SR-05-13-2014-3CCity Council Meeting: May 13, 2014
Agenda Item: .3—C
To: Mayor and City Council
From: Dean Kubani, Manager, Office of Sustainability and the Environment
Subject: Second 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 second modification to professional services agreement #9292 with
Commerce Energy to provide renewable electricity for City electrical accounts from
June 1st 2014 through May 31, 2015 at a rate not to exceed $0.0846 per kilowatt hour
(kWh). This would result in a two and one half year amended contract term.
Executive Summary
On November 9, 2010 Council awarded Bid # 9292 to Commerce Energy at a rate of
$0.0665 per kilowatt hour for accounts contracted October 1, 2010 through September
31, 2012, and $0.0700 per kilowatt hour for new accounts switched to Direct Access
under SB 695 to provide renewable electricity for municipal facilities.
A formal bid process for renewable energy services is currently underway. This process
will yield a short list of qualified Energy Service Providers that will enable the City to
annually seek the best price for renewable electricity from the most qualified providers.
The competitive process to develop a short list of qualified providers is expected to take
six months, so a modification of the existing contract is recommended.
Energy prices fluctuate daily in an open market, so staff recommends giving the City
Manager authority to enter into a contract for an amount up to 120% of the most up -to-
date quote available at the time of writing. A modification to the current agreement with
Commerce Energy at a rate not to exceed 120% of the most up -to -date quote of
$0.0740 /kwh, which equals $0.0888 /kwh, to extend provision of renewable electricity
through May 31, 2015 would ensure uninterrupted renewable electricity service.
Discussion
Santa Monica has been a Direct Access electricity customer since Council authorized
such an arrangement on February 23 1999. Direct Access status allows the City to
purchase electric generation from a third party while paying Southern California Edison
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for transmitting the electricity to City facilities. Generation charges make up roughly half
of the total electric bill for City facilities with transmission charges making up the other
half.
A Request for Proposals was issued on September 20, 2010 to Energy Service
Providers (ESPs) seeking an energy product consisting of fossil - fueled power
(unidentified natural gas sources) bundled with renewable energy certificates (RECs)
from California or western state renewable energy generation in order to meet the City's
100% renewable energy goal. Three bids were received and Commerce Energy's was
the lowest and best price. On November 9, 2010, Council awarded Bid # 9292 to
Commerce Energy at a rate of $0.0665 per kilowatt hour for accounts contracted
October 1, 2010 through September 30, 2012, and $0.0700 per kilowatt hour for new
accounts switched to Direct Access under SB 695, to provide renewable electricity for
municipal facilities for a two year term through May 31, 2013. SB 695 enabled existing
Direct Access customers, including the City of Santa Monica, to enroll accounts that had
been activated since the suspension of Direct Access enrollment in 2001.
The First Modification of the contract, approved on October 2, 2012, extended the term
through May 31, 2014 and reduced the price of power from $0.0665 to $0.0602 per
kilowatt hour and from $0.0700 to $0.0661 per kilowatt hour.
Renewable Energy Certificates are purchased by Commerce Energy on behalf of the
City and are certified by the Center for Resource Solutions to verify the renewable
generator's source of supply. Green power, provided in this manner, is an important
component of the City's sustainability efforts.
It is estimated that the contract and first modification have saved the City approximately
$500,000 in electric costs compared to Southern California Edison rates over three and
a half years. This modification will also result in lower electricity costs compared to
Southern California Edison.
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Staff is in the process of formally bidding out all renewable energy provision services
and will return to Council with a short list of qualified vendors. Having the short list in
place will enable staff to regularly seek the best possible price for renewable electricity
and will speed the contracting process. The competitive process and contract
negotiations may take six months. In order to ensure uninterrupted renewable energy
services in the interim, a modification for professional services agreement #9292 at a
rate not to exceed $0.0888 to extend renewable energy services at municipal facilities
until May 31, 2015 is recommended.
Financial Impacts & Budget Actions
This contract modification will set a rate not to exceed $0.0888 for June 1, 2014 through
May 31, 2015. Funds are included in Departments' existing 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: Matt Henigan, Sustainable Energy Engineer
Approved:
Dean Kubani, Manager
Office of Sustainability and the
Environment
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Forwarded to Council:
Rod Gould
City Manager
Reference:
Modified Agreement
No. 9292 (CCS)