueling times made it difficult, UTA's Carpenter said.

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