Mike Whalen got the letter in the mail last week, and at first it sounded good. Leffler Energy thanked him for renewing his heating oil agreement; it announced that his price per gallon would be capped at $4.69.

Then it informed him he was being billed a "price protection fee" of $336. And Whalen saw red.

"That fee wouldn't go toward any oil," said Whalen, of Columbia. When you average it out, he said, "I'd really be paying over $5 per gallon."

So he opted out. "It just doesn't make sense to me," he said.

But in the up-is-down oil market, there is a tough logic to it.

While the price of oil has been falling in recent weeks, the cost of heating oil remains far higher than what it was this time last year. Beyond this, however, is the fact that enrolling customers in price protection plans — in which the cost of oil is capped — has grown vastly more expensive for heating oil companies, which are passing the extra cost along to consumers.

"Many companies like ours commit to buy forward futures contracts at a fixed price throughout the coming year to guarantee our customers' supply," said Seth Obetz, vice chairman of the Manheim oil firm Worley & Obetz.

"To ensure that we will be able to lower our price if the market goes down as it recently has, we buy 'put' options that will compensate us and in turn lower our price to our customers. This 'insurance' used to cost a few cents per gallon. With today's volatility, it now costs 50 to 70 cents per gallon which translates into $400 or more per customer."

Some companies allow customers on a monthly payment plan to amortize the amount over the length of their contract; others are being asked to pay the fee up front.

Either way, consumers are steamed. While capped-price plans have grown in popularity as heating oil costs have soared, the new fees could prompt more consumers to take their chances in the open market.

"We're in a tight time right now," said Joel Miller, general manager of Schwanger Bros. & Co. Inc. "But we'll get through it."

Like many other oil firms, Schwanger Bros. offers customers the chance to spread out their yearly oil bills over monthly "budget" payments. This year those budget payments will be nearly twice what they were last year, said Miller. "And there are still a lot of people paying balances from last year," he said. Most are rolling it over into their new budget.

Schwanger Bros. customers who want to lock in a price ceiling can pay either $500 or $300 up front; the higher amount would give the customer a 10-cents-per-gallon discount.

On top of that, Schwanger Bros. is asking other customers who don't want to be on the price-cap plan to pay a "security deposit" of a few hundred dollars. "It's returned to them at the end of the season," said Miller. "We commit the oil to you, you commit to buy it from us."

The company's never done anything like this before, Miller acknowledged. "It's all because of the volatility of the market."

Rhoads Energy is billing "price protection" customers 40 cents per gallon, or an up-front fee based on usage, said Mike DeBerdine III, Rhoads chief executive officer. "Whether it's worthwhile for people to do this or not" is unknowable until the end of the heating season, he said. Oil's price could continue to fall, but if it goes back up and consumers aren't protected, they could get socked.

So could oil companies. "If [companies] didn't have 'insurance' " to protect them from market volatility, said DeBerdine, "they'd be out of business."

Dan Gilligan, president of the Petroleum Marketers Association of America, told The New York Times last week that most fuel dealers in the northeastern U.S. are not offering price protection plans this year, because of the market's volatility.

Doug Woosnam, president and general manager of Leffler Energy in Mount Joy, said that's because smaller oil firms simply can't make it in this market.

"If you have a smaller dealer with 1,000 customers who wants that kind of [price cap] program, and it runs $350 per customer — that's $350,000" the company has to pay up front, he said.

"I don't know a whole lot of [small dealers] who can write a check for $350,000."

Woosnam said his firm is careful to "match every sale up with a buy" so that Leffler doesn't purchase more "insurance" than it has customers who want that insurance.

Whalen, of Columbia, says the cost of heating oil this year has prompted him to take a good look at his own consumption. "I've been a pig," he said. "That's going to change.

"There's no way I would have agreed to pay a $336 'protection' fee," he said.

"I'm burning coal and wood this year."