Advanced Electricity Procurement for Large Ohio Loads
The short answer
Once an account uses more than 700,000 kWh a year (a mercantile customer) or a business runs several sites, a single fixed-price contract signed on one day is rarely the best tool. Larger buyers spread purchases over time, fix a baseload block and float the rest, take capacity as a pass-through and manage their tag, and use a master agreement to buy for every site at once. Since HB 15 took effect on August 14, 2025, mercantile customers can also connect their own or third-party generation behind the meter.
For the fundamentals, see commercial electricity procurement basics; for running the bid itself, see the step-by-step RFP guide; and for the risk trade-offs of each hedging tool, see electricity hedging strategies.
Start from what's already known
Two big parts of an Ohio business's cost are no longer market bets:
- Capacity is priced through May 2029: $329.17/MW-day for 2026/27, $333.44 for 2027/28 and $325.00 for 2028/29 — roughly $120 per kW of capacity tag per year.
- Delivery follows docketed rate cases: AEP Ohio's April 2026 order, FirstEnergy's March 2026 rates and 2027–2029 plan, Duke's pending case (about 3% for non-residential customers, around May 2027), and AES Ohio's three-year plan filed July 2026.
That leaves wholesale energy as the main open risk, and it's where the strategies below do their work.
Layered buying
Instead of fixing 100% of next year's energy on one day, buy it in tranches. A common pattern for a 10 million kWh-a-year portfolio buying calendar 2028:
| Tranche | Timing | Share of volume | Illustrative energy price |
|---|---|---|---|
| 1 | 24 months before start | 25% | 6.2¢ |
| 2 | 18 months before | 25% | 6.8¢ |
| 3 | 12 months before | 25% | 6.5¢ |
| 4 | 6 months before | 25% | 6.4¢ |
| Blended | 100% | 6.475¢ |
The blend avoids locking everything at a single high point — and equally gives up the chance of catching the single low one. Mechanically, you need a supplier agreement that allows multiple price fixes under one contract (sometimes called a load-following contract with layered fixes), plus a written policy on who can execute each tranche and at what trigger prices. Because capacity is already known, layering here is about energy only; confirm how each tranche treats capacity so it isn't double-counted.
Block-and-index
Fix a block of power at a set price and let the remaining usage settle at the market (index) price.
Sizing the block. Set it at or below your minimum load so you rarely buy power you don't use. Example: a plant uses 16,000 MWh a year, never drops below about 1.2 MW overnight, and peaks near 3 MW on day shift. A 1.0 MW around-the-clock block is 8,760 MWh — about 55% of annual use — fixed. The other ~45% floats at the day-ahead or real-time price for the plant's zone.
Risks to accept in writing:
- Index exposure on ~45% of volume during price spikes, typically summer afternoons and winter cold snaps.
- Hours when usage falls below the block (shutdowns, holidays) mean selling surplus back at the index price, which can be a gain or a loss.
- The contract should state the index, the zone, and every adder applied to indexed volume.
Block-and-index suits sites with a real baseload, interval data and someone who watches the market; it is a poor fit for a single-shift site with little overnight load.
Capacity pass-through plus peak management
With capacity near $120 per kW-year, the tag is worth managing directly. On a pass-through contract you pay your actual tag × the PJM price, so reductions flow straight to you.
Example. A manufacturer carries a 2,000 kW tag — about $240,300 a year at the 2026/27 price. If it cuts 300 kW during PJM's summer peak hours in 2027, its June 2028–May 2029 tag falls accordingly, worth about 300 × $118.63 = $35,600 that year.
What it takes:
- A contract that passes capacity through at cost (or re-prices for tag changes each June 1).
- Peak-day alerts and a pre-approved curtailment list by shift.
- Interval data to verify performance, and a review of the new tag each spring.
- Awareness that some utilities allocate transmission by a separate tag (NSPL), which rewards the same hot-afternoon discipline.
See capacity tags explained for how tags are set.
HB 15 behind-the-meter options for mercantile customers
HB 15 lets mercantile customers (over 700,000 kWh a year) connect their own or a third party's generation behind the meter, and bars utilities from owning new behind-the-meter generation. That opens third-party-owned on-site solar, storage, gas generation or combined heat and power under a lease or power purchase agreement.
Points to settle before signing anything:
- Your supply contract. On-site generation lowers the kWh you buy. Make sure bandwidth and material-change clauses exempt customer-sited generation, or you may pay a penalty for your own project.
- Interconnection and standby. The utility still reviews interconnection, and your tariff may include standby or backup charges; model them.
- Net metering. Ohio allows systems up to 120% of usage at interconnection, with excess credited at the energy component of the default price — not the full retail rate.
- Federal credits. For commercial solar, the clean-electricity credit now requires construction to have started by July 4, 2026 or the project to be placed in service by December 31, 2027. Storage keeps the full credit for construction starting through 2033. Foreign-entity-of-concern rules apply to projects starting after December 31, 2025. Confirm with a tax adviser.
- Peak value. On-site generation or storage dispatched during PJM's summer peaks also lowers your capacity tag.
Multi-site master agreements
For portfolios across AEP Ohio, Duke Energy Ohio, AES Ohio and the FirstEnergy utilities:
- One master agreement, many confirmations. Common credit, billing, pass-through and termination terms, with a transaction confirmation per utility zone or site group.
- Co-terminous end dates so the whole portfolio re-bids once.
- Add/delete rights. New sites join at then-current market pricing for the remaining term; closures or sales up to an agreed share of volume leave without penalty.
- Separate pricing by zone. Energy prices, and in some years capacity prices (Duke's zone cleared at $96.24/MW-day in 2024/25 versus the $28.92 RTO price), differ by utility zone; don't let a single blended price hide it.
- Summary invoicing or a portfolio report, especially with dual billing.
- Aggregation hygiene. Accounts at or below 700,000 kWh a year that aren't under a supplier contract can be auto-enrolled in a community aggregation program. Keep every account under contract or opted out so your portfolio doesn't fragment.
- Renewal tracking. HB 15 notices only reach accounts with demand of 25 kW or less, so keep your own expiration calendar for every account — the large ones get no statutory reminder.
FAQ
What is a mercantile customer in Ohio?
A commercial or industrial account using more than 700,000 kWh a year. Mercantile status matters for aggregation (opt-in only) and for HB 15's behind-the-meter generation rights.
Is block-and-index riskier than a fixed price?
Yes, on the indexed portion. It trades certainty for potentially lower average cost, so it suits buyers with a stable baseload and someone monitoring the market.
Can I add on-site generation while under a supplier contract?
Under HB 15 mercantile customers can, but check your contract's bandwidth and material-change terms first so the lower usage doesn't trigger charges.
Should a large buyer fix capacity or pass it through?
Pass it through if you can reliably cut load during PJM's summer peak hours; otherwise fixing it simply bundles a cost that's already known.