sr-072809-1LCity Council Meeting: July 28, 2009
Agenda Item: ~ _ ~-
To: Mayor and City Council
From: Dean Kubani, Director Office of Sustainability and the Environment
Subject: Purchase of Renewable Electricity for City Facilities
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute an amendment and reinstatement of Contract 8604 (CCS) with Commerce
Energy for the purchase of renewable electricity for City facilities from July 1, 2008
through June 30, 2010.
Executive Summary
On June 27, 2006, the City entered into a second agreement with Commerce Energy for
100% renewable energy for all City electrical-accounts. On October 1, 2007, the City
modified the agreement with Commerce Energy covering July 1, 2007 through June 30,
2008. From July 1, 2008 through June 30, 2009, the City paid a premium of $0.134 per
kilowatt hour for renewable energy as a result of escalating costs for fossil fuels. Under
the terms of this proposed amendment and reinstatement, the contract will retroactively
include last year's price for FY 08-09 and Commerce's proposed new price for FY 09-
10. From July 1, 2009 through June 30, 2010, Commerce will provide 100% renewable
electricity for City facilities at a fixed price of $0.07275 per kilowatt hour, saving
approximately $1 million in electrical costs over last year.
Discussion
Purchasing renewable electricity for City facilities is a key strategy supporting the
energy goals in the Sustainable City Plan. In 1999, Santa Monica became the first city
in the nation to purchase renewable electricity for its municipal operations from
Commerce Energy. City became a direct access customer of electricity in 1999 when
the State attempted utility deregulation. Direct access was stopped by the Legislature
in 2001, but the City remains a direct access customer for most of its electrical accounts
and annually renegotiates a price for renewable energy with Commerce Energy, an
energy service provider. On June 26, 2006, the City entered into a second contract with
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Commerce Energy for one year with an option to renew the agreement for four
additional years at amutually-acceptable price. On October 1, 2007, the City entered
into a contract modification with Commerce for FY 07-08 to pay
$0.099 per kilowatt hour for 100% renewable energy, less than it would have paid
Southern California Edison for fossil fuel-generated electricity. In June 2008, the price of
crude oil rose to $150 per barrel and the cost of natural gas also increased. The City
paid a premium of $0.134 per kilowatt hour during FY 08-09 because the City contracts
with Commerce for electricity generated from natural gas-fueled plants combined with
sufficient renewable energy certificates to "green" the City's entire demand. In this way,
the City purchases 100% renewable electricity.
A second contract modification covering FY 08-09 was not executed. Reorganization
transitions created a temporary gap in contract oversight, This situation has now been
rectified and responsibility for this contract will reside with OSE. The current contract
must be amended with the proposed amendment and reinstatement to include the
$0.134 per kilowatt price for FY 08-09 and the price for FY 09-10. The Commerce
Energy proposal for July 1, 2009 through June 30, 2010 is for a fixed price of $0.07275
per kilowatt hour.
If the City consumes the same amount of electricity as last year (17,126,548 kilowatt
hours), cost savings in FY 09-10 will total an estimated $1,049,000: Commerce's fixed
price does not include transmission and distribution charges, other Edison or State
charges, or taxes which are still paid to Southern California Edison. The fixed price
includes the electricity and the purchase of renewable energy certificates to cover all of
the City's electrical demand including those accounts remaining with Edison. Southern
California Edison currently provides 16% renewable energy to its customers and the
State mandates that it provide 20% renewable energy by 2010.
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Alternatives
If the City were to return its direct access accounts to Edison and not enter into an
agreement with Commerce Energy, the City would relinquish its rights to the direct
access market for a minimum of three years. The City would have to pay higher Edison
rates, an average of $0.16 per kilowatt hour, plus the cost of purchasing renewable
energy certificates to cover its demand if the City continues to implement a renewable
energy purchasing policy.
Contractor/Consultant Selection
Commerce Energy was selected as the City's energy service provider through a
competitive process in 1999. In 2006, few energy service providers certified by the
CPUC would provide renewable electricity to Santa Monica other than Commerce
Energy and the City entered into a sole source agreement. During FY 09-10, staff will
work with an energy consultant to identify other renewable energy procurement options
and develop a request for proposals for the purchase of renewable electricity for City
facilities for future years.
Financial Impacts & Budget Actions
Funds for the purchase of electricity during FY 09-10 are available in various
departmental accounts.
Prepared by: Susan Munves; Energy and Green Building Programs Administrator
Approved:
Dean Kubani
Director, Office of Sustainability and the
Environment
Forwarded to Council:
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may iayei
Reference Amendment to
Contract No. 8604 (CCS).