ITEM NO: 18.1 Confidential MEETING TYPE Ordinary Council MEETING DATE: 17 October 2019 SUBJECT: Supply of Below 160 MWh Electricity FILE NUMBER F19/22 - Chief Executive Officer RECORD NUMBER: R19/16734 AUTHOR: Karina Ewer ATTACHMENT (S): Attachment 1 – Recommendation Report (R19/16732)

Attachment 2 – Streaky Bay Comparison Pricing (R19/16733) LINKS TO STRATEGIC MANAGEMENT PLAN 2016-2026 KEY RESULT AREA: 1. Governance

STRATEGY: 1.2. Maintain financial viability and accountability in budgeting and

administration.

ACTION: 1.2.1 Adopt appropriate financial targets based on LGA financial sustainability guidelines

BACKGROUND: LGA Procurement contacted all CEOs on 12 February 2019 to commence the process of securing set pricing for electricity across the State. The then Acting CEO requested approval to sign the form as the Authorised Officer to participate in the Initial Process (the Agreement to Participate in Initial Process) at the Ordinary Council meeting held 21 February 2019. Council at that time moved to: On 29 April 2019 Council moved to appoint Karina Ewer as the Chief Executive Officer and therefore able to fulfil the completion of the Electricity Agreement on behalf of the District Council of Streaky Bay.

Recommendation That Council, having considered Report No 18.2 SA Local Government – Electricity Procurement post 31 December 2019, 21 February 2019 and its role under Section 6, 7 and 8 of the Local Government Act 1999 approve the Acting CEO to sign and submit the Council Agreement to participate in the Initial Process form. Recommendation That Council, having considered Report No 18.2 SA Local Government – Electricity Procurement post 31 December 2019, 21 February 2019 and its role under Section 6, 7 and 8 of the Local Government Act 1999 delegate to the position of CEO the ability to sign an Electricity Agreement on behalf of the District Council of Streaky Bay once the final pricing is submitted.

On 17 May 2019 the CEO signed the Electricity Agreement for the Above 160MWh sites, noting that LGA had advised on 17 May 2019 that “due to a number of external factors beyond our control – volatility of the market and the uncertainty with the upcoming election results and energy policies, we only received three submissions for the supply of Electricity….bot Below 160MWh sites. The Evaluation Team resolved to go back to the market in August / September with the objective of receiving more responses and sharper pricing.” Council received and noted that Confidential Report at the 20 June 2019 Ordinary meeting. The information presented through this report is for the Below 160MWh sites not included in the initial agreement. Through this agreement the District Council of Streaky Bay will receive the following percentage savings over the current pricing for the next 3 years:

• 1 January 2020 to 31 December 2020 – 12% • 1 January 2021 to 31 December 2021 – 30% • 1 January 2022 to 31 December 2022 – 38%

This represents a $35,279 saving in Electricity for Below 160MWh sites for the 3 years of the Agreement. Combined with the initial agreement for the Above 160MWh sites, the District Council of Streaky Bay – through the assistance of the team at Local Government Association – Procurement will save $79,041 over the period 1 January 2020 to 31 December 2022.

Risk Management – Framework and Policy Provisions

(a) Risk Consequences must be considered as per Appendix B of the Risk Framework; (b) The likelihood of the recognised risk occurring must be considered as per Appendix C of the Risk Framework; (c) Where risks are identified as Extreme or High (Appendix D), Council must ensure its decision reduces the recognised risk to

Medium or Low (residual risk) depending on the agreed tolerance level (Appendix E). Risk Matrix

Likelihood/Consequence Insignificant Minor Moderate Major Catastrophic Almost Certain Medium High High Extreme Extreme Likely Low Medium High Extreme Extreme Possible Low Low Medium High Extreme Unlikely Low Low Low High Extreme Rare Low Low Low Medium High

Comment: Given the Agreement has been signed by the CEO there is little possible impact

on Council other than a savings in electricity cost. Further investigations into renewables in the future may provide further savings to Council as we move toward solar and other renewable energy generation devices.

OPTIONS:

ecommendation: That Council: (a) Pursuant to Section 90(2)(3)(d)(i)(ii) of the Local Government Act 1999, orders that all persons with

the exception of the Karina Ewer (Chief Executive Office), Sandra Brice (Manager, Business & Administration Services), Jennifer Brewis (Manager, Regulatory Services), Darren Walker (Manager, Infrastructure and Civil Works) and Judy Childs (Executive Assistant & Governance Officer/Minute Taker), be excluded from attendance at the meeting for agenda item 18.1, relating to ‘Supply of Electricity”

(b) Is satisfied pursuant to Section 90 (2)(3)(d) (i)(ii) of the Act, the information the disclosure of which

(i) could reasonably be expected to prejudice the commercial position of the person who supplied the information, or to confer a commercial advantage on a third party; and (ii) would, on balance, be contrary to the public interest.

(c) Is satisfied that the principle that the meeting be conducted in a place open to the public has been outweighed in the circumstances as commercial details would be disclosed

Recommendation That Council, having considered Report No 18.1 Supply of Below 160 MWh Electricity, 17 October 2019 and its role under Section 6, 7 and 8 of the Local Government Act 1999 receive and note the report. Recommendation That Council considered the agenda item 18.1 relating to ‘Supply of Electricity’ in confidence under Section 90(2) and (3)(d) of the Local Government Act, pursuant to Section 91(7) of the Act orders that the minutes, reports considered and discussed in relation to agenda item 18.1 be retained in confidence and not be available for public inspection and its role under Section 6, 7 and 8 of the Local Government Act 1999 determine to keep this report Confidential until the xxx

RFT 19054.2 – Recommendation Report Page 7 of 10

Supply of Below 160 Electricity & GreenPower for Local Government Sites in South Australia

Recommendation Report 26 September 2019

Attachment 1

RFT 19054.2 – Recommendation Report Page 1 of 10

Recommendation

TO: Electricity Authorised Officers

FROM: Andrew Haste, Chief Executive Officer, LGA Procurement

SUBJECT: Recommendation report for retail electricity for South Australian councils and local government entities

DATE: 26 September 2019

Below 160MWh Supply

Under LGA Procurement Contract Number 19054.2 for the supply of Electricity (Black and GreenPower) for Below 160MWh, it is recommended that South Australian councils and local government entities accept the tender from Origin Energy, commencing 1 January 2020 for a period of 3 years, expiring 31 December 2022.

It is important to note that: 1. The offers presented in this recommendation report are only valid until 10am, Monday 30

September 2019 (unless the selected retailer withdraws their offer before then, due to adverse wholesale market movements or other events beyond that company’s control);

2. Councils and entities are now required to complete the formal response form attached to this report, which MUST be completed and returned to LGA Procurement by 10am, Monday 30 September 2019 by email to procurement@lga.sa.gov.au;

3. Any response not received by that time will be assumed to be a non-acceptance of the offer;

4. If you do not wish to proceed under this Arrangement, Council will be required to obtain Contracts for all sites currently with Origin independently, to be in place by 1 January 2020; and

5. If no contracts are in place post 1 January 2020, Council will move to default rates. The

following link shows the indicative default rates are currently set to 29 cents (per kWh / Peak) and 17 cents (cents per kWh / Off Peak) - https://www.originenergy.com.au/business/commercial-and-industrial/forward-plan/pricing.html

Attachment 1

RFT 19054.2 – Recommendation Report Page 2 of 10

Executive Summary

It is with great pleasure that I present this Recommendation Report to you detailing the last tranche of contracted electricity supply to the SA local government sector.

The National Electricity Market (NEM) continues to be a volatile and complex thing with many factors influencing price and contractual conditions.

Casual observers of the NEM over the past three or so years would be correct in believing the nation (and particularly South Australia) as being in the midst of an energy crisis. Such a crisis has developed through a range of factors including high gas prices, shutting down of ageing coal fired plants, policy uncertainty, an abundance of renewables, lack of competition and so on. The result has been an ever-increasing price outlook with new wholesale price records being set during this period.

Throughout this period, LGA Procurement has continued to act in the interests of SA councils, navigating the complexities of the NEM and delivering real benefits through aggregated price leverage and well managed contracts.

This Recommendation Report once again presents a favourable and positive outcome to the sector.

The below chart demonstrates the pricing results achieved by LGA Procurement over the past two contracts and on to the current, ending in 2022.

This is in addition to the tender avoidance consultancy costs of around $2M for a disaggregated approach.

It is therefore the recommendation of the Evaluation Panel that I present you with the following for the supply of your councils’ Below 160MWh requirements

With savings totalling over $5.5M over three years, this is an incredible result for the sector.

Please note: This contract is based purely on the energy component of your electricity invoices which equates to approximately 40% of the total electricity bill. The remaining 60% is regulated by the Federal Government through the Australian Energy Regulator and is non-negotiable.

Attachment 1

RFT 19054.2 – Recommendation Report Page 3 of 10

See below:

With aggregation and a united local government sector comes the benefit of negotiating the best possible value for the sector. Without this unity, the value obtainable would not be the same. Another benefit for councils it that you will enjoy major customer status because of the aggregated purchasing and will have a Dedicated Account Manager for all aspects of your electricity account.

LGA Procurement will, as in the past, act as the contract managers and liaison between your council and the Dedicated Account Manager for any roll-in/roll-out of sites and to investigate any issues with your accounts on your behalf.

We are very pleased with the outcome of the tendering process and now require your council to complete the attached “Authority to Participate” which must be received by 10am, Monday 30 September 2019 by email to procurement@lga.sa.gov.au.

Andrew Haste Chief Executive Officer, LGA Procurement E: andrew.haste@lga.sa.gov.au T: 08 8224 2073

Attachment 1

RFT 19054.2 – Recommendation Report Page 4 of 10

Background Phase One

On 5 March 2019 LGA Procurement, on behalf of those councils and certain local government entities who have previously indicated their initial approval, issued an expression of interest (EOI) as Phase One of the electricity procurement process, to several electricity retailers and renewable energy project owners for the supply of electricity to large, small and unmetered council sites for the SA local government sector with contracts to commence from 1 January 2020.

Eleven (11) responses were received through the expression of interest (EOI) process to provide indicative pricing for large, small and unmetered customer sites. This initial exercise sought to assess where the South Australian electricity market sits currently with regards to pricing, with the intention to then issue a formal request for tender (RFT) (as Phase Two of the process) to all 11 respondents to submit formal pricing offers for supply from 1 January 2020.

Phase Two

On 2 April 2019 a formal RFT was issued to all 11 respondents from the EOI process, with a closing date of 29 April 2019.

On 18 April 2019, LGA Procurement extended the close time to 6 May 2019 due to a number of factors, not least being the current run of warm weather not being conducive to any significant drop in pricing, which is generally experienced in the April/May period.

At close of tenders on 6 May 2019, LGA Procurement received 7 responses to the RFT for provision of electricity to the SA local government sector.

On 7 May 2019, the Evaluation Team met and resolved to go back to the 7 tenderers, requesting clarification on a number of items and to request negotiation on a range of additional charges that were included by some respondents that could impact the overall price to councils.

Tenderers were also asked to provide a best a final offer for pricing, closing on 13 May 2019.

The Evaluation Team resolved to proceed with Infigen Energy for the supply of Above 160 and 12/24 Sites.

Due to the volatility of the small sites market, only three submissions were received for the supply of electricity (Black and GreenPower) for Below 160MWh sites. The Evaluation Team resolved to go back to the market in August/September with the objective of receiving additional retailer responses and sharper pricing.

Phase Three

On 2 September 2019, a formal RFT was issued to 9 respondents from the EOI process who indicated their intention to tender for the Below 160MWh sites, with a closing date of 23 September 2019.

At close of tenders on 23 September 2019, LGA Procurement received 5 responses to the RFT for provision of Electricity (Black and GreenPower) for Below 160MWh sites to the SA local government sector.

Attachment 1

RFT 19054.2 – Recommendation Report Page 5 of 10

Response Summary At close tenders (12.00pm on Monday, 23 September 2019), LGA Procurement had received responses as follows:

Contract number Description Companies which tendered

RFT 19054.2 Below 160MWh Supply

• Supply of Electricity, LGCs, STCs and GreenPower/Solar Feed-in

• Supply of Electricity only • Supply of LGCs, STCs &

GreenPower / Solar Feed-in only

• Supply of Export Electricity Rate/Charge to Solar Sites

• AGL Sales Pty Ltd • Energy Australia Pty Ltd • ERM Power Retail Pty Ltd • Origin Energy Electricity Limited • Simec Zen Energy Retail Pty Ltd

The Electricity Evaluation Working Party comprising two council representatives (from Charles Sturt and Onkaparinga), Diane Harris, Procurement Specialist and Victoria Newton, Contracts Officer, of LGA Procurement and CQ Partners and met on Tuesday 24 September to receive and evaluate all tender submissions. Evaluations were conducted based on the following pre-determined criteria and associated weightings:

Criteria Percentage Score

Pricing (including both Black and GreenPower) 55%

Invoicing, Reporting incl Mandatory Business Processes 15%

Customer Service 15%

Renewable Options 10%

Referee 5%

Attachment 1

RFT 19054.2 – Recommendation Report Page 6 of 10

Origin Energy Renewable Options Origin have committed to purchase the offtake from approximately 1,200 MW of new wind and solar projects. In FY2019, the second stage (110 MW) of the Bungala Solar Farm in South Australia was commissioned and available to the grid, creating Australia’s largest solar farm as of November 2018. Furthermore, Origin continue to invest in their existing gas fleet to improve its reliability and flexibility. In FY2019, at their Quarantine Power Station in South Australia, they commissioned a new fast-start aero-derivative turbine that can start up in as little as three minutes, helping support growth in renewables. Clare Solar (100 MW), Daydream Solar (150 MW) and Darling Downs Solar (110 MW), all in Queensland, were also commissioned in FY2019. The 530 MW Stockyard Hill Wind Farm is currently under development and expected to be online in 2020, putting Origin on track to reach their target of more than 25 per cent of Origin owned and contracted generation capacity being made up of renewables and storage by 2020 – up from 19 per cent in FY2019.

Origin Energy Value-added Offers Origin will provide Councils with an array of solutions including access to our online portal, tariff reviews and site analysis we will also explore with councils our other products that can be made available these include solar and LPG. Origin have programs that can be made available to local schools within council areas and would work with LGA Procurement and Councils to deploy these resources to the schools. These include; Energy for Schools Learning Program, littleBIGidea’s Program and Origin Foundation “Lights for Learning” program.

Attachment 1

RFT 19054.2 – Recommendation Report Page 7 of 10

Pricing Detail - Below 160MWh (Small Sites) Following the evaluation, the Panel considered the three (3) year option offered by Origin Energy for the Supply of Electricity (Black and GreenPower) for Below 160MWh sites, to be of best value to the local government sector. Delivering significant reductions across peak and off peak rates, the sector will benefit from a $5.5 million savings across the three year contract. Seeing an 9.45% reduction in year one (2020), 23.96% in year two (2021) and 30.21% in year three (2022), as compared to the current pricing being paid. Peak

$/MWh Off Peak $/MWh

LRET $/Cert

SRES $/Cert

GreenPower $/MWh (additional charge on top of the 100% black power energy used)

Energy Usage Environmental Charges

Current energy rates to 31 December 2019 (Origin Energy) $176.59 $83.01 $77.00 $33.00 $163.00 (at 20%)

Year One Origin Energy offer from 1 January 2020 to 31 December 2020

$156.84 $71.82 $31.25 $40.00 $33.35 (at 100%) $16.675 (at 50%) $8.337 (at 25%)

Year Two Origin Energy offer from 1 January 2021 to 31 December 2021

$124.72 $60.48 $15.75 $40.00 $18.10 (at 100%)

$9.05 (at 50%) $4.525 (at 25%)

Year Three Origin Energy offer from 1 January 2022 to 31 December 2022

$109.08 $56.40 $12.50 $40.00

$14.60 (at 100%) $7.30 (at 50%) $3.65 (at 25%)

Attachment 1

RFT 19054.2 – Recommendation Report Page 8 of 10

Pricing Detail - Solar Feed-in-Tariff

Note: Origin has provided a fixed Feed-in-Tariff (FiT) of 15c/kWh ($150 MWh) exported for each year of the contract. Standard FiT price reviewed annually in line with Origin tariff reviews. Origin will pass through changes in the event the standard FiT increases above 15c/kWh.

Small Sites $/MWh

Current rates to 31 December 2019 (Origin Energy) $110.00

Year One Origin Energy offer from 1 January 2020 to 31 December 2020 $150.00

Year Two Origin Energy offer from 1 January 2021 to 31 December 2021 $150.00

Year Three Origin Energy offer from 1 January 2022 to 31 December 2022 $150.00

Attachment 1

RFT 19054.2 – Recommendation Report Page 9 of 10

Pricing Comparison to Current Agreement

The following information provided by the consultant, CQ Partners shows the % difference to the current agreement.

2020

Current Origin New

Item Peak kWh Off Peak kWh Total kWh Current

Total $ Total $ $ Difference % Difference to

Current to Current

Small Sites 28,806,000 11,676,000 40,482,000 $8,702,877 $7,880,140 -$822,737 -9.45%

2021

Current Origin New

Item Peak kWh Off Peak kWh Total kWh Current

Total $ Total $ $ Difference % Difference to

Current to Current

Small Sites 28,806,000 11,676,000 40,482,000 $8,702,877 $6,618,051 -$2,084,826 -23.96%

2022

Current Origin New

Item Peak kWh Off Peak kWh Total kWh Current

Total $ Total $ $ Difference % Difference to

Current to Current

Small Sites 28,806,000 11,676,000 40,482,000 $8,702,877 $6,073,333 -$2,629,544 -30.21%

Attachment 1

RFT 19054.2 – Recommendation Report Page 9 of 10

148 Frome St Adelaide SA 5000

GPO Box 2693 Adelaide SA 5001

T (08) 8224 2000

E procurement@lga.sa.gov.au

lgaprocurement.sa.gov.au

Attachment 1

Total Savings on

Council Annual Peak

Consumption

(kWh)

Annual Off Peak

Consumption

(kWh)

Peak(c/kWh)

Off Peak(c/kWh)

LRET + SRES

(c./kWh)

Admin Fee($/meter/

month)

Total Peak(c/kWh)

Off Peak(c/kWh)

LRET + SRES

(c./kWh)

Admin Fee

($/meter/month)

Total Peak(c/kWh)

Off Peak(c/kWh)

LRET + SRES

(c./kWh)

Admin Fee

($/meter/month)

Total Peak(c/kWh)

Off Peak(c/kWh)

LRET + SRES

(c./kWh)

Admin Fee

($/meter/month)

Total Over 3 Years

STREAKY BAY

193,420 51,816 17.659 8.301 1.708 $3.33 $43,885 15.684 7.182 1.566 $2.08 $38,672 12.472 6.048 1.043 $2.08 $30,589 10.908 5.64 0.946 $2.08 $27,114 $35,279

Current Origin 2020 2021 2022

Item 18.1 Attachment 2