HomeMy WebLinkAbout2010-10-13 10-340 ORDERCOUNCIL ACTION
Item No. i s 40
Date: 10-13-2010
Item/Subject: Order, Authorizing Execution of Electricity Supply Contract(s)
Responsible Department: Finance
Commentary:
For a number of years, the City of Bangor has been a member of Maine Power Options (MPO). MPO
is an energy purchasing consortium that serves as an aggregator for Maine's local governmental and
non-profit organizations.
Currently, the City is under contract for its medium service electrical accounts through 12/1/2011 at
a rate of .0940/kwh, its large service electrical accounts through 12/1/2011 at a rate of .0875/kwh
and its streetlight accounts through 12/1/2011 at a rate of .078/kwh.
MPO notified all its customers with December 2011 expiration dates of an opportunity to contract for
supply costs beginning 12/1/2011. Due to the current market conditions, i.e. higher than expected
natural gas reserves, lower than expected demand and a relatively quiet hurricane season, the
pricing being offered is significantly lower than current pricing.
Due to the time sensitive nature of utility bidding, the actual pricing offer must occur within 48 hours
or so of acceptance. The pricing offer will contain options of one, two or three year terms. The
attached order would enable staff to execute at least a one-year contract for the period ending
12/1/2012, provided that actual pricing offers represent a savings of approximately 20% of current
costs. Final pricing options will be reviewed with the Finance Committee Chair upon receipt.
This has been reviewed and recommended for approval by the Finance Committee.
Department Head
Manager's Comments:
City Manager
Associated Information: Order
Budget Approval: Estimated annual savings Citywide would be approximately $3 000.
Finance Director
Legal Approval:
Introduced for
X Passage
First Reading
Referral
Page _ of ,_
City Solicitor
10 "40
Assigned to Councilor — Bronson October 13, 2010
CITY OF BANGOR
(TITLE.) Order, Authorizing Execution of Electricity Supply Contract(s)
By the City Council of the City of Bangor.
ORDERED, THAT Deborah Cyr, is hereby authorized to execute contract(s) with Maine Power
Options to fix electricity supply costs for the period beginning 12/1/2011.
IN CITY COUNCIL
October 13, 2010
Passed
C TY CL
ORDER
(TITLE,) e„rhnr;zine Execution of
Fl-aricity Supply contract
Assiped•to Conncllor
�Uv 1
10 340
To:
Finance Committee
From:
Debbie Cyr
Date:
October 4, 2010
RE:
Electricity Supply
For some time, the City of Bangor has been a member of Maine Power Options
(MPO). MPO is an energy purchasing consortium that serves as an aggregator
for Maine's local governmental and non-profit organizations.
Electric bills are comprised of multiple charges i.e. supply, distribution,
transmission and capacity. Most consumers pay the standard rate for their
electrical supply. The standard rate is set annually by the Maine Public Utilities
Commission. Through deregulation, the opportunity exists for consumers to
select their respective energy supplier and in turn "bid" the cost of their supply
for a fixed cost over a fixed period of time. Since the option of "bidding"
electricity supply has become available, the City has followed a strategy of
locking in for a longer term typically 3 — 5 years. Over time this approach has
proven beneficial.
Currently, the City is under contract for its medium service electrical accounts
through 12/1/2011 at a rate of .0940/kwh, its large service electrical accounts
through 12/1/2011 at a rate of .0875/kwh and its streetlight accounts through
12/1/2011 at a rate of .078/kwh.
MPO notified all its customers with December 2011 expiration dates of an
opportunity to contract for supply costs beginning 12/1/2011. Due to the current
market conditions, i.e. higher than expected natural gas reserves, lower than
expected demand and a relatively quiet hurricane season the pricing being
offered is significantly lower than current pricing. Recent offers for supply costs
are in excess of 20% lower than current pricing.
As the contract(s) for electrical supply are in excess of $50,000, any such
agreements must be authorized by the City Council. The next Council meeting is
scheduled for October 13th, the City could receive pricing on October 12th. Due
to the time sensitive nature of utility bidding, the actual pricing offer must occur
within 48 hours or so of acceptance. The pricing offer will contain options of
one, two or three year terms. For each additional year, the annual supply cost is
expected to be .20/kwh more.
Staff recommendation is that the City execute a one-year contract for the period
ending 12/1/2012, if the actual pricing offers represent a savings of
approximately 20% of current costs. Final pricing options would be reviewed
with the Finance Committee Chair upon receipt.