The Energy Cost Crisis: Why Every Executive Needs to Rethink Their "Fixed" Expenses

A wake-up call from the trading floor that could transform your bottom line.

My morning routine is simple: coffee, Bloomberg Radio, and Tom Keene's market updates as I head to client meetings or the office. But on September 22nd at 7 AM, Keene delivered news that should have every business executive paying attention.

American Electric Power had just announced rate increases for Ohio, at 10–15% for residential customers, with my analysis suggesting business rates could spike by as much as 30%. This is just for commodity and capacity rates, not even accounting for transmission and distribution.

Then came the kicker: it was suggested that consumers simply had to accept these as “fixed costs.”

But the increases noted above are exactly where customers can influence what they pay. There are options, and every customer should be aware of them. This mindset, treating energy as a fixed cost, perfectly captures a dangerous misconception still present in boardrooms across America, Europe, and Asia. In reality, energy is not a fixed cost, and treating it like one could be costing your business millions.

The Fixed Cost Fallacy

Let's get our definitions straight. A fixed cost remains constant regardless of your business activity, such as rent, insurance premiums, or base salaries. These expenses stay the same whether you produce 100 units of product or 10,000.

Your electricity bill is a different story entirely.

The only truly "fixed" portion of your energy bill is the basic connection fee, which is usually a modest monthly charge just for being connected to the grid. Everything else fluctuates based on three critical variables:

• How much electricity you consume (measured in kWh: your energy "odometer")
• When you consume it (peak demand measured in kW/kVA: your energy "speedometer")
• What price you're paying (which often depends on usage patterns and market conditions)

In deregulated markets, you can even choose how and when to purchase your energy. This is not a fixed cost, but one of your most controllable business expenses.

The Perfect Storm Ahead

The Ohio rate increases aren't an anomaly, but a preview for the rest of us. Electricity demand is outpacing supply across North America, Europe, and Asia, driven by data centers, electric vehicles, AI computing, and industrial reshoring. This supply-demand imbalance will only intensify.

What happened in Ohio will begin to happen everywhere. The question isn't whether energy costs will rise in your market, instead it is how quickly they will rise and by how much.

Your Competitive Advantage Hiding in Plain Sight

Here's what separates winning companies from the rest: they recognize energy as a strategic variable, not an unavoidable expense. Smart executives are already:

• Optimizing consumption patterns to avoid peak pricing
• Investing in energy efficiency that compounds returns annually
• Exploring on-site generation through solar, wind, or combined heat and power
• Leveraging energy storage to buy low and use during expensive periods
• Negotiating strategic supply contracts in deregulated markets

The companies treating energy as "fixed" will watch their margins erode. Those managing it strategically will gain a sustainable competitive edge.

The Bottom Line

Energy costs are a factor your business controls. As supply constraints tighten globally, the executives who master energy management will separate themselves from those still stuck in the "fixed cost" mindset.

Three Moves for Proactive Leaders:

• Benchmark your energy costs and demand profile quarterly.
• Identify your biggest exposure: peak demand, rate class, or supply contract?
• Set a calendar reminder: renegotiate, optimize, or invest, before the next rate hike hits.

Will you be reactive or proactive? Because while you can't control market fundamentals, you absolutely can control how your business responds to them.

The energy transition is already here. The winners will be those who act accordingly.

‍