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City Council Special Meeting: May 27, 2015
AgendaItem:3 -E
To: Mayor and City Council
From: Dean Kubani, Sustainability Manager
Subject: Third 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 third modification to professional services agreement #9292 with Commerce
Energy to provide renewable electricity for City electrical accounts from June 1st 2015
on a month to month basis at a rate not to exceed $0.0888 per kilowatt hour (kWh).
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
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. Subsequent
modifications to the contract have extended the contract term through May 31, 2015.
A formal bid process for renewable energy services was completed on December 5,
2014. This process yielded a short list of qualified Energy Service Providers that were
presented to Council on February 24, 2015. This arrangement will enable the City to
annually seek the best price for renewable electricity from the most qualified vendors.
Negotiating enabling agreements with each of the vendors on the short list of qualified
providers is ongoing so a modification of the existing contract is recommended.
Energy prices fluctuate daily in an open market. Staff recommends a modification to the
current agreement with Commerce Energy for an amount up to 120% of the most up -to-
date quote available at the time of writing. The proposed modification would extend
provision of renewable electricity at a rate not to exceed 120% of the most up -to -date
quote of $0.0740 /kWh, which equals $0.0888 /kWh until negotiating enabling
agreements are executed. This would ensure uninterrupted renewable electricity service
provided by Commerce Energy until the contracting negotiations with the short list of
vendors is completed.
Background
Santa Monica has been a Direct Access electricity customer since Council authorized
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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
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. The Second Modification
of the contract, approved on May 13, 2014, extended the term through May 31, 2015
and included a price not to exceed $0.088 per kilowatt hour.
Discussion
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 over $500,000 per year in electric costs compared to
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Southern California Edison rates over three and a half years. This modification will also
result in lower electricity costs compared to Southern California Edison.
Staff completed a formal bidding process for renewable energy provision services and
returned to Council with a short list of qualified vendors on February 24, 2015. This
short list will enable staff to regularly seek the best possible price for renewable
electricity and will speed the contracting process. The contract negotiations are
underway and may take up to 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 is recommended.
Financial Impacts and Budget Actions
The contract modification to be awarded to Commerce Energy will continue to set a rate
not to exceed $0.0888 per kilowatt hour. Funds are included in Department's existing
electricity budgets. Future year funding is contingent upon Council budget approval.
Prepared By: Garrett Wong, Sustainability Analyst
Approved Forwarded to Council
Dean Kubani, Sustainability Mang63/2015 Elaine M Polachek, Interim City NS€rt OOO5
Attachments:
A. November 9, 2010 Council Meeting
B. February 23, 1999 Council Meeting
C. October 2, 2012 Council Meeting
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D. February 24, 2015 Council Meeting
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Reference:
Modified Contract
N o. 9292
(CCS)