ACTION REQUESTED:
Title
Communication from the City Manager and Finance Director/Comptroller with a Request to Approve a Three-Year CONTRACT with NOBLE AMERICAS ENERGY SOLUTIONS for the Purchase of the City of Peoria’s ELECTRICITY SUPPLY.
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BACKGROUND:
In 2008, the City of Peoria worked cooperatively with other local units of government, including Peoria County and the City of East Peoria, to jointly purchase electricity supply for its own facilities. (This is separate from the municipal electricity aggregation contract for residential accounts.) The winning supplier was Sempra Energy Solutions, which has since changed its name to Noble Americas Energy Solutions. Council has taken a number of actions on this issue:
• The original contract (approved by Council July 8, 2008) ran from January 1, 2009 to December 31, 2011 and covered 40% of the City’s electricity load. The price per MWh was $66.37 (or $0.0637 per kWh).
• On December 15, 2008, Council authorized the purchase of an additional 40% of the City’s electricity load from Sempra, with the contract still ending on December 31, 2011. The price for that additional load was $62.72 per MWh.
• On May 11, 2010, the Council approved an extension of the contract through December 31, 2013 that blended the rate (for 80% of the City’s load) to $58.12 per MWh for the extended term.
• On June 11, 2013, the Council approved an extension of the contract through December 31, 2015 that blended the rate (for 80% of the City’s load) to $34.34 per MWh for the extended term.
The current contract expires at the end of 2015. Staff has been in contact with Noble to determine the best option for continuing the contract. Electricity prices are still considerably low and are currently lower than the current $34.34/MWh price. Noble is offering a three year contract (2016-2018) at $31.18 per MWh. There is also a $1.50 per MWh administrative charge that is above and beyond the quoted price. The contract is attached as Exhibit 1. This contract would cover 85% of the City’s electrical load (vs. 80% in the current arrangement); the remaining 15% is paid at a fluctuating index rate.
The electricity wholesale markets change every day. The price quoted was prepared on December 1, 2015 but may change between the date this agenda item is published and the time of Council’s decision. An updated price, if any, will be presented at the December 8, 2015 Council meeting. The City Manager is seeking authorization to sign the extension so long as the price is within reasonable range of the quoted price.
FINANCIAL IMPACT: There is a small price difference between the current rate and the quoted rate for the new contract that should account for a modest savings over the next three years.
NEIGHBORHOOD CONCERNS: Not applicable.
IMPACT IF APPROVED: The City will have secured a price for 85% of its electricity for the next three years.
IMPACT IF DENIED: The City will not have secured a price for any percentage of its load and will pay 100% at the indexed rate, which may be lower or higher than the fixed rate.
ALTERNATIVES: Noble has also provided the City with the option of a two-year contract at $30.77/MWh. While slightly lower than the three year price, staff believes the additional year of price certainty, given the fluctuations in the market, is worth the $0.41 difference.
WHICH OF THE GOALS IDENTIFIED IN THE COUNCIL’S 2014 - 2029 STRATEGIC PLAN DOES THIS RECOMMENDATION ADVANCE?
1. Financially Sound City Government, Effective City Organization
WHICH CRITICAL SUCCESS FACTOR(S) FROM THE COMPREHENSIVE PLAN DOES THIS RECOMMENDATION IMPLEMENT?
1. Have an efficient government.
DEPARTMENT: Finance