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Why Isn’t the Propane Industry Regulated Like Utilities?

Posted: January 27, 2017

House utilities

From time to time, a debate emerges over whether propane companies should be subjected to further regulations, such as being placed under the jurisdiction of state public utility commissions (like your natural gas, electric and water companies).

First, it’s important to emphasize that the propane gas industry is already highly regulated at the state and local levels. The National Propane Gas Association (NPGA) works closely with state officials and state propane gas associations across the country to ensure that the safety and reliability of propane gas service does not become compromised. Additionally, existing fair trade practices and similar measures can be used to address problems that may arise.

According to the NPGA, the public utility model should not be applied to propane delivery service for a number of reasons.

For starters, unlike the utility companies, propane dealers are private businesses that do not operate as monopolies; they are not franchised by the state to work exclusively within a service territory awarded to them. That’s why propane companies should not be subjected to price regulations—in the same way that other products are not regulated, including fuel oil, gasoline, food and clothing.

Right now, propane customers remain free to shop around for a propane gas dealer that offers them the best price and service. Monopolizing propane companies and forcing them to play under the same rules as utilities could easily result in chaos, and adversely affect the quality of propane service that North Carolinians have come to rely on.

Understanding propane prices

The debate over regulations usually arises whenever some propane consumers feel they are being overcharged. Here is a brief explanation about how propane prices are set.

Besides overall market factors like the weather and the balance between supply and demand, the retail price you pay for propane is heavily influenced by how strong the competition is in your area. Buying propane is similar to going shopping for food, clothes or other essentials: you can always count on paying different amounts for the same products in various stores.

The fluctuations you see in propane prices tend to be based on the company you use, how much propane you need, when you need it and how you get deliveries, along with whether you rent or own your home and even whether you rent or own the propane tank.

Your usage plays a large part in determining the propane price each dealer will offer. The higher your propane usage is, the lower the propane price. (This is known as tier pricing).

The size of your propane tank also influences your price. The larger a propane tank, the lower the propane price tends to be because the amount of propane a customer orders will be higher. Larger deliveries mean less frequent deliveries and lower costs for the propane company. They can then pass on these savings to their customers.

Read more about why propane should not be regulated as a utility.