HomeMy WebLinkAbout29A - UTILITY COST REDUCTION SRVSREQUEST FOR
COUNCIL ACTION
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DECEMBER 20, 2016
TITLE
PAYMENT AUTHORIZATION TO
PROCURE AMERICA FOR
ELECTRIC UTILITY COST
REDUCTION SERVICES
{STRATEGIC PLAN NO. 4,31))
CITY MANAGER
RECOMMENDED ACTION
CLERK OF COUNCIL USE ONLY:
APPROVED
❑ As Recommended
❑ As Amended
❑ Ordinance on tat Reading
❑ Ordinance on 2nd Reading
❑ Implementing Resolution
❑ Set Public Hearing For
CONTINUED TO
FILE NUMBER
Authorize payment of Procure America Invoice #6-1603b in the amount of $15,078.99 as
compensation for generating electrical utility cost savings under Agreement A-2014-227.
DISCUSSION
On September 16, 2014, Council authorized staff to execute an agreement with Procure America
for utility cost reduction services. The three-year agreement called for an operational review of
the City's gas and electric utility costs to include analyzing invoices, supplier contracts, and other
pertinent data to identify potential cost saving opportunities. Procure America compensation
would have two payment schedules: Schedule 1 would consist of Initial Payments calculated as
1% of the City's Gross Annual Spend on gas and electric utility bills; Schedule 2 would consist of
Subsequent Payments calculated as a 40% share of gas and electric utility bill savings identified
by Procure America during the three-year period of the agreement.
Absent information from the pending operational review at the time, staff estimated and set the
contract cost at a not to exceed (NTE) amount of $50,000. At this juncture, Procure America has
completed the operational review and selected 43 out of more than 1,200 City electric service
accounts for rate adjustments to generate electric bill savings. No cost-saving opportunities for
gas service accounts were identified. Based on the Finance Department Fiscal Year 2013-14
Utilities Expenditure Report, Procure America is owed Schedule 1 Initial Payments in the amount
of $71,610.56, which represents 1% of the City's $7,161,056 gross annual spend on gas and
electric bills.
Procure America has submitted three invoices for payment to date. The first payment was
approved by Council on April 20, 2016, for Invoice #8-1503 in the amount of $49,346.57
exhausting most of the original NTE amount of $50,000. The second payment, which required
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Payment Authorization To Procure America For
Electrical Utility Cost Reduction Services
December 20, 2016
Page 2
Council to increase the A-2014-227 NTE amount from $50,000 to $70,108.69, was approved in
the amount of $20,762.12 for Invoice #10-1052a on August 2, 2016. For the third payment,
Procure America submitted Invoice #6-1603b for $15,078.99 to be split between Schedule 1 for
$1,501.87 and Schedule 2 for $13,577.12 as detailed in Exhibit 1 and tabulated as follows.
The recommended action to authorize payment of this third invoice requires Council to authorize
in effect a second increase in Procure America's NTE amount to a new NTE amount of
$85,187.68 which is a $35,187.68 or 68.6% increase over the original NTE amount of $50,000.
PROCURE AMERICA TOTAL COMPENSATION
SCHEDULE 1
Initial Payments calculated as 1 % of City's Gross Annual
Spend on Gas and Electric Utility Bills of $7,161,056
First Initial Payment on April 20, 2016 $49,346.57
Second Initial Payment on August 2, 2016 20,762.12
Third and Final Initial Payable: Invoice #6-1603b 1,501.87
Total $71,610.56
SCHEDULE2
Subsequent Payments calculated as 40% Share of Electric
Utility Cost Savings for a 3 -year Period
First Subsequent Payable: Invoice #6-1603b $13,577.12
Total $13,577.12
Grand Total $85,187.68
As indicated in the above table, this third payment would be the final payment on the amount
owed Procure America under Schedule 1 Compensation. However, Procure America will
continue to submit Schedule 2 Compensation invoices to the City for payment on a quarterly
cycle for the duration of the contract. Staff will also continue to request Council to approve the
necessary increases in Procure America's contract NTE amount in order to authorize subsequent
payments to Procure America.
All payments to Procure America are funded by the City's electric utility cost savings generated
under this energy -efficiency initiative. For example, the funds to pay for the recommended action
comes from $35,444.66 in savings generated from January 7 through May 6, 2016 by electric
service account # 3-005-2303-50 at Centennial Park Dan Young Soccer Fields located at 3000
W. Edinger Avenue. As shown in Exhibit 1, and per the agreement, 100% of initial savings are
used to pay Procure America Schedule 1 compensation of $1,501.87 leaving a balance of
$35,444.66 less $1,501.87 or $33,942.79. Schedule 2 compensation is calculated as 40% of
$33,942.79 or $13,577.12. Procure America generates these cost savings by identifying electric
service accounts eligible for a rate review and requesting Southern California Edison (SCE) to
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Payment Authorization To Procure America For
Electrical Utility Cost Reduction Services
December 20, 2016
Page 3
adjust rates as applicable. The cost saving is the difference between the higher electric bill under
the old rate and the lower electric bill under the new rate. Since savings are used to compensate
Procure America, City staff verifies reported savings by reviewing relevant SCE electric bills and
other documents using an audit procedure that has been vetted by the City's Finance
Department before payments to Procure America are approved.
STRATEGIC PLAN ALIGNMENT
Approval of this item supports Strategic Plan Goal #4 - City Financial Stability, Objective 3
(Maintain a structurally balanced budget with appropriate reserve levels), and Strategy 3D
(Establish a committee of City staff to explore innovative revenue and cost recovery strategies).
FISCAL IMPACT
Funds are budgeted and available in fiscal year 2016-17 in the following account:
Parks, Recreation and Community Services Park Maintenance 01113250-62000 $15,078.99
APPROVED AS TO FUNDS AND
ACCOUNTS:
Gerardo Mouet Francisco Gutierrez
Executive Director Executive Director
Parks, Recreation and Community Finance and Management Services
Agency Services
JA/WN
Exhibits: 1. Payment Distribution 11/30/16 for Invoice #6-1603b
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City of Santa Ana
Procure America Invoice 6-1603b
Payment Distribution
Page 1 of 1
Finance & Management Services Agency
Facilities & Fleet Management
30 -Nov -2016
Dept Division
SCE Account Address Description Charge
Number Account
Invoiced
Amount
PRCSA Park Maintenance
3-005-2303-50 3000 W. Edinger Avenue Dan Young Complex
$15,078.99
SUBTOTAL
01113250-62000
$15,078.99
TOTAL - PRCSA
$15,078.99
GRAND TOTAL
$15,078.99
EXHIBIT 1
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