Stop HB443 - It will change how you can pre-buy fuel
 

The intent of this thread isn't to start a discussion of politics but to make you all aware of bill that may pass that could cause undue costs to be passed on to those of you who heat your homes with fuel oil and propane.

I just received an email about HB433, which was just passed by Legislature. This bill prohibits offering pre-buys to the public before May 1st of any year (was previously Jan1). It was inserted an an amendment to the bill. This does perhaps even the playing field for large companies that are afraid to purchase early by making all their competitors buy at the same time or later.

In the case of municipalities, these costs will impact your town's and school district's budgets! (Remember - they generally have to buy early because of budgeting that has to be approved by the voters.)

Stop HB443


As I understand it, the bill has not been signed by Governor Lynch yet. We still may have a chance to prevent it from becoming law. Please email Governor Lynch's office at http://www4.egov.nh.gov/governor/goveforms/comments.asp to protest this arbitrary restriction that does not benefit members as fuel consumers. Or you may call the Governor at 271-2121 and leave a message.

You may also want to email or call the Sponsors of the bill:
Rep. C. Christensen, Hills 19; c.christensen@leg.state.nh.us <mailto:c.christensen@leg.state.nh.us>
Rep. Hinch, Hills 19; dick.hinch@leg.state.nh.us <mailto:dick.hinch@leg.state.nh.us>
Rep. Tupper, Merr 6; frank.tupper@leg.state.nh.us <mailto:frank.tupper@leg.state.nh.us>
Sen. Letourneau, Dist 19 robert.letourneau@leg.state.nh.us <mailto:robert.letourneau@leg.state.nh.us>
and the Sponsor of the Amendment: Sen. Harold Janeway harold.janeway@leg.state.nh.us <mailto:harold.janeway@leg.state.nh.us>


Again, please... let's not get into bi-partisan finger pointing. My intent of this thread is to make you aware of a bill that might have an impact on you and further restrict how businesses (fuel companies) do business in NH.

Thank you. :)

Hmmm, interesting bill, I would like to understand the rationale behind changing the date from January to May and the requirement that the deal buy 75% of it's commitment. Sounds to me like this will make the contracts more expensive.

dealers
 

Any reputable company already hedges most or nearly most of the commitments. That 75% is so that a company doesn't offer a fixed price, take upfront money and use it for other expenses without solidifying their futures position.

The dealer doesn't hedge and price skyrockets, dealer then cannot afford current market and bankruptcy unsues with the consumer losing the contracted fuel/gallons.

What's the problem?
 

This is fundamentally a consumer protection issue. As Hazmatmedic said already, any reputable firm that offers pre-buy contracts to consumers goes into the oil futures market to buy (read lock in) oil to be delivered at a future date at a contract price in sufficient volume to cover most, if not all the contracted volume. That's what they should do since they can lock in their fuel costs, add their margin and properly price the contract for the consumer. If the fuel distributor sells pre-buy contracts and doesn't cover its future delivery obligation by purchasing futures contracts, then it's no longer just a fuel oil distributor, it's now also in the oil speculation business and using the consumer's money to play the game. If oil prices fall, he stands to make a windfall, but if oil price rise signficantly, the dealer would no longer be able to acquire the fuel he contracted to deliver to consumers without taking huge losses. That's why every once in a while you hear about oil distributors going out of business in the middle of the season, leaving pre-pay customers with neither their money nor the oil they thought they bought.

So please, AW, tell us what the problem is here? How is this going to drive up consumer's costs?

Honestly, you either don't understand the amendment or have been fed some very bad info.

origination of info
 

AW was relaying propaganda from Mr. Barraford, of the Our Town Energy Group.

The dealers can still hedge their positions in January, if they care to and then sell the contracts after May 1st or they can wait to purchase after May 1st and sell at the same time.

And Mink Islanderis certainly correct, many NH residents have lost large sums of money because of dealer speculation.

Ok, I'm almost buying the 75% requirement, although I think if a company is mismanaged enough to screw this up, they will screw it up regulated or not. I don't understand the May 1 date and the rationale for that. Who cares when the contract is implemented?

Mismanagement is hard to mitigate....
 

You are right, it's always possible for any business to implode if mismanaged. Look at the whole Mr. Fireplace fiasco. I don't understand the movement in the date either and couldn't find anything on the 'net that addressed the rationale. Maybe someone else knows.

From "the dog ate my homework" partyline... I had spent some time (not a lot but enough) typing out a very informative response to y'all only to have the forum hiccup when I hit the "submit reply" button. Please forgive me for now submitting the abbreviated version of my post - it's not to be rude - but it is late.

#1 For full disclosure: Yes, I am a member of Our Town Co-Op. No, I was not asked to post this thread or the information I'm offering. Furthermore, I don't wish to talk about any of the political controversy around Dan Barraford, his views or business (simply because that's NOT what this forum is for). My views are my own and this is a subject I have spent a lot of time researching. I did not disclose this information at the start of this thread simply because I did not want to get into any controversy or ruffle feathers.

#2 In my opinion, the problems with this bill are:
(1) legislature is dictating how businesses can do business;
(2) planning for the upcoming heating season (which starts around September) will be a four month window if this bill passes vs. the nine month window we now have when we can buy in January;
(3) town and school districts' budget will have to be based on the higher prices of the market and that will drive up overall budget costs - hence, more tax money will be needed to cover the approved budgets;
(4) oil prices are lowest in the first quarter of the year (see graph, below) but if this bill passes we will not be able to pre-buy at that price;
(5) oil companies will have to base supply on demand that is identified in May of the year and will have less time to project supply needs.

Here's the graph I mentioned in item (4). This illustrates prices of crude oil (red line) and retail prices (blue line) for four years.

CLICK HERE FOR GRAPH

Note: the prices are lowest in the first quarter.

If you want to check this tool out more and go further back to look at trends you can find it HERE.

MinkIslander: I agree with your statements and do understand the purchase/sales/distributing portion of the industry quite well. I also know from experience that contracts can be re-negotiated if there's significant drops in market prices. I saw several cases of this over the winter when prices went down. You may note on the graph I posted that prices will be up in May (vs. where they're at in January) because of the past trends.

The price increases will be due to timing - and isn't that so true in the oil market? Timing is everything - so what's the logic in our legislature trying to limit the buying time? Sorry but did a lot oil companies tank because of pre-buys or because of other reasons? (My research shows it's more due to consumers' with bad debt than anything else. I followed this closely over the winter/spring this year.)

What thought was given to those on fixed incomes or who receive fuel assistance, as the window for receiving that assistance is shortened by four months, if the bill passes?

Personally speaking, I'm less than happy with the recent tax increases that have been imposed. It seemed like there was very little notice about those increases and little time to respond - before we knew it, the increases were a reality. Well... what about this fuel bill issue? Here's another proposed change that doesn't have many positive things about it but trends show could cause the consumer to spend more than they have to AND further tells businesses how they need to operate. All this during one of the toughest economic times we've ever seen in this state. How is this good?

Apples and Bananas
 

You cannot look at a price curve for gasoline and relate that to heating oil.

As a general premise, gasoline is typically cheaper in the winter than in the summer -- it's demand driven and people simply drive less in the winter so prices tend to be lower. Heating oil is far more seasonal than gasoline and contrary to your graphs it is typically cheaper to buy forward in the summer for the coming winter. Go find the historical NYMEX forward curve for Heating Oil delivered to NY harbor. That's the better proxy for Heating Oil prices in New England.

But we're talking tendencies, not absolutes and as last winter showed, in volatile commodity markets, sometimes typical trends don't happen. Heating oil (along with all refined products) were very expensive in the summer of 2008 and then prices collapsed in Dec/January. That's why folks that bought contracts in summer 2008 felt screwed when the spot market for heating oil suddenly was much cheaper than the prices they had locked in six months earlier.

I agree with you that the restrictions around when dealers can market pre-pay contracts is purely a public policy issue. My best guess (and it is a guess) is that the intent is to not have consumers spooked by high prices in the winter, lock in over priced contracts for the following season in January when in any normal season, prices will be lower in the summer. Government meddling? Sounds like it. But I don't think you're right that this shortened window to market contracts to consumers will make them more expensive.

government interference
 

I agree that all levels of interference by our governments are increasing at a phenomenal rate. They are passing legislature before anyone (even the members of the houses) gets to read the bill.

The problem I saw was that AW copied and pasted Barraford's email right to the forum without doing any research. Again, I know our legislators are out of control, but I haven't found the reason for the date either. It could be there to protect consumers AW. Some companies may offer the pre-buy in January for cash flow for other businesses and bridge the gap. I know this has been done for tax reasons in certain cases.

The graph doesn't have any correlation to heating oil and propane. Something else that hasn't been mention is that the spot price is not the same thing as the future price. Crude oil was @ $30 a barrel in January but the future price in January 2010 was @ $55. It has only been since Katrina (2005) that prices have been lower earlier in the year, because speculators and NORA would say that this year will be a "bad hurricane season" and would drive up the price through the summer. July and August were always the cheapest time to buy oil futures until Katrina.

The bill, it seems, limits when companies can offer the programs. It doesn't limit when they buy them. Thus, a company could choose to buy in January, if they felt the time was right.

Maybe a call to our Reps for clarification is in order. The date change alludes me as well, but lets not jump to conclusions, is all I say.

It's a gas-related website but the graph shows crude oil prices vs. heating oil prices. I had trouble posting the link but that site is a useful tool for looking at the history of costs. You can go back as far as 6 years with it. I wish I had been able to post it correctly but internet has been really spotty here these past two days. (Metrocast and Onion Tel are doing work.)

====
Hazmat - When you say you saw I posted from Barraford's email without any research, that was your assumption. Please don't take that comment as a defensive one - it's not - but this is a market I'm more than familiar with.

I was glad that Barraford sent the email to alert us to the problem - I only wish I'd had time to be more pro-active about the recent tax/fee increases imposed on us - but that's fodder for another forum. I don't mean this in an unkind way to Mr. Barraford but I don't necessarily subscribe to his politics or points of view. (I don't always go with the Co-Op's plans for fuel because I have saved money by shopping the market on my own at times. In other words, my fuel buck doesn't stop with the Co-Op.)

My views are my own and I would never post anything like this if I didn't know the subject very well. Funny you mentioned the hurricane season and the impact that it has on prices - I had also written about that in the post that disappeared. Ditto for any conflicts in the middle East.

Much more I'd like to add to this - but time is short and the day is nice. I have little ones to shoo outside. :)

I'm impressed! It does seem you have more knowledge than I first thought. You have my sincere apologies and I won't doubt you again.
But I'm always here if you need to bounce something off someone.
Petroleum industry or emergency care that is.
:D

Thanks! I used to work with a sales/marketing and engineering division of GE Power Systems. If there was ever a job I could choose to walk back into, that would be it. :)

I heard on the news tonight that Gov. Benson vetoed this bill because of the May 1st date, he claimed that this did not allow enough time for consumers to shop around for the best contract price. For once I agree with the guy.

Thanks for the post, ITD - good news!

Here's the press release about the veto:


By the authority vested in me, pursuant to part II, article 44 of the New Hampshire Constitution, on July 16, 2009, I vetoed HB 443, an act relative to underground storage facility operator training and relative to requirements for guaranteed price plans and prepaid contracts for petroleum.

I appreciate the general court’s well-intentioned effort to strengthen protections for consumers of heating oil in this bill. I am concerned, however, that this bill may contain unintended consequences for consumers that will impact their ability to negotiate the best price possible for heating oil. Under current law, a prepaid or capped-price contract for heating oil cannot exceed a term of one heating oil season, and these contracts can be offered no earlier than January of the year in which the heating oil season begins. This bill would allow prepaid or capped-price contracts to be offered no earlier than May of the year in which the heating oil season begins. The proposed legislation would give consumers four months less time each year in which to enter into prepaid or capped-price contracts.

This proposed legislation was introduced in an effort to protect consumers who, on some occasions in the past, have paid monies in advance for home heating oil, and then did not receive the heating oil because the oil dealer went out of business before the next heating oil season. Nevertheless, I am not convinced that this bill is the proper solution to address the problem. I also question whether we should limit the pre-buy period between January and May. Many residential and business consumers of heating oil have indicated that, by shortening the window to offer these contracts, the proposed legislation will materially impact their ability to obtain the best price possible for heating oil. I believe this issue warrants further consideration by the general court. For this reason, I am vetoing HB 443.

I fully support establishing requirements for training operators of underground petroleum storage facilities as set forth in the first two sections of this bill.

SOURCE: http://www.governor.nh.gov/news/2009/071709_hb443.html

Thankyou very much for the veto, Governor Benson......aka......Gov Hummer.....it's great that NH has a conservative Republican governor who isn't timid applying that veto stamp.......thud!

"Let's dooooo the time warp... yahhhhhhhhhhh"
 

Not sure what time warp you're living in, but John H. Lynch (D) is our 90th governor and is serving his third term.

(pssst! The "D" by his name stands for "Democrat".)