Thursday, February 26, 2009

NYC Energy Switchers

The New York Times City Room Blog recently posted about how many NYC property owners are leaving heating oil and moving to natural gas. The post is here. And it made me sad and angry and wanting to stand on my soapbox. And since this site is really just one big bully pulpit....

When do you think we will learn? Our industries, that is...When do you think propane and heating oil will learn that it is NOT about providing the lowest annual price per gallon but rather enrolling customers for an annual commitment that makes it easy for the customer to pay? No more $800 bills - how about $150/month, instead. No more huge debit balances that you have to worry about collecting. People HATE that. My mother-in-law hates that. I hate that.

My mother-in-law is a widower that had to find supplemental health insurance. She pays through the nose. It is painful for me to see her monthly bill. But now, when she gets sick, she goes to the doctor. And she doesn't pay one penny after the monthly premium. She knows what to expect, and for this certainty she pays a premium. But she is cool with that - 'cause she hates unexpected costs. Might there be a lesson there in behavioral economics? Do propane and heating oil retailers need to take note of her buying habits? It might not hurt.

I recently got into a little wreck. Yep, again. The 4Runner got up close and personal with the receiver hitch of a Chevy Silverado. It is sad, but if my driving ability equated to a golfing score it would be a +20. But here is the deal. I did about $500 of damage to the front bumper of my car (and no damage to the Silverado). When I had the accident, at least three times the idea went through my mind "Maybe I should turn this in. I will pay more than $500 bucks in total, but at least I won't have to pay the bill all at once. " I had the money, but I did not want to spend it.

And so, propane and heating oil consistently lose customers to the electric and natural gas utilities. These businesses do their best to minimize the impact of a particular month or day of consumption by leveling payments for their customers.

How often do you hear that the local utility company has an $x/kilowatt hour rate? How often do you see that the ccf price at the natural gas burner tip cost x/btu? Likely once or twice in the last year.

How often have you heard from your customers that the propane company down the street is cheaper? Often. In the propane industry, our interest in competing with our propane competition creates a point of leverage for our real competition, natural gas and electricity. Our emphasis on price compromises our value against other sources of heat whose suppliers obfuscate the cost of their service.

Considering these factors, I have a plan. Enroll everyone you can in a cap program. Tell then their price will not exceed $x/month, but the payments might be cheaper. Begin collecting for next year's deliveries in April or May. Then spend the next year holding a credit balance with your customers and reaffirming to them that they made the right choice of an energy provider. Take the Zing! out of the payment and create customers that happily pay, tell their friends, and never switch to electric.

1 comment:

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