CBRE documented that outcome directly in a 2026 analysis of corporate energy procurement. Two companies purchased essentially the same 12-month power product in the Northeastern United States, with similar volumes, markets, and delivery periods. One paid approximately $20 million; the other paid about $5 million after contracting several months later. The $15 million difference came down entirely to timing.
When a company waits until an electricity or natural gas contract approaches expiration, solicits bids, and fixes a large portion of its next contract at once, it is not avoiding market timing. It is concentrating market timing into a single decision. For companies with significant energy spend, that turns an administrative renewal process into a financial market position few CFOs would tolerate for foreign exchange, interest rates, or other exposures.
Contract Renewal Creates a Concentrated Price Decision
Traditional energy procurement often revolves around a calendar. A contract expires, procurement goes to market, suppliers submit bids, and the company evaluates fixed, floating, or blended structures before signing. The process provides contractual certainty, but leaves cost dependent on market conditions during a narrow purchasing window, which matters more when prices move quickly.
CBRE's analysis found that volatility cycles across power, natural gas, and crude oil have become shorter since 2022. The firm defines a cycle as a price rally of at least 10% followed by a correction of at least 10%, and found those cycles occurring about twice as frequently from 2022 through 2026 as from 2018 through 2021. A company entering the market during one of those rallies may lock in different economics from another buyer procuring the same product weeks or months later. The contract may protect the company from future price movements once signed, but it cannot protect the company from the price at which it entered the hedge.
Treasury Rarely Manages Risk This Way
The comparison with treasury is useful because companies already have frameworks for managing other market exposures. A multinational with material foreign exchange exposure does not wait until the day a currency payment is due to decide whether the exchange rate looks attractive. Treasury can establish hedge ratios, authorized instruments, maturity ranges, and risk limits, monitoring exposure over time and hedging portions as the obligation approaches, and interest-rate risk can be managed with similar discipline.
Energy frequently remains different. A company can know years in advance that its factories, warehouses, offices, or data centers will consume substantial electricity and natural gas, yet much of the price decision may still be deferred until a supply contract enters its renewal window. That makes the expiration date disproportionately important. For a financially material energy portfolio, the better question is not simply when the contract expires. It is how much of the company's future exposure should still be floating when that date approaches.
Layering Purchases Reduces Dependence on One Date
One alternative is layered procurement: rather than fixing an entire expected volume at once, a company can establish positions over time as future delivery periods become available and market conditions change. A company expecting a stable electricity requirement next year might secure portions of that load at several points instead of committing all of it during one procurement event, leaving other volumes floating or addressed through different instruments depending on risk tolerance. The objective is not to predict the bottom of the market but to reduce the financial consequence of being wrong on any single day.
Trying to wait for the perfect purchasing opportunity is still market timing. A structured hedging program instead establishes in advance how much exposure the company is willing to leave open and how that exposure changes as delivery approaches. CBRE argues corporate energy portfolios should increasingly be managed through a continuous cost-at-risk framework, tracking forward power and natural gas prices against market fundamentals and historical ranges rather than treating procurement as a periodic renewal, which begins to make energy management look much more like how treasury already handles other exposures the company carries.
The Hedge Can Extend Beyond a Fixed Supply Contract
Layered forward purchases are only one tool. An energy portfolio can combine fixed-price supply, floating exposure, futures, swaps, options, power purchase agreements, onsite generation, storage, and demand flexibility, each managing a different part of the risk. A long-term PPA can hedge some electricity-market exposure, but it does not necessarily match when and where a company consumes electricity, and differences between contracted generation and actual load can leave basis, volume, and shape exposure. Natural gas hedges carry their own considerations, including regional basis and gaps between financial benchmarks and delivered gas costs, and options can protect against adverse price movements while preserving upside, though that flexibility comes at a premium.
The point is not to replace one contract with a complicated collection of financial instruments. It challenges the assumption that one supply contract should manage every dimension of energy risk, an assumption already breaking down in how volatility moves through supplier agreements once it is no longer contained inside a single procurement decision.
Growing Electricity Demand Raises the Stakes
This shift is occurring as the power market becomes harder to forecast. The U.S. Energy Information Administration expects electricity consumption to increase for a fourth consecutive year in 2027, producing the strongest four-year period of U.S. electricity-demand growth since 2000, with data centers a major driver. Natural gas adds another variable because it remains central to U.S. electricity generation while competing with export demand, and EIA expects natural gas consumption by the electric power sector to reach a record during summer 2027, driven partly by industrial and commercial electricity growth in Texas and the Mid-Atlantic. None of that means prices will move in only one direction, but it does mean companies are procuring in markets shaped by a larger, more complex set of demand, supply, infrastructure, and weather variables, making it harder to justify one big purchase in a single renewal window.
The Renewal Date Should Become a Deadline, Not a Strategy
Moving toward active energy-risk management does not mean procurement teams should speculate on power and gas prices, and the distinction between hedging and trading has to remain clear. A company first identifies the commercial exposure created by expected consumption, then finance and procurement determine how much price variability the business can tolerate and what instruments fit. Governance can establish maximum and minimum hedge percentages, permitted products, authorized counterparties, duration limits, and reporting requirements, a structure supplier-driven energy risk rarely gets once cost variability is embedded in someone else's contract instead. Forecast accuracy matters too: a company that hedges more electricity than it consumes can create a new exposure, and businesses adding facilities or rapidly expanding data centers may have particularly uncertain load forecasts. The purpose of the policy is less about locking every megawatt-hour and more about preventing an arbitrary contract date from determining too much of the energy budget.
Supplier competition still matters. Contract terms still matter. Procurement teams should continue testing the market and negotiating aggressively, but those activities answer a different question from when the underlying energy exposure should be managed. A competitive bidding process can produce the best supplier price available on a given day. It cannot guarantee that the day itself was a good time to fix the market, and that is the risk the traditional renewal model can obscure.
For companies with modest energy costs, accepting that exposure may be reasonable, since a hedging program carries administrative, financial, and governance costs of its own. For energy-intensive companies, the calculation differs. If electricity and natural gas can move operating costs by millions of dollars, the expiration date on a supply contract should not determine when a company begins thinking about the next price. Finance teams already understand that principle when managing currencies and interest rates. Energy is increasingly large and volatile enough to deserve the same conversation.
