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How do I sign up for Price Protection?
The Price Protection Plan sign up period is from June through October each year.
When are the Energy Co-op's price protection plans available?
Co-op members may enroll in our price protection plans each year from early July through the end of October.
Is price protection worthwhile?
Generally, it works in our members’ favor. When we looked at average prices over the past five years, here’s what we found:
- Price protection (our Pre-Buy or Smart Choice plans) was the best choice in three years out of five.
- In the other two years, our cash price (paying for each oil delivery within 10 days) produced the lowest average price.
Which price protection plan is the best?
There is no one type of plan that always works out the best, but no matter what you decide, you can count on us to follow through on our promises, and to stand behind our plans. Choose the plan that best matches your situation and your concerns – and call us with your questions, especially when you’re deciding which plan is right for you.
What are you recommending to your members this year?
Your heating fuel purchase decisions should be based on your personal situation, and whichever option makes you feel most comfortable. Many people like our Smart Choice plan because it gives them protection whether prices go up or down. And both our Smart Choice and Easy Pay plans make your fuel bills easier to manage by spreading them evenly over eight to eleven months.
Are all oil dealers’ price protection plans similar?
There are really only two kinds of price protection; those that fix your price and those that set a ceiling (often known as a cap) on the price you pay and also allow your price to drop if market prices go down. Payment methods for fixed and capped price programs include pre-buys (payment in full in advance) and budgets (monthly payments for 8 to 12 months).
When you purchase price protection, you should make that decision based not just on what could happen to prices, or on the actual fixed or capped price that different companies offer, but also on the integrity and reputation of the oil dealer. Over the years, some companies have gone out of business after making very attractive price protection offers. The decision about which dealer you use to protect your oil price is even more important than which plan you choose.
Are price protection programs regulated?
Yes. Vermont law (9 V.S.A.§2461e) requires oil dealers to have contracts with their suppliers for at least 75% of the heating oil they sell to their customers. We are also required to have written contracts with our members setting out our terms and conditions in plain language.
What’s the difference between a fixed price plan and a cap price plan?
With a fixed price plan, your fuel price is fixed at one set price throughout the heating season. If prices go up, that’s great. However, if they go down, you’re stuck. You have already committed to pay a certain price and you can’t benefit from a price drop.
When you are enrolled in our Smart Choice plan, your price is guaranteed not to rise above a set “cap price” no matter how much fuel prices rise. And because this program also includes downside protection, if prices go down, you’ll benefit, because your price will drop, too.
Would I be better off waiting to see if prices drop?
It's impossible for us to say. No one knows if prices will drop or surge higher over the next few months. It depends on international events that are beyond anyone's control. It's up to you to decide what to do - and we would be happy to discuss your options. It may be helpful to think about two scenarios. Which would be harder for you?
You don't sign up for price protection and prices go up, or
You sign up for a pre-buy plan and prices go down?
What’s the difference between your Easy Pay and Smart Choice plans?
Our Easy Pay and Smart Choice plans are both budget plans. Instead of paying for each delivery, you make the same monthly payments for eight to eleven months, ending in May each year. Our Easy Pay plans do not include price protection; our Smart Choice plan comes with a cap price.
Cap Price Plans
When is the Energy Co-op's cap price plan available?
Members may enroll in our Smart Choice plan for heating oil - with a cap price and monthly payments - from July through October each year. Our Smart Choice plans end on May 31st the following year.
What is your Smart Choice plan?
Our Smart Choice plan places a cap on how high your price can rise, and because it includes downside protection, anytime our daily price drops during the season, you pay the lower price. Here’s an example of how the cap price works. You sign up for our Smart Choice plan with a cap price of $2.89, say. When we deliver your heating oil, if our daily price is $3.29 – you pay $2.89. And if our daily price is $2.59 when we deliver your heating oil, that’s the price you pay.
Am I guaranteed to save money with your Smart Choice plan?
Not necessarily. If prices rise above your cap and stay there, this program could pay off for you in a big way. If prices go down you benefit as well, because you’ll pay our daily price, which will reflect this drop. But if prices remain stable or only go above the cap briefly, you won’t recover your “price protection fee.” Most members who choose our Smart Choice plan select this option because it gives them some protection when the oil markets become volatile.
Why is there a price protection fee for your Smart Choice plan?
As you might expect, our suppliers charge us a premium for offering the “insurance” that keeps your heating oil price from skyrocketing and, at the same time, lets us lower your price when market prices fall. We pass this cost along to our members on our Smart Choice plan. We do not make any money on this fee. We simply pass our cost on to our members who want the protection provided by a cap price.
How is the price protection fee determined?
Our suppliers set the cost for this "insurance" depending on the volatility in the market and how far into the future we are looking. Market volatility varies year by year, as do our price protection costs. We calculate your price protection fee based on your expected heating oil use and our cost, currently about 25 cents a gallon. This is a one-time cost that is included in your first month’s payment. It is non-refundable.
How do you figure my monthly Smart Choice payments?
We use your fuel delivery record from the previous year to estimate the number of gallons you will probably use during the next heating season. We multiply the number of gallons by an estimated price per gallon. Then we add in your price protection fee, which is about 25 cents a gallon. We then spread out this total amount – heating oil plus price protection - into equal monthly payments. This way, you don’t get hit with two or three huge bills in winter. Even if you get two deliveries in one month, you'll still get one low monthly bill.
Can my monthly payment amount change?
Yes, it can. Remember that your monthly payment is based on estimated use. If you use more or less oil than our estimates, we may adjust your payments accordingly. You might add new insulation, and use less oil. An especially cold winter may increase your oil use. We adjust monthly payments, as needed, in either January or February each year.
When do I need to sign up for your Smart Choice plan?
You may sign up anytime between July and October. Because heating oil prices change daily, we cannot guarantee that our cap price will be the same next week as it is today. It could move higher or lower.
Fixed Price Plans
When are the Energy Co-op's fixed price plans available?
Members may enroll in our fixed price, Pre-Buy plan for heating oil from early July through October each year. This plan ends on May 31st the following year.
Our Early Buy plan for wood pellets is available from early April through May or June each year.
What is the Energy Co-op’s fixed price Pre-Buy plan?
We offer a fixed price Pre-Buy plan for heating oil. Members may enroll in this plan on our web site from early July through October each year. Our Pre-Buy plans end on May 31st of the following year. The minimum purchase is 400 gallons, which is paid in advance. Our fixed price is always lower than our cap price.
What is the advantage of a Pre-Buy plan?
It provides certainty during volatile times. If you like certainty, our Pre-Buy plan works best. No matter how high – or low – oil prices go, your price for the gallons that you pre-buy won’t change. Our Pre-Buy plan has a minimum purchase of 400 gallons.
Is there a risk to signing a Pre-Buy contract?
Yes, absolutely. We have learned several times over the years, that while prices can skyrocket up, they can also go down by large amounts. If you Pre-Buy when prices are high, you will be stuck at the higher rate. There will be nothing we can do. Of course, because you have a fixed price, you are protected if prices go above the Pre-Buy price you paid for your oil.
What if I change my mind?
You can’t. After your Pre-Buy agreement goes into force, we can’t refund your purchase because we will have secured your heating oil from our suppliers. They don’t allow us to get out of our agreement with them.
What happens if I use less oil than the amount I Pre-Buy?
It's up to you - as long as you take delivery of at least 75% of your Pre-Buy oil. At the end of the season any unused Pre-Buy gallons become a dollar credit on your account. You can put this credit towards future oil deliveries or price protection plans, or you can get a refund - whatever works best for you.
When you Pre-Buy your oil, we agree to buy that specific amount of oil from our suppliers at a set price. As a result, you are responsible for taking delivery of at least 75% of your Pre-Buy oil. If you don’t, the Co-op reserves the right to retain 60 cents a gallon on the undelivered gallons.
Here’s an example: A Co-op member Pre-Buys 1,000 gallons but takes delivery of only 600 gallons (60%). The Co-op has the right to retain $240 to cover its costs (400 gallons x $0.60 = $240. So please be clear about how much oil you really want to Pre-Buy.
What happens if I use more oil than the amount I Pre-Buy?
Once we have delivered all your Pre-Buy oil, future deliveries are at our daily price. This may be above or below your Pre-Buy price.
Some of our members choose to buy less oil than they will need for the whole year. When that’s used up, they pay our regular daily price. This gives them some protection against rising prices, but also allows them to benefit if prices drop later in the season.
Is there another way to get price protection?
Yes, there is. Many Co-op members sign up for our Smart Choice plan with monthly payments and a cap price. There's no large upfront payment. During the season, your price cannot go above our cap, but it will also drop if the market falls. So you're covered either way. We are charged a fee from our suppliers for this "flexible protection" and so we must pass that along to you. It costs 25 cents per gallon, which we charge as soon as you sign up. However, we allow you to pay the fee over 8 to 11 months. Keep in mind that prices have risen and fallen more than a dollar up and down in two of the last five years, so downside protection is definitely valuable.
By Brian Gray
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