The brutal winter serves as a reminder to improve

Fundamental solutions for the propane customer, marketer

The silver lining in adversity is lessons are learned and people become stronger by overcoming the challenge.

Certainly this past winter presented ample opportunity for our industry to learn and become stronger. Arguably, it was the most adverse period in our industry’s history. So, what did we learn and how did this past winter make us a stronger industry and better propane marketers? Which fundamentals of a well-run propane business were we reminded of this past winter? Propane marketers should ask themselves these questions.

Here are some of my answers, all of which are not new ideas:

1. Customer’s wants and needs – This past winter reaffirmed the need for the customer services listed below. However, too often, marketers do not offer the service or the customer does not accept what’s in his or her best interest.

a. Price protection – This past winter’s $1.50-per-gallon residential price increase over last year (as reported by the EIA) meant our customers experienced what they fear most: high prices. Yet, price cap protection is not new to our industry. There should be more residential customers wanting a price cap this spring.

b. Not running out of gas – Out of gas is another major customer fear. It’s also a measure of propane delivery service. The marketers who allow the will-call customer to run their business were playing catch-up to prevent out-of-gas incidents. Conversely, the marketers who use an effective, predictive demand system and manage their will-call customers were better able to schedule deliveries. As a result, they experienced fewer out-of-gas incidents while also making fewer stops and miles driven.

c. Customer phone support –The customer call in the winter generally means they need gas or want to know that they have not been forgotten. If the customer does not get an answer when they call, they’re left hanging. Phone support is one of the most important elements of customer service.

d. High-priced invoices – The $1,200 invoice for one gas delivery due in 30 days is a sucker punch for the customer and a black eye for our industry. It should be easier to sign up customers for your budget/level pay program this spring.

2. Effective business planning – The two things that must move together in a propane business are propane and money; each requires planning to mitigate the risks of supply interruptions.

a. Propane supply – The only point here is to do three things that mitigate dependence on the risky spot market, which are 1) be prepared for lower summer/winter gallon ratios on contracts; 2) be prepared for higher costs and differentials for contracts; and 3) adequate marketer storage is basic to a secure winter supply.

b. Bank credit line – A simple financial forecast helps mitigate the risk of running out of working capital when propane supply costs increase drastically. This happens every several years. Review your forecast with your banker. Warn your banker of anticipated funding shortfalls. Bankers do not like the surprise of learning late in the game that the credit line is inadequate.

3. United we stand– We need to appreciate the yeoman’s work by the NPGA and state associations, which advocated the industry’s case on several important issues with federal and state government agencies and elected officials. This past winter reminded us of the value derived from our membership and for the need to be united under our associations.

The quote from 19th-century German philosopher Friedrich Nietzsche “that which does not kill us makes us stronger” may apply, but then again maybe not. If we do not reflect on lessons learned from this past winter from which we can become stronger, then all we will have experienced is a very difficult winter. This past winter has given a great opportunity to be better and stronger. Let’s reflect and learn from it.

Randy Doyle is CFO for Blossman Gas in Ocean Springs, Miss. He can be reached at rdoyle@blossmangas.com.