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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