With power in numbers, mass-buying co-ops get lower oil prices
Last year George and Patricia Scollins saved 12 cents a gallon on their heating-oil bill and $30 on their oil-burner service contract for their single-family home in Roxbury, Mass. And they didn't have to freeze to do it. They joined a consumer co-op.
The nonprofit Boston Fuel Consortium (BFC), like similar operations springing up around the country, operates on a "power in numbers" principle. Its 900 residential and 100 commercial members -- representing one big 1.5 million-gallon customer -- are able to obtain fuel from retail oil companies for a substantial discount.
"During the oil gult, when wholesale prices started to come down, the retail price stayed up" for everyone else, says BFC member Patricia Hainer. But the price BFC members paid was pegged weekly to the wholesale price -- and every week the consortium members reaped additional savings.
Last March and April these savings reached 20 percent under retail price, bringing last winter's seasonal average to 15 percent.
Energy co-ops and buying groups began springing up in Canada in 1979. Now, despite the oil glut and stabilized prices, groups along the East Coast of the United States are growing an average of 50 percent annually in membership, according to Jose Feliciano of the Energy Cooperative Alliance in New York City.
Continuing the tradition of self-reliance that fostered the older agricultural co-ops and more recent consumer ones, some groups offer classes and workshops on do-it-yourself projects and offer discounts on materials for weatherization.
By giving their business to companies offering low prices and reliable service, oil co-ops put competitive pressure on retail fuel oil companies, thus forcing them to offer more to keep their regular customers.
Immediately after a news conference in February pointing out the widening gap between rapidly falling wholesale prices and slowly dropping retail heating-oil prices, retail prices in the area decreased 5 cents, notes Mike Gordon, director of the New York Public Interest Research Group's mass-buying group.
The BFC, which serves Boston and 79 surrounding towns, funnels its oil purchases to four midsize retail heating-oil companies, comprising up to 10 percent of the companies' total annual volume. The companies provide heating-oil, billing, and complete oil-burner service to BFC members. The BFC collects 3.3 cents a gallon from the oil company for sales made through it.
Through BFC, fuel-oil companies "can pick up accounts in an area convenient to us," says the manager of one retail fuel-oil company who deals with buying groups.
"They act as sales agents for us. Our regular customers will call us up and ask us why they don't get a discount," he explained.
Although the company does make a profit on customers signed up by BFC, the manager insists that "no company can exist with all customers buying at discounted prices."
The consortium asks permission of the bidding companies to go through their customer files, calling the retail customers at random to check on the quality of service according to Mark Draisen, the president of BFC. The Boston group also checks with the Better Business Bureau, fuel assistance agencies, and municipal officials about a retail company's reputation.
BFC makes its selection among the heating-oil companies based on several key selection factors: low price, reliable supply, and reputable 24-hour oil burner service.
The buying group does not require a fee or work hours from its members. To join, prospective members simply send in an application.
Members may serve on fund-raising committees, recruit members, select oil companies, or monitor companies' performance.
"It's important to develop more consumer control over vital resources," explains Michael Kutler, a volunteer BFC price-control monitor, "and co-ops are one way to do it." Adds Ms. Hainer, "It's good to know that through the community getting together, we can bargain for lower prices."