For City Council meeting of April 1, 2013 Business of the City by Motion: Electricity Aggregation Supplier Agreement For Action

Transcription

1 For City Council meeting of April 1, 2013 Item A4 Business of the City by Motion: Electricity Aggregation Supplier Agreement For Action Memorandum To: From: Subject: Honorable Mayor and Members of the City Council Administration and Public Works Committee David Stoneback, Director of Utilities Catherine Hurley, Sustainable Programs Coordinator Approval of 2013 Community Choice Electricity Aggregation Supplier, Agreement (RFP 13-08) Date: April 1, 2013 Recommended Action: Staff recommends that City Council authorize the City Manager to execute the Master Agreement to Provide Services to an Aggregated Group with Verde Energy USA Illinois, LLC (101 Merritt 7, 2 nd Floor, Norwalk, CT) for a 12-month term with a 100% renewable energy mix at the price of $ per kilowatt hour. Contract Term: Staff recommends that the term of the agreement be 12 months to assure that the rate for the Evanston aggregated group will be lower than that available from Commonwealth Edison (ComEd). Energy Mix: Staff recommends that the 100% renewable energy mix is selected since the price difference between the Base bid and the 100% renewable alternative bid from Verde Energy USA is $ per kilowatt hour (kwh). This is well below the staff recommendation to select the 100% renewable option if the cost difference is less than $ Analysis: As indicated in the Memorandum dated March 20, 2013, five Alternative Retail Electric Suppliers (ARES) were determined to be pre-qualified to submit actionable pricing on April 1, Proposals were received from the following four prequalified ARES.

2 Supplier Constellation NewEnergy, Inc. FirstEnergy Solutions Integrys Energy Services, Inc. Verde Energy, USA Illinois LLC Address 10 S. Dearborn, Chicago, IL 341 White Pond Drive, Akron, OH 1716 Lawrence Dr., De Pere, WI 101 Merritt 7, Norwalk, CT A summary of the prices provided for the actionable prices received by 12:00 p.m. today are shown in Table 1. Table 1 Summary of Pricing Received Verde Energy USA Illinois, LLC FirstEnergy Solutions Constellation NewEnergy, Inc. Contract Term BASE Proposal IRPS (1) compliant Alternate 1 100% Renewable w/ RECs BASE Proposal IRPS (1) compliant Alternate 1 100% Renewable w/ RECs BASE Proposal IRPS (1) compliant Alternate 1 100% Renewable w/ RECs ($/kwh) 12 Month $ $ $ $ $ $ Month $ $ $ $ $ $ Month $ $ $ $ $ $ Month $ $ $ $ $ $ (1) Renewable energy percentages from May 31, 2013 through June 1, 2014 according to the Illinois renewable portfolio standard. Integrys Energy s proposal was deemed nonresponsive since they qualified their proposal. Verde Energy USA provided the lowest proposals for all pricing options. While Verde Energy USA price is higher than Constellation s price awarded last year ($ ), it is lower than Constellation s 24 month proposed price ($0.0531) provided last year. Cost Comparison Analysis: The ComEd Supply Price to Compare of $ includes two costs, a purchase electric charge (PEC) ($ ) and a transmission services charge (TSC) ($ ). Just this past Friday (March 29, 2013), ComEd announced that their PEC rate beginning June 2013 will be $ / kwh. This is significantly lower (24%) than the price last year. The TSC is currently $ / kwh, but ComEd has notified the ICC that it estimates that its TSC will increase percent beginning June 1, 2013 in the range of $ to $ / kwh. 2

3 Additionally, ComEd also charges a purchased electricity adjustment. This adjustment can change month to month, and cannot exceed $0.005 / kwh. During the past year ComEd charged the maximum amount the majority of the months. Table 2 below shows the impact of proposed cost savings realized on the supply side of a customer s bill by a typical, single family home which uses 9,000 kwh on an annual basis. The cost savings shown in Table 2 are conservative because they do not include the proposed increase in the ComEd TSC or the purchased electricity adjustment costs. Table 2 Cost Savings ComEd Supply - Price to Compare Price $ per kwh $ $487 Estimated Annual Supply Cost Year 1 Savings from ComEd Price IL RPS Compliant (8%) $ $460 $27 100% Renewable Energy $ $467 $19 Based on staff s recommendation to award a 12 month term agreement with Verde Energy USA with a 100% renewable energy mix, the typical single family home which used 9,000 kwh on annual basis, will save $19 annually. Municipal Comparisons: Table 5 below provides a comparison of prices for municipal aggregation from neighboring communities. Community / Buying Group Price ($ / kwh) Agreement Details % renewable energy Awarded Evanston $ year contract 100% Spring 2013 Lake Shore Power year 2 of a 3-year $ Alliance contract 8% Spring 2013 North Shore Electricity year 2 of a 3-year $ Aggregation contract 8% Spring 2013 Consortium Lincolnwood, Grayslake & Oak Brook $ year contract 8% Fall 2011 Oak Park $ year contract 100% Fall

4 The Lake Shore Power Alliance includes Wilmette and Kenilworth. The North Shore Electricity Aggregation Consortium includes the communities of Deerfield, Glencoe, Lake Bluff, Northbrook, Skokie, Highland Park, Lake Forest and Park Ridge. 4

5 For City Council meeting of April 1, 2013 Item A4 Business of the City by Motion: Electricity Aggregation Supplier Agreement For Action Memorandum To: From: Subject: Honorable Mayor and Members of the City Council Administration and Public Works Committee Catherine Hurley, Sustainable Programs Coordinator Dave Stoneback, Director of Utilities Approval of 2013 Community Choice Electricity Aggregation Supplier Agreement (RFP 13-08) Date: March 20, 2013 Recommended Action: Staff recommends that City Council authorize the City Manager to execute a Master Agreement to Provide Services to an Aggregated Group with the pre-qualified Alternate Retail Electric Supplier (ARES) that provides the most favorable price per kilowatt hour ($ / kwh) for the length of term and renewable energy mix that the City Council determines to be the most advantageous. At the City Council meeting on April 1, 2013, staff will present a recommendation to the City Council authorizing the City Manager to negotiate and execute an agreement with the prequalified ARES that submits the most favorable pricing based on the recommendations provided in this memo. Background: On Monday, April 30, 2012 the Council authorized the City Manager to enter into an agreement with Constellation NewEnergy Inc. to provide services to the Evanston Aggregated Group for a 12-month term with a 100% renewable energy mix at the price of $ per kilowatt hour. This represented a 36% reduction in comparison to the ComEd price at the time of $ per kilowatt hour. Most of the participants in the aggregated group began receiving their power supply from Constellation in August 2012 and received their first invoice with the lower rate in September. The current agreement with Constellation for the aggregation program will end in July

6 Staff released a request for indicative pricing and company qualifications (RFP 13-08) for Municipal Aggregation of Electric Supply for Residential and Small Commercial Retail Customers on February 26, Indicative Pricing and Qualification Results: Six responses to the request for indicative pricing and company qualifications were received on March 12, 2013 in response to RFP as listed below: Supplier Constellation NewEnergy, Inc. FirstEnergy Solutions Homefield Energy Integrys Energy Services, Inc. MC Squared Energy Services Verde Energy, USA Illinois LLC Address 10 S. Dearborn, Chicago, IL 341 White Pond Drive, Akron OH 1500 Eastport Plaza Dr., Collinsville, IL 1716 Lawrence Dr., De Pere WI Two North Riverside, Chicago, IL 101 Merritt 7, Norwalk, CT The following individuals were part of the committee that reviewed the responses and helped to prepare the recommendations to the City Council: Richard Lanyon, Utilities Commission Chair David Grumman, Utilities Commission Member Co-Chair Jonathan Nieuwsma, Utilities Commission Member Catherine Hurley, Sustainable Programs Coordinator David Stoneback, Director, Utilities Department The responses were evaluated based on criteria set forth in the RFP and are summarized in Exhibit 1. The criteria and corresponding point value is provided below: Qualifications of the Supplier to conduct a municipal aggregation program based on references, past experience, financial information and litigation information. 40 points Energy supply rate and power mix. 10 points Willingness of Supplier to execute the proposed Master Agreement to Provide Services to an Aggregated Group. 30 points Completeness of Proposal. 10 points Proposed aggregation implementation plan. 5 points Quality of customer service procedures and resources 5 points Homefield Energy s response was determined to be non-responsive since they did not provide pertinent required information in their proposal, and therefore they were not evaluated. 2

7 A minimum score of 70 points is required to be considered responsive and qualified under this process. Based on the committee s evaluation, Constellation NewEnergy, First Energy, Integrys Energy, MC Squared Energy Services and Verde Energy USA were determined to be responsive and qualified. Cost Analysis: The City requested indicative pricing to supply energy for four different terms (12, 18, 24, and 36 months) and three different fixed prices: one where the renewable energy component would be eight percent (8%) 1, in accordance with Illinois Renewable Energy Portfolio Standard (IRPS) Illinois Public Act , and the two prices based on the renewable energy component being fifty percent (50%) and one hundred percent (100%). Staff requested a large number of pricing options to understand the incremental cost of various contract terms and renewable energy options with the goal of narrowing down the number of options requested for actionable pricing. Due to the volatile pricing of electricity, which changes hour by hour, suppliers will not hold purchase prices for more than 24 hours without a considerable risk factor markup. For the indicative pricing proposal the ARESs were only provided the energy usage and profile for eligible customers based on typical ComEd customers and Evanston s population. As a result, the pricing provided in these responses are only an indication of what to expect when actionable pricing is requested and therefore they should be evaluated to understand the variety of term and energy mix options only. A summary of the average prices is provided in Tables 1, 2 and 3. Average prices are presented across all contract terms and energy mix options. In addition, staff has calculated the average price differential between the contract terms and the energy mix options. Table 1 Summary of Average Prices Contract Term Energy Mix 12 month 18 month 24 month 36 month Average Price $ per kwh IL RPS Compliant (8%) $ $ $ $ % Renewable Energy $ $ $ $ % Renewable Energy $ $ $ $ Note: The current ComEd price to compare is $ per kwh. Table 2 Summary of Average Price Differential: Price Terms Contract Term Option % Difference 12 to 18 month 6.8% 12 to 24 month 11.32% 12 to 36 month 16.26% 1 Renewable energy percentage good thru May 31, 2013 through June 1, 2014 according to the Illinois Renewable Energy Portfolio Standard, Illinois Public Act Renewable energy percentage will increase by one percent each year through

8 Table 3 Summary of Average Price Differential: Energy Mix Renewable Energy Average cost increase per kwh Option above IL RPS Compliant (7%) 50% $ % $ All of the proposers provided the lowest indicative fixed price based on the 12-month term and with the 8% renewable energy component. The average low price is $ as shown in Table 1. Recommendations Contract Term: The difference in average price between the three contract terms is provided in Table 2. The review committee recommends that the Council consider awarding the longest term that provides a price less than 110% of the 12-month price. The low bidder s prices for the 100% renewable energy mix provided last year for 12 months was $ and for 24 months was $ Since the 24 month price was more than 10% over the 12 month price, Council accepted staff s recommendation and awarded the 12 month term. While the City might pay around the same cost this coming year, the fact that the price was lower last year proves that this was an appropriate recommendation. Recommendations Energy Mix: Table 3 provides a summary of the average incremental cost for renewable energy options above the IRPS requirement. Based on the actual number of accounts that participated in the aggregation program, staff estimates that a 100% renewable energy option would be needed to meet the city s goal established in the Evanston Climate Action Plan. The committee recommends selecting the 100% renewable energy option if the price difference between the IL RPS Compliant cost and 100% renewable energy cost per kwh is less than $ This equates to $8 annually or less than $1 per month for the average single family home with a typical annual use of 9,000 kwh. Table 4 below shows the impact of potential cost savings realized on the supply side of a customer s bill by a typical, single family home which uses 9,000 kwh on an annual basis. 4

9 Table 4 Summary of Average Cost Savings Price $ per kwh Estimated Annual Supply Cost ComEd Supply - Price to Compare $ $ 674 Year 1 Savings from ComEd Price IL RPS Compliant $ $ 469 $ % Renewable Energy $ $ 473 $ % Renewable Energy $ $ 478 $ 197 Renewable Energy and Energy Efficiency Alternatives: The City requested indicative pricing for two additional alternatives over and above the purchase of REC s for 100% of the City s aggregated energy usage. The goal of these alternatives is to understand other ways that the City s aggregation program could provide environmental and financial benefits to the community. One alternative requested that the suppliers also install 100 kw of solar photovoltaics on public property, which would generate enough energy to power approximately 30 homes in Evanston. The other alternative requested pricing to include an energy efficiency program focusing on residential and commercial customers. Both alternatives would reduce the City s greenhouse gas emissions, reduce operating costs for facilities included and provide jobs that could benefit the local economy. All qualified suppliers responded that, if selected, they could partner with the City to implement distributed energy generation and/or energy efficiency projects as part of municipal aggregation. However, the capabilities to support such project varied among the respondents and only one respondent actually provided a price in $/kwh for both alternatives. To receive comparable bids from the suppliers, a refined and further detailed description of the work and services to be completed under these alternatives needs to be developed. Staff recommends researching options and presenting a draft plan to City Council in advance of the next electricity aggregation contract award for a program that incorporates local renewable energy and/or energy efficiency benefits into the City s next aggregation contract. Attachments: Exhibit 1 Evaluation of RFP Responses 5

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