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led to believe this makes up the bulk of the bill. However, the Basic Facility Fee
is where maintenance, payroll, advertising and other expenses come in. It also
is where the Public Service Commission allows a built-in profit (return on equity)
when it approves rates. That ROI is often 10-12%. With higher appliance efficien-
cies and competition from alternative energy, the Basic Facility Fee is where
utilities make their profit.
Our natural gas customer used 27 therms (100,000 BTUs) on the monthly bill at a
cost of $51.48. Multiply 27 x 100,000 to see that 2,700,000 BTUs were used during
the billing cycle. Divided by propane’s 91,500 BTUs per gallon, this equals 29.51
gallons of propane. To break-even with natural gas in this example, propane
would need to sell for $1.74 per gallon.
Show your math:
27 units x 100,000 (BTU per therm) = 2,700,000 total BTU
2,700,000 divided by 91,500 (BTU of one gallon of propane) = 29.51 gallons
Bill of $51.48 divided by 29.51 gallons equals a break-even price of $1.74
It is important to remember that customers are not swayed by numbers alone.
Most consumer reluctance regarding propane falls into three areas: safety,
price and reliability. Each of those require different approaches to overcome
objections, and you need to be prepared to discuss each one. A single unan-
swered customer objection could cause you to lose the sale.
For example, the Polar Vortex crisis of several years ago has etched high pro-
pane prices in the minds of many, even those who never saw an outage or
price increase. Make sure to have a program in place that can provide assur-
ance on reliability and price. Regarding safety, it is always a good idea to let
customers know how well your employees are trained, and to participate in lo-
cal activities such as firefighter events, homebuilder groups, etc. to build rapport
within your community.
Good luck on your efforts to grow your business through new customer sales.
Now it’s your turn! Calculate the comparable propane cost for these customers:
ABC Motors $45.89 natural gas bill; 17.3 therms
Total BTUs__________ Propane gallons ________ Break-even price $________
Bill Johnson $118.78 electric bill; 1345 KWH
Total BTUs__________ Propane gallons ________ Break-even price $________
17 Alabama Propane Gas Association | September / October 2019
