City girl moving to the country needs help understanding propane costs (Minneapolis: rental car, renter)

[KimLovesBeagles]

Hi- So my husband and I recently moved from our rental townhome in downtown Minneapolis to a rental house out in Minnetrista, MN. Just after a week of living here, we received a bill from the owner (our landlord) stating that he "prepays for the entire year" for propane and that we will owe 206 dollars per month for the whole year. Now, in Minneapolis we paid about 46 dollars per month for natural gas. I know propane can cost up to 2 or 3 times as much as regular natural gas, but 4.5 times as much seems extreme. Can someone help me understand why 206/month is reasonable/unreasonable? And also, could someone explain how it's possible to "prepay" for propane? If you don't know how much you're going to use in a year, how do you prepay? I just want to make sure we're not getting ripped off... Thanks so much!

[demtion35]

Look at the contract. See if you can get the gas bill in your name. Be careful, seems like alot of cash per month if you ask me. Sounds like the Land Lord is changing the rules halfway through the game.
Sounds like you should be cautious. If it were me Id call and check local gas dealers and check on their prices. Also it is within the renters rights to see the heating billes of the previous years and if the landlord wont permit that then you should run. LOL
But I believe you have the right to see the heating bills even if the utility companys have them.
Good luck

[Ghengis]

I guess the 1st thing I'd ask you was how was the cost of the utilities addressed in your agreement.

Our propane cost with an older 1 1/2 story 1,800 sq ft house with a pretty new and efficient furnace was about $2,300 this past year (July - June).

Pre-buy is when you pay up front with the gas company based on a pre-determined amount of propane you would like to contract for. Typically you'd save from 10 to 20 per-cent but would have to pay in advance which can be a big hit. This past year we didn't have the reserves to do the pre-buy and it saved us beacuse the purchase is done in July-Aug and the prices decreased throughout the winter along with gas, oil and the like. Likely a bit of an exception though.

My cynical nature tells me that if your landlord did the pre-buy last year (especially if he's contracting for more than one property) he lost quite a bit on his pre-purchase. Take that for what it's worth.

I'd ask for documentation of the past several years of consumption along with the rates he paid and the prevailing non-pre-buy costs. I would want to be assured you are paying for your consumption and not what he may have spent last year when prices were higher than now. If you pay for his pre-buy commitment, I'd ask to protect yourself in case he over-orders and you don't use everything he has bought. He'd likely be inclined to charge you for his over-estimation.

If he is pre-buying, he is laying out a lot of cash on your behalf to (in theory) get a favorable rate. However, if he is passing on a mark-up to you, he should be able and willing to disclose that.

[MN-Born-n-Raised]

I'd assume you will take over the propane filling and buying. The fact that he wants to control it is odd.

Find out if the person RENTS his propane tank or OWNS the propane tank. If he rents it, then you have to go to the same propane company. There is no negotiating.

If he owns the tank, then call around some. Right now, propane is about $1.40 (at least in Northern MN). You usually get a nickel less for prompt pay. They have all kinds of prepay options (versus pay as you go) to "lock in" your rate.

I rolled the dice and did not prepay this year as I predict it hanging in there.. If I prepaid, it would have been $1.65. Last year, I paid $2.40 a gallon!!! In 2005, I got it for $1.25 which was a great rate. So as you see, propane pricing really can change from year to year.

But you need to do some more digging. He he owns the tank, don't assume the price is the price. To steal a customer they are giving "1st time customer deals".

The key is have him show you what he paid for the propane and write him out a check for the amount that is in the tank. So if it says "50%" on the meter and it is a standard 500 gallon tank, pay him the price he paid times 250 gallons. Then you negotiate the refill price. The day you leave, he then writes YOU out a check for the amount that is in the tank (at what you paid for it).

As to the price per month. That depends on too many variables. I've never had a $45 bill for natural gas in any home I have owned (assuming a 12 month average). But $202 x 12 is WAY to much!

Good luck.

[marmac]

------" But $202x12 is WAY to much"--

How in the world would you know that about her house ?

( evidently you didn't bother to read Ghengis' post which is right above yours.)

I can't say if it is WAY too much,just right , or too little as I have no idea how much fuel it takes to heat the OP's houser

[Clifford63]

This can be confusing for sure because of several factors.

1. Propane is sold by gallon or lb depending and Natural Gas is often measured in Therms.

You can convert whatever units you are buying in to BTU and compare the true cost of heat by doing this. You might find that propane cost two or more times as much as Natural Gas per BTU, but propane prices are more volitile.

2. How much energy you need to heat your house varries a lot. Some people keep heat at 78, some to 65 and that will make a huge difference. Some homes have better insulation and windows than others. THis makes a huge difference as well. Size of the house matters a great deal too. This alone makes it hard to compare costs from one house to another.

3. I like the idea of looking at the tank meter on the day you signed the lease as a suggestion. That should show the value of what is in the tank today by looking at the previous purchase receipt. The concept of rental cars is somewhat similar. They give you a full tank, and if you bring it back with a full tank, there is no charge. With this situation, you may be starting with a 1/2 a tank an empty tank, but it sounds like it might be a full tank.

4. If it were me, I would probably say the tank is at level X and worth Y dollars (based on current market price). I will handle the propane bill directly and we can look at the tank when I move out and settle any difference based on the starting point. I would be open to bulk purchase if information provided was complete and it shows that bulk purchase will save money.

5. I would not assume the guy is out of line, but it is odd that this was not disccused previously. The situation where he wants to pass on prices from last years prebuy that are higher than current prices is certianly possible, so you do want to dig into that. Generally speaking, it would be somewhat likely that the tank is at a low point in late summer and you would want to purchase as much as you need in one chunk to last the entire winter if you can afford that. If the tank is close to empty and has not been filled recently, chance are good that you are looking at current rates.

Propane prices are why some people are still holding onto the old fuel oil furnaces even though they are not as efficient.

[MN-Born-n-Raised]

Originally Posted by marmac

------" But $202x12 is WAY to much"--

How in the world would you know that about her house ?

( evidently you didn't bother to read Ghengis' post which is right above yours.)

I can't say if it is WAY too much,just right , or too little as I have no idea how much fuel it takes to heat the OP's houser

If you would have read my post you would have known that Propane has varied from $1.25 to $2.40 after shopping it heavy over the past few years. Last year I paid $2.40 with a lot of shopping. If I didn't shop (or own my own tank) it would have been $2.75 a gallon.

My cabin is 4000 sq foot home and I go though two tank fulls per year. At $1.25 that is $1250. At $2.75 / gallon it is $2750 with gas dryer and gas fireplace and gas stove. The bulk of it is the heating. I'm 7 degrees cooler than the cities (on average) as well.

Of course I don't know what her house consumes. It's a concept knowing as "benchmarking" (look it up). It goes something like this (follow along): if I have a bigger than average home using all gas appliances in Northern Minnesota which is cooler and I know that gas is about 1/2 of last year I can make a statement like "that sound like WAY too much". In 2008, I would have said "that sounds about right". I also extrapolated that since she paid $45 per month with natural gas and surprised, she didn't have a big home. Now call me a fortune teller but I am guessing she isn't renting a 4000 sq foot home and paying $45 a month. It's a smaller place.

Thanks for stating the obvious that I have no idea what the Op's house is. I also didn't assume she was renting a 400 sq foot home or for that matter, a 9000 sq foot home. While I don't know her exact situation, it goes without saying that it's a nominal size home (2,000ish) or she would not have been surprised. If we all had to know every detail on this forum in order to give advice all questions should be answered "I have no idea".

My advice is to control the situation and then you know you cannot get screwed. Buy the propane yourself versus writing out a check assuming someone is honest. Also do your own homework and figure out if pre-buying (which costs more than the current market) is smart for you. It's a function of demand. If the economy is in a slump (as predicted) propane will stay low. Hence, a prebuy price by definition will be too high if the price does not go up and is also the reason why I said it is WAY to high. The propane companies need to mitigate their risk and that is why people are pre-paying a higher amount (not a lower amount as others suggested). She is paying for a guarantee which I predict will not be needed. She should fill-up at $1.25 NOW. Watch in the early winter. When it is still low, top off every few hundred gallons to avoid a trip charge.

[Susan Poole]

We rented property with propane. Changed them all over to Natural gas, or electric. Had renter put account in there own name,and pay us for gas in tank based on what we paid for it. We showed renter the bill. When renter leaves, we pay them for the propane left in tank based on what they paid. No money should be made on propane. That the way we did it.