The Plan to Eliminate Propane Demand

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Will your state follow the VT Public Utility Commission (PUC) proposal?

Last Business Standing.

Wouldn’t it be nice if you could tax your competitors at higher amounts every year to encourage their customers to switch over to you?

You wouldn’t need a better product. You wouldn’t even need to offer better service.

You would just need to collect money from them until their business was no longer viable. And if the rate of taxation wasn’t working its magic quickly enough, you could re-examine the tax rate and make adjustments.

At the end, when you’re the last one standing, you could tearfully describe the loss of hundreds of small businesses and thousands of jobs as a necessary consequence of local progress.

More Funding.

The statements, excerpts and quotes below (in italics) are taken from the Vermont Public Utility Commission’s Act-62 report to the Vermont State Legislature on January 15, 2021:

“The inconvenient truth is that we need more funding. The basic policy question – how to fund energy efficiency and fuel switching in the world of unregulated fuels?”

That’s a good question! After all, how can a Utility Commission ensure sufficient funding to encourage consumers to switch their fuel from propane to electricity if they don’t control the competition?

Free enterprise stands in their way.

The answer, of course, is to control your competition thru taxation. The Commission’s recommendation is that “the legislature establish a stable and sizable stream of funding” and “new funding should come from unregulated fossil fuel sources”.

New Taxes on Propane to Encourage Fuel Switching.

The recommendation to lawmakers is that they implement a “Thermal Efficiency Benefit Charge” to be assessed on all propane sales. The total proposed new charges and taxes on “unregulated fuels” in the Vermont report add up to about $100,000,000.

So part of the real issue here is price control of unregulated fuels versus regulated fuels.

Here’s the Commission’s logic behind higher taxes on propane:

“Gradually implementing and increasing charges on unregulated fossil fuels, rather than electricity, will make those fossil fuels slightly more expensive and send the right price signal to consumers to use those fuels more efficiently or move away from them entirely.”

Robin Hood in Reverse.

When a state raises taxes on propane but not natural gas or electricity to subsidize the operational costs of a state utility, they’re playing Robin Hood, but in reverse.

Many taxpayers can’t afford (or don't want) a new electric car or solar panel roof so states are taking tax dollars from the less-wealthy (new taxes) and giving them to the most-wealthy (tax credits).

And When Did Electricity Become a Renewable Fuel?

From the Commission’s report: “Keep electricity an affordable, renewable fuel” and “a clean alternative to fossil fuels.”

How is it correct to say that electricity is a renewable fuel and alternative to fossil fuels when natural gas is a non-renewable fossil fuel and the largest source of electric generation?

What Can Be Done?

As the world turns green, we can respond by reaching out to customers on a grass-roots level with the message that propane has an important place at the clean-energy table.

The National Propane Gas Association (NPGA), the Propane Education Research Council (PERC), and your state and regional associations are working together to disseminate two positive new messages to the public:

  • Clean and renewable energy like propane accelerates de-carbonization.
  • Access to clean, affordable, and renewable energy like propane ensures equity on the path to zero.

What’s Happening with Propane Prices?

Frigid temperatures and wide-spread electric blackouts and power outages across a large swath of the country have pushed natural gas and propane prices up to levels we haven’t seen since September, 2018.   

Also, crude oil prices have gone up $25.00 bbl. since November, which is the propane equivalent today of about $.45 per gallon, roughly equal to the propane price increase during the same timeframe.      

Propane Price Chart

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Weekly Inventory Numbers

U.S. propane inventories showed a modest draw of 2.90 mmbbls. for the week ending February 12, 2021, slightly lower than industry expectations. That brings national inventory levels to 48.65 mmbbls., about 42 percent behind last year and 9 percent behind the 5-year average.

PADD 2 (Midwest/Conway) inventories had a robust draw of​ 1.62 mmbbls. They currently stand at 11.74 mmbbls., roughly 14 percent behind ​last year.

PADD 3 (Gulf Coast/Belvieu) inventories recorded a nominal draw of​ .44 mmbbls. They currently stand at 28.36 mmbbls., nearly 66 percent behind last year.

The Skinny

It seems that there are a million and one new legislative attempts every day which would impact propane demand or make propane more expensive. Most of the proposals include higher taxes to encourage fuel-switching to electricity or prohibit the use of any energy source other than electricity.  

Anyone reading this blog understands that our country is a long way away from being able to “electrify everything” with renewable energy. The truth will prove out, we all know that.

But it’s better for us to be an important part of the path forward thru public awareness and education than to argue that there is no path.

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