Wed., Feb. 26, 2014 | NEWS
h-e-L-P: The propane crisis in-depth
Part One: The basics, history and the issues
Part Two: The impact, stories and relief
Part Three: The causes, possible changes and conclusions
Greg Marsten | Staff writer
FREDERIC – Unlike other public-service-regulated utilities, people who rely on liquid propane for their heat or cooking can, in effect, be shut down with little question and no recourse.
As hundreds, if not thousands, of users have discovered in recent weeks, LP customer service is a veritable crapshoot of policies, with literally no regulation or standardized requirements.
But the impact for LP users has been in cost per gallon, which has notably skyrocketed in the last six weeks, just as the weather grew arctic and demand grew with empty tanks.
This week, we will concentrate on the issues, impacts and responses to the LP crisis locally, with a few real-world stories from residents and local officials who are trying to deal with the cost and supply problems.
As we'll also see, there are inherit issues within the system that have made the crisis even worse, and for some, a veritable nightmare that cannot be solved by simply turning the thermostat down and wearing extra layers.
People have and continue to suffer, and it seems that much of that suffer could have been avoided.
The contractual limits
As a primer, residential LP service is almost always contracted with a specific vendor or provider, which includes tank rental and exclusive rights to fill, either through a prebuy program, keep-full contract, monthly billing or on a will-call basis.
While many customers routinely pay the often thousands of dollars in the fall or late summer to ensure a steady supply at a stable, set price with no additional charges, even those contracts can apparently be modified with additional surcharges, either for deliveries or other costs. And as the cold weather gripped the region this winter, many of those prebuy customers quickly used up their contracted amounts, which may be twice what they bought at last fall, leaving them at the mercy of the market price. But for hundreds of those LP users who either chose not to or could not afford the large initial prebuy outlay – as is the case with many renters, retirees or low-income households – prebuying is not a realistic option, leaving them at the mercy of the market.
This winter proved to be merciless.
Starting late in the fall, temperatures were steadily lower than in previous years, proving to be a budget-busting, cold trip through supplier nightmares and four-digit fill costs as prices rose beyond $4 per gallon, at times, as supplies of the precious fuel dwindled.
As hundreds of people may have discovered after their LP tanks were filled, the precious fuel tank was now worth more than their car, but few of the vendors offer similar financing deals as GM, Ford or Chrysler.
According to the U.S. Energy Informational Administration, the reality of the LP crisis was an unforeseen price hike unlike any ever seen prior. "Residential propane prices in the Midwest rose from an average of $2.08 per gallon on Dec. 2, 2013, to $4.20 per gallon on Jan. 27; prices fell back to $3.83 per gallon on Feb. 3."
While they address the colder-than-average winter east of the Rockies, the EIA noted that the average heating degree days across the nation were only about 12 percent higher than last winter, so far, but added that the Midwest was 17 percent colder than last year.
While it may seem that it has been extremely cold, there were multiple reasons for the shortage and the price spikes, which we'll address in the Part Three.
At press time, the average local price per gallon was still almost twice the rate of last fall, but some areas of the nation have even higher prices, and spot pricing continues to fluctuate but has generally fallen in the past three weeks, for reasons we'll also address next week.
For comparison, the average price per gallon of LP is on par with unleaded gasoline, but slightly higher than almost all carbonated beverages, many juices and even some beers. LP prices eclipsed some household items like liquid bleach, many shampoos and, according to the latest U.S. Bureau of Labors Statistics prices, on average, local LP prices have been higher than milk since January.
While it may seem like an unfair comparison, you may be right, because consumers can shop around for cheaper milk, gasoline, drink mixes, laundry detergent or shampoo. Unless you own your own LP tank, the price is almost irrelevant, as the industry, LP vendor and market prices determine what you pay, period.
It would seem appropriate in comparing LP prices while under contract to using Henry Ford's often-cited Model T quote on paint colors, “People can have the Model T in any color – so long as it’s black.”
It doesn't take much speculation to realize that the almost total lack of regulation in the LP world has shown the industry's worst faces, and for some people, they are seemingly held hostage by their suppliers for heat, and the ransom may depend on who answers the phone and what day it is.
The fees and the independents
Contractual LP customers are bound by a fee structure set by the vendor, and not just for raw LP costs. Every other fee, from delivery charges, tank removal, after-hours fills or deposits on tanks, there is no standard and no regulation at all. The only real LP requirement is that an empty tank requires a leak test, which can also vary from $50 to even more.
As many LP users have discovered, there may be lots of charges if they run dry in the cold weather, from the leak test to an after-hours delivery charge, surcharge or other fees, meaning they may be spending over $200 before getting one shot glass of LP in their tank.
Combine that with inflated prices on a widely varied minimum delivery amount and it was not uncommon for people to have close to a $2,000 bill and a barely full tank in the coldest weather, with several months of heating season ahead of them.
The problem for many of those people is that several of the LP vendors required that account to be clean, back to zero, before they would deliver again, regardless of their situation.
And for those who own their own LP tanks, they have another issue. They may be able to shop for prices, but many vendors won't take them as customers, and if thy do, they are at the end of the line and may have to wait for weeks.
Sadly for LP users, both independents and those bound by vendor contracts, root beer, shampoo or milk furnaces don't seem to be in development at this time.
The residential stories
Over the course of several weeks, we have been contacted by dozens of people telling their LP tales, both the good and the horror stories, and while the issues are often similar, and many of the same vendor names showed up repeatedly, it would not seem fair to name those with negative comments, as their own circumstances or finances may be unique.
Ditto to giving full names of those people who contacted us with their stories. Many of them requested anonymity, as there can be a certain stigma associated with seeking heat assistance and emergency funds to pay off their swelling LP bills so they are able to keep their tanks full enough.
But their stories are so similar, it is hard to ignore.
Rob E. of western Barron County waited until the last possible minute to have his tank filled, as the price neared $5 per gallon. They also did what hundreds have done. "We have now instituted a lower thermostat setting at night, dropping the temperature in the house about five degrees. Not sure if it is helping since both of my children, ages 3 and 1, have been constantly sick since doing so. We have also went out and bought heated mattress pads to keep them warm at least under the covers."
Kari K. of northern Polk County is a renter who was unable to do a prebuy, and has bore the brunt of the inflated prices all winter. She said her vendor refused to work with them, and put it bluntly, "We got (hit) hard and are trying to catch up with our electric bill (after) running electric heaters. We are also trying to save up because we know we will need it again! Might have to take a loan out for the next fill ... it (stinks)!" She added that with young children in the house, turning the thermostat way down is not a viable option.
Linda G. of eastern Polk County had positive words for her supplier, Northwoods Propane, but her story was a similar one. "Our contract for prepay was used up. Am now paying going rate day of fill ... Have not applied for assistance, yet. Cannot afford more fuel. Broke. Because of substantially more, (and) more costly propane purchased ... we are doing without anything nonessential. Less gas for cars. Less groceries. Not always paying other bills on time. May need to borrow (money) for shortfall. Ugh ..."
Lisa S. of rural Balsam Lake was happy with her provider, Country Comfort, whom she said has been working with her during the crisis. But she still has had to borrow hundreds of dollars from both her elderly parents, while dipping into her dwindling retirement funds to keep her tank partially full, and even then she still owes over $1,000. "I received $300 in heat assistance early on, but that barely took anything off the bill. I've dropped the (thermostat) way down, but not sure how I can afford any more when that runs out."
Tom G. of rural Centuria had horrible supplier stories, with endless waits for a fill and a demand to clear a bill before they received any fuel. While they have dropped their thermostat into the 50s during the night, he said their supplier refused to work with them and continued to tack added fees on them when it ran dry, charging "... north of $4 a gallon (for a) partial fill." He said they have gone so far as to sell inherited gold jewelry, and they expect the they won't have enough to make it past mid-March. "This (stinks). A whole paycheck to (LP) and the tank is still only 60 percent. This is a scam!"
Chuck W. from Minnesota echoed those comments, noting that he has had "two entire paychecks go to LP, and I have to decide what other bills not to pay. I hope someone is making money off this (expletive)."
Keith Z. of rural Balsam Lake had positive comments on his supplier, Lakes Gas, but they have still run into issues. "We have now ran out of prebuy and they are willing to work with us on the next fill we will need. You can feel and hear the fear in them when you call in to ask a question, but how can you be mad at them? We have turned the temp down 8-10 degrees, if the grandson is coming over we will bump it back up but if we are watching a movie or TV program we sit with a blanket, we put extra blankets on the bed and even the dog got a bigger blanket for his daytime slumber."
Gene T. of rural Dresser said they have had their prebuy contract honored, but the vendor "seems to always look for charges wherever they can find them" and he said they have now used up their prebuy. "I'm not sure where the next round of payments will come from ... You can't get blood from a stone."
Other stories echoed those comments, and while several residents applauded how their providers have worked with them, more often than not, they spoke very poorly of two or three local providers, who stood out on refusing to work with outstanding bills and fill times that often went out 10 days or more. But, as you'll see, it wasn't just the residents who have had issues.
The governor's office has touted the addition of monies to several relief programs, specifically to emergency assistance and to the Keep Wisconsin Warm Fund, on top of the annual allocations to heat assistance.
Diana Peterson is the economic support lead worker for Polk County Human Services. She spent a long time explaining the issues, eligibility and programs, as well as common complaints among customers, which again, echoed residential complaints and praise along the way.
The Low Income Heat Assistance Program is a one-time payment program for heat assistance that runs from Oct. 1 through May 15. It is a one-time payment toward heat and/or electric payments.
"The (crisis money) is built in on top of that (LIHEAP)," Peterson said. "Each county sets its own crisis policy. You set your guidelines to the (dollar amount) as well, as to other resources."
She noted that Polk County – as well as Burnett County – is without many outside assistance sources, beyond the Salvation Army and some church groups, so the burden on their assistance and help falls more squarely on their shoulders than in many areas.
The issue with LP is that there are no disconnect rules, unlike Class A utility providers such as electric or natural gas suppliers. In other words, they cannot disconnect a customer for nonpayment between Nov. 1 and April 15, but LP and cooperative electric utilities, such as Polk-Burnett Electric, have no obligation to continue service.
"After April 15, they can start to disconnect. So right now, all our crisis (money) is going to heating oil, LP and (cooperative electric utilities)," she said, noting that the extra crisis money requires a threat to disconnect (or no fill). Our goal is to help them."
The governor's office mandates have changed the usual emergency heat-assistance protocol. "We've been told our crisis plans should be put aside," Peterson said, as outstanding bills with a supplier were formerly exempt from eligibility, but now her department is attempting to work with LP providers to pay down those outstanding bills to allow a fresh, albeit minimum, fill and that has not always gone well.
"Even with guaranteed money from us, the amount of minimum deliveries seems to fluctuate. It seems to change day to day, depending on whom you talk with and which company. There is no consistency among vendors, at all. It's very frustrating," she said.
She did note that several vendors have been very easy to work with, while several others have been "really, really tough to negotiate with." The ones so hard to work with have, ironically, seemed to be the same vendors that residents also complained most loudly about in their comments to the Leader.
Polk County has one assistance worker to work with the vendors, customers and the available funds to negotiate a payment to allow a minimum fill, and she has a backlog of appointments almost into April.
Peterson noted that many of the funds they are using are going to the added fees of leak tests and delivery surcharges, if it was not a normal trip route, as well as emergency fill fees, all on top of record fuel prices.
She noted that some providers have had trouble meeting their prebuy contracts, while others, such as Larry's LP in Webster, could not get enough supply to meet their contracts, which left other vendors to pick up the slack. "Actually, they've been great up there," she said, noting that Larry's has even offered refunds to those customers.
She also addressed the Keep Wisconsin Warm Fund, which was recently established with $500,000 for people who lie just outside usual income eligibility requirements. However, the counties are so overwhelmed with pending work and eligibility, they have no time to administer the program.
"Basically, we're swamped with other work, so the state is doing their own administration," she said.
The numbers and the amounts
So how many people are signed up for heat assistance and what kind of money are we talking? Since Jan. 1, there have been 233 crisis cases in Polk County, and 1,804 heat-assistance cases for the heating season of Oct. 1 through May 15. In comparison, for all of the 2013 heating season in Polk County, they had 2,054 cases.
"We're almost at our max for last year, with three months (of disconnect season) left. We've definitely exceeded our previous numbers of people served," Peterson said. "But we’re still encouraging people to apply."
The numbers of Burnett County are also way up, with 256 new assistance applications since the first of the year, on top of 1,147 overall heating assistance cases during the October 2013 through - May 2014 heating season. They have 173 crisis cases so far.
As for the amounts of money distributed, Polk County has allocated $132,374 so far, out of a $160,367 total, with almost $28,000 of that from the crisis allocations. Burnett County has also allocated most of their funds so far, with just over $18,000 remaining from approximately a $122,000 allocation.
The issue is that, so far, that money has gone almost exclusively to rural customers, either for LP, electric disconnects or for heating oil.
"We haven't even started the disconnect season in the cities (and villages)," Peterson said.
Yes, as the rural LP customers struggle with payments and possible electric disconnects as they respond to the high prices, the urban residents face an April 15 disconnect deadline that may leave them without usual funds.
"People are really hurting," she said. "It's nuts."
Peterson sighed as she recalled a recent story of an elderly woman whose LP tank went empty and she was left with no heat.
"(Her provider) said, ‘Well, we'll be there within 10 days,’" she said with a shake of her head. "Realign with things like that, and vendors who respond like that makes it hard to think something isn't seriously wrong."
She also noted horror stories of pipes freezing, furnaces failing due to age and heavy use in subzero temps, as well as the general problem and safety issues with people turning to electric space heaters, kerosene heaters and other potentially dangerous sources.
"I just got a call from the (Polk County) Sheriff's Department the other night on an elderly couple (with a broken furnace)," she said. "I had to set them up with two electric space heaters, and told them to put them where the pipes are, until WESTCAP can come out to assess the problem. Yeah, it's nuts."
Others have noted that while people continually try to find alternate sources, such as wood, pellet or corn stoves, they also have found that the impact of the LP crisis has left those fuels with rising prices and less availability.
On top of that, their insurance costs may go through the roof with a wood stove, which can be enough of a liability risk that some insurers may drop a policy entirely. Others have found that the heavy snow has made access for new wood sources all but impossible.
"It's frustrating. I hate to see little old ladies and kids left out in the cold," Peterson said, stating that she'll wait until the heating season is done to offer suggestions to the state and others on what she thinks should be done. "But I will say that if there was some regulation out there, it would help standardize some of this, to get the money to where it’s most needed, and to make it fair. Of course, I have a different perspective than most."
What to expect in Part Three
Next week we'll look at the possible causes, responses from the industry, vendors and others who are behind the business of LP, as well as the long-term outlook, suggestions and improvements.
But most of all, we'll try to follow the money, which has proven to be a difficult, if not impossible, question to answer.