propane contract in New Hampshire

[Bad LP]

I should have added that most companies will only sell an underground tank. I'm unaware of a leasing program within the last 8 or so years and I know for fact Eastern did not offer such a program when I bought an underground tank on Cape Cod.

 

[twd000]

I've attached a PDF scan of the contract. Paragraph 3 tells me I owe Eastern $1895 if I terminate the contract and switch suppliers, but paragraph 4 tells me I owe them $0 if I do that?

 

[Bad LP]

Fact is they don't have a signed contract with you. They are welcome to remove the tank at their own expense or sell it to you at an agreeable price.

I'd tell the mother %&^#s to go pound sand.

 

[hoverwheel]

*I* would not sign that. If the tank belongs to them so does the cost of maintaining it. They can come and get it, then recover their costs from whomever they last had a contract with.

OTOH, don't be surprised if they instead try to sue YOU for those costs.

 

[beatlefan]

Yeah, I don't think I would sign that contract if I were you. I know you're new to the area, but are there neighbors that you can talk to about their suppliers? You might be able to get some insight from them about other local suppliers.

 

[barmstrong2]

Yup. Tell them you don't agree to those terms. You have no obligation to buy the tank. If the tank remains their property I wouldn't agree to bear the cost of maintenance or repair. As I've said before, there really is no advantage to owning the tank. You have no obligation in this because you do not an agreement with Eastern Propane. If they won't move on their terms, tell them to come get their tank and repair the damage to your property. You have the upper hand here. They have been getting a payment for the lease from the previous homeowner. They are treating this as new equipment. It isn't and they have already recouped some of their investment. Hold firm and force them to negotiate a reasonable offer. They really don't want to come remove the tank. I guarantee it.

 

[twd000]

Yeah, I don't think I would sign that contract if I were you. I know you're new to the area, but are there neighbors that you can talk to about their suppliers? You might be able to get some insight from them about other local suppliers.

I've talked to several neighbors and coworkers, they have different propane suppliers. Most do not own their tanks. When I ask whether they pay a rental fee, or any maintenance costs, or the contract terms, I mostly get quizzical looks in return. "The guy comes and fills it up a couple times a year and we pay the bill he hands us..."

 

[twd000]

Yup. Tell them you don't agree to those terms. You have no obligation to buy the tank. If the tank remains their property I wouldn't agree to bear the cost of maintenance or repair. As I've said before, there really is no advantage to owning the tank. You have no obligation in this because you do not an agreement with Eastern Propane. If they won't move on their terms, tell them to come get their tank and repair the damage to your property. You have the upper hand here. They have been getting a payment for the lease from the previous homeowner. They are treating this as new equipment. It isn't and they have already recouped some of their investment. Hold firm and force them to negotiate a reasonable offer. They really don't want to come remove the tank. I guarantee it.

Right, there is no way the tank is worth anything near $1895. I think it was installed around 2004-2006, based on HVAC work done on the house at the same time. So what is the residual value of a buried tank of that age? It's not worth anything to Eastern; it would cost them money to dig it up and scrap it.

When you say there is no advantage in owning the tank myself, can you explain why? Are you referring to the current buried tank, or installing my own above ground tank? From what others have said, the ongoing maintenance costs should be low, mostly the pressure certification test, and if I can shop around for the best prices, won't that save me money after recouping the initial cost?

 

[Wisneaky]

I should have added that most companies will only sell an underground tank. I'm unaware of a leasing program within the last 8 or so years and I know for fact Eastern did not offer such a program when I bought an underground tank on Cape Cod.

I know every LP company around here will sell an above ground tank if you want one.

 

[Bad LP]

I know every LP company around here will sell an above ground tank if you want one.

My point was that they don't lease underground tanks, the only sell them. Above ground tanks are either or...

 

[barmstrong2]

Right, there is no way the tank is worth anything near $1895. I think it was installed around 2004-2006, based on HVAC work done on the house at the same time. So what is the residual value of a buried tank of that age? It's not worth anything to Eastern; it would cost them money to dig it up and scrap it.

When you say there is no advantage in owning the tank myself, can you explain why? Are you referring to the current buried tank, or installing my own above ground tank? From what others have said, the ongoing maintenance costs should be low, mostly the pressure certification test, and if I can shop around for the best prices, won't that save me money after recouping the initial cost?

The savings in fuel cost are going to be minimal. You might see 20¢ lower per gallon. That gives you just better than a 10 year return on investment, if there are no repairs in that time. One repair, particularly on an UG tank, will be very expensive. Most repairs will not be possible in the field. The tank will need to be evacuated and transported to the shop for repair. It's just not worth it.

Most companies don't install UG tanks anymore unless they are customer owned, for the same reason. They don't want the risk of repair expenses, either. Your tank is not customer owned by the previous homeowner? If it were, it's not Easterns tank to sell.
I remember doing a UG tank repo years ago. The customer failed to pay the financing, under the belief there was nothing the company could do. They sent us out with a boom truck, nobody home, we disconnect the supply lines, dug up the lift lugs and pulled the tank straight out of the ground. Loaded it up and got the hell out of there. 500 gallon tank leaves a big hole in the ground. If have loved to been there when that guy got home!

 

[barmstrong2]

I fired up my old laptop with my retail files. In 2006, a 325 gallon UG tank retail price was $1381. That does not include cost of installation. A 20 lb anode bag was $137 and a 500 gallon tank would have 2 of those installed. Cost of excavation, backfill, loam, seed and mulch would easily bring the total cost to $2000, and then some.
I did my own excavating and the total cost of installing a UG tank, underground supply lines, anode bags, backfill, loam, etc. was in the $3000 range.
But, in your case, I would assume Eastern has already recouped much of the cost.

 

[twd000]

The savings in fuel cost are going to be minimal. You might see 20¢ lower per gallon. That gives you just better than a 10 year return on investment, if there are no repairs in that time. One repair, particularly on an UG tank, will be very expensive. Most repairs will not be possible in the field. The tank will need to be evacuated and transported to the shop for repair. It's just not worth it.

Most companies don't install UG tanks anymore unless they are customer owned, for the same reason. They don't want the risk of repair expenses, either. Your tank is not customer owned by the previous homeowner? If it were, it's not Easterns tank to sell.
I remember doing a UG tank repo years ago. The customer failed to pay the financing, under the belief there was nothing the company could do. They sent us out with a boom truck, nobody home, we disconnect the supply lines, dug up the lift lugs and pulled the tank straight out of the ground. Loaded it up and got the hell out of there. 500 gallon tank leaves a big hole in the ground. If have loved to been there when that guy got home!

wow, sounds like that turned into a pissing match just to prove a point!

I'm going to ask Eastern if they can prove title/ownership of the tank. There have been two homeowners prior to me, and I don't want either of them to come back asking for "their" tank if they think they own it.

 

[barmstrong2]

wow, sounds like that turned into a pissing match just to prove a point

Exactly. I was a paid by the hour employee. I didn't care.

 

[twd000]

I fired up my old laptop with my retail files. In 2006, a 325 gallon UG tank retail price was $1381. That does not include cost of installation. A 20 lb anode bag was $137 and a 500 gallon tank would have 2 of those installed. Cost of excavation, backfill, loam, seed and mulch would easily bring the total cost to $2000, and then some.

But, in your case, I would assume Eastern has already recouped much of the cost.

Thanks for looking that up. I'm not surprised that the initial installation would be over $2000, but like you said they have recouped a lot of that cost over the last decade of propane sales. Is there any sort of depreciation formula I could use to support a reduced buyout price? How long would you expect the anode to last? I've seen estimates of 30+ years life expectancy for a properly installed tank

 

[barmstrong2]

Thanks for looking that up. I'm not surprised that the initial installation would be over $2000, but like you said they have recouped a lot of that cost over the last decade of propane sales. Is there any sort of depreciation formula I could use to support a reduced buyout price? How long would you expect the anode to last? I've seen estimates of 30+ years life expectancy for a properly installed tank

The sacrificial anodes are said to have a 500 year life. Who is going to prove them wrong? I have excavated UG tanks that have been buried for 20 years or better. The tank itself is in very good condition, with no signs of corrosion. The anodes do work. The problems are with the valves. Seals corrode and the valves leak. They can't be repaired without evacuating the tank of liquid and vapor pressure, which has to be done in a plant. They can not be replaced in the field.

At this point, Eastern has been paid a lease fee for 10+ years. They have recovered their expenses. The cost of removing the tank will be $500-$1000. If I really wanted ownership of the tank, I'd offer them $300, to start the discussion. I would say the possibility of a valve failure is better than good, they have already been paid for their investment by previous owners and I'm really just trying to be nice by offering to even take ownership. If they don't want to talk, tell them to come get it. And, I would demand they repair the damage to excavate it. They'll take whatever you offer. You have all the marbles in this. They're bluffing.

 

[barmstrong2]

I might even push them for an indefinite price contract, if I buy the tank, based on Selkirk rack price. The price they pay for fuel is no secret. You can track any fuel price here...

(broken link removed to http://www.bgs.state.vt.us/fuel/weekly_rack_pricing.php)

Tell them you want Selkirk plus $1. That's their price, plus $1 per gallon. Right now, Selkirk is .6935 per gallon. Of course, they have additional costs to get it to their plant and deliver it, but, $1 per gallon still leaves them some room to make money, which is why any business exists. You can look up the rack price anytime yourself.

 

[twd000]

I might even push them for an indefinite price contract, if I buy the tank, based on Selkirk rack price. The price they pay for fuel is no secret. You can track any fuel price here...

(broken link removed to http://www.bgs.state.vt.us/fuel/weekly_rack_pricing.php)

Tell them you want Selkirk plus $1. That's their price, plus $1 per gallon. Right now, Selkirk is .6935 per gallon. Of course, they have additional costs to get it to their plant and deliver it, but, $1 per gallon still leaves them some room to make money, which is why any business exists. You can look up the rack price anytime yourself.

That's an interesting proposition. I found this buyer's club in NY advertising their Selkirk + $ rates
(broken link removed to http://peoplesenergygroup.com/fuel-pricing/)

 

[barmstrong2]

Is there any sort of depreciation formula I could use to support a reduced buyout price?

Every company I worked for used a return on investment formula of 5 years to recover the cost of tanks/regulators. That determined the price per gallon. So, every installation was 5 years to recover the cost of equipment. After that, it's profit per gallon.
An underground installation is different. The cost is much greater. Thus, the lease fee on equipment. By this time, 10+ years into it, I would expect Eastern has recovered their costs.

 

[barmstrong2]

That's an interesting proposition. I found this buyer's club in NY advertising their Selkirk + $ rates
(broken link removed to http://peoplesenergygroup.com/fuel-pricing/)

Interesting business concept. I wonder how they get around the container law with supplier owned tanks? I haven't seen this in this area. We always had Selkirk pricing for large users. It's nothing new. I recall a paper mill in this area that had Selkirk plus .05, just 5 cents per gallon over Selkirk rack price, but, the mill was 1/2 mile from the bulk plant and they took 7,000-10,000 gallons of LP every week. I used to dedicate a bulk delivery truck to that account one day each week. 4 trips out and dump the entire load.
If you own your tank and equipment, it puts you in a position that you can buy based on Selkirk rack price. You will, however, be dealing only with the larger distributors. Eastern, Suburban Propane, AmeriGas are the ones that come to mind. The smaller dealers buy from them, so, they can't offer Selkirk pricing.

 

[twd000]

OK, I just got off the phone with Eastern. The Addendum that I scanned is only part of the contract, they are sending me the main contract at the end of the month. They said the main contract states that maintenance of the tank and regulators is the responsibility of Eastern, I only pay if I request the tank to be relocated (which I won't).

The tank was installed in May 2007, so it's 8.5 years old. He admitted that they have fully recovered their equipment cost at this point. The previous owner was using 1000 gallons per year (I don't think he was supplementing with the woodstove). I asked to negotiate the buyout price of the tank, he said he would need to transfer me to Sales Dept. I'll hold off until I read the rest of the main contract.

There is no tank rental fee, but they charge a 20% premium on the gas price. So $2.00 for homeowner-owned tank becomes $2.50 for Eastern-owned tank. At 1000 g/year, that's $500 "rental fee". Pretty salty. $2.00 a gallon is pretty appealing if I take ownership of the tank.

The minimum yearly usage is 212 gallons/yr (50% tank capacity for a 500 gallon tank @ 85% full). If I use less than that, I pay the difference at their per-gallon rate up to 212 gallons. I don't expect that even with wood heating I will be able to get below 21% of the previous homeowner's consumption.

If I sign the contract but stop ordering gas, I would pay the minimum yearly fee as long as Eastern's tank is on my property. He said that they don't bother to excavate abandoned/transferred tanks.

So I do have plenty of leverage...I'll take a look at the main contract when it arrives then see if Sales is willing to negotiate. I suspect if I decline to sign the contract, they will just abandon the tank. Is there any way I can get it transferred to my ownership if they do that? Then I can shop around for the cheapest supplier each time I need a fill.

 

[Bad LP]

Shopping for the best price is a PITA every time you need a fill up.

Do yourself a favor and establish a relationship with a company. You order, they send the bill, you pay the bill right away. Someday you will need burner service and it may be on some God awful blowing cold night while YOU are traveling and the wife is home with the kids and she's ill. My LP, oil, and AC guys make it happen when the crap is hitting the fan blades because that is how business is done. I can (and have had to) get work done from over 1500 miles away because we established a great working relationship.

If you want to sleep with Eastern then so be it. The driver was great but the office couldn't figure it out.
Amerigas was a much friendlier company in my experience but to each his own.

 

[twd000]

Shopping for the best price is a PITA every time you need a fill up.

Do yourself a favor and establish a relationship with a company. You order, they send the bill, you pay the bill right away. Someday you will need burner service and it may be on some God awful blowing cold night while YOU are traveling and the wife is home with the kids and she's ill. My LP, oil, and AC guys make it happen when the crap is hitting the fan blades because that is how business is done. I can (and have had to) get work done from over 1500 miles away because we established a great working relationship.

If you want to sleep with Eastern then so be it. The driver was great but the office couldn't figure it out.
Amerigas was a much friendlier company in my experience but to each his own.

Yeah I can definitely see the reasons to stay with a steady supplier. If I'm not saving hundreds of $ that may be worth it.

I called one of the local suppliers today. They offered to buy the tank from Eastern to get me as a customer for a year. Their delta was only $0.10. $2.29 if they own the tank, $2.19 if I own it. More expensive than Eastern, but not much savings for owning the tank.

 

[Buzz Saw]

I bought a tank this fall. Above ground refurbished 500 gallon tank. $699. With the purchase I got .07 off per gallon for a total of $0.64/gallon(price at the time). I also locked in rates at $1.19 prebuy for the winter. The price saving was about $0.50/gallon this year. Time will tell if it was worth buying the tank.

 

[twd000]

So I have called 4 or 5 local propane suppliers. They each offered to buy the tank from Eastern at no cost to me. Their prices ranged from $2.09-$2.49 a gallon. They do not required a contract, just a single heating season as a new customer. Some had a $0.10-$0.20 discount for homeowner-owned tanks, probably not worth the savings to me, with the peace of mind of maintenance being their responsibility.

It sounds like I have all the flexibility to shop around even without taking ownership of the tank, which is the best of both worlds. Apparently the companies shuffle around tank ownership among themselves in order to poach other's customers. Fine by me!