ACTION REQUESTED:
Title
Communication from the City Manager with a Request for the following:
A. APPROVE an Amendment to the Services AGREEMENT with GOOD ENERGY, L.P.
B. APPROVE a RESOLUTION Authorizing the Execution of a Service Agreement for the SUPPLY OF ELECTRICITY for Residential and Small Commercial Retail Customers Who Do Not Opt Out of Such a Program (ELECTRIC AGGREGATION).
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BACKGROUND: On October 25, 2011, the City Council approved a professional services agreement with Good Energy, L.P. to assist the City with the creation and administration of a municipal aggregation program. Municipal aggregation is a program created under State law that allows communities to purchase the supply of electricity on behalf of its residents (regardless of usage) and small commercial account holders (less than 15,000 kWh per year). The program is voluntary for individual account holders through a process called “opting out.” Each account holder is given two chances to decline the aggregated price at the time the price goes into effect. Further, account holders can exit the program at any time with no penalty.
Since late 2011, Good Energy has provided excellent service to the City and surrounding communities. In addition to the City of Peoria, Good Energy represents nearly every other community in Central Illinois including Peoria County, Pekin, East Peoria, Morton and Peoria Heights. Good Energy was successful in getting the required referendum passed in March 2012, organized successful bids for electricity supply in 2012 and 2013, and has administered a program that has saved households and the community considerable money with no problems. Just as importantly, the supply contracts have been for 100% renewable energy. The Services Agreement expired in August 2014 but Good Energy has continued to provide the City with advice and guidance. Since the City was in the middle of a two-year supply contract in 2014, renewing the Services Agreement was unnecessary. As the need to procure a new supply contract approaches, the Services Agreement needs to be renewed so that the City can continue being represented by Good Energy. Other communities in the current buying group (over 100) are similarly renewing their agreements with Good Energy.
In addition to extending its arrangement with Good Energy, staff is also seeking authorization to enter into a contract with an electricity supplier for the next round. In April 2012, the City signed a two-year contract for electricity supply with Homefield Energy that provided supply from June 2012 through May 2014. In September 2013, the City (and Central Illinois buying group) went out to bid again and signed a two-year contract, again with Homefield Energy, to provide electricity from June 2014 through May 2016. Over the life of the opt-out program (from June 2012 through the end of the current contract in May 2016), the average Peoria household saved $325. As a community, nearly $12 million dollars was saved (see attached graph).
Good Energy has been monitoring electricity pricing to determine the best time to rebid. They are preparing to take the buying group through another contract procurement in January 2016, though the new price will not go into effect until June 2016. The bid will still include renewable energy and will be at least two years in length.
The attached resolution authorizes the City Manager or his designee to execute a contract on behalf of the City. The authorization for the Manager to sign the contract is important because of the nature of electricity pricing. Electricity is traded as a commodity (like corn, soybeans, or precious metals) and the pricing received at bid opening will be valid for roughly 60-90 minutes. Therefore, it is critical that someone from the City be authorized to execute a contract with the successful bidder at the time of the bid opening.
The resolution requires the aggregation through Good Energy to provide a draft contract or for the prospective bidders to provide a draft contract (without pricing details) in adequate time for the City’s Corporation Counsel to review prior to bid opening.
FINANCIAL IMPACT: The City receives a small commission of $0.001/kWh directly from the selected supplier. The amount is set in the bid documents and is the same regardless of the supplier selected. The City expects to receive about $400,000 per year from this source.
NEIGHBORHOOD CONCERNS: The program was approved via a referendum. Every household is given two opportunities to remove themselves from the program. Through the first year of the program, the City has not received any complaints. Rather, citizens seem very pleased with the process and savings.
IMPACT IF APPROVED: The City will participate with other communities in the upcoming bid.
IMPACT IF DENIED: The City would have to decide whether it wanted to end the program at the contracts end or go out to bid at a different time on its own or with the help of a different consulting firm (without the collective buying power of the larger group).
ALTERNATIVES: None.
EEO CERTIFICATION NUMBER: Not applicable.
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.
2. Support sustainability.
DEPARTMENT: City Manager's Office