PMAA, NEFI and a number of oilheat state associations sent a letter to the Obama Administration highlighting their concerns with language in the Health and Human Services proposed FY 2016 LIHEAP that promotes “fuel switching.” As highlighted in the letter, PMAA will be pressing members of Congress and the Obama Administration to work the industry and not against it.
Additionally, the House Appro-priations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies held a hearing on the HHS budget. Congressman Dent (R-PA) asked a question on heating oil dealers’ behalf to HHS Secretary Sylvia Burwell. Mr. Dent asked: “Given the low cost of crude oil which has translated into heating oil prices being on par with and sometimes lower than the equivalent natural gas price, why would HHS be using valuable LIHEAP program dollars to switch recipient’s fuel systems at cost of $10,000 on average, when there is no real need given the current price of fuel oil? Current LIHEAP funds could go to help consumers make simple, cost effective upgrades that immediately reduces emissions and saves them on their monthly bills to help pay for the fuel they are currently using. Do you really think it’s appropriate for HHS to use LIHEAP rules to discriminate against homeowners based on the fuel they use at this time?”
Burwell responded that she was not aware of the fuel switching issue but that HHS would look into it. PMAA as well as Congressman Dent’s office will be following up with HHS in the near future. Offered below is the letter:
Dear Mr. President:
The undersigned organizations represent the nation’s mostly small business home heating oil and Bioheat® dealers, appliance manufacturers and hardworking service technicians. We write in response to your Fiscal Year 2016 Budget request for the federal Low Income Home Energy Assistance Program (LIHEAP) submitted to Congress on February 2, 2015. Specifically, we are concerned with your proposal that a portion of these funds be used to incentivize fuel switching.
Our industry has been a strong supporter of the fuel assistance program since it was created by Congress in 1981. Full funding is essential in meeting the home energy needs of our nation’s most vulnerable citizens, including elderly Americans, disabled veterans and active-duty military families. Therefore, we commend you for the robust request of $4.5 billion for Fiscal Year 2016, which includes $3.19 billion in state formula grants and an additional $1.13 billion in contingency funds to be used during extreme weather events and other emergencies.
You should also be applauded for your renewed focus on home efficiency as a means of reducing long term energy costs for low income households. Our industry has been a leader in this regard. Investments in more efficient technology, fuel quality and the education of consumers and service technicians into safety and conservation has reduced annual consumption from an average of 1,700 gallons to 700 gallons per home over the last 40 years. Since the year 2000 alone, oilheat efficiency has improved by about 30 percent per home. We believe even further progress can be made and we are eager to partner with you in this shared goal.
We are concerned, however, with your recommendation that states use LIHEAP funds to encourage homeowners to switch from oil and propane to so-called “less expensive” fuels. The budget would require states to set aside 10 to 40 percent of their formula grants for programs designed to reduce energy costs among low income households. It would also provide $200 million in support of state partnerships with utilities and local community-based organizations. “Fuel switching” was listed as a long-term cost savings strategy on which these programs and partnerships should focus. Your proposal that LIHEAP funds be used to promote fuel switching ignores recent changes in the home heating market and the efficiency and environmental gains made by our industry.
Consider for example that today’s heating oil:
- Provides direct, personalized service to consumers. Our more than 6,000 mostly small, family-owned and operated businesses employ approximately 42,000 people. Unlike large utilities, our members personally deliver heating fuels and related services to American homes and have developed close personal relationships with many of these residents.
- Is competitively priced. Average residential heating oil prices are the lowest in five years and have declined nearly 40 percent since last winter alone. Many dealers now offer heating oil at prices that are on parity with—and in some cases lower than—those of competing fuels. Heating oil has held this advantage for 25 out of the last 32 years.
- Is efficient and renewable. Our industry has worked closely with states to lower the sulfur content of heating oil. This has dramatically improved air quality and cut home heating bills by reducing the need for service calls and increasing the longevity and efficiency of existing systems. Future heating appliances will be able to reach unprecedented levels of efficiency through the utilization of low sulfur fuels. Today’s heating oil is also blended with advanced biofuels to produce “Bioheat,” a low-carbon renewable fuel that is compatible with existing heating systems. Most of our dealers now sell up to five percent (B5) blends and in December 2014, ASTM established a specification for blends of up to 20 percent (B20).
- Is helping to address climate change. A full lifecycle analysis of carbon dioxide equivalent (CO2e) emissions has found ultra-low sulfur heating oil to have a lower global warming potential than natural gas when blended with as little as two percent biofuel and used with modern appliances. An industry-wide B20 blend will ultimately eliminate 1.3 billion gallons of conventional petroleum fuel and 9.26 million metric tons of carbon dioxide emissions per year.
- Utilizes a modern, safe and secure infrastructure. Since 1974, our bulk storage facilities have been required to comply with federal Spill Prevention, Control & Countermeasure regulations. These regulations were recently updated to ensure that our storage and distribution system is well maintained, modern, safe and secure. Also, unlike natural gas pipelines and storage facilities, our infrastructure does not leak methane, an extremely potent greenhouse gas.
A federal policy to encourage fuel switching would undermine these accomplishments and economic realities. Such a policy is also cost prohibitive and risky. While the average cost of converting a home from oil to natural gas is approximately $10,000, in some cases the total cost can exceed $18,000. Converting to a biomass (i.e., wood pellet) heating system can be similarly cost prohibitive. By switching fuels, a consumer is also betting prices will remain low and supplies will always be reliable. Most Americans cannot afford to gamble like that—especially not low income families—and the Administration should not be in the business of encouraging such risks.
For many Americans, the fuel that keeps their family warm is a personal choice based on safety and reliability. Rather than make such decisions for them, the Administration should encourage states to focus on fuel neutral solutions that result in proven savings for low income households. For example, upgrading an existing system to an energy efficient modern appliance is less than one-third the cost of fuel switching and can result in immediate savings of more than 40 percent. Other alternatives can produce considerable savings at even lower costs. This includes regular system maintenance (up to 10 percent savings) and the installation of programmable thermostats (up to 10 percent savings) and modern electronic controls (up to 20 percent savings).
We stand ready to work together on cost-effective and fuel neutral solutions to reduce energy costs for low income households and are prepared to meet with you to discuss these issues further.
Thank you in advance for your consideration.