The CFO’s Playbook for Energy Governance
Energy isn’t just another overhead. In deregulated markets, it’s a tradable commodity with volatility, complexity, and real exposure. Yet in most businesses, it’s still treated like office supplies – renewed at the last minute, delegated to operations, and hidden under “utilities” in the P&L. That’s a mistake. For any CFO tasked with protecting margin, the way you govern energy spend is either a silent risk or a strategic lever.
This playbook is for finance leaders who are done with excuses. It lays out why energy governance belongs in your risk framework, how fragmented procurement erodes EBITDA, and the governance structures that put you back in control. If you run the numbers and present them to your board with discipline, energy goes from distraction to advantage.
The Current Reality: Reactive, Not Strategic
Walk into most mid-market firms today and you’ll find the same pattern:
- Energy spend managed by operations or facilities, not finance.
- No consolidated reporting – just invoices processed as payables.
- Contracts renewed in silos, often in the last 30 days before expiry.
- No risk assessment. No scenario planning. No board visibility.
That’s not governance. That’s survival. And survival thinking costs margin. When procurement is reactive, suppliers drive the terms. When contracts are scattered, leverage is lost. When volatility hits, nobody knows what exposure looks like until the P&L reveals the damage.
Why Governance Matters
Governance is about visibility, accountability, and control. Energy meets all three criteria. It’s a material cost line. It’s subject to market risk. And it’s vulnerable to leakage when left unmanaged. Treating it casually undermines the CFO’s mandate: to protect and grow margin.
Boards expect CFOs to oversee treasury, tax, FX, and credit exposure. Why is energy – often a top-five expense – left out? Because it’s misunderstood. The market structure is opaque. The terminology is designed to confuse. But the financial principles are straightforward: energy is a risk asset. Manage it accordingly.
Margin Leakage: The Silent Killer
Every fragmented contract, every unmanaged renewal, every hidden fee creates leakage. Not dramatic, but relentless. A half-cent difference in kWh rate across 20 million kWh equals $100,000 annually. That’s six figures of EBITDA gone, hidden in plain sight. Multiply by three-year terms and multiple sites, and you’re talking millions.
Leakage doesn’t appear as a line item. It appears as “higher than expected costs.” It’s margin erosion by inertia. Governance stops the drip by centralizing spend, aligning expiries, and forcing discipline into procurement.
The CFO’s Framework for Energy Governance
To put energy into governance, you need a structured framework. Here’s the model used by boards that take energy seriously:
- Data Centralization: A single database of all sites, meters, contracts, rates, and expiries.
- Policy Alignment: Energy procurement embedded in corporate risk policy, not left to operations.
- Risk Assessment: Scenario modeling for price swings, demand changes, and regulatory shifts.
- Consolidation Strategy: Aggregating volume to gain supplier leverage.
- Board Reporting: Quarterly updates on spend, exposure, and savings vs. market.
- Audit Discipline: Annual benchmarking to prove competitiveness and uncover leakage.
This framework takes energy out of the shadows and puts it under the same governance lens as any other material exposure.
The CFO’s Role: From Oversight to Leadership
Energy governance is not about micromanaging kilowatts. It’s about setting standards, demanding visibility, and holding procurement accountable. The CFO doesn’t need to negotiate rates – that’s tactical. The CFO needs to insist on aggregated buying, board-level reporting, and risk analysis. Without that top-down mandate, energy will stay fragmented and reactive.
When CFOs lead, the conversation changes. Instead of “Do we have a contract for Site X?” the question becomes “What is our consolidated exposure for the next three years, and how are we mitigating it?” That’s board-level discipline. That’s governance.
What the Board Expects
Your board does not want to hear excuses about energy market volatility. They want to see controls. They want proof that spend is competitive, risk is managed, and exposure is visible. They want to know that you’re not leaving six or seven figures of EBITDA on the table because procurement is disorganized.
The board is not asking you to predict prices. They are asking you to govern spend. And if you can’t show a clear framework, they will assume leakage is happening. Rightly so.
Execution: Moving from Talk to Action
Governance fails when it stays theoretical. CFOs need execution discipline:
- Baseline: Know your total spend, contracted vs. market rates, and expiry timeline.
- Benchmark: Compare rates against market averages quarterly.
- Consolidate: Push sites into unified contracts.
- Standardize: Templates, processes, and policies – no exceptions.
- Report: Treat energy spend like an FX exposure – transparent, board-ready, accountable.
This is not optional. Without it, volatility will hit your P&L before you even know exposure exists. With it, you’re managing risk like a CFO should.
Ask Yourself
Can you present to your board today, with one slide, the total energy spend, renewal exposure, and risk-adjusted forecast for your business? If not, governance is failing. And if governance is failing, margin is leaking.
That is not acceptable. Not for your board. Not for your shareholders. Not for your credibility as CFO.
Take Control with Board-Ready Governance
The Energy Consultant equips CFOs with the data, benchmarking, and governance structure to put energy under proper financial control. We centralize contracts, quantify exposure, and deliver board-ready reporting that protects EBITDA and credibility. You don’t need excuses – you need numbers that stand up in the boardroom.