TRANSMITTAL LETTER FOR BOARD MEETING OF APRIL 9, 2015
COMMITTEE ON PROCUREMENT
Mr. David St. Pierre, Executive Director
Title
Authorization to enter into an agreement with a successful Proposer(s) for the Request for Proposal (RFP) 15-RFP-10, Procurement of Natural Gas, Accounts 101-66000, 67000, 68000, 69000-612160
Body
Dear Sir:
At the February 17, 2011 Board Meeting, the Board of Commissioners was notified via a report on the use of a reverse auction provider for energy procurement and management services.
At the April 7, 2011 Board Meeting, authorization was approved to enter into an agreement for Contract 10-RFP-20, Energy Procurement and Management Services to Perform Real Time Reverse Energy Auctions, with World Energy Solutions, Inc. (WES) for the District for a period of five years.
Approval is requested to authorize the Director of Procurement and Materials Management to accept price offers from Proposers who participate in the real time reverse energy auction using the WES auction platform.
The estimated cost for this RFP is $7,200,000.00. The estimated expenditures are $1,200,000.00 for 2015, $2,400,000.00 for 2016, $2,400,000.00 for 2017, and $1,200,000.00 for 2018. Over the past five years, 2010 through 2014, the District has spent an average of $2,079,944.40 annually; the lowest annual cost has been $1,381,851.00 (2012) while the highest annual cost has been $3,668,069.00 (2014).
The District intends to award a contract(s) for the procurement of natural gas for the years 2015, 2016, 2017, and 2018 on the basis of the technically acceptable proposal(s) that will result in the best value for each pricing group included in the reverse auction to take place in the near future. Technically acceptable proposals will be those proposals that meet the qualifications and requirements contained in 15-RFP-10, Procurement of Natural Gas. These Proposers will be invited to participate in the online reverse auction for natural gas, and Proposers will be allowed to offer and re-offer pricing until the close of the auction time for each pricing group and accompanying contract term period.
The District will be requesting pricing for two different models, a firm fixed price and an index-based price. If the District accepts a price under the fixed price model, the District will pay the same rate for all natural gas purchased under the agreement throughout the duration of the term of the agreement. The pricing for this model will include the natural gas commodity as well as other ancillary costs such as storage and management, transportation, pipeline losses, pipeline capacity, all applicable royalties and taxes, any additional contractor's costs, and supplier margin. If the District accepts a price under the index-based model, the natural gas commodity price will rise and fall with the market while the ancillary costs will remain fixed. Under both pricing models, certain ancillary costs that are fixed on the day of award may change as a result of regulatory action in the future.
The pricing requested during the auction will only represent a portion of the costs incurred by the District to purchase natural gas, which represent the costs to deliver the natural gas to the citygate. The District will also be responsible for costs to be paid directly to the Local Distribution Company (LDC), which delivers the natural gas from the citygate to the District's facilities.
The Proposer(s) will agree to hold their prices in the auction for a certain period of time (i.e., two or three hours) after the online auction is closed. During this period of time, the District needs to select the best value price offer(s) submitted in the auction which meets the needs of the District.
District staff and WES will review the groups' pricing received, and the District will select the Proposer(s) who provided the best value price submitted to lock in prices and execute an agreement with the successful Proposer(s).
The Affirmative Action Interim Ordinance Appendix D and the Multi-Project Labor Agreement will not be included in 15-RFP-10 because it is primarily a furnish and deliver contract.
Therefore, it is requested that the Board of Commissioners authorize the Director of Procurement and Materials Management to enter into an agreement with a successful Proposer(s) to supply natural gas to the District, subject to appropriation, at a maximum price of $5.00 per dtherm under the fixed price option or for an indexed price providing the best value price offer submitted which meets the District's needs on the date of the auction. If an indexed price is chosen, the price of the natural gas will fluctuate with the market while the delivery charge for the District will remain fixed for the term of the agreement, up to a maximum term of three years. In either case, certain ancillary costs may increase or decrease as a result of regulatory action throughout the term of the agreement.
A report will be submitted to the Board of Commissioners on the results of the reverse auction for natural gas.
Requested, Manju Prakash Sharma, Director of Maintenance and Operations, AQ:SO'C
Recommended, Darlene A. LoCascio, Director of Procurement and Materials Management
Respectfully Submitted, Barbara McGowan, Chairman Committee on Procurement
Disposition of this agenda item will be documented in the official Regular Board Meeting Minutes of the Board of Commissioners for April 9, 2015