Ohio Industrial Procurement 2026: Escaping the Supplier Risk Premium
Ohio is home to one of the most robust, high-voltage manufacturing ecosystems in the United States, stretching from Cleveland steel corridors to massive automotive footprints along I-75. In 2026, the strategic imperative for these energy-intensive operations has shifted entirely. Buying a "fully-fixed" electricity contract from a supplier is now a toxic asset due to the supplier embedding massive risk premiums to protect themselves against explosive PJM wholesale capacity costs. The new standard for Ohio manufacturing is surgical unbundling: securing energy hedges through Block-and-Index architecture, while violently crushing localized capacity exposure via integrated Coincident Peak (CP) Management.
Executive Impact
- →The Fixed-Rate Trap: If an Ohio die-casting plant demands a "flat" rate for 2026-2029, the retail supplier looks at PJM\'s highly unstable capacity market. To ensure they don\'t lose money if capacity doubles, the supplier adds a massive margin on top of the actual commodity value. You are paying for their insurance.
- →Pass-Through Structures: The solution is to pass through all non-energy components (Capacity, Transmission, RPS mandates) explicitly at cost. This transfers the risk back to the facility, requiring the manufacturer to actively manage their PLC (Peak Load Contribution) during the summer.
- →Demand Response Double-Dip: A facility passing through capacity at cost and engaging in CP management can simultaneously enroll in an Economic Demand Response program—getting paid to shut down during the exact same hours they are avoiding future capacity tags.
Anatomy of the Block and Index
Rather than wrapping everything into a single price, large Ohio users isolate the energy component and manage it specifically against the PJM West Hub index:
- The Base Block (Fixed): If an injection molding facility runs 24/7 with a baseline load of 8 MW, they purchase a 6 MW "Around-The-Clock" (ATC) physical block of power, stripping risk off the table for their core operation.
- The Delta (Index): The remaining 2 MW of load variability (the difference between the 6 MW block and the facility\'s actual hourly consumption) settles against the PJM day-ahead or real-time hourly index. This allows the facility to capture depressed wholesale prices during low-demand periods (like mild spring nights) rather than paying a supplier a fixed premium for those hours.
Leveraging AEP and FirstEnergy Tariffs
While energy is deregulated, the monopoly wires companies (AEP Ohio, FirstEnergy, Duke) still dictate the delivery infrastructure. Facilities undergoing major capex expansions in 2026 must audit their interconnection voltage. Upgrading a substation to take power at sub-transmission rather than primary distribution voltage often yields enough savings on the regulated tariff side to completely fund the electrical infrastructure upgrade within 36 months.