Ohio deregulation: 2026 state of play

Why the two pools exist in the first place

In the 1990s a wave of US states moved to "deregulate" the retail electricity market. The starting condition was vertically integrated utilities — a single company owned the generators, the transmission lines, the local distribution wires, the meters, and the billing relationship with end-customers. Deregulation forced these utilities to separate ownership of generation from ownership of wires-and-meter, and to allow third-party licensed suppliers to compete on the supply portion of the bill.

The wires-and-meter side stayed regulated. A monopoly is the most efficient way to run physical infrastructure that connects every building to the grid — duplicating that infrastructure to allow competition would be expensive and counter-productive. The PUC sets the delivery tariff, approves capital investments, and supervises outage performance.

The supply side became competitive. Suppliers — often called Retail Electric Providers (REPs) in Texas, Energy Service Companies (ESCOs) in New York, or just "suppliers" elsewhere — buy electricity wholesale and resell it to end-customers at a per-kWh rate. The PUC licenses them, but does not set their rates. They compete on price, contract term, contract clauses, and customer service.

The capacity charge, the silent compounder

The capacity charge is one of the more confusing line items on a US electricity bill. It pays for the regional grid operator (PJM, ERCOT, ISO-NE, etc.) to ensure there is enough generation capacity available to meet peak system demand — typically a hot afternoon in summer or a cold morning in winter, depending on the region. The capacity charge is a delivery-side line item: it is regulated, set once a year via the regional capacity auction, and locked in for 12 months.

Capacity charges have been the silent compounder of US electricity bill inflation since 2022. PJM's 2026 capacity auction cleared at the highest price in a decade, driven by retiring coal generation, slow renewable integration, and growing data-centre demand. That clearing price flows into delivery-side bills with a 6-to-18-month lag.

Locking the supply rate does not insulate the capacity charge — that part of the bill keeps moving with the regulated tariff regardless of who supplies your kWh. The lock only stabilises the supply-side. It is best understood as a partial hedge: the largest hedge available to a non-utility customer, but not a complete hedge.

What the rate trajectory looks like locked vs unlocked

The structural difference between a variable rate and a locked rate is exposure to wholesale market movement. A variable supply rate re-prices monthly. The supplier passes through the wholesale curve, plus a small administrative margin, with a 30-to-60 day lag. When the wholesale spike hits in winter, the variable bill follows within two billing cycles.

A locked rate is contractually fixed for the term you signed — 12, 24, 36, or 48 months. The supplier absorbs the wholesale spike, in exchange for a steadier monthly bill on your side. From the supplier's perspective, they hedge the locked rate in the wholesale futures market; the rate they offer you reflects the cost of those hedges plus margin.

In an inflationary environment (the US has been at 4–7% per year in deregulated regions since 2022), the gap between variable and locked widens monthly. The chart below models a typical commercial supply rate at 14.5¢/kWh signing, inflated at 6%/yr with seasonal winter spikes. The locked alternative at 12.6¢/kWh stays flat for the entire 24-month term. The gold area between the two curves is the cumulative estimated savings.

When to lock — the seasonal calendar

Wholesale electricity futures front-load the winter spike. December through February consistently prices the highest in PJM and ERCOT zones, driven by gas-for-heat demand, capacity tightness, and weather risk. The cleanest lock-in window for most deregulated zones runs August through October — far enough ahead of the winter ramp that the spike is not yet priced into a 24-month curve, but close enough that suppliers compete hard for the next-quarter delivery year.

For commercial multi-site bundles, September is historically the cheapest single month to clear an RFP. Suppliers have most of their next-year capacity to place, and an attractive bundle (5+ sites, clean load profile, single utility zone) gets the best response window. Locking in January or February is the most expensive time of year because the spike is already in the curve and suppliers have less incentive to be aggressive.

There are exceptions. If wholesale prices have spiked dramatically due to a one-time event (a generation outage, a regulatory ruling), and supplier inventories are heavy, the lock window can briefly invert. We watch the futures curve and surface the call to lock when it is materially advantageous.

How commercial procurement actually runs

Commercial energy procurement is a discipline of standardising the load profile, scoring offers apples-to-apples, and avoiding the silent rollover at end of term. For a single-site SMB the math runs $4,500–$6,500 in monthly bills; for a Class-A office or a multi-site retail portfolio it can run $25,000–$60,000+ per month. The leverage of a clean lock at the right month with the right supplier is non-trivial.

The process is a four-stage funnel. We invite 9 PUC-licensed suppliers per market to bid on the bundled load profile. 5 typically come back with priced offers (locked rate, term, contract clauses, commission disclosure). 2 finalists are scored apples-to-apples, with the commission baked into the rate comparison. 1 supplier is locked, and we begin the renewal-watch clock the day the contract starts.

Bundles work best when sites share a utility or PJM/ERCOT zone. Aggregating 8 storefronts under one supplier contract often clears 1.5–2.5% better than each site shopping alone. Cross-state bundles often need separate contracts per state due to license boundaries, but can still be coordinated to expire in the same month.

• Bundle the load profile first — kWh, kW peak, contract end-dates, current supplier, current rate.
• Approach 5–9 PUC-licensed suppliers minimum. Score on locked rate + term + contract clauses + commission disclosure together — not on rate alone.
• Disclose renewal timing in the RFP. Suppliers underprice known windows because the rollover risk is gone.
• Watch the renewal 60–90 days before expiry. Re-shop and lock again, or roll for a quarter at the variable default if the curve favours waiting.