U.S. General Services Administration
GSA’s Reverse Auction for Energy in Texas Saves Taxpayers Money
One-hundredth of a penny might not seem like much, but when the federal government is bidding on the electricity used throughout Texas for the next five years, those pennies add up fast. Five years ago in 2013, the U.S. General Services Administration’s Greater Southwest Region was tasked with providing the most cost-effective solution for purchasing electricity for GSA-owned and operated buildings in the deregulated areas of Texas. The region’s Energy Team, which included the Office of Facilities Management and the Office of Acquisition Management, was up to the task and eager to try something new.
Prior to 2013, when GSA’s Greater Southwest Region sought to procure power, individual quotes would be requested from electricity vendors and those bids would be evaluated. In 2013 however, the region took a more innovative and asked vendors to bid directly against one another in real-time; a reverse auction. The new process created intense competition and was a huge success. The reverse auction resulted in the procurement of 60 month contracts for 50% renewable energy across the board at a savings of approximately $33 million compared to the previous contract.
Fast forward to 2018 and the 60 month contracts that were awarded in 2013 were approaching expiration. Given the success of the previous procurement strategy, GSA’s Regional Energy Team with support from EnerNOC, Inc. developed another reverse auction for the new electricity buy. Based on an assessment of the market and the GSA’s regional objectives, the team decided to aggregate accounts into two groups:
- Fixed Price - 100% Green for 29 electricity accounts in the Oncor and Centerpoint service territories representing 353,795,635 kWh over the 60 month term
- Fixed Price - 100% Green for 70 electricity accounts in the AEP service territory representing 144,272,208 kWh over the 60 month term
GSA and EnerNOC, Inc. prepared estimates to provide to assess of current and future market prices. The analysis highlighted some challenges that helped
develop GSA’s negotiation strategy. Short term prices for electricity in Texas had risen dramatically since October of 2017. Also, prices for 12, 24, 36 and 48 month contracts were trading at higher prices than 60 month prices. Based on this information, Region 7 focused solely on pricing for 60 month contracts which were still trading at very low levels.
Two weeks before the reverse action, GSA requested technical proposals from interested electricity suppliers. A total of nine proposals were received which was a significant increase in participation from the 2013 auctions. Over the next two weeks, the Regional Energy Team entered into negotiations reviewing proposals and requesting clarifications and/or additional supporting information.
On June 12, 2018, GSA successfully completed reverse auctions for the next 60 months for federally owned facilities in Texas. The first auction ended at 11:30 a.m. cst with 24 bids submitted by seven bidders for 29 electricity accounts in the Oncor and Centerpoint service territories. The second auction ended at 11:45 a.m. cst with 15 bids received from six bidders. Multiple bidders for both auctions were within $0.002 per kWh of the final winning bid.
Two suppliers were awarded 99 electricity accounts with annual usage of 99,613,569 kWh or slightly more than 498 million kWhs over the 60 term of the contract. The new contracts will begin August 1, 2018. The estimated annual savings for the new contracts is $1.65 million or $8.23 million over the full sixty month term ($0.05644 v. $0.03992 per kWh). This represents a savings of 29.3%.
The winning bids for each event are provided below:
- Fixed Price - 100% Green for twenty nine (29) electricity accounts in the Oncor and Centerpoint service territories – Best bid of $0.03920 per kWh from Agera Energy, LLC
- Fixed Price - 100% Green for seventy (70) electricity accounts in the AEP service territory - Best bid of $0.04168 per kWh from NextEra Energy Services
While this is impressive, it is equally as impressive that the Greater Southwest Region also increased its renewable percent from 50% in the previous contracts to 100% percent in the new contracts. All of the renewable power will come from solar and wind generation located in Texas allowing GSA to support renewable generation within the state. GSA’s goal was to achieve cost savings, to improve procurement efficiency and to leverage the expertise of the Regional Energy Team. Clearly, the outcome of this auction was an outstanding achievement for all parties involved and a shining example the GSA’s efforts to become a more sustainable government.