Propane spot price (per gallon at point of production) fell slightly this week — from 46.1 cents last week to 43.9 cents this week (Mont Belvieu, Texas). Same week, a year ago, the spot price was $0.515.
Propane delivery prices nationally varied widely for the week of March 28, with a high of $4.716 in Florida to a low of 99.7 cents in North Dakota, with the national average at $2.008, according to the U.S. Energy Information Administration. In the West, the average was $1.831.
Throughout the winter of 2015-16, propane prices have held steady at historically low levels.
At the beginning of this series in January, we stressed, based on interviews with all the companies then supplying the Hill, that there are many components that determine per-gallon price. They include daily spot price at point of production, transportation costs from refinery, costs of storage, customer type (high volume/low volume; regular route “keep full” or customer call to company for fill; member of any property owner or professional association group; and leased or customer-owned tank).
First fills, for new customers, are generally “teaser” rates designed to encourage a customer to sign a contract. Subsequent fills are based on the above-mentioned components used, especially by national companies, to determine pricing. There are many websites, including those of propane suppliers, that are informational aids customers can use to understand propane pricing and shop for suppliers with the best customer service and deals. One site, www.propanedeal.com, compared the three national companies — Amerigas, Ferrellgas and Suburban Propane — during the first week of March 2016 and found Amerigas to be most competitive (national average) with first fill at $1.699 per gallon, subsequent fill at $2.099; Ferrellgas at $1.499 and $2.370; and Suburban Propane, the most expensive, at $1.799 and $2.599.
Tank owners have the most leverage with pricing since they can shop competitively for each fill. Propane companies know this and, consequently, quote prices to tank owners that are 20 cents to 30 cents less per gallon than tank lessees pay.
The best preparation for any propane customer is to read company contracts for propane supply and tank rental as well as to conduct research on other propane-related informational websites.
Scott Brockelmeyer, Ferrellgas vice president of marketing at company headquarters in Kansas, provided assistance in understanding how the propane industry works in general and how his company sets pricing and policy.
His company’s contract is available online and is instructive regarding customer and company responsibilities — including fees for charges to discontinue service (tank pump out and tank pick-up surcharge), delivery charges (for “off route” and “emergency” delivery), low-usage surcharge and any service work. Ferrellgas contract terms often include “may, at our discretion,” giving Ferrellgas options and flexibility with regard to each customer.
Brockelmeyer explained how his company determines when to fill “on-route” customer tanks. “We have an algorithm in our company computers that factors in weather variances and customer home profile information — for instance, the square footage of the home, the number of appliances that are propane-fueled and whether propane is used for heating the home,” he said.
He also explained how Ferrellgas computes transportation costs from point of production. “Ferrellgas’ Fontana, California, location is a rail facility that receives product via rail from multiple supply points throughout the western United States,” he noted. “The LA basin is another major supply point for us at times throughout the year, including now.” Other charges include truck transportation from railhead to storage facilities and then truck delivery to home.
In short, pricing can vary widely from company to company. Price spikes during the remainder of this year’s peak season are unlikely based on winter pricing to date and the onset of warmer weather.
Local prices are as follows: Suburban — refusal to discuss with press: Ferrellgas, $1.69 per gallon first fill, subsequent fills vary based on above-cited information; Amerigas, $1.59 per gallon first fill, $1.99 for subsequent fills as part of “community pricing;” AC Propane, $1.79 per gallon, less for an owned tank; Diamond Valley, $1.93 per gallon, $1.73 for owned tank; and SoCal Propane, $1.95 per gallon and $1.65 for owned tank.
One reader with a 500-gallon owned tank provided the following information for last week: Amerigas, $1.59 first fill, $1.99 returning customers; Ferrellgas subsequent fills $2.69, property owner association members $2.19; Suburban, $3.61 “regular” price but for a large tank (customer-owned), $1.97 or $2.07 if only for a 100-gallon fill. This information is based on only one customer interview. Another reader, who supplied a copy of his Suburban Propane bill for a fill that occurred on March 18, paid $2.679/gallon for 175.9 gallons.
In general customers, who do their research and ask questions are likely to receive the best deals, customer service and overall satisfaction. The bottom line is that all propane companies, even the national ones, have discretion with regard to customer service and price.
We’ll check back in at the end of July/early August with all the companies about how pricing seems likely to unfold in the peak winter/spring 2016-17 propane season.