Agenda item

Report of the Director of Finance. To be introduced by the Cabinet Member for Finance and Local Investment.

This report will seek a decision on the award of the new electricity and gas contracts from 1 April 2025 to 31 March 2029 for the Council's Streetlighing, Corporate and Housing portfolios and Schools that choose to opt-in.

The Council Constitution Part 5 section C Protocol for key decisions advises at paragraph 4a that contracts for the supply of energy are exempt from being defined as a key decision.

Cllr Chandwani and Cllr das Neves returned to the room.

The Cabinet Member for Finance and Local Investment introduced the report which sought approval from Cabinet to access LASER Framework Agreements and to use these to call off and procure contracts for the supply of electricity and gas to the Council for the four-year period - 1 April 2025 to 31 March 2029.

The following was noted in response to a question from Cllr Cawley Harrison:

Officers were looking at the business cases for increasing the solar portfolio onto all buildings. That would be based on roof space availability and the long-term plans for the Council. There was a case a few months ago about the solar panels on Hornsey Library not operating correctly, that had since been under review. An assessment of the solar panels across the portfolio was now being managed and maintained to ensure that they were operating. Officers were working towards the long-term maintenance of those systems to ensure that they were fully functional for the summer period. In terms of the demand technology and building energy management systems, it was an ongoing programme that was currently being worked through.

Further to considering exempt information at item 28,

RESOLVED

1.          To consider the outcome of consultation with leaseholders set out at paragraphs 6.44 to 6.51 of this report.

2.          To approve that the Council enters into an access agreement with Kent County Council, trading as LASER so the Council can access framework agreements for Electricity (Flex 2024 – 2028, Framework Number: Y22009) and Gas (Flex 2024 – 2028 Framework Number: Y22008), as permitted under CSO 7.01 b) (selecting one or more contractors from a Framework).

3.          To approve the award of an electricity supply contract under LASER framework agreement Y22009, to Npower Commercial Gas Limited (Npower) for the period of four years commencing on 1 April 2025 and expiring on 31 March 2029, with an estimated value of £36.68m in accordance with CSO 9.07.1 d) (Contracts value at £500,000 or more can only be awarded by Cabinet).

4.          To approve the award of a gas supply contract under LASER framework agreement Y22008 to Corona Energy Retail 4 Ltd (Corona) for the period of four years commencing on 1 April 2025 and expiring on 31 March 2029, with an estimated value of £19.76m in accordance with 9.07.1 d) (Contracts value at £500,000 or more can only be awarded by Cabinet).

5.          To approve the use of LASER’s ‘Price Certainty’ energy buying strategy for both electricity and gas.

6.          To approve the use of LASER’s ‘Procurement Only Service Option’ (POSO) as opposed to the ‘Fully Managed’ (FM) service.

7.          To agree that the annual and forthcoming year’s estimated expenditure, will be reported to the Director of Finance and Cabinet Member for Finance. Where the estimated expenditure exceeds those stated in 3.3 and 3.4 above, Cabinet delegates the authority to the Director of Finance  after consultation with the Cabinet Member for Finance, the approval to vary the contracts and increase the values to cover the additional expenditure within the original term of the contracts; and any expected spend above a 10% increase set out in this report, shall be reported to Cabinet.

8.          To note that, in alignment with the Council’s commitment to net zero by 2027, Haringey is engaged with London Councils’ Renewable Power for London workstream. This aims to develop an opportunity for London Boroughs to purchase renewable electricity directly from a renewable energy generation asset such as a solar farm, through a collective Power Purchase Agreement (PPA). This opportunity may become available during the term of the electricity contract and the terms of the LASER framework contract allows for electricity volume purchased through a PPA to be transferred-in (known as sleeving in).

Reasons for decision

The Council considers it necessary to enter into these two Contracts to provide an uninterrupted energy supply to the Council’s buildings and services, including corporate buildings; streetlighting; housing communal areas, shared services, communal heating systems, hostels and non-domestic buildings; and schools that choose to opt-in. The Council needs to be able to supply electricity and gas to ensure Council services can operate; that common parts at residential properties have continuous service of lighting, lifts, security and electrical equipment; that residential shared heating systems continue to operate and that schools opting-in have continuous electricity and gas supply.

Energy prices have fluctuated significantly in recent years. To allow for any future fluctuations in prices, delegated authority is being sought to approve contract variations to allow for continuous supply of energy to the Council and its partners.

The decision is not a key decision in accordance with CSO 9.0.7.1 (f) that states “In accordance with Part 5 Section C of the Constitution, the award of spot contracts for care packages and contracts for the supply of energy to the Council are not “key decisions”.

 Alternative options considered.

Short term, spot buy (fixed duration, fixed price contracts) This is where the

Council would buy short-term contracts for a fixed price over the time period,

directly with suppliers. Although it is possible that lower prices could be achieved, the opposite is also true. This is a high-risk strategy and the Council would be significantly more exposed to the vagaries of the wholesale market (a price for the supply period is fixed on a single day). The Council also risks paying higher off[1]contract prices until appropriate new contract(s) are in place. The approach is not compliant with either Procurement Standing Orders (PSOs) or public procurement legislation. Further, the Pan Government Energy Project (now part of the Cabinet Office) recommendation is that all public sector organisations adopt aggregated, flexible and risk-managed energy procurement. This has been ruled out due to the risk of price volatility and lack of in-house expertise.

Procure the Council’s energy by direct tender - This option would involve the Council running a standalone compliant tender process to secure contracts with the selected energy provider(s) (or via a broker see option 5.3). This approach is unlikely to produce the best results due to the relatively small scale of the Council’s energy requirement compared to that of most large purchasing organisations. By contrast, a Public Sector Buying Organisation can obtain good wholesale prices through aggregating the demand of many public sector organisations. In addition, a direct tender would require us to engage additional resources (skilled energy traders and additional staff for contract management) and provide greater risk of exposure to energy price fluctuations. This option is therefore deemed unviable.

Procure through a Private Sector based provider - The Council would require a tender for a private sector Third Party Intermediary (TPI) to procure energy supply (as option 5.2 above), but it would need to be sure that we 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 our 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 compliant tender process would be required to engage with such a provider with all the associated resource and time implications that would be entailed. Due to this level of complexity and lack of in-house resources to deliver this, this option has been ruled out.

Do nothing. Due to the value of the Council’s annual electricity and gas spend, it is required to have a contract in place. If a contract is not put in place, the Council may default onto more expensive out of contract rates that would not provide value for money, so doing nothing is not an option.