01The Setup
Most commercial customers procure on autopilot: contract ends → RFP cycle → renew. This is procurement aligned to administrative calendars, not market conditions. It's a discipline of convenience.
The cost of bad timing isn't subtle. Locking 12-month supply in July (peak summer scarcity in many markets) vs. March (shoulder season) can yield 10-15% pricing differential — sometimes more. For a customer spending $2M/year on energy, that's a $200-300K decision being made by an Outlook calendar reminder.
Calendar-driven procurement made sense when energy markets were relatively stable. Today's volatility — gas, capacity, renewables — punishes calendar adherence and rewards market timing. The asymmetry isn't symmetric: bad timing costs you more than good timing saves you in expected value terms.
02The Data
- Power shoulder months: Mar–May, Oct–Nov
- Gas shoulder months: Apr–May, Aug–Sep
- Typical shoulder/peak spread: 8–15%
- Cost of always renewing 90d pre-expiry: Locks current curve
- Bridge options if needed: Month-to-month, indexed
The shoulder month framework: in most US markets, demand is lowest and forward curve volatility is lowest in spring (post-heating, pre-cooling) and fall (post-cooling, pre-heating). These windows offer better pricing not because suppliers are generous, but because supply-demand balance is loosest and curve volatility is lowest.
The calendar trap: most contracts end at year boundaries (Jan, Apr, Jul, Oct). Procurement teams default to RFPing 60-90 days before expiry. If the contract ends in July, you're locking summer pricing into next year. If the contract ends in October, you're locking heating season pricing.
Forward curve shape matters. Backwardation favors locking far-dated supply now. Contango favors locking near-dated and waiting for far-dated. Most procurement teams don't ask the question — they just lock whatever tenor the supplier is selling.
03The Implication
The decision is not 'should we renew?' — it's 'when should we lock, and for what tenor?' Those are separate questions, and the right answers may not be 'right now' and '12 months.' Conflating the two makes procurement a process job instead of a decision job.
Customers with sophisticated procurement (energy-intensive industrials, large ESPs) already think this way. Most commercial customers don't. The gap is mostly tooling and discipline — and the advisor's role in changing both.
04The Recommendation
- Separate the questions. 'Are we locking?' and 'Are we renewing?' are different decisions. The contract end date is administrative; the lock decision should be curve-driven. Treat them as separate gates.
- Build a watch list. For each customer (or each site, for multi-site companies), identify when forward curves are pricing favorable vs unfavorable lock conditions. Watch the windows. The Suite handles this automatically; spreadsheets handle it manually.
- Decouple from expiry. Customers can use bridge structures (month-to-month, indexed defaults) to span unfavorable periods until the lock window opens. Most don't realize this is available — they assume the calendar dictates the decision.
- Document the math. When customers see the differential between 'renewed in the auto-cycle' and 'renewed when the market was favorable,' the behavior change happens on its own. The data is the persuasion.
Most procurement decisions are forced by calendars: contracts end, renewals trigger, RFPs go out. But the calendar doesn't know what the curve is doing. Customers who learn to wait when waiting is profitable — and lock when the market gives them a window — outperform their peers without changing anything about how they consume energy. The arbitrage isn't in the contract. It's in the timing.