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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 1 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. 2 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 9 Forwarded to Council: Rod Gould City Manager Reference: Modified Agreement No. 9292 (CCS)