Write an Energy Risk Policy for Your Ohio Business
The short answer
An energy risk policy is a short written document that says how much electricity price risk your business will accept, who can commit to contracts, and what rules guide purchases. It turns procurement from a once-every-three-years scramble into a routine decision, and it's the difference between a layered strategy and guessing. One to two pages is enough for most companies.
For the tools the policy governs, see hedging strategies.
The eight sections of a practical policy
- Objective. For example: "Keep annual electricity cost within ±5% of budget" or "Minimize cost over three years while never exceeding $X in a single month."
- Scope. Which accounts, sites and utility territories are covered; how municipal or co-op sites are handled.
- Authority. Who can approve pricing and sign (and the dollar limits), plus a backup signer for same-day quotes.
- Hedge targets. The share of expected usage to have fixed at each horizon — e.g., 90–100% for the next 12 months, 50–75% for months 13–24, 0–50% for months 25–36.
- Allowed products. Fixed, block-and-index, capacity pass-through, index — and anything prohibited.
- Triggers. Price levels or dates that prompt the next purchase (e.g., buy the next layer if the 24-month price is at or below budget, or no later than six months before need).
- Counterparty rules. PUCO certification required for suppliers and brokers; minimum supplier financial strength for terms over 24 months.
- Reporting. A quarterly one-page report: hedged share, average locked price vs budget, upcoming end dates, capacity tag trend.
A sample hedge ladder
| Delivery period | Target fixed share | Latest purchase date |
|---|---|---|
| Next 12 months | 90–100% | 3 months before start |
| Months 13–24 | 50–75% | 9 months before start |
| Months 25–36 | 0–50% | Opportunistic |
Ohio-specific inputs to include
- Capacity: prices are set through May 2029 ($329.17, $333.44 and $325.00 per MW-day for 2026/27–2028/29), so the policy should focus on managing the capacity tag rather than hedging the price.
- Default price resets: utility default prices change each June 1; use them as a benchmark, not a target.
- Aggregation: small accounts may sit in community aggregation programs; decide whether the policy allows staying in them.
- HB 15 notices: assign someone to act on supplier renewal notices.
FAQ
Does a small business need an energy risk policy?
A simple version helps — even three lines (budget tolerance, who signs, renewal date) prevent rollovers onto variable prices.
Who should approve electricity contracts?
Whoever owns the budget (often the CFO or owner), with a named backup, because firm quotes expire the same day.
How often should the policy be reviewed?
Annually, and whenever the business adds or closes sites or changes operations significantly.