Attorney General's Opinion

Attorney General, Richard Blumenthal

February 27, 2006

The Honorable M. Jodi Rell, Governor
State of Connecticut
State Capitol
Hartford, CT 06106

Dear Governor Rell:

I am writing in response to your request that I review the proposal for needy Connecticut citizens to receive heating oil assistance from Citizens Energy through its agreement with CITGO, a major oil refiner in the <st1:country-region>United States</st1:country-region> owned by a company controlled by the Venezuelan government.  You asked that I address the “legality of the state of Connecticut sanctioning participating in this program,” including, in particular, whether there are any antitrust issues.

My review indicates no legal impediment to this proposal.  Neither the state of Connecticut nor its agencies are involved in sanctioning or aiding the program.  Further, current information reflects no antitrust concerns.

The third largest refiner in the <st1:country-region>United States</st1:country-region>, CITGO is wholly owned by the national oil company of <st1:country-region>Venezuela</st1:country-region>.  CITGO has offered to sell -- over a period of weeks -- about 4.8 million gallons of heating oil to Citizens Energy, a Boston-based non-profit energy company, at a 40% discount from the wholesale price of heating oil.   Citizens Energy will immediately sell the heating oil at the full wholesale price to Global Oil, a large heating oil wholesaler.  Pursuant to its agreement with CITGO, Citizens Energy will use the profits from the sale of this oil to provide financial assistance to heating oil customers in Connecticut.

According to Citizens Energy, the heating oil relief program will be modeled after existing programs in Vermont, Delaware, Rhode Island and the Philadelphia region.   Citizens Energy has provided a copy of the agreement with the Rhode Island Community Action Association (RICAA), which will serve as a template for the agreement with its Connecticut counterpart -- the Connecticut Association For Community Action (CAFCA), an umbrella organization for the twelve local Community Action Partners (CAPs).  Such local agencies are non-profit, private organizations dedicated to assisting low income people.  Their programs include DSS funded activities as well as programs funded through private sources or federal grants. 

Under this agreement, Citizens Energy will provide financial assistance to Connecticut consumers who are eligible for the federal Low Income Heating and Energy Assistance Program (LIHEAP) but have exhausted their LIHEAP benefits.  Out of approximately 24,000 LIHEAP recipients in Connecticut, 15,000 will exhaust their benefits.  Citizens Energy funds will be used to pay 40% of the CAPs clients’ bills for heating oil.  The maximum amount of funding for the entire program will be the profits that Citizens Energy earns on the sale of the 4.8 million gallons of heating oil.

Once the agreement is signed, the CAPs will send a letter to their client list of LIHEAP eligible households telling them that they are now eligible for the Citizens Energy/CITGO benefits.   A similar letter will be sent to the heating oil dealers that participate in the LIHEAP program.    When a client needs heating oil,  he will contact his usual heating oil dealer, notify the dealer that he is participating in the CITGO program and arrange for delivery of heating oil.  The client will pay 60% of the bill, which should reflect the normal retail delivery price for that day.  The heating oil company will send an invoice for the remaining 40% to Citizens Energy.   Citizens Energy will then send a check to the heating oil companies for the 40% amount in their invoices.  The CAPs will be reimbursed for their administrative costs by Citizens Energy.  The benefits are limited to 200 gallons of heating oil per customer.

Once Citizens Energy’s Connecticut fund is nearly depleted, Citizens Energy will ask CAFCA to notify its clients and participating heating oil dealers that the program will no longer accept deliveries after a certain date.

In essence, this proposal involves two non-profit, private organizations -- Citizens Energy and the Connecticut Association For Community Action -- in an agreement providing financial assistance and low-cost heating oil to needy Connecticut citizens.  No state action or approval is necessary.  No concern should exist about whether the state is aiding or sanctioning it. 

Individual community action agencies contract with the Department of Social Services (DSS) to implement a variety of programs that benefit indigent or low-income Connecticut residents, including LIHEAP, but they remain private, non-profit organizations.  Additionally, while each of these CAPs are designated as a community action agency by DSS pursuant to Conn. Gen. Stat. § 17b-885 and must submit a community action plan to DSS for approval,  a community action agency may receive private, state and federal funding for programs that meet the goals of the community action program.  Conn. Gen. Stat. § 17b-888. 

Under this proposal, the limited funds that would be received by the CAPs in their role as private non-profit organizations (the administrative fee for processing the invoices) would not be subject to DSS review or approval because the funds and the contract are not part of a DSS funded program.  Use of the heating oil assistance funds clearly would be consistent with the goals of the CAPs to provide assistance to needy or low-income individuals.  If DSS has any concern that this program may overlap with programs that it funds, it could simply discuss and resolve those concerns with the CAPs.

You also asked whether any antitrust issues are raised by this transaction.   The proposed agreement involves Citizens Energy and CAFCA -- two non-profit organizations that are not engaged in commerce or in the state heating oil market.  It implicates no anti-competitive issues relating to impact on market share or pricing.  Accordingly, based on current information, the program raises no plausible antitrust claims.

As a matter of policy or political perspective, there may be sound reason to have reservations about the source of this assistance -- a company effectively owned by a foreign government that may have questionable policies or motives.  There is also sound reason to be critical of Congress, whose ill-advised neglect makes this assistance necessary.  As a matter of law, there is no reason to decline or disapprove it.  Indeed, it fills an unfortunate, profoundly important need for our citizens, consistent with our laws.

I trust this opinion addresses your concerns.

Very truly yours,

RICHARD BLUMENTHAL

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