Propane contracts and pricing

Propane contracts and pricing

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Once you have decided to use propane for energy and have requested and compared quotes from different propane companies to find the deal that is best adapted to your situation, you will be required to sign a propane contract with the company you have selected.

Your propane contract, or propane supply agreement, is the framework within which your propane will be delivered, your equipment maintained, your system inspected, etc. It is also an opportunity for you to check on any “hidden” fees and to list as many criteria you consider important as possible (e.g., your preferred delivery or payment option) with the conditions that apply (e.g., fees for late payment).

Unless you have a fixed pricing arrangement, propane retailer pricing is unlikely to be explicit. Indeed, propane prices vary with crude oil price (since propane is a by-product of crude oil), location (from a major supply source and in terms of climate), usage (large usage tends to be better priced per gallon), etc. This is something you should negotiate with propane companies as you request quotes and at each delivery.

What to look for in propane retailer contracts and pricing?

As you requested quotes from different propane companies you will have listed your needs in terms of propane pricing options, delivery options, payment options, services, tanks, etc. This is precisely what you should seek in propane contracts: everything that is important to you, whether it is a fee you pay for fixed propane prices, the framework for monthly payments, maintenance and repair options for your propane tank or system, how the delivery option you prefer works – it should be clear what conditions the propane company you have selected applies to the services that matter most to you.

For example, if you rent a propane tank from a propane company, the propane retailer contract should specify what obligations you have in terms of maintenance. Similarly, if you have selected automatic delivery, you might check under what conditions your propane company has access to your property. And if you require equipment that you rent from a company, you should verify what you are liable to pay and what obligations apply.

Propane retailers use contracts to set disclaimers regarding safety, equipment use, payment, etc. Usually, this implies that should you not follow exactly what the contract recommends (e.g., in terms of maintenance) the company absolves itself of any responsibility. All the more reason to check what your responsibilities are and see whether or not you can change them if they are not suitable (e.g., for a secondary home that you do not often use).

Fees and charges

It is important that the contract you sign with your propane retailer have a list of all the fees and charges that may apply. Some states (e.g., Vermont) require propane companies to have these available to all potential or current customers for the sake of consumer information and transparency. It is in your interest to request them if the propane retailer does not provide them automatically.

There are four main kinds of fees that propane retailers might charge:

  • Propane retailers tend to offset certain costs by including specific fees in propane retailer contracts. Commonly, these are the HAZMAT (safety and hazardous material training fee) and the fuel transportation surcharge (which aims to absorb potential fuel hikes companies may have to take into account for transportation costs).
  • Various fees apply to different delivery situations. If you order less than a certain amount of propane or less propane that agreed in your usage estimation, if you request an after-hours delivery, or if you ask for propane to be delivered off the company driver’s planned route, a fee will probably be required.
  • Fees associated with tanks include a potential (but rare if the tank is rented) tank installation fee and a tank rental fee. This is more common: most propane retailers charge a certain amount for customers to rent one of their tanks and to cover maintenance costs.
  • Propane retailers impose fees on customers who do not respect their payment obligations. These fees apply for late payments (bill percentage) and returned checks in particular (fixed fee).

Contract termination

Whenever you sign a contract, you should know exactly what to do if you need to end it or cancel it. Ending propane contracts typically involve four items:

  • Propane retailers charge a closeout fee to cover administrative costs associated to terminating a propane supply agreement.
  • If there is excess propane in your tank it will need to be removed and a pump-out fee may apply.
  • Rented tanks will need to be removed, and your propane company will probably charge a tank pick-up fee.
  • If you terminate your contract outside of the conditions stipulated therein, you might be liable to pay an early termination fee.