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Decision details
Schools 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 Schools Energy Club
natural gas supply contract, which provides gas for schools, 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 was a
significant risk of locking the Council in to high rates for an
extended period if the contract had been renewed in the usual way.
Most energy supply contracts let by the Council include provision
for extensions, but these had 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 contract for the Schools Energy Club 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