Decision details

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