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Budget committee approves hedging 75% of natural gas use Dec'Oct to limit utility budget risk
Summary
The committee voted to lock in 75% of the district's natural gas purchases from December through the following October to provide budget certainty; staff said hedging reduces upside risk but forgoes downside market gains.
Waunakee Community School District budget committee members voted on Nov. 7 to lock in (hedge) 75% of the district's natural gas purchases for a December-through-October period to protect the utilities budget from price spikes.
Administrators said the district has historically purchased natural gas through a third-party supplier and sometimes hedged a portion of consumption to reduce budget volatility. Hedging lets the district fix a price on a portion of its expected usage, limiting exposure to sharp winter-price increases at the cost of not participating in any subsequent price drops.
"The advantage of hedging is more so I would describe as almost budget protection than anything else," a district staff member explained while showing recent pricing and historical comparisons. The staff noted that hedging has produced modest annual savings in the $10,000'$25,000 range under typical scenarios, though in volatile years the difference can be larger.
After discussion about duration and percentage, a committee member moved to hedge 75% of expected natural-gas use from December through the following October. The motion was seconded and approved by voice vote ("Aye"). Administrators said they will coordinate with the district's purchasing staff to lock in the purchase and that Allie (staff) will support execution of the contract.
Why it matters: Locking a large portion of gas procurement at known prices reduces the risk that a cold winter or market disruption will create a large unbudgeted utility expense. The committee emphasized this is a budget-management strategy, not a guarantee of savings; if market prices fall, the district will not participate in the lower prices for the hedged portion.
Clarifying details: Committee members discussed options for months covered (the district has hedged December'April previously) and for the percent of usage to lock. The committee chose a longer December'October period and a 75% hedge to maximize budget certainty for the 2025-26 heating season. No dollar amount for the contract was discussed publicly at the meeting; administrators said daily market prices determine the final terms and that the district will report back on implementation.
