SR-10-02-2012-3ACity Council Meeting: October 2, 2012
Agenda Item: 3 -A
To: Mayor and City Council
From: Dean Kubani, Director Office of Sustainability and the Environment
Subject: First Modification to Commerce Energy Agreement for the Purchase of
Renewable Electricity
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute a first modification to Professional Services Agreement #9292 with Commerce
Energy, a Toronto, Canada -based company, to:
1. Purchase renewable electricity for City electrical accounts through May 31,
2014; and
2. Purchase renewable electricity for City electrical accounts switched under SB
695 from June 1, 2013 through May 30, 2014.
This will result in a new 18 month contract agreement for an estimated $3 million.
Executive Summary
Staff has negotiated a reduction in electricity rates for renewable electricity with the
City's current energy provider. With Council approval of a first modification to
Professional Services Agreement #9292 with Commerce Energy, the City would pay
$0.0602 per kilowatt hour for electric accounts switched to direct access in 2001 and
contracted from October 1, 2012 through May 31, 2014, and $0.0661 per kilowatt hour
for accounts switched to direct access under SB 695 on April 16, 2010 and currently
contracted from June 1, 2013 through May 31, 2014. The contract modification would
continue to save the City approximately $300,000 over the 18 month term compared to
the cost of purchasing electricity from Southern California Edison.
Background
On November 9, 2010, the City approved a contract with Commerce Energy to
purchase 100 % renewable energy in the form of renewable energy certificates (RECS)
for City electrical accounts at a fixed price of $0.0665 per kilowatt hour from October 1,
2010 through September 30, 2012, and $0.0700 per kilowatt hour for accounts switched
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under SIB 695 effective June 1, 2011 through May 30, 2013. SIB 695 was enacted in
2010 to allow direct access customers an opportunity to phase in electric accounts that
were established after the direct access electricity market was suspended in 2001.
Discussion
A direct access customer since 2001, the City pays Commerce Energy approximately
$2 million per year for the electricity commodity and Southern California Edison
approximately $2.5 million per year for transmission and distribution through the electric
grid. The City purchases a "bundled" product of electricity and renewable energy
certificates (RECs) that allows the City to achieve its 100% renewable energy goals.
The RECs are certified by the Center for Resource Solutions which verifies the
renewable generator's source of supply and specifications. Lower costs for natural gas
over the past year have reduced the cost for electricity generation in California. Staff
was able to negotiate a lower rate for electricity with Commerce Energy than the City is
paying on its current contract.
The contract modification would lower the fixed price of 2001 direct access accounts
from $0.0665 per kilowatt hour to $0.0602 per kilowatt hour through May 31, 2014. The
fixed price for City electrical accounts switched to direct access under SIB 695 on April
16, 2010 would be reduced from $0.0700 per kilowatt hour to $0.0661 per kilowatt hour
through May 31, 2014. The modification term will bring both groups of accounts into
alignment so that future price quotes can be obtained for a single, larger amount of
electricity. Staff estimates savings of approximately $300,000 during the 18 month term
compared to the cost of purchasing electricity from Southern California Edison.
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Financial Impacts & Budget Actions
The contract modification is an estimated $3 million for October 1, 2012 through May
30, 2014. Funds are included in Departments' FY2012 -13 budgets in various accounts
for electricity charges. Budget authority for subsequent years will be requested in each
budget cycle for Council approval. Future funding is contingent upon Council approval.
Prepared by: Susan Munves, Energy and Green Building Programs Administrator
Approved:
Dean Ku ani
Director, Office of Sustainability and the
Environment
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Forwarded to Council:
Rod Gould
City Manager
Reference Amended
Contract No. 9292 (CCS).