Group Purchasing Saves Heating Dollars

Group Purchasing Saves Heating Dollars

Depending on your location and the crops you grow, heating fuel may be one of our most significant input costs. Some greenhouse operations in Colorado and California are mitigating that expense through a program that provides group purchases of natural gas.

Greenhouse Services Foundation, Inc. (GSF) is a non-profit 501 © (5) corporation that provides group wholesale purchasing of natural gas supply for greenhouses and agriculture-related business. Combining natural gas volume requirements from multiple facilities improves purchasing power and those savings are passed on to the program participants.

GSF maximizes savings by handling as much of the administration as possible.

“Having an active and involved board, as well as natural gas industry managers, has allowed the program to evolve and respond effectively to changing natural gas dynamics,” says Tagawa Enterprises’ Dave Tagawa, an early GSF board member and past president. “This unique program has proven to be beneficial for the growers.”

Group Purchases Step-By-Step

Here’s how the program works:

• Current areas of physical supply operation include California (PG&E: non-core) and Colorado (Xcel Energy).

• A volunteer board of directors provides oversight of the program. board members are owners or representatives from both Colorado and California participating growers.

• Natural gas industry professionals with more than 40 years of combined experience administer the program.

• Each grower signs a natural gas supply contract with GSF for full volume requirements.

• Each participant has an annual credit support requirement based upon peak monthly usage and pricing. Sixteen percent of estimated winter gas cost is posted as a cash deposit. This is held through the heating season and returned in the late spring and early summer months as a credit on the invoices. The balance of the annual credit support can be covered with a letter of credit, personal guaranty or cash. In lieu of the letter of credit or personal guaranty, monthly prepayment arrangements can be made for participants.

• Pricing is calculated monthly from the weighted average cost of gas. That month’s purchases and any pipeline imbalance trades are included in the calculation. The treasurer reviews and approves monthly pricing before invoices go out.

• Each participant has access to a special section in the GSF website,, where they can view volume history data for each meter, current natural gas market commentary and indicative future pricing.

One of the most unique features of the program is active supply procurement. Given the volatility of natural gas prices and weather demand swings, the supply portfolio for each area is made up of monthly, daily and term purchases. The program administrators are in the market daily and purchase decisions are based upon current usage, prices, weather forecasts and monthly balancing. This flexibility allows purchases to be made based upon the best economics for the group at the time.

Over the last several years, the board approved locking up a portion of the winter supply requirements at a fixed price. This smooths out price swings that can occur during severe winter storm periods.

Another feature of the program is price flexibility for large users. An individual grower may want a different fixed price level, term or volume than the board established. The program allows a large end-user to set its own volume and price levels and have the program administrator procure that supply on their behalf.

Benefits Beyond Direct Savings

There are numerous benefits for growers in the program. First, of course, is savings versus the local utility tariff sales rates. From October 2008 through June 2013, including all program costs, growers in the program experienced a combined savings of more than $3.4 million. This breaks down to be $0.72 per dekatherm (dth) for Colorado participants and $0.24 per dth for California participants.

Program administrators actively monitor the natural gas market on a daily basis and make procurement decisions based on keeping costs at a minimum, not to make extra margin.

“The fact that supply volumes, prices and imbalance trades are independently reviewed gives me confidence that my monthly pricing is correct,” says California Pajarosa’s John Furman.

Depending on the pipeline system, GSF will hold the transportation agreement or act as agent to manage the participants transport agreement and, if necessary, their existing supply contract. More time can be focused on the greenhouse business, eliminating the need for committing resources for market research or even employing a full-time energy manager.

The administrators can also act as agents for participants in other natural gas matters such as filing claims associated with class action lawsuits or finding a gas supplier on other pipeline systems.

Can Group Purchases Work For You?

Local utility rules, regulations and rates vary across the country. However, if growers are currently purchasing transport natural gas supply, it would be worth exploring. Here are a few considerations:

• On the local utility, determine how many growers could be aggregated and what their monthly/annual usage would be. Your local grower association may be able to help start the process with its existing members. There are economies of scale, so more volume is better.

• Check state and utility rules to see if licensing is required.

• Review the natural gas tariff sales rate structure with your local utility and verify that adequate savings can be realized from a third-party supply program.

• Identify transport agreement options. Understand the scheduling and balancing rules and confirm billing cycle(s) and sales tax responsibility.

• For program management, determine what structure and oversight would work best. Do not forget about legal, accounting and banking services.

• With credit, the structure of the program will determine which entity has the credit risk. Identify workable/reasonable options to address credit risk, such as cash deposit, letters of credit, personal guaranty or prepayment.

If such a program is impractical to work in a given area, growers should at least consider going out for bid as a group to see what the market can offer.

Leave a Reply

More From Finance/Operations...
Gaillardia x grandiflora 'Arizona Apricot'

February 25, 2015

National Garden Bureau Designates 2015 As Year Of The Gaillardia

Gaillardia, also known as the blanket flower, is a member of the sunflower family (Asteraceae) and a long-blooming pollinator plant. It is fitting that the National Garden Bureau has specified 2015 as The Year of the Gaillardia.

Read More
IPPS Sharing Plant Production Knowledge Globally Logo

February 25, 2015

International Plant Propagators Western Region Sets Annual Meeting Date

The annual meet for the International Plant Propagators' Society (IPPS) Western Region has been set for this September. It will take place September 23 to 26 in Modesto, Calif., and will include learning sessions, tours to local nurseries, a research poster display and poster presentations, various networking opportunities and an awards banquet to close the event.

Read More
Evolvulus Blue My Mind

February 24, 2015

Blue Ribbon Bloomers For Greenhouse Production

Grow what consumers want! Surveys show that blue is one of the top preferred colors of today’s consumers. Here are twelve top recommended blue-flowering Proven Winners annuals and perennials to suit your spring production cycle.

Read More
Latest Stories
IPPS Sharing Plant Production Knowledge Globally Logo

February 25, 2015

International Plant Propagators Western Region Sets Ann…

The annual meet for the International Plant Propagators' Society (IPPS) Western Region has been set for this September. It will take place September 23 to 26 in Modesto, Calif., and will include learning sessions, tours to local nurseries, a research poster display and poster presentations, various networking opportunities and an awards banquet to close the event.

Read More
myers industries Lawn and Garden Logo

February 24, 2015

Myers Industries, Inc. Lawn And Garden Business Sold, N…

The management of Myers Lawn and Garden Group, along with Wingate Partners V, L.P. have recently acquired the Myers Industries, Inc. Lawn and Garden business. The new company is named The HC Companies, and will continue as a North American leading provider of horticulture containers supplying the greenhouse, nursery and retail markets.

Read More

February 17, 2015

AmericanHort Announces New Board Members

AmericanHort recently announced the election of new officers and members to the board of directors. Each will assume their positions on the board during Cultivate’15, July 11 to 14 in Columbus, Ohio.

Read More
All American Selections

February 17, 2015

All-America Selections Elects New Officers, Names New J…

While meeting during the Flower and Vegetable Seed Conference in Tampa, Fla., hosted by the American Seed Trade Association, All-America Selections elected new officers for a two-year term. Read on to learn about the new officers, as well as all of the new judges that were added in 2014.

Read More
Greenhouse on your desktop, on your phone, on your tablet

February 11, 2015 Relaunches With Responsive Design …

Greenhouse Grower magazine, the nation’s leader in profits, production and education for greenhouse growers, announces the launch of its completely redesigned website, The new design is the product of direct user feedback and analytics, and includes responsive design for ease of mobile use.

Read More
Andy Higgins

February 3, 2015

MasterTag Names Andy Higgins As Its New President

Former CEO and president of Ecke Ranch, Andy Higgins, joins MasterTag as its new president. He brings more than two decades of industry experience to the position.

Read More
Syngenta Bioline Hires Ronald Valentin For Technical Lead Role

January 28, 2015

Syngenta Bioline Hires Ronald Valentin For Technical Le…

Ronald Valentin has been appointed technical lead for Syngenta Bioline, effective January 2015. He will be responsible for technical support of Bioline biological control agents and will be instrumental in helping growers develop integrated pest management (IPM) solutions.

Read More

January 27, 2015

Give Equal Time To The Number Crunchers

Before investing in a new business opportunity, check in with the financial gurus of your organization to make certain you have the cash flow to back up your efforts.

Read More
Plant Introductions, Inc. partners Mark Griffith, Dr. Michael Dirr and Jeff Beasley and Bailey Nurseries President Terri McEnaney.

January 20, 2015

Bailey Nurseries’ Purchase Of Plant Introductions Inc. …

When Bailey Nurseries purchased its long-time breeding partner, Plant Introductions, Inc. (PII), in early January 2015, it freed the PII team to concentrate on what they do best: develop new plants. Bailey Nurseries will take on the business management side of the partnership, but otherwise the relationship it has enjoyed with PII for years will be largely unchanged.

Read More
Plant Introductions, Inc. partners Mark Griffith, Dr. Michael Dirr and Jeff Beasley and Bailey Nurseries President Terri McEnaney.

January 13, 2015

Bailey Nurseries Acquires Plant Introductions

Bailey Nurseries has acquired Plant Introductions, Inc. (PII), effective January 1, 2015. PII has developed numerous innovative new varieties that have been marketed worldwide, many introduced by Bailey Nurseries.

Read More

January 7, 2015

How Inflation Affects Your Business And Why You Can’t I…

Awareness of the true increase in costs after inflation is a necessary part of good financial management for greenhouse operations.

Read More

December 4, 2014

New Developments In Shipping/Logistics Software

Improved shipping and logistics software from Picas Software and MapMechanics makes it easier for growers to plan loads efficiently and automate day-to-day distribution planning.

Read More
Fritz Dramm

December 2, 2014

Dramm Corporation Welcomes Back Fritz Dramm

Dramm Corp. recently welcomed Fritz Dramm as the new fertilizer production and compliance manager. Dramm previously worked at the company through high school and college, and is back after 20-plus years.

Read More
Sarah Harwood

November 24, 2014

Take Control Of Your Operation’s Succession Planning Pr…

Proper business and estate planning with your intentions clearly expressed can ensure your goals for the future of your business are fulfilled.

Read More

November 24, 2014

Succession Planning For Growers

Succession planning is a sensitive subject, but one that needs to be addressed when deciding on your operation's legacy. Greenhouse Grower caught up with two growers who shared their process and provided tips for a smooth transition.

Read More

November 24, 2014

BrightFarms Pioneers Hydroponic Greenhouses For Urban A…

BrightFarms brings fresh, local produce to underserved areas with hydroponic greenhouses located on neglected urban spaces.

Read More

November 10, 2014

NGB, AFE To Join In #GivingTuesday On December 2

The American Floral Endowment will participate in #GivingTuesday on December 2, a national movement to encourage charitable giving.

Read More

November 8, 2014

Amid Drought, Californians Talk Water

As extreme drought conditions continue, the state looks at how it manages its resources, while growers try to conserve and meet changing consumer needs.

Read More