Illustrative Case: Ohio Level I Cultivator Structures Block-and-Index Supply on AEP Ohio

The facility and starting situation

Assume a Level I dual-use cultivator outside Columbus on an AEP Ohio account in PJM, licensed by the Division of Cannabis Control [oh-dcc-cultivators-processors] [oh-energychoice-glossary]. Senate Bill 56, effective March 20, 2026, merged adult-use and medical licenses and eliminated the Level III tier, leaving 37 cultivators statewide: 23 Level I and 14 Level II dual-use sites [oh-lsc-sb56-final-analysis]. Level I cultivators may grow up to 100,000 square feet after expansion [oh-lsc-sb56-final-analysis]. This facility operates 62,000 square feet of flowering canopy, 14,000 square feet of veg, and 5,000 square feet of mother space in a purpose-built greenhouse with supplemental LED aisles.

Ohio's humid continental climate drives year-round HVAC and dehumidification: statewide normals are 5,689 heating degree days and 792 cooling degree days, with summer dew points in the mid-60s to low-70s F [noaa-cag-ohio]. Assume LED flower lighting at 36 watts per square foot and gas heat with electric dehumidification. Measured peak demand is 480 kW in August and 390 kW in February. The account sits in AEP Ohio general service secondary class GS-2 or GS-3 territory with distribution demand charges billed per kW [aep-ohio-rates].

At energization the operator stayed on the utility Standard Service Offer because buildout capital was tight. All Ohio investor-owned utility customers may buy generation from a PUCO-certified Competitive Retail Electric Service provider instead [oh-energychoice-glossary]. By spring 2026 the CFO wanted off default service before the June 1 SSO auction reset and before S.B. 56 expansion rooms came online [oh-lsc-sb56-final-analysis].

House Bill 15, signed May 2025, repeals Electric Security Plans after each utility's final SSO delivery period and requires distribution rate cases every three years, so both supply and delivery lines will move through 2027 to 2029 [occ-hb15]. PJM capacity and network transmission charges were sharply higher in the 2025/26 and 2026/27 delivery years, showing up in SSO auction prices and CRES pass-through products [oh-energychoice-glossary].

What the baseline bills showed

The table mixes cited program facts with assumed usage. SSO mechanics and license rules are facts; kWh, kW, and dollar totals are inputs.

Line item	Assumption or rate	Monthly (summer)	Monthly (winter)	Notes
Flower and veg lighting	420 kW avg on cycle	183,000 kWh	183,000 kWh	Assumed
HVAC and dehumid	180 kW summer / 140 kW winter	129,600 kWh	100,800 kWh	Assumed
House and irrigation	25 kW continuous	18,250 kWh	18,250 kWh	Assumed
Peak demand	480 kW / 390 kW	480 kW	390 kW	Sets GS class
AEP Ohio delivery	Modeled $7.80 per kW + riders [aep-ohio-rates]	$3,744	$3,042	Distribution only
SSO supply + transmission	Modeled 10.8 cents per kWh all-in	~$35,500	~$32,700	Pre-June reset
Approximate total		~$73,000	~$66,000	Excludes taxes

Annualized: about 3.1 million kWh and roughly $830,000 all-in. The EIA June 2026 Ohio industrial average was 9.89 cents per kWh [eia-epm-5-6-a]; this facility ran higher because of distribution demand, winter heating load, and PJM pass-through on the SSO. Ohio's commercial average was 13.77 cents in the same period [eia-epm-5-6-a].

After the June 1, 2026 SSO reset, FirstEnergy's Rider GEN rate for small commercial GS-Secondary customers rose about 6 percent to 9.38 to 9.45 cents per kWh depending on operating company [ecm-fe-ohio-sso-2026]. AEP Ohio's SSO moved similarly in the operator's broker model. Staying on default service into summer would have added roughly $18,000 a year at the same usage.

What changed

The operator ran a structured RFP to PUCO-certified CRES suppliers in March 2026, before the June reset [oh-energychoice-glossary].

Block-and-index structure. The winning offer was a 24-month contract with 70 percent of expected annual load (2.17 million kWh) priced at a fixed 8.9 cents per kWh for energy and 30 percent floating on PJM West Hub day-ahead LMP plus a 0.4 cent adder. Capacity and network transmission were passed through at actual PJM billing rates, not fixed. The fixed vs. index vs. block-and-index page explains why hybrids fit load that is stable in kWh but exposed to capacity markets.

Explicit capacity language. PJM capacity charges for the 2026/27 delivery year were a known step-up [oh-energychoice-glossary]. The contract capped supplier margin on capacity pass-through at 0.15 cents per kWh but did not cap the underlying PJM charge. The operator modeled a $0.012 per kWh capacity adder in base case and $0.018 in stress case.

Load shape disclosure. Cultivation kWh is relatively flat month to month compared to retail, which helped the supplier size the block. The operator provided twelve months of interval data and a pro forma for 15,000 square feet of expansion canopy in 2027 [oh-lsc-sb56-final-analysis]. The supplier set the block at 70 percent, not 90 percent, because expansion would push kWh up mid-contract.

Timing and enrollment. Enrollment completed in May 2026 through the Ohio switching process. AEP Ohio continued as the delivery utility on a single bill with the supplier charge embedded, which PUCO rules allow [oh-energychoice-glossary].

The math after

Compare modeled SSO default to the block-and-index contract on 3.1 million kWh a year. Supply-side lines only; delivery unchanged.

Component	Before (annual, SSO post-reset)	After (annual, block-and-index)	Notes
Fixed block (70% at 8.9 cents)		$216,000	2.17 M kWh
Index portion (30%)		$93,000 at modeled 10.0 cents	Floats with hub
Capacity + NITS pass-through	~$46,000 at SSO	~$43,000	Modeled PJM
Supply-side total	~$381,000 at 12.3 cents	~$352,000 at 11.4 cents
AEP Ohio delivery	~$449,000	~$449,000	Unchanged
Modeled all-in	~$830,000	~$801,000	~$29,000/year

The savings were supply-side only. At 9.89 cents industrial average, the same kWh stack looks cheaper on paper [eia-epm-5-6-a], but GS-2 and above delivery demand still applied to 480 kW peaks [aep-ohio-rates].

If index prices averaged 11.5 cents instead of 10.0 on the floating 30 percent, supply-side savings shrank to about $12,000. If they averaged 8.5 cents, savings grew to about $41,000. That band was acceptable to the board because the fixed block covered base operations and the float tracked a market they could monitor weekly.

What did not work

A 100 percent fixed three-year offer at 10.4 cents. The lowest fixed quote looked simple but priced in full PJM capacity risk. It beat SSO by only $8,000 a year and carried a $180,000 early termination fee.

Pure index at one store the operator owned separately. A smaller extraction site on pure index saved money in mild months and spiked $6,000 in one January cold snap when day-ahead prices jumped. The cultivator rejected pure index for the main campus.

AEP Ohio prescriptive LED rebate for existing flower rooms. H.B. 6 ended Ohio's mandated efficiency portfolios in 2020; AEP Ohio's Efficient Products program is narrower than in neighboring states [aep-ohio-efficient-products]. Horticultural LEDs required confirmation of DLC listing; two veg rooms already qualified and the rebate did not cover flower replacements planned for 2027.

Delaying until after expansion. The supplier would re-price the block at enrollment or at a contract amendment. Signing at pre-expansion load locked the 70 percent block before kWh grew.

Block sizing to minimum monthly kWh

Ohio cultivators on block-and-index products should size the fixed block to minimum monthly usage in normal production months, not peak expansion plans. Usage above the block floats at index. Coordinate block amendments with canopy expansion and witness test schedules [oh-energychoice-glossary].

SSO June 1 benchmark timing

Ohio Standard Service Offer prices reset June 1 from PUCO-supervised auctions. Block-and-index contracts should compare the fixed block portion to the SSO price at signing and at each June reset during the term [puco-energy-choice]. Delivery demand from the utility tariff remains independent of block sizing.

Index exposure on shoulder hours

Block-and-index fixes the base load block; veg room shoulder hours and batch equipment may still float on index. Size block to minimum steady-state month, not nameplate expansion [puco-energy-choice].

Lessons that transfer to other Ohio cultivators

Compare all-in supply against the SSO Price to Compare every May, not every month [oh-energychoice-glossary]. Structure capacity pass-through explicitly in PJM; it is not optional on Ohio CRES products [oh-energychoice-glossary]. Block-and-index fits cultivation because kWh is predictable even when kW peaks are not. Match block size to expansion plans under S.B. 56 tier limits [oh-lsc-sb56-final-analysis]. Delivery is a separate problem: pull GS class thresholds from the current AEP Ohio tariff before you sign supply [aep-ohio-rates]. H.B. 15 will reset delivery economics through mandatory rate cases; treat supply savings as one line, not the whole bill [occ-hb15]. See demand charges explained, the FAQ on supplier choice, and Ohio cultivation facility energy.