Heating Oil Contracts: Beware of Fine Print and the Gamble of Price Locks

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Spring is the time to turn down your thermostat and enjoy the sun. It’s the time to get heating systems cleaned and serviced. And for many, it’s the time to renew their heating oil contract or find a better deal elsewhere for next heating season. Before signing the contract with your 2009-2010 heating oil supplier, the professionals at HEAT USA have some important advice that will help you spend less and get more for your money.

1. Read every word of your contract.
One-year contracts between a heating oil provider and a consumer are legal documents that may put restrictions on the consumer’s rights and absolve heating oil companies of important responsibilities. It is for this reason that you MUST read every word of your heating oil contract before you sign it. In most heating oil contracts, terms of delivery (such as price, minimum burn, and frequency of deliveries) are generally straightforward. But other parameters of the contract such as liability for damage to your system or property, the terms of service and repairs and the duration of the agreed-upon oil price can be incredibly complex and are often written in dreaded “fine print.”

Consider the recent experience of one member of HEAT USA as a cautionary tale: the homeowner received a promotional email from a major heating oil dealer in the Northeast and was intrigued by the offered price, so he visited the dealer’s website to find out more. While researching the dealer’s offer, the homeowner found that the price described in the email he received came with attached terms and conditions, as all contracts do. However, when the homeowner clicked on the “terms and conditions” link on the dealer’s website, text appeared in a pop-up window that he was unable to copy, save, or print. Later visits to the website and clicks on the “terms and conditions” link led him to an error message and blank web page. When the homeowner contacted the dealer by phone to request a written copy of the advertised contract including all of its terms and conditions, he was told to “look on the website.” It seems obvious that this particular dealer did not want potential customers reading the terms and conditions of its heating oil contract, probably because the contract is not favorable customers. In the past, this same dealer’s contract included such provisions as the dealer retaining the right to change the agreed upon oil price at any time “based on then prevailing market conditions”; the right of the dealer to automatically renew the contract when it expires under a new price; and the limitation of liability by the dealer—even in the case of negligence on the part of the dealer’s employees—to just $250.

Under those conditions, the dealer could change the “locked-in” price of oil whenever wholesale oil becomes too expensive for the dealer to make a profit. At the time of the contract’s expiration, the dealer would have the right to raise the retail price of oil in the contract and automatically renew the contract under that price without notifying the consumer. And if one of the dealer’s technicians made a mistake that resulted in the breakdown or even complete destruction of a client’s heating system, the dealer would only be obligated to pay the consumer $250.

The best way to avoid becoming a victim of such unfavorable contracts is to read every word of the contact and be sure you understand what it all means. Demand your own written copy of the heating oil contact including all applicable terms and conditions so you are able to spend time reading it and comparing it to other heating oil contacts. If you have a friend who is a lawyer, having him or her take a look at it couldn’t hurt either. For help comparing the contract you are considering to contacts offered through HEAT USA, call 1-888-HEAT USA (1-888-432-8872), and an Outreach Associate will help you find the pros and cons of both arrangements.

2. Understand that any price-lock or price-cap contract is a gamble.
Many heating oil dealers try to attract new customers in the spring by offering price-lock and price-cap contracts at rates that (at the time) look like great deals. It’s crucial to remember that today’s great price could be tomorrow’s highway robbery—it all depends on where the market price of oil goes. And nobody can possibly predict where prices might go tomorrow or next week, much less next winter. Price-lock and price-cap contracts amount to making a bet with your heating oil budget. Like any gamble, it could pay off and end up saving you money, but as anyone who locked in prices at $4 and $5 per gallon last summer can tell you, it could end up costing you more than you could have imagined.

HEAT USA members pay for their oil exclusively under the Fair Price Protection Plan, which limits the amount of profit dealers can take on the oil they sell rather than gambling on a specific price. 24 years of experience has taught the professionals at HEAT that the Fair Price Protection Plan is the most reliable and consistent way to save heating oil consumers money. To learn more about the Fair Price Protection Plan and other benefits of HEAT USA membership, call 1-888-HEAT USA (1-888-432-8872).

This article first appeared in the April 24, 2009 issue of the HEAT This Week newsletter.