Agenda item

i.  Adopted and approved the Gas & Electricity Risk Management Strategy (Appendix A) as follows:

a.  Approved the purchase of electricity on a ‘month ahead’ basis and gas on a ‘day ahead’ basis on the open wholesale energy market price.

b.  Set wholesale energy market price caps for power for the summer 24 period (April 24 to September 24) to £90/MWh and the winter 24 (October 24 to March 25) to £110/MWh.

c.  Set wholesale energy market price caps for gas for the summer 24 period (April 24 to September 24) to £35 MWh and the winter 24 (October 24 to March 25) to £40/MWh.

d.  If the wholesale energy markets price increase such that the cap is expected to be exceeded, or is exceeded, then Cabinet approves the purchase strategy for eEnergy to buy the remaining energy volume in that summer and/or winter period to limit further cost exposure.

ii.  Delegated authority to the Executive Director of Regeneration, Housing and Environment, in consultation with the Executive Director of Finance and Commercial (the S151 officer) and the Lead Member (Financial oversight, council assets, procurement, and revenues and benefits) to purchase energy in line with the Gas & Electricity Risk Management Strategy.

iii.  Approved the compliant procurement of new energy supply contracts with an estimated contract value between £8m and £11m for the period 25/26, 26/27 and 27/28. The procurement will be based on the most competitive price, supplier performance, bill validation and meter services, and flexibility to amend volume to align with the Estate Strategy. Council officers will be required to report back to Cabinet by 31st December 2024 and seek approval to award new energy contracts for the period 25/26 – 27/28.

The Lead Member for Finance, Council Assets, Procurement and Revenues & Benefits introduced a report on the proposed arrangements for the purchase of energy contracts.

The wholesale energy markets had stabilised after two years of significant price fluctuations due to global factors including the Russian invasion of Ukraine.  The wholesale cost of energy had fallen by more than 50% over the past 12 months.  The Council was entering into the final year of its flex and fixed rate energy contracts which would all expire on 31st March 2025.  To limit the Council’s exposure to potential future energy price fluctuations during 2024/25 and to provide an opportunity to obtain additional market value, the Cabinet was requested to delegate authority to the Executive Director of Regeneration, Housing and Environment to purchase energy below an approved cap price and to approve the procurement of new energy contracts to start on 1st April 2025 for a 3-year period.

The Cabinet considered the options and noted that the proposed approach sought to manage and balance the risks at a time of potential future price volatility.  It was noted that whilst the wholesale price had fallen over the past year, it was significantly higher than pre-pandemic levels and remained unpredictable.  Lead Members therefore agreed the recommended strategy and delegations to seek to achieve the best price in the market and secure best value for the Council.  A report would come back to Cabinet by the end of 2024 on the contracts for 2025/26 to 2027/28.

Resolved –

i.  That the Gas & Electricity Risk Management Strategy (Appendix A) be adopted and approved as follows:

a.  Approved the purchase of electricity on a ‘month ahead’ basis and gas on a ‘day ahead’ basis on the open wholesale energy market price.

b.  Set wholesale energy market price caps for power for the summer 24 period (April 24 to September 24) to £90/MWh and the winter 24 (October 24 to March 25) to £110/MWh.

c.  Set wholesale energy market price caps for gas for the summer 24 period (April 24 to September 24) to £35 MWh and the winter 24 (October 24 to March 25) to £40/MWh.

d.  If the wholesale energy markets price increase such that the cap is expected to be exceeded, or is exceeded, then Cabinet approves the purchase strategy for energy to buy the remaining energy volume in that summer and/or winter period to limit further cost exposure.

ii.  That delegated authority be given to the Executive Director of Regeneration, Housing and Environment, in consultation with the Executive Director of Finance and Commercial (the S151 officer) and the Lead Member (Financial oversight, council assets, procurement, and revenues and benefits) to purchase energy in line with the Gas & Electricity Risk Management Strategy.

iii.  That the compliant procurement of new energy supply contracts with an estimated contract value between £8m and £11m for the period 25/26, 26/27 and 27/28 be approved. The procurement would be based on the most competitive price, supplier performance, bill validation and meter services, and flexibility to amend volume to align with the Estate Strategy. Council officers would be required to report back to Cabinet by 31st December 2024 and seek approval to award new energy contracts for the period 25/26 – 27/28.