Heating Customers Speak Out

Consumer held hostage-company responds

Well I’ve got to give the guys credit.

Mike Taylor from CES responded. Like I said “I was interested in hearing his side of the story.”

Mikes response was fast.

Here it is:

John:

Thanks much for the heads up that one of our customers has a problem with the annual minimum use fee we charge for propane tanks.  It’s good to hear complaints

so you have the opportunity to evaluate if there is a real concern which needs to be addressed in the big picture.

I searched your site and I can’t really figure out where I should respond or find your blog on this.  Maybe you can aim me in a direction.

[JB] I’ve since added a page to make it clear and easy for people to comment on any posts.

Propane dealers don’t hold anyone hostage at all.  Every area has competition and customers are truly free to go to another supplier at any time.  We do own the tank, but that doesn’t mean that any customer has to stay with us or any other supplier they feel isn’t treating them right.

[JB] I’m going to e-mail mike for the details and keep everyone posted.
I’m interested in exactly what the process is.

As most consumers realize, the cost of everything is up and it’s no difference for the propane industry.  The cost of diesel to run our trucks is now over $5 per gallon as well as everything else we touch.

[JB] Not for nothin’ Mike has a good point here. After all it’s just not us consumers that are takin’ the hit here. Let’s see what else he has to offer…

The major reasons for having an annual minimum use fee for having our propane tank are the following:

1. Cost of replacement steel tanks:  The cost of steel has more than doubled in the past 5 years.  A 100 gallon tank now costs us close to $500 and these have to produce revenue in order to pay for itself.  Propane tanks & pressure reducing regulators require maintenance such as inspections which vary from 5 year visual to 12 year hydrotesting.Installation, new valves & gauges, sandblasting, painting.  Whether it’s a new tank we have to buy for $500 or one that we have to rotate out of the field for refurbishing, it all has to get paid for somehow.  A tank that doesn’t move enough gas through it just doesn’t justify leaving it in place.  We spent over $400,000 on new propane tanks & maintenance on tanks last year alone.  These are assets in the field that need to be purchased, maintained & kept within compliance and to ensure they are safe.

1. Insurance:  the cost of liability insurance has more than doubled in the past 10 years in addition to the costs associated with adhering to the endless regulations we’re required to follow for the DOT, OSHA, NFPA, DOL, Dept of Homeland Security – just to name a few.  That tank has our insurance associated with it 365 days a year and being a hazardous materials that can potentially cause damage when mishandled – it sure ain’t cheap!

Options for the customer we offer:

We offer every customer the option of having a smaller tank installed at no cost which would have a lower annual minimum use fee based on gallons consumed.

[JB] In my earlier post the customer requested a smaller 100 gallon tank and took some heat for it. Sounds like your message/information isn’t getting to your customers.

This is explained in our correspondence with all our customers as well as if they contact our office.  Or they can purchase the tank and take the expense of the steel out of our hands.  It’s always an option we offer the consumer in minimum use situations.

[JB] This sounds good but I’m interested in learning what the homeowners responsibility would be from an insurance stand point and if it could be checked every year by a company and they have the burden of the insurance issue?

We finally went to annual minimum use fees when the cost of steel finally made us open our eyes that we have many tanks out there being under utilized and we need to keep investing in more new constantly.

[JB] I’m not sure I understand that paragraph, I’m looking for clarification from Mike.

We’re not trying to hurt anyone, we’re just trying to get a return on our capital investment and if it’s not through an annual minimum of propane consumption, it’s through an annual fee.

The problem we have is in our region we have a huge number of weekend & second homes where gas usage is discretionary based on if they decide to use their home or not.  We also have many customers that want large tanks since they ‘may need it’ for discretionary use items such as:  back-up electric generators, pool heaters, back-up space heaters and gas fireplaces.  They may use gas or they may not.

In all these circumstances, with rising fuel costs, people are using less understandably and there our tanks sit being under utilized.  No pistol against anyone’s head.  We offer the options and try to work with individual customers.   We just can’t have expensive assets sitting at homes when they can be better utilized elsewhere.  When you have to pay $55,000 for a tractor trailer load of new tanks – these things have to pay for themselves somehow.

If I can answer any questions, please feel free to contact me.      Truly yours, Mike Taylor

[JB] Once I get more details I’ll let you have my take on this.

Hope this helps people see how the other side thinks.

Once I get more clarification I’ll fill you in.

John

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