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Decision details

Provision of the Councils Gas Supply

Decision status: Recommendations Approved

Decision:

6.1

The report seeks approval to award a further 1-year contract to Total Gas and Power via the Crown Commercial Services (CCS) framework for the supply of gas to the Council. There is a requirement for a corporate contract to supply natural gas for heating and hot water across the authority’s portfolio of sites as well as for some schools and academies.

 

The gas needs of these buildings are currently being supplied by Total Gas and Power Ltd and contract managed through Facilities Management and Procurement and Supply Chain Team. The contract was procured for a period of four years from 1st April 2021 to 31st March 2025.

 

To allow forward purchasing of gas to take place for the following year (2025/26), and to bring this contract in line with the electricity contract, the Council will need to extend the current arrangement for a further one year before the 15th of September 2022.

 

 

6.2

RESOLVED UNANIMOUSLY: That Strategy and Resources Policy Committee:-

 

 

1. agrees the Council commission of a further 1-year provision, for the period from 1st April 2025 to 31st March 2026 for the Council’s gas supply, as outlined in this report; and

 

2.  approves the procurement strategy and contract award of a 1-year contract to Total Gas and Power via the Crown Commercial Services (CCS) framework RM6011.

 

 

6.3

Reasons for Decision

 

 

6.3.1

The Council do not currently have expertise in energy market trading, therefore contracting through a Public Buying Organisation (PBO) such as CCS offers the Council the best value procurement route.

 

 

6.3.2

The commissioning decision taken in 2021, and the reasons provided in the decision report to use the Crown Commercial Services (CCS) framework still apply and therefore are considered to offer the best route for purchasing the Council’s gas supply.

 

 

6.3.3

To bring all future contract renewals (and council decisions) in line with the CCS framework renewal date, the next decision would be required by 15 September 2023, and every 4 years after that (15 Sept 2027, and so on), to enter the council into contract (aligned with the 4 year framework term) for a period of 4 years. 

 

 

6.4

Alternatives Considered and Rejected

 

 

6.4.1

Option 1 - Do nothing

 

Advantages:

-       There are no benefits with this option

 

Disadvantages:

 

-       The Council will be unable to continue trading under its preferred strategy until the end of the current CCS framework.

-       The Council will not be able to align both electricity and gas purchasing.

-       A continued fragmented decision-making process for the purchase of gas and electricity and consequential duplication of effort.

 

Option 2 – SCC procure directly from a supply company:

 

Advantages:

 

-       SCC able to run a fully compliant tender process to establish a supply agreement to purchase energy through various strategies including on the day spot purchasing or flexible contract. The council would tender only the known ‘fixed’ price element of the gas (this includes suppliers profit margin/fee and estimated non-commodity costs over delivery period). The commodity costs are subject to live trading which will be made with the nominated supplier.

-       Opportunity to work collaboratively with other local councils to achieve some economies of scale and potential income generation as lead authority.

-       Council avoids paying any management fees to third parties for administrating any frameworks/contracts.

-       Increased potential to maximise economic, social and environmental benefits through a Council led procurement process (by ensuring social value is captured in tender specifications and contract)

 

Disadvantages:

 

-       Requires significant expertise and knowledge to manage energy purchases in a complex market.  It requires ongoing monitoring of energy markets and relies on officers going to the market on the right time and day. These purchases will be made through the nominated supplier.

-       Limited volume of spend in comparison to PBOs who aggregate large volumes, means this is less attractive to suppliers resulting in higher prices.  

-       Time consuming and requires significant lead in time to implement the new arrangements/contracts. If contracts are not awarded in time, we may incur out of contract rates from current suppliers increasing costs.

 

 

Option 3 – SCC procure through an energy broker:

 

Advantages:

 

-       Potential to secure prices direct from suppliers by monitoring market prices. Independent energy brokers are like PBO’s but without the benefit of aggregating large Local Authority portfolios.

 

Disadvantages:

 

-       Brokers will most likely charge a fee for their service. Types of contracts include fixed (broker charges fixed fee for service), hybrid (brokers costs built into unit cost of energy) and inclusive (cost of service built into total cost of energy)

-       Smaller brokers may not have access to all supplier offerings

-       SCC would need to ensure that the arrangements have been subject to a full procurement process to ensure PCR compliance.

 

Option 4 – Continuation of the Use of The CCS Framework.

 

Advantages:

 

-       Compliant with PCR 2015.

-       The Framework centralises spend into single supply contracts aggregating demand by combining energy volumes across organisations to form one large portfolio making it more attractive for suppliers. CCS can deliver energy prices which are lower than the Council would be able to achieve on its own.

-       The risk of market volatility is reduced by opting for procurement through CCS which is also considered to represent best value for money due to economies of scale and purchasing power. CCS will optimise energy prices by purchasing in advance and ensure risk is managed and controlled by market experts.

-       Increased certainty of utility commodity costs due to forward purchasing arrangements

-       Scale of Operations – large aggregation of Public Sector energy spend

-       experienced energy staff including energy Specialists providing customer support

-       established governance arrangements in place such as committees and boards

Disadvantages:

 

-       CCS charge a small management fee for accessing their arrangements

 

 

 

 

 

Report author: Tom Smith

Publication date: 15/09/2022

Date of decision: 15/09/2022

Decided at meeting: 15/09/2022 - Strategy and Resources Policy Committee

Accompanying Documents: