Worried about your winter heating bill? You might be able to hedge

You may want to lock into a fixed-rate contract as the cold season approaches.

Whether you use natural gas, heating oil or propane for your boiler and furnace, this could be a really expensive winter. The good news is that you might be able to hedge against high heating bills, depending on what fuel you use and where you live.

“At this point, I expect that the cost of heating products like propane, natural gas (and) heating oil are likely to increase at least another third,” says Dan McTeague, president of Canadians for Affordable Energy.

The price increase reflects a global energy crunch, as soaring demand from economies recovering from the impact of COVID-19 runs up against supply snarls as producers struggle to ramp up production fast enough after delaying capital investments amid the pandemic.

Unusual weather patterns have also resulted in unusually low output from renewable energy sources in some areas, exacerbating the shortages.

But if you’re worried about your winter heating bill, there may be more you can do than plug up drafty spots and change your furnace filter to protect yourself from sticker shock. You might be able to lock in a fixed rate for your household energy needs.

If you’re heating your home with furnace oil or propane, you may be able to sign a fixed-price or capped-price contract for your cold-season fuel supply.

With the first, you are guaranteed a certain price for a certain period of time. With the second type of contract, your rate fluctuates with market prices, but you won’t have to pay more than a set cap, which is usually higher that the provider’s fixed price.

If you’re considering a fixed-price contract, it’s a good idea to compare what’s on offer from different suppliers, McTeague says. Also, you should also make sure that the fixed price is lower than what you’re currently paying and understand you may lose out if prices don’t rise as much as expected this winter or even decline, he adds.