News Release:                                                                        November 4, 2008

 

Home Heating Customers’ Concerns with Fixed Price Contracts

 

With the unexpected and significant drop in crude oil prices, there has understandably been considerable concern and frustration expressed by consumers who entered into fixed price heating fuel contracts at the higher prices in effect in the Spring and Summer.  These fixed price contracts for fuel oil or propane take a variety of forms – including prebuy, budget, and installment agreements.  Home heating retailers are sympathetic to the plight of their customers who have fixed price fuel contracts at prices higher that than the current market.  In fact, the retailers and the customers are both in the same boat in this respect.  Here are some facts to consider.

 

To secure the fuel required for customers who choose to purchase a fixed price heating fuel contract, the home heating retailer enters into a fixed price contract for the heating season with its wholesale suppliers.  In fact, many states require by law that retailers secure their obligations to fixed price customers.  Typically this is done through the retailer’s own fixed price contracts with its suppliers.  When the price drops as it currently has, the wholesale suppliers do not lower the prices that the retailers must pay or reduce the quantity of fuel they must purchase under these agreements.  Consequently, retailers are not able to lower the price for their customers or release them from their obligations to take deliveries of fuel at the previously agreed upon price.

 

Fixed price heating fuel contracts are intended to provide stability and certainty to customers through the heating season.  They have never been a guaranty of cost savings as it is impossible to predict whether markets will go up, down or stay the same.

 

In recent years, customers have saved considerable money by purchasing fixed price contracts.  In those rising price markets, retailers honored their commitments to their customers and delivered the product at the price agreed to.

 

Home heating retailers are working hard to keep their customers warm this winter.  As they have always done, retailers will live by their fixed-price commitments to their suppliers and their customers.  Retailers trust that their customers understand how critical it is that they honor their fixed- price commitments. This means making payments as agreed to and accepting deliveries from their retailer in accordance with their fuel requirements.  And while we can make no predictions, who really knows where prices will end up this winter once the cold weather arrives.

 

Most New England States Energy Offices and Departments of Consumer Protection have information available on their web sites regarding fixed price fuel contracts.  If you need additional information please contact Joe Rose at the Propane Gas Association of New England.   jrose@pgane.org or 401-254-2331.