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Frequently Asked Questions about Propane

Q: What is Propane?

A: Propane (C3H8) is a co-product of natural gas and oil production, and is found mixed with other natural gas liquids. Propane and other liquefied gases, such as butane and ethane, are separated from natural gas at natural gas processing plants, or from crude oil at refineries. The amount of propane produced from natural gas is about 70% of the natural gas, and from refineries, 30%. 

 

The amount of U.S.-produced propane has increased along with the fracking boom, increasing the amount of propane exported across the globe.

 

More information on propane can be found here.

 

Q: Why do propane prices rise in the winter and drop in the spring and summer?

A: Propane use is seasonal in Wisconsin. The autumn harvest and crop drying season is followed closely by the winter residential heating season. This seasonal pattern is reflected in the supply of propane coming into Wisconsin, and the prices of propane across the state, which generally climb in the fall, peak in January, and decline in the spring.

 

Q: What does it mean that propane is an "unregulated fuel"?

A: In Wisconsin, electricity and natural gas are regulated fuels, meaning they are sold by utilities, and their distribution and pricing are regulated by the Public Service Commission. Propane and heating oil are sold through independent marketers and are not regulated by the Public Service Commission.

 

Regulated fuels (electricity and natural gas) and subject to the Winter Moratorium which means if you are a utility customer in good standing on November 1st, your access to fuel is guaranteed throughout the heating season regardless of your ability to pay.

 

As unregulated fuels, heating oil and propane are not subject to the Winter Moratorium, meaning there is no guaranteed access to fuel. Customers who are unable to pay must work with their fuel retailer to maintain access to heating fuel; the retailer is not obligated to deliver fuel without payment.

 

Customers without the ability to pay should click here to find out where to apply for the Wisconsin Home Energy Assistance Program, benefits are dispensed to vendors to offset heating fuel costs based on income levels and previous years’ costs

 

Q: How do I switch away from propane to a different heating fuel, and what are the options and costs?

A: The State Energy Office has put together a document describing the different heating fuels, and created a calculator to allow customers to compare estimated heating costs across the season. The document can be found here.

 

Q: Where does the State Energy Office get pricing information?

A: Wisconsin participates in the federally-funded State Heating Oil and Propane Program (SHOPP) which collects prices from propane and heating oil retailers across the state. Prices are collected every week in the winter (October through March) and monthly in the summer (April to September).

 

The list of retailers is a statistically selected sample developed by the U.S. Department of Energy, and participation by retailers is mandatory if they are selected.

 

All states participating in SHOPP send propane prices to the U.S. Department of Energy to create state, regional and national pricing statistics. Although all prices are confidential to protect private business interests, aggregated prices are published on the Wisconsin State Energy Office website and on the federal Energy Information Administration propane website.

 

Q: Who uses propane and why did the prices go so high during the winter of 2013-2014?

A: During the spring and summer of 2013, the Midwestern storage of propane at Conway, Kansas was below the five-year average. Then, during the fall of 2013, Wisconsin and the rest of the Midwest, experienced a bumper corn harvest with a high moisture content. Farmers used propane to dry the corn, resulting in a large volume of propane used by the agriculture sector.

 

In most years, there is enough time between the agricultural use of propane and the heating season to allow retailers to fill their onsite storage. However, in 2013, the cold came early and stayed, leaving retailers no time to fill their storage before residential customers starting using the fuel to heat their homes.   

 

While retailers worked to fill their onsite storage, the entire Midwest region experienced a shortage of propane. Many retailers in Wisconsin fill their trucks at the Janesville pipeline terminal or nearby in Minnesota, at the Cochin pipeline, or from rail deliveries to other propane terminals across the state. Supply availability was curtailed due to the shut-down of the Cochin pipeline (in November and December), extensive reliance on rail, and low inventories in Conway, KS.

 

The market responded with increased prices, and the Federal Energy Regulatory Commission exercised its authority to prioritize pipeline shipments of propane to the Midwest.

 

In all, the result was higher priced propane due to a high demand for propane, exacerbated by a very cold winter.

 

 

Q: What does propane supply for this winter look like?

A: The outlook for the winter of 2014-2015 is optimistic for the following reasons:

·         Using Energy Information Administration (EIA) data that tracks the volume of fuel shipped to Wisconsin, the SEO believes the volume of propane currently in storage in customer tanks at their homes, and in retailer storage, is robust, thanks to summer fill efforts.

·         Propane inventories in Conway, KS are above the five-year average.

·         The National Oceanographic and Atmospheric Administration (NOAA) released a climate forecast that favors a winter warmer and drier than last year, which may mean less propane consumption for space heating.

·         The corn harvest this year, while predicted to be another bountiful crop, may be dried in the field due to low commodity prices, using less propane in the agriculture sector.

·         A new 360,000 gallon rail terminal built by Federation Cooperative and CHS will begin operation in Hixton, Wisconsin soon. This is a welcome propane supply addition for the state.

 

The challenges for 2014-2015 are once again supply and storage related. The Cochin pipeline no longer carries any propane, and many propane terminals (bulk purchase sites) rely on truck and rail for their supply of propane. There are logistical concerns with rail. For example, trains in the winter have to be shorter due to the impacts of cold weather on train breaking, and a large volume of rail in the United States is currently dedicated to moving crude oil from the Bakken shale (in North Dakota). While trucks can ship propane, the trucking industry is experiencing a shortage of qualified drivers, and the drivers who are working are subject to transportation safety rules that govern the number of hours they can spend behind the wheel.

 

 



Last Modified:  1/12/2015 8:39:38 AM

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Wisconsin State Energy Office
610 N Whitney Way
Madison, Wisconsin  53705
Phone:  608-261-6609  FAX:  608-266-3957
OEI@wisconsin.gov