What it means

Wholesale electricity prices move constantly, driven by fuel costs, demand, generation availability and weather. Hedging means fixing the price of some or all of your expected usage in advance so that those movements affect less of your bill.

Risk management is the broader decision of how much of your usage to fix, when to fix it, and for how long, a budget question as much as an energy one.

Common contract structures

Fixed price

One rate for the contract term. Budget certainty, and no benefit if the market falls.

Index

The rate follows the wholesale market each month. Captures low prices, and carries the full cost of spikes.

Block and index

Part of the load is fixed, the rest floats. A middle position between the two.

Layered purchasing

Portions of the load are fixed at different times, so no single purchase date sets the whole price.

How the process works

1. Exposure is measuredHow much does a cent per kWh move your annual spend, and how much variation can the budget absorb?
2. A structure is chosenThe mix of fixed and index that matches that tolerance.
3. Timing is plannedContracts are bought against forward prices and renewal dates rather than whenever the current term happens to end.
4. The position is monitoredMarket conditions and upcoming renewals are tracked over the life of the contract.

Our role

Radiant Energy Partners helps clients choose a purchasing approach and hedging strategy that fits their budget and risk tolerance, and monitors the market on their behalf.

Start with a free bill review