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Heating Fuel Contracts - Bad Idea?

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Is signing up for a heating fuel contract a good idea, or a bad idea? There is no fast and easy answer.

Deciding on a contract for heating oil or propane probably boils down to several key questions: Can you afford to pay for heating fuel if prices increase over the course of the season? Are you conscientious about monitoring the price of heating oil or propane? Do you know the right questions to ask a vendor?


When a representative from a large mid-Atlantic vendor was asked what advice she would give her customers, she said “Be aware that the price of heating oil and propane can fluctuate daily.”

Of course, with any contract, you want to make sure you review it carefully before you sign it.

Questions to Ask Heating Oil and Propane Vendors about Fuel Contracts

For the most part, the duration of heating fuel contracts cover 12 months. However, you may find some vendors that offer contracts that cover up to 24 months. For any type of contract, you might pay a sign-up fee and an early-termination fee.

Consider asking a vendor questions about contracts and other contract related issues:

  • Contracts: Ask the vendor what types of contracts they offer?

No Contract -  If you opt for no contract, you’ll pay the market rate. If fuel prices are falling, you’re safe. If they appear to be rising, this may not be the best option. You’ll pay the market rate, which could drastically rise, each time a vendor fills up your tank.

Ceiling -  When prices are dropping, vendors are more likely to offer ceiling contracts. These type of contracts cap the rate at a per-gallon price, but will also charge you less per-gallon should rates drop.

Fixed -  These types of contracts can be a gamble. You don’t want to be locked into a higher rate if the price of heating fuel drops. Price protection is another name for this type of contract. Make sure that the contract does not have a clause that allows the vendor to raise your rates if heating fuel prices increase drastically.

Pre-paid -  If you chose this contract, you’ll pay, upfront, the number of gallons the vendor estimates you’ll need for the duration of the cold season. Often, if you used fewer gallons than estimated, the dollars remaining on your contract will be applied towards the cost of next year’s contract. The vendor may also require that you purchase a minimum number of gallons for this type of contract. Be careful, some of these contracts include clauses that state you will be invoiced a per-gallon processing fee on all undelivered contracted gallons.

 You should also ask the vendor what safeguards they take to ensure that they can deliver the amount of propane they’ve committed to in your contract.

  • Discounts: You might receive discounts for automatic delivery, bulk or volume purchase, electronic funds transfer, senior, pre-paid, new customer, and Veteran. Discounts on the first fill are common. Potentially, you could also pay less per-gallon the more you buy at any one time.
  • Budget Payments: Budget payments allow you to more easily plan for your monthly costs. Level pay is another term used for these types of payments. Instead of paying huge heating bills during the cold season, you can even out the payments over a prescribed period of time.
  • Automatic Delivery versus Will Call: Some vendors will not offer will call. Ask the vendor if they track your usage to help determine when to make an automatic delivery.
  • Fees and Charges: The vendor may charge a signing fee, but more importantly, they will often charge early-termination fees. Vendors can charge hundreds of dollars to cancel your contract before its end date.

A service rep working for a major vendor in the northeast, quoted these early-termination fees: “You’ll pay an early-termination fee of $599.00 for a fixed rate one-year contract, $199.00 for a two-year ceiling contract, and $99.00 for a one-year ceiling contract.”

Make sure you keep copies of your contract. In some cases, when vendors merge or have been acquired by new owners, contracts can be lost.

Saving a Few Bucks Isn’t Always a Good Reason to Change Heating Oil or Propane Vendors

As with all relationships in life, the relationship with your heating fuel vendor is also important. You want to consider service and safety, as well. Sometimes you’re willing to pay more because you trust and like your vendor, and forecasting your fuel usage with a new vendor may not be as accurate.

Vendors Who Don’t Honor Your Contract

If you believe that a heating fuel vendor is not meeting the terms of your contract or is engaging in unfair or deceptive practices, call the Department of Consumer Protection at (860) 713-6160. When necessary, the Department has brought action against these unscrupulous vendors to ensure that they honor their contracts.

Click here to see current prices and reviews of local heating oil companies provided by customers like you.

For additional information:

Read this article for an explanation of why fewer customers than ever signed fixed rate contracts in 2014.

Visit this website to understand heating oil and why its price can fluctuate so often and so drastically.

See 2015 pricing statistics for heating oil and propane collected by the U.S Energy Information Administration.


Find a better deal on heating oil or propane from local vendors in 30 seconds or less:

Fuelwonk recommends comparing local vendor propane and heating oil prices before you make the decision to fill up your home tank - use our online comparison tool to find the best offers in your area.

Have questions about heating oil or propane, choosing the right vendor, or heating your home economically?
See our collection of tips and articles:

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