B-28106 JPMC Natural Gas Supplier Request for Proposals Q and A 001 220422.pdf

Illinois Department of Central Management Services JPMC Natural Gas Supplier

21-416CMS-BOPM4-B-28106

Questions and Answers #1

04/22/2022

Q1 Today in practice any intra-month spot gas needs for Nicor/PGL/NSG is handled at a spot market price that the State decides if they want to purchase the gas or not. In light of the tariff changes at Nicor to tighter daily and monthly storage tolerances, will that practice continue for the supplier to provide intra-month spot gas needs and intra-month spot pricing? And given the potential daily timely need to transact daily, would the State consider the supplier to provide an intra-month purchase recommendation if the needs change and if we do not hear from the State before day ahead trading occurs the supplier could transact the gas at a spot price if not provided a reply from the State in order to keep the State's storage account in tolerance?

Page 21-D.1

A1 Intra month purchase recommendations should continue with an added margin to meet Nicor requirements.

Daily adjustments should fall within the agreed upon margin/error amount accounted during the intra month purchase recommendations. Daily adjustments will not need State approval, but a copy of the transaction will be requested. The numbers must be reconciled the following month.

Q2 There are two sections that may be in conflict with each other:

1) D.3.1.b - The governmental unit will retain control of the customer-owned storage capacity volume with the awarded Offeror being authorized to leverage such volumes as needed to avoid the imposition of penalties.

2) D.2.4.a - Governmental units shall have no obligation to order any specific quantity of natural gas in any specific month. The quantity of natural gas needed by the governmental unit shall be delivered pursuant to any resulting contract.

Can you confirm that in working with State on monthly and daily nominations as needed to remain in tariff tolerances imposed by the utility that the State will work with the supplier in good faith to order gas as needed to avoid penalties?

Page 23-D.2.4.a Page 25-D.3.1.b

A2 The State will make a good faith effort to work with the supplier to order gas as needed. Penalties incurred by improper management of the storage volumes will not be incurred by the State.

Q3 In Section D.2.9. it states "The awarded Offeror shall create a pool of governmental units within the LDC’s pooled balancing program to better facilitate its daily balancing responsibilities. This pool will consist of governmental units included in Attachment A but may also include other governmental units served within an LDC territory."

In addition, in Section D.3.1.a it states "A single storage account may contain either customer-owned (NICOR/PGL/North Shore Gas) or Vendor-owned gas (Ameren Illinois)."

We wanted to confirm if this allows the supplier to pool all State of Illinois accounts into one storage group for balancing purposes as long as the supplier could continue to bill the accounts and departments separately for deliveries? Could the accounts be pooled with non-State of Illinois accounts?

Page 24-D.2.9

Page 25-D.3.1.a

A3 Accounts can be pooled for best practice management of the storage volumes and more favorable price terms. State accounts can be pooled with non-State accounts as long as all accounting and billing is separated.

A management plan should be offered that explains how the vendor will manage the accounting and existing stored natural gas. This plan will need to align with State of Illinois billing practices and receive approval prior to a single pool approach can be implemented.

Q4 Today we are actively serving 411 accounts but the Account List provided as Attachment A shows 868 accounts. Just looking to confirm if there are additional accounts that are planned to be added to the winning supplier as part of the new RFP? If there are additional accounts being added could you provide the LDC account numbers so we could compare to active accounts to see the increased load?

Attachment A Rows 1-871

A4 Yes we can provide LDC numbers for accounts associated with the State of IL.

Q5 The "FY21 Therms" column D on the Account List Attachment A totals to 21,465,111 therms. In various places throughout the RFP document it references an annual estimated need as 28 million therms (D.2.6;

D.6.1.a; and D.6.5). Can you confirm the annual estimated need and if different than the Attachment A provide the account details by LDC and month for the additional load?

Attachment A Rows 1-871

A5 Given the hybrid work schedules during FY21, we estimate the natural gas usage during this time was lower than the normal requirements for the State. Therefore, the approximately 28 million therms is the estimated need.

Q6 The Account List Provided in Attachment A has additional rows 873-901 referencing 28 additional

Governmental Units with 214 additional gas accounts with no historical usage provided. Will those Governmental Units be considered part of the RFP pricing and contract provisions? If so can a detailed account list with historical usage shaped monthly be provided? If not priced as part of the RFP will they be priced separately as a stand-alone contracts BOA'd to the State agreement?

Attachment A Rows 873-901

A6 Listed units will be part of the RFP. The additional governmental units expressed interest in participation with the current procurement; however, the additional government units are under no obligation to participate in this solicitation or award. These additional accounts should be considered "potential" accounts, that would need further investigation after a contract is executed. Additional government units would enter into a separate contract with the awardee and reference the State's executed agreement.

Q7 In Section 3.F.1.1 it states "This contract has of ten (10) years. If a start date is not identified, then the term shall commence upon the last dated signature of all Parties." Can you confirm the term would start 7/1/2022 at the end of the existing contract with current supplier? And if the RFP would not be modified would the 10-year term end 6/30/2032 or 10-years from the date of the signature of all Parties?

Page 35-3.F.1.1

A7 Contract start date will be determined during contract negotiation, as well as any transition period timeline.

Q8 In Section 3.F.1.2 it states "RENEWAL: No applicable. Subject to the maximum total term identified above, the State has the option to renew for the following term(s): 0."

Can you confirm that the initial term of 10-years will be transacted all at one time and therefore no renewal term that goes beyond 10-years is applicable?

Page 35-3.F.1.2

A8 The term of the contract is 10 years with no renewal.

Q9 In Section D.3.5 it states "As the index is based upon the most appropriate and advantageous index price available to the governmental unit using the prices indices as identified in D.1 which is the pricing point for natural gas futures each governmental unit may renegotiate the rate if any of the following occurs:

a. The rolling average over the last two (2) calendar months of natural gas spot market index price is 20% below the contracted rate. The index price of the previous two calendar months will be analyzed individually.

b. The rolling average of the natural gas spot market price over the last four (4) calendar months is 15% below the contracted rate.

c. The rolling average of the natural gas spot market price over the last twelve (12) calendar months or more is at least 10% below the contracted rate."

Can you confirm if this means that if any of these events occur that the NGI vendor cost adder outlined in E.1.2 could be renegotiated and would no longer be considered firm and binding by both parties?

Page 26-D.3.5 Page 35-E.1.2

A9 Yes. The section intends to provide parameters in which the State has the capacity to renegotiate the rates with the vendor in the case of a significant market swing during the contract term.

Q10 In Section D.2.7 states "Gas Purchased from LDC – Governmental units reserve the right to purchase natural gas directly from LDC’s in the event the price for gas charged to governmental units by the LDC is lower than the price available through awarded Offeror, who will be notified of such purchasing no later than five (5) days before the first of the month."

Given you have customer owned storage, in practice the only way to do this through the LDC is to have your storage account be 0 and then take the LDC supplied gas. If you then still plan to take LDC supplied gas are you comparing that to the monthly Index Rate as well as any fixed prices that may be in place? And as such is any fixed price gas not considered a binding deal by both parties if that deal could be exited by the State if the LDC price is lower at any point in the future?

Page 24-D.2.7

A10 This provision's intent was to maintain the State's right to purchase gas outside of the contract if the supplier could not deliver gas to the State. The pricing renegotiation is already covered in the renegotiation clause.

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