Most energy budgets start with last year’s total and add a percentage. That works until one line moves for a reason the percentage never considered. A better budget separates what is locked from what is not, and plans for each one differently.
Start with usage, not price
The most common budget miss is volume, not rate. Pull twelve months of usage and demand by account. Then adjust for what will change next year: a new location, a closed site, longer operating hours, new equipment, or electrification of a process that used to run on gas. A good rate on the wrong volume still produces the wrong number.
Separate what is locked from what moves
A commercial bill is several bills in one, and each part behaves differently over a budget year.
Energy: locked if you are on a fixed contract that covers the full year. Exposed if you are indexed, or if the contract expires partway through.
Delivery: set by the regulated utility and adjusted when its tariffs change. It passes through regardless of supplier.
Transmission:for many larger customers, set by last summer’s four coincident peaks and carried through the following year.
Demand charges:driven by your highest usage interval each month. One spike can move a month’s bill.
Taxes and assessments: depend on organization type and use, and on whether exemptions have been filed.
Budget each line on its own logic. One blanket escalator hides where the risk actually sits.
Plan for the contract that expires mid-year
If a contract ends in, say, June, the second half of the year is unpriced. The forward curve shows what the market charges today for those months, and it is the most honest starting point. Add a buffer that reflects how far out the months are and whether they include summer. If the curve is in contango, assume later months will not get cheaper on their own.
Build two cases, not one
A single number gives a false sense of precision. Build a base case and a high case. The high case should assume a hotter summer, higher pass-throughs, and renewal pricing at the top of the recent range. If the operating budget can absorb the high case, the plan is sound. If it can’t, that is a reason to look at fixing more of the load or acting on the renewal earlier.
Revisit it during the year
A budget set in October is a forecast. Check it after the summer, when 4CP and peak demand are known, and again before any renewal decision.
Sector 7 helps clients build energy budgets that hold up through the year →