UPDATE 2-Michigan subpoenas Ferrellgas on propane price hikes

Thu Mar 20, 2014 12:12pm EDT

(Adds Michigan attorney general comments)

March 20 (Reuters) - The Michigan attorney general has subpoenaed propane company Ferrellgas Partners LP and its affiliate as part of an investigation into customer complaints about price hikes for the heating fuel this winter.

"Michigan families have enough rising costs to worry about without being concerned that they may be taken advantage of by their energy supplier," Bill Schuette, the attorney general, said in a statement. "We are prepared to take legal action if it is determined that state law has been broken."

Ferrellgas said in a statement it received the subpoenas and was reviewing the documents. It denied any wrongdoing.

Propane prices in January soared to a record high near $5 a gallon in January as Arctic weather in the Midwest led to tight supplies and distribution problems.

Under the Michigan Consumer Protection Act, Schuette said a retailer may not charge a price that is "grossly in excess of the price at which similar property or services are sold".

Evidence gathered to date suggests that while the statewide average retail price for propane went as high as $3.76 in early February, some Ferrellgas customers were apparently charged more than $8.00 per gallon, Schuette said.

"Ferrellgas denies there have been any violations of the Consumer Protection Act. The sudden wholesale price increases, supply constraints and logistics challenges faced by the propane industry this winter were unprecedented and were particularly severe in the state of Michigan," the company said in the statement.

Propane providers "had no choice but to pass those additional costs onto their customers," it said, adding that many customers in Michigan had pricing contracts prior to the heating season so they were not exposed to higher prices.

Schuette said his office has been contacted by more than 700 Michigan consumers since January who have complained of excessive pricing by the propane industry and misrepresenting the price that consumers would have to pay for the heating fuel.

He said his office received 65 complaints about Ferrellgas, of Overland Park, Kansas, and its affiliate, Best Propane. (Reporting by Scott DiSavino; Editing by Jeffrey Benkoe and Stephen Powell)