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.”
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At a glance
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