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Energy Aggregation - An important lesson on gathering and documenting information needed to make decisions.


----------------- Update - 4 Sept, 2016---------------------
The resolution passed on a 5 to 3 vote.  I vetod the resolution.  Part of that process requires I let council know the reason(s).  The read ahead on the work session agenda contains the required written objections.
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The discussion on Energy Aggregation continues with the second reading of the resolution on Monday.  The plan is for council to waive the third reading and pass the resolution even though we haven't yet made sure we have all the information needed to make a decision which will save residents the most amount of money possible.  


First Point:  Council hasn't even discussed the Resolution.  There is nothing in this resolution which guaranties our residents will get a good deal or shows council is ready to walk away if we don't.

Second:  We have only seen the performance history of two of the four companies and council isn't going to hire the one with a record of getting the best savings.

Third:  Staff originally told us a performance history couldn't be constructed so they based their recommendation on
17 items.  Looking closer though we see the note at the bottom of the recommendation tells us the other companies also perform the same functions.  During our discussions council heard that all the companies were equally capable of doing  the items found on the list.

 

The Resolution:
The Resolution is what authorizes the signing of the contract.  This resolution needs to contain either: 1. all the items we as council expect to see in the final contract or 2. a requirement that the City Manager bring it back to council for approval.  There are 8 items within the 17 items cited by staff that should be listed in the resolution as requirements that must be in the final contract.  In addition, council needs to add into the resolution the exact fee structure we will be paying the management company.  There also needs to be a clause which prevents the management company from receiving any monies or other valuables from the energy supplier that wins the award for supplying our residents.  As a starting point for Monday's discussion I propose the resolution include language that ensures the contract will contain at least these requirements:

 
  • Contract Requirements
    • Will list Huber Heights as the Energy Aggregator with the PUCO but Management company will completely run and maintain the program and all associated costs including all mailers.
    • Will provide all public notifications throughout process.
    • Will develop bid specifications for the electric supplier RFP.
    • Will prequalify all bidders to ensure performance.
    • Will allow residents to opt-in or opt-out at any time with no restrictions and no termination fees.
      • Define the opt-out procedures and time period
    • Will run a dedicated website for our Energy Aggregation Program.
    • Will maintain staff employee to handle all customer phone calls.
    • Will contain no fees to be incurred by Huber Heights even if the City decides to end the program prior to completion.

  •  
    In addition, there will be language in the contract that:
    • Restricts the management company from receiving any monies or other valuables from the energy supplier as a result of the City of Huber Heights contracting with the energy supplier.
    • Specifically defines the fee to be received for this contract to the Management Company as being only $0.000475 per KWH sold through program (if Schneider awarded contract), $0.0005 per KWH (if Buckeye Energy or Energy Alliances awarded contract) or $0.00075 per KWH (if AG&E awarded contract).

Performance History
Performance history can be broken up into two areas; 1.  How well do they perform the 8 items of the 17.  2. How well do they do in negotiating the rate for residents.  

How well do they do the 8 items?  Staff mentions that EA included multiple letters of recommendations from the municipalities they serve within their bid response (found on pgs 25-29.  All but one were for providing natural gas service).  Both Schneider Electric and AGE provided recommendations from local Cities.  Other items such as committing to building a website, providing notification letters for the residents etc are discussed by all companies and samples can all be found within the bids

How well do they do negotiating rates?  Below I've taken the information provided by AGE and EA and put it into one document so we can compare how they have done negotiating rates. 

In order to read the important part of this table look at the first row of the AG&E section you can see that on Feb 5, 2016 the residents of Sidney OH had three choices.  They could remain with DPL and pay $0.0749 per KWH.  They could go to the Apples to Apples website and sign up for $0.0610 per KWH or they could take the energy aggregation rate negotiated by AGE of $0.0544.  The AGE rate was 27.36% lower than the DPL rate and 10.80% lower than the best Apples to Apples rate available on Feb 5, 2016.

Looking at the EA section in the first row on Jun 4, 2016, Clearcreek Township residents could have remained with DPL and pay $0.072 per KWH, choose the best Apples to Apples rate of $0.0597 or take the energy aggregation rate negotiated by EA of $0.0539.  The EA rate was 25.14% lower than the DPL rate and 9.72% lower than the best Apples to Apples rate available on Jun 4, 2016.
 



 Council should be having a discussion about what this means in terms of which company can provide the best rate and the best savings for our residents.  In the two examples given above the best savings was provided by AGE even though EA had the lower rate.  Our discussions should be about how the energy market works.  Electric rates change based on the cost of oil, natural gas and coal and also on demand.  That is why I believe we should be looking at how much savings we can get compared to our other choices at the time the contract is negotiated.  That is why I constructed this table and wish we had all four companies performance to look at.  

Other things that need to be considered are things that we started to have conversations about but we haven't presented them in a way that is useful for in our decision process.  For instance each company has explained "load factors" and tried to tell us why going in with other communities is either a good way to go or not.  Council did not discuss these points.  Instead council got all wrapped up in a discussion on whether we should or should not be getting this clarifying information from the industry experts we are thinking about hiring.



Council Member Byrge believes it is better to have the companies negotiate new rates for the city every 12 months where the companies want to negotiate those rates only once every 36 months.  If you look at today's (Aug 20, 2016) Apple to Apple's rate you can see the 12 month rate is $0.0519 (5.19¢)  while the 24 month rate is $0.0599 (5.99¢) and there isn't even a 36 month rate to compare against.  We should be asking these questions.  Do the companies want us to do 36 months because that means they only have to negotiate one time in order to get their fee?  Or does the fact that the 24 month rate is so much higher than the 12 month rate and there isn't even a 36 month rate tell us that the Apple to Apple suppliers believe electric rates are about to go up a lot?  
 
The answer to these questions make a big difference in my decision on whether we should be looking to lock in rates for 12 months or a 36 months.  But have you heard us talk this through at the meetings?  Has it been documented in the read ahead materials or the minutes?  No, because these council members waste our time talking about whether it is right or wrong to ask these questions or discuss these points at our council meetings.  
 

Staff Recommendation
When I saw the bullet recommendations of the 17 items and the note that said the other companies also could do those items, I let staff know I wanted to see a table that showed which of the 17 items the other companies also performed.  Staff never came back with that information.  How is this council going to make a good decision without that comparison?  Also, Schneider Electric spent more than a year selling the city on the idea of pursuing energy aggregation.  At one time they brought a City of Troy representative to speak about the savings realized there because they entered the program.  I don't believe this council can make an informed decision about how well Schneider competes if we don't see their past performance.  Yet we don't have the DPL and Apples to Apples rates available to Troy residents when the Energy Aggregation rate went into effect in that city.  

Why is council only going to pass this resolution after just two readings when there is so much important information still needed and available for us to consider if we went to a third reading?  

Vote No on the Charter Amendments!


If you recall council was given almost no useful information in the read ahead for the work session when staff made their recommendation to go with Energy Alliances (EA).  I've been working hard to get us more information so we can make an informed decision, however, council said Tuesday they don't want to make an informed decision.  In fact, at least two members were frustrated that we didn't immediately go with staff's recommendation.  The discussion ended Tuesday with a motion by Council Member Shaw to stop discussion with the expectation that council will pass the resolution at the second reading.  This highlights why I will be campaigning to make sure the "one and done" charter amendment on the ballot in November doesn't pass.  Mr. Shaw and Mrs Bryge keep telling us that the Charter can be changed so that only one reading is required because we can trust them to add more readings for important resolutions, yet next week they will vote to keep us from getting the information we need to make sure we don't waste the opportunity to get the best savings possible when we implement the Energy Aggregation program. 

We learned a lot about  energy aggregation since staff made their original recommendation.  We could learn a lot more and be much more confident that we will go with the right company to negotiate our best rate if we were to go to a third reading and tell staff we want that information.  Even now before the Charter change your council members aren't trustworthy enough to be counted on to get us that information.  Think about how bad it will be if the Charter were changed so only one reading was required for an item as complicated as this?  They aren't responsible enough to give us three readings when three readings are what the Charter expects.  Why should we expect them to do the hard work of understanding the issue if we make it so that one reading becomes the standard?

Make sure you Vote No on the Charter Amendments.  




 

See my article Fix the Emergency Legislation Problem.  Don't make it worse!

 

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