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HomeMy WebLinkAbout29A - UTILITY COST REDUCTION SRVSREQUEST FOR COUNCIL ACTION N1�i�telwkIMr_Wr 141- 11krCrVi DECEMBER 20, 2016 TITLE PAYMENT AUTHORIZATION TO PROCURE AMERICA FOR ELECTRIC UTILITY COST REDUCTION SERVICES {STRATEGIC PLAN NO. 4,31)) CITY MANAGER RECOMMENDED ACTION CLERK OF COUNCIL USE ONLY: APPROVED ❑ As Recommended ❑ As Amended ❑ Ordinance on tat Reading ❑ Ordinance on 2nd Reading ❑ Implementing Resolution ❑ Set Public Hearing For CONTINUED TO FILE NUMBER Authorize payment of Procure America Invoice #6-1603b in the amount of $15,078.99 as compensation for generating electrical utility cost savings under Agreement A-2014-227. DISCUSSION On September 16, 2014, Council authorized staff to execute an agreement with Procure America for utility cost reduction services. The three-year agreement called for an operational review of the City's gas and electric utility costs to include analyzing invoices, supplier contracts, and other pertinent data to identify potential cost saving opportunities. Procure America compensation would have two payment schedules: Schedule 1 would consist of Initial Payments calculated as 1% of the City's Gross Annual Spend on gas and electric utility bills; Schedule 2 would consist of Subsequent Payments calculated as a 40% share of gas and electric utility bill savings identified by Procure America during the three-year period of the agreement. Absent information from the pending operational review at the time, staff estimated and set the contract cost at a not to exceed (NTE) amount of $50,000. At this juncture, Procure America has completed the operational review and selected 43 out of more than 1,200 City electric service accounts for rate adjustments to generate electric bill savings. No cost-saving opportunities for gas service accounts were identified. Based on the Finance Department Fiscal Year 2013-14 Utilities Expenditure Report, Procure America is owed Schedule 1 Initial Payments in the amount of $71,610.56, which represents 1% of the City's $7,161,056 gross annual spend on gas and electric bills. Procure America has submitted three invoices for payment to date. The first payment was approved by Council on April 20, 2016, for Invoice #8-1503 in the amount of $49,346.57 exhausting most of the original NTE amount of $50,000. The second payment, which required 29A-1 Payment Authorization To Procure America For Electrical Utility Cost Reduction Services December 20, 2016 Page 2 Council to increase the A-2014-227 NTE amount from $50,000 to $70,108.69, was approved in the amount of $20,762.12 for Invoice #10-1052a on August 2, 2016. For the third payment, Procure America submitted Invoice #6-1603b for $15,078.99 to be split between Schedule 1 for $1,501.87 and Schedule 2 for $13,577.12 as detailed in Exhibit 1 and tabulated as follows. The recommended action to authorize payment of this third invoice requires Council to authorize in effect a second increase in Procure America's NTE amount to a new NTE amount of $85,187.68 which is a $35,187.68 or 68.6% increase over the original NTE amount of $50,000. PROCURE AMERICA TOTAL COMPENSATION SCHEDULE 1 Initial Payments calculated as 1 % of City's Gross Annual Spend on Gas and Electric Utility Bills of $7,161,056 First Initial Payment on April 20, 2016 $49,346.57 Second Initial Payment on August 2, 2016 20,762.12 Third and Final Initial Payable: Invoice #6-1603b 1,501.87 Total $71,610.56 SCHEDULE2 Subsequent Payments calculated as 40% Share of Electric Utility Cost Savings for a 3 -year Period First Subsequent Payable: Invoice #6-1603b $13,577.12 Total $13,577.12 Grand Total $85,187.68 As indicated in the above table, this third payment would be the final payment on the amount owed Procure America under Schedule 1 Compensation. However, Procure America will continue to submit Schedule 2 Compensation invoices to the City for payment on a quarterly cycle for the duration of the contract. Staff will also continue to request Council to approve the necessary increases in Procure America's contract NTE amount in order to authorize subsequent payments to Procure America. All payments to Procure America are funded by the City's electric utility cost savings generated under this energy -efficiency initiative. For example, the funds to pay for the recommended action comes from $35,444.66 in savings generated from January 7 through May 6, 2016 by electric service account # 3-005-2303-50 at Centennial Park Dan Young Soccer Fields located at 3000 W. Edinger Avenue. As shown in Exhibit 1, and per the agreement, 100% of initial savings are used to pay Procure America Schedule 1 compensation of $1,501.87 leaving a balance of $35,444.66 less $1,501.87 or $33,942.79. Schedule 2 compensation is calculated as 40% of $33,942.79 or $13,577.12. Procure America generates these cost savings by identifying electric service accounts eligible for a rate review and requesting Southern California Edison (SCE) to 29A-2 Payment Authorization To Procure America For Electrical Utility Cost Reduction Services December 20, 2016 Page 3 adjust rates as applicable. The cost saving is the difference between the higher electric bill under the old rate and the lower electric bill under the new rate. Since savings are used to compensate Procure America, City staff verifies reported savings by reviewing relevant SCE electric bills and other documents using an audit procedure that has been vetted by the City's Finance Department before payments to Procure America are approved. STRATEGIC PLAN ALIGNMENT Approval of this item supports Strategic Plan Goal #4 - City Financial Stability, Objective 3 (Maintain a structurally balanced budget with appropriate reserve levels), and Strategy 3D (Establish a committee of City staff to explore innovative revenue and cost recovery strategies). FISCAL IMPACT Funds are budgeted and available in fiscal year 2016-17 in the following account: Parks, Recreation and Community Services Park Maintenance 01113250-62000 $15,078.99 APPROVED AS TO FUNDS AND ACCOUNTS: Gerardo Mouet Francisco Gutierrez Executive Director Executive Director Parks, Recreation and Community Finance and Management Services Agency Services JA/WN Exhibits: 1. Payment Distribution 11/30/16 for Invoice #6-1603b 29A-3 29A-4 City of Santa Ana Procure America Invoice 6-1603b Payment Distribution Page 1 of 1 Finance & Management Services Agency Facilities & Fleet Management 30 -Nov -2016 Dept Division SCE Account Address Description Charge Number Account Invoiced Amount PRCSA Park Maintenance 3-005-2303-50 3000 W. Edinger Avenue Dan Young Complex $15,078.99 SUBTOTAL 01113250-62000 $15,078.99 TOTAL - PRCSA $15,078.99 GRAND TOTAL $15,078.99 EXHIBIT 1 29A-5 29A-6