Consumer Propane Pricing Questions and Answers

Are you a new propane home heating customer? Review the following propane price questions to learn about propane price protection, propane pre-buy, propane price cap, new customer offers, propane supplier service fees, interview questions to find the right propane service company and more:

What is a propane price protection agreement?

A propane price protection agreement is any type of propane supplier agreement that either establishes a maximum propane price per gallon for a period of time or establishes a fixed price per gallon for a specific volume of propane through the following heating season.  Common propane price protection programs include “propane pre buy” or a “propane price cap”.

With a propane pre-buy agreement (sometimes referred to as a “contract price”), a propane customer will purchase the amount of propane that the customer is expected to use during the following heating season in advance (typically mid to late summer before the heating season begins).  Since the summer months are non-heating months, propane demand is typically lower and prices may be favorable for propane pre-buy agreements. The propane is purchased at a fixed price per gallon and is typically paid in full at the time of the pre-buy agreement. Some suppliers charge a propane pre-buy participation fee while other suppliers do not charge a pre-buy participation fee.  When winter arrives, the propane supplier will then deliver the propane to the customer’s tank as needed throughout the heating season until the total propane pre-buy volume has been exhausted.

When the pre-buy propane supply has been exhausted, the price for additional propane will typically change to the current non-pre-buy price offered by their propane supplier.   If a surplus of pre-buy propane exists after the heating season, the supplier may refund the balance or credit the propane balance to the following heating season.

With a propane price cap agreement, the supplier will offer a high-side price cap to ensure that the customer’s propane price per gallon does not exceed a specified amount during the upcoming heating season.   Propane suppliers will typically charge their customers a participation fee for a propane price cap agreement.

Do most propane suppliers offer a new customer offer?

Yes. New customer offers are very common among propane suppliers to attract new customers. “New customer offers” can include some free propane, no tank rent and/or lower propane prices during a period of time following the start of a new customer agreement. However, it is very important to distinguish between propane prices that are part of a new customer offer and propane prices that apply after the completion of the “new customer promotional offer”. The truly relevant information is the suppliers everyday propane pricing.

Should I prebuy my propane supply for the upcoming winter?

Many propane consumers elect to prebuy their estimated propane supply for the upcoming winter. Since the demand for propane is typically lower during the non-heating summer months, propane pricing is typically lower, which may create a favorable propane buying opportunity. Propane pre-buy is typically a money saving program for propane consumers. However, many propane consumers that bought a prebuy contract during the summer of 2008 were surprised to discover propane pricing during the winter was lower than many summer prebuy contracts.

It is impossible to predict the future of propane pricing with certainly. Therefore, it makes sense to contact your supplier and inquire about their propane pre-buy offer each summer.  When considering any propane price protection program, make sure that you are aware of any participation fees that may apply.

Do all propane suppliers charge customers extra fees?

No. Propane companies have operational expenses just like any other business.   Some propane companies charge their customers propane delivery fees, safety hazmat fees, administrative fees, prebuy and payment participation fees, invoice fees, fuel surcharge fees, etc.   When these fees are included in your bill, they can drastically increase your propane expense with a propane supplier.

If applicable, ask your supplier to explain these fees in detail.   It is very important to understand all of these extra propane supplier fees and what triggers the charges.  Are the charges per delivery?  Are they per invoice?  Do they apply under other circumstances?  Are these fees passed directly through to the government or does the company retain the money to help offset expenses resulting in better company profits?  Not all suppliers charge extra fees.

Converting the annual total of the fees not paid directly to the government into a propane price per gallon value will provide useful information when comparing your price per gallon with other suppliers. To determine your additional price per gallon attributable to your suppliers extra fees, contact your propane supplier and ask them for the total of the fees that you paid and your total gallons purchased during the past 12 months.  Divide the total fees by the total gallons to arrive at the additional propane price per gallon attributable to your suppliers extra fees. For example, if your total fees were $90 for the past 12 months and you purchased 900 gallons during the same period, your estimated additional price per gallon attributable to extra fees is estimated to be 10 cents per gallon. Keep this in mind when comparing the residential propane price per gallon among various suppliers in the future.

 What questions should I ask the propane suppliers that I am considering for future service?

When multiple propane suppliers are competing for your home heating propane business, you should view this as an opportunity to achieve highly competitive propane pricing with excellent service. When interviewing several propane suppliers in your selection process, ask the following propane price questions of the companies being considered:

(1) Does your propane company display current propane prices on your website? If not, to give me an opportunity to compare and verify that your propane prices are always competitive, will you give me a voice mail, fax or e-mail 24 to 48 hours before each automatic delivery notifying me of my propane price per gallon for the scheduled delivery?

(2) In most areas, propane supplier’s choose not to publicly post their current propane prices and most federal goverment EIA propane price surveys are only available October through March of each year.  Contact each propane supplier in your area to ask if they publicly post their current propane prices on their website or on a sign for public comparison.  If you find that all propane suppliers in your area do not publicly post their current propane prices, ask the following question of each propane supplier that you are considering using for your home service:  “What is your basis for comparison to establish competitive propane pricing when government propane price surveys are not available and you can’t see the propane prices offered by other local propane suppliers?”

(3) Does your propane company maintain a large inventory of propane fuel at your propane plant for customer deliveries? If so, ask how many gallons of propane they store onsite. Then, ask if the company posts current propane prices on their company website.  If they do not, and claim that they do not publicly share propane prices because they claim wholesale propane prices change so frequently, ask the supplier to explain why their current customer propane prices cannot be calculated based on their current cost of propane inventory rather than changes in the wholesale cost of propane.

(4) If your home has a propane fueled furnace, ask each propane supplier to provide a printed report showing their propane prices charged to their home heating customers during the past 12-month period on a weekly basis. If you found that the other local propane suppliers do not publicly post their propaneprices for public comparison (See Item #2 above), ask the propane supplier how they obtain competitor propane pricing information to align their own propane prices to be competitive each day between April and September when most Federal Government EIA propane price surveys are not available.   Your goal is to gain access and monitor the same source of competitive propane pricing information used by the local suppliers to set their own propane prices as a basis for your own competitive propane pricing research.

(5) “Competitive propane prices” indicate that the supplier is consistently offering propane prices that clearly “compete” with the propane prices offered by other local propane suppliers.  Hence, if a propane supplier is willing to match the propane prices offered by other local suppliers, then the supplier is clearly “competing” with the propane prices offered by other local propane suppliers.  Ask each supplier the following question: Will your company note in our written agreement that you will consistently match or beat the propane prices offered by other local propane suppliers during the term of my propane service agreement?

(6) If I receive a price quote from your competitor that is more than 10% below your current propane price at anytime during the term of my service agreement with your company, will you write in your agreement that I can cancel your contract without further service obligations and receive a full refund for any installation costs that I may have paid when I started your service?

(7) Does your company install new or used propane tanks? If the supplier installs used propane tanks, before signing any paperwork, visit the supplier’s plant to inspect the specific tank that is earmarked to be installed at your home.  You want to make sure that your supplier’s used propane tank is rust-free and freshly painted, with a functional lid – to ensure the tank does not have a negative impact on the appearance of your property.  Make a note of the propane tank serial number for comparison after the installation has been completed.  Ask the supplier if they will note in your written service agreement that they will replace or repaint the tank every 24 months, for example, while they continue to be your propane service provider – without further notice from you.  Ask the supplier if they will agree in writing to automatically suspend the tank rental fee if the repainting service is not completed as per the promised timing in your written agreement.

(8) Many propane consumers purchase their propane tank allowing them the opportunity to call other propane suppliers to compare local propane prices and order propane from the supplier with the lowest propane prices.  It would be very beneficial for any propane consumer with a leased propane tank to have the option to purchase their tank if they detect that they are stuck paying the higher propane prices being charged by the company that owns their leased tank.  Ask your supplier if they will agree in writing to sell you the tank that they install at your home under a lease agreement at anytime during your service agreement.  Make sure the tank purchase price is noted in the agreement as well.  With the option to purchase the tank, you can buy the tank at anytime and immediately take advantage of the lower propane prices being offered to customers that own their propane tank.

These are some of the important questions to ask any supplier that you are considering. Each suppliers response to these questions will give you a good indication if the propane supplier truly offers competitive propane prices and exceptional service to their customers. During your service agreement, you should contact your supplier and challenge their propane pricing if you feel that you are being overcharged for any delivery.

If it becomes obvious that your supplier’s propane prices are not competitively priced over a period of time, it may make sense to change your service to another propane supplier. If you decide to change your propane service to another supplier, make sure that you complete any pending service obligations with your current supplier prior to asking your new supplier to install a replacement tank and start your new delivery service.

Whom do I contact for unresolved problems related to propane pricing, service fees or billing issues?

Mistakes happen, problems pop up. Where can you turn for help? Visit the Federal Trade Commission website.  The FTC is the nations consumer protection agency.  Read through the available resources.  If you wish to file a complaint with this organization, there is a link from this organizations home page to a complaint form.  If you prefer to contact this organization by telephone, call 1-877-FTC-HELP.

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