The propane waiting game can be costly: Midwest propane shortage hits area residents right in the wallet
The Bemidji Cooperative Association never actually had a significant shortage of propane, CEO Galen Teichert said. However, the wholesale price it paid went up astronomically as its supplier, Cenex, had to transport it from as far away as Nebraska, Kansas and Iowa. He credited Cenex Propane with keeping the co-op’s supply adequate even amid the crisis.
“We never looked at it and said, ‘Oh my God, we’re not going to be able to get propane to our patrons,’” he said. “However, supply and demand dictated the price, and the price just rocketed. We were victims of the high price ourselves.”
Teichert said he empathized with the homeowners that got stuck paying extra.
“I don’t care who you are, when you hand somebody a $1,500 to $2,000-a-month bill to heat their house, it hurts,” he said. “I feel for these people.”
The highest retail price that the co-op charged its 7,500 to 7,800 customers was $4.84 per gallon, Teichert said. He said he lowered the co-op’s price markup as the wholesale price went up, and if he’d kept the markup where it was the price would have been $5 a gallon or higher.
“There were times I was selling under cost,” he said, meaning he sold propane at a retail price that was lower than what the co-op paid for it wholesale as he struggled to adjust pricing to keep up.
“Once we get inventories rebuilt… we’ll be able to see prices continue to soften,” he predicted. “They’re softening now, but not to the tune of where they should be.”
Representatives from Lakes Gas Co., which has an outlet in Bemidji, declined to comment for this story. However, a letter to customers posted on their website said their price increases were also due to the market and not retail mark-up.
“Supplies have been at critical levels since December due to larger than expected grain drying, record cold temperatures, railcar transportation difficulties and the export of propane,” the letter said. “The increase in price you are seeing is the result of the market and is not being done at the branch level.”
The propane crisis prompted executive action from Gov. Mark Dayton, lifting state safety restrictions on the amount of hours fuel transport drivers can be on the road. Dayton also expanded eligibility for the Low Income Home Energy Assistance Program.
Additionally, the state commerce department is also actively looking into consumer complaints of price gouging and price fixing during the propane crisis, spokesperson Anne O’ Connor said. She was unable to say how many complaints or concerns about the crisis originated in Beltrami County but said the calls were mostly evenly distributed across Minnesota .
Veterans need heat help
Beltrami County Veterans Service Officer Scotty Allison has been receiving calls, too. As of last week, his office had seen about 15 veterans call in looking for help with propane costs. The calls had started about three weeks ago, and there’s only so much the county veterans office can do to lend a hand, he said. Veterans can seek financial help from State Soldiers Assistance Program if they’re unable to work because of a temporary disability, or utilities help from the Minnesota Assistance Council for Veterans (MAC-V). The flaw with both grant methods is that they’re essentially a one-time-only proposition, Allison said, and they may take days to be effective.
“Somebody that’s out of fuel, or getting close to being out of fuel, it’s pretty hard on them to wait that long,“ he said.
Propane by rail
Teichert, the CEO of the Bemidji Cooperative Association, said although this year’s crisis is gradually lessening, a potential supply issue looms on the horizon in the form of the Cochin Pipeline reversal. The line moves propane from Canada — 40 percent of the state’s supply — but in April, pipeline operator Kinder Morgan will reverse the flow northward in order to carry diluting agents to the oil sands fields in Canada.
Bemidji Co-op gets the majority of its propane from the Cochin terminal in Benson, Minn., Teichert said. For two to three weeks in December, no propane flowed through the line as operators worked through the process of reversing the flow, he said.
Alliance Energy Services bought the Benson terminal in September for $5 million and plans to convert it to take railway deliveries. Cenex is the energy division of larger co-op CHS, which is tripling the size of its rail car fleet at a price tag of more than $5 million a year.
“We’re going to have to rely on rail,” Teichert said of the future after Cochin is reversed.