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Burning money

State gives extra millions to oil dealers, leaving the poor and elderly out in the cold
By LANCE TAPLEY  |  February 16, 2006

You’d think, with nearly $30 million to spend on heating oil for poor people this winter, the Maine State Housing Authority would have bargained a pretty good price with the oil dealers, right?

Wrong. For the 30-year life of the Low Income Home Energy Assistance Program (LIHEAP), its overseers in Maine have refused to ask for competitive bids for the oil, or even to require a discount.

The housing authority, which has had LIHEAP under its wing since the early 1990s, has paid what the dealers ask — often, higher prices than homeowners’ payment-plan discounts. These prices hit the elderly especially hard because they make up about half of LIHEAP’s 48,000 low-income recipients in Maine. The higher the price for the oil, the less available to be divided up.

Last year, however, seeing fuel oil prices soar and wanting to get as much oil for her bucks as possible, the new housing director, former state treasurer Dale McCormick, proposed rules requiring the state’s several hundred oil dealers to give LIHEAP recipients the same discounts they give other residential customers. In exchange, the authority would pay them half the oil money months in advance.

Although state government normally asks for bids or negotiates discounts for big purchases, McCormick ran into a political buzz saw. At a hearing last summer, oil dealers showed up by the score to protest.

“We got pushback” is how McCormick describes the hearing.

Afterwards, she also got pushback from her board of housing commissioners, whose five politically appointed members (in addition to herself, as chair, and the state treasurer) are very attentive to the oil dealers.

“She’s on a crusade,” says John Sevigny, a Portland real-estate manager and contributor to Democratic Governor John Baldacci’s last campaign whom Baldacci appointed to the board. “She’s going about it on her own” to try to get a discount.

Another board member, Sheryl Gregory, a Litchfield real-estate agent appointed by Governor Angus King, explains, “It’s not that I’m trying to make people pay higher prices,” but she’s concerned about what might happen to smaller oil dealers if too much pressure is put on them.

The board not only refused to push back against the dealers, but in December it voted not to have, for the 2006-2007 heating season, any more than the voluntary discount plan McCormick offered dealers after she backed away from the mandatory one. If a dealer agrees to a small (6- to 10-cent-per-gallon) discount or to “cap” the price of heating oil for recipients, it can get half the LIHEAP money early on.

Twenty percent of the dealers have participated in this plan, McCormick says. But most are small. The housing authority’s savings amount only to $68,000 this season, she reports. Overwhelmingly, the authority pays the price the dealer has arranged with the customer. Often this is the cash-on-delivery price, since many poor people are unable to do more than buy 100 gallons at a time.

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Just before deadline, Richard Davies, an aide to Governor John Baldacci, called to say, “The governor would like to move to a system where we have volume buying for LIHEAP customers around the state,” but “it appeared the furthest we can push” the housing agency board “at the moment” is to accept the pilot project.

Ironically, most of the board members are Baldacci appointees — including McCormick. So how come the governor can’t move the board more to this line of thinking?

“Once they become members of the board, we trust them to exercise their best judgment,” Davies says. “We don’t bully them around to get them to do what we want them to do.”

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