10/18/21, 2:13 PM Procure Electricity through Direct Access - City of Santa Monica https://www.smgov.net/departments/council/agendas/2015/20150224/s2015022403-H.htm 1/5 City Council Report
City Council Meeting: February 24, 2015
Agenda Item: 3-H
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 prequalified 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 prequalified 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.
10/18/21, 2:13 PM Procure Electricity through Direct Access - City of Santa Monica https://www.smgov.net/departments/council/agendas/2015/20150224/s2015022403-H.htm 2/5 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.
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 10/18/21, 2:13 PM Procure Electricity through Direct Access - City of Santa Monica https://www.smgov.net/departments/council/agendas/2015/20150224/s2015022403-H.htm 3/5 $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 Energy Rate Comparison
Usage Rates Savings Direct Access SCE
Approximately
25,000,000
kWh
$0.0602-$0.0661/kWh $0.0887/kWh
Estimated
Annual Cost
(usage x rate)
$1,505,000-$1,652,500 $2,217,500 $565,000-$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.
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 10/18/21, 2:13 PM Procure Electricity through Direct Access - City of Santa Monica https://www.smgov.net/departments/council/agendas/2015/20150224/s2015022403-H.htm 4/5 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 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 10/18/21, 2:13 PM Procure Electricity through Direct Access - City of Santa Monica https://www.smgov.net/departments/council/agendas/2015/20150224/s2015022403-H.htm 5/5 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.
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: Forwarded to Council:
Dean Kubani
Sustainability Manager
Elaine Polachek
Interim City Manager
Attachments:
· Direct Access Scoresheet