Safety-Kleen is committed to controlling costs in order to provide our customers with the high value products and services they have come to expect. Unfortunately, there are some variable or non-standard costs we cannot fully control, and due to the nature of these costs, we believe our customers are best served by not trying to recoup these through the price of our products and services. We believe that our customers deserve a higher level of visibility and transparency to these costs and how they are impacting all of our businesses today.
Our standard recovery fee is meant to help us cover these costs and maintain an acceptable operating margin. The variable recovery fee is a single line item on customer invoices, comprised of three components: a fixed 1.5% charge for insurance, a fixed 1% charge for security costs, and a variable charge for fuel costs.
This charge helps us keep up with the changing costs of diesel and other hydrocarbon based fuels, and allows us to achieve the operating margin we need to maintain a high level of service. Our fuel component calculation is tied directly to the national average price of diesel fuel as reported by the U.S. Department of Energy's (DOE) Energy Information Administration. This index is objective, publicly available and widely recognized as an industry standard. Tying our fuel component to this index ensures our customers are assessed a charge that is easy to calculate, adjusted in a timely fashion, and equitable to all parties.
Visit the U.S. DOE's Energy Information Administration to learn more.
The fuel cost is calculated using the No 2 Diesel Ultra Low Sulfur index generated from the websites listed above. The prior month’s average from this index will be used to calculate the current month’s price, and will be updated on the first Monday of every month. Rate tables used in this calculation can be found below. Minimum and maximum charges will be applied, and will vary according to the rate table mentioned above. This table shows what the fuel component, as a percentage of your invoice charges before taxes, would be based upon.
Security & Transportation Component
The security and transportation portion of the fee is 1% and is made up of additional costs that Safety-Kleen incurs to maintain heightened security at our facilities and for our transportation fleet and associated employee costs. Regulations such as the Patriot Act have increased costs, and Homeland Security measures have been instituted which have also driven up costs.
We also incur additional costs to operate our transportation fleet due to an increase in road stops and checks. We are considered at greater risk by Homeland Security because we transport hazardous waste; therefore, our trucks are stopped more frequently for roadside checks. The time spent at these checks directly increases our cost of transportation.
Furthermore, all employees are now subject to background checks. We must pay an outside agency to complete these thorough checks. These are direct costs we incur to maintain security.
The insurance portion of the fee is 1.5% and is made up of additional insurance costs we incur from higher insurance rates. As a result of billions of dollars of claims, the insurance industry has passed along much of the expense in the form of rate increases.
Frequently Asked Questions
Q: Why do you charge a fuel component?
A: The historical fluctuation in the cost of diesel fuel has made it difficult for our Company to recover and administer fuel expenses in standard operating margins. Our vehicles that run on diesel get 4 to 5 miles per gallon. In addition, third party vendors that transport our waste charge us a fuel surcharge or an increased price for added fuel costs.
Q: If the price of fuel goes down, will my fuel component go down too?
A: Yes, because the charge is tied to EIA index, if the EIA national average diesel price falls, your fuel component will come down as well. This information is updated monthly.
Q: Why is there a fuel component when the cost of fuel is less than what it was when my service began or was renewed?
A: Our service rates contemplate a $2.30/gallon baseline fuel rate, which we selected when we implemented the most recent recovery fee program.
Q: Will the security or insurance fee component change each month?
A: No. The security and insurance charge will not fluctuate each month. These are currently set at 1% and 1.5% of the invoice respectively (excluding taxes). The percentage may be changed periodically if there is a business determination that warrants a change in the charge