COD Heating Oil vs. Budget Plans

Most areas where heating oil is widely used, mainly New England and the Central Atlantic states, have competitive markets in heating oil. Prices may vary by 20 percent, according to the New York State Consumer Protection Board. Some counties maintain a database of heating oil providers, with regularly updated price listings. Each provider also typically offers several payment plans. Two of the most cost-effective options are typically annual budget plans and collect-on-delivery (COD) programs.

(See ways to Cut the Cost of Home Heating)

COD Heating Oil

If you want to buy 100 gallons of heating oil today, your cheapest option is probably COD (also known as cash-on-delivery), and providers often offer discounts for cash payments and large deliveries.

For example, the US Energy Information Administration reported that the average residential heating oil price for the week of Nov. 8 was $3.08 per gallon. At the time, an eastern Pennsylvania heating oil company was charging $2.72 per gallon for COD customers who purchased more than 300 gallons of heating oil.

However, COD deals are risky in two ways. They typically don't include service, and you are subject to market prices. A COD purchase doesn't involve contracts, which means you can switch services at any time, but it also means you are on the hook for any repairs or emergencies. Heating oil prices typically rise through the winter heating season. The Nov. 8 average price of $3.08 was a 9-cent increase from the previous week, and it's not even really winter yet. With COD, you will still pay below the average retail price, but you are subject to the winter price spike.

(See 10 Mistakes People Make with Heat)

Budget Plans

One way to avoid the price spike, and a hefty February heating oil bill, is with a budget plan. Many companies will spread the payments across the year, with 10 or 12 equal monthly payments for a delivery and service contract based largely on the amount of heating oil you used in the same house the previous year.

Typically, this involves either a locked or capped price. A locked price remains constant at a rate typically higher than the summer average but lower than the midwinter maximum. A capped price means you will pay the market cost up to a set cap. This means you could pay less than the cap when prices are lower, but never more than the cap.

(See How to Get the Most from a Programmable Thermostat)

Other Ways to Save

Other ways to cut your heating oil bill include joining a fuel-buying co-operative and finding discounts through a union, organization or based on your age, if you are a senior. Fuel-buying co-operatives can make cheaper bulk purchases. They typically charge annual fees, but the fees should cover some service and repair charges. Federal and state programs also are available to help cover heating oil costs. Heating oil is getting more expensive, but there are good ways to avoid paying full market prices for heating oil.

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