City Commissioners voted during their June 17 meeting to extend their agreement with Guzman Energy for three years.

The contract is for energy supply and the city made the decision on the advice of their consultant in an effort to keep costs lower.

The city has been contracting with Guzman Energy since 2024.

Commissioner approved that contract in April 2024, effective Nov. 1, 2024 through December 2026.

Staff asked commissioners to approve a contract extension as a “blend and extend” to continue purchasing energy on the open market, for better predictability, rate stability and potential savings over the default supplier, NorthWestern Energy.

City releases energy cost bids [2024]

If the city defaults to NorthWestern Energy for energy supply, it cannot resume purchasing power on the open market.

Commissioners voted to allow the city manager to sign a blend and extend agreement when he received a firm proposal on June 18, as long as it was within the consultant’s recommended parameters.

But, City Manager Greg Doyon told The Electric on June 20 that the rates did not come in within the accepted parameters so there’s been no change in the city’s electric contract.

“As geopolitical events unfold in the middle east, the city was not able to secure more competitive electric rate through a ‘blend and extend’ with Guzman Energy,” Doyon told The Electric.

The city’s energy consultant, Jim Morin of PowerGas Corporation, advised the city to wait for at least a few weeks, or longer, and pursue quotes again, Doyon said.

The city remains under its current contract for energy supply with Guzman and so it can’t seek competitive bids from other suppliers, but can take advantage of lower rates with Guzman if they become available, Doyon said.

During the May 6 commission work session, Morin provided an update on the city’s energy use and contracting.

The city spends about $3.7 million annually on power and gas with power making up about 95 percent of that cost.

PowerGas, Morin’s company, manages the city’s energy supply contract.

Guzman Energy is actively transitioning its portfolio toward renewable sources projected to reach 80 percent renewable by 2026, according to the city, compared to NWE’s portfolio of 65-70 percent renewable.

Morin said during the May 6 meeting that the city’s cost of electricity had dropped 44 percent in recent years from $120 per megawatt hour in October 2022 to $74.75 megawatt hour in November 2024.

The city’s electricity increased by about 3.8 percent for 2024 while costs rose 0.4 percent and natural gas costs dropped 22 percent, according to the city.

Morin’s company implemented a load management and billing optimization program, saving about $170,000 for the city and is expected to save another $230,000 over the next 18 months, according to the city, and administrative efficiencies in coding and processing utility invoices have saved about $50,000 in labor costs for the first six months.

The city was planning to pursue a blend-extend contract “to lock in favorable rates while continuing to capitalize on Guzman’s increasingly renewable portfolio and avoid market volatility. A blend and extend contract could also protect the city from regulatory lock-in that would occur if it transitioned to NorthWestern Energy,” according to city staff.

Morin provided information to the city before the June 17 meeting that within the last few weeks, energy markets had moved up $3-5 depending on term, so saving were less but still there.

Morin said the city could blend and extend the contract for three or five years with an indicative price of $70 megawatt hour.

Savings would be the same for both terms since the city would only be replacing the first 18 months of the existing contract at $74.75 per megawatt hour with $70, for a savings of about $140,000 during that period.

The $70 per megawatt hour is a relatively low rate that may not last long, according to Morin.

That price didn’t last long, Doyon said, as unrest in the Middle East gave the market jitters, so the price jumped higher than the city’s approved parameters.

Doyon and Finance Director Melissa Kinzler had recommended that commissioners take the three-year option, which they did.

“Current comparisons show that the city’s energy supply rate is slightly better than the regulated utility’s rate. However, transmission costs — the fees charged to move electricity across the grid — are higher for the city because of how those rates are calculated on the open market. Even so, locking in a rate at or near the current $70 price could allow the city’s total electric rate to match or even beat the utility’s standard rates over time, especially if utility prices continue to rise,” according to the city staff report.