Agenda item

Report of Corporate Director for Communities, Environment, and Resident Services

Councillor Longford, Portfolio Holder for Energy, Environment and Waste Services, introduced the report.

Wayne Bexton, Director of Environment and Sustainability, Antony Greener, Head of District Heating and Waste Strategy, and Andy Whitley, Utilities Manager, presented the report and stated the following:

·  the current supplier of electricity and gas announced in August 2022 an intention to withdraw from the supply market to large scale commercial users, of which Nottingham City Council are categorized;

·  the current contract with the supplier will finish on 31 March 2024, and they would honour this contract. However, during discussions with the supplier, the opportunity for a one-year early cancellation of the contract on 31 March 2023 has been offered. This provides the Council the opportunity to undertake a soft market test by inviting pricing from ESPO, via their energy supply frameworks, for electricity and gas;

·  the current contract that Enviroenergy has for export of electricity to grid is due to finish on 31 March 2023, and a new contract is required to be in place by then so that the Council continues to receive income for the electricity that it generates and sells to an off-taker.

Resolved

(1)  to approve spend of up to £13million, and any income, related to the contracts for electricity supply and sales and gas supply;

(2)  to delegate authority to the Director of Environment and Sustainability as follows:

(a)  in consultation with the Head of Procurement:

(i)  to identify the best procurement option available to secure electricity and gas supplies for Nottingham City Council;

(ii)  to identify the best procurement option available in securing the sale of electricity generated by Nottingham City Council for export to grid;

(b)  to approve the outcome of any procurement process and award contracts:

(i)  based on the most economically advantageous offer available at the time of renewal, for the supply of electricity and gas to the Council;

(ii)  based on the most economically advantageous offer available at the time, for the sale of electricity generated by the Council for export to grid, including, but not limited to, any secondary value delivered by low carbon generation.

Reasons for recommendations

(i)  The opportunity to refresh the current electricity and gas supply contract is available due to the incumbent supplier, decision to withdraw from the large-scale commercial user’s energy supply market.

(ii)  The energy wholesale market has changed at pace during this current contract which commenced in April 2020, with unprecedented volatility in the wholesale commodity costs for electricity and gas. The current contract allows for fixed price, fixed term unit rates for 100% grid supplied electricity and gas, with no option to procure green gas.

(iii)  Entering into new utility supply contracts will also provide opportunity to reduce 3^rd party liabilities currently held by the Council in respect of partner organisations which obtain their Utilities through our current contracts.

(iv)  After directly supplying their own requirements and the requirements of their private wire customers, Enviroenergy currently export any surplus electricity generated to the grid and receive an income for this volume, along with income for the sale of the associated ROCs (Renewable Obligation Certificates) and REGOs (Renewable Energy Guarantee of Origin).

Other options considered

(i)  For the Council to combine its export and import requirements into a single contract to take advantage of the generated export from Enviroenergy.

  This option would mean developing a bespoke flexible export and import contract, requiring a risk management approach to buying and selling power volumes and additional resource to manage and be responsible for a hedging strategy.

  Whilst this option may provide the most economically advantageous outcome for the Council, it is not currently resourced to deliver this arrangement within the timescales required for renewal.

  However, by entering into short term supply and sale arrangements, the option can be further explored, and the right procurement strategy can be developed.