Balancing Fixed and Index

The choice between fixed and index pricing isn’t binary. Mid-market companies often need both. A blended strategy — part fixed, part index — provides stability while leaving room for savings. The art is in balancing the two so your business gets protection without paying unnecessary premiums.

Why Balance Matters

All fixed = predictable budgets but higher average costs. All index = potential savings but exposure to volatility. Balancing the two lets you set a budget floor while keeping some upside.

Common Structures

• Block & Index: Fix a set block of usage (say 70%) and float the rest.
• Seasonal Blocks: Fix winter load, float summer, or vice versa.
• Collars: Set caps on index exposure while keeping downside benefit.

How to Decide

• Usage profile: Steady load may support more index. Volatile load may need more fixed.
• Risk tolerance: How much volatility can your P&L or board accept?
• Market conditions: Rising, falling, or flat? Benchmarking helps time your mix.

Explore hedging strategies to see how balancing protects you. For board-level considerations, read what your board needs. Compare with fixed vs. index pricing basics.

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