AN ACT CONCERNING RESIDENTIAL RETAIL HEATING OIL AND PROPANE CONTRACTS.

This bill requires parties entering into an agreement for the retail sale of fuel oil or propane gas for residential heating to execute a written or qualifying contract containing the terms and conditions for delivery and any potential fees, charges, or penalties. The bill restricts the fees a retailer may charge and limits potential liquidated damages. The contract must also allow the customer to purchase the propane tank for fair market value at the end of the contract. The bill does not require a written contract if the terms and conditions are fully disclosed on the delivery ticket.

The bill also amends the written residential disclosure report to include, if applicable, a statement disclosing the (1) existence of a propane tank in excess of 20 gallons, (2) name of the tank owner, and (3) related contract.

The bill defines “guaranteed price contract” to include all forms of prepaid and fixed-price heating oil and propane contracts. It (1) adds physical supply contracts and a letter of credit as acceptable forms of security to ensure delivery and (2) requires that the commitments obtained through futures or physical supply contracts be at least 80% of the maximum number of gallons that the dealer is committed to deliver. It requires any holder of a futures contract, surety bond, physical supply contract, or letter of credit to notify the Department of Consumer Protection (DCP) of any cancellation.

The bill also eliminates a provision in current law making violations of registration, advertising, contract cancellation, and license display requirements unfair trade practices. The bill does not appear to create new penalties for violations.

The bill also provides that none of these provisions would validate an otherwise unenforceable liquidated damages provision or clause in a consumer contract.

The bill requires parties entering into an agreement for the retail sale of fuel oil or propane gas for residential heating to execute a written contract for up to 36 months. By law, retailers must include the unit price, units sold, and delivery surcharge on the delivery tag. Retailers may not collect more than the ticket value.

The contract must contain the terms and conditions for delivery and, in 12-point bold type, any fees, charges, or penalties that may be imposed. The only fees allowed under the contract are the cost of tank rental, tank removal, contract violation penalties, and liquidated damages. There may be no liquidated damages provision allowing for the damages to exceed the actual damage to the retailer. A retailer may increase its fees during the contract period if such increase is clearly and conspicuously disclosed. Individuals may enter into separate contracts for additional services, such as maintenance, repair, and equipment warranty. If a propane tank is supplied, the contract must allow for its purchase at fair market value, net of depreciation, when the contract expires.

Current law requires contracts for the retail sale of home heating oil or propane gas that offer a guaranteed price plan, including fixed price contracts and any other similar terms, to be in writing. The contracts must disclose the terms and conditions (1) in plain language, (2) immediately following the language concerning the price or service that could be affected, and (3) in at least 12-point boldface type of uniform font (CGS § 16a-23n(a)). No contract may require a consumer commitment for a period of more than 18 months (CGS § 16a-23n(d)).

The bill allows dealers to meet the written contract requirement by complying with the Connecticut Uniform Electronic Transaction Act, the federal Electronic Signatures in Global and National Commerce Act, and provisions on electronic contracts in the Uniform Commercial Code (see BACKGROUND).

Oral or telephonic agreements do not satisfy the written contract requirement unless the retailer gives the consumer a written copy of the terms and conditions before the telephone conversation. The retailer must also (1) use an interactive system providing the duration, unit price, and maximum number of units covered by the contract to complete the contract; (2) retain readily retrievable recordings of the agreement for at least one year beyond the contract; (3) send a confirmation letter informing the consumer that the contract is binding unless he or she rescinds it in writing within three days of receipt of the confirmation; and (4) retain a copy of the confirmation letter. The written contract requirement does not apply to contracts without fees, charges, or penalties assessed, but such contracts must state the unit price and surcharges.

The preceding provisions do not apply to existing customers with valid contracts on October 1, 2009. They also do not apply to customers without valid contracts if the customer receives a written contract before October 1, 2009 containing the terms and conditions, fees, surcharges, and penalties, provided:

1. fees are not greater than existing fees and may not increase; and

2. an existing customer may reject the contract within 60 days with no penalty, including for tank removal.

Current law prohibits retailers from charging a surcharge for deliveries greater than 100 gallons unless the delivery is outside the normal service area or business hours or involves extraordinary labor costs. The bill prohibits any other fee, charge, or penalty on such deliveries totaling more than the unit price multiplied by the total number of units stated on the delivery ticket, plus the amount of any delivery surcharge stated on the delivery ticket.

The law requires a real estate seller to give prospective purchasers a residential condition report before the binder or contract is executed in a residential real estate transaction (i. e. , sale, exchange, or lease with option to buy). The report discloses information about the property and environmental matters, such as lead and radon. The bill amends the required written residential disclosure report to include, if applicable, a statement disclosing the existence of a propane tank in excess of 20 gallons, the name of the tank owner, and the related contract.

The bill requires that “guaranteed price contracts,” instead of contracts offering a “guaranteed price plan,” for the retail sale of home heating oil or propane gas be in writing. These include a fixed or capped price contract or any other agreement where there is a set per gallon price unless certain circumstances occur. The latter includes fixed price contracts.

The bill defines a “capped price contract” as an agreement where the cost to the consumer may not increase above a specified price per gallon but may be reduced under circumstances specified in such contract. It defines a “fixed price contract” as an agreement where the cost to the consumer is set at a specific price for the term of the contract. The bill requires that guaranteed price contracts describe the circumstances in which the price may change.

The bill adds physical supply contracts to the commitments allowing dealers to purchase heating oil or propane gas in an amount not less than 80% of the maximum number of gallons that the dealer is committed to deliver. These are agreements for wet barrels or wet gallons of propane that have been secured by the heating oil or propane dealer from a wholesaler. It also adds a secured letter of credit at 50% of the total funds paid by consumers for guaranteed price contracts to the acceptable forms of security. A “secured letter of credit” is a standby, revolving, or irrevocable letter of credit issued by a bank or other state or federally chartered financial institution that provides for DCP to be named beneficiary if a dealer defaults on a promise to deliver heating oil or propane under contract to consumers.

Under existing law, a dealer must obtain (1) heating oil or propane gas futures or forward contracts or other similar commitments or (2) a surety bond of at least 50% of the total amount of funds paid by consumers. The bill defines “surety bond” as a bond issued by a licensed insurance company on behalf of a dealer, guaranteeing that the company will reimburse any consumer losses incurred as a result of the dealer' s failure to fulfill an obligation to a consumer. Dealers must maintain the total amount of futures and forwards contracts, physical supply contracts, and secured credit for the effective life of the guaranteed price contracts, though they may be reduced to reflect payment and delivery. Under the bill, a “futures contract” is a standardized, transferable, exchange-traded agreement requiring delivery of heating oil or propane at a specified price on a specified future date.

The bill requires these security forms to be obtained within five days of receipt of the guaranteed price contract.

Under existing law, a dealer entering into, extending, or renewing capped, fixed, or guaranteed price contracts must (1) inform DCP in writing, (2) identify secured lines of credit or surety bonds, and (3) notify DCP at any time the physical supply contracts or secured lines fall below 80% of the maximum gallons the dealer is committed to deliver. The dealer already must identify secured futures or forwards contracts and report those below 80%. The bill requires persons from whom a dealer has a physical supply contract or bond or secured letter of credit to notify DCP of cancellation. (Futures contracts cancelled must already be reported under current law. )

Under the bill, the provisions of guaranteed price contracts are not enforceable against the estate or survivors upon the customer's death unless express assignment was accepted in writing.

The bill removes the CUTPA violation from a number of provisions in the statutes. Under current law, a person, firm, or corporation must obtain a certificate of registration from the Department of Consumer Protection (DCP) to legally engage in the retail sale of home heating oil or propane gas (CGS § 16a-23m(a)). Applicants must provide evidence of (1) general liability insurance coverage and (2) insurance to cover any potential environmental damage related to fuel oil spills or propane gas leaked. The coverage must be at least $ 1,000,000. Dealers must providence evidence of renewals or changes to the coverage within five days of renewal or change (CGS § 16a-23m(b)). A dealer' s insurance company must notify DCP upon cancellation of the required insurance, and DCP must revoke the registration of a dealer lacking the necessary coverage (CGS § 16a-23m(d)).

The dealer may obtain and maintain heating oil or propane gas futures, forwards contracts, or other similar commitments, at amounts allowing the dealer to purchase, at a fixed price, heating oil or propane gas of at least 80% of the maximum number of gallons or amount that such dealer is committed to deliver pursuant to all prepaid home heating oil or propane gas contracts entered into, renewed or extended by such dealer or that such dealer estimates is committed pursuant to all capped price per gallon home heating oil or capped price per unit propane gas contracts, respectively.

Dealers must inform the DCP commissioner in writing that the dealer is entering into, renewing, or extending such contracts and identify any entity from which the dealer has secured futures or forwards contracts or other similar commitments. Dealers must notify the commissioner if at any time the total amount of such secured futures, forwards contracts, or other commitments is less than 80% of the maximum number of gallons or amount that such dealer is committed to deliver or that the dealer estimates it is committed to (CGS § 16a-23n(f)).

Anyone from whom a dealer has secured a futures or forwards contract or other similar commitment must notify the DCP commissioner, in writing, of the cancellation of such contract or other similar commitment within three business days of the cancellation (CGS § 16a-23n(g)).

Any prepaid home heating oil or propane gas contract must indicate (1) the amount of paid by the consumer under the contract, (2) the maximum number of gallons of home heating oil or maximum amount of propane gas committed by the dealer for delivery to the consumer, and (3) that performance of such prepaid home heating oil or propane gas contract is secured. The contract must include information that the contract price of any undelivered home heating oil or propane gas owed to the consumer under the contract, on the end date of such contract, will be reimbursed to the consumer within 30 days of the contract end date unless otherwise agreed (CGS § 16a-23n(d)).

Registered dealers must display their registration number in all advertisements or other prepared material (CGS § 16a-23m(c)). A home heating oil or propane gas dealer offering plumbing or heating work service must submit evidence when registering, that the registrant subcontracts with or employs only persons licensed or registered to perform such work. The registrant must attest, when applying for registration as a dealer, that all plumbing or heating work service must be performed in accordance with the law. Any registrant under this section who offers such plumbing or heating services must display the state license number of the subcontractor or employee performing such work for the registrant on all commercial vehicles used in his or her business and display such number in a conspicuous manner on all printed advertisements, bid proposals, contracts, invoices and stationery used in the business (CGS § 16a-23o).

A home heating oil or propane gas dealer that advertises a price must offer it for at least 24 hours or until the next advertised price is publicized, whichever occurs first (CGS § 16a-23n(b)).

The bill repeals the statute making failure to comply with any of the above provisions a CUTPA violation.

The Connecticut Uniform Electronic Transactions Act establishes a legal basis to use electronic communications in transactions in which the parties have agreed to conduct business electronically. The federal Electronic Signatures in Global and National Commerce Act (E-SIGN) validates the use of electronic records and signatures (15 USC § 7001 et seq. ). The Uniform Commercial Code modifies the federal law in certain ways to the extent federal law allows (CGS § 42a-7-101 et seq. ).

The law prohibits businesses from engaging in unfair and deceptive acts or practices. CUTPA allows the consumer protection commissioner to issue regulations defining what constitutes an unfair trade practice, investigate complaints, issue cease and desist orders, order restitution in cases involving less than $ 5,000, enter into consent agreements, ask the attorney general to seek injunctive relief, and accept voluntary statements of compliance. The act also allows individuals to sue. Courts may issue restraining orders; award actual and punitive damages, costs, and reasonable attorneys fees; and impose civil penalties of up to $ 5,000 for willful violations and $ 25,000 for violation of a restraining order.

HB 5400 (File 63) requires the written residential condition report used in residential real estate transactions to include a statement listing all leased items on residential property, including propane tanks and security system hardware.

SHB 6114 (File 736) requires the residential condition report to include a statement that if the property is historic or in an historic district or village, a person may contact the town clerk for compliance requirements information for the property.

On March 31, the House referred the bill (File 134) to the Appropriations Committee, which reported a substitute, eliminating the unfair trade practice designation for violations of (1) the bill's provisions relating to contract requirements and surcharges and (2) existing laws governing violations of registration, insurance, advertising, contract cancellation, and license display requirements.

Yea

Nay

(03/05/2009)

Yea

Nay

(04/15/2009)