Tips on Evaluating a Home Heating Oil Contract

Q.      Last year my mother bought a prepaid oil contract and it worked out okay.  This year we are checking several different oil providers.  Only two companies have sent a copy of their contract for us to review.  It seems they want her to agree on the phone and take her verbal commitment as a binding agreement.  We have not agreed to anything at this point.  What should we be aware of before locking into a contract?  L.G. Ivyland

A.      The most important decision is to make sure you understand all the terms of the contract. 

Make sure there is never an automatic renewal of the terms when the contract expires.  Remember when your contract starts and when it is finished.  Most contracts have a terms and conditions section that includes a financial penalty for canceling a contract. 

A really important part of your contract outlines what happens if you use less fuel than you prepaid for.  That needs to be spelled out. 

Most companies offer a pre-pay program that will lock the consumer in at a certain price for the entire year.  However if the price of oil drops you are still stuck paying the higher price. 

That is where the CAP programs come into play.  A cap protection is usually a two or three hundred dollar upfront fee that guarantees the agreed upon price and if the price of oil drops so will your cost.  However, if it rises, the cap guarantees that the price will not exceed your agreed-upon price per gallon. 

There are also budget programs that allow you to pay each month for twelve months at a set price per gallon.  If you have a cap with that program you will likely be assured that the price will not go up and that if the price goes down you will get the lower price. 

There is also the automatic delivery market price.  Basically, you are signed up for the year to get deliveries automatically and you will be billed at the market price for that day. 

There is also the option of just paying cash on delivery from anyone you choose to use.  There is usually a minimum delivery required with this option.  The price you pay will be market price. 

We encourage every consumer to ask questions before agreeing to anything.  Make no commitment until you know the costs and penalties and understand the terms fully.