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Heating oil too costly? Just buy the company


BURLINGTON, Vt. - It seems counterintuitive at first, a group of progressive-minded, enviromentally concerned people at the helm of an oil company. Imagine PETA buying a McDonald's franchise, or Greenpeace a nuclear reactor.

And yet it's an idea gaining ground in New England, where consumers are increasingly weary of being squeezed by high fuel prices every winter. If a co-op could be formed to buy and sell cheaper granola, why not that other necessity of life here: heating oil?

So, as the price of crude hit 10-year highs almost every day during the past week, a co-op - the Vermont Consumers Energy Co-op - became the proud owner of a well-established local heating oil company, its three delivery trucks, five employees and 2,100 customers.

Power to the people, indeed.

"There are margins to be made here, let's be clear. I'm from capitalism," said the co-op's managing director, Eric Belliveau. "But we hope to do well by doing good."

With the market so in flux, Belliveau says, consumers need to focus on how to use oil efficiently, not just on its steep cost. (The U.S. Department of Energy forecasts that average heating oil prices could reach $1.33 per gallon by February - and New England's prices are generally higher than average - compared with $1.18 a year ago.)

Belliveau plans for the oil co-op, which trades under the name of Consumerco, to offer energy audits to members, for example, and to sell them "green" products like energy-efficient appliances and light bulbs. Such sales would help support the co-op, and allow it to offer services to low- and fixed-income residents.

Across New England, a number of co-ops have formed in recent years to buy fuel in bulk at lower rates than its members could get as individuals.

But the experience of Belliveau's co-op was all too common. It would negotiate a good deal for its members one winter, but the oil company would refuse to renew the contract the next year, knowing it would retain many of the co-op members anyway but as regular, higher price-paying customers.

"In some areas of Vermont, you don't always have more than one oil company," he said. "So then the co-op would lose members, and lose our bargaining power. It just wasn't economically viable."

Unable to beat the oil industry at its own game, Belliveau's co-op decided to join it.

Housed for the moment in a building with solar-heated water and lights that turn themselves off if sensors detect no one in the room, the co-op will need to make money to stay in business. But profits will be fed back into the operation or redistributed to its members in much the same way as food co-ops work.

Co-op-owned oil companies are among a range of options being explored by New Englanders, who last winter were hit by unexpectedly high oil prices and fear that this year might be even worse.

In western Massachusetts, another group that found little success as a fuel-buying group soon expects to finalize its own purchase of several local oil companies.

Even as parts of New England enjoyed a surprising streak of 80-degree days earlier this week, many consumers were already thinking ahead to the approaching chill. In Vermont, where more than 60 percent of homes are heated with oil, stores that sell wood-burning stoves reported swarms of customers seeking an alternative, or at least a supplement, to their oil- and kerosene-fueled heating systems.

Oil companies said they were flooded with calls from customers who wanted to top off their tanks now before the demand - and the price - gets higher closer to winter.

Some consumers are locking in on a price now, pre-paying an entire winter's supply of fuel to hedge against any future fluctuations in price.

"The best deal I could get was $1.19 a gallon," said Jack Northrup, who runs a fuel co-op in New Hampshire, but lives in a part of Vermont without such a group. "I had to pay $2,700 up front. But then, last February, I was paying $2.16 a gallon."

Fuel co-ops, especially, are benefiting from the turbulence of oil prices over the past several years. The Our Town Consumers Choice co-op in Barnstead, N.H., is only in its second year of operation but is already straining under its success.

Started as a small, community service by Daniel Barraford, a publisher of telephone books, it now has 800 members, many of whom were attracted by the deal he managed to negotiate last winter.

"We got oil for 82 cents a gallon, at a time when some people were paying $2 a gallon," Barraford said. "Members saved an average of $400 to $700, and some businesses saved $5,000."

Barraford was not able to get such a low price this year with suppliers themselves unsure of what their costs will be on the wholesale market.

Co-ops are a familiar way of doing business in New England, where such collectives have a rich tradition. Food co-ops do a brisk business - one based in Montpelier, Vt., announced this week that because sales were up more than 15 percent, its members would receive refunds of 2.5 percent of their purchases. And electricity co-ops have long served rural residents who are too few and far between to interest the regular, investor-owned utilities.

Farmers, in particular, are accustomed to the co-op way of operating, banding together as they have over the years both to purchase supplies as well as sell their own products. Cabot cheese, sold nationwide, is one such co-op, a collective operated by a group of Vermont dairy farmers.

In the face of an economy that is increasingly global, co-ops are a way of retaining some control for the famously independent-minded New Englanders.

"In this region, there's a growing interest in consumer co-ops in general in response to the mega-merger mania that has struck all industries," said Avram Patt, general manager of Washington Electric Co-op in Montpelier, and a member of Consumerco's board. "Whether it's a bank, or an oil company, there's this sense that these mergers have removed local service, local control. And in Vermont, local ownership means a lot."

To avoid alarming any of the fuel company's existing customers, Consumerco is going to continue using the same trucks, drivers and servicemen.

But already, word is trickling out that there's a co-op-owned oil company out there and Belliveau has received phone calls from consumers who want to know what kind of deal they can get.

For now, Consumerco will handle the old oil company's accounts and try to enlist new customers. The fuel-buying group's members, who numbered about 250 and bought in bulk together for the past three winters, will be recruited to join the new organization.

Some co-op members, though, couldn't wait. Unsure whether Consumerco would be up and running by winter, and heeding the reports that fuel prices would soar just when they needed heat the most, they decided to sign up with other companies in the meantime.

"We wanted the security," said Jack McCullough, a member of the fuel buying co-op that eventually became the fuel company-owning co-op. He supports the co-op nonetheless, and sees it as a way of taking away some of the oil companies' power and giving it to consumers.

"In Vermont, we don't have access to oil wells, but something like this gives us access to the retail end of the business," he said.

McCullough, a lawyer, decided to pre-purchase his oil for the winter from a company that offered him fuel at $1.19 a gallon.

"You risk the price going down this winter," he said, "but I think this year, that's an acceptable risk."

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