HomeMy WebLinkAbout4/11/2002 - STAFF REPORTS DATE: April 11, 2002
TO: City Council
FROM: Director of Procurement and Contracting and
Director of Parks, Recreation&Facilities
AUTHORIZE CITY MANAGER TO ENTER INTO PRICING AGREEMENT FOR PURCHASE
OF NATURAL GAS
RECOMMENDATION:
That City Council authorize the City Manager to enter into a pricing agreement(purchase order)for
purchase of natural gas for use at the City's cogeneration plants at a unit price not to exceed $5.00
per decatherm; term of agreement not to exceed 12 months beginning September 1, 2002.
SUMMARY:
On March 6, 2002, City Council approved a minute order authorizing the City Manager to lock in
a firm fixed price for natural gas for a term not to exceed 12 months and at a price not to exceed
$3.50 per decatherm. The day following the City Council action,the market for 100%fixed pricing
for the desired length of time exceeded the$3.50 maximum authorization and has not returned to
that level, or below, since. In light of world events, staff requests authorization to lock in pricing
at a higher level as a risk management tool. Current pricing is available in a range between $3.80
and$4.00 per decatherm. Pricing changes daily so it is impossible to bring a specific award number
to City Council for approval. Today's quoted pricing expires at 5:00 p.m.
BACKGROUND
Two entities, Occidental Energy Marketing, Inc. and Sierra Southwest Cooperative Services are
willing to supply a firm fixed price for 100% of the gas use for the City's two cogeneration plants.
Their pricing structure provides flexibility in usage for 20% over or under the City's historical use
baseline with no penalty. TXU,Sempra and California Utility Buyers(CUB)are willing to provide
firm fixed pricing for 80%of the City's historical baseline. Any additional usage would be at index
pricing. Coral Energy(Shell)declined to quote and Enron was not contacted. Because world events
could precipitate a sudden escalation of pricing, staff is requesting latitude for the City Manager to
enter into an agreement with any of the gas marketers authorized to sell on the Southern California
Gas System offering a pricing structure serving the best interests of the City.
The gas purchase will be funded from the Energy Fund whose costs are recovered via charges to user
departments.
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OTT NTMESELL HAROLD E. GOOD
irector of Parks, Recreation &Facilities Director of Procurement & Contracting
.APPROVED:
City Manager
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MINUTE ORDER NO.
AUTHORIZING THE CITY MANAGER TO ENTER
INTO PRICING,AGREEMENT FOR PURCHASE OF
NATURAL GAS. TERM OF AGREEMENT NOT TO
EXCEED 12 MONTHS BEGINNING SEPTEMBER 1,
2002, AT A UNIT PRICE NOT TO EXCEED $5.00
PER DECATHERM.
I HEREBY CERTIFY that this Minute Order authorizing City Manager to enter
into a pricing agreement for purchase of natural gas for a term not to exceed 12
months beginning September 1, 2002, at a unit price not to exceed $5.00 per
decatherm was adopted by the City Council of the City of Palm Springs,
California in a meeting thereof held on the I I" of April, 2002.
PATRICIA A. SANDERS
City Clerk
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