Posted: April 30, 2010

By Michael Schwartz

michael.schwartz@insidebiz.com

In time for the usual summer hikes in gas prices, local chambers of commerce have signed on to a program that could help businesses protect themselves against fluctuating fuel costs.

ChamberSolutions, the for-profit member services entity owned by several local chambers, has partnered with Silicon Valley-based Pricelock to offer a program that lets small and medium-sized businesses pay a premium to lock in a set per-gallon cap for fuel, allowing those businesses to be able to better predict and budget for fuel costs.

Pricelock says on its homepage that gas prices in the last three years have moved between $1.61 and $4.11 per gallon. The company allows businesses to lock in, for example, at $3 per gallon. The participant selects the number of gallons, the set price and the duration it wants to cap. The business then pays a premium of around 5 to 6 percent of its annual fuel costs. If the price of fuel goes above that threshold, based on weekly U.S. Department of Energy averages, Pricelock pays out the difference per gallon each month.

So if a participant locked in at $3 per gallon and the monthly average was $3.25 per gallon, that business would get $0.25 for each gallon it contracted for.

Tripp Dunman, managing director at Pricelock, said that though there are similarities, the Pricelock program is not insurance.

"It's a financial product," Dunman said.

Participants get paid if the national average goes above their set price. And if it stays below that level, the company will have hopefully spent less on the premium than what it budgeted for fuel costs.

There are various levels of coverage. The higher the likelihood of a payout, or "settlement" as Pricelock calls it, the higher the premium. Participants set the cap for as little as three months or up to a year if they register online. That can go up to three years in cap protection if customers use the fee-based customized service.

ChamberSolutions is the first chamber-related organization in the country to sign on to offer the program to its members. ChamberSolutions is owned by 14 chambers of commerce in Virginia. It is headquartered in Hampton Roads and the Hampton Roads Chamber of Commerce is its largest shareholder.

Kenn Penn, president and CEO of ChamberSolutions, said the company partnered with Pricelock because it recognizes "that fuel prices aren't going to go down."

The unpredictable fluctuations in fuel prices over the last few years "ate up people's budgets horribly," Penn said.

The partnership with ChamberSolutions is Pricelock's first push into targeting chamber members. The push begins in Hampton Roads and then through Virginia. ChamberSolutions and Pricelock hope to take the program nationwide, growth that would be financially beneficial for both.

Pricelock hopes to create similar programs for other types of commodities with fluctuating prices.

"Our target market is 360 million businesses that haven't had access to this," Dunman said.

The focus now is to spread the word to chamber members explaining how it works.

"The challenge early on is how do you educate a large amount of businesses that have never been exposed to this," Dunman said.

Large companies that consume large quantities of fuel have the ability to contract with a fuel supplier at set bulk rates - a luxury smaller companies don't have.

The program does not require participants to buy from specific suppliers.

Demand for the program could be high. The Hampton Roads chamber received about 10 calls and e-mails in the first 24 hours after notifying members. nib