The contracts made sense when they were signed. The market conditions that made them make sense no longer exist, and the provisions that seemed like boilerplate in 2021 are now the source of cost exposure that procurement teams are being asked to explain.
Energy contracts signed during the procurement rush of 2021 and 2022 were built around one overriding priority: get a rate locked in before prices climbed further. That urgency was reasonable. What it left behind, in agreement after agreement, were pass-through clauses, capacity charge escalators, and delivery performance thresholds that received limited scrutiny at signing and are now activating in ways the original cost models did not account for.
This is not a forward-looking risk. It is a present-tense problem sitting inside executed agreements at companies that have not yet looked closely enough at what they committed to. For procurement and finance leaders entering Q3 planning, the relevant question is not whether their energy contracts carry hidden exposure. It is how much, and whether there is still time to respond before that exposure becomes a budget conversation they are not prepared to have.
Why Contracts Signed in 2021 and 2022 Are Underperforming Now
Speed dominated energy procurement in 2021. Prices were rising, supply windows were narrowing, and locking in a long-term agreement felt like the responsible move. The problem is that speed and legal rigor rarely travel together. Many of the agreements executed during that period were accepted with pass-through language that procurement teams treated as standard, without modeling what those provisions would mean under market conditions that diverged significantly from the baseline assumptions in the original deal.
According to U.S. Energy Information Administration (EIA) data, certain regional retail electricity prices, particularly in the South and Midwest, have experienced cumulative increases exceeding 18% in the years following 2020 due to supply constraints. Buyers who locked in fixed-rate agreements during that period believed they were insulated from further increases. What they did not fully account for was that fixed-rate contracts frequently allow suppliers to recover costs tied to regulatory changes, transmission investments, capacity market outcomes, and equipment import tariffs. Those provisions are now active, and the costs are real.
Wood Mackenzie’s 2026 Corporate Energy Outlook listed tariff exposure and capacity market restructuring among the top five financial risks embedded in existing corporate energy portfolios. Neither risk was widely modeled at the time the contracts were signed.
How Tariff Pass-Through Clauses Are Working Against Buyers Right Now
A tariff pass-through clause gives a supplier the right to recover costs resulting from government-imposed tariff changes on equipment, fuel, or grid infrastructure. When most corporate energy agreements were drafted before 2023, these clauses were treated as theoretical. Tariffs on solar panels, inverters, and battery storage components were relatively stable, and few procurement teams built scenario models around what would happen if they changed significantly.
They changed. Tariff adjustments on imported clean energy equipment have shifted supplier cost structures materially since 2022. Suppliers with procurement exposure to affected components are invoking pass-through language to recover those increases from their buyers. S&P Global Commodity Insights reported in early 2026 that pass-through clause disputes in corporate power purchase agreements (PPA) increased more than 30% year-over-year in 2025, with the largest concentration in agreements executed between 2020 and 2023.
The organizations carrying the most exposure are those that accepted broad definitions of qualifying tariff events, did not include cost caps on pass-through recoveries, or allowed the supplier to self-certify the cost basis. In many cases, that language was reviewed by procurement staff rather than energy legal counsel. That distinction is now material.
Capacity Charge Escalation: The Clause Most Finance Teams Have Not Modeled
Beyond pass-through provisions, capacity charge escalation is generating a second wave of cost surprises in 2026. Capacity markets in PJM, MISO, and ISO-NE experienced significant pricing volatility in 2024 and 2025 that suppliers are now passing through to buyers under escalation provisions that were accepted without much scrutiny during the original negotiations.
PJM’s 2025-2026 Base Residual Auction cleared at prices roughly three times higher than the prior delivery year, according to FERC public filings. For buyers with contracts that tie capacity charges to auction outcomes, those increases translate directly into higher effective energy costs regardless of what the headline rate in their agreement states. The rate they thought they had locked in is not the rate they are paying.
Delivery shortfalls add a third layer of exposure. Interconnection delays affecting renewable energy projects have caused some suppliers to miss contracted delivery timelines. Depending on how force majeure and delivery failure provisions are written, buyers may have limited remedies and are purchasing replacement power at spot prices that significantly exceed their contracted rate.
What a Useful Contract Review Actually Looks Like Before Q3
The step most organizations have not yet taken is a structured review of their executed agreements that specifically targets pass-through language, capacity charge escalation provisions, and delivery failure remedies. This is not a full renegotiation. It is a focused legal and financial read-through designed to answer three questions: which provisions are currently active, which are likely to activate in the next twelve months, and what is the dollar ceiling on the exposure each provision creates.
Based on BloombergNEF’s 1H 2026 Corporate Energy Market Outlook released in February 2026, global clean PPA volumes fell for the first time in nearly a decade, with corporations announcing 55.9 GW of clean power in 2025—a 10% decrease from the previous year. The report highlights that this decline occurred amid rising power prices, policy risks, and a consolidation of buying power among large technology companies, which accounted for 49% of all global activity. Among the organizations that had reviewed their contracts, the majority identified at least one clause they had not previously flagged as a financial risk.
Finance teams entering Q3 budget planning without this review are working with an energy cost projection that may not reflect what their agreements actually require them to pay. The variance between projected and actual energy costs in organizations with unreviewed contracts is becoming one of the more common budget explanations that leadership did not see coming. The source is usually not the market. It is the agreement.
Where to Start if Your Team Has Not Done This Review
Start with the agreements that have the longest remaining terms and the broadest pass-through definitions. Those carry the highest forward exposure and the most time for costs to compound. Pull the original contract language and map the pass-through triggers against what has changed in the regulatory and tariff environment since the signing date.
Next, isolate the delivery performance provisions in any renewable energy agreements tied to projects that were under development at signing or commissioned in the past two years. Check whether interconnection-related delays qualify as force majeure events under the contract’s specific definition. Many agreements use definitions narrow enough that grid-side delays do not qualify, which places the shortfall cost entirely on the buyer.
Convert the exposure into a number before bringing it to leadership. Energy contract risk that exists only as a legal observation rarely moves up the priority queue. Organizations that have translated their clause review into a dollar range tied to specific trigger scenarios are the ones currently in productive conversations with their suppliers about renegotiation, amendment, or forward hedging. The organizations that have not done this work are having those conversations later, under worse conditions, with less leverage.