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TO: Mayor Richard C. Irvin
FROM: Christopher Minick, Chief Financial Officer
DATE: March 30, 2022
SUBJECT:
A resolution authorizing the Chief Financial Officer to execute an agreement with an electricity supplier to provide electricity to various city facilities and street lighting not covered under the ComEd Franchise Agreement.
PURPOSE:
To obtain the City Council's approval to authorize the Chief Financial Officer to execute an agreement resulting from a reverse auction conducted by the city's electricity consultant, Progressive Energy Group. It is necessary to execute the contract before close of business on the day of the reverse auction. The reverse auction is targeted for the first week in May 2022.
If the Chief Financial Officer is unavailable to confirm a contractual agreement, the Director of Purchasing is authorized to do so.
BACKGROUND:
MP2 Energy provides electricity to nearly 74 accounts/city facilities not covered under the current ComEd Franchise Agreement, with a contract expiring June 1, 2022 and 20 accounts for street lighting, with contracts expiring February 1, 2023. The City has historically used the services of a consultant to obtain bids from electricity suppliers. Progressive Energy Group was contracted in October 2019 to provide these services. They will continue to review and identify renewal opportunities. The bids include an array of sourcing options: i.e. duration of commitment, percentage green energy, percentage blended energy.
The city must choose their preferred options and enter into a contract prior to close of business the day of the auction.
DISCUSSION:
Electricity is a commodity in which the price changes daily. Long term agreements are priced to offset market risks. The percentage of green energy influences price. Should the city choose to delay entering an agreement at the conclusion of the reverse auction, proposers would increase price to offset their risk.
Attached are the estimated rates currently available for Large Accounts, Small Accounts and Street Lighting. As with all commodities, the rates have significantly increased since our last agreement in December 2019. These rates are not the exact rates we will pay beginning June 2022, but Progressive Energy anticipates them to be close. Based on this estimate the City electrical costs could increase $600,000 annually. Staff requests a contract period of up to 36 months for a majority of the accounts, and street lighting accounts could be 29 months per the attached data. We will be working with the company to terminate services for Street Lighting to be in line with the Large and Small Accounts. The new rate for Street Lighting would not take effect until February 1, 2023
IMPACT STATEMENT:
Timing is critical. The current contracts for large and small accounts expire June 1, 2022. If the reverse auction does not occur in early May, the affected city accounts will pay above market price for services.
If we followed a traditional approval process (Invitation to Bid), the electricity proposers would add a contingency fee to their bid thus adversely affecting cost to the city
RECOMMENDATIONS:
Request that a resolution authorizing the Chief Financial Officer to execute an agreement with the electricity supplier offering the best fitting sourcing option be approved
cc: Finance Committee
CITY OF AURORA, ILLINOIS
RESOLUTION NO. _________
DATE OF PASSAGE ________________
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A Resolution authorizing the Chief Financial Officer to execute contracts with electricity suppliers to provide electricity to the City of Aurora.
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WHEREAS, the City of Aurora has a population of more than 25,000 persons and is, therefore, a home rule unit under subsection (a) of Section 6 of Article VII of the Illinois Constitution of 1970; and
WHEREAS, subject to said Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs for the protection of the public health, safety, morals, and welfare; and
WHEREAS, Illinois municipalities were afforded the opportunity to purchase electricity from any one of the multiple electricity suppliers in the market place effective January 1 2007; and
WHEREAS, the City is currently soliciting competitive proposals from electricity suppliers due to the expiration of the current contracts June 1, 2022; and
WHEREAS, the City expects that it will be necessary to accept proposals of the most competitive firms and execute any associated contracts the same day the proposals are submitted; and
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Aurora, Illinois, as follows:
Section 1: That, pursuant to the solicitation of competitive proposals to provide electricity to City-owned properties in May 2022, the Chief Financial Officer is hereby authorized to accept those proposals deemed to best meet the City's electricity needs and execute all related contracts for the provision of said electricity to City-owned properties.
Section 2: That in the absence of the Chief Financial Officer, the Director of Purchasing is authorized to take the actions described in Section 1 above.
Section 3: If any section, paragraph, clause or provision of this Resolution shall be held invalid, the invalidity thereof shall not affect any other provision of this Resolution.
Section 4: All ordinances, resolutions, motions or orders in conflict with this Resolution are hereby repealed to the extent of such conflict.