Fixed vs. Variable Rate Questions for Cannabis Facilities

Fixed, index, and block-and-index in one table

The full contract structures page walks through each product. At a glance:

Structure	Who carries price risk	Best fit for a grow
Fixed	Supplier (for the components that are truly fixed)	Operators who need budget certainty through a capacity reset
Index / variable	You	Facilities with cash reserves and load flexibility
Block-and-index	Shared	Most indoor cultivators: fix the flat base, float the edges

The Pennsylvania PUC defines a fixed price as an all-inclusive per kWh price that remains the same for at least three billing cycles or the contract term, whichever is longer [pa-puc-electric-terms]. A variable price can change by the hour, day, or month per the supplier's disclosure statement [pa-puc-electric-terms]. Those definitions sound simple. Pass-through clauses are where fixed stops meaning fixed.

What pass-throughs do to a "fixed" quote

Delivery charges and demand charges stay on the utility tariff no matter who supplies energy. On the supply side, capacity is often the largest moving part in PJM territory. PJM's 2026/2027 Base Residual Auction cleared at the FERC-approved cap of $120,147 per MW-year across the RTO [enel-pjm-2026-capacity]. Capacity is allocated to customers based on peak usage during PJM's five Coincident Peak hours, and suppliers either embed that cost in a fixed rate or pass it through as a separate line item [pjm-glossary].

If your contract passes capacity through, signing a fixed energy rate in March does not protect you from a higher capacity charge starting June 1. That is not a bait and switch. It is the contract working as written. Before you sign, list every component the supplier can adjust without your consent.

Lock in or float: a decision frame

Assume a 10,000 sq ft indoor flowering facility in ComEd territory using 450,000 kWh per year with a coincident peak of 620 kW. Those are inputs for illustration, not industry averages.

Choice	What you gain	What you risk
Full index	Lowest average cost if markets stay calm	A cold week or hot week can double the supply line
Full fixed	One number to budget from	You pay a risk premium; pass-throughs may still move
Block-and-index	Fixed cost on 70 to 85% of kWh	Only the shoulder hours float

ComEd's published price to compare for summer 2026 is 10.399 cents per kWh for supply plus transmission, before delivery and demand [il-plugin-comed-ptc]. That is the number on the utility default you are trying to beat or avoid. When default resets every June and October, riding default is its own form of floating.

Contract length and calendar timing

In deregulated states, three dates matter: your contract end date, your utility default reset date, and your ISO capacity delivery year (June 1 through May 31 in PJM). Misaligning them is how operators auto-renew into a bad month.

For a facility signing its first supply contract, twenty-four months aligned to a June 1 start covers two PJM delivery years with one renewal decision. Shorter terms make sense when you are expanding canopy and expect load to grow more than a bandwidth clause allows. Longer terms require confidence in your license, lease, and entity structure because early termination fees on commercial contracts can be formula-based and large.

Use the supplier contract comparison worksheet to line up pass-through language across quotes. If you are in Illinois, the switching guide covers enrollment timing relative to ComEd billing cycles.

When fixed beats default (and when it does not)

Fixed is insurance against a cold snap or capacity spike on the supply line. Default supply is also floating, with a lag. ComEd's price to compare updates on a published schedule [il-plugin-comed-ptc]. When PJM capacity jumped for 2026/2027, suppliers priced it into fixed quotes immediately while default customers saw it on the next reset [enel-pjm-2026-capacity]. Fixed wins when you need bankable numbers or capacity just cleared at the cap. Index wins when forward curves are falling and you can absorb a bad month.

Block-and-index sizing for a flat grow load

Indoor flower rooms run the same schedule daily. That flat profile is ideal for a fixed block.

Assume the same 450,000 kWh per year facility with load concentrated in twelve-hour lighting windows. A supplier might fix 350,000 kWh per year (roughly 78 percent of total) at a fixed rate and settle the remaining 100,000 kWh at the day-ahead index. You get budget certainty on the bulk of the bill while still participating when off-peak hours are cheap.

Sizing the block wrong is a common mistake. Size it to your minimum monthly usage in a normal production month, not to peak expansion plans. If you add canopy mid-contract without amending the block, usage above the block floats at index and bandwidth clauses may trigger on the fixed portion.

Reading a quote like a CFO

Before you compare cents per kWh, confirm these five items in writing:

1. Components included in the fixed rate (energy only vs energy plus capacity vs true all-in).
2. Pass-through list and whether each item is capped or at cost.
3. Bandwidth on fixed-volume products (plus or minus percent before penalty pricing).
4. Start date relative to utility billing cycle and PJM delivery year (June 1).
5. Renewal and notice window so you do not evergreen into a variable month.

The Pennsylvania PUC fixed-price definition requires the rate to stay the same for at least three billing cycles or the contract term for included components [pa-puc-electric-terms]. Ask which components the supplier excluded from that definition. Two quotes at 9.5 cents can differ by more than a cent once capacity pass-through lands on the invoice.

Index products and cultivation risk

Full index works when you have load flexibility or deep reserves. Most indoor cultivators do not. If you float, set an internal price ceiling and a realistic curtailment plan. Partial index on veg rooms or shoulder hours beats full exposure on every kWh. The understanding your commercial utility bill page shows which invoice lines a supply contract actually moves.

Default supply is also floating, with a lag

Riding utility default service is not the same as avoiding price risk. ComEd's price to compare updates on published summer and non-summer schedules [il-plugin-comed-ptc]. When PJM capacity cleared at the cap for 2026/2027, competitive fixed quotes moved immediately while default customers saw the move on the next reset [enel-pjm-2026-capacity]. Default is floating with administrative lag and less transparency on forward components.

Hedging capacity separately from energy

Sophisticated operators sometimes fix energy on a block-and-index product while accepting capacity pass-through at PJM clearing prices [pjm-glossary]. That splits the risk: energy is budgetable; capacity moves with auction results. Ask suppliers whether they offer a capacity cap or a fixed capacity adder for part of the term. Not every supplier will, but commercial accounts large enough to present interval data sometimes negotiate a hybrid.

When index beat fixed in recent cycles

Index wins when forward curves fall after you would have locked. It loses when cold snaps, heat waves, or capacity auctions spike wholesale prices during your heaviest usage months. Cultivation loads are concentrated in predictable hours, which cuts some hourly volatility but not monthly averages. A facility that can shift veg lighting to off-peak hours has more index flexibility than a flower-only meter with a rigid photoperiod.

Document your internal price ceiling before you float. If the supply line exceeds that ceiling for two consecutive months, have a pre-agreed trigger to request fixed quotes without waiting for board approval.

Capacity delivery year alignment worksheet

For PJM accounts, list three dates on one page: contract start, contract end, and June 1 capacity delivery year starts. If your contract spans only one delivery year, capacity pass-through may move once mid-term when the next auction clears [enel-pjm-2026-capacity]. If it spans three years, you may see three capacity step changes on pass-through products while energy stays fixed [pjm-glossary].

Compare fixed offers using the supplier contract comparison worksheet with a column for capacity treatment: embedded, capped, or at cost.

Board approval packet for a fixed term

Include in the board packet: all-in fixed rate, pass-through list, bandwidth percent, ETF formula summary, June 1 capacity treatment, and a comparison to the published price to compare [il-plugin-comed-ptc]. Two pages of contract language beat a single cents-per-kWh slide when PJM capacity is passed through at cost [pjm-glossary].

Veg-room partial index option

Some operators float supply on veg rooms while fixing flower-room blocks because veg hours can shift without crop risk. Confirm bandwidth treats veg and flower as one account or separate subaccounts before you split products [pa-puc-electric-terms].

Veg-room partial index option

Some operators float supply on veg rooms while fixing flower-room blocks because veg hours can shift without crop risk. Confirm bandwidth treats veg and flower as one account or separate subaccounts before you split products [pa-puc-electric-terms].