Rural Minnesota hit hard by high cost of propane

PINE COUNTY — The cost of propane hasn’t been this high in nearly a decade, up more than 60% from last year alone, forcing consumers to spend hundreds of dollars more this winter to heat their homes.

“I remember when the prices were good, and you could buy a lot and just have it,” said Dave Gossen, 56, at his home near Pine City. “Today’s world just ain’t that way.”

He would have liked to fill his two 500-gallon tanks by now in case prices rise higher still, as they reliably do in the winter. But being on a fixed income, he expects to buy small amounts all winter long, patching together energy assistance from the government and nonprofits where he can get it.

Propane prices jump

Virtually every household can expect to pay more for heat this winter, but the pain will be especially acute for people who rely on  propane. The average cost of propane in the Midwest is $2.37 a gallon, up more than a dollar from this time last year, according to the U.S. Energy Information Administration.

Swings in propane prices are felt more broadly in Minnesota, where 10% of households use propane to heat their homes, more than twice the national rate. Propane use is even more common in rural areas where people can’t access natural gas, which is generally more cost-effective than propane.

Thirty percent of households in Pine County are heated with propane, while in a handful of other counties, more than 40% of households do so.

And unlike electricity and natural gas, propane prices aren’t regulated by the state’s Public Utilities Commission, so consumers pay what the market demands.

In December, Minnesota’s utility regulators stepped in to slash price hikes for electricity and natural gas to help customers whipsawed by surging prices and surcharges from last February’s freezing temperatures that crippled Texas gas systems and sent prices soaring.

Over the course of the year, propane prices can fluctuate anywhere from a few cents a gallon to a few dollars, as they did in 2013 and 2014. That season, Minnesota suffered from a perfect storm of extremely cold temperatures and numerous supply interruptions, including a gas line explosion in Canada, that sent the average price from $1.67 a gallon to $4.67 a gallon in just three months.

Although it was a highly unusual season, that winter led the state to pass a law requiring propane companies to offer consumers a budget plan. Lawmakers also ordered a report on how to transition Minnesotans away from propane, although the share of households using propane hasn’t changed significantly.

Prices in Minnesota are dependent not just on demand across the country, but the world. The United States is the world’s largest propane exporter, sending 60% of its supply to other countries.

Jason Scribner, who owns a small propane company called Premiere just south of the Twin Cities, says he’s seen more customers preparing for higher prices this winter by pre-buying their propane — paying for the fuel they expect to use up front to lock in a fixed price.

“So that protects (customers) from that price jumping,” Scribner said. “It’s not much we can do about it at this point besides turn the thermostat down. But that only does so much.”

Energy assistance not enough

Back when Gossen worked as a truck driver, he could afford to pre-buy his propane in the summer. But two brain surgeries and heart surgery forced him to retire early.

Since then, he’s relied on energy assistance through the federal government and nonprofits to keep his home heated.

He already received $300 this year, but with the high prices, Gossen notes, “that ain’t gonna go far.”

A milder start to the winter provided some relief, and Gossen is a little better off than many consumers in some ways: he was able to weatherize his home with new windows and siding after a hail storm came through a few years ago and left baseball-sized holes in his house. He also owns his own propane tanks, unlike most consumers who lease them from the propane company. That means he can shop around for the best price.

He’ll also likely be eligible for more assistance as the winter goes on.

More assistance available

Minnesota’s Department of Commerce has more than twice as much money this year to give out in assistance — up from $117 million last winter to $273 million this winter, boosted by an infusion from the American Rescue Plan.

Gov. Tim Walz touted the expanded assistance last month at a news conference with members of President Biden’s administration and three other Democratic governors.

“Without the American Rescue Plan, we would be in a crisis situation right now,” Walz said.

Minnesota also received $672 million in federal rental assistance that can be used to pay utility bills.

Only about a fifth of eligible Minnesota households receive energy assistance, both a function of limited resources and whether people know about assistance and want it. The Commerce Department aims to increase the number of households by 20% through expanding eligibility and boosting payouts.

An additional 100,000 more Minnesota households are eligible to receive assistance with the higher income thresholds: $35,000 a year for a single person and nearly $68,000 for a family of four.

This year, households can receive up to $3,200 to pay for electricity, natural gas, oil, propane or wood, up from about $2,000 before the pandemic. So far this year, the average energy assistance payment is $1,158.

Homeowners can also apply for help repairing or replacing broken heating systems and home weatherization to lower energy bills.

Business owners like Kathy Saari, who runs a custom lettering business with her family in Pine City, aren’t eligible for the energy assistance.

They go through a 500-gallon tank per month to heat the warehouse where they apply vinyl logos to trucks and buses and even do hand-painted lettering from time to time. Because they go through so much propane, their provider locks them into a rate in the fall. Saari paid $1.79 a gallon to fill up her tank the last time.

For Saari, propane is just one more of the many costs going up and squeezing their business. Recently she went to buy a tool to remove vinyl that normally costs $35 but is now $61.

“Anything that we use, the prices have gone up,” Saari said, which means working more and maybe raising prices. “What are we gonna do anyways? How much control do we have over that?”

Learn about energy assistance and how to apply here.