City Council Report
City Council Meeting: January 25, 2022
Agenda Item: 3.C
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To: Mayor and City Council
From: Rick Valte, Public Works Director, Public Works, Office of Sustainability & the Environment
Subject: Authorization to Reinstate Enabling Agreement and Execute a Purchase Order with 3 Phases Renewables for Direct Access Electricity for Municipal Facilities
Recommended Action
Staff recommends that the City Council Authorize the Procurement Manager to:
1. Amend the term of the enabling agreement with 3 Phases Renewables to procure electricity through Direct Access; and
2. Negotiate and execute a purchase agreement with 3 Phases Renewables to procure power for up to six months, in an amount not to exceed $1.5 million.
Summary
The City of Santa Monica purchases 100% green power for City-owned electricity accounts through a Direct Access power agreement. Direct Access allows the City to purchase electricity from a third party while paying Southern California Edison (“SCE”) for transmitting the electricity to City facilities. Under Direct Access, the City can negotiate power rates directly with certain service providers. The City has procured power through direct access agreements since 1999 to transition to renewable energy and realize savings on electricity costs. The current power pricing for City-owned accounts will expire on July 1, 2022.
The City negotiated its current pricing through 3 Phases Renewables, a Direct Access electricity service provider. Staff now seeks to amend the agreement with 3 Phases Renewables to extend the agreement for an additional six months until January 1, 2023.
This would enable staff to negotiate a short-term supply contract and provide time to 2 of 5
issue a new request for proposals from additional electricity service providers.
This agreement only negotiates rates for City-owned electricity accounts. Participation in the Direct Access program has no effect on rates set by Southern California Edison or Clean Power Alliance customers.
Discussion
The City manages 570 different municipal accounts through the Direct Access power agreement across all City facilities, including City buildings, parks, streetlights, utilities, maintenance yards, and other facilities. Since 1999, maintaining enrollment in Direct Access has enabled the City to save millions of dollars and avoid approximately 118,322 metric tons of carbon dioxide emissions from electricity generation, making it one of the City’s most impactful sustainability policies.
The City currently has a two-year Direct Access Purchase Agreement with 3 Phases Renewables for renewable electricity at a flat rate of $0.0692 per kilowatt hour (kWh).
For comparison, the average price of renewable electricity from the Clean Power Alliance is $0.108 per kWh. Multiply that savings by the quantity of kWhs the City typically consumes annually via Direct Access (21 million kWh) and the total savings the City has received over the term of the existing two-year contract is approximately $1.6 million.
Based on energy market conditions and indicative pricing from Electricity Service Providers, staff anticipates the cost per kWh would be higher in the second half of 2022, in the range of $0.12 to $0.14 per kWh resulting in an estimated six-month cost of up to $1.5 million for electricity. The City’s approach is to only procure a six-month contract until the winter months (Q4 of 2022) when staff can negotiate for 12, 24, or 36-month terms. An energy contract that starts and ends in winter months is expected to result in lower rates and a long-term contract hedges against volatility. Savings from Direct Access cannot be guaranteed due to the volatility of the energy market, but this approach is expected to mitigate utility rate increases paid by the City over time. 3 of 5
Vendor 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 online bidding site, and notices were sent directly to State-authorized electricity service providers in accordance with City Charter and Municipal Code provisions. A total of 22 vendors were notified and 15 vendors downloaded the bid.
Three statements of qualifications were received and 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, 3 Phases Renewables was the only responsive vendor that executed an enabling agreement with the City. The Enabling Agreements do not contain any pricing or cost but allow the City to proceed in completing a purchase agreement that establishes power costs for participating City electricity accounts. The Enabling 4 of 5
Agreement with 3 Phases Renewables expired on September 1, 2020 after the City secured power rates through July 1, 2022.
With Council approval, the City would extend the term of the Enabling Agreement with 3 Phases Renewables until January 1, 2023. This would enable staff to seek the best possible price for Direct Access electricity generated from renewable sources for the six month period between July 1, 2022 and January 1, 2023. Concurrently, staff would publish a new RFQ to select a short-list of prequalified Direct Access Electricity Service Providers to seek new pricing in Q4 of 2022 for a 12, 24, or 36-month term.
Past Council Actions
Meeting Date Description
02/24/2015 City Council authorized the City Manager to approve enabling agreements with a pre-qualified list of electricity service providers and to negotiate and execute power
purchase agreements for municipal facilities.
Financial Impacts and Budget Actions
Staff seeks authority to approve available funding from various funds to increase the amount of the agreement with 3 Phases Renewables. Future year funding is contingent on Council budget approval.
Agreement Modification Request
Agreement #
Current Authorized
Amount Not to
Exceed
FY 2021-22 Budget
Modified Request
Amount
Dept/CIP Account # Total Revised
Contract Amount
10157 $15 million $1.5 million Various $16.5 million
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Prepared By: Drew Johnstone, Sr. Sustainability Analyst Approved Forwarded to Council
Attachments:
A. February 24, 2015 Staff Report
B. 3PR Oaks Initiative Form
C. 3Phases Enabling Agreement-Santa Monica 070115-executed