R2018-58 Authorizing City Manager to Execute a Contract with AEP Energy, Inc. for Electricity Supply Services

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Item Coversheet Pagel of 2 M Financial Management DATE: 5/14/2018 MEMO: Letter to the Decatur City Council Financial Management Department 2018-05 TO: Honorable Mayor Julie Moore Wolfe and City Council FROM: Tim Gleason,City Manager Gregg D.Zientara,City Treasurer&Director of Finance SUBJECT: Electricity Supply Contract SUMMARY RECOMMENDATION: It is recommended that the City Council approve the attached resolution, which authorizes the City Manager to award an Electricity Supply Services contract. This resolution will be presented to Council at the May 21St meeting. BACKGROUND: The City purchases electricity service to"light up"city owned buildings,traffic signal lights and lampposts throughout the city. The current contract with MidAmerican Energy Services,LLc expires in October 2018. Requests for Price Proposal were sent to six(6) electricity supply companies. Four(4) suppliers expressed interest in the City business whereby the City is expecting to receive electricity supply price bids from the four(4)suppliers,including,AEP Energy Inc.,Constellation NewEnergy Inc.,Illinois Power Marketing d/b/a Homefield Energy,and MidAmerican Energy Services,LLC (current electricity and natural gas supplier).These four suppliers are among the largest electricity supply companies in the United States.They are also trusted names in the electricity supply business. Electricity supply contracts are typically of one to three-year duration.Time length variation is generally buyer driven due to buyer sentiments regarding future price expectations.Longer term contracts generally coincide with the expectation for rising electricity pricing,where shorter contracts generally result from the expectation of declining prices. Electricity is a commodity and therefore follows the price structure of the commodity market.Price quotations have a short life, price quotes must be acted upon before the close of business on the day of the release of the price quote. The four(4)suppliers,noted above,are asked to deliver a price quotation to the City Treasurer on Monday May 21,2018 before 1:00 pm CST covering 1,2 and 3 year terms.The City Treasurer will review the price quotations with the City energy advisor, CQI,Associates,Principal Richard Anderson,where the electricity supply bid will be chosen and presented to the City Manager for his consent. Upon consent of the City Manager,the City Treasurer will notify the selected supplier to lock the price pending final contract approval by the City Council. A resolution authorizing the City Manager and City Clerk to execute the supply contract will be presented to the Council for adoption at the May 21"council meeting.The Council approved contract will be executed by the City Manager and City Clerk for delivery by the City Treasurer to the selected supplier on the morning of May 22nd, 2018, securing the locked pricing of the previous days quotation. The contract price of the selected supplier will be available at the Council meeting including the price quotations from all price bids. The contract of each of the four(4)suppliers is provided in the council packet. https://decatur.novusagenda.com/AgendaWeb/CoverSheet.aspx?ItemID=1535 5/16/2018