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Board ratifies two‑year electricity commodity agreement as capacity costs rise
Summary
The board ratified a two‑year electricity commodity agreement with AEP Energy covering Dec. 2024 through Dec. 2026; staff said the commodity rate rose slightly driven by an over 800% year‑over‑year spike in the capacity component of grid costs.
The Franklin Regional School Board ratified a two‑year electricity commodity agreement with AEP Energy at its Jan. 13, 2025 meeting. Administration asked the board to ratify the agreement covering December 2024 through December 2026 to provide price certainty amid volatile capacity costs.
Finance staff (Mr. Perry) told the board the overall rate in the proposed two‑year agreement showed a slight increase that is “entirely driven by the capacity portion of the electricity cost,” which guarantees grid reliability and available generation. He said competing forces of declining local generation supply and rising demand (for example, from data centers) have increased capacity prices and that, absent the capacity spike, the agreement would have produced a lower commodity rate than the previous term.
Staff reported the capacity component had spiked “over 800% year over year” on the power grid, which influenced the district's decision to lock in a longer two‑year term rather than one‑year agreements to gain more certainty for budgeting.
Why it matters: the capacity portion of electricity costs affects the district's utility budget. Locking a two‑year commodity agreement is intended to reduce year‑to‑year rate uncertainty caused by sharp swings in capacity charges.
Next steps: With board ratification the district will proceed to finalize the contract and manage budgeting for the coming fiscal periods. Staff said they opted for a two‑year term to stabilize anticipated electricity costs given current market conditions.
