Winter Propane Charges Should Decline

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Despite plummeting oil prices, Payson propane bills will drop just 17 percent this winter, officials say.

SemStream Arizona has eliminated one surcharge, although another has risen incrementally through the past year, company president Douglas Mann said Wednesday. Mann said the company is still recouping costs incurred from purchasing propane at

historically high summer prices, which is when SemStream traditionally purchases much of its winter supply.

The company will also continue normal operations in the immediate future despite the bankruptcy proceedings of its parent company SemGroup, according to paperwork filed with the Arizona Corporation Commission.

Highs of $147 per barrel of oil have subsided to around $45, and SemStream has dropped a 55-cent per-therm surcharge that

paid for the record-shattering prices. The surcharge disappeared in May.

A second surcharge, called an adjuster, has increased by roughly 12 cents, to 96 cents per unit of heat. The company beefs up winter supply during the summer when prices are traditionally lower. This year’s winter prices, however, have reached four-year lows, the Wall Street Journal reported Thursday.

Market prices aren’t immediately reflected in retail prices. “If I owned a gas station,” Mann said, “I could go out there every afternoon at one o’clock and repost my prices.”

The complicated methods by which utilities determine propane prices, however, lag behind the market.

A typical SemStream customer can expect to pay, on average, $172 each month between now and March, down from $206.

Last winter, some SemStream customers complained about their massive propane bills. Mann said some customers saw $1,000 bills in January, and in earlier reports attributed the spike to the parallel jump in oil prices.

The corporation commission investigated earlier this year, but found no wrongdoing.

“I can’t tell you if you had a $600 bill last year (that you’re) going to have a $300 bill this year,” Mann said. “We expect people’s bills to be a significant amount lower.”

However, Mann said the company will likely seek approval from the corporation commission in January to implement another surcharge, although the exact price is not yet known. The adjuster surcharge usually fluctuates a few cents from month to month.

SemStream is only permitted to assess surcharges if it undercharges customers by $120,000. The bank balance has fallen below that limit, so the company removed the surcharge.

However, Mann said he anticipates the company will ask the corporation commission for another, albeit lesser, surcharge in January.

Utility pricing is slow to respond to spikes in prices, and so customers ideally see smaller increases over an elongated period of time, instead of a dramatic changes, Mann said.

“In theory, it makes it easier for a consumer to budget,” Mann said.

SemStream’s bank balance has not been paid down enough to where it won’t creep back up to the $120,000 threshold.

The utility company’s base rate has not changed since 1997, and Mann said surcharges are likely to be added and subtracted as bank balances flirt with the $120,000 threshold.

Although propane prices do not mirror oil prices, Mann said they tend to mimic one another. He predicted gas prices will likely remain close to current levels.

“When we bring out our crystal ball,” Mann said, “our bet is that (oil prices are) not going to be going upward.”

SemGroup’s July bankruptcy hinged on $3.2 billion in losses from oil speculation. The Oklahoma-based company has since hired a chief reorganization officer and secured $150 million in court-approved financing to continue business.

SemStream Arizona Propane has not filed for bankruptcy. SemGroup is awaiting court approval for additional time to file its post-bankruptcy action plan. A hearing is scheduled for Dec. 9.

NASDAQ has threatened to de-list SemGroup Energy Partners (SGLP), the public subsidiary of SemGroup, because the company is late filing both its second- and third-quarter financial statements, according to paperwork filed with the Securities and Exchange Commission late last month.

Stock exchange officials granted SemGroup Energy Partners until Feb. 17 to file the reports. SGLP’s president said in a press release that the company is still evaluating the impact of SemGroup’s bankruptcy.

A former FBI director was appointed in August to investigate the company’s trading practices. A report is expected by March 24, the Tulsa World reported.

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