Q & A With Leo Kirby, COO, Ideal Gas
By Susan Burnell
The propane industry is due for some fresh ideas, says Leo Kirby. The Chief Operating Officer for St. Augustine’s Ideal Gas is thinking outside the tank, and working to educate Florida customers about their options.
Q: According to the U.S. Energy Information Administration, residential propane prices in Florida are historically the highest in the nation. Why do Floridians pay so much more for propane?
LK: If you talk to propane suppliers, they will tell you that the average residential customer in Florida consumes less propane than the average customer in any other state. So for a propane company to make money selling residential propane they need to charge a higher price.
Q: There’s more to that story, isn’t there?
LK: Yes. It is true that residential customers in Florida use less propane than in other states, since they don’t need it as much for heating. Propane suppliers charge more here because they need to recoup the cost of the tank, which they normally own. But this has created a situation in Florida where the residential customer has paid higher and higher prices for propane, tank rental fees, and delivery fees such as fuel surcharges and HAZMAT or other regulatory fees. And the customers often have very little knowledge of how much this is costing them and have no way of controlling these costs.
Q: Isn’t the industry regulated, like a utility?
LK: In a couple of states, prices and contracts are regulated. But generally, as in Florida, propane companies can charge whatever they want.
Q: What else has happened to the industry in recent years that has not benefited consumers?
LK: Historically, the residential propane business was a mom-and-pop industry of hard working families delivering bottled gas out of a truck to members of their community. Like many industries, that has changed with corporate mergers and acquisitions. In the last few years, major acquisitions between four of the largest national propane companies in the industry have limited competition. That means that many customers who, at one time, bought propane from an independent, family-owned supplier in their community, now buy their supply from a national corporation. And when you buy propane from a national company your price is not always controlled in the local market. So warm weather in the North may actually cause the prices in Florida to go up because your company is not selling as much propane for heating as they budgeted for in other parts of the country.
Q: If a customer wants to save money on their residential propane costs, where do they start?
LK: First of all, they can look at their invoices for the last 12 months. They should look at the price per gallon, how many gallons were delivered, and see what extra fees, fuel surcharges, HAZMAT, and regulatory fees are included. They should add up the gallons delivered to calculate how much propane they used in the past year. And they can check to see whether or not there is a tank lease charge on the bill. This can help them figure out who owns the tank.
Q: Why do you recommend customers find out who owns their tank?
LK: This is very important to know. If you purchased and installed your own tank, or can show you own it, that’s great. You are free to use any company you choose, and you can shop around for the best price and service. But if your gas supplier owns the tank, you might be locked-into a tank lease and to purchasing propane from that company. If your company claims you have signed a lease agreement, they should have a copy of that agreement.
Q: Sounds like you might be trying to start a consumer revolution.
LK: Not really. But I feel a customer is a better customer if we are transparent and he understands his true costs and options. And I honestly feel that we are a better industry if we are transparent.
Q: And if they decide to choose a family-owned, Florida-based company like Ideal Gas?
LK: We can show them the difference between owning their own tank and leasing a tank, to give them better control of their residential propane costs.