Bulk LPG - Cheapest suppliers / supply route?

GrandadRob · 13 March 2011 at 6:06PM

I am overcome with emotion, to hear that Mr Flogas is working hard to keep me happy. If he is in the neighbourhood, perhaps he would like to call in for a chat, and I will explain some of my very petty niggles about his company to him. I will even give his chauffer a coffee to drink in the Roller whilst he waits. :beer::beer:

DAVID.T_3 · 14 March 2011 at 2:38PM

HateLPG wrote: »

I was thinking this morning about the economics of buying LPG, specifically in respect to setting up "Buyers Consortia" and what the optimum size for any consortium might be.

It is well known that for any commodity, the greater your annual usage, the better the price at which you can buy that commodity, and the more clout you have with your supplier.

From various posts that have been made in this thread, we know that for your average domestic user, the supply companies will have various "bandings". Typically, these will be something like:

< 1500 litres per year

1500 - 5000 litres per year

> 5000 litres per year

We also know that Garages selling LPG for Automotive use are shifting substantially greater volumes than this and as a result are getting somewhat better ex-duty, ex-VAT prices than the humble domestic user.

BUT, there has to be a point at which any further increase in volume, while perhaps giving the buyer a bit more "clout" with the supplier, will not lead to any further significant reduction in price.

Bearing in mind that setting up a buyer consortium is, at best, a difficult, tedious and time-consuming process which will become ever more difficult to manage as more people join, the important question is:
"What is the optimum size (in terms of projected annual consumption) for a buyer's consortium, beyond which the additional 'cost' in terms of time and effort to organise and it do not deliver a commensurate return on that 'investment'"?
Or put more simply:
"at what level of annual consumption, do we reach the point where no further significant reductions in price are likely to be available"?
If you are reading this, David.T, could you make any comment please???

To answer the question directly there is no limit to annual consumption where no further reductions in price are available. Some large customer who use 10 tonne per day (20,000 lts) pay just a few tenths of a penny on cost. What is important is where are the people in the consortium, if they are spread out then there is no great benefit to the gas company.

DAVID.T_3 · 14 March 2011 at 2:41PM

Ozzysmate wrote: »

Flogas has also been awarded the Carbon Trust Standard as a result of improving its carbon efficiency by 18.8%*.

*Level of carbon dioxide emissions relative to turnover when comparing 2009 emissions and turnover against the averages of 2007 and 2008.

Am I missing something here or is the way to improve carbon efficiency simply to do nothing, just increase prices?

They may have improved their carbon efficiency by 18.8% buy letting 18.8% of people run out this winter !!!:rotfl:

DAVID.T_3 · 14 March 2011 at 2:59PM

HateLPG wrote: »

Further to my post of yesterday, in respect of various tank uplift clauses (http://forums.moneysavingexpert.com/showpost.php?p=41830780&postcount=791), note that some companies say that they will remove the tank and any gas remaining in it. Calor, for example, are explicit in stating that they will not re-imburse the user for any gas remainig in the tank at time of uplift; Flogas make no statement in this respect as far as I can see, but I believe the intent is implicit as they do state that they will remove the tank and any gas in it at the time of uplift.

This raises an interesting point in the case that all gas is fully paid for and/or all outstanding amounts owed are to be paid by the user prior to contract termination: any gas in the tank is yours, and unless they are recovering the tank in the event of non-payment by the user, I suspect that, irrespective of anything that might be written in the contract, they will be on extremely thin ice legally, as they are in effect depriving the user of something that they own and to which they have right and title.

That said, it is one thing to think (or even know) that you are in the right; It is another (and potentially very much more costly) matter entirely to pursue the matter through the small-claims court to recover the money: If you weren't aware, under the small claims process, the defendant has the right to have the case transferred to a court of their choice. So if you live a long way from the company's head office, pursuing a claim can prove a very costly and time-consuming business. To make matters worse, the claims that you can make to recover your out of pocket costs are very limited; No consideration will be given to loss of earnings etc and I believe it is not at all easy even to recover any legal fees that you might incur.

So, if you are considering having your tank removed, make sure that you have used every last valuable fume of LPG before you allow them to take it away.

This is all entirely hypothetical, of course. I think most companies would be more than happy to come to an arrangement that allows you to do that anyway (I can't say all companies - maybe the less scrupulous ones might try to wring every last drop of blood out of you to the bitter end) as it is far less hassle for them to deal with an empty tank than a half full one that will have to be emptied before they can move it! Unless, of course, they always have to send a tanker out to empty it regardless, in which case it makes no odds how much gas is in it.

Oh, and of course (as far as I can see), none of the companies will meet any charges for groundworks or making good the site following removal of the tank.

Maybe David.T could advise on the mechanics and finer points of the uplift procedure?

On the whole gas left in a tank is seen as a problem not an advantage by a gas company as we cannot transport them by road with more than 2% in them, and the cost of sending a tanker with an engineer to pump gas out usually costs more than the gas is worth.

So if the tank is being replaced by a new tank from another suppler it is normal for the incoming suppler to pump the gas from the old to new tank and for the old supplier to be more than happy with this.

The only time you may lose out is if you a removing LPG completley

GrandadRob · 14 March 2011 at 7:18PM

I was told by a rep today, that they have a machine which pumps out the gas into a holding tank, then puts it back afterwards.

This is in the event of a tank change over.

HateLPG · 14 March 2011 at 7:39PM

DAVID.T wrote: »

To answer the question directly there is no limit to annual consumption where no further reductions in price are available. Some large customer who use 10 tonne per day (20,000 lts) pay just a few tenths of a penny on cost. What is important is where are the people in the consortium, if they are spread out then there is no great benefit to the gas company.

David, Thanks for your contribution (and the addition of yet another variable!) I appreciate, that very high volume users will pay just a fraction over cost - take this to it's logical conclusion, and if I am the only user of LPG worldwide, I will own production and pay cost!

Maybe it would help if I used some purely hypothetical figures to illustrate my thinking:

< 1000 ltrs per year: 60ppl
1000 - 4999 ltrs per year: 52.5ppl
5000 - 25,000 ltrs per year: 47.5ppl
25,000 - 50,000 ltrs per year: 45ppl
50,000 - 100, 000 ltrs per year: 44.5ppl
100,000 - 250,000 litres per year: 44.25ppl
250,000 - 750,000 litres per year: 44.15ppl

Clearly, if those figures were representative, there would be nothing to be gained by trying to set up a consortium who's combined usage was much in excess of 50,000 litres per year as it would have to double in size yet again to achieve a saving of just 0.5ppl. This might be significant to the supplier, but to the person organising the consortium, it would double the headache for a miniscule return. These figures are obviously plucked from thin air - what I would like to understand in general terms is, if I am looking to set up a consortium, at what point (in terms of litres LPG delivered to the consortium) am I increasing my effort for little significant benefit?

And, to pick up on the other good point that you raised, how would you define "spread out"? Are we talking about all consortium members being within say a 5 mile radius, or would the supplier only consider it to be beneficial if the deliveries were within a much tighter radius, and (you guessed my next question) what sort of radius would we be talking about?

Mbday · 16 March 2011 at 6:06PM

The OFT have just announced they are inviting contributions to their study of the "Off grid" market, which includes LPG (bulk supply as well as cylinders). An important part of the study is to see how the orders, which were issued following the Competition Commission's investigation, are working. (Think we know the answer to that one.) I would urge you to spread the word and get as many LPG users as possible writing into the OFT with their experiences. Money Saving Expert won't let me post the link, so just Google "Off Grid Energy Study" and this will take you to the site. You can e-mail comments to the OFT (details on front page of study. Again, can't give you address here.) CLOSING DATE IS 27 MAY.

LittleVermin · 16 March 2011 at 6:50PM

mbday wrote: »

The OFT have just announced they are inviting contributions to their study of the "Off grid" market, which includes LPG (bulk supply as well as cylinders). An important part of the study is to see how the orders, which were issued following the Competition Commission's investigation, are working. (Think we know the answer to that one.) I would urge you to spread the word and get as many LPG users as possible writing into the OFT with their experiences. Money Saving Expert won't let me post the link, so just Google "Off Grid Energy Study" and this will take you to the site. You can e-mail comments to the OFT (details on front page of study. Again, can't give you address here.) CLOSING DATE IS 27 MAY.

Thanks for letting us all know about this - here's the link:

http://www.oft.gov.uk/OFTwork/markets-work/current/off-grid/

And, if you haven't added your 'thanks' to voisin's post - asking for the LPG market to be looked at - please do so at:

http://forums.moneysavingexpert.com/showpost.php?p=39205254&postcount=477

80 thanks so far - the top 'moneyfesto' post!... so ML should also take it up with top politicians, etc (see the first post in that thread). Obviously good to send evidence to the OFT as well individually.

And HateLPG has been posting recently about setting up a buying group ... mbday is someone who has actually done it - see his post [and add your thanks!]:

http://forums.moneysavingexpert.com/showpost.php?p=38832310&postcount=369

HateLPG · 16 March 2011 at 10:55PM

Thanks for the "Heads Up", mbday, and for posting the links, LittleVermin.

Having had a read of the "Statement of Scope" (OFT1302f), which is available as a pdf document (http://www.oft.gov.uk/shared_oft/market-studies/oft1302f.pdf), I have to say that I was somewhat disappointed. This, in my opinion (and I am sure the opinion of many others reading this thread), was an ideal opportunity not only to review the effect of the Competition Commission Order that came into effect in 2009, but (and arguably more importantly) to address those areas of the LPG market that are still not functioning in a "proper" manner, irrespective of whether or not they were in the scope of the Original Order.

Regrettably, the scope of this current OFT investigation into Off Grid Energy Supply, in respect of Bulk Domestic LPG seems to be little more than a review of the Competition Commission Order and an investigation into supplier compliance with the Order. The following is the relevant section from the OFT "Statement of Scope" document:

LPG

LPG is another common source of off-grid energy: it is estimated that at least 150,000 UK households use LPG as their primary source of heat.

Our study will extend to both cylinder and bulk LPG. There are important differences in how these products are supplied and we will differentiate our treatment of them accordingly.

For cylinder LPG, our study will focus on whether conditions of supply to distributors exhibit anti-competitive features.

For bulk LPG, an investigation into the domestic market by the Competition Commission in 2006 resulted in the making of Orders intended to reduce barriers to switching. These took effect in 2009. The OFT has a statutory responsibility to monitor compliance and to keep the carrying out and effectiveness of such Orders under review. Our market study will look for observations or other evidence of compliance with the Orders, their initial impact and any implications for their longer term effectiveness.

So, it sounds like it is time to dig out our copies of the original Order again and to scrutinise it for those aspects of LPG supply that were explicitly addressed and in which there are still unresolved issues, or where issues have arisen as a result of the Order.

The timescale and other important information as set out in the Statement of Scope are as follows:

Next steps

The study team will continue to engage with stakeholders. In particular, we would welcome submissions from interested parties on the substantive issues raised above by 27 May 2011.

Please send submissions to [EMAIL="offgrid@oft.gsi.gov.uk"]offgrid@oft.gsi.gov.uk[/EMAIL], or to
Off-Grid Energy Market Study
Office of Fair Trading (2nd Floor)
Fleetbank House
2-6 Salisbury Square
London
EC4Y 8JX

We intend to complete the study in October 2011 and will post updates on our website at: www.oft.gov.uk/OFTwork/markets-work/current

In respect of perceived misconduct by individual companies or systematically across the entire sector, it would seem at first reading that if those matters were not addressed in the Order, then they will fall outside the scope of this latest study. As such, I believe that the only approaches open are as follows:

If it is a systematic problem related to the sector as a whole, then I suggest that the correct agency to contact in the first instance is still the OFT. Dependent on the precise nature of the matter, they may either request that you make new submission (possibly outside the scope of the Off Grid study), or alternatively, they will be able to direct you to the agency best placed to deal with the matter;

If it is a problem relating specifically to your supplier or your contract, then as always, the first port of call should be Consumer Direct (Tel: 08454 04 05 06, Web:www.consumerdirect.gov.uk). It is also worth noting that the Consumer Association have the power to intervene and to require a supplier to amend their contract if it is found upon investigation to be legally unfair. They also have very useful advice lines and legal support (for subscribers only). More information and full contact details can be found at www.which.co.uk.

One final observation, which might be a "Ray of Hope" (or possibly just a case of "Clutching at Straws" if you're more of a "Glass Half Empty" kind of person) is that the Statement of Scope states in its introduction:

Below we set out the aspects we expect to cover with respect to each [fuel source].

which could be taken to mean that if there are sufficient and compelling reasons to investigate other matters, then they too could be included.

Mbday · 17 March 2011 at 10:15AM

Think one of the key things in the orders issued by the Competition Commission was about improving market competitiveness - hence new rules about being able to switch suppliers without having to pay tank uplift charges. From my own perspective - which tallies with many of the other comments I have read - the lock in for two years is not really doing much to increase competition as prices can be hiked throughout this period, with the consumer unable to do a thing about it. In addition, a number of people cannot switch suppliers because of the "new" health and safety rules, which means a hefty charge to move their tanks, if they switch supplier. If you are in the latter category you need to let the OFT know this, as effectively it means that the orders issued by the Competition Commission have done absolutely nothing to help you get a better deal. Hope that helps some of you understand better what you need to highlight when you write to the OFT. I'm sure others will be able to offer further advice. The important thing is to let the OFT know, with specific details/examples. General comments are unlikely to hold much sway.

PS Only my third post so can someone tell me how to thank Vermin, so I can join the campaign.

Bulk LPG - Cheapest suppliers / supply route?

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