And the answer is?

December 1, 2003 By    

What I like best about our annual State of the Industry Report is that it gives propane retailers nationwide an open forum to give unbridled, bare-knuckled feedback from the front lines.

So, when 424 marketers take the time to answer our survey questions and share their insights about this industry, we listen. Their cumulative answers provide the meat and potatoes of our fourth annual report. It’s the kind of data that should help you see the trends and challenges in our changing business community.

Perhaps more insightful to me, however, are the flood of written comments that accompany responses to questions about sales, customers and pricing. A healthy 27 percent took the time to express their concerns, and their message was loud and clear: The propane retail industry is in a cost crisis that is pushing many out of the business.

What answers can we offer for their most pressing worries?

Insurance costs: Virtually every marketer has been hammered with huge increases in health, liability and worker’s compensation costs. The good folks in Washington promise they’ll find an affordable health care system soon; I say not as long as the drug companies and physicians are helping set the agenda.

For all the stumping for tort reform, the price for liability coverage won’t recede until more insurance companies get back in the game. And that won’t happen until propane retailers can prove they are doing all they can to make their work place, transportation routes and delivery sites as safe as possible – and themselves a better risk for insurers.

Price spikes: More and more, marketers are concluding that their customers want price stability – even if it costs a bit more – from their energy supplier. That will require several huge steps in the years to come:

The industry must continue to invest in applications that build off-season load. Agriculture applications, on- and off-road motor fuel use and fuel cells are the kinds of projects that could pump up summer consumption and help balance our over-dependence on the winter heating season load.

Changing the industry’s 2:1 winter-to-summer ratio would mean more efficient use of the propane supply distribution system. Only then will the pipeline owners consider upgrading the infrastructure to ease the supply outages and system bottlenecks that aggravate propane price volatility.

Cost cutters: Retailers justifiably howl when their competitors skip employee training or ignore vital safety steps to drive down costs, then slash prices in order to steal customers.

The best solution I’ve heard for this quandary is a system to reward those who play by the rules. NPGA has been kicking around a “Gold Star” program that would identify responsible dealers and educate customers about the hidden value behind those propane sticker prices. There’s a lot of details to be worked out, but it’s a good idea whose time has come.

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