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Bang for the buck

October 1, 2003 By    

It’s going to take a lot of cash to prove whether the propane industry’s money
is being well spent.

Since its inception, the Propane Education & Research Council has been
dogged by a fundamental question: How do you measure the progress gained through the millions of dollars being spent on consumer education, safety, and research and development projects?

Propane industry members, who fund PERC’s $51 million budget with a per-gallon
assessment on the product they sell, want proof they are getting a good return
on their investment. To date, however, PERC has only anecdotal evidence that
its efforts are making an impact on propane sales.

PERC board members last month took a bold step to quantify the growth in propane usage nationwide. After recovering from a severe case of sticker shock, they voted to spend $1 million for researchers to gather and distill data on domestic
propane consumption. They also will measure what role – if any – PERC’s efforts
have played in that market growth.

A dozen proposals were reviewed before the council awarded the contract to
Bruce Henning of Energy and Environmental Analysis Inc. and David Clayton of
Wirthlin Worldwide. The project partners say the project will unfold in three
phases:

  • Work with the American Petroleum Institute to upgrade its annual survey
    of Ngl consumption. This step should be done by next spring.
  • Measure propane market performance over the last five years by building
    a consumption data base that is far more comprehensive than any previous public
    or private source. Those raw consumption values will be analyzed to identify
    trends and market growth opportunities.
  • Build a model to evaluate the impact of external factors such as weather,
    the economy, pricing of competing fuels, etc. on overall sales growth. They
    say this work can be adjusted by geographic region.

By spring of 2005, the numbers will be crunched and PERC will know empirically
whether its blood, sweat and dollars has meant more propane gallons being sold
to more customers. It will cost them another $250,000 annually to update that
data each year thereafter.

Council members are keenly aware that the cost of this metrics project likely
won’t sit well with some propane marketers, especially those who oppos-ed the
one-tenth of a cent rate hike that also was approved at the September meeting.

But the fact is they risk even greater criticism if they can’t start showing
the industry the bang it is getting for its buck. Once and for all, this industry
needs to be able to accurately measure its performance so it can more wisely
plan its future.


CORRECTION: An item on the table of contents page of the September issue
of LP Gas Magazine incorrectly identified Star Gas of Stamford, Conn. as the
propane company that had gotten financing for the upcoming heating season. The
company was All Star Gas of Lebanon, Mo. My apology for the error.

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