Officials investigating gouging claims in wake of propane shortage
LOUISVILLE, Ky. — Supply problems in several states where propane is a crucial heating source have prompted governors and other officials to take action against vendors, investigate claims of price gouging and increase aid to low-income customers.
The propane drain coincides with extreme cold temperatures in several Midwestern and Southern states where residents and business owners are struggling to keep heating tanks filled due to increased costs or supply cut-offs.
"The industry as a whole should have been prepared for this," Missouri state Sen. Mike Parson said Wednesday. Parson is urging the U.S. Justice Department to investigate rising prices in his state. "We should be able to figure out what our supply and demand is."
In Wisconsin, Gov. Scott Walker sent President Barack Obama a letter on Wednesday asking his administration to speed up the release of money that helps pay for heating costs for those with low income.
Walker also said he welcomed a review of the impact of propane exports on domestic supply and price and any regulatory barriers that could ease the shipment of propane delivery.
Walker said he also supports the Federal Trade Commission monitoring the spike in wholesale propane to ensure there is no anti-competitive activity.
Walker said Wednesday he plans to speak about the propane issue with Obama when he greets the president Thursday during a stop in the Milwaukee area.
National supplies of propane were depleted by a late harvest that increased demand from farmers who needed to dry an unusually large amount of grain before storage. As colder-than-normal temperatures spread across much of the country, supplies dropped to the lowest level ever during the second week of January.
The national average price for a gallon of propane spiked this week to a little over $4, up from $2.96 from the previous week, according to the U.S. Energy Information Association. About 5.5 million homes are heated with propane, mostly in rural areas.
Kentucky's attorney general was granted an injunction against a major propane supplier that had stopped delivering to commercial customers in several states. The court order allows customers of Paducah-based United Propane Gas to get their tanks refilled from other sources without seeking permission from the company. Calls to the company were not returned on Wednesday.
In Washington, U.S. Sen. Claire McCaskill of Missouri requested on Wednesday that the Commodity Futures Trading Commission examine whether price manipulation is a factor in the increased propane costs.
Officials in Minnesota and Wisconsin earlier this week boosted aid for low-income residents who have been unable to refill tanks as prices spiked. Georgia Gov. Nathan Deal signed an executive order prohibiting suppliers from price-gouging, and Indiana Gov. Mike Pence on Thursday asked farmers and other propane users to return unused portions to suppliers. Lawmakers in Illinois were drafting legislation that would help low-income families buy propane by increasing the number of families eligible for energy assistance.
Last week, dozens of states loosened transportation rules to allow for extended hours for propane haulers to make deliveries.
"Our sense is that it's slowly moving in a positive direction," said Mollie O'Dell, a spokeswoman for the National Propane Gas Association. "A lot of these immediate fixes take a little bit of time to get moving."
The shortage is forcing some residents on an American Indian reservation in the Dakotas into public shelters to keep warm. Standing Rock Sioux Tribe Chairman Dave Archambault II said about 90 percent of the reservation's 5,500 homes are heated with propane.
"Many families don't have enough resources to heat their homes when propane costs rise above $3.50" a gallon, Archambault said, adding that the price has been about $4. "When the price of propane reaches $6 there's going to be a dire need — life or death."
The Missouri resolution sponsored by Parson would also ask the Justice Department to look into the price disparity between propane storage facilities and the "inaccessibility of propane to the citizens of Missouri." A Senate panel was expected to vote on the resolution next week.
Lee Garrett, the owner of Dallas County Propane in Buffalo, Mo., said the high prices have had a devastating effect on his business and his customers.
"From a customer-relations standpoint it has been absolutely devastating," he said. "We are in a particularly poor county and our customers just can't afford the prices."
Garrett said his wholesale price went up $3 in a single day last week.
The Kentucky propane supplier, UPG, sent a Jan. 21 letter to its commercial customers in several states saying it was ceasing deliveries, but customers could acquire a waiver to seek propane from another source. When business owners complained that they weren't able to reach the company to get a waiver, the Attorney General's office intervened and sought a court order.
"It baffles me why a company would not put the needs of its customers first, especially with the recent weather conditions we've been experiencing in Kentucky," Attorney General Jack Conway said in a release.
Last updated: 10:06 am Thursday, January 30, 2014