Propane Prices: Fixed vs. Variable Plans

Some propane suppliers offer a variety of propane pricing programs to consumers.  The major propane price plans include a variable propane price plan or a fixed propane price plan (i.e propane-pre-buy). While some propane consumers are more comfortable knowing their propane price per gallon with a fixed price guarantee, other propane consumers are comfortable with a propane pricing program that is subject to change by their propane supplier. While a fixed propane price removes the risk of increasing propane prices, it is important to realize that fixed propane price programs generally do not guarantee a lower cost of propane through a heating season.

The following points should be carefully considered by propane consumers when evaluating the pros and cons of a fixed propane price per gallon program vs. a variable propane price per gallon program:

Since most propane suppliers do not publicly post their current propane prices, it is very difficult to determine a local current “market propane price per gallon” averaging the propane prices of all local propane suppliers.  Some propane suppliers will communicate that their current propane prices are based on “usage”, yet the same suppliers typically fail to publicly share a propane pricing schedule that clearly outlines the propane prices that specifically apply to annual quantity brackets (for example, a customer that uses 200 to 500 gallons per year pays this propane price per gallon, while a customer that used 500 to 800 gallons per year pays this price per gallon, etc).  Furthermore, many propane suppliers indicate on their website that they do not publicly post their current propane prices because the prices change frequently.  Considering these factors, and considering that it is unlawful for propane suppliers to communicate between themselves to fix propane prices, many propane consumers can only assume that each propane supplier has it’s own “market price” which may or may not be competitive compared to other local propane suppliers.  As a result, propane consumers maintain the responsibility of making sure that their propane supplier shares their propane price per gallon before each delivery for comparison with other local suppliers to ensure that is it competitive before
each delivery.

When working with a propane supplier that does not publicly post or publicly communicate current non-fixed propane price per gallon information for public comparison, it is very difficult for consumers to determine if their decision to participate in a fixed propane price program was a good decision vs. a non-fixed propane price per gallon at the time of each delivery.  Furthermore, the supplier may be charging a fixed propane price program participation fee that ultimately increases the customers propane cost per gallon. Considering these unknown factors, many propane customers struggle with trying to determine if their fixed propane pricing plan is in fact a money saving program.

The best way to eliminate the mystery around fixed and variable propane pricing is consumer education.   When viewing fixed propane price programs offered by local propane suppliers each summer (i.e. propane pre-buy or similar programs), contact each supplier to learn about available fixed propane price programs.  Ask each supplier
that offers a fixed price program to clearly explain the applicable participation fees, if applicable. Make sure that you read and understand the entire fixed propane pricing program contract before signing.

Propane consumers should also be mindful that a longer-term service agreement (i.e. a multi-year commitment with one propane supplier) may eliminate the option to change propane suppliers to take advantage of a lower fixed propane price program offered by another propane supplier during a multi-year contract without a contract cancellation fee (if offered).  Therefore, it may make sense to request a shorter-term agreement (i.e. month to month) giving you the option to change to another propane supplier when considering renewing a fixed propane price contract during future years. A shorter-term month-to-month service agreement also gives you the additional option to change suppliers within a 30-day period should you find that your current propane suppliers overall service is unacceptable.

In addition to fixed propane price and variable propane price plans, some propane suppliers offer a propane price cap program.  This type of program basically offers the features of a variable propane price with the protection of propane prices not exceeding a specific propane price per gallon.  In most cases, propane suppliers will charge a participation fee as this plan can be viewed as an insurance plan to keep propane prices within a certain range,  regardless of the amount that wholesale propane prices change within the contract period. Contact local suppliers to find out if this type of propane pricing program is available in your area.

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