Councillor Eamonn O’Brien, Leader and Cabinet Member for Strategic Growth and Skills, presented the report which sought formal approval to use the YPO electricity supply framework for the purchase and supply of the Council’s corporate electricity for the period 1 April 2023 to 31 March 2027, with the option to extend for a further two-year period to 2029 and for a further two years until 2031. The Council’s corporate electricity supply contract covers the supply of electricity to office buildings, schools, community centres, libraries, leisure facilities and buildings occupied by Persona and Six Town Housing. This comprises in excess of 500 supply points across the borough.
1. Approved the use of the YPO Energy Framework Agreement to administer the purchase and supply of the Council’s corporate electricity contract for the period 1 April 2023 to 31 March 2027 (at an annual cost of circa £7m per annum). The total estimated contract value will be circa £28m over a four-year period, with options to extend to 2029 and 2031. (The annual and total contract value may change significantly as current energy prices have been significantly affected by the conflict in Ukraine);
2. Approve the use of YPO’s appointed framework supplier, Npower Business Solution, for the supply of electricity through the framework duration; and
3. Provide delegated authority to the Executive Director of Operations and Executive Director of Finance, in consultation with the portfolio lead for Corporate Affairs and HR, to award the contract and facilitate the execution, implementation, and operation of the contract.
Reasons for the decision:
The proposed arrangements ensure that the Council has a compliant contract in place and has tested the market for best value.
Alternative options considered and rejected:
Spot Buy (Fixed Price Contracts)
This is where the Council would buy short-term contracts for a fixed price over the time period. Although savings could potentially be made, the council would be more exposed to the vagaries of the wholesale market (a price is fixed on a single day in the year) and could pay higher off-contract prices until an appropriate new contract is in place. It is also not compliant with either Contract Procedure Rules (CPR) or public procurement legislation. This was ruled out due to the risk of price volatility, lack of in-house expertise and the fact that this does not comply with Council Constitution.
Procure our own energy by direct tender
This option is possible, but it would involve a standalone OJEU (Official Journal of the European Union) tender to secure contracts directly with the selected energy provider(s) (or via a broker see option 6.2.3). This approach is unlikely to produce the best results due to the relatively small scale of the portfolio compared to that of most large purchasing organisations. In contrast, a Public Sector Buying Organisation such as YPO, can obtain good wholesale prices through aggregating the demand of a large number of public sector organisations. In addition, a direct tender would require the Council to engage additional resources (skilled energy traders and additional staff for contract management) and provide greater risk of exposure to energy price fluctuations. It was therefore determined as unviable.
Procure through a Private Sector based provider
The Council would be required to invite tenders for a private sector Third Party Intermediary (TPI) to procure energy supply (as per 4.2.2), but it would need to be sure that it would be getting best value through a truly aggregated, flexible contract. Full price transparency of all costs, including TPI fees and any commission paid by suppliers to the TPI would be needed. By aggregating the Council’s volumes, the TPI could access the wholesale market on our behalf, but we may only receive prices based on the supplier’s view of the market. A full OJEU tender process would be required to engage with such a provider with all the associated resource and time implications this would entail. TPIs may have issues regarding business continuity in the present economic climate and are unlikely to be able to aggregate the council’s volume with other customers in an OJEU compliant manner or to the same level or offer the same additional and social value as the YPO contract. Due to this level of complexity and lack of in-house resources to deliver this,
this option was dismissed.
This is not an option as the Council and users of its buildings rely on energy to operate. It would place a requirement on services, schools, Persona and Six Town Housing to procure their own energy supplier or run out of contract which is a cost with a premium.