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March 2014

Propane Emergency Defines Our Winter

Many rural residents have been impacted this winter by the propane shortage and by record retail propane prices. The shortage began last fall when farmers across the Midwest needed substantial amounts of propane to dry high-moisture grain that came from the cool and wet conditions, as well as supply disruptions arising from the unexpected two-month shutdown of the Cochin Pipeline which supplies propane to much of the Upper Midwest. This shortage is cascading throughout winter as already unusually low propane stocks have become even further stressed by this unusually cold and lengthy winter. Approximately 250,000 Wisconsin homes and businesses rely on propane for heat and about half of these homes and businesses are supplied by cooperatives.

The State of Wisconsin reports it was receiving an average of 1,000 consumer complaints and inquiries per day in late January and early February. Nearly all of these complaints and inquiries are about private propane suppliers and focus on the following: (1) the difficulty in obtaining propane, (2) the high price of propane, (3) unreasonable delivery charges, and (4) failure by propane suppliers to honor contract terms. At the same time, state officials have said they are pleased with cooperative fuel suppliers because they have worked hard to provide propane to homeowners abandoned by private suppliers who apparently went broke.

Like many readers, I use propane to heat my rural home. Fortunately, I signed a fixed-price propane delivery contract with my local cooperative last summer. I was required to pay up front for my winter propane heating needs, but gained the guarantee that propane would be provided at a set price which is substantially below the current retail price. The large check I wrote hurt, but it set a heating budget for the entire winter. By contrast, I have heard from many consumers who did not sign a propane contract and either could not get propane or it came at a very high price, in some cases more than $7 per gallon. These consumers told me they had intended to gamble on the propane price or said they simply could not afford to write a check for the entire winter fuel cost.

Winter 2015 could be milder than this winter. In addition, we should all hope farmers will face more favorable Fall 2014 harvest conditions. Even so, I recommend readers consider signing a propane heating contract with their local cooperative this summer if financially possible. Next fall could bring continued tight propane supplies despite the broad and costly efforts of the cooperative fuel supply system, including CHS and Growmark, to build additional transportation and storage infrastructure. Unfortunately, the Cochin Pipeline is scheduled to quit transporting propane beginning in April because Kinder-Morgan, the pipeline’s owners, have determined the company can make more profit supplying inputs to the Canadian oil fields rather than shipping propane. This closure will shift supply risk to the cooperative fuel system, private suppliers, and consumers, all of whom have depended upon the Cochin pipeline for decades. Call the state propane hotline at 1-866-432-8947 if you need assistance.

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