Pre-buy contracts
A pre-buy contract is the most straightforward fixed-price option. You commit in summer or early fall to a specific gallon quantity at a locked rate. The dealer ships the gallons through the heating season as you need them. You've paid upfront (or financed) the entire commitment, and you don't pay an extra dollar regardless of what happens to market prices.
Pays off when: winter prices rise above the locked rate. The locked rate is usually set close to the summer wholesale price plus a fixed-margin retail markup, which typically sits in the lower band of what dealers charge mid-winter. Loses when: winter prices fall below the locked rate — you're stuck paying more than the spot market.
Capped (ceiling) contracts
A capped contract sets a maximum price you can be charged in any given delivery, but lets you benefit if market prices fall below the cap. Dealers typically charge a small enrolment fee (sometimes a few cents per gallon over expected usage) to cover the implicit option they're writing.
Pays off when: winter prices spike sharply — the cap protects you while you would otherwise be paying market. Loses when: winter is mild and prices stay below the cap — you've paid the enrolment fee for protection you didn't need.
Fixed-price (locked-in) contracts
A pure fixed-price contract locks the per-gallon rate for the entire heating season regardless of gallons purchased. It is similar to pre-buy except you don't commit to a specific quantity — the dealer simply guarantees the rate for whatever you consume. Less common than pre-buy because it transfers more risk to the dealer.
Pays off when: winter prices rise. Loses when: winter prices fall. Same logic as pre-buy but without the volume commitment.
Budget billing
Budget billing is not, strictly speaking, fixed pricing — it's a cash-flow smoothing programme. Your estimated annual usage at expected market rates is divided into 10-12 equal monthly payments. At year-end the actual cost is reconciled — if you used more or prices rose, you owe the difference; if you used less or prices fell, you receive a credit.
Pays off when: you want predictable monthly cash flow regardless of seasonal usage swings. Doesn't change: the underlying price risk — you still pay market, just on a smoothed schedule.
Quick comparison
| Contract | Price risk | Upside if market falls |
|---|---|---|
| Pre-buy | Customer (locked rate) | None |
| Capped / ceiling | Capped at ceiling | Yes — pay market |
| Fixed-price | Customer (locked rate) | None |
| Budget billing | Customer (pays market) | Yes (reconciled at year-end) |
Frequently asked questions
When are fixed propane contracts offered?
Most dealers offer pre-buy and capped programmes between June and September, for the following October-March heating season. By October the programmes are usually closed or offered only at less attractive rates.
Which fixed contract is the best deal?
It depends on your risk tolerance and view of winter prices. Pre-buy and fixed-price maximise certainty but lose upside. Capped contracts cost a small fee but preserve downside — usually the most balanced choice for most customers.
Are fixed contracts required?
No. Most dealers also offer market-rate per-delivery pricing (auto-fill or will-call). If you don't enrol in a fixed programme, you pay each delivery at the dealer's then-current rate.