title
ADOPT A RESOLUTION TO APPROVE FINDINGS AND AWARD A THREE-YEAR AGREEMENT WITH CONSTELLATION NEWENERGY - GAS DIVISION LLC FOR THE PURCHASE OF NATURAL GAS
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution to:
1. Approve findings pursuant to Stockton Municipal Code section 3.68.070 in support of an exception to the competitive bidding process.
2. Authorize the City Manager to execute a three-year agreement with Constellation NewEnergy - Gas Division LLC to purchase natural gas.
It is also recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of the resolution.
body
Summary
The School Project for Utility Rate Reduction (SPURR) is a Joint Powers Authority (JPA) established to increase the purchasing power of public agencies to reduce costs of natural gas supplied to those agencies. For over 15 years, the City has participated in SPURR to reduce the overall cost of natural gas purchased by the Municipal Utilities Department (MUD) to produce electric power at the Regional Wastewater Control Facility’s (RWCF) Cogeneration Facility. This facility can generate enough electricity to meet nearly half of the daily power demand.
On October 19, 2023, SPURR gave notice that the JPA would no longer provide natural gas commodity retail services. SPURR would instead use a competitive solicitation process to source retail service providers to their participants for consistency with their other programs. In the summer of 2023, SPURR conducted a Request for Qualifications and Proposals (RFQP) for core (small usage) accounts. The RFQP for non-core (large usage) accounts was conducted in the spring of 2024. As a result of this RFQP, Constellation NewEnergy - Gas Division LLC (Constellation) was recommended on May 10, 2024.
Staff recommend entering into a three-year agreement with Constellation for the purchase of natural gas at MUD. The agreement includes several documents for execution: a Master Retail Natural Gas Supply Agreement (Exhibit 1 to the Resolution), three (3) PG&E enrollment forms listing Constellation as our noncore provider (Exhibit 2 to the Resolution), and a Natural Gas Intelligence (NGI) Index indicative transaction confirmation for the period of the agreement (Exhibit 3 to the Resolution).
DISCUSSION
Background
In 2006, the City Council approved Resolution 06-0320 authorizing natural gas purchases through the SPURR Program, a Joint Powers Authority established to increase the purchasing power of public agencies to reduce costs of natural gas. The City has participated in SPURR, which on average has reduced the overall cost of natural gas purchased by about 20 percent for use at the Regional Wastewater Control Facility’s (RWCF) Cogeneration Facility.
Over the past five years, MUD Wastewater Division has spent the following amounts on natural gas including the required Pacific Gas and Electric transportation charge:
|
Fiscal Year |
SPURR |
|
2020 |
$32,652 |
|
2021 |
$12,714 |
|
2022 |
$82,229 |
|
2023 |
$345,704 |
|
2024 |
$131,440 |
The year-to-year variations in natural gas purchased from Pacific Gas and Electric was dependent on the amount of anerobic digester gas generated and used during the year.
On October 19, 2023, SPURR notified staff that they would no longer provide natural gas commodity retail services. To align with their other programs, SPURR would instead use a competitive solicitation process to source retail service providers to their participants. In the summer of 2023, SPURR conducted a Request for Qualifications and Proposals (RFQP) for core (small usage) accounts. The RFQP for non-core (large usage) accounts was conducted in the spring of 2024. As a result of this RFQP, Constellation was recommended on May 10, 2024.
Present Situation
Over the past three years, the RWCF used between 95,000 to 150,000 therms (thm) of natural gas per year. This amount is more than in prior years when the usage averaged 75,000 per month. By purchasing natural gas from Constellation, the City will realize cost savings since the rates are expected to remain stable and there is no surcharge or tariff.
To transfer purchasing authority to Constellation as the noncore natural gas provider, several documents need to be executed. These documents include a Master Retail Natural Gas Supply Agreement, three (3) PG&E enrollment forms listing Constellation as our noncore provider, and a Natural Gas Intelligence (NGI) Index indicative transaction confirmation for the period of the agreement. To continue receiving a discounted price on natural gas purchases, staff recommends entering into a three-year agreement with Constellation NewEnergy-Gas Division LLC.
SPURR will continue to conduct RFQPs for natural gas service providers to source retail service providers for their program participants.
Findings
Stockton Municipal Code Section 3.68.070 provides an exception to the competitive bidding requirements when the City Council approves findings that support and justify the purchase through a cooperative purchasing agreement.
Proposed findings to support this purchase are:
1. SPURR conducted public solicitation for a Request for Qualification and Proposals to determine who to recommend as a provider to their participants.
2. Procurement staff reviewed the RFQP and determined it meets the City’s purchasing requirements.
3. Constellation natural gas customers are offered several pricing plans including a balanced portfolio, which is similar to the terms that were offered by SPURR, a joint powers authority that conducts complex procurements for schools, colleges, and other public agencies.
4. The purchase of natural gas through Pacific Gas and Electric (PG&E) involves volatile pricing scenarios.
5. By purchasing natural gas through Constellation, the City will realize a stable price.
FINANCIAL SUMMARY
The charges for natural gas are paid for by the City and charged to Wastewater Treatment Plant Natural Gas account in the same manner as charges for other PG&E utility services.
There is no impact to the General Fund, or any other unrestricted funds, from this action.