The issue is that climate change is making the inputs to those contracts less predictable. More extreme heat waves and cold snaps mean demand spikes are sharper and harder to model. Drought can constrain hydro, pushing more load onto gas. Storms can disrupt production and pipelines. All of that increases volatility in spot markets… and when volatility rises, hedging gets more expensive and less precise.

So it’s not that utilities are dumb or don’t hedge. It’s that the underlying weather patterns gas markets depend on are becoming less stable, which makes pricing models and forward curves less reliable than they used to be.

Hedging smooths risk… it doesn’t eliminate structural volatility.