The Face of Delinquency

Every day, Holly Linden contends with an increasing number of customers who cannot afford to pay their propane bill.

As co-owner of Linden’s Propane in LaGrange, Ohio, Linden will direct these customers – some who have been good customers for decades – to assistance programs, such as Low-Income Home Energy Assistance Program (LIHEAP), or local churches and charity groups, to help them afford a partial fill. Sometimes she must make the hard choice to admit she can’t stretch their credit any longer.

It’s a decision that eats away at her, particularly when the customer is someone she’s known a long time and who now lives on a fixed income. Even with LIHEAP assistance, their limited resources can’t stretch to accommodate today’s record propane prices.

“It makes you sleepless at night,” she admits. “You feel terrible, you hate doing it. I would hate to have someone out cold who’s been my customer for years. I don’t like it at all.”

The graph shows how prices for all propane users have risen rapidly in recent years.

Linden is just one of myriad retailers who are feeling squeezed by economic conditions that are making it increasingly difficult for customers to heat their homes and retailers to stay in business. An economy near – or, some say, in – recession means more people are out of work and unable to pay bills, so retailers are forced to stretch credit limits, extend days before payment is due, and in some cases, write off uncollectible debt. At the same time, record energy prices are making suppliers tighten their payment requirements and are demanding payment from retailers 10 days after delivery rather than 15 or 20, retailers say.

Linden says she feels caught in the middle because she doesn’t want to cut off her customers – especially during the extremely cold winter – but she has her own creditors to answer to.

As shown prices of energy sources comprising the composite residential price index also have increased.

“I also know I have a responsibility to keep the business going for all my customers and my employees, and I have to be able to pay my bills,” Linden says.

How LIHEAP works

Started in 1982 to help low-income households pay their home energy bills, the program gave assistance to 5.8 million people last year – just 16 percent of 34 million eligible households, according to the National Energy Assistance Directors’ Association.

LIHEAP is funded by the federal Department of Health and Human Services through block grants issued to each state through a complex formula that includes that states’ number of heating degree days and the number of people living in poverty. Eligible families or individuals apply for aid primarily through community action programs, local welfare agencies and area agencies on aging.

Residential propane prices are rising at a greater rate than the residential composite energy price index. Energy sources are compared in MMBtus.

In 1982, the government allocated $1.85 billion for the program; more than 25 years later, that level has not grown to keep pace with inflation – or the growing need, says David Fox, executive director of the National Low Income Energy Consortium.

“Here we are in 2008 and program funding is only $2.2 billion, yet if you just do the math based on inflation to provide the equal level of funding today, it would take better than $4 billion,” Fox says. “It simply has not kept up. We have more people in need and the dollars don’t go as far.”

Legislative efforts last month unsuccessfully tried to raise that level to $5.1 billion as part of a federal stimulus package, says Phil Squair, National Propane Gas Association’s senior vice president, public and governmental affairs. “It got caught up in the legislative undertow,” he says.

Legislators agree the need is undeniable, but find it equally hard to cut other social programs to increase LIHEAP funding, he adds. And while the dollars allocated to the program stagnate, energy costs spiral upward, so the money doesn’t go as far.

Catering to the customer: helpful tips

Meanwhile, low-income people are forced to make “dangerous” decisions so they can heat their homes, Fox says.

A Missouri study showed 45 percent of households eligible for LIHEAP skipped meals once a week just to pay their energy bills, Fox says. About 44 percent chose to limit the money they spend on the doctor and prescription medicines to pay for heat.

“Every year you see stories of children dying in house fires lighted with candles because they were using those to heat their homes,” Fox says.

Often people are ignorant of the help that is available to them, or they’re too proud to ask for it. Even those who apply for assistance only get a one-time boost – often just $150 to $300, depending on each state’s program.

“They can get $200 to $300 (in Ohio), and that doesn’t get them anything,” Linden says. “They can get 75 gallons of gas, and that’s not even a week’s worth. It’s a very difficult situation for people who are out of work. You can’t ask somebody who’s 75 or 80 years old to go out and get a job.”

In New York state, qualifying households receive $550 per household, with another $600 available through “emergency HEAP,” says John A. Hamilton, chief executive officer of Griffith Energy in Rochester, N.Y.

“That’s certainly not enough; the typical customer is going to use $1,500 to $2,000 to heat their house over the season,” he says.

The money is paid directly to the retailers or other energy providers. However, neither Squair nor national LIHEAP advocates or directors were able to say how much of that pie goes to help propane customers. Squair works with other energy lobbyists to argue that the funding should be increased.

Ultimately, the industry benefits from increased LIHEAP funding because it allows marketers to maintain customers, he adds.

“It allows propane customers who are on a fixed income to remain propane customers, and by remaining propane customers, that maintains or increases businesses for our marketers,” Squair explains.

The funds help to reduce the overall cost, but marketers still need to be paid before the next heating season begins.

“We’re still expecting to be paid for the balance,” Hamilton says. “We certainly do lean or stretch a little bit to make it work.”

Linden says a growing percentage of her customers – about 10 percent to 15 percent this year – rely on LIHEAP funding to get through the winter. One 17-year customer was completely out of propane on a February day when temperatures remained in the single digits, and she first pointed him to the program for help.