OLR Bill Analysis
sHB 6470 (as amended by House “A”)*
AN ACT CONCERNING RESIDENTIAL RETAIL HEATING OIL AND PROPANE CONTRACTS.
This bill requires contracts between heating oil and propane gas dealers and their residential purchasers to be written, except for those meeting certain specified conditions. It requires the contracts to include all terms, conditions, and charges and to be in plain language. It exempts contracts from the requirement that they be written if they (1) are with existing purchasers and certain conditions are met, (2) finalized by telephone and certain steps are followed, and (3) comply with federal and state e-sign law. The bill restricts the types of fees a fuel dealer may charge and limits potential liquidated damages. Under certain conditions, the contract must also allow the customer to purchase an underground propane tank at a commercially reasonable price.
The bill defines “guaranteed price contract” to include all forms of prepaid and fixed-price heating oil and propane contracts. It (1) also allows dealers to securitize their fuel delivery commitments with physical supply contracts 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, or physical supply contract to notify the Department of Consumer Protection (DCP) of any cancellation.
The bill increases criminal penalties and enhances the DCP commissioner's enforcement powers.
Additionally, the bill revises the law making certain commercial refuse removal or disposal contracts that renew automatically unenforceable in court unless specified contract requirements are met and the customer has acknowledged that the contract includes a renewal provision and has not refused to renew the contract.
*House Amendment “A” (1) revises the bill's guaranteed price contract provisions, (2) changes the bill's provisions concerning the consumer option to purchase a propane tank, (3) increases penalties against dealers who violate registration and residential heating contract law, (4) reduces the threshold for the prohibition against imposing delivery surcharges, (5) eliminates the bill's real estate disclosure provision, (6) requires dealers to disclose affiliated registered companies when registering with DCP, (7) eliminates a provision in the bill allowing dealers to securitize their delivery commitments with secured letters of credit, (8) removes the provision that would have removed CUTPA as a penalty for violating certain provisions of the dealer registration and residential heating law, and (9) adds the provision concerning renewal of commercial refuse removal contracts.
EFFECTIVE DATE: Various
§ 1 — CONTRACTS
The bill generally prohibits dealers for home heating oil or propane for residential heating from selling without a written contract that includes all the delivery terms and conditions, including the method for determining the unit price and the amount of fees, charges, or penalties that may be assessed under the contract. It prohibits the contracts from lasting longer than 36 months. By law, contracts in which the dealer offers a guaranteed price plan must be written and retailers must include the unit price, units sold, and delivery surcharge on the delivery tag. The bill defines “residential heating” as heat provided for a structure with between one and four dwelling units. The contracts must be written in plain language and, in 12-point bold type, state any fees, charges, or penalties that may be imposed. The only fees allowed under the contracts are the cost of tank rental, tank removal, contract violation penalties, and liquidated damages. Any liquidated damages provision may not allow for damages above the actual damage to the retailer. A retailer may increase its fees during the contract period if such increase is clearly and conspicuously disclosed.
The bill allows retailers to enter into separate contracts with consumers for additional services, such as maintenance, repair, and equipment warranty. If an underground propane tank on the consumer's property is lent or leased to the consumer, the contract must give the consumer the option to purchase it and associated equipment for a commercially reasonable amount when the contract expires or at other times specified in the contract. The option may include a reasonable waiver of liability or transfer of warranty, each of which must be stated in the contract. The bill defines “associated equipment” as a gas regulator, gas line, sacrificial anode, interconnecting hardware, and other equipment needed to install and operate a propane tank.
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 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, except the duration, unit price, and maximum number of units covered by the contract, before the telephone conversation. The retailer must also (1) use an interactive system to provide this information to complete the contract, (2) retain readily retrievable recordings of the agreement for at least one year beyond the contract's end, (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 receiving the confirmation, and (4) retain a copy of the confirmation letter for at least the period of the contract plus one year.
The written contract requirement does not apply to contracts that do not assess fees, charges, or penalties, 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, but they apply to contract renewals.
The provisions also do not apply to existing customers without valid contracts if they receive a valid written contract before January 1, 2010 containing the terms and conditions, fees, surcharges, and penalties, provided:
1. the method of calculating the unit price is the same as the method most commonly used for the calculation during the previous six months;
2. fees are not greater than existing fees and may not increase during the contract term; and
3. an existing customer may reject the contract within 30 days with no penalty, including for tank removal.
The written contract is effective if not rejected within 30 days of receipt. The bill states that at the end of such a contract's term, its provisions do not apply to existing customers if they receive a complying contract by certified mail, return receipt requested, between 30 and 90 days before the end of the contract's term. The contract must include all of the terms and conditions for fuel delivery and the amount of any fee, charge, or penalty allowed that the dealer may assess under the contract. The following conditions must apply to the new contract:
1. the method of calculating the unit price must be the same as the method most commonly used for the calculation during the previous six months;
2. the contract's fees and a comparison of them to those in the current contract must be clearly and conspicuously disclosed;
3. the customer has 30 days after receiving the contract to reject it without penalty, including a tank removal fee; and
4. the contract is effective if the customer does not reject it within the 30-day time period.
The bill requires the dealer to keep the signed, certified mail receipt for at least three years from the contract's effective date.
The bill prohibits dealers from making the sale of fuel oil or propane to a consumer contingent on the consumer's purchase of a tank and making the sale of a tank contingent of the consumer's purchase of fuel oil or propane.
Current law subjects a dealer who violates the prohibition against selling fuel oil or propane to be used for residential heating without printing the unit price, total number of units sold, and the amount of any delivery surcharge on the delivery ticket to a fine of up to $ 100 for a first offense and up to $ 500 for each subsequent offense. The bill (1) applies the penalty to anyone who violates the contracting law, (2) also applies the penalty to all of its contract requirements, and (3) increases the penalty. Under the bill, violators are subject to a fine of up to $ 500 for a first offense, up to $ 750 for a second offense occurring within three years of the first offense, and $ 1,500 for a subsequent offense occurring within three years of a prior offense.
EFFECTIVE DATE: October 1, 2009
§ 2 — SURCHARGES
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. It also changes the threshold for imposing the prohibition from more than 100 gallons to 100 gallons.
The bill makes violators subject to a fine of up to $ 500 for a first offense, up to $ 750 for a second offense occurring within three years of the first offense, and $ 1,500 for a subsequent offense occurring within three years of a prior offense.
EFFECTIVE DATE: July 1, 2009
§ 3 — AFFILIATED COMPANIES AND INTERLOCKING BOARDS
The bill requires home heating oil and propane dealers, when applying for their annual DCP registration certificate, to disclose all affiliated companies registered with DCP that are under common ownership or have interlocking boards of directors.
EFFECTIVE DATE: October 1, 2009
§ 4 — GUARANTEED PRICE CONTRACTS
Current law requires “contracts offering a guaranteed price plan” to be in writing. The bill re-designates them as “guaranteed price contacts” and defines them as including a fixed or capped price contract or any agreement in which there is a set per gallon price, unless certain circumstances occur. It defines a “capped price contact” as an agreement in which the cost to the consumer may not increase above a specified price per gallon but may be decreased under circumstances specified in the contract. It requires capped price contracts to specify how the price will or will not decrease in relation to the heating oil or propane commodities market. It defines a “fixed price contract” as an agreement in which the cost to the consumer is set at a specific price for the contract term.
The bill requires that guaranteed price contracts describe the circumstances in which the price may change. It provides that the guaranteed price contract requirements also apply to contract renewals or extensions.
The law prohibits home heating oil and propane gas dealers from entering into prepaid or capped price-per-gallon contracts with consumers unless they secure the contracts with either (1) futures or forwards contracts or similar commitments that allow them to purchase at a fixed price at least 80% of the oil or gas they commit to providing under all of their prepaid contracts or (2) a surety bond for at least 50% of the total amount they received from consumers under prepaid contracts. The bill defines “futures contracts” as a standardized, transferable, exchange-traded agreement that requires delivery of heating oil or propane at a specified price on a specified future date. It also allows dealers to securitize their sales with physical supply contracts and defines the term as an agreement for wet barrels or gallons of propane secured by the dealer from a wholesaler.
Under existing law, a dealer may also securitize his guaranteed price contracts with 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 their security for the effective life of the guaranteed price contracts, though they may be reduced to reflect payment and delivery.
The bill requires dealers to securitize their commitments within five days of receiving a 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 the entities that have secured their commitments, and (3) notify DCP at any time the security falls 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 to notify DCP of cancellation. (Cancelled futures contracts must already be reported under current law. )
Under the bill, the provisions of any home heating oil or propane contract for residential heating are not enforceable against the survivors upon the customer's death unless express assignment was accepted in writing.
EFFECTIVE DATE: October 1, 2009
§ 5 — CRIMINAL PENALTY
By law, a dealer who knowingly violates the law's requirements concerning contracts offering a guaranteed price commits a class A misdemeanor, punishable by a fine of up to $ 2,000, up to one year imprisonment, or both. The bill subjects anyone who knowingly violates these provisions to the penalty. The law provides that a person is criminally liable for conduct constituting an offense the person performs, or causes to be performed, in the name of or on behalf of a corporation or limited liability company to the same extent as if the conduct were performed in the person's own name or behalf (CGS § 53a-11).
The bill subjects anyone who violates the provisions (1) requiring dealers to register; (2) requiring residential heating contracts to meet the law's requirements, except those relating to guaranteed price contracts; or (3) the law requiring dealers to attest, when registering with DCP, that work will be performed by properly licensed tradesmen and to state their license numbers in their advertisements and printed stationery to a fine of up to $ 500 for a first offense, up to $ 750 for a second offense occurring within three years of the first offense, and $ 1,500 for a subsequent offense occurring within three years of a prior offense.
EFFECTIVE DATE: October 1, 2009
§ 6 — ENFORCEMENT
The law authorizes the DCP commissioner to suspend or revoke a dealer's registration if its holder (1) is grossly incompetent, engages in malpractice or unethical conduct, or knowingly makes false, misleading, or deceptive representations about his work; (2) fails to use residential heating contracts that meet the law's requirements; (3) violates the law's implementing regulations. The bill authorizes the commissioner to compel by subpoena the production of documents from a dealer or a provider of futures contracts, physical supply contracts, or other similar commitments and to suspend or revoke a dealer's registration for failing to comply with such a subpoena.
§ 7 — UNENFORCEABLE CONTRACT PROVISIONS
The bill also provides that none of these provisions would validate an otherwise unenforceable liquidated damages provision or clause in a consumer contract.
§ 8 — AUTOMATIC RENEWAL OF CERTAIN CONTRACTS
The law makes provisions in certain commercial refuse removal or disposal contracts that renew a contract for a specified amount of time unenforceable in court unless the person against whom the contract is to be enforced initialed or signed a conspicuous statement immediately following the renewal provision acknowledging the renewal. The law sets standards for the acknowledgement. The bill limits the application of this provision to contracts deemed renewed for more than one year. It additionally makes the contract provision unenforceable unless (1) the service provider, within 90 days of the end of the contract term, mails or delivers a notice to the customer's authorized representative notifying him or her of the renewal and (2) the customer, within 30 days of the mailing or delivery, does not provide a written statement to the service provider that he or she does not intend to renew the contract.
By law, these provisions do not apply to (1) consumer contracts subject to plain language requirements and (2) contracts in which the automatic renewal period is less than 32 days and can be cancelled without penalty or damages at any time. The bill also exempts an initial contract with a term of one year or less that includes a renewal contract with a specific length and the customer has initialed or signed a conspicuous statement immediately following the provision stating, in blod 12-point type “I acknowledge that this contract contains an AUTOMATIC RENEWAL provision. ”
The bill also limits contracts for refuse removal or disposal to one year unless the recipient of the services signs or initials a clear and conspicuous written statement.
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. ).
Plain Language Tests
The law requires all consumer contracts, defined as those having a value of $ 25,000 or less or to lease a residence, to be written in plain language and establishes two alternative tests for determining if the requirement has been satisfied. The subjective test requires the contracts to meet nine standards, such as using short sentences and paragraphs, everyday words, and readable type. The objective test has 11 standards, such as limiting the number of words per sentence to 50 and words per paragraph to 150, limiting the average number of syllables per word to less than 1. 55, and prohibiting type face smaller than eight points (CGS § 42-152).
Connecticut Unfair Trade Practices Act (CUTPA)
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.
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. It referred the bill to the Energy and Technology Committee, which favorably reported the bill unchanged.
General Law Committee
Joint Favorable Substitute
Joint Favorable Substitute
Energy and Technology Committee