Statement Regarding Forward-Looking Disclosure

This Quarterly Report on Form 10-Q includes "forward-looking statements" which represent our expectations or beliefs concerning future events that involve risks and uncertainties, including those associated with the effect of weather conditions on our financial performance, the price and supply of home heating oil, the consumption patterns of our customers, our ability to obtain satisfactory gross profit margins, our ability to obtain new accounts and retain existing accounts, our ability to make strategic acquisitions, the impact of litigation, our ability to contract for our current and future supply needs, natural gas conversions, future union relations and the outcome of current and future union negotiations, the impact of future environmental, health, and safety regulations, the ability to attract and retain employees, customer credit worthiness, counter party credit worthiness, marketing plans and general economic conditions. All statements other than statements of historical facts included in this Report including, without limitation, the statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere herein, are forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct and actual results may differ materially from those projected as a result of certain risks and uncertainties. Important factors that could cause actual results to differ materially from our expectations ("Cautionary Statements") include, but are not limited to, those set forth under the heading "Risk Factors" and "Business Initiatives and Strategy" in the Partnership's Annual Report on Form 10-K (the "Form 10-K") for the fiscal year ended September 30, 2008 and under the heading "Risk Factors" in this Quarterly Report on Form 10-Q. Without limiting the foregoing, the words "believe," "anticipate," "plan," "expect," "seek," "estimate" and similar expressions are intended to identify forward-looking statements. All subsequent written and oral forward-looking statements attributable to the Partnership or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. Unless otherwise required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Report.

Overview

The following is a discussion of the historical condition and results of operations of the Partnership and its subsidiaries, and should be read in conjunction with the description of our business in Item 1. "Business" of the Form 10-K and the historical Financial and Operating Data and Notes thereto included elsewhere in this Report.

In fiscal 2008, we completed our transition from a centralized customer service model to a more traditional customer service model in which the majority of our customer service calls are answered locally. We have implemented an employee staffed centralized call center to augment our internal staffing requirements for certain overflow, off-peak and weekend hours.

Current Economic Conditions Could Adversely Affect Our Results Of Operations And Financial Condition.

In 2008 and the beginning of fiscal 2009, economic conditions in the United States have experienced a downturn due to the sequential effects of the sub-prime lending crisis, general credit market crisis, the general unavailability of financing, collateral effects on the finance and banking industries, volatile energy prices, concerns about inflation, slower economic activity, decreased consumer confidence, reduced corporate profits and capital spending, adverse business conditions, increased unemployment and liquidity concerns.

Uncertainty about current economic conditions poses a risk as our customers may postpone spending in response to tighter credit, negative financial news and/or declines in income or asset values, which could have a material negative effect on the demand for the Partnership's equipment and services and could lead to increased conservation and the possibility of certain of our customers seeking lower cost providers. If adverse economic conditions persist, the Partnership could experience an increase in bad debts from financially distressed customers, which would have a negative effect on our liquidity, results of operations and financial condition. In addition, the current economic environment has increased our rejection rate of potential accounts due to unacceptable credit scores.

Seasonality

In analyzing our financial results, the following matters should be considered. Our fiscal year ends on September 30. All references to quarters and years respectively in this document are to fiscal quarters and years unless otherwise noted. The seasonal nature of our business results in the sale of approximately 30% of our volume of home heating oil in the first fiscal quarter and 45% of our volume in the second fiscal quarter of each fiscal year, the peak heating season. In addition, sales volume typically fluctuates from year to year in response to variations in weather, wholesale energy prices and other factors. Gross profit is not only affected by weather patterns but also by changes in customer mix. In addition, our gross profit margins vary by geographic region. Accordingly, gross profit margins could vary significantly from year to year in a period of identical sales volumes.

Degree Day

A "degree day" is an industry measurement of temperature designed to evaluate energy demand and consumption. Degree days are based on how far the average temperature departs from 65°F. Each degree of temperature above 65°F is counted as one cooling degree day, and each degree of temperature below 65°F is counted as one heating degree day. Degree days are accumulated each day over the course of a year and can be compared to a monthly or a long-term (multi-year) average, or normal, to see if a month or a year was warmer or cooler than usual. Degree days are officially observed by the National Weather Service and officially archived by the National Climatic Data Center. For purposes of evaluating our results of operations, we use the normal heating degree day amount as reported by the National Weather Service in our operating areas.

EBITDA and Adjusted EBITDA

EBITDA (Earnings from continuing operations before net interest expense, income taxes, depreciation and amortization) and Adjusted EBITDA are used as supplemental financial measures by management and external users of our financial statements, such as investors, commercial banks and research analysts, to assess:

• our compliance with certain financial covenants included in our debt agreements;

• our financial performance without regard to financing methods, capital structure, income taxes or historical cost basis;

• our ability to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners;

• our operating performance and return on invested capital as compared to those of other companies in the retail distribution of refined petroleum products business, without regard to financing methods and capital structure; and

• the viability of acquisitions and capital expenditure projects and the overall rates of return of alternative investment opportunities.

Adjusted EBITDA is calculated as earnings from continuing operations before net interest expense, income taxes, depreciation and amortization, (increase) decrease in the fair value of derivatives, gain or loss on debt redemption, goodwill impairment, and other non-cash and non-operating charges. Management believes the presentation of this measure is relevant and useful because it allows investors to view the Partnership's performance in a manner similar to the method management uses, and makes it easier to compare its results with other companies that have different financing and capital structures. In addition, this measure is consistent with the manner in which the Partnership's debt covenants in its material debt agreements are calculated and investors measure its overall performance and liquidity, including its ability to pay quarterly equity distributions, service its long-term debt and other fixed obligations and fund its capital expenditures and working capital requirements. This method of calculating Adjusted EBITDA may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP.

Per Gallon Gross Profit Margins

We believe the change in home heating oil margins should be evaluated on a cents per gallon basis, before the effects of increases or decreases in the fair value of derivative instruments, as we believe that realized per gallon margins should not include the impact of non-cash changes in the market value of hedges before the settlement of the underlying transaction.

A significant portion of our home heating oil volume is sold to individual customers under an arrangement pre-establishing the ceiling sales price or a fixed price of home heating oil over a fixed period. We currently purchase option contracts, swaps and futures contracts for a substantial majority of the heating oil that we expect to sell to these price-protected customers when the customer makes a purchase commitment for the next period. The amount of home heating oil volume that we hedge per price-protected customer is based upon the estimated fuel consumption per average customer, per

month. In the event that the actual usage exceeds the amount of the hedged volume on a monthly basis, we could be required to obtain additional volume at unfavorable margins. In addition, should actual usage in any month be less than the hedged volume, our hedging losses could be greater.

Fixed Priced Customers

During the four months ended January 31, 2009, we estimate that approximately 10,700 of our fixed price customers as of September 30, 2008 (equal to approximately 2.7% of our home heating oil customer base) that entered into a fixed price arrangement during the period from April 1, 2008 to October 31, 2008 have either renegotiated their fixed price (approximately 7,500 customers) or switched to a competitor (approximately 3,200 customers) as a result of significant decreases in the price of home heating oil. Based on renegotiations and terminations through February 1, 2009, we believe that the impact of this development on our net income in fiscal 2009 will be significantly less than the $3.0 million previously estimated in December 2008. If home heating oil prices continue to fall and/or more fixed price customers decide to renegotiate their fixed price arrangement or seek another supplier, we expect that our profitability would be adversely impacted. However, due to the numerous variables and uncertainties involved we cannot reasonably estimate at this time the amount of such impact, although such impact could be material.

Derivatives

SFAS No. 133, established accounting and reporting standards requiring that derivative instruments be recorded at fair value and included in the consolidated balance sheet as assets or liabilities. To the extent derivative instruments designated as cash flow hedges are effective, as defined in SFAS No. 133, changes in fair value are recognized in other comprehensive income until the forecasted hedged item is recognized in earnings. Currently, the Partnership has elected not to designate its derivative instruments as hedging instruments under SFAS 133, and the change in fair value of the derivative instruments are recognized in our statement of operations. Therefore, we experience great volatility in earnings as outstanding home heating oil derivative instruments are marked to market and non-cash gains and losses are recorded prior to the sale of the commodity to the customer. To the extent that the Partnership continues this accounting treatment, the volatility in any given period related to unrealized non-cash gains or losses on derivative home heating oil instruments can be significant to the overall results of the Partnership. However, we ultimately expect those gains and losses to be offset when they become realized.

Volatility in Home Heating Oil Prices

The wholesale price of home heating oil has been extremely volatile over the last several years. During fiscal 2008, new record highs for home heating oil were achieved many times. Wholesale home heating oil prices in the last 15 months have both increased by over $2.00 and decreased by over $2.80 per gallon. Our liquidity is adversely impacted in times of increasing heating oil prices, as the Partnership must use cash to pay for its hedging requirements and to fund a portion of the increased levels of accounts receivable and inventory. Our liquidity is adversely impacted at times of decreasing heating oil prices due to the increased margin requirements for futures contracts and collateral requirements for swaps that we use to manage market risks related to our fixed price customers and physical inventory. Consumer awareness of all energy costs, including home heating oil, is increasing. This heightened awareness has increased customer losses and hindered our ability to attract new customers, as many new price-conscious customers seek out the lowest price providers regardless of the level of service they provide or their financial stability. We also have experienced a reduction in volume of home heating oil sold due to conservation efforts by our customers, and we expect that this trend will continue.

Weather Insurance Contract - Warm Weather

Weather conditions have a significant impact on the demand for home heating oil because our customers depend on this product principally for space heating purposes. Actual weather conditions can vary substantially from year to year, significantly affecting our financial performance. Furthermore, warmer than normal temperatures in one or more regions in which we operate can significantly decrease the total volume we sell and the gross profit realized on those sales and, consequently, our results of operations. We purchased weather insurance to help mitigate the adverse effect of warm weather on our cash flows for the period from November 1, 2007 to February 29, 2008, taken as a whole and for the period November 1, 2008 to February 28, 2009, taken as a whole. The strike or "pay-off" price is based on the 10-year moving average of degree-days for the contract period and has been set at approximately 3% less than the 10 year moving average. For every degree-day not realized below the strike-price we are entitled to receive $35,000, up to a maximum of $12.5 million. Based on temperatures through January 31, 2009 we do not anticipate realizing any benefit from our weather insurance contract in fiscal 2009. Currently, we do not have weather insurance beyond February 28, 2009.

Accounts Receivable

As of December 31, 2008, the Partnership's accounts receivable balance was $147.9 million (net of allowance) and represents a decrease of 20.4% when compared to the balance as of December 31, 2007 of $185.8 million (net of allowance). Day's sales outstanding as of December 31, 2008, declined to 35.3 days, when compared to the level at December 31, 2007 of 38.5 days. Included in the gross accounts receivable balance as of December 31, 2008 are amounts due that are 90-days in arrears of $19.9 million. As of December 31, 2007, the comparable amounts due from customers 90 days in arrears was $12.8 million. The Partnership is actively collecting these past due accounts and has established a reserve based on historical data and current economic and pricing conditions. Given the current economic conditions, the collection of these amounts could prove to be more difficult than in the past and bad debt expense could increase.

Customer Attrition

We measure net customer attrition for our full service residential and commercial home heating oil customers. Net customer attrition is the difference between gross customer losses and customers added through internal marketing efforts. Customers purchased in acquisitions are not included in the calculation of gross customer gains, but are factored on a pro-rata basis in the denominator when calculating the percentages of gross customer gains and losses. Gains and losses at acquisitions since the acquired date of the acquisition are included in the calculation of net customer attrition. Gross customer losses are the result of a number of factors, including price competition, move-outs, service issues, credit losses and conversions to natural gas. When a customer moves out of an existing home we count the "move out" as a loss and if we are successful in signing up the new homeowner, the "move in" is treated as a gain.

Gross customer gains and gross customer losses

                                            Three Months Ended
                                                December 31
                                             2008         2007
                   Description
                   Gross Customer Gains      26,300       22,000
                   Gross Customer Losses    (31,800 )    (27,500 )

                   Net Customer Loss         (5,500 )     (5,500 )

Net customer attrition as a percentage of the home heating oil customer base

For the three months ended December 31, 2008, gross losses increased to 7.9% versus 6.6% for the three months ended December 31, 2007, largely due to heightened consumer price awareness.

                                            Three Months Ended
                                                December 31
                                           2008            2007
                 Description
                 Gross Customer Gains         6.5 %           5.3 %
                 Gross Customer Losses       (7.9 )          (6.6 )

                 Net Customer Attrition      (1.4 )%         (1.3 )%

We lost 5,500 accounts during the three months ended December 31, 2008 (net), or 1.4% of our home heating oil customer base, as compared to the three months ended December 31, 2007 in which we lost 5,500 accounts (net), or 1.3% of our home heating oil customers. The increase in gross customer gains was primarily due to the success of our customer and employee referral programs, and selective media advertising. The increase in gross customer losses was primarily due to

price and credit-related losses and conversions to natural gas. During the three months ended December 31, 2008, the Partnerships' account losses (mostly price and credit) were adversely impacted by approximately 2,600 customers who decided to terminate their fixed price arrangement and switched to a competitor.

We believe that the continued adverse economic conditions and price volatility will adversely impact our ability to attract customers and retain existing customers in the future.

Results of Operations

The following is a discussion of the results of operations of the Partnership and its subsidiaries, and should be read in conjunction with the historical Financial and Operating Data and Notes thereto included elsewhere in this Quarterly Report.

Volume

For the three months ended December 31, 2008, retail volume of home heating oil decreased by 3.6 million gallons, or 3.1%, to 109.6 million gallons, as compared to 113.2 million gallons for the three months ended December 31, 2007. An analysis of the change in the retail volume of home heating oil, which is based on management's estimates, sampling and other mathematical calculations, is found below:

            (in millions of gallons)                      Heating Oil
            Volume-Three months ended December 31, 2007         113.2

            Impact of colder temperatures                         9.4
            Net customer attrition                               (5.4 )
            Acquisitions                                          2.2
            Conservation and other                               (9.8 )

            Change                                               (3.6 )


            Volume-Three months ended December 31, 2008         109.6

Temperatures in our geographic areas of operations for the three months ended December 31, 2008 were 8.3% colder than the three months ended December 31, 2007 and approximately 3.3% colder than normal, as reported by the National Oceanic Atmospheric Administration ("NOAA"). For the twelve months ended December 31, 2008, net customer attrition was 4.4 %. Volume of other petroleum products for the three months ended December 31, 2008 was 11.3 million gallons, which was 4.4 million gallons, or 28.1% lower than the volume of other petroleum products sold during the three months ended December 31, 2007.

Product Sales

For the three months ended December 31, 2008, product sales decreased $51.2 million, or 12.8%, to $349.7 million, as compared to $401.0 million for the three months ended December 31, 2007, due to lower home heating oil selling prices and volume which was partially offset by $4.5 million in liquidated damages that the Partnership billed to customers electing to renegotiate their protected price arrangement or switch to a competitor.

Installation and Service Sales

For the three months ended December 31, 2008, service and installation sales decreased $4.3 million, or 8.2%, to $48.6 million, as compared to $52.9 million for the three months ended December 31, 2007, largely due to a decline in new equipment sales as we believe that consumers were generally reluctant to replace their heating systems given the current economic environment.

Cost of Product

For the three months ended December 31, 2008, cost of product decreased $69.7 million, or 21.8%, to $249.5 million, as compared to $319.2 million for the three months ended December 31, 2007, due to a decrease in wholesale product costs and a decrease in home heating oil volume sold.

We believe that the change in home heating oil margins should be evaluated before the effects of increases or decreases in the fair value of derivative instruments, as we believe that realized per gallon margins should not include the impact of non-cash changes in the market value of hedges before the settlement of the underlying transaction. On that basis, home heating oil margins for the three months ended December 31, 2008 increased by $0.1920 per gallon to $0.8837 per gallon in the three months ended December 31, 2008, from $0.6917 per gallon realized in the three months ended December 31, 2007. The Partnership utilizes weighted average cost to value its home heating oil. Due to the rapid decline in home heating oil prices during the three months ended December 31, 2008, the Partnership's inventory was valued higher than the wholesale market price at December 31, 2008. As a result, product gross profit was favorably impacted by $6.9 million during the three months ended December 31, 2008 and home heating oil per gallon margins were favorably impacted by 6.3 cents per gallon then if the inventory was valued at the December 31, 2008 wholesale market price.

The Partnership expects that product gross profit and per gallon margins will be negatively impacted by $6.9 million at some point during fiscal 2009 once home heating oil prices stabilize and the value of its inventory on a weighted average cost basis is closer or equal to the wholesale market price. In addition, the majority of our ceiling, or capped, price-protected customers were priced at their maximum (ceiling) selling price during the three months ended December 31, 2007. Conversely, during the three months ended December 31, 2008, wholesale home heating oil prices declined by over $1.46 per gallon from the beginning of the period. In addition, the Partnership increased margins, in part to offset the effect of an increase in it's annual operating expenses.

The percentage of home heating oil volume sold to residential variable price customers decreased to 39.0% for the three months ended December 31, 2008, as compared to 46.4% for the three months ended December 31, 2007. The percentage of home heating oil volume sold to residential price-protected customers increased to 46.2 % for the three months ended December 31, 2008, as compared to 38.8% for the three months ended December 31, 2007. For the three months ended December 31, 2008, sales to commercial/industrial customers represented 14.8% of total home heating oil volume sales, unchanged from three months ended December 31, 2007.

For the three months ended December 31, 2008, total product gross profit (product sales less cost of product) increased $22.9 million, as compared to the three months ended December 31, 2007, due to the impact of using weighted average inventory costs to value our home heating oil inventory, the change in market conditions experienced during the three months ended December 31, 2008 compared to the three months ended December 31, 2007, the required increase in gross profit to mitigate the increase in operating costs, and higher fixed price account income from liquidated damages.

(Increase) Decrease in the Fair Value of Derivative Instruments

During the three months ended December 31, 2008, the decrease in fair value of derivative instruments resulted in the recording of a $36.9 million charge due to the expiration of certain hedged positions or their realization to cost of product ($9.6 million credit), and a decrease in the market value for unexpired hedges ($46.5 million charge).

During the three months ended December 31, 2007, the increase in fair value of derivative transactions resulted in the recording of a $17.8 million net credit due to the expiration of certain hedged positions or their realization to cost of product ($2.4 million credit), and an increase in the market value for unexpired hedges ($15.4 million credit).

Cost of Installations and Service

During the three months ended December 31, 2008, cost of installations and service decreased $3.5 million, or 6.7%, to $49.0 million, as compared to $52.5 million for the three months ended December 31, 2007, due to the decline in installation sales, which management believes was due to the adverse economic conditions. Management views the service and installation department on a combined basis because many expenses cannot be separated or allocated to either service or installation billings. Many overhead functions and direct expenses such as service technician time cannot be precisely allocated.

Installation costs were $16.5 million, or 86.7% of installation sales during the three months ended December 31, 2008, and were $19.7 million, or 83.2% of installation sales during the three months ended December 31, 2007. Service . . .