Track C – 2:00 – 3:15 PM Thursday, June 19, 2014 2014 NEUAC Kansas City, MO Presenter: Akm Rahman Massachusetts Department of Housing & Community Development www.mass.gov/dhcd akm.rahman@state.ma.us

Unique Challenges of Deliverable Fuels

“Many parts of the country serve households that use propane or fuel oil for home heating. About 6.5% of U.S. households heat their home with heating oil.”

“This workshop will address some of the unique challenges associated with these fuel sources and how stakeholders working together can collaborate to address these challenges.” - 2014 NEUAC, session description.

Approximately 80% of those households are in the Northeast region of the country.

Problem & Goal Statements

Understand regional effects of Home Heating Oil (HHO).

Discuss Health and Safety issues.

Discus Supply and Demand - price volatility.

Know more about regulatory barriers or lack there of.

Demonstrate the role of LIHEAP in reducing Energy Burden.

Explain program management challenges and offer solutions.

Suggest policy/operational changes.

The Objectives are to:

• About 6.5% of U.S. households heat their home with oil.

• 80% of those households are located in the Northeast region (Vermont, Maine, New Hampshire, Massachusetts, Rhode Island, Connecticut, New York, New Jersey and Pennsylvania).

• Fuel oil consumption ranges between 20% and 70% in the Northeast.

• Regional cold temperature can pose many challenges.

• Supply and Demand fundamentals often don’t work.

• Northeast Oil customers have a very high residential energy burden.

Regional Effects of Home Heating Oil

47.40%

70.50%

32.80%

49.90%

12.50%

28.80%

20.20%

37.40%

48.30%

6.50%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Consumption of Fuel Oil

Consumption of Fuel Oil for Home Heating –

Percent of Total

CT ME MA NH NJ NY PA RI VT U.S

The Northeast Region and Consumption

Source: Census – EIA Comparative Notes: 25 European Union countries combined use heating oil to meet 20% of their heating needs.

$2.741 $2.937 $2.995

$3.880 $3.877 $4.123

$4.008 $4.029 $3.837

$4.123

$0.000

$0.500

$1.000

$1.500

$2.000

$2.500

$3.000

$3.500

$4.000

$4.500

$5.000

Price per gallon

Price per gallon

November/March Intervals – November 2009 through March 2014

Residential Heating Oil Prices (November 2009 – March 2014)

Source: EIA (New Aggregation Methodology)

-42%

266%

400%

-100% 0% 100% 200% 300% 400% 500%

Demand for Heating Oil (% Changed)

Residential Prices Per Gallon (% Changed)

Crude Oil Acquision Cost - $ Per Barrel (%

Changed)

Non-functioning Demand & Supply Northeast, 2000 – 2013

Analysis based on Congressional Research Service (CRS) Report

• The correlation between older housing stock and heating oil use.

• Elderly and vulnerable population’s reliance on heating oil.

• Heating emergencies –high likelihood of imminent or total loss of heat during winter months.

• Unaffordable home energy > severe health conditions.*

• Unsafe practices – Stay Warm, Be Safe.

*”Unhealthy Consequences: Energy Costs and Child Health”, Child Health Impact Working Group, April 2007, Boston, MA

“Heat or Eat: The Low Income Home Energy Assistance Program and Nutritional and Health Risks Among Children Less Than 3 Years of Age”, Pediatrics, April 2007H. Casey, Maureen M. Black and Carol Berkowitz, Wilson, Suzette Levenson, Alan F. Meyers, Timothy Heeren, Diana B. Cutts, Patrick, Deborah A. Frank, Nicole B. Neault, Anne Skalicky, John T. Cook, Jacqueline D.

What are the Health and Safety issues involved?

• Home Heating Oil is considered a Hazardous Material.

• Distribution is highly regulated.

• Lacks price controls and consumer protection.

• Subject to Weight and Measures and other state requirements.

• Why heating oil companies are called “Unregulated” vendors?

Regulatory Barriers or Lack There of…

• Vendor Authentication Process.

• Vendor Contracting Provisions – non-discrimination, proper credit, current usage, non-disclosure, accurate billing, delivery slips or computer printouts, reporting of cost, consumption, and performance measures (selected vendors).

• Price Controls – MOR or Retail, whichever is lower (allows suspension of this provision).

• Vendor Management – vendor level reporting to state, payment reviews, and post audit.

LIHEAP Program Management Process

Vendor Authentication and Payment Process

Vendor Agreement templates &

authentication standards are released

Comments are received through the public

hearing process

Clarifications are given during the Annual

Training Conference

Vendors are activated in the LIHEAP software

Signed Agreements are received, authenticated, and executed by LAAs

Agreements are released to vendors

Client eligibility information is shared with active vendors

Deliveries are ordered and billing files are

shared

Oil tickets/payment files are received and

payments are made

Vendor Monitoring & Payment Controls, Akm Rahman, presented, June 2013, San Diego, CA

Vendor Refunds

• Cost of heat vs. Energy Burden reduction.

• Average annual oil heat cost of $2,800 vs. average annual utility heat cost of $1,200 – how can we reduce the energy burden?

• Two-tiered benefit levels (1) deliverable fuel; (2) utilities.

• Additional benefit for High Energy Consumption households.

LIHEAP Program Management Process

• Not enough LIHEAP funds to support price increases.

• Number and mix of Heating Oil vendors.

• Access to credit vis-à-vis 30 days payable period.

• Vendor complaints – pricing, credit vs. cash, reimbursement delays.

• Differences between OPIS reported and actual terminal prices.

• Complaints from clients and Local Administering Agencies.

• Compromise between Vendor Monitoring and Vendor Management process.

• LIHEAP performance measures tracking.

Program Management Challenges

• Heating Oil is not as efficient as natural gas or electricity, but there are new technologies out there.

• Heating Oil burners can contribute up to 15% of SO2 emission in certain areas.

• Low Sulfur (ls) fuel is better than High Sulfur (hs) fuel. Consider bio-fuel mix.

• The oil tank, lines, sleeves can be prone to environmental risks, but many states like MA have strict regulatory guidelines.

• Transportation is regulated therefore > an optimum distribution distance may help reduce cost.

Environmental Consideration

• Continue the National conversation about oil heat reserve, supply, demand, pricing, efficiency, distribution issues, health and safety issues.

• Drive the conversation based on evidences from the Northeast, Midwest and other states.

• Review LIHEAP allocation and its role in reducing energy burden for oil customers.

• Take a regional approach to oil heat issues > consistency in LIHEAP rules.

> multi-state oil wholesale & retail companies.

• LIHEAP Program Management Suggestions:

(1) Benefit Targeting > To reduce Energy Burden.

(2) Discount Pricing > To maximize the value of LIHEAP benefits.

(3) Vendor Management > To maintain Program Integrity.

Suggested Policy & Operational Changes

National Oil Heat Alliance

National Oil Heat Vision?

Regional Solutions – Northeast, Midwest & others

Governors working together - GHG/oil industry

State and Local Level Solutions – LIHEAP, WAP heating programs, and stakeholders partnerships

Solutions (all of the above)?

Resources

http://scholarworks.umass.edu/cgi/viewcontent.cgi?article=1834&context=theses

http://www.hiaguide.org/sites/default/files/ChildHIAofenergycostsandchildhealth.pdf

http://pediatrics.aappublications.org/content/118/5/e1293.full

http://www.eia.gov/petroleum/heatingoilpropane/

http://www.nora-oilheat.org/site20/index.mv?screen=home

http://www.nora-oilheat.org/site20/uploads/AMarin.pdf

http://www.mass.gov/hed/docs/dhcd/cd/liheap/fy2014vendoragreements.pdf

http://www.mass.gov/hed/docs/dhcd/cd/liheap/fy-2012-liheap-annual-report.pdf

For further information, please contact: Akm Rahman Senior Program Coordinator Division of Community Services Massachusetts Department of Housing & Community Development 100 Cambridge Street, Suite 300 Boston, MA 02114 (617) 573 - 1413 Akm.rahman@state.ma.us www.mass.gov/dhcd

Contact Information