SR-02-24-2015-3HCity Council Meeting: February 24, 2015
Agenda Item: — "
To: Mayor and City Council
From: Dean Kubani, Sustainability Manager
Subject: Execute enabling agreements to procure electricity through Direct Access
Recommended Action
Staff recommends that the City Council authorize the City Manager to:
1. Approve enabling agreements with 3 Phases Renewables, a California -based
company; Constellation NewEnergy Inc, a California -based company; and Shell
Energy North America, a California -based company, to be a part of the pre - qualified
list of vendors to procure electricity through Direct Access.
2. Select the best bidder from the pre - qualified list on an annual basis and negotiate
and execute a purchase agreement with that vendor in order to procure power for
that year, based on the best bid. This could be the same vendor each year, or
another pre - qualified vendor, depending on the bids received.
3. Negotiate and execute a purchase agreement with one of the vendors on the pre -
qualified list on an annual basis: 3 Phases Renewables, a California -based
company; Constellation NewEnergy Inc, a California -based company; or Shell
Energy North America, a California -based company, in an amount not to exceed $3
million for one year, with four additional one -year renewal options in the amount of
$3 million, for a total amount not to exceed $15 million over a five -year period with
future year funding contingent on Council budget approval.
Executive Summary
Consumption of electricity generates pollution and greenhouse gases from the burning
of fossil fuels, whereas energy from renewable resources like solar, wind, small
hydroelectric, geothermal and biomass, generates significantly less by comparison.
Conventional grid -tied electricity from Southern California Edison (SCE) provides an
energy portfolio with a limited percentage of electricity generated from renewable
resources. In 2013, a majority of SCE's power was sourced from natural gas, nuclear,
coal and large hydroelectric, with 22% coming from eligible renewable sources.
Procurement of electricity via Direct Access has allowed the City to source 100% of its
electricity from renewable sources. At the direction of City Council, and consistent with
the goals established in the Sustainable City Plan, Santa Monica has been purchasing
100% green power since 1999.
1
Historical procurement requirements limited the City's ability to maintain long -term
contracts with vendors and procure electricity at time - sensitive rates. The current
contract with Commerce Energy is set to expire May 31, 2015. In anticipation of this,
and to improve the procurement process in the future, staff is seeking to establish a pre -
qualified list of vendors from which pricing can be solicited on an annual basis over the
next five years. By maintaining a contractual relationship with prequalified vendors and
bidding electricity rates annually, the City can save time and money in the process of
procuring green power.
A formal qualification process for Energy Service Providers was completed on
December 12, 2014. This process yielded a short list of Energy Service Providers that
staff recommends Council approve to enable the City to seek the best price for green
power annually from the established list.
Background
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 electricity from a third party while paying Southern California Edison (SCE) 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.
Renewable Energy Certificates (RECs) are purchased on behalf of the City and are
certified by Green -e to verify the source of supply. RECs can be purchased for
electricity that is generated via solar, wind, biomass and small hydroelectric plants.
Green power, provided in this manner, is an important component of the City's
sustainability efforts.
The City currently has a Direct Access contract with Commerce Energy for renewable
electricity. On November 9, 2010, Council awarded Bid # 9292 to Commerce Energy at
a rate of $0.0665 per kilowatt hour (kWh) for accounts contracted October 1, 2010
through September 30, 2012, and $0.0700 (kWh) 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.
2
On October 2, 2012, Council authorized the first modification of the contract with
Commerce Energy in order to procure power as a Direct Access customer. The
agreement extended the term and reduced the price of power from $0.0665 to $0.0602
per kWh and from $0.0700 to $0.0661 per kWh for the accounts added in 2012 through
May 31, 2014. On May 13 2014, Council authorized the second modification of the
contract with Commerce Energy in order to again procure power as a Direct Access
customer. The agreement extended the term and established a single rate across all
accounts at $0.0705 per kWh through May 31, 2015.
Staff compared rates paid to Commerce Energy versus the weighted average rate for
SCE for power used in 2013. Table 1 below highlights the rates from each source as
well as the estimated savings achieved through the purchase of energy as a Direct
Access customer.
Table 1. 2013 Enerav Rate Comparison
Usage
Rates
Savings
Direct Access
SCE
Approximately
$0.0602-
$0.0887 /kWh
25,000,000 kWh
$0.0661/kWh
Estimated Annual Cost
$1,505,000-
$2,217,500
$565,000 -
(usage x rate)
$1,652,500
$712,500
As illustrated in Table 1: 2013 Energy Rate Comparison, the City used approximately 25
megawatt hours or 25 million kWh in 2013. The weighted average SCE rate for that
period was $0.0887 /kWh and the Direct Access rate ranged between $0.0602 and
$0.0661 /kWh. Purchasing power using the Direct Access model saved the City
between $565,000 and $712,500 in 2013.
Discussion
Procuring green power via Direct Access helps the City meet its commitment to
sustainability and reducing greenhouse gas emissions related to municipal operations.
Additionally, Direct Access. has enabled the City to save money by procuring green
power at rates that are less expensive than conventional electricity provided by SCE.
3
Approval of 3 Phases Renewables, Constellation NewEnergy Inc, and Shell Energy
North America to be a part of the pre - qualified list of vendors for Direct Access
electricity supply would allow the City to negotiate and execute enabling agreements
with each of the vendors. The enabling agreement does not contain any pricing or cost,
but would allow the City to proceed in completing a purchase agreement.
Staff would annually request pricing for electricity from renewable resources from these
vendors and select the best bid. The annual purchase agreement in the first year is
expected to be less than $2 million. Energy prices fluctuate daily in an open market, so
staff recommends giving the City Manager authority to negotiate and execute the
purchase agreement in an amount not to exceed $3 million to allow for volatility in
market pricing and possible changes in energy use in City facilities. Each year, staff
would negotiate and execute a purchase agreement with the selected vendor in an
amount not to exceed $3 million for one year for a total amount not to exceed $15
million over a five -year period.
Vendor /Consultant Selection
On October 20, 2014, the City published a Request for Qualifications (RFQ) to furnish
and deliver electricity as a commodity via Direct Access as required by the Office of
Sustainability and the Environment, which is responsible for ensuring the City's
electricity is sourced from 100% renewable energy sources. The RFQ was posted on
the City's on -line bidding site, and notices were sent directly to State - authorized Energy
Service Providers in accordance with City Charter and Municipal Code provisions.
Twenty -two vendors were notified, 15 vendors downloaded the bid. Three statements
of qualifications were received and publicly opened on December 5, 2014. Statements
were evaluated based on the criteria in SMMC 2.24.072, including price, previous
experience, capacity and skill, ability to deliver, quality of product, and compliance with
City specifications and scope of work. Based on these criteria, three vendors - 3 Phases
12
Renewables, Shell Energy and Constellation Energy - are recommended as best
bidders to be on the pre - qualified list to provide electricity via Direct Access
procurement due to their experience in selling the desired products, flexibility in meeting
customers' needs, diversity and strength of energy portfolios, financial stability and
references.
Next Steps
With Council approval, the City would enter into enabling agreements with each of the
three companies on the pre - qualified list of vendors for Direct Access electricity supply.
Before May 31, 2015, staff would seek the best possible price for electricity generated
from renewable resources for one year from the pre - qualified list of vendors. Staff would
select the best bid and proceed to enter into a purchase agreement with the selected
vendor. This process would be repeated each year for the following four years to
identify the best available pricing for energy for the upcoming year from this list of
vendors and establish a new purchase agreement with that vendor in order to purchase
power for that year. This could be the same vendor each year or another pre - qualified
vendor, depending on the proposals received.
5
Financial Impacts & Budget Actions
There is no immediate financial impact or budget action necessary as a result of the
recommended action. The purchase agreement to be executed before May 31, 2015 is
expected to be less than $2 million per year. Funds are included in departments'
existing budgets in various accounts for electricity charges. Energy prices fluctuate daily
in an open market, so staff recommends giving the City Manager authority to negotiate
and execute one purchase agreement each year in an amount not to exceed $3 million
to allow for volatility in market pricing and possible changes in energy use in City
facilities. Budget authority for subsequent years will be requested in each budget cycle
for Council approval. Staff will return to Council if specific budget actions are required in
the future.
Prepared by: Garrett Wong, Acting Sustainability Analyst
Approved:
Dean Kubani
Sustainability Manager
Attachments:
® Direct Access Scoresheet
0
Forwarded to Council:
Elaine Polachek
Interim City Manager
Attachment: Direct Access Scoresheet
Score Sheet Summary: 3 Phases
Category
Cat -Total
- Notes
Weight
Sub -Total Weight
Final Score
Renewable Resources /Products(
95.0.
Very strong
30%
30%
Ability to Facilitate Santa Monica's Renewable Goals
95.0(Deep
experience: in procuring and selling renewables in CA
40%
935 - 30%
qp%
Net Energy Metering Capabllites `i
90.0
Allot of experience wth'on -site renewabie generation '
30%
75.ti
Not a lot offered + here, it's not tlielr strong point.
Pricing Methodologies and Invoicing Approach
90.0
Bills on SCE billing cycle; fair pricing methodolgles for RPS, RA, and CAISO pass thrus; can offer
consolidated billing
25%
z i }hy F
800
Load Scheduling ;
900
Been a scheduling coordinator to CA for a long time. -
25Y
fir; tail3 -r! 3`Y�r7k r j
85,13
pe..es, �rgig,x{�Fa.?`.,2 „SY>a`,i .,tr }s .,,;�5 .,.v..
89,Q,
Didn't provide margin /adder. RPS:$4.74 /MWh(2014); RA. $2.38 /kWmonth(2014)
Background and Experience
85 o
Focused on renewables focused on serving CA marketplace I
p1il i )
s ttd"WO M,7?ei
50/
`� 0 k ti 2 3
Very experienced ESP with a very large customer portfolio
Financial Strength /Capacity I
600 :Privately
held company; small balancesheet;fcould be a fianancial risk potentially
100% 1
60.0 15%
1000 .Very
ValueAdded Services
87.01Experiencewith`on-site
generation; PPAs; located closeto: City; no DR
1S%
950 :Very
Value Added Services
Score Sheet Summary: Shell Energy
Category
Cat -Total
Notes
Weight
sub -Total
Weight
I Final Score
Renewable Resources /Products—
.85.0
Not a lot of detailed experience in this regard.
30%
Abllityto Fanlitate5anta Monica's Renewable Goals
95.0
Abrhyto Facilitate Santa Monica's Renewable Goals
85.0
Will be the leastflexible ofthePESPs and creative working with: the Cityto meet renewable goals
qp%
8210
30%
Solid straightforward NEM polity.
Net Energy Metering Capabilites I I
75.ti
Not a lot offered + here, it's not tlielr strong point.
30%
800
Does not offer consolidated billing with SCE
25/
Pricing Methodologies and Invoicing Approach
800
Does not provide consolidated billing with SCE :Need to discuss with Shell and City.
25/
ira�tt +`
Y� re'
li {
k.,�v�U'�i"rsst attri;�v zktiE.,
Load BS8��cAAheduling�y
"e �ni� 4a i ,., ut Y } '$i., e t s
.�t
880
. t ♦
.iY...t,H. Yk,
Done hyadd3rd party (EDMS )
,pklPO �e'd1,
lid' lbi;
2595
tt
>t {Y '2
tk`Y
' `
83.98
Background and Experience
95.0
Very experienced ESP with a very large customer portfolio
50%
k4'r '}1S ki'^it}ir kin `t'y
Financial Strength /Capacity
Financial Strength /Capacity
1000 .Very
large and strong.
100%
100.0
1S%
950 :Very
Value Added Services
I 650:
Weak, not a lot of value-added services provided.
100%
65.0
:: 10%
Score Sheet Summary: CNE
Category
Cat -Total
Notes
Weight
Sub -Total (Weight
IFinal Score
RenewableResources /Products
92.0
Very strong and diverse portfolio of renewable projects. Very active in the renewable marketplace
30%
Abllityto Fanlitate5anta Monica's Renewable Goals
95.0
CNE will be a good partnerto the City; will work hard to help develop creative and unique solutions.
40%
92.6 30%
Net Energy Metering Capabilites
940
Solid straightforward NEM polity.
30%
Pricing Methodologies and Invoicing Approach
800
Does not offer consolidated billing with SCE
25/
;z rtY i, tkn tYYi utxl�
Load
950
Flexible Ind ex Sollvtiyon is a plus. Scheduling and settlement done in-house.
25/o
li {
k.,�v�U'�i"rsst attri;�v zktiE.,
92.0q
fyStheduLng
= ,ESRtgt�t��r�' ..i. }t`i✓fiv �ti }"k tt }}..at�,,SYit,O .�.
:.:. �..;>2% ?,., �p`
i$, �1 �"±. Y�pf.: G4ilf?ENU?a!` BiTlt6i{' �Cfl�` ..t <�„' +3��µ,71!lx�,{i,P�tl�A;i �15Y��E.ii�trvat ;..,.S tY,kt3., 1.Y...iet \lii.J,. '"ti�it
„FtJ, ��4,A.:k
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W
Background and Experience
Ny
{ t k i„ >.;,YX :�ti _y §Y1t
950
tr }r,i e r542i.,1
Very strong and expenenced company with a large portfolio of customers in CA and across US
0' Li, �S .`i`f�1�ulCdlt�`{lfle,'J`E'2z'' S'tCbsrJ�itk1..YY.
50/
k4'r '}1S ki'^it}ir kin `t'y
Financial Strength /Capacity
I 95.0
Ivery strong. Parent company, Exelon, is one ofthe largest energy companiesSm the country.
1 100%
95.0 ;i 15%
Value Added Services
950 :Very
strong portfolio of value -addes services: DR, solar PPAs, energy efficiency funding, etc .
1 100%
95.0 r 10%