Monday, October 23, 2017
By Steve Ahrens . . .
(October 23, 2017) — The propane industry recently celebrated the achievements of the only CEO that the Propane Education & Research Council (PERC) has ever known. Roy Willis stepped down after 20 years at the helm, rightly receiving the accolades due him for not only aiding the legislative effort that created the council, but leading it through some turbulent times. We join those throughout the industry in commemorating his contributions and wishing him well in retirement.
Now, Tucker Perkins, a former marketer and Roy’s second-in-command at PERC, steps in to lead the organization. Among his first actions will be implementing the council’s FY 2018 budget, currently out for public comment. While the spending document hews closely to previous budgets, and includes a return to the (maximum) 5/10 of a cent per gallon of unodorized propane assessment, Perkins has already taken steps to tweak some of the traditional priorities. A refocused consumer campaign, tied to a national appliance rebate program, is among the new ventures.
More impactful than a single budget document, however, will be necessary changes to the structure, outreach, and operation of the council itself. In that regard, we offer the following suggestions as PERC adopts to new leadership within an ever-challenging energy environment.
1. Do fewer things and do them better
The council approves dozens if not hundreds of “dockets” each year. Dockets are the work orders for various council programs, each with a funding piece, staff and consultant responsibilities, and varying levels of oversight.
While the docket system is useful to coordinate and track these programs, it also creates a maze that can mask duplication, sustain non-essential investment, and diffuse focus and accountability. We support fewer and more comprehensive dockets that clearly combine program content, messaging, and staff responsibilities with desired outcomes. A thicket of dockets also obscures true priorities, and there are many who believe the council’s efforts have become diluted and ineffective.
Therefore, we strongly suggest that Perkins and the council confirm that the organization’s primary mission is to grow the residential market. That core priority must be elevated in the budget process. Residential growth is Job #1 and should not be relegated to the energy- and attention-sapping shuffle of the docket system.
Every contributing program to grow the residential market — from appliance incentives to segment-specific marketing content to targeted R&D investment—should be identified in a Residential Master Plan. Currently, the docket parts do not identify the target whole; it is easy to confuse “completion” with “success.”
To sustain the effort, the council might consider supporting a comprehensive Master Plan over more than just a single budget year. A two-year commitment would create more continuity and momentum than the current 12-month cycle permits. Elevating core missions will push some programs to the “nice but unfunded” margin. A half-million-dollar material handling docket, for example, might give way to a more urgent need to boost contractor incentives. For many, that would be an acceptable trade-off.
In a growth environment, something-for-everyone is a nice budget bonus. We are not in a growth environment. Program cuts would be an inevitable result of reshaped priorities.
That doesn’t leave the cupboard bare. PERC has enjoyed wide latitude in compiling a sizable inventory of projects. There are more burner tips available for LPG than ever before, and without question, PERC’s investment in commercialization has played a role. However, most marketers rely on home heat and hot water for their core business and see their annual gallons threatened by multiple competitors.
While the gains of new technology are promising, PERC was created 20 years ago primarily to fund industry advertising campaigns aimed at boosting residential gallons. Slimming down the project portfolio while prioritizing residential marketing is essential to the council’s credibility and the industry’s future success.
2. Reconnect with propane marketers
A slide presented at the council’s Denver meeting in July was a stark and telling statement on where the organization finds itself today. In a recent industry survey conducted by the council, marketers declared that PERC’s top two strategies should be to increase outreach to marketers, and to increase outreach to state organizations. Those responses — greater than the interest in growing residential, autogas, or any other category — can only be interpreted as a rebuke of the current structure.
PERC has the opportunity today, under new leadership and armed with its own survey results, to redouble its effort to connect with those who pay the assessment. The first order of business should be to begin the process of moving the national headquarters from Washington, D.C. to some location within “Propane Country.” We have no location in mind nor any vacant building to rent — Des Moines, Austin, Omaha, or Columbus would all be suitable, in our view. But until the council has a more immediate connection with its constituents, PERC is part of the “D.C. swamp” in the minds of many.
This is particularly troublesome when the legislation that created PERC specifically forbids the organization from engaging in lobbying. Washington, D.C. is the default location for governmental advocacy, which may have been useful as the council sought legislative approval 20 years ago. Today, however, the higher administrative costs of doing business in the nation’s capital subtract directly from the organization’s bottom line, diverting funds from core missions. The location also is at odds with the nature of its constituents and their businesses. We’ll note that the National Biodiesel Board is found in the heart of soybean country—Jefferson City, Mo. There is no compelling business imperative that requires PERC to be in Washington, and there are many who argue against it.
The only reason to remain in the district would be if PERC was folded into the National Propane Gas Association’s (NPGA) footprint. PERC already has a financial agreement with NPGA — why not logistical as well? The two industry groups would maintain separate boards, budgets, staff, audits, and expenses while realizing savings through shared common spaces and elimination of duplicate operations. This combination would create a mutually beneficial industry asset.
Some may contend that this alignment is too cozy or invites criticisms of lobbying influence, but that exact arrangement is successfully deployed every day by state propane organizations across the nation. Hundreds of volunteer leaders serving on state association and council boards will endorse this approach. While care must be taken in combining the two, the synergy of shared and amplified resources would be a lasting benefit to all.
3. Reward buy-in for autogas partnerships
We are aware of the immense promise that autogas holds for the industry: more gallons, year-round load, stronger supply chains, cleaner air. Yet the industry at-large has not been able to maintain traction in motor fuel due to recurring challenges such as the fluctuating price of gasoline, the peripatetic nature of conversion kits, a dearth of qualified technicians, and the higher profile of other alternative fuels.
Certainly, some companies have made significant commitments to developing autogas fleets and infrastructure. These visionaries are to be commended for their efforts, but the overall result is still that we are a niche player in a niche market.
Autogas penetration is a little like trying to compete with a McDonald’s by operating a lemonade stand. You will do some business but when the weather turns cloudy or the customers want more than your limited menu, or if you grow weary of manning the stand by yourself, it’s a difficult business model to perpetuate.
A different approach might be useful.
PERC could offer to make a lump-sum investment of $3 million to $4 million (about its annual autogas budget) to a qualified consortium of propane marketers who support autogas themselves. That consortium would raise a matching sum (or more) and run the program, hiring staff, coordinating the outreach, and providing accountability. This “block grant” approach would have several benefits:
First, PERC would then be freed to focus primarily on residential growth, which is the core business favored by most marketers. Its investment in the consortium would include some staff oversight but no other budgetary or operational involvement. The groups would coordinate case studies, marketing, and R&D, but these would be driven by consortium staff and funded by the original investment.
Second, this arrangement solidifies the industry’s commitment to this segment. Too often, individual players find themselves up against other realities that detract from their autogas effort. A coming blizzard siphons off personnel; a quarterly dividend deflects investment; changes in technology or regulations strain already scarce resources. By encouraging a consolidated entity that shares in the expenses, resources, risk, and reward, the industry would gain more long-term benefit than PERC’s fragmented, arms-length approach can generate.
Third, this arrangement mirrors what our segment’s competitors enjoy — less intra-fuel competition, greater market capitalization, coordination of training, technology, marketing, and infrastructure; and a sharing of best practices, fleet contacts, and lead generation. The propane industry is too fragmented to compete with large utilities and too undersized to match them in corporate staying power. But imagine “AutogasUSA” composed of the top motor fuel experts from consortium member companies, cooperating to grow the market, create branded infrastructure, coordinate training and installation facilities, and ensure the flow of adoptions necessary to sustain the business model.
Let’s use real numbers to spotlight the challenge: Tesla has a market capitalization of $65 billion. Consolidated Edison: $24 billion. Ameren: $15 billion. Kansas City Power and Light (part of a regional utility group): $7 billion. Meanwhile, the top three U.S. propane companies have a combined market cap of about $6.5 billion. That is — the most financially secure and engaged propane companies in the country have the total financial muscle of a regional utility, and that potential is fragmented and uncoordinated. Can the industry do better? Can the shareholders and ownership of these companies expect more?
We firmly believe that the best way to compete effectively in this segment — to be sustainable, visible, and relevant — is to pool resources and expertise. PERC funding could make that happen.
Fourth, a consortium rewards those marketers who already have skin in the game and gives them more control of the industry investment. By leveraging the PERC contribution with their own resources, those dedicated marketers can develop a more immediate and effective market presence. An autogas consortium would be laser-focused on what works for that organization, faster to react, and more customer-driven.
(I’ll add a personal fifth benefit: The autogas consortium could engage a lobbying firm to support alternative fuel tax incentives. This would free NPGA to oppose tax credits for geothermal and other competing residential energy technology. Now that Google’s Dandelion offshoot is installing $20,000 residential geothermal units, blocking reauthorization of the expired 30% tax credits is essential to protect the home heat/hot water market.)
If successful, this funding mechanism would even benefit the non-autogas marketer by strengthening the supply backbone and lifting the prospects for eventual new business. It would eliminate the well-meaning but unnecessary “motor-fuel guilting” of companies with no interest in the segment, an aggravating drumbeat that diminishes other PERC messages and programs. It transitions PERC from the complicated role of ringmaster to the lighter lift of check-writer. It puts real dollars at the end of the autogas rainbow for those who desire the opportunity.
This supposes that current competitors and those who have already rolled out significant investment might suddenly join hands and cooperate. That may seem unlikely, but it is a critical consideration. As electric vehicles become ascendant, as more automakers make commitments to move away from petroleum-based vehicles, such cooperation seems vital. A consortium would provide the essential agility and flexibility to respond in a challenging, changing, churning environment — something the current PERC protocol cannot accomplish.
Autogas has an opportunity to become a reliable, affordable, and clean motor fuel, but that window won’t be open forever.
The propane industry is a proud, dedicated, and resilient community. From the beginning, marketers have responded to new challenges and old threats. Country cook stoves and Warm Morning heaters became tankless water heaters and hydronic heat; school buses have come full circle; everything changes and we never stand still.
PERC’s opportunity is now — to reintroduce itself to the industry, to respond to urgent demands, to honor its first 20 years by ensuring relevance for the next 20. The suggestions here are offered not as a criticism of the organization, but as a challenge. We urge the council to move confidently, think critically, and act boldly, not only in its current budget deliberations, but in its ongoing leadership responsibility to our “exceptional energy” partners and to their future success.
Steve Ahrens is executive director of the Missouri Propane Gas Association (MPGA). He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.. This article contains the editorial “we” throughout but is the opinion of the writer. It does not constitute an official position of BPN, MPGA, the Missouri Propane Education and Research Council, individual board members, or companies.
(October 23, 2017) — The propane industry recently celebrated the achievements of the only CEO that the Propane Education & Research Council (PERC) has ever known. Roy Willis stepped down after 20 years at the helm, rightly receiving the accolades due him for not only aiding the legislative effort that created the council, but leading it through some turbulent times. We join those throughout the industry in commemorating his contributions and wishing him well in retirement.
Now, Tucker Perkins, a former marketer and Roy’s second-in-command at PERC, steps in to lead the organization. Among his first actions will be implementing the council’s FY 2018 budget, currently out for public comment. While the spending document hews closely to previous budgets, and includes a return to the (maximum) 5/10 of a cent per gallon of unodorized propane assessment, Perkins has already taken steps to tweak some of the traditional priorities. A refocused consumer campaign, tied to a national appliance rebate program, is among the new ventures.
More impactful than a single budget document, however, will be necessary changes to the structure, outreach, and operation of the council itself. In that regard, we offer the following suggestions as PERC adopts to new leadership within an ever-challenging energy environment.
1. Do fewer things and do them better
The council approves dozens if not hundreds of “dockets” each year. Dockets are the work orders for various council programs, each with a funding piece, staff and consultant responsibilities, and varying levels of oversight.
While the docket system is useful to coordinate and track these programs, it also creates a maze that can mask duplication, sustain non-essential investment, and diffuse focus and accountability. We support fewer and more comprehensive dockets that clearly combine program content, messaging, and staff responsibilities with desired outcomes. A thicket of dockets also obscures true priorities, and there are many who believe the council’s efforts have become diluted and ineffective.
Therefore, we strongly suggest that Perkins and the council confirm that the organization’s primary mission is to grow the residential market. That core priority must be elevated in the budget process. Residential growth is Job #1 and should not be relegated to the energy- and attention-sapping shuffle of the docket system.
Every contributing program to grow the residential market — from appliance incentives to segment-specific marketing content to targeted R&D investment—should be identified in a Residential Master Plan. Currently, the docket parts do not identify the target whole; it is easy to confuse “completion” with “success.”
To sustain the effort, the council might consider supporting a comprehensive Master Plan over more than just a single budget year. A two-year commitment would create more continuity and momentum than the current 12-month cycle permits. Elevating core missions will push some programs to the “nice but unfunded” margin. A half-million-dollar material handling docket, for example, might give way to a more urgent need to boost contractor incentives. For many, that would be an acceptable trade-off.
In a growth environment, something-for-everyone is a nice budget bonus. We are not in a growth environment. Program cuts would be an inevitable result of reshaped priorities.
That doesn’t leave the cupboard bare. PERC has enjoyed wide latitude in compiling a sizable inventory of projects. There are more burner tips available for LPG than ever before, and without question, PERC’s investment in commercialization has played a role. However, most marketers rely on home heat and hot water for their core business and see their annual gallons threatened by multiple competitors.
While the gains of new technology are promising, PERC was created 20 years ago primarily to fund industry advertising campaigns aimed at boosting residential gallons. Slimming down the project portfolio while prioritizing residential marketing is essential to the council’s credibility and the industry’s future success.
2. Reconnect with propane marketers
A slide presented at the council’s Denver meeting in July was a stark and telling statement on where the organization finds itself today. In a recent industry survey conducted by the council, marketers declared that PERC’s top two strategies should be to increase outreach to marketers, and to increase outreach to state organizations. Those responses — greater than the interest in growing residential, autogas, or any other category — can only be interpreted as a rebuke of the current structure.
PERC has the opportunity today, under new leadership and armed with its own survey results, to redouble its effort to connect with those who pay the assessment. The first order of business should be to begin the process of moving the national headquarters from Washington, D.C. to some location within “Propane Country.” We have no location in mind nor any vacant building to rent — Des Moines, Austin, Omaha, or Columbus would all be suitable, in our view. But until the council has a more immediate connection with its constituents, PERC is part of the “D.C. swamp” in the minds of many.
This is particularly troublesome when the legislation that created PERC specifically forbids the organization from engaging in lobbying. Washington, D.C. is the default location for governmental advocacy, which may have been useful as the council sought legislative approval 20 years ago. Today, however, the higher administrative costs of doing business in the nation’s capital subtract directly from the organization’s bottom line, diverting funds from core missions. The location also is at odds with the nature of its constituents and their businesses. We’ll note that the National Biodiesel Board is found in the heart of soybean country—Jefferson City, Mo. There is no compelling business imperative that requires PERC to be in Washington, and there are many who argue against it.
The only reason to remain in the district would be if PERC was folded into the National Propane Gas Association’s (NPGA) footprint. PERC already has a financial agreement with NPGA — why not logistical as well? The two industry groups would maintain separate boards, budgets, staff, audits, and expenses while realizing savings through shared common spaces and elimination of duplicate operations. This combination would create a mutually beneficial industry asset.
Some may contend that this alignment is too cozy or invites criticisms of lobbying influence, but that exact arrangement is successfully deployed every day by state propane organizations across the nation. Hundreds of volunteer leaders serving on state association and council boards will endorse this approach. While care must be taken in combining the two, the synergy of shared and amplified resources would be a lasting benefit to all.
3. Reward buy-in for autogas partnerships
We are aware of the immense promise that autogas holds for the industry: more gallons, year-round load, stronger supply chains, cleaner air. Yet the industry at-large has not been able to maintain traction in motor fuel due to recurring challenges such as the fluctuating price of gasoline, the peripatetic nature of conversion kits, a dearth of qualified technicians, and the higher profile of other alternative fuels.
Certainly, some companies have made significant commitments to developing autogas fleets and infrastructure. These visionaries are to be commended for their efforts, but the overall result is still that we are a niche player in a niche market.
Autogas penetration is a little like trying to compete with a McDonald’s by operating a lemonade stand. You will do some business but when the weather turns cloudy or the customers want more than your limited menu, or if you grow weary of manning the stand by yourself, it’s a difficult business model to perpetuate.
A different approach might be useful.
PERC could offer to make a lump-sum investment of $3 million to $4 million (about its annual autogas budget) to a qualified consortium of propane marketers who support autogas themselves. That consortium would raise a matching sum (or more) and run the program, hiring staff, coordinating the outreach, and providing accountability. This “block grant” approach would have several benefits:
First, PERC would then be freed to focus primarily on residential growth, which is the core business favored by most marketers. Its investment in the consortium would include some staff oversight but no other budgetary or operational involvement. The groups would coordinate case studies, marketing, and R&D, but these would be driven by consortium staff and funded by the original investment.
Second, this arrangement solidifies the industry’s commitment to this segment. Too often, individual players find themselves up against other realities that detract from their autogas effort. A coming blizzard siphons off personnel; a quarterly dividend deflects investment; changes in technology or regulations strain already scarce resources. By encouraging a consolidated entity that shares in the expenses, resources, risk, and reward, the industry would gain more long-term benefit than PERC’s fragmented, arms-length approach can generate.
Third, this arrangement mirrors what our segment’s competitors enjoy — less intra-fuel competition, greater market capitalization, coordination of training, technology, marketing, and infrastructure; and a sharing of best practices, fleet contacts, and lead generation. The propane industry is too fragmented to compete with large utilities and too undersized to match them in corporate staying power. But imagine “AutogasUSA” composed of the top motor fuel experts from consortium member companies, cooperating to grow the market, create branded infrastructure, coordinate training and installation facilities, and ensure the flow of adoptions necessary to sustain the business model.
Let’s use real numbers to spotlight the challenge: Tesla has a market capitalization of $65 billion. Consolidated Edison: $24 billion. Ameren: $15 billion. Kansas City Power and Light (part of a regional utility group): $7 billion. Meanwhile, the top three U.S. propane companies have a combined market cap of about $6.5 billion. That is — the most financially secure and engaged propane companies in the country have the total financial muscle of a regional utility, and that potential is fragmented and uncoordinated. Can the industry do better? Can the shareholders and ownership of these companies expect more?
We firmly believe that the best way to compete effectively in this segment — to be sustainable, visible, and relevant — is to pool resources and expertise. PERC funding could make that happen.
Fourth, a consortium rewards those marketers who already have skin in the game and gives them more control of the industry investment. By leveraging the PERC contribution with their own resources, those dedicated marketers can develop a more immediate and effective market presence. An autogas consortium would be laser-focused on what works for that organization, faster to react, and more customer-driven.
(I’ll add a personal fifth benefit: The autogas consortium could engage a lobbying firm to support alternative fuel tax incentives. This would free NPGA to oppose tax credits for geothermal and other competing residential energy technology. Now that Google’s Dandelion offshoot is installing $20,000 residential geothermal units, blocking reauthorization of the expired 30% tax credits is essential to protect the home heat/hot water market.)
If successful, this funding mechanism would even benefit the non-autogas marketer by strengthening the supply backbone and lifting the prospects for eventual new business. It would eliminate the well-meaning but unnecessary “motor-fuel guilting” of companies with no interest in the segment, an aggravating drumbeat that diminishes other PERC messages and programs. It transitions PERC from the complicated role of ringmaster to the lighter lift of check-writer. It puts real dollars at the end of the autogas rainbow for those who desire the opportunity.
This supposes that current competitors and those who have already rolled out significant investment might suddenly join hands and cooperate. That may seem unlikely, but it is a critical consideration. As electric vehicles become ascendant, as more automakers make commitments to move away from petroleum-based vehicles, such cooperation seems vital. A consortium would provide the essential agility and flexibility to respond in a challenging, changing, churning environment — something the current PERC protocol cannot accomplish.
Autogas has an opportunity to become a reliable, affordable, and clean motor fuel, but that window won’t be open forever.
The propane industry is a proud, dedicated, and resilient community. From the beginning, marketers have responded to new challenges and old threats. Country cook stoves and Warm Morning heaters became tankless water heaters and hydronic heat; school buses have come full circle; everything changes and we never stand still.
PERC’s opportunity is now — to reintroduce itself to the industry, to respond to urgent demands, to honor its first 20 years by ensuring relevance for the next 20. The suggestions here are offered not as a criticism of the organization, but as a challenge. We urge the council to move confidently, think critically, and act boldly, not only in its current budget deliberations, but in its ongoing leadership responsibility to our “exceptional energy” partners and to their future success.
Steve Ahrens is executive director of the Missouri Propane Gas Association (MPGA). He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.. This article contains the editorial “we” throughout but is the opinion of the writer. It does not constitute an official position of BPN, MPGA, the Missouri Propane Education and Research Council, individual board members, or companies.
