HEATING MONEY

Just a year after the state first began getting a discount for the millions of gallons of heating oil it obtains for the state’s low-income residents, the Maine State Housing Authority and the Maine Oil Dealer’s Association again disagree on what that discount should be. If the rancor over discounts continues, a reasonable alternative would be for the state to solicit bids from companies to deliver oil to low-income residents on a regional basis.

In 2006, the housing authority developed a new pricing system for the Low Income Home Energy Assistance Program, or LIHEAP, so it could buy more oil with the money it received from Congress. In Maine, more than 50,000 people receive LIHEAP benefits, representing about 3 percent of the state’s heating oil market.

Under one option, dealers, which voluntarily participate in LIHEAP, could charge the rack price, which is basically the retail price, plus a margin determined by an outside consultant. The margin takes into account overhead costs and profit. Massachusetts, Connecticut and New York use this system.

Competitive Energy Services, the consultant hired by the housing authority, determined the margin should range from 28 cents per gallon in the Bangor and Portland areas to 37 cents in portions of Aroostook and Piscataquis counties.

According to the housing authority, LIHEAP customers who got oil from companies that chose this option saved $170 a year.

More than 90 percent of companies chose the discount option whereby dealers had to discount the price of oil to LIHEAP customers by 3 cents for all their oil or 6 cents for just the oil purchased with LIHEAP funds. These customers saved only $30 per year, according to the housing authority review.

To boost savings, which means more oil can be purchased for LIHEAP recipients, the housing authority sought to increase the discounts to 14 cents and 17 cents. After oil dealers balked, Housing Authority Director Dale McCormick brokered a compromise with large dealers. The discount is now 7 cents for LIHEAP purchases. Dealers can still use the margin over rack option.

Jamie Py, president of the Maine Oil Dealer’s Association, said the higher discount will cost oil companies millions of dollars and cause many to withdraw from the program. Although companies save a little money by getting paid up front, Mr. Py said the paperwork and small deliveries that are part of the LIHEAP program make it costly for companies to participate.

In July, the authority sent a survey to oil dealers and 80 percent said they would continue in the program with the new discount. Dealers have until Sept. 17 to sign up to participate in LIHEAP. Last week, Webber Energy Fuels of Bangor, said it would no longer participate.

If too few companies sign up, a new approach is needed. Soliciting bids is a reasonable alternative.