Nearly a dozen fuel dealers are dropping out of the state’s newly revised fuel assistance program.
Friday was deadline for fuel dealers to sign up to participate in the Low Income Home Energy Assistance Program (LIHEAP), which provides state and federal fuel assistance for low-income residents. After changes in the program’s policy this year requiring dealers to offer LIHEAP customers a statewide fuel price, 11 dealers withdrew from the program. The following suppliers have dropped out: Bourne’s Energy, Gillespie Fuels, Inc., Gillespie Randolph Coal & Oil. Jack F. Corse Inc., Kevin L. Rogers Inc., Patriot Fuels Inc., Patterson Fuels, Patterson Propane, (Patterson Fuels) Lacross Fuels Inc., Rowley Fuels and Simple Energy.
Richard Moffi, chief of the state’s Fuel Assistance Office within the Department for Children and Families, said this means nearly 1,400 customers receiving fuel assistance will have to find a new dealer. There are more than 100 fuel suppliers participating in the assistance program.
The Fuel Assistance Office will provide customers with a list of alternative nearby fuel dealers who are still participating in the program, Moffi said. Recipients of the fuel assistance will be able to accrue their benefits until they find a new dealer.
Bourne’s Energy, a full-service fuel oil dealer in Lamoille County with 436 clients formerly receiving LIHEAP assistance, was the largest dealer to withdraw from the program.
In an Oct. 21 letter addressed to customers, owner Peter Bourne said the company would either have to raise the price of fuel for customers not receiving assistance or force employees to accept pay reductions after changes in the program were made.
“The State of Vermont has set a price requirement that we cannot possibly work under,” Bourne wrote in a letter addressed to his clients.
On Oct. 17, fuel dealers received a delayed notification of the changes to the program’s pricing system that set a statewide price for heating fuel and a 5-cent increase on per gallon discount rates when selling to customers who receive fuel assistance. Dealers had until Friday to decide whether to participate in the program.
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Bourne said he is not writing off the program for next year. He said he decided to opt out about a week before the deadline because the statewide pricing system would not have covered his operating costs.
“Everybody runs their business differently. Everybody has different costs,” Bourne said Monday afternoon. “When [Fuel Office officials] are looking at one size fits all, it doesn’t.”
As part of last session’s appropriations bill, the program was revised to require that dealers offer either a “margin over rack” or “discount off retail” price on fuel to their customers receiving LIHEAP assistance.
Rack price is a daily price of fuel set by the Oil Price Information Services. The Fuel Assistance Office will use the current day’s rack price plus a margin to establish the next day’s cost per gallon for fuel for all dealers in the state. The margin for this winter is set at 45 cents per gallon. (The margin is the fixed amount over the rack price that dealers can charge to cover their operational expenses and overhead costs.)
However, this “one size fits all” pricing system ignores the operational and overhead costs for the diverse range of fuel dealers in the state, said Matt Cota, executive director of the Vermont Fuel Dealers Association.
“This rack system is unworkable,” Cota said. “Sometimes there is no relationship to the actual cost.”
The wholesale price of fuel varies widely across the state, he said. The cost of fuel depends on the dealers’ business model, they type of fuel they use and their transportation and distribution costs, for example, he said.
Moffi said the Fuel Assistance Office will likely change the program’s pricing guidelines next year.
“We’re not perfect, we’ve got some tasks to do this coming year to improve the program next year,” he said.
One of these changes includes a price-setting option for dealers that accounts for their travel time to the rack terminal and their service area. These factors often determine the transportation and distribution costs for fuel dealers, Moffi said.
Last week, Gov. Peter Shumlin and the state Emergency Board approved an extra $2.1 million in state spending to support the program, bringing the average annual benefit to $797 for 28,600 households.
The federal government’s share for fiscal year 2014 is about $17 million and the state will provide about $8.1 million.
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