HomeMy WebLinkAbout1F OCRCity Council Staff Re{Jort
DATE: March 11, 2021 CONSENT CALENDAR
SUBJECT: AUTHORIZE THE CITY MANAGER TO ENTER INTO ANNUAL
PURCHASE AGREEMENTS FOR NATURAL GAS
FROM:
BY:
SUMMARY
David H. Ready, City Manager
Maintenance & Facilities Department
Approval of this action authorizes the City Manager to enter into annual purchase
agreements for natural gas from the wholesale commodity market. The City Council has
historically authorized the City Manager to enter into purchase agreements for natural
gas, the current purchase agreement expires June 30, 2021, and it is necessary to
authorize the City Manager to enter into new purchase agreements for natural gas.
RECOMMENDATION:
1. Authorize the City Manager to enter into annual purchase agreements for natural
gas from the wholesale commodity market for an amount not to exceed $6/Dth;
2. Authorize the City Manager to execute all necessary documents.
BACKGROUND:
The City purchases natural gas to fuel the Municipal Co-Generation Plant at City Hall
that produces electricity and thermal energy (heating and cooling) for the Airport, Fire
Station No. 2, City Hall, and Police Department, as well as electricity for the City Yard.
In order to ensure the City has fuel to operate the Municipal Co-Generation Plant, it is
necessary to solicit bids from the wholesale natural gas commodity marketplace. The
natural gas prices available on the open market vary depending upon numerous hard-
to-foresee factors that affect both the structure and the duration of the pricing
agreement.
ITEMNO. .1.F
2City Council Staff Report March 11, 2021--Page 2 Purchase of Natural Gas Due to the volatility of the market, staff historically requests authorization for the City Manager to enter into a purchase agreement for supply of natural gas at a time and at a price that best serves the City's interests. The current natural gas purchase agreement expires June 30, 2021, and it is necessary to authorize the City Mana·ger to enter into future purchase agreements for natural gas. STAFF ANALYSIS: Since the federal government de-regulated the wellhead price of natural gas in the mid-1980's, market forces (of supply and demand) now set natural gas prices. Prices often change direction for no apparent reason, often due to weather changes, the economy, hurricanes (which can temporarily affect gas production in the Gulf of Mexico), oil prices, and more recently, expected demand for gas-fired electric generation, which is highly dependent on actual or forecasted Summer weather. Historical natural gas price trends have shown lower contract prices in the late fall months, however, recent solicitations have reflected price increases from hurricane season causing damage or destroyed natural gas and petroleum refineries located in the Gulf Coast, resulting in price spikes. Under the City Council's prior authorization, the City Manager entered into the following purchase agreements for natural gas: • 12/1/12 -11/30/13 = $4.32 fixed per Dekatherm (0th) • 12/1 /13 -11 /30/14 = $4.14 fixed/0th • 12/1 /14 -11 /30/15 = $4.39 fixed/0th • 12/1 /15 -11 /30/16 = $2.83 fixed/0th • 12/1/16-11/30/17 = $3.36 fixed/0th • 12/1 /17 -11 /30/18 = $3.18 fixed/0th • 12/1/18 -11/30/19 = $5.82 fixed/0th • 12/1/19 -11/30/20 = $3.06 fixed/0th • 12/1/20-12/31/20 = $5.08 index/0th • 01/1/21 -01/31/21 = $4.83 index/0th • 02/1/21 -02/28/21 = $3.72 index/0th· Recently, current natural gas price have dropped to $3.28/Dth. An unusually strong winter season for natural gas, combined with the sudden decrease in natural gas production led to large price increases at many natural gas hubs in mid-February. The cascading effects of the supply/demand imbalance resulted in upward price pressures in demand markets less affected by the recent cold weather. For example, the price at SoCal Citygate, which sources much of its natural gas from western Texas, rose to an all-time high of $144 on February 13, through February 17, before it began its decline to $3.28/Dth.
3City Council Staff Report March 11, 2021--Page 3 Purchase of Natural Gas It is unknown how much higher or lower pricing will be affected in the wholesale natural gas commodity marketplace. During solicitations for natural pricing to the extent pricing exceeds the budget allocation of $6/Dth, the City Manager will meet with the City Council Budget Subcommittee to advise them of the fiscal impact of such higher pricing. Due to the volatile nature of the natural gas market it is impractical, if not impossible, to bring a specific contract amount to the City Council for approval. Price quotes, when delivered, expire within minutes as the market responds to daily inputs. As a result, staff is requesting that the City Manager be authorized to lock in pricing that is favorable to the City as a result of monitoring the market on a day-to-day basis thru the bidding process. It is further recommended that City Council authorizes the City Manager to enter into annual purchase agreements for natural gas from the wholesale commodity market, for an amount not to exceed $6/Dth. ENVIRONMENTAL IMPACT: Section 21084 of the California Public Resources Code requires Guidelines for Implementation of the California Environmental Quality Act ("CEQA"). The Guidelines are required to include a list of classes of projects which have been determined not to have a significant effect on the environment and which are exempt from the provisions of CEQA. In response to that mandate, the Secretary for Resources identified classes of projects that do not have a significant effect on the environment, and are declared to be categorically exempt from the requirement for the preparation of environmental documents. In accordance with Section 15301 "Existing Facilities," Class 1 projects consist of the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public structures, facilities, mechanical equipment involving negligible or no expansion of use beyond that existing at the time of the lead agency's determination. Therefore, authorizing the purchase of natural gas to operate the Municipal Co-Generation Plant is considered categorically exempt from CEQA. FISCAL IMPACT: The cost of natural gas is budgeted in the Energy Fund at $6 per dekatherm (0th) in the current 2020/2021 fiscal year, and recommended for the upcoming 2021 /2022 fiscal year budget. The current contract price for natural gas is $3. 72/Dth. To the extent natural gas pricing exceeds $6/Dth, the City Manager will forward such requests to City Council for additional approval authorization.
4City Council Staff Report March 11 , 2021--Page 4 Purchase of Natural Gas SUBMITTED: tenance & Facilities • APPROVED: David H. Ready, Esq. . City Manager Attachments: 1. Sample Request for Natural Gas Pricing Marcus L. Fuller, MPA, P.E., P.L.S. Assistant City Manager/City Engineer
5CITY OF PALM SPRINGS, CA SPRING 2021 REQUEST FOR NATURAL GAS PRICING AND RELATED INFORMATION Background: The City of Palm Springs, California operates one co-generation plant to produce electricity and to meet its thermal production needs. The City's current contract for supply of natural gas expires on June 30, 2021. The City is now prepared to receive pricing and other related information for our next contract period, commencing July 1, 2021 for the projected needs of the Municipal Cogeneration Plant. Historic Usage: Although the City's natural gas supply requirements are traditionally very stable, there has been some fluctuation in gas usage in prior years due to conducting a series of tests or downtime for maintenance/repairs and engine replacement. The following table represents the actual amounts of natural gas in dekatherms that the City purchased during 2020 for the Municipal Plant. Actual ~ :usage Core · Non-Core -, ·-~uni~f p~I P_l~nt 2020 13990757 12886051 Jan-20 118 6,989 7,108 Feb-20 118 6,859 6,978 Mar-20 101 6,947 7,048 Apr-20 852 5,818 6,670 May-20 1,695 6,980 8,675 Jun-20 2,236 6,650 8,886 Jul-20 2,553 2,218 4,771 Aug-20 1,803 4,810 6,613 Sep-20 1,500 7,002 8,501 Oct-20 7,417 1,168 8,585 Nov-20 293 6,160 6,453 Dec-20 19 5,275 5,293 Plant Total (Dth): 85,581 Projected Usage for next 12 month period (July 2021 thru June 2022): The projected amount of natural gas in dekatherms that the City will require during the next 12 month period is as follows: (These estimated amounts should be used for the basis of your quotation, however there may be maintenance downtime or other factors that could impact these projections) 1
6R:rojected Usage • : . ..,, . Non-· July 202.1 :• ·June , . :f Core·: .·core Municipal -2022 13~90757 12886051 Plant :,, Jul-21 119 6,931 7,050 AuQ-21 77 4,823 4,900 Sep-21 479 6,421 6,900 Oct-21 1,278 6,422 7,700 Nov-21 1,970 6,830 8,800 Dec-21 2,384 4,416 6,800 Jan-22 2,181 3,519 5,700 Feb-22 1,661 5,939 7,600 Mar-22 4,436 4,064 8,500 Apr-22 3,845 3,655 7,500 May-22 156 5,744 5,900 Jun-22 69 6,131 6,200 Plant Total (0th): 83,550 Request for Price Quotations: Historically the City has procured gas both on a fixed price contract basis, as well as using a combination of fixed price (75%) and market-based index pricing (25%) as a cost-savings measure. Our gas is purchased and billed on a monthly basis, not in one tranche. Application for payment shall be submitted by the twentieth day of each month, the supplier shall submit to the City an invoice for services provided during the previous month. For purposes of the RFP herein, the City seeks to enter into a 12 month contract term commencing July 1, 2021. The intent is to remain in the selected supplier's Contracted Marketer pool for the entire term. The City is hereby requesting price quotations in a form that is ready for execution by the City on the basis identified below. For the fixed price options, the City is seeking contract pricing that allows for the City to consume as little as 90% of the contracted amount or as much as 110% of the contracted amount without penalty. This requirement is non-negotiable and pricing that does not reflect this 10% +/-bandwidth shall not be accepted. Delivery Point: Socal Citygate Price Structure: Option 1A: Option 1 B: Option 2: Firm Fixed price for a 12 month period commencing July 1, 2021 Firm Fixed price (75%) and market-index price (25%) for a 12 month period commencing July 1, 2021; State the monthly NGI Index Price for Socal Citygate + your Differential = Total current Index price/dth 12 Month Contract Term $ ____ /_dt_h (Estimated 83,550 0TH) NOTE: All firms submitting pricing in response to this RFP must be familiar with, fully understand, and be compliant with all So Cal Gas delivery requirements, including Backbone Transportation Service (BTS). The City requires that the pricing offered in 2
7response to this RFP be BTS tariff "neutral", such that any BTS tariff per 0th shall be charged according to the filed tariff rates at the time of delivery. Therefore, the fixed pricing requested MAY BE OFFERED TO THE CITY AS EITHER SO CAL BORDER OR AS CITYGATE (you may not offer both pricing options*), AS LONG AS YOU DEFINE WHICH PRICING YOU ARE OFFERING AND THE BTS TARIFF IS CLEARLY IDENTIFIED ("un-bundled"). For example, if you offer Border pricing, give your per/0th price and provide what the BTS tariff/0th is that would be added, so that we may determine the total cost per/0th. If you offer Citygate pricing, give us the total per/0th price and identify what portion of that total price is the BTS tariff. Gas deliveries priced on volumes used above or below the applicable swing tolerance of +/-10% will be priced according to the posted NGI So Cal Border or Citygate index price, to be consistent with the pricing you offer above. The City will not enter into additional utility contracts nor will the City participate in any on-line bidding for BTS capacity -this must be handled by the supplier. Beginning day, Month, 2021 the City would like to start receiving price quotations twice per week, on Tuesdays and Thursdays, based on the price structure options identified above. Interested firms shall email their price quotations to the City by no later than 10:00 A.M., PST. The City desires to have ONLY 1 point of contact with each supplier, and will only accept 1 pricing proposal (email) from each supplier. We will not accept multiple representatives of natural gas suppliers submitting separate email pricing proposals. Also, it is IMPORTANT to note that our RFP stipulates that the pricing you submit to us MUST be 11ready for execution11• To further clarify that, pricing MUST be 11executable11 for no less than 5 hours after receipt by the City. Pricing, once submitted, is FIRM. Pricing may NOT be 11refreshed11 or 11updated11 for 5 hours once submitted, and at NO TIME shall it be "refreshed" or "updated" if the City accepts the pricing via electronic email confirmation, or prior to execution of the contract. The City will not accept "contingent" pricing offers. Failure or refusal to offer the 10% tolerance as per the RFP will result in rejection of your pricing and removal from the process. Also, the City will not provide 11daily11 historical information for the purposes of this RFP. Quotations are to be sent via email to EACH of the following 4 email addresses: Leigh.Gileno@palmspringsca.gov tabitha.richards@palmspringsca.gov staci.schafer@palmspringsca.gov marcus.fuller@palmspringsca.gov Required Documents to be submitted: Each firm responding to this RFP must send via email to the four (4) email addresses listed above an electronic (pdf) file copy of the following required documents: • Sample Master Natural Gas Sales Contract • Sample Master Services Contract-Transportation Services Addendum (OCC) • Statement and evidence indicating financial resources available to execute and deliver the natural gas in the amounts projected in this RFP • References, including current name and phone number for each, of no less than 5 customers with natural gas supply needs that are similar in size and scope to this RFP • Price Structure Page (Attachment "A") • Non Conflict of Interest and Non-Discrimination Form (Attachment "B") • Business Disclosure Form (Attachment "C") 3
8Failure to provide the above documents may deem your submission of pricing as non-responsive. The City reserves the right to make such investigations as it deems necessary to determine the ability of the offerer to perform the contract and the offerer shall furnish to the City all such information and data for this purpose as the City may request. The City reserves the right to reject any submittal if the evidence submitted by, or investigation of such, offerer fails to satisfy the City that such offerer is properly qualified to carry out the obligations of the contract and to complete the work contemplated therein. Market Analysis: To ensure that the City makes the best possible decision in its purchase of natural gas for the next contract period, the City is requesting each firm that submits a price quotation to also include a weekly natural gas price forecast and market analysis. At a minimum this forecast and market analysis should include, but is not limited to: • market trends; • timing of major market turning points; • seasonal probability analysis; • natural gas storage summary; • projected outlook for natural gas prices; and • other factors that could affect natural gas pricing in the foreseeable future. The weekly price forecast and market analysis should be provided to the City every Monday until the City purchases natural gas. Questions: If you have any questions please do not hesitate to contact Leigh Gileno, Procurement and Contracting Manager, Acting for the City of Palm Springs via email at Leigh.Gileno@palmspringsca.gov *Note: In the interest of public health and safety, City Hall offices are closed to the public until further notice. City operations will continue during this time via email and telephone. City Hall office hours are: Monday -Thursday, 8:00 AM to 6:00 PM, PST. City Hall is closed on Fridays. Official Agency Name: City of Palm Springs, CA Address: 3200 East Tahquitz Canyon Way, Palm Springs, CA, 92262 Dun & Bradstreet# 072522006 {under Municipal Governments) Federal ID# 95-6000757 4
9ATTACHMENT "A" Natural Gas Price Structure Spring 2021 -City of Palm Springs Estimate: 83,550 Dekatherms 12 month term. Option 1A: 10% Bandwidth Option 18: 10% Bandwidth Option 2: 10% Bandwidth Supplier: Representative: Submittal: Firm Fixed price for a 12 month period commencing July 1, 2021. $ /0th -----Fixed $ /0th $ /0th incremental decremental Firm Fixed price (75%) and market-index price (25%) for a 12 month period commencing July 1, 2021 $ /0th $ /0th Fixed (75%) Index (25%) $ /0th $ /0th incremental decremental State the monthly NGI Index Price for Socal Citygate + your Differential = Total current Index price/dth $ /0th + Monthly NGI Index Price (Socal Citygate) $ /0th Differential = $ /0th $ /0th $ /0th incremental decremental Supplier Name Name and Title Date Time 5
10ATTACHMENT "B" *THIS FORM MUST BE COMPLETED AND SUBMITTED WITH YOUR BID CITY OF PALM SPRINGS, CA CONFLICT OF INTEREST AND NON-DISCRIMINATION CERTIFICATION Conflict of Interest. Bidder acknowledges that no officer or employee of the City has or shall have any direct or indirect financial interest in this Agreement nor shall Bidder enter into any agreement of any kind with any such officer or employee during the term of this Agreement and for one year thereafter. Bidder warrants that Bidder has not paid or given, and will not pay or give, any third party any money or other consideration in exchange for obtaining this Agreement. Covenant Against Discrimination. In connection with its performance under this Agreement, Bidder shall not discriminate against any employee or applicant for employment because of actual or perceived race, religion, color, sex, age, marital status, ancestry, national origin (i.e., place of origin, immigration status, cultural or linguistic characteristics, or ethnicity), sexual orientation, gender identity, gender expression, physical or mental disability, or medical condition (each a "prohibited basis"). Bidder shall ensure that applicants are employed, and that employees are treated during their employment, without regard to any prohibited basis. As a condition precedent to City's lawful capacity to enter this Agreement, and in executing this Agreement, Bidder certifies that its actions and omissions hereunder shall not incorporate any discrimination arising from or related to any prohibited basis in any Bidder activity, including but not limited to the following: employment, upgrading, demotion or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship; and further, that Bidder is in full compliance with the provisions of Palm Springs Municipal Code Section 7.09.040, including without limitation the provision of benefits, relating to non-discrimination in city contracting. NAME OF BIDDERNENDOR: ______________ _ NAME and TITLE of Authorized Representative: (Print) ________________________ _ Signature and Date of Authorized Representative: (Sign) ________________ (Date) _____ _ 6
11Who Must File? ATTACHMENT "C" CITY OF PALM SPRINGS PUBLIC INTEGRITY DISCLOSURE (INSTRUCTIONS FOR APPLICANTS) Applicants that are NOT a natural person or group of natural people that will be identified on the application, and seek a City approval determined by a vote of City officials. Examples include corporations, limited liability companies, trusts, etc. that seek a City Council approval, or an approval by one of the City's board or commissions. Why Must I File? The City of Palm Springs Public Integrity Ordinance advances transparency in municipal government and assists public officials in avoiding conflicts of interest. The City's Public Integrity Ordinance, codified in Chapter 2.60 of the municipal code, reflects the City's interest in ensuring that companies (and other legal entities that are not natural people) doing business in the community are transparent and make disclosure as to their ownership and management, and further that those companies disclose the identity of any person, with an ownership interest worth two thousand dollars ($2,000) or more, who has a material financial relationship with any elected or appointed voting City official, or with the City Manager or City Attorney. Note: A material financial relationship is a relationship between someone who is an owner/investor in the applicant entity and a voting official (or the City Manager or City Attorney), which relationship includes any of the following: (1) the owner/investor and the official have done business together during the year prior to the application; (2) the official has earned income from the owner/investor during the year prior to the filing of the application; (3) the owner/investor has given the official gifts worth fifty dollars ($50) or more during the year prior to the filing of the application; or (4) the official might reasonably be anticipated to gain or lose money or a thing of value, based upon the owner/investor's interest in the applicant entity, in relation to the application's outcome. When Must I File? You must file this form with the Office of the City Clerk at the same time when you file your application for a City approval determined by a vote of City officials, whether elected or appointed. What Must I Disclose? A. The names of all natural persons who are officers, directors, members, managers, trustees, and other fiduciaries serving trusts or other types of organizations (attorneys, accountants, etc.). 7
12Note: (1) only trusts or other organizations that are not the fiduciaries, (2) if a second entity that is not a natural person serves the applicant entity (e.g., as a member of an applicant LLC), then all officers, directors, members, managers, trustees, etc., of the second entity must be disclosed). B. The names of persons owning an interest with a value of two thousand dollars ($2,000) or more who have a material financial relationship with an elected or appointed City official who will vote on the applicant's application, or with the City Manager or City Attorney. PENALTIES Falsification of information or failure to report information required to be reported may subject you to administrative action by the City. *There are some additional supplementary instructions with an example following the form should you need further clarification. 8
131. 2. 3. 4. Name of Entity PUBLIC INTEGRITY DISCLOSURE APPLICANT DISCLOSURE FORM Address of Entity (Principle Place of Business) Local or California Address (if different than #2) State where Entity is Registered with Secretary of State If other than California, is the Entity also registered in California?• Yes D No 5. Type of Entity D Corporation D Limited Liability Company D Partnership D Trust D Other (please specify) 6. Officers, Directors, Members, Managers, Trustees, Other Fiduciaries (please specify) Note: If any response is not a natural person, please identify all officers, directors, members, managers and other fiduciaries for the member, manager, trust or other entity -----------------• Officer D Director D Member D Manager [name] D General Partner D Limited Partner D Other -----------------• Officer D Director D Member D Manager [name] D General Partner D Limited Partner D Other _________________ D Officer D Director D Member D Manager [name] D General Partner D Limited Partner D Other City of Palm Springs Spring 2021 Request for Natural Gas Pricing and Related Information Page 9 of 5
147. Owners/Investors with a 5% beneficial interest in the Applicant Entity or a related entity EXAMPLE JANE DOE 50% ABC COMPANY, Inc. [name of owner/investor] [percentage of beneficial interest in entity and name of entity] A. [name of owner/investor] [percentage of beneficial interest in entity and name of entity] B. [name of owner/investor] [percentage of beneficial interest in entity and name of entity] C. [name of owner/investor] [percentage of beneficial interest in entity and name of entity] D. [name of owner/investor] [percentage of beneficial interest in entity and name of entity] E. [name of owner/investor] [percentage of beneficial interest in entity and name of entity] I DECLARE UNDER PENALTY OF PERJURY UNDER THE LAWS OF THE STATE OF CALIFORNIA THAT THE FOREGOING IS TRUE AND CORRECT. Signature of Disclosing Party, Printed Name, Title Date City of Palm Springs Spring 2021 Request for Natural Gas Pricing and Related Information Page 10 of 5
15City of Palm Springs, CA. Business Disclosure Supplementary Instructions In an effort to ensure we capture the required business entity information in accordance with the attached instructions, we provide you these supplementary instructions to clearly identify the required information, and the format the information should be provided. If you, as the applicant, are a business entity (i.e. a corporation or limited liability company), and it is also comprised of other business entities as its members or having a financial interest, all other such business entities must also be disclosed, including those entities other business entities, if any. Ultimately, the City's disclosure document (attached) requires a listing identifying all natural persons having any financial interest over 5% of the business entities (and any other business entities comprising your business entity). As an example, Applicant is: Acme Brothers, Inc., a California corporation, whose officers are: John Doe, Jill Doe, and Jay Doe, which is owned 50% by Acme Brothers, LLC, a California limited liability company, and John Doe (25% interest) and Jill Doe (25% interest). Acme Brothers, LLC, is managed by Acme Brothers 2, Inc., a California corporation, whose officers are: George Doe, Bill Doe, and Jane Doe, which is owned 100% by Acme Brothers 2, LLC, a California limited liability company, which is managed by George Doe, with George Doe and Jane Doe having 50% interest each. The full business entity disclosure in this example would resemble the following: 1. Acme Brothers, Inc., a California corporation a. Officers: John Doe, Jill Doe, and Jay Doe b. Ownership: i. 50% Acme Brothers, LLC, a California limited liability company ii. 25% John Doe iii. 25% Jill Doe 2. Acme Brothers, LLC, a California limited liability company a. Managers: Acme Brothers 2, Inc., a California corporation b. Ownership: 100% Acme Brothers 2, Inc., a California corporation 3. Acme Brothers 2, Inc., a California corporation a. Officers: George Doe, Bill Doe, and Jane Doe b. Ownership: 100% Acme Brothers 2, LLC, a California limited liability company 4. Acme Brothers 2, LLC, a California limited liability company a. Managers: George Doe b. Ownership: i. 50% City of Palm Springs Spring 2021 Request for Natural Gas Pricing and Related Information Page 11 of 5