Vendor Agreements

1. Vendor Agreements Presented by Elizabeth Bellis Kay Joslin Jim Nolan Nick Sunday Mark Wolfe February 21, 2013 Prepared by the National Energy Assistance Directors’ Association in coordination with the Office of Community Services within the U.S. Department of Health and Human Services Administration for Children and Families

2. Disclaimer This presentation is intended to serve as a general introduction to vendor agreements.  Nothing contained in this presentation should be construed or relied upon as legal advice. 

3. Purpose of Vendor Agreements LIHEAP Statute requires that each participating grantee establish procedures, commonly included in “vendor agreements,” that:  Notify each participating household of the amount of assistance paid on its behalf;   Assure that the home energy supplier will charge the eligible household the difference between the actual cost of the home energy and the amount of the payment made by the grantee Assure the vendor will treat LIHEAP households the same as other customers Ensure vendor payments are contingent on vendor taking measures to alleviate client energy burden

4. Purpose of Vendor agreements (cont) • Allowing agreements between unregulated  vendors and clients that • Reduce home energy costs, • Minimize the risks of home energy crisis, and   • Encourage regular payments by individuals receiving financial assistance for home energy costs * Agreements with regulated vendors are also likely to have these provisions • Programs that meet this requirement include: • Budget billing or payment plans • Shutoff moratoria • Vendor discounts or other rate assistance programs • Emergency delivery procedures.

5. Who are vendors? • Regulated natural gas and electric utilities • Unregulated gas and electric companies (municipal utilities and co-ops) • Unregulated fuel dealers (heating oil, propane, kerosene, wood, etc.) * Grantees, LAAs are parties / signees of agreement; clients are beneficiaries

6. Overview of contracts:A Vendor Agreement is a Contract A “contract” is an agreement between two or more parties that may be enforced by governmental authority if broken.  Thus, a contract is a good way to comply with the LIHEAP statutory requirement that the grantee establish procedures to “assure” that vendors act (or refrain from acting) in specific ways. Each state has its own rules regarding enforceability, severability, liability, damages and other aspects of contract law…but there are some general requirements shared by most jurisdictions.

7. Overview of Contracts:Basic Elements of a Contract • One party makes a promise to another (such as to provide LIHEAP funds) in exchange for that party doing something • Example: home energy supplier will charge the eligible household, in the normal billing process, the difference between the actual cost of the home energy and the amount of the payment made by the grantee. • Agreeing NOT to do something (forbearance) • Example: “no household receiving assistance will be treated adversely because of such assistance under applicable provisions of State law or public regulatory requirements” • Taking an action (such as making a monetary payment)

8. Overview of Contracts:Remedies for Breach of contract • Notice of breach of contract • Example – OR: The Agency, by written notice of default (including breach of contract) to the home energy supplier (HES) may terminate the whole or any part of this Agreement if the HES fails to perform any of the provisions of this Agreement in accordance with its terms, and after receipt of written notice from the Agency fails to correct such failures within 10 days or such longer period as the Agency may authorize. • Suspension due to breach of contract • Example – CT: Agree that completion of this Document obligates the Vendor to all terms and conditions, as detailed herein, for the 2009/2010 energy assistance program year and that failure to comply with any of these terms and conditions will result in the Vendor's suspension from the program for the remainder of the 2009/2010 program year.

9. Overview of Contracts:Remedies for Breach of contract (CONt) • Money damages. In many cases, remedy for one party breaking its promise is for that party to pay a sum of money to the other party. • The measure of damages depends on various factors. • In some cases, an agreement may specify the amount of money to be paid and the court respects this “liquidated damages” provision. • “Specific performance”. In some cases where money damages are not adequate, a court will command one or more parties to do what they agreed to do. • Limitation: Attorneys fees and other costs may make it expensive to pursue a remedy for breach of contract

10. Overview of Contracts:Remedies for Breach of contract (CONt) • Prosecution for fraudulent or other unlawful activities • Example – NY:May be prosecuted under applicable federal and/or State law for false claims, statements or documents or concealment of material fact. • Potential for ban from future state/federal contracting

11. Overview of Contracts:Common Contractual Terms Parties – who are exchanging promises? Promises regarding action, forbearance and timing – what will each party do (or refrain from doing) and when? Term or duration – for how long is the agreement in effect? Governing law – under what law do the parties wish the agreement to be construed? “Representations” – what facts do the parties promise are true? “Conditions” – what circumstances or conditions must be in place for the agreement to be binding? Notices – where should any required notices be sent to each party?

12. Overview of Contracts:Value of vendor agreements A good vendor agreement is a legal contract that can be enforced in court if necessary. The process of agreeing to a set of terms provides both parties the opportunity to get “on the same page” about important aspects of their relationship and bargain in advance. The vendor agreement provides written documentation of the agreement that can be referred to in the case of confusion or disagreement in the course of the relationship so that parties may be less likely to need to resort to courts

13. Mutual benefits of vendor agreements Grantees have flexibility to structure, negotiate vendor agreements to fit their programs as needed and to benefit all concerned. Mutual benefits to all concerned (grantees, LAAs, clients and vendors) are: • Increased LIHEAP purchasing power • Reduced crisis caseload • Reduced administrative and program  costs

14. Advantages to grantees & local administering agencies Vendor Agreements are essential to ensuring & enhancing program integrity Specify how LIHEAP benefits are to be applied, e.g., only toward current home energy bills, or to include past due bills or other vendor charges Specify what payments are allowable and what payment are not. Ensure that all payments are timely and properly allocated and verified Require proper record keeping, reporting for performance measures, and auditing Help establish vendor’s identity and legitimacy as business Provide method for refund of unspent funds or credit balances Provide recourse for inaccurate or fraudulent acts by a contracted vendor

15. Protections, Advantages to Clients Vendors must: Meet requirements for special provisions such as discounts, moratoria protection Adhere to emergency fuel delivery procedures to prevent or reduce crisis Follow procedures and policies regarding shutoff prohibitions, and requirements for reconnection or continuation of service Follow federal anti-discrimination policy and any other applicable state or federal law Ensure confidentiality of client information Vendors may also: Require or encourage payment plans to prevent or reduce crisis Include additional client health and safety requirements Include procedures for payment in event vendors will not serve client

16. Protections, Advantages to Vendors • Provides timely payment schedule thereby assuring more reliable cash flow • Example – IL: Agencies must notify vendors who are to receive funds on behalf of applicants. Vendors must be notified within 30 days via computer generated forms which are a binding commitment that payment is forthcoming from the agency. • Example - MA: The Agency shall mail payment of the invoice to the Vendor within (30) days of receipt of each invoice. • May result in larger and more reliable customer base • Allows for better working relationship between local agencies and vendor • Establishment of clear fiscal controls and oversight helps prevent not only customer fraud, but also possible theft or misdirection of LIHEAP funds by the vendor’s employees. • May be used to help promote vendors energy conservation and payment management programs.

17. Types and Duration of Vendor Agreements Can be by vendor or vendor type: regulated utility/ delivered fuel Duration of Agreements: One year or multiple years Automatically renewed each year Negotiated each year

18. More information on Vendor agreements • LIHEAP State Plans and Manuals http://www.liheap.ncat.org/stplans2013.htm • LIHEAP Vendor Agreementshttp://www.liheap.ncat.org/admin.htm • Contact National Energy Assistance Directors’ Association with additional questions: Cass Lovejoy, clovejoy@neada.org, 202-333-5915

19. State Examples – Advantages to Grantees:Proper allocation of benefits MO: Must first credit full amount of benefit to current customer bill, may credit remainder to previous balance. ME: Benefits may not be applied to bills incurred prior to start of fiscal year (October1) unless customer has entered into prepayment plan or budget payment with vendor. IA: In addition to current energy costs, incidental home energy costs such as charges for delivery, routine services, and reconnections allowed.

20. State Examples – Advantages to Grantees:limiting payments to liheap activities IA: Excludes security deposits, tank rental/leasing, water, sewer, garbage and/or telephone. MN: Expenses such as service contracts, water, sewer, garbage, cable, internet, telephone, gasoline, machine parts, engine oil, etc. cannot be paid with EAP funds. UT: Where supplier provides multiple utility services, supplier will insure that payment by state is credited only toward the energy (heat and/or electricity) portion of the account.

21. State Examples – Advantages to Grantees:Timely, verified and correct payments AL: Vendor will credit entire payment to client’s account immediately upon receipt, regardless of whether a credit balance is created; the balance will be credited to the household until it is depleted or the account is closed.   AK: Vendors receiving cash advances must promptly provide verification to state that the payments were received and credited to the household's account. Accomplished by either a signed statement citing the name, date, and the amount credited to the household's account, or by submitting a copy of the household's bill showing the credited amount.

22. State Examples – Advantages to Grantees:Proper record keeping and auditing OR: Vendor must maintain an accounting system to allow verification of amount of home energy delivered to eligible households. Auditors and/or investigators of the state or federal government allowed access to all supplier’s LIHEAP records. NY: Vendor shall maintain an accounting system and supporting fiscal records adequate to audit for a period of not less than three program years (current year plus three years) and will otherwise verify the proper disbursement of HEAP funds. WI: Vendor agrees to provide at no cost, to state, client, or agency, written information on an applicant household’s home energy costs, bill payment history, or arrearage history for specific time period.

23. State Examples – Advantages to Grantees:Establishing Vendor As A legitimate Business OH: Checks with Secretary of State for vendor disbarment or suspension; vendors must also complete a Data confidentiality Agreement, a Homeland Security DMA form, and an IRS W-9 form. MD: Check state assessment/ taxation dept. for business status; wood dealers must have Forest Products License, verified via online database; vendor names and addresses searched on Google and Google Maps. If questions remain, potential visit by state office or LAA. MN: In addition to SSN and FEIN, requires state ID number and signed W-9.

24. State Examples – Advantages to Grantees:refund of unspent funds/credits NJ: Vendor will immediately refund by check all balances if participant ceases to be a customer due to a change of fuel type, a move to a new address, or has a credit balance after April 30th. MD: Refund procedures clearly detailed. Refunds sent in dual process, i.e., check and customer list sent separately; list by email to alert state to watch for, and provides paper trail if checks get lost. MT: Requires unused credits greater than $50 be returned to the state and verifies this on monitoring visits.

25. State Examples – Advantages to Grantees:Recourse for inaccuracies or fraud CT: Misrepresentation or violation of agreement subject to immediate suspension and prosecution. NY: May be prosecuted under applicable federal and/or State law for false claims, statements or documents or concealment of material fact.

26. State Examples – Advantages to Clients:Special provisions (discounts, moratoria) MA: Upon verification of customer eligibility, vendor must within 7 days code customer as eligible for LIHEAP, enroll customer in vendor discount rate, if any, and code customer as protected by winter moratorium on terminations. MD: Oil, kerosene, propane and coal/wood suppliers, must provide 3-percent per unit discount off the lowest residential cash price. NY: Vendor will not add or include finance charges to a customer’s account for HEAP deliveries; state sales tax will not be collected on deliveries paid for with HEAP funds. Local County Sales Tax may be collected if applicable.

27. State Examples – Advantages to Clients:Emergency fuel procedures IA: Deliverable fuel vendors must accept $600 minimum benefit as requirement for minimum delivery.  Delivery must be within 48 business hours with no additional charges.  In emergency requiring delivery in less than 48 business hours, empty tank, etc., the vendors’ customary charges will apply.  Vendor accepts local agency payment guarantees by phone, fax, or email for emergency fills. OR: (Unregulated vendors) Upon notification of commitment, assist the agency in resolving the energy crisis of an eligible household within one business day.

28. State Examples – Advantages to Clients:Shutoff prohibition and reconnection CO: On notification of client approval, must within 24 hours initiate, continue or restore service; continue service for at least 60 days. (Subject to conditions.) MA: For customer pending termination or terminated, vendor must either restore service or not terminate upon notification that agency will pay 25 percent of customer’s past due balance. UT: Supplier agrees not to discontinue service for at least 30 days after receiving any payment or verification of payment from state, whether for the standard H.E.A.T. program or for emergency funds, excluding repairs.

29. State Examples – Advantages to Clients:Anti-discrimination policies Standard language most states: Vendor agrees not to not discriminate against any eligible household in regard to terms and conditions of sale, credit, delivery service or price, nor treat adversely any household receiving energy assistance because of such assistance. TX: Vendor will not refuse to provide energy service or otherwise discriminate in the marketing and provision of energy service to any certified customer because of race, creed, color, national origin, ancestry, sex, marital status, lawful source of income, level of income, disability financial status, location of customer in an economically distressed area, or qualification for low-income or energy efficiency services.

30. State Examples – Advantages to Clients:Payment plans to reduce crisis NY: Vendor may refuse to accept payment for disconnected customers; however if vendor accepts payments for such customers it must restore or continue service for 30 days and impose no conditions on customers other than an option for a deferred payment agreement. TX: Vendor must work with agency and customer regarding flexible payment arrangements that may include waiving security deposits, reconnect fees, application fees, and all other fees whenever possible. MO: Suggests vendors enter into deferred payment plans, for past due amounts, and consider waiving deposits and late fees.

31. State Examples – Advantages to Clients:Confidentiality of client information MA: Vendors will not disclose to any individual or entity the customer’s participation in the program, except as authorized in writing by customer or the agency for program purposes. NY: Must treat all information and, in particular, information relating to recipients, as confidential information, and not use any information so obtained in any manner except as necessary to the proper discharge of vendor’s obligation.

32. State Examples – Advantages to Clients:Health and safety requirements WI: Vendor must report dangerous heating or fuel delivery situations for EAP households to the Service Provider. TN: Vendor must report to agency client situations that threaten health, life or safety. CO: Vendor will not terminate or refuse service to approved households if household has medical certificate stating that termination would be dangerous to health and safety of any household member.