TO: HONORABLE MAYOR FROM: Lori Mitchell
AND CITY COUNCIL
SUBJECT: SEE BELOW DATE: August 21, 2023
Approved Date
9/7/23
SUBJECT: AMENDMENT TO STANDARD CONSULTANT AGREEMENT
WITH TULLETT PREBON AMERICAS CORP. FOR POWER
PRODUCTS
RECOMMENDATION
Adopt a resolution authorizing the City Manager or designee to negotiate and execute a First Amendment to the Standard Consultant Agreement with Tullett Prebon Americas Corp. for assisting City staff to identify opportunities for the City to buy or sell required power products, to:
(a) Increase the maximum compensation from $320,000 to $640,000 through June 30, 2027, subject to the appropriation of funds; and
(b) Adjust the compensation table to become a tiered structure based on the notional value of a resource adequacy transaction.
SUMMARY AND OUTCOME
Community Energy Department (CED) has a Standard Consultant Agreement with Tullett Prebon Americas Corp.
1 for brokerage services to identify buyers and sellers of power products, including resource adequacy, a product that is needed to comply with state requirements and that is in very short supply. The amendment adds funds to this agreement to allow CED to continue to use the brokerage services and reduces the compensation percent paid for larger transactions. This provides better value for brokerage services for larger resource adequacy deals.
1 CON666916-000: Standard Consultant Agreement with Tullett Prebon Americas Corp.
COUNCIL AGENDA: 9/19/23
FILE: 23-1226
ITEM: 2.7
HONORABLE MAYOR AND CITY COUNCIL
August 21, 2023
Subject: Amendment to Standard Consultant Agreement with Tullett Prebon Americas Corp. for Power Products
BACKGROUND
On November 30, 2020, CED released a Request for Proposals for qualified brokers or firms to provide brokerage services for power products needed for San José Clean Energy. Tullett Prebon Americas Corp. and two other firms were selected. On June 9, 2021, a Standard Consultant Agreement was executed with Tullett Prebon Americas Corp. for a three-year term with three one-year options to extend through June 30, 2027 with a maximum compensation of $320,000.
ANALYSIS
State law requires that CED procure determined amounts of resource adequacy for San José Clean Energy. San José Clean Energy is subject to significant fines if it does not comply with state resource adequacy procurement requirements. Resource adequacy, short-term renewable energy, and low-carbon products are currently in very limited supply, in part because of supply chain delays that resulted in corresponding delays in numerous new project online dates.
Since executing the Standard Consultant Agreement in June of 2021, Tullett Prebon Americas Corp. has assisted CED with finding and procuring resource adequacy, short-term renewable, and low carbon products that CED was unlikely to have identified without assistance from the firm. In addition, Tullett Prebon Americas Corp. has assisted CED to identify buyers for excess resource adequacy. Given the extreme tightness in the market, this service has been vital in supporting San José Clean Energy’s efforts in meeting its resource adequacy requirements in both 2022 and 2023.
Since June of 2021, CED has used a large amount of the $320,000 maximum compensation amount for the Standard Consultant Agreement. Thus, staff recommends amending the Standard Consultant Agreement with Tullett Prebon Americas Corp. to increase the maximum compensation from $320,000 to $640,000, subject to the appropriation of funds, in order to maintain uninterrupted brokerage support. Staff will return to the City Council for approval if additional compensation is required during the term of the agreement.
In addition to increasing the maximum compensation, the amended agreement will include a revised compensation table. Unlike other products, brokered resource adequacy volumes are currently compensated as a fixed percent of total notional value. To increase the transactable volume, CED will amend the compensation table to reduce the percent paid (e.g., brokerage fee) as the notional value of transactions increase. Staff is not proposing to amend the compensation table for renewable energy products (PCC1, PCC2, and PCC3) as it is already structured to reduce the brokerage fee as the notional value increases.
HONORABLE MAYOR AND CITY COUNCIL
August 21, 2023
Subject: Amendment to Standard Consultant Agreement with Tullett Prebon Americas Corp. for Power Products
EVALUATION AND FOLLOW-UP
No additional follow-up is expected at this time.
COST SUMMARY/IMPLICATIONS
The recommended actions in this memorandum will allow for an amendment to increase the maximum compensation for the Standard Consultant Agreement to an aggregate amount not to exceed $640,000. CED has thus far incurred expenditures under this agreement totaling $254,010, with the remaining $65,990 expected to be expended before October 31, 2023, when the resource adequacy year-ahead procurement must be completed. CED expects that expenditures in FY 2023-2024 will be at least as high as the average annual amount since June of 2021 (approximately $125,000) and potentially higher since the price of resource adequacy, short-term renewables, and low-carbon products has increased substantially since June of 2021.
The ability to expend against this Standard Consultant Agreement in FY 2023-2024 and in future years through the term of the agreement is subject to the appropriation of funds, and approval by the City Council for increase in compensation for future years.
COORDINATION
This memorandum has been coordinated with the City Attorney’s Office and the City Manager’s Budget Office.
PUBLIC OUTREACH
This memorandum will be posted on the City’s Council Agenda website for the September 19, 2023 City Council meeting.
COMMISSION RECOMMENDATION AND INPUT
No commission recommendation or input is associated with this action.
CEQA
Not a Project, File No. PP17-003, Agreements/Contracts (New or Amended) resulting in no physical changes to the environment.
HONORABLE MAYOR AND CITY COUNCIL
August 21, 2023
Subject: Amendment to Standard Consultant Agreement with Tullett Prebon Americas Corp. for Power Products
PUBLIC SUBSIDY REPORTING
This item does not include a public subsidy as defined in section 53083 or 53083.1 of the California Government Code or the City’s Open Government Resolution.
/s/
LORI MITCHELL
Director, Community Energy
For questions, please contact Lori Mitchell, Director of Community Energy, at (408) 535- 4880.