City to consider natural gas contract extension

The city’s energy contracts are set to expire next year and the city’s energy consultant has encouraged locking in new rates early to get better deals.

During Tuesday’s meeting, City Commissioners will consider extending a natural gas contract with Energy West.

In 2013, the city hired energy consultant Bill Pascoe and entered into contracts with Talon Energy, formerly PPL, for electricity and Energy West for natural gas supply. Those contracts run from Nov. 1, 2013 to Oct. 31, 2018.

Since the electric and natural gas supply markets have changed since 2013, Pascoe indicated that there are different providers in the Montana market that could provide the city with competitive rates and a stable supply. The city is currently requesting electric supply proposals and they will be considered at a special City Commission meeting on Nov. 30.

Pascoe indicated that he could not be able to assist with natural gas bids, so the city hired Jim Morin of Earth Energy Advisors, a Great Falls company, in a five-year contract for $8,500 that was approved during the Nov. 7 meeting.

Earth Energy Advisors evaluated the current supply contract and determined that the best and most competitive approach would be to “blend and extend” the city’s current contract with Energy West, according to the staff report.

Natural gas demand has increased statewide and EEA has advised the city to lock in rates before the current contract expires.

There was a lack of other interested gas suppliers, and Energy West remains the “most logical and competitive supplier,” according to the staff report.

EEA began negotiations with Energy West in mid-October and the energy supplier submitted a revised agreement/proposal in late October. The proposal is to blend the current natural gas supply contract into a new 5-year agreement, effective Nov. 1. The proposed agreement includes the first two years at a fixed price full requirements of $3.37/Mmbtu and the remaining three years of the contract at an Aeco 7A Index plus adder of $0.682/Mmbtu with an option to fix that index in the future.

The current contract proce with Energy West is $4.14/Mmbtu and the revised agreement would lower the rate by 77 cents for the next two years.

The contract term is projected to save the city in excess of $200,000 over the next five years compared to the last five years, or about a 30 percent reduction in supply cost, according to city data.