Here in the Northeast, we have a lot of homes which rely on heating oil instead of natural gas for heat.  While many of us stay with the same oil company for years, there are sometimes good reasons to change home heating oil companies, including a poor service experience, lower price for oil and differences in the financial products offered to fix or cap the price of oil.

For us, it was a customer service interaction which caused us to look for a new home heating oil provider.  We were unhappy with a service to our boiler, and in the discussion to resolve the issue, decided that this was the last year with our current home heating oil supplier.

Changing home heating oil companies is easy, but there is a lot to consider beyond the lowest delivered price:

• Service territory.  Are you in the heart of their service territory?  What kind of response time should you expect?
• Service plans.  Do you want a basic burner-only plan, or would you prefer a “deluxe” plan with coverage for all the vents, pumps, valves and tanks which “touch water?”  There can be significant price and coverage differences.
• Cash price.  Some companies have oil inventory at favorable prices.  Others are stuck with oil that is currently out-of-market.  This can mean a big difference if you are a floating/cash buyer.
• Fixed (or "locked-in") price.  The price the company is willing to quote for a full heating season.  As with cash prices, a lot depends on the oil company’s commitments in place at the time you call.  A company which has positioned itself well with respect to forward commitments can sometimes price very favorably for a full season.  
• Capped price.  For a set fee per gallon, you can lock in a price ceiling but benefit if prices fall over the course of the heating season.  
• Terms and conditions.  Some companies have rules which help you tailor your program and pricing to your view of the market.  For example, you might be able to purchase late summer at cash prices, then cap or fix the rest of your heating season needs (effectively splitting your heating oil purchase into cash price and capped/fixed price portions).
• Incentive to switch oil companies.  There often are coupons or cash incentives available for new accounts.  Worth from $50 to $100 or more, they can make a difference in your calculation.  Also look for service specials for new accounts – sometimes you can get the first year service contract for free or two years for the price of one.
• Reputation.  How is the company's BBB rating?  Are there a lot of complaints online?  Did you check Yelp or other customer review Websites?  You also can ask your neighbors, as service is usually handled in territories, and your neighbors' experience is perhaps as important as the company's overall reputation.  And, are they a member of your State's association of heating oil companies?  These organizations have standards of conduct their members must abide by, offering you a little bit of assurance on their business practices.

We contacted two major oil companies in Connecticut for their pricing plans.  Here’s how they compared.  Note that oil prices fluctuate daily (these are as of Oct. 3, 2011).

So what is the net cost difference to us?

We use about 1500 gallons of oil during a heating season.  Company A will let us pay spot price for a delivery this week of about 550 gallons and then cap any amount we wish to protect for $.20 per gallon; for simplicity, we’ll assume we pay for a cap for the full heating season.  Company B is “all or nothing,” so we’d have to protect the full 1500 gallons at $.25 per gallon.  But they have a price anomaly with fixed for the season (no upside or downside movement) at $3.239 per gallon, so we’ll also see what that might possibly save us…

Here’s how our expected cost for home heating oil and service breaks down for these two providers based on our expected heating oil use and service contract preference:

Company A (mix of spot and capped):

500 gallons at spot price: $1724.50

1000 gallons cap fee: $200.00

1000 gallons at capped price: $3,499.00

Incentive to switch: -$100.00

Service plan maximum: $183 (two years for price of one)

Total Company A (spot & capped):  5,506.50

Company B (Capped):

1500 gallons cap fee: $375

1500 gallons at capped price: $5158.50

Service plan maximum: $254

Total Company B (capped): $5787.5

Company B (Fixed): 

1500 gallons at $3.239: $4858.5

Service plan maximum: $254

Total Company B (fixed): $5112.50

We decided to go with Company A, even though it might cost a little more that Company B’s fixed price offer, although it’s possible that if oil prices drop over the heating season that the difference wouldn’t be that much at all.  We just liked how Company A handled us over the phone.  But if we were shopping purely on price, we’d have gone with Company B and its low fixed-cost price for the current year.  My thinking is that it’s the best price we’d be offered all season, as home heating oil prices generally go up, not down, over the course of the winter. 

If you have any experiences to share as you approached the winter heating season, please add to the comments on this blog post, as they’re most welcome!