Lifting of PERC Restriction Highlights Southeastern Event

The announcement from National Propane Gas Association (NPGA) chair David Lugar that the restriction on the Propane Education & Research Council’s (PERC) consumer education programs had been lifted after more than five years was a main highlight of an eventful NPGA Southeastern Convention in April that also included the convention’s first-ever Autogas Pavilion. The association reported that the 2015 expo was the industry’s largest show in nearly 10 years, with more than 230 exhibitors, more than 3000 attendees, and 30 countries represented.
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“I have the pleasure to announce a very favorable event for the industry, something we’re very proud of,” Lugar told the audience at the PERC Update session during the Southeastern event in Atlanta. “Last year at this time, after the winter we’d gone through, one of the questions we kept asking is when is the PERC restriction going to be lifted? We need to get back to talking to our customers. I’m here to say, it is officially lifted.”
 

The news ended a saga in which the U.S. Department of Commerce (DOC) placed a restriction on PERC’s consumer education activities in 2009. Under the Propane Education and Research Act of 1996 that created PERC, DOC is assigned to annually calculate the price for “consumer-grade propane” and compare it with an index of prices of specified competing fuels. Whenever the price of propane exceeds a certain threshold, the industry is restricted from conducting most of its educational outreach activities. In 2009, the DOC calculation triggered the restriction, and PERC’s educational outreach ceased. Last December, President Obama signed H.R. 5705, the Propane Education and Research Enhancement Act (PEREA) of 2014. The new law states that DOC must use data reflecting all propane market sectors, not just residential. Using the congressionally mandated data for its price analysis, the DOC reported that propane prices were below the statutory threshold.

“Therefore, no restrictions are required to be placed on the activities of the Propane Education [&] Research Council,” stated an April 10 letter from DOC that NPGA distributed at the Southeastern show.

PERC president and CEO Roy Willis spoke to BPN at the Southeastern show soon after the council’s notice of the lifting of the restriction, giving “kudos” to NPGA for its work in getting PEREA signed into law.
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“The effort demonstrates their legislative program is performing at full speed,” Willis said. He noted that the council wants to see a plan before deciding whether to raise the assessment from its current four tenths of a cent per gallon of odorized propane sold. PERC lowered the assessment from five tenths of a cent to four tenths after the DOC restriction was put into place in 2009.

“We have multiple audiences we want to reach,” Willis also told BPN. “We need to analyze each market segment and give deep considerations to the media options that are available. And we don’t want to rush it. It’s important to build consensus in the industry. We learned in the last campaign that we need to have the industry — state associations and marketers — collaborating to expand the reach of the consumer education campaign.”

He added that PERC has not done extensive promotional events in areas that have emerged since the restriction took place, such as landscaping and fleets. “We’ve done some in agriculture, but we have more to talk about there. So there are challenges in building this multi-audience campaign.”

Since the restriction was implemented in 2009, NPGA led the industry’s advocacy within the DOC and on Capitol Hill during five Propane Days events to end the restriction. Phil Squair, NPGA senior vice president, public and governmental affairs, told BPN after the event: “NPGA is very pleased that its top legislative priority has now been accomplished.”

Session Topic: Going Paperless One of Many Benefits of Automation
Five presenters took part in different sessions under the category “Propane Delivery Automation Workshop.” Vertrax, a back-office software and mobile logistics company for the propane and fueloil industries, focused on three main benefits of using mobile logistics during its presentation titled, “When Bad Routes Happen to Good Fleets; a Tale of Two EBITDAS.” The first benefit is the ability to increase profits by attacking your customer base proactively instead of keeping drivers in their pre-defined zones. John Rosen, vice president of sales for Vertrax, described a fleet that is delivering over a million gallons more per year with two fewer bobtails and how that has improved the company’s net worth.

A dramatic reduction in stress in and out of the office is the second benefit. Increased managerial vision and controls creates a transparent environment. When customer service representatives, drivers, and managers are all working off the same page, it creates a manageable environment.

The third benefit is the ability to institutionalize a fleet’s information, which Rosen stated is probably the greatest benefit as well as the important insurance policy a company could possibly have. Many fleets are still delivering off route cards, but mobile logistics is a strong tool to end that dependency. Going paperless and having paperwork electronically stored is a major advantage for most fleets, as is the ability to centralize dispatch in multi-branch locations.

Jason Levine, director of sales, truck automation, for BASE Engineering (Saint John, N.B.), conducted an additional session in the Propane Delivery Automation Workshop titled, “What to Expect When Implementing Truck Automation.” The presentation focused on the project management involved with executing a truck automation system. Marketers buying an automation system should look at it as a project, not just a purchase, Levine noted. For many propane bobtail products such as valves and meters, the marketer can bolt the system on and walk away. He might not have to collaborate with anyone until something goes wrong. But executing products such as billing systems, inventory management systems, or fleet tracking systems involves dealing with more moving parts than a marketer can imagine.

“The idea is, this has to be managed like a project,” Levine said. “Like a civil engineering project, if you were to re-engineer the Hoover Dam, you wouldn’t say, ‘Build me a dam tomorrow.’ You want to have clear expectations, [and] understand what the scope of the project is. Even if you don’t believe it’s your responsibility, it’s good you’re educated on how and what to do. That will help the project move forward much smoother.”

Whether a marketer is switching to a new automation system or going to automation for the first time, it involves stress because you are in a sense changing the way you run your business. You’re changing the way the drivers interact with something in the vehicle, and you’re changing the way the accounting team interacts with a new piece of software in the office.

“This has historically been painful, and it’s better to be prepared for what to expect than to let that creep up on you. By the time the next November or even October arrives, you start getting ramped up for the next peak season, and you realize, ‘I waited too long to put the system on, and I’m still struggling,’” Levine noted. Planning should take place from contemplation to realization, answering questions such as who will install the product and how the truck builders are involved.

“If you have a road map laid out for you, you will feel more comfortable in all the discussions you have with the various vendors so you are not in the dark about ‘What are they talking about?’ ‘Why the delay?’ ‘Why are the lead times so long?’ These are all things you want to be aware of before you make the initial call to start discussing truck automation.”

Marketers should also identify a “champion” at their company to oversee the process. “The champion is the one who believes that without this solution, the project will not succeed, and at all costs will be the one that helps push through all the political issues both internally and externally.” In a small company, the owner might be the champion who makes sure the accounting team, the drivers, and IT staff have bought into the project. “Without a champion, I guarantee the project will not succeed, because when something needs to happen, you won’t have that one person who will drive meetings to completion [and] make sure everyone’s schedules are coordinated with the start-up.”

Session Topic: Growth Opportunities with Irrigation
Cinch Munson sees a two-year window of opportunity for the propane industry to gain significant market share in irrigation. “That’s growth in gallons, profits, growth in placing engines, and selling propane because of it,” said Munson, director of agriculture business development for PERC. Marketers should talk to farmers about how propane irrigation can help them, but it can also help marketers sell a significant amount of extra summer gallons.

“Why are propane irrigation engines such a good choice? A typical engine can burn anywhere from 4000 to 12,000 gallons per year. That’s a pretty significant amount of fuel,” he stated, adding that as a general rule, per liter of displacement on the engine, it will burn about a gallon an hour. A 5.7-liter engine will burn about six gallons an hour. A farm might run that engine for 1000 hours in a summer, depending on location and other factors. He showed a slide with a large number of blue dots on a U.S. map, noting that each of the blue dots is equal to about 10,000 irrigated acres, and each engine or pump is doing about 100 acres on average. Each dot represents about a million gallons. “This opportunity is so big, it’s really hard to fathom.”    —Daryl Lubinsky