Fuel shortage addressed
Crystal Flash, the West Michigan-based heating and transportation fuel company that is one of the largest family-owned propane distributors in Michigan and 22nd in the nation, says it is ready for a repeat of the winter of 2014.
Some prognosticators — notably, the Old Farmer’s Almanac — claim another bad winter is coming, one of the agricultural variables that also makes a difference in the propane supply.
On Dec. 20, 2013, Gov. Rick Snyder declared a state of energy emergency for propane, one of 24 states to do so. Propane is used for heating by an estimated 9 percent of the households in Michigan, and the governor’s energy emergency order exempted fuel delivery truckers from the “hours-of-service” regulations that limit how many hours truckers can drive per day.
Last winter, severe weather reduced fuel delivery trucks’ average speed by about half, according to Marc H. Foerster, vice president of business development at Crystal Flash, which has its corporate offices on Alpine Avenue in Grand Rapids. The company has a fleet of more than 150 trucks, some of which deliver diesel fuel and gasoline.
In addition to cold weather driving up demand, propane inventories in the region were 43 percent lower than the same period a year before, according to the Michigan Public Service Commission. The MPSC said one of the factors contributing to the high demand was the late and very wet grain harvest season. Almost 10 percent of Michigan propane is used for drying corn in grain elevators, and there was a record harvest last year. Corn harvested late in the season, in wet conditions, requires even more BTUs of heat to dry.
This year there is yet another record harvest of corn predicted, and the wet weather this fall may make the harvest late again because heavy farm equipment can’t work in very muddy fields. How wet this fall turns out to be — and it has been wet thus far — is the variable that can impact propane supply in the winter, said Foerster.
Crystal Flash, the third-largest propane distributor in Michigan, “does not play the market” when it comes to buying its propane from producers, said Foerster. He said some distributors will wait and see where the price is going rather than contracting supplies in advance at a set price.
That conservative practice does add some cost to what Crystal Flash pays, but he says it makes for good customer relations because it enables the company to offer a price protection plan to its customers, locking in the price they pay throughout the winter.
Last year, said Foerster, distributors who did not have contracts for propane going into the winter ended up facing much higher prices from producers, which of course were passed on to consumers.
The propane shortage caught some distributors by surprise last year, with complaints of skyrocketing prices, canceled contracts and price gouging. It led to an investigation of some providers by Michigan Attorney General Bill Schuette. The dramatic increase in cost, which was especially hard on low-income customers, added to the agitation at the state government level.
Foerster said the Crystal Flash price this winter for its price-protected customers is a little higher than it was last year, slightly over $2 a gallon for propane.
Crystal Flash, which sells more than 25 million gallons of propane a year, also took the extra step of doubling the amount of propane it stores in advance in a leased salt mine near Port Huron. This year it has more than 1 million gallons in the mine as a contingency plan.
Crystal Flash isn’t saying this winter will definitely be another cold one, but has devoted a lot of time to studying the various factors and evolving conditions.
“We’re waiting, just like anybody else. The thing is to be prepared,” said Foerster.