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New Year’s resolve

It’s no surprise that most folks trying to drop a belt notch or two each New Year surrender when diet or exercise pledges aren’t rewarded with smaller numbers on the bathroom scale.

Even the most valiant efforts inevitably wane without measurable strides toward realistic goals. You better believe my resolve to jog through Ohio’s winter slush wouldn’t stand a chance if I still couldn’t get my workout sweatshirt zipped over my holiday-enhanced spare tire.

The U.S. propane industry enters a new decade facing a similar scenario. Its financial commitment to grow gallons has been significant over the last 10 years, but new data raises questions about the net results in the most critical market segment.

Despite long-term growth in the number of propane households from 1997-2007 and increases in combined use (space heating, water heating, cooking, drying) gallons, new data shows a significant decline in the number of households using propane as their primary space-heating fuel. According to ICF International, the market research and number-crunching gurus paid handsomely by the Propane Education & Research Council (PERC), home space heating consumption has fallen a startling 10.2 percent since 2004. Final 2009 numbers are expected to reveal another 4 percent slide.

Blame record propane price spikes, consumer conservation, increased appliance efficiency and home insulation for the troubling trend.

The news is particularly alarming since 60 percent of the residential market, which represents more than half of all domestic propane sales, is for space heating. Plus, PERC has spent the biggest chunk of its $50 million annual budget in recent years targeting promotions at homeowners.

The bottom-line numbers come at a critical time for PERC, which is under marching orders from the U.S. Department of Commerce to cancel promotion of propane as an energy choice Americans should consider. The ban likely will last at least five years – unless the National Propane Gas Association can magically arrange for Congress to rewrite the rules governing PERC spending.

Should the council scale back its spending of industry dollars given the mandate and sales performance data? Or should the promotion budget be spent in other areas – such as safety and technology development – in hopes of creating new market demand?

PERC councilors last month flopped on an earlier decision to simply reallocate funds generated by its assessment rate of five-tenths of a cent per gallon. Beginning in April, the rate will drop to four-tenths of a cent, giving PERC $6 million less to invest in 2010.

With ICF projecting a meager 2 percent growth in consumption within the combined domestic residential, industrial, commercial, agriculture and engine markets through 2015, PERC President and CEO Roy Willis realizes this is a watershed moment for both his organization and the industry as a whole.

Like individuals pushing for an improved lifestyle in the New Year, PERC has vowed to remake itself in 2010. Energy Guys TV ads are out; expanded technology development and deployment is in.

“Our ability to grow overall gallons ultimately depends on the success of appliances and equipment being brought to the market. That’s why we are concentrating on partnering with manufacturers in market development. They have to step up and do lots of the marketing and advertising that PERC can no longer do,” he said.

“I see an opportunity to add gallons. Whether or not those gallons can be added faster than the decline due to improved efficiencies and conservation, I don’t know. But the decline will be worse if we are not out there aggressively trying to grow the market. We need to figure out how to deploy our resources to that end.”

Stay tuned to see if the industry likes what it sees in the mirror.