New law aimed at preventing dealers from using next winter's money to buy this winter's oil

LACONIA — Curtis Stafford of Stafford Oil Company, Inc. applauded the Legislature for tightening the regulation of pre-buy contracts for the purchase of heating fuels. "I think it's going to protect the consumer and have a positive impact on the industry," he said yesterday.

This week House Bill 1282 carried the New Hampshire Senate by a voice vote after the House of Representatives passed it by a convincing majority of 226 to 98 in March. Although the bill will be referred to the Senate Finance Committee in accord with Senate Rules, this week's vote is unlikely to be reversed.

The legislation addresses an issue that has dogged the Legislature for the past five years. In that time, according the Attorney General's Office, three independent heating oil firms have failed, leaving customers $650,000 out-of-pocket. This past winter was marked by the struggles of Fred Fuller Oil & Propane Co., among the largest home heating oil dealers in the state, to make timely deliveries to its prepaid customers, which prompted the Attorney General's Office to intervene.

Stafford said that perhaps the most important provision would forbid dealers from advertising or soliciting prepaid contracts earlier than May 1 or later than October 31. He explained that the current law, by allowing such contracts to be closed after January 1 — before the next year's heating fuel season begins on May 1 — enables dealers to apply funds for future purchases to current operations. By changing the date, Stafford explained, the bill intends to ensure that the proceeds from prepaid contracts fund future purchases at the contracted price and not finance operations during the remainder of the current season. He said that in effect the bill would manage dealers' cash flow.

Current law requires that within seven days of entering into prepaid contracts dealers must commit to a futures contract or other arrangement that guarantees the purchase of fuel representing 75-percent of the maximum number of gallons their prepaid contracts bind them to deliver. Alternatively dealers may post a surety bond payable to the Attorney General equal to at least 50-percent of the amount paid by customers for prepaid contracts or a letter of credit, also payable to the Attorney General, representing 100 percent of the dealer's cost of the fuel required to fulfill prepaid contracts. The bill would add a fourth option by allowing dealers to acquire an inventory of fuel amounting to 75 percent of the volume their prepaid contracts require them to deliver.

The bill would further require dealers to register their intent to offer prepaid contracts with the New Hampshire Secretary of State by May 1 each year as well as file annual reports with the agency by December 1. The annual report must demonstrate how the dealer has complied with the statute, including how prepaid contracts are secured.

Finally, the bill adds both making false statements and failing to deliver contracted fuel violations of the Consumer Protection Act.

"The bill gives the law a lot more teeth," said Stafford, a director of the Oil Heat Council of New Hampshire, which assisted lawmakers in drafting the bill.