HomeMy WebLinkAboutItem 01 - Electrical PurchaseREM • .�;��
MEMO TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: ROGER NELSON, CITY MANAGER
MEETING DATE: NOVEMBER 6, 2001
SUBJECT: APPROVAL OF AN ELECTRICAL PURCHASE AGREEMENT
RECOMMENDATION:
City Council to consider approving an agreement to purchase electrical energy and
authorize the City Manager as signatory and take any necessary action.
BACKGROUND:
The 76th Texas Legislature enacted Senate Bill 7 that deregulated the purchase of
electrical power for most consumers in Texas with an effective date of January 1, 2002.
Electricity will become a commodity subject to market fluctuations influenced by supply
and demand. Grapevine purchases $1,000,000 of electrical power annually and must
determine the most cost-effective method of procurement under the new guidelines.
Cities and other large users are entering into contracts with electric providers for
purchase under numerous methods. Grapevine's electrical demand typically cannot be
deferred because of the critical nature of the service we provide so a fixed price contract
with a defined term is the most advantageous.
There are three methods of procurement:
• Grapevine can do nothing and continue with TXU as a provider at market
price. This method is subject to seasonal fluctuations, and in other states, has
resulted in tremendously high electric bills.
• Grapevine can solicit pricing and contract terms independently from the
various electric providers and enter into a contract for purchase. This
approach is currently being pursued by City Staff.
• Grapevine can join with a group of electrical users, "aggregators", to pool their
electrical profiles and solicit bids for electric purchase working under the
premise that an economy of scale exists that would result in a better unit price.
City Staff is also currently pursuing this option.
November 1, 2001 (1:21 PM)
1 1 Grapevine entered into an alliance for aggregate purchase of electrical power with other
water and sewer agencies such as the Trinity River Authority under the umbrella of the
Texas Water Conservation Association. Bids were solicited and the "aggregation" did
not receive a responsive proposal. The group decided to dissolve and seek alternative
methods of electrical purchase. Prior to the dissolution of the Texas Water Conservation
Association group, Grapevine joined the Houston -Galveston Area Council aggregation
as a fall back position.
Grapevine has a long history of utilizing the Houston -Galveston Area Council (H -GAC)
for cooperative purchases and has saved many thousand of dollars doing so. Many of
our fleet vehicles and construction equipment have been purchased through this
organization. They procure equipment and services for public entities across the State.
Grapevine has retained Malcolm Pirnie, Inc. to assist staff in procuring proposals for
electrical purchase and evaluating the proposal from H -GAC. Malcolm Pirnie, Inc. is a
national company that has represented public entities in energy procurement in Texas
and other deregulated states. The Trinity River Authority of Texas utilized Malcolm
Pirnie, Inc. and found their service to be admirable.
The City must make a decision within 24 hours of receipt of the proposals due to the
volatility of the energy market. The electric providers will not assume the risk of keeping
a proposal on the table for an extended period of time. Price is important but not the
over riding -determining factor in securing electric energy. The following are terms that
Malcolm Pirnie, Inc. will assist the city in evaluating:
• "Swing" - The percentage a provider will allow the purchaser to exceed or go
under the contracted amount of electricity before subjecting the purchaser to
market pricing. Market pricing can be many magnitudes higher than the
contract price depending on supply and demand. The typical swing is 5-10%;
• Payment Terms;
• Energy Related Services such as energy consulting, engineering, energy
audits, load shift consultation, etc.; and
• Price, which includes the sum of energy price, transmission and distribution
charges, taxes and tariffs.
Staff will present a recommendation on electrical energy procurement and a contract
term at the Council meeting.
MS/ms
October 31, 2001 (3:09PM)
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
GRAPEVINE, TEXAS APPROVING AND AUTHORIZING
EXECUTION OF A "SUPPLY AGREEMENT" WITH A
RETAIL ELECTRIC PROVIDER, APPROVING INITIAL
PROPOSAL PRICING, APPOINTING AUTHORIZED
REPRESENTATIVE(S) AND PROVIDING AN EFFECTIVE
DATE
WHEREAS, Houston -Galveston Area Council Purchasing Corporation (the
"Corporation") is a non-profit political subdivision corporation, as defined in Chapter 303
of the Texas Local Government Code (to be codified effective September 1, 2001 as
Chapter 304); and
WHEREAS, the Corporation is authorized to negotiate on behalf of its members
for the purchase of electricity, make contracts for the purchase of electricity, purchase
electricity, and take any other action necessary to purchase electricity for use in the
public facilities of the political subdivisions represented by it; and
WHEREAS, the City of Grapevine has adopted a resolution authorizing
participation in the Corporation; and
WHEREAS, the Corporation has negotiated and contracted with various Retail
Electric Providers (each a "REP") and has entered into a contract with the REP
referenced in the Supply Agreement attached as Exhibit "A"; and
WHEREAS, the City of Grapevine, a Buyer, has selected the REP referenced in
the attached Supply Agreement; and
WHEREAS, the Corporation has received and distributed to its members the
initial proposal pricing ("$0.0514244/kWh") of the REP and the Political Subdivision has
reviewed the Initial Pricing, which is incorporated herein by reference; and
WHEREAS, the Political Subdivision acknowledges that the Initial Pricing is not
binding on the REP but will be updated during a subsequent time period to be
announced by the Corporation, at which time final closing pricing (the "Final Pricing")
will be announced; and
WHEREAS, the Political Subdivision has reviewed a Supply Agreement with the
selected REP (the "Supply Agreement"), a copy of which is presented with this
Resolution as Exhibit "A" and is incorporated herein by reference, and wishes to enter
into such agreement provided that the Final Pricing does not exceed the Initial Proposal
Pricing;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF GRAPEVINE, TEXAS:
Section 1. That the Supply Agreement attached as Exhibit "A" with the Initial
Proposal Pricing made a part thereof is hereby approved and adopted.
Section 2. That the following officers, officials or employees of the Political
Subdivision are hereby designated as "Authorized Representatives," with full power and
authority to execute the Supply Agreement, so long as the Final Pricing is less than or
equal to the Initial Proposal Pricing, exclusive of any regulated rates subject to change,
which the Political Subdivision has elected, and take all other actions deemed
necessary or appropriate to consummate the transaction authorized by this Resolution.
Section 3. That this resolution shall take effect from and after the date of its
passage.
PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF
GRAPEVINE, TEXAS on this the 6th day of November, 2001.
ATTEST:
RES. NO. 2