Heating Oil Contracts – What You Should Know Before Signing
Over the last 10 years the price of heating oil has climbed from just over $1.13 per gallon to $2.94 per gallon*. Heating your home is now a significant household expense that requires planning, budgeting and importantly, knowing your options and risks. Each year, a substantial number of homeowners consider the option of committing to a heating contract or price protection plan. Since a heating oil contract is legally binding, before you put pen to paper, here are a couple of important things to consider.
How does your company “risk manage” their heating oil price protection program?
Every year it seems at least one company is unable to keep its promise and deliver the gallons they owe their customers. This is especially criminal when the customer has prepaid for fixed price gallons and is left out in the cold looking for another heating supplier. Before signing a contract, ask your company how they manage their price protection program and if they purchase gallons in advance so they can honor their commitments to their consumers. A reputable company will purchase the gallons for your contract in advance for consumption throughout the heating season. If a heating oil company doesn’t purchase the gallons and the market price spikes, they will not have the funds to purchase oil on your behalf and therefore, they cannot afford to deliver the gallons specified in your contract.
What are the penalties or fees for under lifting?
Each contract specifies a number of gallons a customer agrees to purchase. If the market price decreases and a customer had committed to a significantly higher fixed price, he may be tempted to shop around for a lower price from another dealer. But since the heating oil company purchased the gallons for your contract in advance, you are required to take full delivery throughout the heating season of the gallons as agreed in the contract. Failure to take all of your contracted gallons may result in substantial liquidated damages. Make sure you review the contract and understand how liquidated damages are calculated.
Heating contracts and price protection plans are complicated agreements, primarily because there is a lot of money at risk for both the customer and the heating oil company. If you’re interested in price protection, do you homework, educate yourself to the requirements and risks associated with any home heating oil contract.
*Source: Mass state average in Jan 3/2000 vs. Jan 4/2010 as per US Energy Information Administration
Learn more about signing price protection contracts at http://www.clickfil.com Cindy Burke works for Clickfil a new type of heating oil company in the Boston area offering lower prices every day and the simple convenience of doing all your heating oil business online, when and where it’s convenient for you.
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