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    Frequently Asked Questions
    for the Pricelock Fuel Price Protection Program

    Concept

    1. What is fuel price protection?

    Fuel price protection offers businesses a way to set a protection price for gasoline or diesel for a specific number of gallons and months. When the price of fuel exceeds the protection price, you get cash back from Pricelock. This cash can be used to offset the additional amount you are paying at the pump. Pricelock's protection plan will pay you the difference between your chosen protection price and the national-average retail price of regular gasoline or diesel (using an average determined by the US Department of Energy). Any month the national average price is above your protection price, you will receive a payment. Your protection plan will cover a fixed number of gallons each month, and will be good for the number of months you select.

    2. Is this insurance?

    No, fuel price protection is not an insurance product. Amongst other things, insurance claims require the insured to show actual damages. Can you imagine trying to settle your fuel price claim with detailed receipt filing? Insurance products also have specific regulatory requirements. However, the motivation for purchasing fuel price protection is similar to that for purchasing insurance for your property or equipment: to reduce the risk that market events outside of your control will have a negative impact on your business.

    3. Do I get a discount at the pump?

    No. You still pay the regular pump price but you receive offsetting payouts from us for every month that the national average fuel price is higher than your protection price.

    4. Do I have to keep receipts and turn them in?

    No. Pricelock Fuel Price Protection pays you based on the plan you created and you do not have to turn in any receipts to receive your payouts.

    Eligibility

    5. Who can purchase fuel price protection plans?

    Regulations govern to whom we can sell fuel price protection. An "eligible contract participant" is defined in the Commodities Exchange Act as, among other things, "a corporation, partnership, proprietorship, organization, trust or other entity . . . that - (aa) has a net worth exceeding $1,000,000; and (bb) enters into an agreement, contract or transaction in connection with the conduct of the entity's business or to manage the risk associated with an asset or liability owned or incurred or reasonably likely to be owned or incurred in the conduct of the entity's business . . ." In other words, the entity must be protecting the cost of fuel actually used in it business, as opposed to speculating on the price of fuel for profit.

    Other entities may also qualify as an "eligible contract participant," and the full definition may be found in Section 1a(12) of the Commodities Exchange Act.

    6. Who should purchase fuel price protection?

    Any firm that has exposure to increases in fuel costs should consider fuel price protection. By purchasing fuel price protection, the firm gets budget predictability which allows it to focus on its core business instead of worrying about how to deal with uncertain fuel costs.

    Mechanics

    7. How does price protection work?

    There are three steps:

    1. Design a plan that's right for you. This means deciding on four things:

    • Type of fuel (regular gasoline or diesel) for which you want protection.
    • Number of gallons to be protected each month
    • Protection Price - you'll be reimbursed anytime the monthly average price is over this amount
    • Protection Term - how long, in months, you want to be protected

    2. Receive a Confirmation and pay for your plan.

    Pricelock will execute your plan and send you a confirmation via email. At times, market conditions can change significantly between the time that you submit your plan and our ability to execute it. If prices go down, we will execute your plan at the lower price; if prices go up, we will hold your plan and execute it as soon as prices reach the level you were quoted. We will keep you informed via email. You can view the status of your plan, accept current pricing or cancel it, online at pricelock.com. Pricelock will charge your account at the time your plan is confirmed. If payment is not received, your protection plan will not take effect.

    3. Receive payouts when the national average price of fuel is above your protection price.

    8. Are there any monthly fees or service charges?

    No, there are no other fees or service charges beyond the Price Protection Fees paid to initiate your plan.

    9. How do I pay for this?

    We prefer that you pay by interbank transfer from your checking account because we will need your account details anyway in order to make payouts to you, if fuel prices rise above your protection price. We also accept payment by credit or debit card (VISA, MasterCard, American Express, or Discover, only).

    10. What fuel protection price should I choose?

    Think about it the same way you think about the deductible on your insurance policies: the higher you set the deductible, the lower the premium but the more of the risk you have to absorb. The right protection price for you will depend on how much control you want over the price you pay for fuel. A high protection price gives you protection against only catastrophic price increases; a low protection price gives you much greater certainty about your fuel costs but at a higher initial protection fee.

    11. What protection term should I choose?

    Your choice should be based on your protection, budget and cash flow needs. Some customers select a 12-month term to match their budget cycle. Others select a shorter term to provide protection for peak periods.

    Index

    12. Why do you use a Department of Energy (DOE) National index instead of the price I get at the pump to determine how much I am paid?

    We use the National DOE average for a number of reasons:

    • The index closely follows retail fuel prices in cities and states across the country
    • The national index is transparent and widely accepted: each week the DOE updates the averages at http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp
    • There is historical data since the early 1990s for both the regular gasoline and diesel averages, which lets us use them to create trend and other analyses that may help you make a decision about fuel price protection
    • Because we use an index to calculate your payments, you retain complete freedom to purchase fuel at any location nationwide or via any other manner that you currently use to get fuel, all without impacting your price protection plan payments

    13. Who sets the price index?

    The Energy Information Administration (EIA) within the US Department of Energy (DOE) sets the index and publishes it each week. The index is based on a survey of gas stations across the country, which is used to calculate a weighted average price using sales and delivery volume data and population estimates. The monthly index used to calculate your payouts is based on these weekly averages and is published on the same site.

    14. How do I follow the index?

    The index is located at http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp and is updated every Monday afternoon.

    Payouts

    15. How do you calculate the monthly payout?

    At the end of each month, the Department of Energy will publish the national average price for your fuel type during the month.

    If this average market price is greater than your protection price, we will pay you:

    Protected Gallons * (national average price - protection price)

    If the national average price is less than your protection price, there will be no payment.

    16. When do I know if I will get a payout and how much it will be?

    After each monthly average is posted by the Department of Energy, we will do your payout calculation and notify you via email. If you are due a payout, it will be distributed on the fifth business day of the following month.

    17. How will you send me the payouts for my price protection?

    We will send your payout via interbank transfer (ACH) to the account you specified when you set up your account. If you desire to change the account for the payout, you can do that online in the My Accounts |Profile section.

    18. Won't you go out of business if the price of fuel rises more than you expect?

    No. It makes no difference to us if prices go up or down. We buy price protection ourselves from investment banks and oil companies in large quantities and resell it to companies like yours. We use the payouts from the protection plans we buy to make the payouts on the protection plans we sell. We make our money by selling at a higher price than we buy, just like any retailer.

    19. Are there any tax or accounting consequences?

    You will need to consult with an accountant to review your specific tax situation. If you are part of a publicly-traded company and have general questions about Hedge Accounting treatment (known as FAS-133), please refer to the information on our Custom Solutions or call us at 877-754-2710 to talk to our consultants.

    © 2017 Pricelock, Inc.