By Tux Turkel, Staff Writer
Portland Press Herald
Copyright 2000 Blethen Maine
Newspapers, Inc. Reprinted by permission
Not far from the stores and traffic at busy Cook's Corner, Maine, stand quiet neighborhoods of clustered, cape-style homes, clad in weathered clapboards. At Coastal Estates II, a trained eye can spot metal vents sticking out from the wooden siding, an indicator that most occupants here warm their homes with through-the-wall kerosene heaters.
Efficient and easy to install, kerosene heaters have become a popular weapon to battle the Maine winter. Too bad the fuel isn't less expensive. Last week kerosene was running $1.65 a gallon or so in the Brunswick area, roughly 25 cents more a gallon than heating oil.
But for 41 of the 50 homes in this planned development, kerosene is a relative bargain. The residents have organized a homeowners fuel-buying cooperative that negotiated a discount with a local dealer. In exchange for handling one master bill and coordinating delivery schedules, the owners bought a total of 15,000 gallons of kerosene last year at roughly 25 percent below the retail cash price. That added up to an estimated savings of about $100 a home.
"In a cold winter, people could save much more," said Jim Friedlander, a resident who helped organize the buying group.
Cooperative fuel buying isn't a new concept. It's commonly used by companies and government. Dealers can give a better price when they deliver large volumes to a single group of commercial customers.
But residential, neighborhood co-ops are a recent and growing trend, driven by high energy prices. Dealers say they are getting more inquiries from organized groups of homeowners.
That said, neighborhood fuel-buying co-ops aren't easy to organize and sustain, and they may not be financially attractive to dealers. The one operated by the Coastal Estates II homeowners association, however, is an example of how some Maine residents can save money on heat by banding together.
The co-op was conceived by Friedlander, who is retired and moved with his wife two years ago to the development. Friedlander had experience with cooperative fuel-buying for town governments when he was director of the Greater Portland Council of Governments from 1979-1981. He also participated in a fuel co-op with innkeepers in Freeport, where he owns a bed and breakfast. He wondered why a buying group wouldn't work at Coastal Estates II.
The 15-year-old units in his development are good candidates. The homes were originally heated with electricity. When that became too costly, most owners put kerosene heaters in their living or dining rooms, fed by tanks installed in attached garages.
Everyone fended for themselves until last winter, buying from a variety of oil dealers. But at a homeowners association meeting last year, Friedlander suggested putting a questionnaire in the group's monthly newsletter, to see if residents were interested in saving money through collective purchasing. Forty-one owners said 'yes.'
Friedlander called six oil dealers and sent out bids. The bids asked for the lowest mark-up for delivery over the wholesale price in Portland Harbor, where oil products enter southern Maine. Four replies came back. The lowest was from C.N. Brown.
The association is staying this year with C.N. Brown, which has offered a price of 17 cents per gallon above wholesale, if the bill is paid within 30 days. After that, the price differential rises to 27 cents per gallon.
For example: The wholesale price for kerosene at the middle of last week was around $1.27 a gallon. That means homeowners would pay C.N. Brown $1.44 for kerosene that the company was selling retail for $ 1.70 a gallon, a cash price that reflects transportation, overhead and profit.
C.N. Brown can offer a discount to the homeowners because of two important economies of scale. First, the company sends one master bill to the homeowners association. That saves on accounting expenses. Second, C.N. Brown has arranged twice-monthly deliveries for all homes. That saves big money. High diesel and labor costs are pinching oil dealers, who would rather not have their trucks crisscrossing the countryside, dropping 100 gallons here and 200 gallons there.
"We go up there and empty a whole truck," said Mark Cyr, heating oil sales manager at C.N. Brown.
Cyr said the cooperation of the homeowners group helps make the deal workable. For instance: The fill-up spigots for the kerosene tanks are inside garages at Coastal Estates II. Homeowners have to open their garage doors or give the driver access on specific days. Those kind of logistics make the company cautious about accepting bids from less-organized homeowners.
"This is a unique situation," Cyr said. "It works for us."
The association also needs to operate like a small business.
One resident, who acts as the finance manager, agreed to get the master bill and distribute individual bills to each home. He receives a 2-cents-a-gallon stipend for his trouble. Last year, a renter in one of the units skipped out without paying the final bill. This year, the association has taken a $100 down-payment from everyone.
A successful co-op will also need someone like Friedlander, who has the time and interest to oversee the bids and organize homeowners.
"Someone's got to take the bull by the horns," he said.
The association has also offered to help organize other groups. Paul Putnam, past president of the association, has met with representatives from seven other planned developments in Brunswick.
"With all the news about oil prices you'd think everyone would want to get in on it," Putnam said.
Elsewhere in Maine, other neighborhood associations are doing just that. Their agreements take different forms.
Robert Tracy, a regional manager for Irving Oil, said the company has negotiated fixed-price contracts with a dozen homeowner groups in southern Maine. Each homeowner is billed separately, but the efficiency comes by delivering large volumes of oil to one place on scheduled days.
In Freeport, for instance, homeowners in the Bishop Farm Road subdivision were savvy enough to negotiate a fixed-price contract with Irving early last summer, when oil prices were much lower. Irving was able to secure a supply that will allow it to sell the homeowner soil this winter for 98 cents a gallon.
"Homeowners are becoming very sophisticated in this type of market," Tracy said. "They understand the details of oil buying and they buy early to lock in prices."
At Coastal Estates II, Friedlander said he's happy to hear from residents in condominiums or subdivisions who want more information about how to organize a fuel-buying co-op. (His e-mail address is Ikesspot@aol.com.)
"Falmouth and Portland are loaded with developments like this," he said. "They have more opportunity to make something like this succeed." [end]
