1 / 21

NYS HEAP Oil Buying Component

NYS HEAP Oil Buying Component. Phyllis Morris, Paula Cook and John McCarthy NYS Office of Temporary and Disability Assistance Peggie Neville NYS Energy Research Development Association National Low Income Energy Conference June 2006 . Overall Objectives.

tevy
Download Presentation

NYS HEAP Oil Buying Component

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. NYS HEAPOil Buying Component Phyllis Morris, Paula Cook and John McCarthyNYS Office of Temporary and Disability Assistance Peggie NevilleNYS Energy Research Development Association National Low Income Energy ConferenceJune 2006

  2. Overall Objectives • Increase the buying power of HEAP funds • Use an approach that will: • Encourage ALL vendors to participate • Minimize the need to ‘switch’ clients • Maintain relationships between clients & vendors • Minimize additional administrative burden to local social services districts • Allow a reasonable profit to vendors

  3. NYS HEAP Facts • About 30% of HEAP benefits are issued to oil dealers (~$60 million) • Prior industry practice was to charge full retail price for fuel purchased with HEAP dollars • Counties have unique characteristics (# of dealers, fuel types)

  4. How did we get here? • Evaluated other approaches (Connecticut, Massachusetts) • Pilot program initiated in 2003 • Solicited volunteer counties for pilot program • 5 county pilot conducted during 2003-2004 and 2004-2005 • Statewide rollout began in 2005-06 (20 counties) • Incorporated input from industry

  5. Dealer Pricing Options Dealers participate by choosing one of the following pricing options: • Margin-Over-Rack (MOR): a specified margin over the wholesale cost • Discount-Off-Retail (DOR): a specified cent discount off the retail price • Price Protection or Service Contracts: contracted price

  6. 2006-2007 HEAP Oil Component- Heating Oil - • MOR Pricing Option lesser of: • Oil dealer’s retail price for heating oil; or • Rack price for heating oil based on Oil Pricing Information Service (OPIS) average • Plus 35¢/gal for HEAP oil purchases • Plus 39¢/gal for ALL oil sold to HEAP customers thru season

  7. 2006-2007 HEAP Oil Component- Kerosene - • MOR Pricing Option lesser of: • Dealer’s retail price for kerosene; or • Rack price for kerosene based on actual suppliers in area • Plus 38¢/gal for HEAP kerosene purchases • Plus 42¢/gal for ALL kerosene sold to HEAP customers thru season • Oil-kerosene blend price strategy • Lesser of retail “blend” price; or • MOR price for blend (based on 50/50 blend)

  8. Development of MOR Pricing • State-to-State Margin Comparison • Market Research • Trade Journals • Price Surveys • Extensive conversations with industry • Initial Pilot Year – ‘volunteered margins’ • Median margin = 29 cents per gallon

  9. State-to-State MarginComparison • Estimated average dealer margins on oil purchases by NY DSS (43-75¢) are much higher than those being paid by MA DSS (28.5¢) and CT DSS (25¢)

  10. 2006-2007 HEAP Oil Component • Discount Off Retail Pricing (DOR) • Dealer provides discount off dealer’s posted price • 13¢/gal for HEAP Purchases Only • 9¢/gal for ALL deliveries to HEAP customer thru season • Discounts apply to heating oil, kerosene and heating oil/kerosene blends • Inclusion of option was the direct result of industry input

  11. Development of DOR Pricing • Comparison of margins of participating & non-participating vendors • Determine percentage discount or cents per gallon discount • Analysis of discount level to achieve comparable saving to MOR • Industry input

  12. 2006-2007 HEAP Oil Component • Dealers are exempt from MOR or DOR pricing for HEAP customers with confirmed price protection agreements or service contracts • Other limited exceptions may be made, with prior State approval, if adequate coverage is lacking (primarily in emergency situations)

  13. * Price protection agreements include a formal capped price (sometimes called ceiling price) or fixed price arrangement, usually accompanied by a budget plan that enables customers to lock-in a maximum price for all heating oil and/or kerosene purchased during a heating season

  14. 2006-2007 HEAP Oil Component • To participate, dealer must sign a Uniform Vendor Agreement and select a pricing option • Participating Dealers receive direct payments from district in ALL cases • Non-Participating Dealers receive 2-party checks for customers with confirmed price protection agreements or service contracts • Customers without price protection agreements or service contracts need to select a participating dealer

  15. Ensuring Continued Dialogue • County start-up meetings – “veteran” counties are invited to participate • “Dealer Advisory Group” meetings are held regularly to review program and make recommendations • Recognition provided to all participating dealers • Clean and tune component added as an incentive

  16. Providing Extensive Program Support • Website – www.heapoil.org • Provides MOR pricing, program material, C&T information • Program Price Line • Provides daily MOR pricing • Program Daily Fax • Provides daily MOR Price Fax & other communication to all participating dealers • Program Support Line • Provides help with dealer’s technical questions

  17. Statewide Implementation • Statewide rollout began in 2005-2006 • Statewide implementation to be completed by 2007-08 • Adding approx. 20 counties per year • Expanding to contiguous counties • Saving the most challenging (New York City/Long Island and North Country) for final year

  18. Dealer Participation • 218 oil dealers participating across 20 counties • Dealers representing 65% of HEAP $$, historically, are participating • Breakdown by Level of Participation • In 11 counties – dealers representing greater than 75% of historic HEAP $$ are participating • In 6 counties – dealers representing 50-75% of historic HEAP $$ are participating • In 3 counties – dealers representing less than 50% of historic HEAP $$ are participating • Adequate coverage provided in all counties, despite concerns in a few counties

  19. Outcomes • On average, 6% more oil/kerosene has been purchased with HEAP dollars in participating counties • These savings have been especially valuable in assisting low-income households in meeting their escalating home energy costs

  20. Learning to Date • Need faster payment turnaround • Dealers more likely to participate if they can be paid more quickly • We are pursuing electronic funds transfer for the upcoming HEAP season to expedite vendor payments • Combination of pricing options allows variety of vendors to participate • Education for HEAP customers is needed • Industry input critical to create program that works

More Related