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Guaranteed Price Plan Heating Contracts: Don’t Get Burned!

  

 

As the weather gets cooler, many consumers begin to think about trying to control heating costs by entering in to a Guaranteed Price Plan (“GPP”).  Here’s some information that may help.

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1.  What is a Guaranteed Price Plan (“GPP”)?

 A GPP is a contract that offers heating fuel at a promised price or a promised maximum price.  For example, a heating oil company may offer to sell heating oil at $3.25 per gallon for the duration of the contract.  Another type of GPP would be a contract where the price may go up or down but would never be more than $3.50 per gallon.  In that case, the consumer might pay $3.25 per gallon during one week, $3.40 per gallon another week and $3.50 per gallon on another week.  In that type of contract, the fuel company can charge whatever rate it wants, so long as the per-gallon charge never exceeds $3.50. “Guaranteed plan”, “fixed price”, “buy ahead”, “prebuy”, “prebought”, “prepaid”, “full price”, “lock in”, “capped”, “price cap”, are all terms that are commonly used to refer to GPPs. 2.  Are there rules about what a GPP must look like or say? Yes.  Connecticut law requires that heating oil companies put all GPP contracts in writing.  The contract must contain all of the terms and conditions of the GPP.  The terms and conditions portion of the GPP must at least be in the same size as the rest of the contract (no fine print). 3.  How do I know that the oil company will have enough oil? As with any contract, nobody can ever be sure that both parties will perform all of their contractual obligations.  However, Connecticut law does provide protection for consumers.  For example, heating oil companies are required either to buy enough oil to cover at least 80% of its commitments to al of its prepaid and GPP contracts, or to take out a surety bond (which acts like insurance) that will cover at least 50% of the total amount of funds paid to the oil company by all of its pre-paid GPP customers.  The purpose of the surety bond is to ensure that consumers will be able to get refunds if the heating oil company is unable to meet its obligations under the GPP. If the heating oil company cannot provide oil, then it will have broken or  breached the contract.   If the consumer is forced to buy heating oil at a higher price because of this, he or she may sue the heating oil company to recover the total price difference. 4.  Is there a maximum length for GPPs? Yes.  Connecticut law does not allow GPPs to be longer than 18 months.  There is no minimum length.  Consumers may enter into new GPPs after their contracts expire. 5.  What about automatic renewal or extension contracts? Connecticut  law does not permit heating oil companies to offer contracts that renew automatically.  If  consumers want a new contract, then they must enter into a new one after the old contract expires. 6.  What happens if a heating oil company breaks the law? A violation of any of the GPP regulations is automatically deemed an “unfair trade practice” under a Connecticut law called the “Connecticut Unfair Trade Practices Act” (“CUTPA”), which allows consumers to bring lawsuits.   Consumers can sue their damages (lost money or increased oil costs), plus the costs of bringing the lawsuit (including attorney’s fees).  In cases where a court determines that the heating oil company acted in bad faith, the consumer may also be awarded punitive damages, or extra damages to punish the company. 

Conclusion

 As with all contracts, consumers who are considering GPPs should carefully review their contracts before entering any agreement.  Particular attention should be paid to the maximum gallons, the price and the length of the contract.  It is a good idea to be aware of your general heating fuel usage before considering a GPP.  If the heating oil company is unable to meet at least most of your usage needs at the guaranteed price, a GPP may not make sense.  

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