Propane Costs Expected To Rise

Think about heating costs now to save this winter

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It's hard to think about heating costs during summer, but propane officials are recommending customers do just that.

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Bill Wilson delivers propane to Energy West Arizona customers in the Rim Country.

The area managers for Energy West Arizona, Matlock Gas and Northern Energy expect prices for propane to go up in coming months.

The best deals are most likely available now.

Current prices range from around $2.25 to $2.35 per gallon.

"In the worst case scenario we could see a 20 cent increase," said Buff Cunningham of Matlock Gas. Customers will probably see the price rise 10 to 15 cents per gallon, he said.

Doug Mann of Energy West said the company sent notices to its customers receiving underground delivery advising they would see a 20 percent increase in their costs. He said that group is going to pay around $2.40 per therm unit (a therm provides approximately 10 percent more energy than a gallon of propane, Mann explained).

"I always say there are three things we can't control the cost of," said Norm Tucker, district manager for Northern Energy, "oil, pharmaceuticals and insurance."

Tucker said he recommends his approximately 3,000 customers buy their propane in August or September.

Mann said Energy West traditionally has a customer appreciation sale in August, but the way the market looks, the coming "sale" price could be higher than the current rate.

He said his company is negotiating a purchase for a good portion of its winter gas supplies.

"Oil is up 26 percent and propane is derived from oil, so it follows those prices pretty closely," Mann said. "With oil selling for $75 per barrel recently, it does not bode well for propane prices."

He said traditionally the price for propane is higher in winter, but drops in the summer. That is not the case anymore.

"Traders (of oil commodities) in the market use events as the driver."

Cunningham echoed that theory, "Weather and supply and demand drove it in the past, now anything that happens can have a huge impact."

He said last year the driving factor in the price increase was the hurricane activity that took out or disabled many of the offshore drilling platforms.

"The saving grace was we didn't really have any winter," Cunningham said.

This year, prices are as high as they were after the hurricane season. (The National Oceanic & Atmospheric Administration is predicting a very active hurricane season for 2006, though not as active as 2005; hurricane season runs from June 1 through Nov. 30.)

The higher costs utilities must pay for the fuel they sell is passed on to the customer, Mann said.

"In the utility business the Arizona Corporation Commission tries to mitigate the impact, but we still must account for increases," Mann said.

Cunningham said in an effort to keep from being at the mercy of the oil refineries, his company tries to purchase what it needs between March and October and stores it.

"We have about 100,000 gallons of above-ground storage capacity at our facilities around the state and Arizona has approximately 200 million gallons of underground storage capacity."

To find out more, or to place an order for service, contact the propane companies:

Energy West Arizona, (928) 474-2294

Matlock Gas, (928) 474-1193

Northern Energy, (928) 474-3334

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