Breaking Pre-Paid Home Heating Oil and Gas Contracts

If you are one of the thousands of consumers across the country that have pre-paid their home heating oil for the winter season, there is a good chance that you are discouraged in the recent price decline of home heating oil.

In some cases, homeowners “locked-in” their rates between $4.00 and $5.00 per gallon while their neighbors are topping off their tanks at spot day rates of $2.00-$2.50 per gallon.

While each pre-paid home heating oil contract is different, there may be options available to fulfill your contractual obligations while saving money on your heating oil, propane, and natural gas costs.

Refusal of Delivery Penalty:
Many oil, propane, and natural gas, delivery companies have a clause in their pre-paid delivery contracts that you cannot refuse a delivery. Penalties for refusing a delivery can vary but seem to range between $.50 and $1.00 per gallon.

If the price difference between your contract’s delivery price and the “day rate” price per gallon is more than your delivery refusal penalty, it may be worth paying the penalty and having your oil company (or another company) deliver the oil to your home as part of a normal delivery.

Third Party Oil Deliveries:
In some cases, pre-paid home heating oil contracts say that you “cannot refuse a delivery”, but say nothing that prevents homeowners from topping off their tank with another oil delivery company.

The cost of your prepaid home heating oil contract is dependent on the estimated amount of oil or gas your home burns during the heating season multiplied by the unit price of the fuel. Generally your payment goes into an individual account maintained by the delivery company, and in some cases the account bear interests.

Any unused funds from your pre-paid account are generally returned to you at the end of the heating season or rolled over in an interest bearing account until next season. You can take advantage of lower delivery day rates from other companies, while still meeting the obligations of your prepaid contract.

Make sure you have a lawyer review your contract before making any decisions.

Alternative Heating Sources:
If your contract forbids you from seeking third party fuel deliveries, or your “delivery refusal penalty” is too high, you may still be able to consider alternative heating sources as a way to reduce the amount of “expensive” home heating oil you use.

If you have a wood or pellet stove sitting idle in your home, it may be worthwhile to fire it back up! Every gallon of home heating oil that you can avoid using can result in huge energy savings. The pre-paid funds in your account will remain and can be used when your renegotiate your heating oil contracts for next year.

You can also reduce the amount of home heating oil or gas you use by opting to use portable space heaters in the rooms that you occupy the most during the day and night.

Reducing Your Home’s Energy Use:
In addition to alternative heating sources, there are also easy home improvements you can do to maximize the amount of heat you get from each unit of fuel your home burns. Check out my articles on stopping cold drafts in your home and my do it yourself home energy audits.

Are Pre-Paid Heating Oil Contracts Worthwhile:
Although I have considered pre-paying my home heating oil over the last couple of years, the “budget plan” that my local heating oil delivery company offers is the best option for me.

Although I pay a slight premium for the delivery of oil (about $.25 per gallon) it assures that I will not pay over a certain amount for oil but allows me to take advantages of lower prices should the price of oil fall.

Even with the collapse of home heating fuel prices, many people I have spoken with here in Maine are still happy with their choices. For them, pre-paying their home heating fuel costs is buying “piece of mind”.

Related Articles:
An Explanation of how Geothermal Heat Pump Systems Work
Insulated Concrete Forms (ICF): Green Building Technology
Do It Yourself (DIY) Geothermal Cooling System
Should You Pre-Buy Your Home Heating Oil This Year?
Do It Yourself Home Energy Audits
36 Ways to Reduce Your Home’s Energy Use

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One Response

  1. Mandy 8 years ago

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