Connecticut attorney general Richard Blumenthal says the state picked a claims administrator to pay back defrauded heating oil consumers. (image: politico.com)

It’s been nearly two years since F&S Oil, a heating oil company in Waterbury, CT, closed without warning and left 2,500 customers who had prepaid for their heating oil empty-handed. On Wednesday Waterbury’s Republican-American reported that the state of Connecticut has made further progress in securing restitution for those customers.

According to Connecticut’s attorney general, Richard Blumenthal, the state has selected a professional claims administrator to manage the process of reviewing claims and issuing payment to affected customers. The move came after a judge for the Hartford Superior Court approved a settlement with F&S Oil, proposed by Blumenthal in December, that allocated $1 million dollars for distribution to F&S Oil’s pre-buy customers.

Customers with pre-buy contracts lost much more than $1 million—the total value of the unfilled contracts was closer to $3.4 million—so any restitution will only be partial. A court-appointed receiver raised a total of $2.5 million by selling off F&S Oil’s assets, but because F&S Oil owed substantial sums to suppliers, vendors, and its employees, only a portion of the money raised could be issued to heating oil customers.

So when will customers receive their restitution checks? Blumenthal couldn’t give a precise date, but did say, “They will be going out very shortly. Part of the final negotiations with the administrator is to push for as early a distribution as possible.”

The amount of each check will depend on the number of claims and the amount of each claim. Roughly 2,500 customers have filed claims with the attorney general’s office, but it’s not too late for customers shortchanged by F&S Oil to file a claim and receive their share of the settlement. To do so, consumers need only contact the attorney general’s office.

For heating oil consumers left without oil they had already paid for—as has happened to customers in New Hampshire, New Jersey, and Pennsylvania this heating season—the prospect of receiving a 30 percent repayment more than two years after the fact probably seems both too little and too late. Like paying for anything in advance, pre-buy heating oil contracts carry a risk. Customers should do their homework on any heating oil company before signing a contract, including checking with the Better Business Bureau and their local department of consumer affairs. If customers do decide to pre-pay for heating oil, they should pay with a credit card so they can stop payment or request a charge back if their heating oil company does not fulfill the contract.

Firefighters were called to put out the fire, but home heating oil—ironically, dumped to add to the fire—had already worked to contain the blaze. (image: blog.mlive.com)

Authorities allege that a Mount Vernon man tried to burn down his house, setting alight what Sgt. Ken Grimes of the State Fire Marshal’s Office called “some ordinary combustibles,” and then cutting the filter from the tank in his basement to empty out the heating oil and transform the small blaze into a conflagration. But as the Kennebec Journal reported on Saturday, his hopes were dashed when the heating oil, rather than igniting, actually helped to put out the flames.

Heywood Hinds, now charged with arson and criminal threatening, allegedly set the fire after police came to his home in response to a report of domestic violence. However, Hinds’s plan (such as it was) failed because he didn’t fully understand how his home heating system worked.

Though heating oil is burned in order to heat your home, it is not easily combustible in its liquid state. If a lit match were dropped into heating oil, it would simply go out. To get heating oil to ignite, home heating systems must first vaporize heating oil in a combustion chamber. Only when the heating oil vapor is mixed with air in the right proportions does it burn efficiently, or at all. Hinds’s heating system, like all oil heating systems, was much safer than he realized.

Shortly after the fire was started, Hinds came out of the house and surrendered to police. He was treated for smoke inhalation. The house itself sustained only minor damage and, according to Sgt. Grimes, is “certainly repairable.”

Thermal image of a (heated) house on a cold night. A federal program's temporary termination would cause the number of homes without heat to grow considerably. (image: epogee.co.uk)

As reported Monday by the New York Times, applications for heating assistance in the United States have reached record levels for the third consecutive year. Soaring demand for federal heating assistance has forced states to scrape the bottom of the $5.1 billion federal heating assistance program known as LIHEAP (Low-Income Home Energy Assistance Program). That sum, allocated by Congress to be spread out among every state, has not budged from its 2008 levels despite the past year’s increase of over one million applicants. The pressure has led state officials to warn Congress that they may have to discontinue further heating grants if no more money is awarded to the program.

Utility companies, barred in many states from shutting down service during the winter, wait until the spring to sever connections to households with unpaid bills. Until receiving the backlog of payments, they will then wait indefinitely before again providing heat, even as winter returns. Despite the staggered sequence of this scenario, when coupled with the millions of jobless who will see their unemployment checks expire this April, it means that untold numbers will be faced with no gas and electricity during the spring and coming winter.

The World Socialist Web Site (WSWS), unsurprisingly, puts the matter in starker terms than the New York Times, calling the need for heating assistance a “social crisis mounting.” Though it strikes a disarming tone for readers unused to getting news from sites devoted to social revolution, that strong wording attaches a proper weight to the underreported impact of energy prices on struggling Americans.

Without heat, people die. Iowa LIHEAP director Jerry McKim stated: “This is more than an energy issue and needs to be acknowledged for what it is: a serious public health matter.”

He explained this evaluation by pointing to heat deprivation’s blow to other necessities.

In an effort to better afford their utility bills, many elderly households cut back on prescribed medicine and/or set their thermostats too low risking their already insecure health and families with young children sacrifice their children’s nutritional needs…Disconnected households use unsafe methods of heating that increase the risk of carbon monoxide poisoning, and those who live by candlelight increase the likelihood of a house fire tragedy.

The WSWS makes the point that even a temporary (one to two months, as reported by the Times article) cut-off in assistance would lead to thousands of people enduring this winter and the next without heat—as mentioned above, utility companies will not restart services until overdue bills have been paid.

The unusual breadth and duration of the present recession will likely push these conditions further into the mainstream. On the one hand, heating oil consumers are at a disadvantage because they rely on a fuel that is provided by private companies, not utilities. No law protects heating oil dealers from cutting off service due to unpaid bills, so people faced with revoked or denied heating oil assistance will not be buffered from harsher consequences.

On the other hand, heating oil consumers in dire straits are at an advantage because their heating fuel service has no connection to their financial standing with utilities. Therefore, heating oil users are not required to pay electricity and telephone bills in order to have heat. It is also worth pointing out that, because heating oil dealers are private companies, they benefit consumers because they compete with one another for the lowest price, unlike utilities which usually enjoy a monopoly.

The flip side of this issue is the difficulties experienced by heating oil dealers. After speaking to 150 heating oil dealers in ten different states, we at HeatingOil.com have learned that in these economic times it is not unusual for heating oil customers to default on their payments by thousands of dollars per month. The burden builds every month as new customers default and previous balances go unpaid. Contrary to the popular belief that the oil industry equals “Big Oil,” heating oil dealers are small businesses that deal with their problems in the same manner as would a local grocery if people stopped buying their goods. When they can’t pay for operating costs, they shut down. Representatives of HeatingOil.com have seen a trend of heating oil dealers raising their credit standards for customers by 8-10 percent during the recession.

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The Low Income Home Energy Assistance Program, or Liheap, was installed in 1982 out of the recognition that residential fuel needs comprise a social welfare issue on par with food and medicine. Its awards an average of $500 per season to its recipients, who are typically families below the federal poverty line, the disabled, and the elderly, but also include people at 150% the federal poverty line. Some states, such as Wisconsin, have committed supplemental funding to their program, permitting aid for applicants with incomes up to a percentage of the state’s median. According to the Times, heating aid applications were 7.7 million last year, 5.7 million in 2008, and are projected to be 8.8 million by the end of this year.

Representative Markey receives his award from NEADA Executive Director Mark Wolfe. (image: markey.house.gov)

On Tuesday, Congressman Ed Markey (D-MA) received an award for his continued support of government heating assistance through the Low-Income Home Energy Assistance Program (LIHEAP), the Belmont Citizen-Herald reported. Markey’s award came from the National Energy Assistance Directors’ Association (NEADA), a private organization that bills itself as “the primary educational and policy organization for the state and tribal directors of the Low-Income Home Energy Assistance Program (LIHEAP).”

As the representative for a heating oil-dependent and populous cold-weather state, Markey has long been a champion of LIHEAP. Most recently, he sponsored the Energy Assistance for American Families Act, which would increase LIHEAP funding from 2011 to 2014 and expand the program to make more Americans eligible to receive help with their heating costs. The bill has not yet been brought to a vote in either house of Congress. Speaking at an award ceremony in Washington, D.C., Markey stressed the widespread need for heating assistance in the Northeast this season:

New England was the site of the perfect storm off our coast, the winds rising as the barometer dropped and temperatures plunged. This winter, rising heating oil prices, an economic downturn, and plunging temperatures have created an economic perfect storm onshore for millions of New England families.

This year is the third in a row in which requests for LIHEAP assistance set a new all-time high. In addition to introducing the assistance bill, Markey announced a four-part plan to continue expanding LIHEAP: requesting the release of $100 million in remaining emergency funds by President Obama this heating season, pressing Congress to pass a supplemental appropriation to ensure all those who need it get assistance this year, advocating an immediate increase in LIHEAP funding for next winter, and passing the Energy Assistance for American Families Act.

In his remarks, Markey gave special attention to the plight of heating oil users, indicating that he is well acquainted with the unpredictability of heating oil prices and the toll it can take on Americans. Although the troubled economy could prevent the significant increases in LIHEAP funding that Markey is pushing for from passing, his efforts will keep the issue of heating assistance in the minds of his fellow legislators.

Heating oil users who struggle to pay their bills can take comfort in knowing that they have a tireless advocate in Congressman Markey.

Heating oil company S.T.S. Discount Oil in Tamaqua, PA has been shorting customers. (image: maps.google.com)

Like pre-buy customers of Flynn’s Oil in New Hampshire and Able Energy in New Jersey, patrons of S.T.S. Discount Oil Co. in Central Pennsylvania have reportedly not been receiving all of the heating oil they pre-bought. According to Paul Muschick’s Sunday “Watchdog” column in the Lehigh Valley’s Morning Call, several pre-buy customers of S.T.S. have received inadequate deliveries of oil and cannot reach S.T.S. representatives by phone.

The common pattern in the handful of cases described in the Morning Call goes like this: customers pay up front for several hundred gallons (1,000 gallons in one case) of heating oil, receive piecemeal deliveries of 100 gallons or less when their tanks are running low, and are unable to get in touch with anyone at S.T.S. to request a larger delivery. Some of the customers reported owner and operator Scott Steffy making promises of future deliveries that never came. One customer, whose grievance goes back to July of 2008, reported, ‘‘[t]he promises I got from that man [were] unbelievable.”

The situation is familiar: as is the case with other companies who have not honored pre-buy contracts this season, it appears that S.T.S. made some bad financial decisions that resulted in an inability to meet their obligations in pre-buy agreements. Perhaps the most important detail that sets the S.T.S. situation apart from the other two recent instances of heating oil companies bilking pre-buy customers is the owner’s criminal record. Steffy has previously been convicted of writing bad checks and stealing oil from a competitor. More recently, he has been successfully sued by customers and forced to pay them refunds for oil not delivered. Adding to S.T.S.’s dicey reputation, the Pennsylvania Better Business Bureau has given the company a rating of “F’ for lack of information about the business and “Failure to respond to one complaint filed against business.”

For now, S.T.S. is not under investigation by the Pennsylvania Attorney General’s office or any other government organization, which may give the company leeway to continue its evasive practices. Through his lawyer, Steffy said he plans to honor all of his customers’ pre-buy contracts, but added that many of those deliveries will take time. “I can’t guarantee all of them this is all going to happen in a day or week,” said Steffy’s attorney Gary Marchalk. “But [Steffy]’s going to deal with it because he has no choice but to deal with it.” Customers who can’t reach S.T.S. directly can lodge complaints with Marchalk at 570-668-5321. Those who would like to file a complaint with the Pennsylvania Attorney General’s Office can do so by calling 800-441-2555 or visiting attorneygeneral.gov.

The S.T.S. case underscores the crucial importance of consumers vetting heating oil dealers before signing any contracts, especially if they involve pre-payment for oil. In addition to running background checks on heating oil companies and their owners with the BBB or local department of consumer affairs, pre-buy customers should also pay for their oil with a credit card, which allows them to stop payment if the dealer does not keep up his or her end of the contract.

Higher efficiency burners and boilers, like this model that boasts an AFUE rating of 95.5, have contributed to lower heating oil demand in the US. (image: redmonheating.com)

Stepped-up conservation efforts by US heating oil users, supported by recent government initiatives, have curbed heating oil demand in the last year—a trend that will likely continue permanently, Reuters reported on Wednesday.

In the 35 years leading up to 2008, heating oil demand declined steadily as increasing numbers of heating oil users switched to other fuels like natural gas. But the rate of converting away from heating oil slowed in 2008: according to the US Census, 320,000 US households switched to natural gas in 2005, but only 52,000 converted in 2008.

But that slowing in conversion away from heating oil has recently been compensated for by conservation efforts by heating oil users. Since the recession began, millions of Americans have dialed back their thermostats with the goal of lowering their heating bills. It’s difficult to determine how much this financially-driven conservation trend has contributed to lowering demand in recent years, but Shane Sweet of the New England Fuel Institute, for one, believes the trend is here to stay. “There have been a lot of conservation measures that wiped away gallons. That is demand we will never get back,” Sweet told Reuters. Besides individual conservation, demand for heating oil has also been cut back by increasingly efficient burners and boilers, as well as a federal programs to fund home energy audits and weatherization improvements included in President Obama’s Recovery Act.

The effects of falling heating oil demand can be seen in the trajectory of heating oil prices this winter: despite several powerful snowstorms and cold snaps that have hit the heating oil-reliant East Coast this year, prices have remained relatively steady. Decreased demand and consumption allowed stockpiles of heating oil to grow to record levels this fall and winter, which provided a buffer against short-term demand increasing bringing price spikes. To commodities analyst Stephen Schork, this amounts to a paradigm shift in how the heating oil markets move. “Weather and winter type fundamentals are becoming less and less relevant,” he said. If Schork is right, he appears to be ahead of the times. Fellow analysts polled for predictions ahead of weekly inventory reports “overestimated the amount of the expected decline in distillate inventories in 11 out of 18 weeks” so far this season, with their thinking presumably guided (at least in part) by considerations of weather and temperature.

For heating oil consumers, this trend is a boon to price stability. If it continues on its current path of expansion, one-day increases of 8 cents or 15 cents per gallon may soon be a thing of the past. It’s all about basic macroeconomics: the less demand for heating oil, the lower heating oil prices will go. So keep conserving, heating oil users—you’re saving yourself money in more ways than one.

Ties between Venezeulan president Hugo Chavez (left) and Rep. William Delahunt could be at the center of an upcoming congressional campaign. (image:heraldinteractive.com)

Rep. William Delahunt (D-MA) told the Boston Globe that he may retire from his congressional seat, but potential challengers are still preparing to campaign against him, and have raised concerns about Delahunt’s role in programs that distribute free or discounted heating oil to low-income households in Massachusetts.

The controversy arises from Venezuelan president Hugo Chavez’s role in all of this. In 2005, Delahunt negotiated a deal with Citgo, the US distribution arm of Venezuela’s state-run oil company, to supply 30,000 low-income households with deeply discounted heating oil. With those negotiations, Delahunt helped pave the way for a partnership between Citgo and Citizens Energy, a nonprofit company run by Joseph P. Kennedy II that distributes up to 100 gallons of free heating oil to families in Massachusetts and other states.

Chavez has been criticized in the US and around the world for human rights abuses and anti-democratic activities. Citizens Energy’s heating oil program has itself come under fire for doing more to advance Chavez’s political interests than help needy families in the US.

Joseph Malone, a likely Republican challenger, has said that any good done by the heating oil program “is far outweighed by the harm [Chavez] does in the international community.’’ Political consultant Paul Fitzpatrick Jr., who worked on Sen. Scott Brown’s recent campaign, criticized Delahunt for dealing with someone who “hates America.”

Nevertheless, the Citizens Energy program has its supporters, especially among those who have been its beneficiaries. Delahunt was defiant in his support of the free heating oil program, and said no Republican challenger would have to raise the issue, because he would bring up the topic himself.

Clean-up crew at Alum Creek. (image: NBC4 via nbc4i.com)

A Sunday night oil spill in Columbus, Ohio is still under investigation as clean-up crews grapple with a 2.5 mile-long slick floating on the Alum Creek water surface. As reported by the Columbus Dispatch, the oil stretched from Livingston Avenue to the state Rt. 104 overpass.

The leak was discovered around 9 PM as officials responded to reports from Alum Creek Drive and Livingston Avenue of a strong unfamiliar smell. Over 200 gallons of oil had drained into the river from a sewage pipe. The source of the leak is still unknown, but according to 10TV, officials at the scene speculate that it may be coming from a building near Route 104. Reports vary as to whether the substance was heating oil or diesel, two very similar grades of fuel oil.

As reported by Columbus NBC4, the Columbus Division of Fire Battalion Chief David Whiting expects the clean-up effort to be “significant.” A hazardous materials team was called on-site to collect the spill with vacuum trucks and oil-absorbent containment booms. The Columbus Sewerage and Drainage Division is investigating the leak source and the Ohio Environmental Protection Agency is helping with cleaning.

To an observer, the oil types would be virtually indistinguishable if not for the use of dye. Because of the tax-exempt status of heating fuel compared to diesel and other high sulfur-content fuels, the Internal Revenue Service requires that heating oil contain red dye in five-fold concentration. Removing dye is illegal. At this time, it is unclear why the spill was reported as heating oil by the Columbus Dispatch and diesel by 10TV.

Regardless, any kind of oil spill is dangerous because of the volume of toxic chemicals that are directly added to the environment. Even though this spill was small compared to other recent spills nationwide, it is considered major because it affected a main waterway. Alum Creek is a source of drinking water for Westerville, one of Columbus’ largest suburbs.

If the spill does turn out to be heating oil, its relatively small size means it will have a negligible effect on local heating oil supplies and prices.

UPDATE, courtesy of NBC4: The fuel is indeed heating oil, and Capital University near Columbus, OH has claimed responsibility, citing a boiler rupture on its campus.

Heating oil users dialing back their thermostats to save money (setting them to 68˚F instead of 72˚F, for example) have helped bring demand for heating oil to historically low levels this season. (image: treehugger.com)

The US Department of Energy’s Energy Information Administration released data on US petroleum product inventories on Friday that strongly confirmed that the downward trend in US demand for heating oil and other fuel products is continuing, reported Reuters.

Speaking to Reuters, analyst Brad Samples summed up the implications of the EIA’s release: “You couldn’t ask for a more bearish report. It speaks to the
continuing lack of demand in the U.S. market.”

Data on heating oil inventories were particularly striking, as last week’s snowstorm that pummeled the Mid-Atlantic and the accompanying low temperatures that covered most of the Northeast failed to put a major dent in existing heating oil supplies. Total US demand for distillate fuels (primarily heating oil and road diesel) over the last four weeks came to 3.73 million barrels per day, a huge 8 percent decrease from this time last year. Separate from diesel, heating oil stockpiles grew by an astounding 1.5 million barrels in the week ending February 5. This statistic is perhaps the most telling, as heating oil demand tends to remain strong throughout the winter, and major snow storms or cold snaps of the type seen last week usually result in a spike in already-elevated demand.

The cause of depressed heating oil demand, even in the dead of winter, is most likely fallout from the economic recession. Faced with economic hardship, millions of families, businesses, and organizations are conserving heating oil as much as possible to save on their heating bills. Put simply, when millions of thermostats are turned down just a few degrees lower than in previous winters, the result is a multimillion-gallon decline in demand for heating oil.

This weak demand, in combination with other economic trends such as a rising US dollar and tightening of bank lending in China, has helped keep crude and heating oil prices relatively stable in recent months, and the EIA report points to that trend continuing, at least until the US economy shows clearer signs of recovery.

So barring any major geopolitical upheaval between now and May, it is reasonable to expect demand to remain low and prevent any huge spikes in heating oil prices, even during periods of exceptionally cold weather.

A heating oil delivery driver makes a delivery in snowy conditions earlier this year in Farmingham, Massachusetts. (image: boston.com)

Another major storm is headed toward the Mid-Atlantic and Northeast areas, and is forecasted to dump a foot or more of snow on the region between now and Thursday night. Residents from Maryland to Maine are preparing for school closures and transportation problems over the next 48 hours. For heating oil users, making sure they’ll get an oil delivery when they need it should be a top priority. If you’re in need of a heating oil delivery this week, take these steps to make sure your heat stays on while you weather the oncoming storm:

1) Order today. If your heating oil tank is currently 1/3 full or less, you should put in an order right away and aim for delivery today or tonight, before the snow begins to fall. Oil dealers will be extremely busy all week, so they may not be able to deliver before the storm hits, but the sooner you place your order, the closer you’ll be to the top of the delivery list.

2) Clear your fill pipe. Residents up and down the East Coast know that shoveling and salting are all part of dealing with winter storms. As Pennsylvania’s ABC 27 News reminds us, heating oil delivery drivers must be able to find your fill pipe in order to fill your tank. Make sure that your fill pipe is free of snow, clearly visible, and accessible from the street.

3) Keep your chimney clear. Just like a fireplace, your heating oil burner has a chimney (also called a stack or exhaust pipe) to vent exhaust from burning oil. Make sure that your burner’s exhaust line remains clear and does not get obstructed by snow. A blocked exhaust pipe can lead to less efficient performance by your heating system and dangerous exhaust fumes seeping into your home.

Following these simple steps will reduce the danger of non-delivery and system failure and keep you warm during the fast-approaching second “snowpocalypse” of 2010. So best wishes to the shovelers and plowers out there, and keep in mind: spring is only 39 days away!