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Staff Report
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Report To: General Government Committee
Date of Meeting: February 16, 2021 Report Number: FSD-008-21
Submitted By: Trevor Pinn, Director of Financial Services
Reviewed By: Andrew C. Allison, CAO By-law Number:
File Number: Resolution#: GG-195-21
Report Subject: 2020 Annual Commodity Hedging
Recommendation:
1. That Report FSD-008-21 be received for information.
Municipality of Clarington
Report FSD-008-21
Page 2
Report Overview
This report complies with the annual reporting requirements to report to Council the status of
the existing commodity hedging agreements.
1. Background
1.1 Under the Ontario Regulation 635/05, the Treasurer is required to report annually to
Council the status of existing commodity hedging agreements, including a comparison
of the expected results to actual of using the agreements and confirmation that they
comply with the Municipality's policies and goals.
1.2 As required by the Municipal Act, 2001, Council adopted a Commodity Price Hedging
Agreement Statement of Policies and Goals in report COD-054-08, on Monday October
6, 2008. In this statement of policies and goals, the responsibilities are delegated as
follows: The Director of Financial Services/Treasurer or designate is responsible for the
financial administrative matters pertaining to commodity price hedging. The Director of
Corporate Services or designate is responsible for the procurement and contractual
administrative matters pertaining to commodity price hedging.
1.3 With the reorganization of the Municipality, purchasing has been moved to the Director
of Financial Services/Treasurer. In 2021, staff will be bringing a report to Council to
revise the hedging policy to reflect the administrative change throughout the
organization.
2. Comments
2.1 Through the Co-operative Buyers Group, Request for Proposal issued by the Region of
Durham and approved through Report COD-003-20, the Municipality has an existing
energy consulting agreement with Blackstone Energy Services Inc., Toronto, for the
provision of consulting and related services for the supply of natural gas. Blackstone
acts as an independent agent of the Municipality of Clarington to execute direct
purchase agreements (subject to the approval of the Corporate Service's Department).
2.2 The Municipality's energy consumption trends have been studied since 2008. Detailed
budget estimates are made based on these consumption trends and pricing projections
of the various utilities including natural gas for the Municipality's operating departments.
This information together with the procurement strategy aimed at reducing risk and
stabilizing cost continues to focus on the need for a stable natural gas supply contract.
2.3 Blackstone Energy Services Inc. on behalf of the Municipality of Clarington is authorized
to enter into fixed priced natural gas agreements as required, considering market
conditions at any given time. Previously natural gas was supplied from two pools —
Municipality of Clarington
Report FSD-008-21
Page 3
Dawn (southwestern Ontario) and Empress (western Canada). All of the Municipality's
natural gas is now supplied from the Dawn hub.
2.4 The Municipality did not have any hedging contracts in fiscal 2020. At the date of this
report the Municipality has not entered any contracts for fiscal 2021, staff continue to
monitor.
2.5 Staff receive regular market intelligence and analysis from Blackstone Energy Services
on the natural gas market. With the information received from Blackstone, the
Municipality is able to proactively respond to the market conditions to ensure a secure
supply source and cost certainty where determined to be prudent.
2.6 To date the Municipality has not hedged electricity. The structure of electricity hedging
is different from natural gas. A significant portion of the large electricity accounts is the
Global Adjustment. Hedging of the electricity commodity does not reduce the Global
Adjustment charges. Electricity hedging could be explored in the future, but it is not
anticipated that the Municipality would be hedging electricity in 2021.
3. Concurrence
Not Applicable.
4. Conclusion
It is respectfully recommended that this annual commodity hedging report be received
for information in compliance with Ontario Regulation 635/05 of the Municipal Act, 2001.
Staff Contact: Trevor Pinn, CPA, CA Director of Financial Services/Treasurer, 905-623-3379
ext. 2602, tpinn@clarington.net.
Attachments:
Not Applicable
Interested Parties:
There are no interested parties to be notified of Council's decision.