Daily GPI / Markets / Regulatory / NGI All News Access

Bill Designed to Mitigate Propane Price Spikes Heads to Obama's Desk

Lawmakers in both chambers of Congress have passed a bipartisan bill designed to help propane distributors and customers withstand shortages and price spikes. The bill on Friday was headed to President Obama's desk for his signature.

The bill, HR 5705, also known as the "Propane Education and Research Enhancement Act of 2014," calls for amending the Propane Education Research Act of 1996 by directing the Propane Education and Research Council (PERC) "to train propane distributors and consumers in strategies to mitigate negative effects of future propane price spikes."

"During the winter months, heat is a matter of survival, not a matter of convenience," Rep. Robert Latta (R-OH), the bill's sponsor, said Thursday. "Last year, we were faced with propane shortages that threatened the lives and livelihoods of many living in Ohio and throughout the Midwest. The Propane Education and Research Enhancement Act addresses some of the challenges experienced last winter in an effort to avoid another disaster."

PERC CEO Roy Willis told NGI that its primary strategy “is to reduce the seasonality of demand by encouraging new uses for propane in non-winter space heating seasons.

“We can do that through a number of technologies that we work with on our R&D [research and development] program,” Willis said Friday. “We’re looking to develop engine-based technologies -- for instance for irrigation, landscaping, and over-the-road and off-road vehicles -- which tend to have peak demand in the summer months, so that we have access to infrastructure that, quite frankly, is less than affordable when you have just the seasonal peak demand like we’ve had this last winter.

“From the industry perspective, it is better understanding the inventory levels and access to transportation assets.”

HR 5705 also calls for the U.S. Secretary of Commerce to use "the refiner price to end-users of consumer grade propane," as published by the U.S. Energy Information Administration, as part of the annual analysis into changes in the price of propane compared to other energy sources.

Willis said the Commerce directive would enable PERC “to do public education about the other demand technologies, which is essential to executing the strategy of mitigating the seasonality of demand.

“Right now the only communications that we’re allowed are those that have a close nexus to our safety training or R&D programs. We’re prohibited from educating the public about the energy efficiency and environmental benefits of using propane because of the price analysis that Commerce performs, which is strictly focused on residential prices and not prices that are realized in other segments of propane demand.”

Willis said this winter’s market for propane is vastly different from last year’s, for a number of reasons.

“We had a light corn-drying season; it wasn’t as demanding in terms of propane as it was last year,” Willis said. “We’ve had, across the nation, a milder winter than we’ve had previously. Although November was cold, the projections are for a milder winter this year. Certainly in December we’ve already seen that in most parts of the country.

“In addition to that, inventories here in the U.S. have risen substantially, in part because of the lack of demand on a global basis for propane. We were anticipating large export quantities, [but] those expectations have been exaggerated. We’ve got plenty of propane, and thus far we’ve had a very successful early fill season.”

Willis added that winter customers nationwide put 7% more propane into storage in advance of the winter heating season than last year. “Both the industry and consumers seem to have taken the message of preparing seriously and have stockpiled resources,” he said.

The bill, introduced by Latta on Nov. 13, passed the House of Representatives by voice vote on Tuesday and then passed the Senate by unanimous consent on Wednesday. The bill has four co-sponsors: Reps. David Loebsack (D-IA), Reid Ribble (R-WI), Timothy Walz (D-MN) and Peter Welch (D-VT).

Last July, a trio of senators from states in the Midwest introduced a bill designed to prevent propane shortages similar to the one that befell farmers, homeowners and businesses across the nation last winter (see Daily GPI, Aug. 1). The bill -- S 2762, also known as the "Propane Supply and Security Act of 2014," was sponsored by Sens. Tammy Baldwin (D-WI), Al Franken (D-MN) and Rob Portman (R-OH) -- was introduced in the Senate on July 31. This bill has not advanced.

Two months earlier, testimony before the Senate Energy and Natural Resources Committee revealed that propane shortages in the Midwest and Northeast could have been avoided if shippers had planned ahead (see Daily GPI, May 2). Recommendations from regulators and the propane industry at the hearing were incorporated into the bill.

On Feb. 7, the Federal Energy Regulatory Commission invoked its emergency authority under the Interstate Commerce Act to help alleviate "dangerously low" propane supplies in the Midwest and Northeast (see Daily GPI, Feb. 10).

Recent Articles by Charlie Passut

Comments powered by Disqus