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Heating oil users lock in rates by Eric Convey Friday, October 27, 2000

Mindful of last winter's $2-a-gallon heating oil and fearful of turmoil in the Middle East, Massachusetts customers are stampeding into long-term contracts.

``We've never had interest like this,'' said Len Bicknell, the president of Alvin Hollis Co., which has offered the contracts for six years.

About 80 percent of the South Weymouth company's customers are locked into deals, he said.

Statewide, as many as 35 percent of heating-oil customers are signed into long-term deals, according to the New England Fuels Institute, a trade group representing 1,100 companies.

The contracts tend to work one of two ways.

One version fixes the price of delivered oil. If the market price goes up, a customer saves money; if it goes down, the seller makes money.

Another version places a cap on the price charged to customers but lets them enjoy savings if the price falls below that cap. Customers inking these deals often pay one-time fees - often about $30 - to cover the cost of the insurance dealers buy to protect themselves from oil price spikes.

With the average New England home using about 800 gallons for a year's heat - most of it during the winter - the savings can be substantial.

Alvin Hollis customers who bought yearlong contracts in May are paying $1.19 per gallon.

The average price of heating oil in Massachusetts, meanwhile, has been mostly climbing since then, according to the state Division of Energy Resources.

This week it's officially at $1.47 a gallon.

So right now, a family with a $1.19-per-gallon contract saves 28 cents for every gallon it buys - several dollars per day, on average.

Jack Sullivan, the fuel institute's executive director, said in addition to reducing the risk to customers, contracts help dealers predict demand. ``This is good for retailers and wholesalers,'' he said.

Michael Ferrante, the president of the Massachusetts Oil Heat Council trade group in Wellesley Hills, said the contracts are good for consumers but pose problems for some smaller dealers.

``(They) are really well-run companies, but (contracts) are oftentimes beyond their business capabilities,'' he said.

The Energy Resources Division endorses contracts in general.

But the agency also advises consumers to read contracts carefully and make sure they're dealing with established companies with solid track records.

Because a few companies balked at honoring contracts when prices spiked last year, Attorney General Thomas Reilly vowed last month to monitor the industry closely this year and make sure there are no similar problems.

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-- Martin Thompson (mthom1927@aol.com), October 27, 2000