HomeMy WebLinkAboutItem 10 - TCAP Power Purchase 2018-2022MEMO TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: BRUNO RUMBELOW, CITY MANAGER �jN
MEETING DATE: FEBRUARY 16, 2016
SUBJECT: TCAP POWER PURCHASE 2018-2022
RECOMMENDATION:
City Council consider adopting a resolution authorizing the City to enter into a contract with
Texas Coalition for Affordable Power (TCAP) to provide the City with electric power for the
years of 2018 thru 2022 and take any necessary action.
FUNDING SOURCE:
Funds are programmed annually in each department's Operating Budget.
BACKGROUND:
The City entered into a contract with TCAP in August 2012 to provide power to the City for
the years of 2014 through 2017. The cost for this power is $0.0531 per kWh.
TCAP is looking for an opportunity to lock -in prices for the five-year term of 2018 through
2022 at or below a benchmark price of $0.0410 per kWh. At this price the City would
experience a savings of $200,000 per year for five years or approximately $1,000,000.
Our electric power budget for the FY 2016 budget year is in the neighborhood of $2.8
million.
TCAP will be soliciting new bids as of the second week of March which will establish our
cost per kWh. The prices are good for only one day. The adoption of the attached
resolution authorizes the Mayor, City Manager, or Public Works Director to execute the
contract once TCAP's supplier is able to lock in a price at or below the benchmark price.
The City Council Utilities Committee has been briefed and recommends approval. Staff
also recommends approval.
JSL/ds
Cost/'kW
SO. :4
SO, �.
2002 - $ 0.04000
2003 - $0.04320
2004 - $0.04940
2005 - $0.06837 - (Jan -Jun)
2005 - $0.06605 - (Jul -Dec)
2006 - $0.11860 - (Jan -Jun)
2006 - $0.07752 - (Jul -Dec)
2007 - $0.08132
2008 - $0.08571- (Jan -Jun)
2008 - $0.13589 - (Jul -Sep)
2009 - $0.06974
2010 - $0.07708
2011- $0.07895
2012 - $0.07884
2013 - $0.07878
2014 - $0.05310
2015 - $0.05310
2016 - $0.05310
2017 - $0.05310
1
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
GRAPEVINE, TEXAS, AUTHORIZING THE TEXAS
COALITION FOR AFFORDABLE POWER, INC. (TCAP) TO
NEGOTIATE AN ELECTRIC SUPPLY AGREEMENT FOR
FIVE YEARS FOR DELIVERIES OF ELECTRICITY
EFFECTIVE JANUARY 1, 2018; AUTHORIZING TCAP TO
ACT AS AN AGENT ON BEHALF OF THE CITY TO ENTER
INTO A CONTRACT FOR ELECTRICITY; AUTHORIZING
WILLIAM D. TATE, BRUNO RUMBELOW OR JOHN S.
LASTER TO EXECUTE AN ELECTRIC SUPPLY
AGREEMENT FOR DELIVERIES OF ELECTRICITY
EFFECTIVE JANUARY 1, 2018 AND COMMITTING TO
BUDGET FOR ENERGY PURCHASES IN 2018 THROUGH
2022 AND TO HONOR THE CITY'S COMMITMENTS TO
PURCHASE POWER FOR ITS ELECTRICAL NEEDS IN
2018 THROUGH 2022 THROUGH TCAP AND PROVIDING
AN EFFECTIVE DATE
-Te A P
WHEREAS, the City of Grapevine, Texas (City) is a member of Texas Coalition
For Affordable Power, Inc. (TCAP), a non-profit, political subdivision corporation
dedicated to securing electric power for its more than 170 members in the competitive
retail market; and
WHEREAS, TCAP has unique rights under Texas law to negotiate directly in the
wholesale market and arrange separate contracts for power supply and retail services
which provides TCAP leverage to achieve contract provisions that single city negotiations
with a Retail Electric Provider (REP) would be unlikely to produce; and
WHEREAS, TCAP's geographic diversity across all four ERCOT zones produces
an aggregated peak load that is lower than the total of individual peak loads of the
individual TCAP members, allowing price benefits in the wholesale market that are not
likely to be available to any given TCAP member alone; and
WHEREAS, TCAP and its predecessor organizations, Cities Aggregation Power
Project, Inc. (CAPP) and South Texas Aggregation Project, Inc. (STAP), negotiated
favorable contract terms that resulted in rebates from the wholesale supplier and
reasonable commodity prices for delivered electricity since 2002 resulting in stable
budgets for electricity for members; and
WHEREAS, commodity prices for electricity experienced significant volatility
between 2002 and 2009, with prices ranging from 4 cents to over 13 cents per kWh,
causing CAPP and STAP members to welcome a five year contractual commitment that
came close to cutting the 2008 prices in half, with that contract being extended until
December 31, 2017, with a negotiated price reduction of about 1 cent per kWh; and
WHEREAS, TCAP has become a forceful voice for consumer protections and
market reform to benefit the public and well as cities and other political subdivisions; and
WHEREAS, TCAP is owned by its members and distributes monetary and other
resources according to relative load size of members and is controlled by a fifteen
member Board of Directors, all of whom must be city employees of members who
represent diversity in size and geography; and
WHEREAS, wholesale power prices within the deregulated Texas market are
largely determined by the NYMEX gas futures prices for natural gas which are currently
low and relatively stable, but which change daily; and
WHEREAS, daily price changes require retail customers to execute a contract
immediately upon receipt of a favorable offer; and
WHEREAS, pursuant to Texas Local Government Code Section 252.022(a)(15)
expenditures for electricity are exempt from competitive bidding requirements; and
WHEREAS, on any given day, TCAP is able to capture a favorable wholesale price
for any period of time, comparable to or better than any given REP or broker; and
WHEREAS, TCAP intends to continue to contract with its current wholesale
supplier, NextEra, because the relationship with NextEra is such that NextEra is willing,
after it knows the size of a given load, to execute a contract at or below prescribed price
and terms; and
WHEREAS, the City desires to execute a contract for electricity for the period
beyond the expiration of its current contract on December 31, 2017, that locks -in
favorable wholesale prices under one of three different supply options:
Option 1 - fixed-price, full -requirements at a price not to exceed 4.1 cents per
kWh for the North and West zones or 4.25 cents per kWh for the South and Houston
zones;
Option 2 - fixed price for on -peak hours and variable spot market prices for off-
peak hours;
Option 3 - block energy at a fixed price to cover the base load hours, a fixed price
for solar energy to cover mid-day peak hours (approximately 10% of total load) and
variable spot market prices for all remaining consumption; and
WHEREAS, TCAP will allow members six weeks from receipt of this resolution to
consider whether to participate in this second opportunity to contract for post -2017
electrical supply, and thereafter allow NextEra until June 30, 2016 to contact for power
for five years at a price not to exceed 4.1 cents per kWh in the North and West zones and
RES. NO. 2
a price not to exceed 4.25 cents per kWh in the South and Houston zones for Option 1,
so long as the aggregated load for any of the three supply options reaches at least 50
megawatts; and
WHEREAS, wholesale suppliers demand assurance that TCAP will pay for all
contracted load; and
WHEREAS, the City needs to assure TCAP that it will sign a Commercial Electric
Supply Agreement (CESA) reflecting the contract extension and budget for energy
purchases for the post -2017 period and honor its commitment to purchase power for its
electrical needs for 2018 through 2022 through TCAP.
WHEREAS, all constitutional and statutory prerequisites for the approval of this
resolution have been met, including but not limited to the Open Meetings Act; and
WHEREAS, the City Council deems the adoption of this resolution to be in the
best interests of the health, safety, and welfare of the public.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF GRAPEVINE, TEXAS:
Section 1. That all matters stated hereinabove are found to be true and correct
and are incorporated herein by reference as if copied in their entirety.
Section 2. That the TCAP Board of Directors and its consultants and advisors
are agents authorized to negotiate for the City's electricity needs as a member of TCAP
for the period 2018 through 2022 at a price not to exceed 4.1 cents per kWh for the North
and West zones and a price not to exceed 4.25 cents per kWh in the Houston and South
zones for supply Option 1;
Section 3. The City prefers to participate in supply Option 1 with the following
understanding: a) while supply Option 1 is a full -requirements, fixed-price option, Options
2 (fixed price on -peak, variable spot prices for off-peak usage) and 3 (fixed price for base
load, fixed price for a portion of peak load, and variable spot market for remainder) have
variable price components and savings over Option 1 cannot be guaranteed, and b) if
there is insufficient desire among members to achieve a 50 MW threshold for either
Option 2 or 3, the member selecting the inadequately subscribed option will be placed in
the Option 1 category. If no option is selected, TCAP will assume that a passed resolution
approves of Option 1.
Section 4. Assuming this resolution is passed before February 25, 2016 and the
combined load of TCAP members passing this resolution exceeds 50 megawatts for the
preferred Option and NextEra is able to provide TCAP an opportunity prior to June 30,
2016 to contract for power to be delivered to members at a price not to exceed 4.1 cents
per kWh for the North and West zones and not to exceed 4.25 cents per kWh in the
Houston and South zones for supply Option 1 for the period January 1, 2018 through
RES. NO. 3
December 31, 2022, any one of the following individuals is hereby authorized to sign an
electric supply agreement for the City within 24 hours of receipt of a contract that has
been approved and recommended by the TCAP Board of Directors: William D. Tate,
Bruno Rumbelow or John S. Laster.
Section 5. That the City will commit to purchase power to meet all of its
electricity needs eligible for competition pursuant to the TCAP approved supply
agreement and approve funds necessary to pay electricity costs proportionate to the
City's load under the supply agreement (whether wholesale or retail) arranged by TCAP
and signed by TCAP's Executive Director or President or other TCAP representatives
authorized by the TCAP Board.
Section 6. That a copy of this resolution shall be sent to Jay Doegey, Executive
Director, TCAP, 15455 Dallas Parkway, Suite 600, Addison, Texas 75001 and Geoffrey
M. Gay, legal counsel to TCAP at 816 Congress Avenue, Suite 1900, Austin, Texas
78701.
Section 7. 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 16th day of February, 2016.
APPROVED:
ATTEST:
APPROVED AS TO FORM:
RES. NO. 4