Hedging

Hedging

An alternative to fixing 100% of your energy supply price all at once would be to fix (or hedge) a portion of your supply, while allowing the remainder to “float” in the market. This strategy strikes a balance between price certainty and the opportunity to take advantage of price declines in the future. Generally speaking, there are a few basic procurement product structures you can choose from.

Well-executed hedging strategies can help companies mitigate price risk, more accurately budget and forecast, and provide flexibility.

Managed Hedging

For the greatest flexibility to react to market events, you can choose an active managed hedging approach. With this plan, you can establish price and time-based triggers to execute hedges. Managed hedging allows you to lock in varying blocks of energy a different times over the course of multiple years. This is a forward-looking approach, allowing you to build into a fixed price with a more certain budget.

Best for: Any company or organization can take advantage of managed hedging. This strategy type has many benefits but it does require time and attention, even when working with a qualified energy consultant.

 

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