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Propane Prices Prompt State Action, Feds Release Funds

January 31, 2014 — As propane prices hit $6 per gallon in some Midwestern locales, state leaders are considering, or have already started, approving funds to supplement energy assistance for low-income households. These states will also receive a boost from the U.S. Department of Health and Human Services (HHS) which released over $450 million in LIHEAP funds this week.

The cost of propane resulted in Wisconsin Governor Scott Walker ordering $8.5 million in state funds transferred to the LIHEAP crisis program. The funds are specifically for low-income propane customers. The state expects to recoup the money from Wisconsin's part of the Congressional appropriation for LIHEAP that was approved earlier in January.

With 10 percent of Indiana homes using propane for heating, Governor Mike Pence released $5 million in additional LIHEAP funds. The heating benefit was increased from $400 to $550 through the end of March. "Our administration is going to continue to pursue every avenue available to us to help Hoosiers through this severe shortage in propane during this difficult winter," Pence said.

In Iowa, the average cost of propane increased from $2 per gallon to $5 per gallon in most areas of the state. This means, when a family wants to have its 500-gallong tank filled, it will pay more than $1,000 more than they have in the recent past. Iowa LIHEAP announced it is putting an additional $600,000 toward its crisis program, in addition to raising its benefit from $500 to $600.

Iowa LIHEAP isn't the only entity in the state concerned. The legislature is considering a bill that would add $1 million of state funds to LIHEAP for assistance. State leaders are also asking the federal government for help. Iowa's U.S. Senators have called on the Federal Trade Commission to investigate the rising propane prices. Additionally, Governor Terry Branstad has asked federal agencies to loosen restrictions related to transporting propane, an action already taken by over 20 governors in their own states during the current propane crisis.

Similar to Iowa, the Illinois General Assembly is considering legislation to provide $10 million to the state's LIHEAP. It would also raise income eligibility for LIHEAP by almost 30 percent. "Families are concerned about the rapid rise in prices," said state Rep. David Reis, "and the possibility they won't be able to keep their homes and farms warm and safe during these extreme temperatures."

Some propane suppliers in Minnesota have warned customers that the price for propane could reach $6 per gallon. In response, the Minnesota Department of Commerce, the LIHEAP grantee, has raised its crisis benefit from $500 to $1,000 for households using propane and heating oil. Governor Mark Dayton declared a "peacetime state of emergency" because of propane prices and lifted many of the restrictions on transporting it through the state. Minnesota's U.S. Senators also asked the Obama Administration to reduce the amount of propane being exported.

There are many reasons the cost of propane is so high: the stockpile of propane was 42 percent lower than last year going into the heating season; higher usage because of extended cold weather; a late corn harvest by Midwestern farmers that use propane to dry their corn; and a key pipeline shut down for maintenance and repair. According to the U.S. Energy Information Administration, the average price of propane has never been higher.

Some assistance is coming to the states from the federal government. On January 30, HHS released over $450 million in LIHEAP funds. The states mentioned in this article will receive the following amounts:

January Funding Release
$7.4 million
$23.1 million
$10.5 million
$15.8 million
$14.2 million

A breakdown of funds for every state can be found here.

Sources: Media articles, U.S. Department of Health and Human Services