Press Releases

08/04/2015

Understand Your Options When Considering a Heating Fuel Contract

HARTFORD, August 4 – Given the temperature outside, heating fuel may not be on the minds of most people. But choosing a home heating fuel company for next winter should not be a last-minute decision. Over the coming weeks, homeowners are likely to receive mailers from companies with heating fuel offers. Advertisements on radio, television, the internet and social media will urge consumers to “lock in” their fuel plans for the best price and service. If you already have an established relationship with a home heating fuel supplier whom you trust, you should have few concerns. But heating fuel plans have variables and risks that need to be considered carefully now to avoid serious worries later.

“Read and understand all the terms of any heating fuel plan that’s being offered,” Consumer Protection Commissioner Jonathan A. Harris said today. “Only you can decide whether a plan offers the terms that fit your unique situation. Remember, in signing an agreement with a fuel company, you are entering into a contract that will affect you for months to come.”

Some heating fuel dealers offer price protection programs in the form of fixed price contracts, cap price contracts, pre-buy programs and budget plans. Before entering into an agreement, make sure you understand each of these options.

Typically, with a “fixed price contract,” you agree to pay a specific price per gallon of oil or propane for the heating season. The price is agreed upon in advance, and does not change, even if the “market” price for fuel goes up or down. If market prices do run higher during the season, you’ll save money. But if prices are lower, you must continue to pay the agreed-upon price.

A “cap price contract,” places a ceiling on the top price per gallon that you will pay during the contract’s term, while potentially allowing you to pay a lower price per gallon when market prices drop below the cap price.

A “pre-buy program,” allows you to pay for fuel now and have it delivered later. In a pre-buy program, you and the fuel company agree before the heating season on a price and amount of fuel that you will buy for that season. You pre-buy that fuel. You then have a claim on that amount of fuel for the time period of the contract and should expect that it will be delivered to you. Although you may save money with a pre-buy program, it can be risky.  Companies that have miscalculated their price or supplies have been known to run out of fuel or even go out of business, leaving pre-buy customers out in the cold.  Also, when pre-buying fuel, keep in mind that global fuel markets are always in flux and, while it may seem that prices are at their lowest now, that may not end up being the case. Connecticut fuel prices were actually lower in December 2014 than they had been in the months leading up to winter. Once you pre-buy your fuel, you are committed to that price even if market prices drop.

By law, pre-buy contracts may only be signed between April 1^st and October 31^st.  No pre-pay contracts can be signed during the heating season from November 1^st through March 31^st.  This limitation helps protect consumers against a company unfairly using them to supply cash to a struggling business, with high risk that the consumers will not get the price or the fuel for which they negotiated.

A “budget plan contract” usually requires a fixed monthly payment, regardless of the amount of oil or propane that you use during the contract period, which is usually one year. The total you spend on fuel over a year may be the same as in the past, but your payments will be spread over 9 to 12 months rather than all at once during the winter. Fuel on a budget plan may be assessed at the market price on the actual day of delivery, or may be part of a cap or fixed price plan.

Many dealers require some advance payment to qualify customers for participating in their price protection programs. Check with your credit card company to confirm that if you pay by credit card, you will be entitled to recovery payments if heating fuel is not delivered in accordance with the contract.

“Before you sign a contract with a fuel company, read it thoroughly,” Harris said. “You should always be careful about what you sign. Contracts must be in writing and must be in plain language. If you cannot understand what the contract says, have someone else look at it before you sign it. Once you sign a contract, you are agreeing to its terms.”

Keep a copy of the contract and any of the company’s solicitations or advertisements that came with the offer. Your contract must include, at a minimum, the following five items.

• the total amount the consumer is required to pay to the company
• the start and end date of the contract
• the maximum number of gallons committed to the consumer
• the steps the dealer has taken to make sure that a sufficient amount of fuel will be available to cover all of his or her price protection contracts

Read more important information about heating fuel contracts in the Department’s fact sheet at http://www.ct.gov/dcp/lib/dcp/pdf/publications/fuel_contracts_2015c.pdf

-end-

Media Contact: Claudette Carveth

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