Propain

(1/31/2012 update at bottom)

Most of the heat in my house is generated by a wood stove which burns three or four cords of wood a year. When the temperature stays below 20° F for a few days, I let the thermostat turn on the oil furnace for three hours in the morning to take the chill off, but I rarely use the furnace to heat the entire house all day long. I also have a propane space heater in one room that runs on most winter days. Propane is also used to heat water and for the kitchen range, and I use about 350 gallons per year.

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The price of all three of these fuels has approximately doubled in the last decade, so it now costs me about $1500 more per year to buy what I need. Last year I found the US Energy Information Administration web site and learned that the average New England price for residential propane was half what I had been paying. In the fall, before my first delivery of propane for the season, I called around and found that my propane dealer was charging 40% more than two other dealers. I then called my dealer, Suburban Propane, and asked them about the difference. The person checked to make sure there had not been any errors, and could not explain how other dealers’ prices could be so much lower than theirs. I asked if there was any reason I should not switch dealers, and she could offer none. She said I was scheduled for a delivery in about a month. I called another dealer, confirmed the price disparity of $2.00 per gallon, and initiated the switch. All of the other dealers said that there would be no charge to make the switch, which involves replacing the tank, and that there were no other fees involved.

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Even though any dealer could raise the price at any time, the decision to switch from $5.25/gallon to $3.25/gallon was a no-brainer and I was looking forward to potentially saving $500 this year. Two days later, I returned home to find a delivery slip from Suburban Propane. They had kindly moved up my delivery by four weeks and forced the sale of 70 gallons of $5.25 propane. I was now worried that I was in over my head trying to game the corporate system. However, it took several weeks for the new company to make the switch, so I needed more propane anyway. And Suburban Propane should reimburse me for any gas left in the tank I return to them. We will see how much they pay me for that gas.

The new company, Pyrofax Energy, switched the tank last week and sent me the bill for filling the new one. As promised, the price was $3.25 per gallon. I am keeping my fingers crossed. When I called Suburban Propane to tell them I was no longer a customer and that they could pick up their tank, I talked to a different person. She said that I should have talked to her first, and that they would have “done something about it.” This suggests that the price one pays for propane is negotiable. All dealers vary the price depending on how much you use in a year (each dealer seems to have a unique pricing structure), so it is not uncommon to pay more or less than your neighbor. The companies might be exploiting this confusing price landscape to maximize profits. It might be that calling your dealer regularly is the only way to get a fair price.

For the last decade, I have entered the data about every propane delivery to this house. Looking at the Excel graphs of my rising cost per day helped convince me to switch dealers. This cost increase happened despite a slight long-term decrease in my rate of propane use, but that method of controlling cost might have run its course.

[Update 1/31/2012] I just got educated by the Suburban Propane guys who came to pick up their tank. I know both of these guys from 12 years of service, and felt really bad to be terminating that relationship. Although I called their office last week about picking up the tank, these guys never got a work order. They just saw the tank in my yard and knew exactly what happened, so they stopped to pick it up. That’s what they do all week — install tanks for new customers and pick them up from ex-customers. All the companies do that, because they all have low introductory prices for new propane customers, and people switch all the time. They said that in a year my price would be back to five plus dollars per gallon. They suggested that the computers which adjust the price daily to account for market fluctuations are also programmed to increment each customer’s price over time. It’s a well established business model. They said the companies have actually talked to each other about transferring ownership of tanks instead of replacing them to save money. But state regulations might not allow that. So the churn goes on.

They also said that I could have negotiated a lower price instead of switching dealers. I just happen to have called the wrong office before I switched. And I would not have gotten the introductory price (which is now $3.49 at Suburban Propane) but something higher than that. So to get the lowest price on propane, maybe you have to switch companies every few years, including three or more companies in the rotation. This does not cost you anything, and is clearly an excellent opportunity to learn all about the residential fuel industry.

For example, I learned that there is one company in New York that uses a different business model. They sell you the tank, and you are responsible for it. You can have it filled by any company that will fill it. If it gets a leak (the delivery man will smell it) you have to pay for repairs before getting more propane. When the tank expires (every 12 years) you have to buy a new one and have it installed. I also learned that natural gas is available in Burlington, and might move south to Middlebury in the next several years. But only commercial customers (e.g., Cabot Cheese factory, Middlebury College) will be hooked up in the foreseeable future. A natural gas pipeline will never come to my road, which currently doesn’t even have cable (not to mention asphalt).