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States Encouraging Pre-Purchase of Propane

August 29, 2014—After enduring last heating season's propane crisis, many states are encouraging customers to purchase the fuel now while the price is low, so they have full tanks going into winter. At the same time, some state LIHEAPs are negotiating pre-purchase agreements with vendors to lock in prices now for the upcoming heating season.

In mid-August, Michigan Governor Rick Snyder urged propane customers to fill their tanks before winter starts to help avoid some of the problems faced during the last heating season.

"Last winter was one we'll all remember," Governor Snyder said. "This is especially true for some propane customers who found it challenging to find additional propane as cold temperatures lingered. That's why now is the time to get an early fill, lock-in prices ahead of the heating season and get on a budget payment plan, if available."

Snyder said multiple agencies and programs are ready to assist households if the upcoming heating season shapes up like the previous one. He specifically mentioned the Michigan Energy Assistance Program, LIHEAP, and a new propane website by the Michigan Public Service Commission. Snyder also mentioned the Public Service Commission will monitor wholesale propane prices throughout the state to look for any indications of price or supply problems that might be developing in specific areas.

Like Snyder, Wisconsin Governor Scott Walker is encouraging households to purchase propane now when the price is about $1.69 per gallon compared to $3.04 per gallon at the end of February 2014. Walker also announced that Wisconsin LIHEAP will begin processing applications now for the 11 percent of households that heat with propane, instead of making them wait until the usual October 1 start date. LIHEAP will estimate the heating benefit an eligible applicant will receive and lock in a lower price with the applicant's propane vendor. The applicant and vendor will establish a future delivery date for the fuel. The state is sending a letter out to the 25,000 LIHEAP households that use propane to let them know about this opportunity.

Governor Walker stated that, by implementing this LIHEAP change, the state could purchase about 15 percent more propane while the price is lower, which could result in saving up to $1 million that can be used to help additional low-income households.

Iowa LIHEAP is planning to pre-purchase propane. For years, the Department of Human Rights, the LIHEAP grantee, has used $3 million to $3.5 million in funds to purchase propane during the summer when the price is lower. It plans to do the same this summer. The state office is also encouraging local administering agencies to enter into vendor agreements with propane dealers that lock in a price now. When an applicant is approved for a LIHEAP benefit, the funds would pay for propane at that locked in price, not the current market rate.

Iowa LIHEAP Director Jerry McKim says the price of propane isn't the most important aspect of these vendor agreements. Instead, it's about providing protection to low-income households using propane. While Iowa has a moratorium on disconnection of service that runs from November 1 through March 31, it only applies to households heating with electricity or natural gas. If the federal LIHEAP funding comes in late, households using propane have no protection unless these pre-purchases options are in place. With the pre-purchase options, the vendor has already been paid, so they will make the delivery.

Sources: State of Michigan, State of Wisconsin, Iowa Department of Human Rights