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Item 4I CITY OF SOUTHLAKE MEMORANDUM (December 30, 2015) To: Shana Yelverton, City Manager From: Ben Thatcher, Assistant City Manager Subject: Item 41: TXU Energy Contract Action Requested: Approve a contract with TXU Energy to provide electric services for the term of June 2018 to November 2026. Background Information: The City has maintained a fixed rate agreement to purchase electricity from TXU Energy since 2007 in its ONCOR electric footprint, and has negotiated several new agreements since then when rates have become favorable to do so. The following agreements and subsequent rates have been made with TXU. • 2007 - $0.0805/kwh (100% traditional energy) • 2011 - $0.0685/kwh (10% renewable energy) • 2014 - $0.0498/kwh (25% renewable energy) The current agreement is set to expire in May 2018. TXU has invited the City to be a part of a new program created for its more fiscally responsible customers that would allow the City to purchase all of its ONCOR provided electricity from a combination of wind and solar energy (both renewable energy sources) at a lower rate, $0.04683/kwh, and for a longer term than previously offered, 8 '/2 years. The proposed contract would allow the City to secure a reduced rate for electric services when the current contract expires in May 2018. Taking action at this time will allow the City to establish a lower fixed rate for future energy costs while rates in the market are low. Electric rates have only been this low twice before since deregulation of the Texas electricity market occurred in 2002. TXU Energy's proposal includes: • $0.04683 per kilowatt hour rate, or lower (The final rate will depend on the market rate at the time of council action and should not vary much from the rate above). • 8 '/2 year term (to begin at the end of the current agreement) • An increase in power from renewable energy sources from 25% to 100% • An estimated savings of $150,000, or more, over the term of the contract • Option to acquire annual energy efficiency rebates of $5,500 to be used on new buildings or upgrades to existing buildings City staff has been monitoring the market and talking with our benchmark cities to compare rates. Until this point staff has not seen a lower rate among other DFW municipalities. Staff recommends entering into an agreement with TXU Energy because their rate is the lowest to others that were quoted and it includes an increase in the percentage of renewable energy. TXU Energy's ongoing level of customer service and responsiveness to the City's needs has also been appreciated. TXU has been a great partner outside of just providing the City electricity. They also provide trees to the City on an annual basis to beautify parks and open spaces, and have recently offered to provide the City electric auto charging stations where appropriate in public spaces. Financial Consideration: An estimated savings of approximately $150,000, or more, over the 8 '/2 year term. Strategic Link: The proposed contract update aligns with the City Strategy Map under the Focus Area "Performance Management & Service Delivery" and Corporate Objective "134 Provide high quality services through sustainable business practices." Citizen Input/ Board Review: N/A Legal Review: The standard contract language has been reviewed previously by the City Attorney. Alternatives: Wait to establish a new contract with TXU Energy or another retailer at the end of the May 2018 contract. Supporting Documents: Proposed Agreement Staff Recommendation: Council approval of the contract with TXU Energy to provide electric services for the term of June 2018 to November 2026. Staff Contact: Ben Thatcher, Assistant City Manager