Agenda item

RESOLVED:

Cabinet Procurement and Insourcing Committee agreed to:

a)  Note the outcome of the purchasing arrangements which have placed Supply contracts with the Energy companies as follows:

1.  The Half Hourly, Non-Half Hourly and Unmetered Electricity

Supply contract is awarded to Total Gas & Power at an estimated value of £12.8m

2.  The Gas Supply contract is awarded to Total Gas & Power at an estimated value of £4.7m.

3.  A further £0.9m will be incurred in Climate Change Levy (CCL) payments on the bill.

b)  Note the indicative aggregate cost impact for Hackney, including Housing and Schools, from these tender awards is a 77% increase against last financial year’s projection, the actual impact will be monitored via OFP.

REASONS FOR DECISION

This report provides the Cabinet Procurement and Insourcing

Committee with the results of the “risk managed flexible purchasing”

exercise carried out on behalf of the Council by LASER between

October 2021 and March 2022 for all gas and electricity supplies to

secure a twelve month contract.

The current contract prices for all supplies include those large (HH)

Half Hourly electricity supplies including Unmetered (UMS) public

street lighting, all gas and small (NHH) Non-Half Hourly electricity

supplies for the year commencing 1st April 2022 to 31st March 2023

that were presented to the Council during May 2022.

For this year’s supplies, the electricity contract was procured with

100% of its volume from renewable sources at £0.495ppkWh.

The contract for all supplies is for a twelve month period commencing

from April 2022 to March 2023.

2020 was set to be the low point in the energy price cycle but this was

extended by the pandemic with its resultant reduction in demand. As

the world economy recovered, energy prices accelerated faster than

predicted partly due to the loss of capacity during the extended low

cycle of prices. The situation in 2021 was exacerbated by political

intervention in the market, particularly by Russia withdrawing capacity,

2022 has been dominated by the impacts of military action in Ukraine

and the resultant sanctions which have disrupted supply, a situation

that is still unfolding.

For the 2022/23 energy supplies contract, the Council has been

partially sheltered from the worst energy prices by the flexible

purchasing process with 95% of the energy purchased before the end

of 2021. The outturn of the next purchasing round which begins in

October 2022 will very much depend on how the geo-political situation

develops.

The Council will explore the adoption of PPAs going forward , this will

also help with smoothing the price volatility of Electricity. If Electricity is

procured via PPAs, the Council will continue with LASER to procure

energy for the gas contracts and any residual electricity required.

  As work to decarbonise Council buildings, including schools,

progresses, this will shift demand from gas into electricity although the

total kWh in aggregate will fall.

13.1  The Council’s Head of Energy & Carbon Management introduced the published report. Committee members noted that the report provided the outcome of 2022’s purchasing round for energy used within Council offices, Hackney Housing and in Schools, where such Schools are part of the corporate contracting arrangement.

13.2  No questions were asked by Committee members about the report.

RESOLVED:

Cabinet Procurement and Insourcing Committee agreed to:

a)  Note the outcome of the purchasing arrangements which have placed Supply contracts with the Energy companies as follows:

1.  The Half Hourly, Non-Half Hourly and Unmetered Electricity

Supply contract is awarded to Total Gas & Power at an estimated value of £12.8m

2.  The Gas Supply contract is awarded to Total Gas & Power at an estimated value of £4.7m.

3.  A further £0.9m will be incurred in Climate Change Levy (CCL) payments on the bill.

b)  Note the indicative aggregate cost impact for Hackney, including Housing and Schools, from these tender awards is a 77% increase against last financial year’s projection, the actual impact will be monitored via OFP.

REASONS FOR DECISION

13.1  This report provides the Cabinet Procurement and Insourcing

Committee with the results of the “risk managed flexible purchasing”

exercise carried out on behalf of the Council by LASER between

October 2021 and March 2022 for all gas and electricity supplies to

secure a twelve month contract.

13.4  The current contract prices for all supplies include those large (HH)

Half Hourly electricity supplies including Unmetered (UMS) public

street lighting, all gas and small (NHH) Non-Half Hourly electricity

supplies for the year commencing 1st April 2022 to 31st March 2023

that were presented to the Council during May 2022.

13.5  For this year’s supplies, the electricity contract was procured with

100% of its volume from renewable sources at £0.495ppkWh.

13.6  The contract for all supplies was for a twelve month period commencing

from April 2022 to March 2023.

13.7  2020 was set to be the low point in the energy price cycle but this was

extended by the pandemic with its resultant reduction in demand. As

the world economy recovered, energy prices accelerated faster than

predicted partly due to the loss of capacity during the extended low

cycle of prices. The situation in 2021 was exacerbated by political

intervention in the market, particularly by Russia withdrawing capacity,

2022 has been dominated by the impacts of military action in Ukraine

and the resultant sanctions which have disrupted supply, a situation

that is still unfolding.

13.8  For the 2022/23 energy supplies contract, the Council has been

partially sheltered from the worst energy prices by the flexible

purchasing process with 95% of the energy purchased before the end

of 2021. The outturn of the next purchasing round which begins in

October 2022 will very much depend on how the geo-political situation

develops.

13.9  The Council will explore the adoption of PPAs going forward , this will

also help with smoothing the price volatility of Electricity. If Electricity was

procured via PPAs, the Council will continue with LASER to procure

energy for the gas contracts and any residual electricity required.

   13.10  As work to decarbonise Council buildings, including schools, progresses, this would shift demand from gas into electricity although the total kWh in aggregate would fall.