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REPORT
CORPORATE SERVICES DEPARTMENT
Meeting: .GENERAL PURPOSE AND ADMINISTRATION COMMITTEE ,q /t~
Date: June 22, 2009 ~~SO/U~~'l ~~rg~7,~
.Report #: COD-043-09 File # By-law # ?~-C~f3
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Subject: AWARD OF REQUEST FOR PROPOSAL OF CO-OP RFP348-2009
FOR NATURAL GAS CONSULTING AND DIRECT PURCHASE AND
ENERGY CONSULTING SERVICES
Recommendations:
It is respectfully recommended that the General Purpose and Administrative Committee
recommend to Council the following:
THAT Report COD-043-09 be received;
THAT the proposal received from Blackstone Energy Services Inc., Toronto, to provide
natural gas consulting services and to act as an agent of the Municipality of Clarington to
execute direct purchase agreements (subject to the approval of the Corporate Services
Department) for a term of three years be accepted;
3. THAT the agreement be extended for up to a two year additional term pending
satisfactory service, pricing and agreement of the Durham Purchasing Co-operative.
4. THAT the Director of Corporate Services and the Director of Finance/ Treasurer be
authorized to sign the required Natural Gas Purchase Agreements and Master Service
Agreements required to implement and maintain this program during the term of the
agreement with Blackstone Energy Services Inc; and
5. THAT the Manager of Purchasing be authorized to enter into negotiations with
Blackstone Energy Services Inc. for the provision of electricity consulting services and to
act as an agent of the Municipality to execute direct purchase agreements for a term of
three years with an option to extend the resulting agreement for up to two additional one
year terms, provided the fee structure remains acceptable and the level of service is
satisfactory; and
REPORT NO.: COD-043-09
PAGE2
6. THAT the attached by-law marked Schedule "A" and "B" authorizing the Mayor and the
Clerk to execute the necessary Agency Agreements for gas and electricity respectively,
be approved.
Submitted by: ~-~w ~'
rie Marano, H.B.Sc., C.M.O.
Reviewed by:~y '""`~-~ ~~,
Franklin Wu,
Chief Administrative Officer
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REPORT NO.: COD-043-09 PAGE 3
BACKGROUND AND COMMENT
1.0 Background
Since 1997, the Municipality of Clarington has participated with the City of Oshawa, the Region
of Durham and the Town of Ajax by jointly calling proposals and awarding contracts for the
provision of natural gas consulting and direct purchase services. This arrangement has proven
to be beneficial by combining natural gas volume to maximize purchasing leverage and
reducing administration costs associated with each municipality inviting proposals separately.
The current agreements for these services expire on November 1, 2009. The Region of
Durham and the Municipality of Clarington have decided to invite competitive proposals for the
upcoming term (3 to 5 years) through a cooperative request for proposals (RFP) issued by the
Region of Durham Supply & Services Section.
The Municipality's current annual consumption of natural gas is approximately 1,044,000 cubic
meters, and the total combined volumes for the two agencies are approximately 8,810,000 cubic
meters annually. The estimated cost for natural gas for the period of November 2008 to
October 2009 inclusive for the Municipality of Clarington requirements is estimated at
$344,500.00 exclusive of Enbridge delivery costs. All affiliated Municipality of Clarington Hall
Boards and Arenas have been invited to participate in this contract.
2.0 Request for Co-op Proaosal RFP 348-2009
Request for Proposals RFP 348-2009 was prepared by the Region of Durham, issued on April
28, 2009, and closed on May 26, 2009, with the following 3 responses received:
Bidder Estimated
Annual Cost
Blackstone Energy Services Inc.
Toronto, ON $1,180.00
ECNG Energy L.P.,
Burlin ton, ON $2,756.16
Local Authority Services Limited
Toronto, ON $3,934.84
REPORT NO.: COD-043A9
PAGE4
Representatives from the two participating agencies scored each proposal- based on the
following criteria then met to discuss and finally achieve a consensus on the ranking of each
respondent:
- Understanding of the RFP requirements
- Methodology and Management Plan
- Experience, Capabilities, Staffing Qualifications and Price Performance Track
Record
- Financial Conditions, Capacity and Integrity
- Proposed Fees
- Client Reference Feedback (Short Listed Respondents only)
- Respondent Interviews
The scores were then compiled with the proposal from Blackstone Energy Services Inc.
receiving the highest score overall based on the requirements of this RFP. Blackstone Energy
Services Inc. provided the most comprehensive proposal overall, which includes the following
services:
- Providing weekly market analysis of natural gas supply, commodity pricing and
forecasts;
- Performing all communication with Enbridge on behalf of the agencies
concerning billing and inventory balancing, and updating lists of locations etc.;
- Ensuring that facilities are allocated to the correct rate plan and ensuring that all
available discounts are secured; '
- Ensuring that a continuous supply of natural gas is supplied to meet the needs of
the municipalities through direct purchase agreements;
- Utilizing the purchasing leverage of the combined agencies' volumes, as well as
providing market analysis and forecasting to maximize price value.
- Reviewing and providing recommendations with respect to direct purchase
agreements for signature by Director of Corporate Services and the Director of
Finance /Treasurer in accordance with the municipalities Hedging Agreement,
REPORT NO.: COD-043-09 PAGE 5
- Monitoring balances of natural gas under contract and minimizing potential risks
of imbalances through buy/sell transactions and pooled inventory.
- Providing financial reports to verify transactions, price reconciliation and
inventory balances.
Blackstone Energy Services Inc. proposed fees for the Municipality of Clarington are
approximately $1,180.00 per year and will be held firm for the first 3 to 5 years of the contract.
(These are considered minimal when compared with the annual value of natural gas purchases
at approximately $344,500.00). For information, the other respondents were in excess of
double the cost.
Note that Blackstone Energy Service Inc. has performed these services acceptably for the
Municipality since September of 2008.
3.0 Budsret Impact
Due to the volatile nature of natural gas commodity pricing, it is not possible to forecast with
accuracy the impact of natural gas pricing on the 2010 Budgets. However, based on current
commodity pricing, market conditions and future supply forecasts it is likely that natural gas
prices will increase or fluctuate but generally result in an increase. The impact of price
escalations for future years may be minimized through fixed price/volume purchases of natural
gas. The Municipality may lock in all, or a portion of the total natural gas requirements under this
type of agreement. Opportunities for fixed price/volume purchases will be monitored on an
ongoing basis by the consultant. Should conditions warrant the Municipality of Clarington will be
able to execute a supply agreement to secure long term pricing stability.
4.0 Conclusion -Natural Gas
It is therefore recommended that the proposal received from Blackstone Energy Services Inc.,
Toronto, to provide natural gas consulting services for the Municipality of Clarington for a
maximum term of five years be accepted.
The Regional Municipality of Durham has also recommended Blackstone Energy Services Inc.
for their requirements and they are presenting a similar report to their Council. The award of a
contract by the Municipality of Clarington is not conditional on the Region's acceptance and
award of a similar contract to Blackstone Energy Services Inc.
REPORT NO.: COD-043-09 PAGE 6
5.0 Electricity Requirements:
During recent months staff has been exploring the options available for the purchase of
electricity to meet our requirements and also to prepare for the move from the Regulated Rate
Plan scheduled for November 2009 as required by legislation. Essentially this will move
everyone to the market price where electricity will be charged by the minute and the time of
consumption will impact the price. By moving to an energy consultant where direct buys can be
made there is an opportunity to make significant savings in energy costs, particularly in the area
of street lighting. Some preliminary discussions have been held with Blackstone Energy
Services and Local Authority Services Limited to obtain an estimate of costs to provide the
consulting services. As with the natural gas consulting services the difference in costs for the
electrical consulting services provided by the two firms is significant with Blackstone Energy
Services indicating a lower cost. Essentially, it is estimated that the annual cost for the
electricity consulting will be in the area of two to three times the cost for natural gas consulting.
In view of the foregoing and in light of our experience in dealing with Blackstone Energy
Services Inc. staff is seeking approval to proceed with negotiations with Blackstone for the
purpose of establishing an agreement for the provision of electricity consulting services.
In the expectation of successful negotiations staff are recommending that the Mayor and Clerk
be authorized to execute the required by-law authorizing the execution of the standard agency
agreement and that the Director of Corporate Services and the Director of Finance be
authorized to sign transaction agreements as set out in the Municipality's Hedging Agreement.
This report has been reviewed for recommendation by the Purchasing Manager and circulated
as follows:
Concurrence: Director of Operations
Director of Community Services
Attachments:
Attachment 1 - Schedule "A", By-law
Attachment 2 - Schedule "B", By-law
SCHEDULE"A"
THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON
BY-LAW 2009-
Being a By-law to authorize a contract between the
Corporation of the Municipality of Clarington and Blackstone
Energy Services Inc., Toronto, Ontario, to enter into
agreement for the direct purchase of Natural Gas.
THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON HEREBY ENACTS AS
FOLLOWS:
1. THAT the Mayor and Clerk are hereby authorized to execute, on behalf of the
Corporation of the Municipality of Clarington and seal with the Corporation Seal, a
contract between, Blackstone Energy Services Inc., Ontario, and said Corporation;
and
2. THAT the contract attached hereto as Schedule "A" form part of this By-law.
By-law read a first and second time this day of , 2009.
By-law read a third time and finally passed this day of , 2009.
Jim Abernethy, Mayor
Patti L. Barrie, Municipal Clerk
SCHEDULE"B"
THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON
BY-LAW 2009-
Being a By-law to authorize a contract between the
Corporation of the Municipality of Clarington and Blackstone
Energy Services Inc., Toronto, Ontario, to enter into
agreement for the direct purchase of Electricity.
THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON HEREBY ENACTS AS
FOLLOWS:
1. THAT the Mayor and Clerk are hereby authorized to execute, on behalf of the
Corporation of the Municipality of Clarington and seal with the Corporation Seal, a
contract between, Blackstone Energy Services Inc., Ontario, and said Corporation;
and
2. THAT the contract attached hereto as Schedule "A" form part of this By-law.
By-law read a first and second time this day of , 2009.
By-law read a third time and finally passed this day of , 2009.
Jim Abernethy, Mayor
Patti L. Barrie, Municipal Clerk