Agenda item

Procurement of a New Contract for the Supply of Electricity and Ancillary Services

From the Cabinet, 12 March, 2024


Further to Minute 93 of Cabinet, the City Council considered a report of the Director of Regeneration and Economy, which indicated that electricity spending fluctuated due to various factors like global events affecting energy markets. The current Council’s electricity contract ends on 30 September 2024 and covered electricity for over 250 Council facilities and around 100 other places like schools.  By starting the process early, the chosen supplier could buy energy over time instead of all at once, which helped avoid sudden price increases in the market.


Since 2016, the Council had been using the Eastern Shires Purchasing Organisation (ESPO) framework to buy electricity. ESPO acted as an intermediary, allowing the Council to access wholesale markets typically only available to large buyers. While this framework had helped manage market volatility to some extent, it was not very flexible and historically had not taken full advantage of renewable energy and new market opportunities.


By partnering with E.ON as the new Strategic Energy Partner, the Council could access a customized supply arrangement that opened up opportunities to save costs and generate revenue from new energy market mechanisms. This partnership allowed the Council to tap into E.ON's expertise and resources in ways that were not possible before.


The recommended option presented the best available opportunity for the Council to minimise the costs associated with the supply of electricity. Besides potential cost savings and flexibility, this new approach also aimed to deliver more social value directly related to the Council's electricity needs.


A corresponding private report detailing commercially sensitive confidential matters was also submitted for consideration (Minute 124 below refers).


The report sought approval to enter contracts with E.ON UK PLC and its subsidiaries, Npower and E.ON Next, as part of the Strategic Energy Partnership contract procured via competitive dialogue, in compliance with Procurement Regulations 2015, signed on September 12, 2023.


In accordance with the Constitution, the report also informed Council of the decision undertaken by the Chief Executive on 19th December 2023 to exercise emergency functions to secure an immediate hedging of energy using an interim 12-month standard flex contract which would be superseded by the supply contract in the report should the recommendations be approved.


RESOLVED that Cabinet recommends that Council:


1)  Approves the proposal to enter into an electricity supply contracts pursuant to the Strategic Energy Partnership for the supply of electricity up to 31st March 2030.


2)  Delegates authority to the Director of Finance and Resources, following consultation with the Director of Regeneration and Economy and the Director of Law and Governance, to finalise the terms and conditions of the supply contract and any other legal agreements required to facilitate delivery of the electricity supply and its ancillary services.


3)  Delegates authority to the Head of Energy Services, following consultation with the Director of Regeneration and Economy, to oversee the ongoing management of the wholesale purchasing strategy during the term of the contract.


4)  Notes the exercise of the emergency functions by the Chief Executive on 19 December 2023 pursuant to Paragraph 3.8 (a) of Part 2M of the Constitution to secure an immediate hedging of energy using an interim 12-month standard flex contract.


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