The dealer establishes what they feel will be a fair average price per gallon for the coming
winter. Do not panic if this price seems high; you will be likely be charged the price of the day for your actual oil (see Billing and delivery, below). Typically, dealers use a higher average price when doing an original estimate. The past few years, we’ve seen $3.00-4.00 per gallon as the standard for the average price estimate, although that may change this season.

Next, the dealer considers your average consumption. If you don’t have a previous relationship with the dealer, they may need to make a couple deliveries before they figure this out. 

Using the established average price per gallon and your anticipated consumption for the season, the dealer comes up with your estimated total cost for the season. Most budget plans call for ten monthly payments, so the dealer divides the total cost estimate by 10 to get your monthly budget payment. You begin paying monthly into your budget account.

Billing and delivery.

Oil is delivered automatically, and the exact amount delivered is charged to your budget account. Although the dealer used an average price estimate to determine your budget plan total cost estimate, you will typically be charged the price of the day when the actual oil is delivered. (Mass Energy or People's Power & Light (PP&L) members are definitely charged the Mass Energy or PP&L budget plan price for the delivery date. Learn more about becoming a member here.

Because you are actually charged the price of the day, and your gallon usage was estimated, you may end up paying more or less than the actual cost of your oil over the course of the season. Dealers review budget plans periodically to check if you are paying too much or not enough. The dealer will then adjust your budget payment accordingly, or will offer a credit toward oil. Dealers usually set higher budget plan payment amounts to provide a little cushion in the event of a price spike or colder weather conditions, so they won’t have to ask you to raise your monthly payment or pay a high end of season balance.

When to sign up

Budget plans are seasonal and dealers try to have them established during the summer months. If the season has begun, you may have to pay a large initial payment to catch up.

An example of a typical budget plan

If you use about 750 gallons of heating oil, and the dealer’s estimated cost per gallon $2.69, your budget plan total estimate will come out to $2017.50. Instead of having five or six $300-500 bills during the season, you will pay your dealer $201.75 per month over ten months to reach the $2017.50 cost. This amount, and your monthly payment may be adjusted over time based on the actual price for oil and your actual gallon usage. This is what we would call the "theory" part of a budget plan.

In practice, if you are a Mass Energy or People's Power & Light member, you would actually be charged our discounted budget price for the day your oil gets delivered, and that amount will be credited against your budget account. For example, if 127 gallons of oil were delivered on August 13, 2015, your Mass Energy or PP&L price would be $2.147 (this is our budget plan average for 8/13/15), so $272.67 would be charged against your budget account automatically.

If you’re not a Mass Energy or People's Power & Light member, you would receive the dealer's normal price per gallon for budget plans, but it would work the same as above. You can learn more about becoming a member here.

Usually, Mass Energy and People’s Power & Light members end up with a credit balance, although not so much this past year due to the extreme winter.

In our 33 years of experience working with local dealers as a consumer advocate, we’ve noticed that each one a little different in how they run their budget program. But generally, they follow the formula in this blog and start signing people up for plans in late spring or early summer. That makes NOW—August---the time to set up your budget program, if you haven’t already!

Good luck, and if you have questions or comments, please post them below or call our office at 800-287-3950 x4.

For more information on our Discount Heating Oil Service and how you can save with a budget plan this year, click below.