Archived decisions

Contact: Tony Stephens, ext 6938 email: [email protected]

1. Unmetered Energy Procurement - April 2004

1.1 The present contract for the supply of £4.3 million of unmetered electrical energy over a two year period with Scottish and Southern Energy will cease at midnight on 31 March 2006.

2. Background

2.1 Competitive energy procurement has been available for the last 10 years and the County Council has made savings in excess of £1 million over this period by purchasing its energy via the competitive process, but during the last two years prices have started to rise and this trend is expected to continue for the foreseeable future.

2.2 The present supply contract provides energy from 100% green (renewable resource) energy sources. The present contract was concluded via the Central Buying Consortium (CBC) Unmetered Supply Tender in 2004. The County Council's corporate target is to purchase a minimum of 10% green energy by 2010, however with similar rates offered for brown and green energy alike in 2004 it was possible to purchase 100% green energy. The County Council would wish to continue this trend if possible. By way of explanation brown energy is generally derived from fossil fuels, such as coal, gas and oil, whilst green energy is produced from wind, gas from discontinued waste tips and some hydroelectric applications.

3. Present Market Trends

3.1 The general view is that energy rates are now on the increase, due to available generation capacity, the increase in the wholesale price of gas and selling energy directly into Europe. Energy costs are expected to continue to rise in the future, and current estimates put the expected annual increase for Hampshire in the order of 60-70%; in monetary terms by £1.2-£1.4 million for 2006/07. A recent competitive energy tender returned to one of the London Boroughs produced a price increase of approximately 110% and the rates offered were only held for two hours, after which the offered rates would be withdrawn.

3.2 It is therefore important that authority is given to be able to make quick decisions when accepting any new rates offered through e-type contracts of this nature. This is due to suppliers not making advantageous rates available for longer than a few hours at the time when tenders are opened. It is therefore proposed that the Director of Environment be given delegated authority in consultation with the Executive Member for Environment: South Hampshire and Resource Management to accept the most advantageous tender.

3.3 Bearing in mind the above, consideration should be given to the term of the contract; one option could be a fixed price two or three year contract; an alternative could be a two year contract with the option to extend for a further two years, but this would not deter price increases if rates are rising. Whichever consortium the County Council chooses to work with it will be asked to ensure rates are provided for the options set out in the recommendation.

3.4 The banding together under the CBC banner or any other recognised consortium would appear to add some weight to the rates offered, albeit that volume is not a strong issue in this type of contract. However, the fragmented way in which authorities still tend to accept offers does not mean that the lowest price wins all the business.

4. Impact Assessments

4.1 The purchase of unmetered energy seeks to obtain up to 100% green energy which has benefits to the environment in reducing green house emissions and other pollutants. There is no clear physical detriment to any member of society resulting from this process.

5. Conclusion

5.1 Given the relative ease with which the CBC contract was concluded in early 2004, it would seem reasonable to continue to use this means of procurement.

5.2 Given the County Council's corporate aim to reduce dependence on brown energy, and with the rates for green and brown energy being similar in the past, it would seem reasonable to seek an option on an up to 100% green energy rate for street lighting.

Recommendations

1. That competitive energy rates be sought via the Central Buying Consortium for the supply of unmetered energy to street lights, illuminated signs and bollards, and traffic signals for periods of up to a maximum of four years.

2. That prices should be sought for the following options:

(i) 100% brown (for comparison purpose only);

(ii) 90% brown, 10% green; and

(iii) 100% green.

3. That the Director of Environment, in conjunction with the Chief Executive, be given delegated authority, in consultation with the Executive Member for Environment: South Hampshire and Resource Management, to accept the most advantageous rates to the County Council, considering the available funding and the County Council's policy on sustainability for 10% of green electricity by 2010, and for the Chief Executive to enter into any relevant contractual arrangements.

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