Propane customers were surprised by price increases last week. Increases were caused by many factors, but Scott Bensink, Petroleum Department Manager and Monroe location manager for Two Rivers Cooperative, says that budget billing is one way avoid sudden, steep price increases.
The shortage of propane traces its roots back to last fall, when there was a wet harvest in the area. Farmers used more propane to dry their corn.
When winter began, the cold temperatures and windy days increased the demand for propane for heat. Supplies of propane could not be rebuilt fast enough. Meanwhile, the infrastructure that transports propane to Iowa customers is antiquated. Bensink believes new pipelines need to be installed, but environmental regulations make this process long and difficult.
The propane shortage and its factors are not limited to Iowa. Other parts of the United States are also dealing with record cold. If temperatures stay low, expect demand and prices to increase. Even this summer, Bensink does not expect prices to come back down to pre-crisis levels.
Two Rivers, and other gas companies, offer budget billing. This process allows customers to lock in a price per gallon, while establishing a monthly payment to keep their tanks filled throughout the year. Bensink said Two Rivers has many customers on budget billing already. He predicts there will be even more next year.
When prices increased, Bensink said the cooperative was doing its best to accommodate customers. The group is not out to gouge customers. When propane is delivered to homes today, not as much product is delivered, in an attempt to keep the cooperative’s costs down. Two Rivers is also holding enough propane on hand to meet demand, in the event no more can be brought in to the cooperative.
“The last thing we want is to not have any at all,” Bensink said. He hopes that the crisis will be a “wake up call” to the industry, to seriously consider upgrading propane infrastructure.
“There’s always a big fight against pipelines,” Bensink said. He believes that it is the safest way to transport propane.
“You seldom hear about a pipeline problem,” Bensink said.
The infrastructure is likely 30-40 years old, Bensink said. Most of the product is transported by truck, as rail service in most towns – especially small towns – is nearly non-existent. When a shortage does occur, the trucks and drivers are forced to wait. Two Rivers had a truck wait in line a full 24 hours before it could get loaded.
Propane is used 365 days a year, but the fall and winter see the heaviest usage. Bensink believes the cooperative has been fortunate with dry crops the past couple of years, but not this year.
“You can never tell when that’s going to happen,” Bensink said. The most important thing for a propane customer to remember is that contracting and budget billing begins in May. Bensink said this is the easiest and safest way to control costs through the winter. For Two Rivers, budget billing is based on a four-year average usage. Contracting with the cooperative is an option for a specified number of gallons. When those gallons run out, however, customers are at the mercy of supply and demand. The worst situation, however, is for someone to not plan ahead for winter. Bensink said no one wants to see a customer run out of its heating fuel during the winter, but the propane situation will remain volatile through the winter, at least one more month.