Lots Of Heat -- No End In Sight

Town forum on high heating bills yields many complaints, but little relief


Only about 50 of the 6,000 residents battered by the doubling or tripling of their propane bills this winter showed up to protest Tuesday, March 18, at a special Town Hall hosted by the Arizona Corporation Commission.

But the homeowners who did show waved their arcane $300 to $600 December bills at the three utility-regulating commissioners and pleaded for an investigation into the bewildering layers of adjustments and surcharges that caught many homeowners by surprise this winter.


Arthur Dickie directs a pointed question to Kristin Mayes, a member of the Arizona Corporation Commission, about the extreme rise in propane prices in Payson since the beginning of last summer. A meeting was held Tuesday evening, March 18, in the Payson High School auditorium.

However, the commissioners promised little concrete action on rates despite the pleas from residents who said their bills doubled even after shutting off most of the rooms in their houses, turning off the heat at night and setting thermostats in the low 60s. Although the commissioners promised to investigate the longer-than-normal billing cycles and the cost SemStream paid for propane, they conceded that the commission had approved the charges and that residents will face staggering monthly bills so long as crude oil remains at record levels.

"As long as the price of propane tracks with the price of crude oil, Payson is going to be in trouble," said Commissioner Kristin Mayes.

Still, the commissioners promised to issue a report on SemStream's billing practices, closely monitor the company's propane purchases and push the company to explain charges more clearly to customers.

In addition, commissioners promised to investigate whether they could encourage the company that provides natural gas in the region to extend a pipeline to Payson.

Payson Mayor-elect Kenny Evans led the critics, suggesting that bills jumped immediately after SemStream bought the company from Energy West last summer, but that the impact of the increase in the surcharges wasn't felt until winter's chill drove up use. He criticized the company for not preparing customers for the magnitude of the increase.

In addition, Evans asked the commission to determine whether the company had manipulated prices through the buying practices of its nation-wide parent company -- which annually buys about 4 percent of the propane sold in the country. Most propane is produced as a byproduct of oil refining, so propane prices have risen in lock step with the soaring coast of crude oil in the past year.

"People had no advanced warning," said Evans, aside from two brief notices from the company warning first of a potential

7 percent increase, then of a 10 percent increase. Instead, many people found their December bills had doubled or tripled, although part of that was due to a billing cycle that for many residents added an extra 8 to 12 days to the bill.

"Something seems amiss with the absolute magnitude of the problem," said Evans, who like the rest of the audience, struggled with the complexities of the bill and the sedimentary layers of surcharges and adjustments.

For instance, Evans went through the complicated process of converting the energy usage measurements on the bill into a cost per gallon and came up with a cost to homeowners of $3.84 per gallon.

SemStream Arizona President Doug Mann later told the commission that in March the company paid $2.39 per gallon, significantly less than competing propane companies that fill homeowners' tanks in the Rim Country, and well below the national average of $2.60.

Mann put up a spirited defense of the company's bill, although he apologized to his customers for the often-confusing categories and the illnesses among meter readers that he said led to the longer-than usual billing period during the winter months.

He said the company's maximum, regulated profit of 10.5 percent is based on the total investment, not on price of the propane. Two different commission-approved surcharges on the bill enable the company to pass along higher than anticipated costs for propane. In fact, the company filings with the commission indicate that SemStream has now accumulated $1.1 million in extra charges it has paid for ever-more-expensive propane, which will get added to bills in the course of the next 12 months.

"I don't dispute any of the comments about the impact of these prices on homeowners, but we're in a position where someone sneezes in the Middle East and prices go up," said Mann, who said SemStream isn't really a monopoly since homeowners can heat their homes with electricity or buy propane from other companies that fill above-ground tanks. He said homeowners are paying the price for a failed national energy policy.


Corporation Commissioners William Mundell, Kristin Mayes and Gary Pierce held a town hall meeting about Payson propane bills Tuesday evening.

"I agree about the lack of a national energy policy," said Mayes, "but I just don't agree that Payson has any real choice."

So without much hope that monthly bills will drop soon, homeowners were left to at least vent their frustration and bafflement.

"You talk about shell shock," said Gloria Shannon, about the abrupt increase in her bills. She noted that one bill covered a 34-day period, but instead of the next cycle being shorter it actually covered a 33-day period. "If they keep doing that, they'll end up with an extra month by the end of the year."

Arthur Dicky said his bill topped $392 -- with two-thirds of it in the various surcharges -- which rose sharply as soon as SemStream bought out Energy West. "So we're helping the company buy the company?"

Commissioner Guy Pierce said surcharges were supposed to only recover the direct cost of the propane the company had previously bought. "It's like when you buy a company you buy the receivables," he said.

However, one of charges levied by Evans was that Energy West, which had not pushed its allowable surcharges to the maximum levels, did raise them sharply immediately before finalizing the sale to SemStream.

Homeowner John Davis said his December bill stretched from Dec. 1 to Jan. 9 and totaled $335 for a three-bedroom house where he'd set the thermostat at 68, closed off two bedrooms and turned the heat off at night. The next bill covered the period from Jan. 9 to Feb. 12 and totaled $354. "It just seems there's something wrong here," he said.

John Monroe ran through the formula for converting the obscure read-outs on the meter into anything comprehensible -- like gallons, which set heads spinning on the third or fourth conversion calculation.


"Those of us on a fixed income face a $600 bill to heat 900 square feet -- it's outrageous." John Monroe/Payson resident

"Why can't we have a meter that measures something we can understand?" he asked. "Those of us on a fixed income face a $600 bill to heat 900 square feet -- it's outrageous," concluded Monroe.

Debbie Dawson, the executive assistant to the Payson town manager, reported that when she investigated resident complaints about their bills, she discovered that people who had tanks next to their houses to store gas weren't being billed for the fuel surcharges and therefore had much lower bills, a report that seemed to surprise the commissioners.

Bob Dalby, said he'd lived in Alaska, Minnesota and Idaho -- but never faced such a stunning heating bill. His total hit $578 for a 2,100-square-foot house, despite his efforts to conserve. He urged the commission to investigate whether Unisource, the company that supplies natural gas to Flagstaff and other nearby communities, could lay a pipe to Payson.

The three commissioners expressed concern, vowed to scrutinize the company's costs and billing more carefully, chided the company for not communicating better with customers, but offered little hope of relief from the record-high bills.

And while company president Mann promised a new bill and a handy Internet bill-paying option, his projections were bleak.

"It's certainly fair game for our customers to be asking these questions. But where you're seeing $110 for a barrel of oil, I would suggest our prices next year are not going to be less than this year. So do I get out my ax and get a wood stove? It depends. Homeowners need to think about a mix of strategies that include electricity and wood-burning and propane and conservation."

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