Valley propane co-ops pick up steam
by Joe Shreve
Jan 28, 2013 | 4699 views | 5 5 comments | 16 16 recommendations | email to a friend | print
Ferrellgas driver Lane Teeters pumps propane into a Bonny Doon co-op members tank on Braemoor Drive last week.
Ferrellgas driver Lane Teeters pumps propane into a Bonny Doon co-op members tank on Braemoor Drive last week.
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Teeters packs up the hoes after delivering propane to a Bonny Doon resident on Braemoor Drive who belongs to the Bonny Doon Propane Co-op.
Teeters packs up the hoes after delivering propane to a Bonny Doon resident on Braemoor Drive who belongs to the Bonny Doon Propane Co-op.
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Energy is typically an expensive proposition during the cold winter months in Santa Cruz County, particularly for households that rely on propane fuel to heat their homes.

Last winter, Bonny Doon resident Sigrid Oseberg said propane cost so much — more than $700 to fill a 250-gallon tank — that her family took drastic measures to conserve.

“We sat here and froze because I didn’t think we could afford to heat the house,” she said.

Hoping to combat high prices, Oseberg and more than 200 fellow Bonny Doon residents have switched their propane service provider to the Elk Grove outpost of Ferrellgas as part of a negotiated cooperative.

Now, Oseberg said, she is paying a rate of $1.97 per gallon — 55 percent less than the $4.35 per-gallon rate she was charged a year ago.

It’s a trend that’s gaining traction with some communities in Santa Cruz County, as neighborhood associations and communities negotiate reduced prices for fuel.

 

Boony Dooners band together

Oseberg said that in September, a small group of Bonny Doon residents met to explore forming a propane co-op, something that a homeowner’s association in the Rodeo Gulch community of Soquel had previously done with Ferrellgas.

“A lot of us were very frustrated with the pricing and the customer service of propane services around here,” Oseberg said.

Especially of concern, she said was the “very inconsistent” pricing of local operators.

As of January 2012, five propane companies in Santa Cruz County charged an average per-gallon price of roughly $2.96 — the highest was AmeriGas at $3.50, and the lowest was Dassel’s Petroleum’s rate of $2.38. Prices fluctuate by the month.

Oseberg said the Bonny Doon committee sent out requests for a quote to several fuel companies, but it received only two responses — one from Suburban Propane, and one from Ferrellgas.

Once the contract was signed, Ferrellgas trucks began delivering tanks to Bonny Doon residents by mid-October, Osegard said.

According to Ferrellgas regional manager Ward Sutherland, the company’s contract with the co-op called for an agreed-upon price per gallon calculated by adding 85 cents per gallon over the monthly wholesale price.

“People have been figuring out there’s money to be saved in numbers,” he said, adding that the company’s non-co-op customers were charged at a rate of wholesale plus $1.20 per gallon. “It’s an increasing endeavor that people are getting into.”

Sutherland said the arrangement was good for the company and its customers alike. In spite of the cost of trucking in fuel and equipment from facilities in Newark and Los Banos, he said, “We’re actually very happy with the (profit) margin we’re getting.”

The increased number of customers in Santa Cruz County has led Ferrellgas to try to establish a more permanent local presence, beginning with a propane storage facility near Watsonville. Sutherland said that would allow Ferrellgas to keep its prices low.

“If our expenses are down, then the margins can be down,” he said. “We did this with the idea that we will be local.”

Sutherland said that while the contract signed with the Bonny Doon co-op was for one year, it was an open-ended arrangement. The company plans to offer the same price rate after the original term expires.

“We don’t plan on making any changes in price,” he said. “As long as (customers are) happy with us, they’ll stay with us.”

 

Other communities take notice

The lower rates in Bonny Doon haven’t escaped the notice of residents in neighboring Boulder Creek.

Gregg Schlaman said he is in the early stages of organizing his neighbors into another cooperative.

“It’s very preliminary at this point,” said the Boulder Creek resident. “We’re still just seeing how many people are interested.”

Schlaman said he is using the online Boulder Creek Family Network Yahoo group to seek input and inform people.

He was inspired to investigate options for propane suppliers when he learned that his parents, residents of Grass Valley, were paying less than $2 per gallon through their homeowners’ association.

“We started looking into it in December, maybe early November,” said Schlaman, who said he is working with more than 30 Boulder Creek homeowners. “It seems to be spreading slowly.”

He has spent time asking around and comparing prices among local suppliers.

“I noticed the prices between the five major providers were varying by a dollar per gallon,” he said. “The local companies are pretty fair — it’s most of the national ones (that charge more).”

Schlaman said that while he would continue his efforts online, plans are in the works for more public outreach. His goal is to enlist 50 households before approaching providers about a contract.

“If you don’t ask questions, (companies) will just charge you what they think they can get,” he said.

 

Too good to be true?

While lower propane costs may entice customers, one local propane provider suggested that Ferrellgas’ prices might be an introductory rate only — a tactic sometimes employed by an outside company seeking to gain a toehold in a new market.

“I think that many individuals feel that group buying is advantageous,” said Jim Dassel, president of Dassel’s Petroleum based in Hollister. “In the end, if you find that the pricing is almost too attractive, you’re going to give up something for it.”

Dassel said his company is committed to its Santa Cruz County customers and has always relied on fair pricing and good customer service as its business model.

His company has no plans to offer special prices for cooperatives, because a deal for one group would come at the expense of other customers.

“We don’t think that a good retail customer needs to be part of a buying group to get quality service at a competitive price,” he said. “I think when you do that, the loyal, faithful customers end up subsidizing it.”

To comment, email reporter Joe Shreve at joe@pressbanner.com, call 438-2500 or post a comment at www.pressbanner.com.

 

At a glance

For information: https://groups.google.com/forum/#!forum/bonny-doon-propane-co-op.

Comments
(5)
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Bill Smallman
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March 06, 2013
I think these propane co-ops are a great idea, and will actually enhance competition. Lompico Community Center tried to do it, but I think it failed because they attempted to get all of Lompico. I think if you just developed a formal, annual contract with a sizable list of homeowners, for the propane companies to bid on, it would work. Most often, a lot of homeowners won't change companies because of the hassle of changing tanks. I think the local companies would actually have an advantage of winning these contracts. As a group, we would be in the driver's seat with more negotiating power to get a fair price for this highly necessary commodity. It would also help with air pollution, for people unable to burn dry firewood, for heating.
thoughts...
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March 06, 2013
Steve- Dassel's is neither a local company or a small company. They are based out of Hollister- and they are not the size of Amerigas (#1 in the country) or ferrelgas (#2). Amerigas is moving from Scotts Valley into Coast's facility in Watsonville. MPS gets their propane from Dassel's. that means technically the only local company is Suburban in Scotts Valley, with FerrelGas and Amerigas a close second between them.

Regarding the skyline user's group (SPUG), they are a different animal- they are supplied by companies in the Bay Area and therefore they get a different deal. Amerigas in San Jose was willing to supply SPUG with low pricing that the Scotts valley office would not honor.
Gregg Schlaman
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February 01, 2013
If you are interested in the BC Propane co-op, please contact us!

bcpropanecoop@gmail.com

http://bit.ly/12ffsee

Steve Homan
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January 29, 2013
The headline should read: "Bonny Doon Co-op Picks Up Steam". We Dooners love the SLV, but there is 1000 to 2000 feet of difference!
Steve Homan
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January 28, 2013
People have had many good things to say about the small local propane companies like Dassel's and Mountain Propane. One of my friends is keeping his association with one of these companies, because he values the service and past relationship, and the price is just a bit more. New customers of Ferrell's say the same things, that the service and price are very good. Competition is a good thing.

By some estimates, Ferrell's is now serving around 20% of the Bonny Doon households. That still leaves room for competition on price AND service.

The other large companies seem to be unresponsive to buying groups, although Ferrell's is a very large company in the U.S. The other large propane suppliers seem to have an out of date business model.

There is also a co-op in the Skyline area, with several companies serving their co-op. I think competition is important. I wonder how long the other big companies can wait until they change their ways?

BTW, according to internet articles, AmeriGas seems to have purchased Coast Gas about a year ago. The big fish eat the little fish.



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