Tertiary storage capacity fills needs during peak demand periods

October 19, 2020 By    
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Putting customers on a budget system that allows them to pay a fixed amount throughout the year helps build tertiary storage in the offseason. Photo: Kameleon007/iStock / Getty Images Plus/Getty Images

Propane retailers can set aside extra propane for a rainy day, or perhaps more appropriately a snowy one, by filling customers’ on-site tanks with more gallons than they typically draw during a particular time period.

Not only does this lessen the load on a retailer’s own bulk plant storage capacity, but having additional on-location gallons already in place – often referred to as tertiary storage – also allows retailers to make fewer delivery runs during peak demand conditions.

Another benefit is being able to fully fill a customer base’s tanks in the summer when pricing is lower, with customers making affordable monthly payments throughout the year instead of being hit with a hefty invoice.

“You make their cash flows easier for them. They’re not going to get a $700 bill the week before Christmas,” explains industry consultant Jeff Thompson at Propane Resources, which has been advocating this marketing method for 20 years.

“Put your customer on a budget pay system – that’s how you build tertiary storage,” he adds; plus, it mitigates monetary concerns over seeing a bobtail pulling up the driveway in the midst of a sweltering heat wave.

“In July, they don’t care that you’re putting propane in their tank because they’re only paying 80 bucks a month,” says Thompson. “Now you can have control of the tank, and you get to decide when to fill the tank – not the customer.”

Describing the technique as a win-win for everyone involved, “I’ve got about 25,000 gallons of storage out in the field,” reports Chris Stanley, vice president of Euliss Propane in Liberty, North Carolina. People in the area tend to purchase a lot of electrical generators to fend off weather emergencies, and they welcome having plenty of available propane.

Previously focused on agricultural accounts but eager to gain more residential business, a big brooder-based customer changed ownership and propane providers, leaving Euliss – a Propane Resources client – with 52 1,000-gallon tanks that had to be pulled from 14 different farms.

Within two to three months, the company was able to set 25 of those large tanks at area homesteads, selling additional customers on the desirability of extra capacity as time went on.

“I just cut out four deliveries per year to that house by having that tank there,” Stanley points out. Miles-driven are reduced along with vehicle wear and tear, and driver payroll costs.

Retailers can work out the accounting details with the customer to fit their desired billing cycle, suggests John Powell, senior vice president and head of the marketing, supply and logistics group at Crestwood Equity Partners.

Photo: Kameleon007/iStock / Getty Images Plus/Getty Images

Tank monitors, even on one or two tanks in an area, can inform retailers about propane consumption at a site so they can set appropriate fill schedules. Photo: Kameleon007/iStock / Getty Images Plus/Getty Images

Pursuing the tertiary storage option is rather common, amounting to some 125 million barrels of propane worth about $7.5 billion, according to Powell. The customer gets cheaper gas, and product is readily on hand during the prime heating season.

Just as important, “I’m pushing more summer gallons out the door,” says industry consultant Shane Sweet, reflecting on the efficiencies of fill-ups conducted at the retailer’s convenience combined with favorable pricing. “I can park 60-cent product in that tank.”

The strategy works best when retailers own the tanks, and Sweet recommends tank monitoring systems to maintain accurate measuring of consumption levels.

“Just like electricity, the customer is only charged for what goes through the meter,” he says.

As with fueling up an automobile, “You don’t pay for the gas that’s underneath the pumps; you pay for what goes through the meter into your car.”

David Herr, vice president of supply and marketing at Blackline Marketing, also favors adoption of tank monitoring technology to ensure that a tank gets filled when the level falls to 40 percent.

“You can watch the drawdown that a house is using,” he says. “You can monitor this from your hand” via a cellphone or similar connective device.

“Not every tank needs to have a tank monitor. You could do a reading off one or two tanks in the area,” Thompson notes.

As tertiary storage is implemented and retailers adjust to the transition, routing shifts will fall into place and “you’ll understand the consumption rates and the highs and lows” of the customer base. “It’s not immediate. It takes some time – then you’re on a roll with tertiary storage,” Thompson says.

Stanley says the prospect of installing tank monitoring equipment is being revisited by ownership, citing the increased accuracy of newer units entering the marketplace. While he says tracking degree-days is adequate for charting consistent consumption, serving varying users such as restaurants and churches can be enhanced through more precise metering capabilities.

24/7 reliability

“Tertiary storage is really the answer in my book,” says supplier George Jaques of Meridian Liquids Partners in Mount Pleasant, Iowa.

“A lot of farmers here in Iowa want larger tanks,” he observes, adding that he has a retailer customer in Minnesota who routinely sets a 1,000-gallon tank on properties that initially request only a 500-gallon vessel.

“The more storage we have the less emergencies we have, and that’s what we want,” he says. “That’s the best storage you can have – tertiary storage. I’ve got two 1,000-gallon tanks sitting in my yard; I can buy at the summer price and I’m set for the year.”

By leveraging tertiary storage, propane can even be pulled from a given tank and transferred elsewhere when urgent needs arise, says Luke Bailey, general manager of Maui County operations at Hawaii Gas.

The company has an array of 2,000-gallon “holder tanks” positioned at shopping malls and other commercial properties. “It becomes an extension of our storage,” he says.

In times of emergencies or in advance of anticipated accelerated need, the contents can be redirected to first responders, medical centers, hotels and other key sites.

“We wouldn’t want to take from a hotel,” says Bailey, “because that’s where people would be going.”

He adds that “this is unique to Hawaii Gas; it’s a way for us to maintain 24/7, 365 reliability for our customers.”

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