The home heating oil industry has a long and proud history, and Fuel Oil News has been there supporting it since 1935. It is an industry that has faced many challenges during that time. In its 77th year, Fuel Oil News is doing more than just holding
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26 MAY 2014 FUEL OIL NEWS | www.fueloilnews.com T he winter was long, the nights and days cold, the snow deep, the hours long and the costs to make it all happen, up. So...if costs are up, how about invoicing each of your customers another $5 to $15 each to offset additional costs you incurred due to the Polar Vortex? One-time only. That will work, right? "Good luck with that," a retailer friend of mine said when I posed this question to him. "Will you visit me in jail?" he said sarcastically. "Or make sure I get a nice rubber room at the hospital," an apparent reference to his required mental state should he attempt such a thing. It is a movie I have seen a number of times, and it always ended badly. Fines assessed to the fuel marketers, an industry lashing in the media, refunds to customers and promises not to try it again. Marketers attempted to assess the charges as separate "delivery charges," "environmental com- pliance charges," "regulatory compliance charges" — etc. but it did not pass government muster for reasons too numerous to address here. At the risk of generalizing, it seems to me that only utilities can get away with recovering extraordi- nary costs. For those of us marketing energy without a Certificate of Public Necessity, or some similarly named official document from the Authority with Jurisdiction, it has been a tough sell. It was early April when I came across a report of an electric retailer in Ohio making an argu- ment for cost recovery based on the additional expenses the company said it incurred due to this winter's "polar vortex." The retailer in question said 2.1 million customers will see a June 2014 surcharge of $5 to $15 to pay for the extreme spikes in wholesale power costs during January's polar vortex, when price caps were lifted as sup- ply tightened. By my math, this electricity retailer should see additional revenue somewhere north of $10,000,000 and south of $30,000,000 if and when it actually happens. It is not a done deal, so say reports, as the regulatory authorities with jurisdiction have yet to weigh in on the matter, and other retailer have chosen not to attempt the same so perhaps there will be market pressure. If the assessment is allowed — good for them. If it is not, I would say they will be looking for that 10-to-30 million dollars someplace else. N o w c o n s i d e r a r e c e n t w h i t e p a p e r b y the American Council for an Energy-Efficient Economy entitled Why Is Electricity Use No Longer Growing? The paper looked at electricity use trends by sector, for use in the residential, commercial and industrial sectors during 1990-2012. Commercial and industrial consumption both peaked in 2007. Commercial use has been "modestly declining" since then, and industrial use has gone down three years and up two years. Residential use peaked in 2010 and has declined in the two years since. Decline. Decline. Decline. (That $30,000,000 noted above would come in handy) Nearly 30 years ago in my neck of the woods the second largest electric utility in the state stunned the propane industry, when it bought a propane dealer of significant size. What followed was a buy- ing spree of propane companies, and an expansion of unprecedented scale. At the time, it was gener- ally regarded as an act by an entity with too much money and delusions of grandeur. The ordeal went on for years, and eventually the propane business ended back in the hands of non-utility folks. In my experience, utility folks long considered heating oil and propane as a means to achieve relative meager profits with a lot of work. Three years ago a partner and I proposed a unregulated project to a regulated utility, and their response was something along the lines of "not enough money; we like the guaranteed return in a regu- lated market." With their environment changing as drastically as ours, could our sector become desirable in the eyes of energy utilities as they seek options for new revenue streams? A few years ago I would have said: "no way." Today, in light of how much things are changing in the energy sector, I have learned to never say never. In 1930 Einstein briefly worked on the cyclical model of the universe, which I take simply to say that the world is cyclic, or tends to repeat itself by some grand design. "Cyclical nature of the Universe." Works for me. l F O N Bio: Shane Sweet is an energy and management consultant with clients in the heating oil, propane and motor fuel sectors. He served the industry as President & CEO of the New England Fuel Institute "NEFI" from 2007 to 2011, and as Executive VP/Director and Lobbyist for the Vermont Fuel Dealers Association "VFDA" from 1993 to 2007. CoNTACT: shanemsweet@gmail 802-558-6101 cell/text. Suggestions by readers for future column content, as well as general comments, are welcome. Shane Sweet OPERATIONAL INSIGHT CYCLIC