Decision details

Corporate Gas supply contract

Decision Maker: Executive Director: Growth and Regeneration

Decision status: Recommendations Approved

Is Key decision?: Yes

Is subject to call in?: No

Purpose:

The Council’s natural gas supply contract, which provides gas for Council buildings and shared heating systems in Council housing, has reached its scheduled end date (31st Oct 21). This unfortunately coincides with historically high energy prices. This contract would normally be renewed under a competitive process, but there is a significant risk of locking the Council in to high rates for an extended period if the contract is renewed in the usual way. Most energy supply contracts let by the Council include provision for extensions, but these have already been used up on this contract. In order to reduce the impact of current high prices on the Council, the decision is being taken to extend the current contract by a further three months beyond its original end date, in order to allow time for the energy market to restabilise before any new contract was let. This will still incur significantly higher costs for the Council in the short term, but will limit this impact to a few months. In the meantime, Council Officers are developing an alternative procurement approach that would reduce the Council’s exposure to energy market prices in future contracts.

Decision:

Extension of the Council’s current natural gas supply contracts for Corporate buildings for three months to 31 January 2022

Alternative options considered:

Option 1 - A compliant competitive procurement has been run to request bids from energy suppliers for the renewal of the gas supply contract. Bids received are three times current rates for a short contract (six months), twice current rates for a longer contract (two years). Accepting these bids will lock the Council in to historically high energy costs for an extended period.
The Council typically contracts for energy supplies on a fixed price basis. This provides certainty for energy prices over the duration of the contract, but can leave the Council paying higher than market rates in a falling market. The Council could instead contract for energy on a flexible price basis, which would allow a supplier to trade ahead for future Council energy requirements to secure better long term deals. Proposals to adopt this approach are now being developed, but could not be implemented cost effectively in the time available.
Option 2 -
Option 3 -

Publication date: 05/01/2022

Date of decision: 19/10/2021