Propane Buyers Groups

In an effort to save money and lower the overall price per gallon of propane, consumers have started forming propane buyers' groups. The goal of this group is simple, entice the propane companies to acquire a large customer list in one place while lowering the overall cost of propane to the group. This is essentially power in numbers and gives the group a powerful bargaining platform.

The group generally has a selected few chosen individuals whom represent the group and negotiate on their behalf. Often a small fee is charged to everyone in the group to cover this management teams expenses.

The prices for the group will vary based on a variety of factors such as how much propane is planned for purchase, geography, and of course how many propane suppliers are bidding/competing for the groups business. This kind of group negotiating gives everyone in the group leverage in many ways that you couldn't achieve individually.

In setting up a group, you must first identify all the members in any given area that need propane, and how much they use on average per year. You then need to contact these people and figure out how many would be interested in joining the team. There are many resources you could use to achieve this efficiently such as contacting the various resources in the area that can contact everyone in the area in the form of a home owner's association newsletter, or acquiring a mailing list of everyone in the area and so on. This could cost a small fee and is part of what the membership fees go towards. You will also need to contact the various propane suppliers in the area to elicit their interest in participating in the negotiating/bidding process. You will find many of them will be more than interested. It is vital to plan ahead in both steps (contacting the suppliers and organizing the group of consumers).

Once you've assessed the number of potential members for your buyers group, you should put together a list of contact information on each person in the group to include details necessary to formulate your request to the propane suppliers such as how much propane will be needed (size of each persons tanks added together and calculated per year of average use, how many are willing to lease vs. how many have their own or are willing to purchase their own tanks, and so on).

Some things to be aware of in putting together your proposal are, how the pricing program will be set up. You can set up a fixed price which sets a specific and rigid price per gallon for everyone in the group for a certain time frame. A variable pricing option would be more flexible for the propane companies while also maintaining your ability to move with the market (save when prices are lower but also pay more when the refinery prices go up for the supplier). The choice you as a group will make will be determined of course by where your located, and various other factors affecting your propane purchasing decisions.

To be fair and to get a fairly diverse list of possible proposals, you should ask the group to individually (by household) come up with, if they choose, a proposal that they'd like to see brought to the suppliers attention. This is fairly an in-house way to generate a bargaining platform, but it would be a liquid bargaining concept. The propane companies should also be invited to make their own proposals to the group individually, to include a written statement of this proposal with full details of how it would work, so the group can decide which one would fit their needs best, as well as pricing.

The supplier proposal should include details such as costs involved in replacing or installing tanks, any applicable fees, service labor costs for set up, and anything else that will affect the price and expense of setting up the accounts. It's important to take care in assuring that the group knows that each proposal potential acceptance is dependant on the supplier being able to service and take care of all members of the group or it will not be considered.

Forming your group is relative to your area and various factors but generally the best time to form one is either in the spring or summer months due to weather conditions and the ability to quickly get the contracts underway, tanks installed, and of course because each of the members of the group can easily calculate their annual propane use from their just passing winter consumption.

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