Cornering the Island Fuel Market
Pete Pellerin took on fuel delivery for Casco Bay islands, and consumers won.
By Jennifer Van Allen
Photos by Gabe Souza
When Pete Pellerin moved to Chebeague Island in 2009, he expected some basic necessities to cost more. But he wasn’t prepared for the expense of propane to power his stove and heat his home. And even though he was juggling five jobs, he wasn’t sure how he would afford it.
“I was blown away that someone could charge $175 to fill a 100-pound tank,” he said. “And I couldn’t imagine how everyone else on the island was taking it on the chin.”
Pellerin’s quest for a more-affordable alternative led to the launch of Maine Island Energy, which now delivers propane to approximately 2,200 residents on the Casco Bay islands of Chebeague, Peaks, Long, Cliff, Bustins, Great Diamond, and Little Diamond.
Pellerin is betting that by serving multiple islands, he can achieve the economies of scale necessary to offer lower prices and more-convenient service than residents have historically been able to get. Already, he has cut the cost of refilling a 100-pound tank from $175 to $135.
What’s more, he has been able to leverage the logistics expertise he developed during a 10-year-career at UPS to get the fuel delivered faster, and reduce his own cost of doing business.
Pellerin stresses that he wants to fill islanders’ unmet needs—he does not want to step on the toes of those who are already in the market.
“I want to honor what people have been doing well for years,” he said. “And I want to work toward a good relationship that will help all islanders.”
Island Markup
Though propane prices in Maine were approaching five-year lows in late 2015, for islanders, fuel has long been more expensive, largely because of the cost and logistical hassle providers must shoulder, arranging barges and working around ferry schedules.
“Getting anything out there is going to be more of a challenge,” said Jamie Py, president of the Maine Energy Marketers Association.
As a result, “Often, only one company ends up serving a community, and the lack of competition contributes to higher costs,” said Suzanne MacDonald, community energy director for the Island Institute (publisher of Island Journal).
Pete Pellerin at his home on Chebeague Island.
Given the relatively small and static size of island populations, suppliers have struggled to spread rising expenses over a limited base of revenues that have little prospect for growth.
“People have been doing it for years, one island at a time, and we all have the same problem,” said Coley Mulkern, co-owner of Peaks Island–based Lionel Plante Associates. “ divide these costs up by a million customers. We divide it over 350. The volume never gets above a certain amount. And you can’t just keep charging customers more.”
The Island Institute has deployed a raft of initiatives to make energy more affordable (see sidebar below). But in the meantime, Pellerin’s plan to aggregate demand has offered relief to many islanders.
“I’m thrilled to see what Pete is doing,” said MacDonald. “He has the ability to build a market that’s big enough to get economy of scale, yet still be community-oriented.”
Island Hospitality
That observation bears out during a visit with Pellerin. He seems to embody lean efficiency, his moves crisp and precise. He doesn’t walk. He darts. He speaks with intention and eye contact. It’s as if the expertise he developed in efficient logistics during his UPS career has saturated his mannerisms, and seeped into his sinewy frame.
In an instant, he can tick off the exact number of footsteps required to refill a propane tank, and the number of minutes to allot for each delivery so he can be off the island before the tide recedes.
And yet he is as warm as he is deliberate.
Whether helping an elderly customer fix a pilot light, assuring another customer about a stove delivery, or orchestrating subcontractors, it’s clear the calm confidence he brings to the work is as critical as the fuel he delivers.
Though relatively new to Chebeague, Pellerin exudes a fierce familial devotion to the island he adopted, and the community that has embraced him.
On a sunny day last September, as I tagged along on service calls, he proudly showed off the island sites where he has established roots—the point at Bennett’s Cove where he and his wife exchanged their wedding vows, the home where his children were born, and the bulk propane dispensary he has established in the front yard of his current house, with capacity for 2,200 gallons of propane.
Priming the Pump
The Island Institute has launched several initiatives to help reduce energy use and increase energy efficiency. In 2014, it helped to organize Community Energy Action Teams on seven islands to tackle energy issues and share solutions.
The Institute also coordinates “weatherization weeks.” To date, 375 homes—15 percent of the year-round housing stock on islands—have been assessed for heat retention and given air-sealing fixes, which deliver an average savings of $300 per household per year.
In May 2015 on Matinicus and Monhegan, Island Fellow Ben Algeo led a campaign
to outfit homes and businesses with LED lightbulbs, which use 75 percent less electricity than incandescent bulbs. The cost to residents was just $1 per bulb, thanks to rebates from Efficiency Maine, plus logistics, and a bulk discount the Institute was able to arrange with Newport-based Gilman Electric Supply.
Last November, 140 island residents, politicians, and energy-industry leaders gathered for the Island Institute’s sixth annual Island Energy Conference in South Portland to exchange ideas, explore challenges and regulatory issues, and discuss the feasibility of alternative energy sources like solar power.
Since moving to Chebeague, Pellerin says, he’s been overwhelmed by island hospitality, which reminds him of the central Maine community where he grew up. “I felt accepted by the community immediately,” he said.
While renovating his house with his wife, Becky, 17 neighbors showed up unannounced one day to lend a hand.
“I was just stunned,” Pellerin said. “It was their way of saying, ‘Welcome to the island. If we can help each other, we do.’ ”
And Pellerin, 47, has embraced the island. He expresses pride that his two children were born on Chebeague, and takes time to serve as a selectman and on the boards of the recreation center and Casco Bay Ferry Lines.
“I want people to be able to live on an island, and not have to struggle to survive,” he said. “And I want my children to have the same opportunities I’ve had to live and thrive here.”
LAUNCHING THE BUSINESS
Pellerin said his desire to make island living more affordable is largely what drove him to get into this business in 2009.
While working as a stern man, caretaker, and maintenance man, he became trained and licensed to install propane-powered appliances like water heaters and wall-heating units.
When Thibeault Energy shut down in 2011 and left some Chebeaguers without a propane supplier, he negotiated with Bath-based M. W. Sewall to deliver a propane truck on a barge. He bought the contents of the truck, then delivered it to 25 residents.
But it quickly became clear there might not be enough customers on Chebeague to sustain a business. And juggling deliveries with his other jobs was tough.
“You have to put a lot of oars in the water to stay afloat on an island,” he said. “If I continued like that, I was going to break my arms.”
Through ISLE, the Island Sustainability through Leadership and Entrepreneurship program, which the Island Institute offers along with the group Leadership for Local Change, Pellerin met residents from other islands who also were struggling to get, and afford, propane. He realized a multi-island operation would be more viable.
“There’s been an imaginary border between the islands for generations,” said Pellerin. “I had an opportunity, as a businessperson and community member, to tie the islands together.”
Pellerin’s expansion plan was welcome news for fuel suppliers who wanted to get out of the business.
Brad Brown had delivered fuel to 300 residents on Long Island since 1985. But in 2012, he became ill and was unable to continue. Brown’s sister Towanda tried managing the business on a temporary basis, but she needed someone who could permanently manage the accounts, field service calls that came in at all times of the day, and handle the physical demands of the job, which often required hauling heavy tanks over rough terrain.
“I was pulling my hair out,” she said. “It’s a really tough business. And I could barely move those tanks.”
She approached Pellerin, and was bowled over by the time he spent with customers to ensure a smooth transition. “He has been so good to so many people,” she said. “He works very hard, and has never let a customer down.”
Pellerin also acquired the oil and gas retail delivery operation from Lionel Plante Associates.
“It was time to start paring down the size of our company, and focus on excavation and barging,” said Mulkern. “So when Pete said that oil and propane was the only business he wanted to be in, it was a great match. The more customers Pete can have, the more he can spread out all his costs.”
To be sure, starting up has been a difficult and costly process. “There’s a reason why not everyone is doing this,” Pellerin said.
He has tapped his savings, loans from investors, and business revenues to finance necessities like insurance, equipment, trucks, and transportation, plus the cost of hiring five employees and five subcontractors, and installing three bulk propane tanks on his property.
But to many islanders, Pellerin has already been a great asset. Even beyond cost savings, his customers rave about the peace of mind he has provided by advising them on efficiency and safety issues, helping them to install larger tanks, and using online billing.
“Pete makes life easy on us, and the fact that he lives on the island is terrific,” said Chebeague resident Jay Corson. “His prices are quite reasonable. And it’s nice to see a youngish guy who is working very hard to provide this
service.”
