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Home My WebLink About2011-01-19 PACKET 04.F.REQUEST OF CITY COUNCIL ACTION COUNCIL AGENDA MEETING ITEM # DATE 01/19/2011 PREPARED BY : Public Works ORIGINATING DEPARTMENT Les Burshten STAFF AUTHOR COUNCIL ACTION REQUEST 2011 Fuel Consortium Purchase Program Update. STAFF RECOMMENDATION 2011 Fuel Consortium Purchase Program Update. BUDGET IMPLICATION $ $ BUDGETED AMOUNT ACTUAL AMOUNT FUNDING SOURCE SUPPORTING DOCUMENTS ❑ MEMO /LETTER: Brian Voelker, January 14, 2011. ❑ RESOLUTION: ❑ ORDINANCE: ❑ ENGINEERING RECOMMENDATION: ❑ LEGAL RECOMMENDATION: ❑ OTHER: Fuel Consortium Fixed and Spot Pricing Overview. ADMINISTRATORS COMMENTS City Administrator Date COUNCIL ACTION TAKEN: ❑ APPROVED ❑ DENIED OTHER (:= CITY OF COTTAGE GROVE MINNESOTA To: Honorable Mayor and City Council Ryan Schroeder, City Administrator Cc: Robin Roland, Finance Director Les Burshten, Public Works Director From: Brian Voelker, Management Analyst Date: Wednesday, January 19, 2011 Subject: Fuel Consortium Purchase Program History The City of Cottage Grove has participated in the State of Minnesota's Fuel Consortium Purchase Program since 2009. The purpose of the Fuel Consortium Purchase Program is to develop a consistent fuel budget for each budget year. Background /Discussion On December 14, 2010, the State of Minnesota entered into a Fixed Price and Spot Price Fuel Program with Yocum Oil. The Fuel Consortium Purchase Program for State of Minnesota Agencies and Cooperative Purchasing Venture Members is a program that the State of Minnesota Acquisition Management is going to operate. The Fuel Consortium Purchase Program consists of two programs: Fixed Price Program and Spot Price Program. The Fixed Price Program requires a participating agency or entity to: • be located primarily in the seven county metropolitan area unless otherwise approved. • agree and comply with the terms and conditions of the Contract. • be able to take either gasoline or diesel fuel in the required product type and as delivered by the Contract Vendor in quantities of at least 500 gallons per delivery. • commit to a specific amount of the fuel for a monthly delivery. • take 100 percent of the committed monthly amount at a fixed price contracted on its behalf. The Spot Price Program may be used by any participating agency /entity, on an as needed basis, and will require a participating agency /entity to: • be located within the borders of Minnesota. • agree and comply with the terms and conditions of the Contract. • place orders directly with the Contract Vendor for its requested amount and product type. • pay the Contract Vendor the amount based on the Spot Price formula contracted, which is the Daily Rack Average Price plus the Contract Vendor's Total Bid Constant (profit/overhead /delivery cost) per gallon delivered. Fixed Price for February 1, 2011 to January 31, 2012 The City of Cottage Grove committed for an estimated 80% (5,500 gallons per month) of 87 Octane gasoline purchases and an estimated 80% (2,300 gallons per month) of Diesel Winter /Summer Blends. The following chart includes the fuel price under the fixed cost, state taxes. and fees: Fixed Prices for Gasoline and Diesel Purchases Gallons Per Month Gallons per Year Price Per Gallon Total Cost Per Year 87 Octane Gasoline 5500 71500 $ 2.88 $ 205,920.00 Diesel (Summer & Winter Blends) 2300 29900 $ 3.03 $ 90,597.00 Total 1014001 $ 296,517.00 Spot Pricing The 20% that the City of Cottage Grove didn't commit to in the fixed price fuel purchase program will be based on the Daily Rack Price for the day and the total bid constant, which we estimate for budget purposes to be $3.60 per gallon average for 87 Octane and $3.78 per gallon average for Diesel Summer and Winter Blends, which is approximately 25% above the fuel consortium price. We are also going to compare the price we receive from Yocum to the open market vendors such as, Hartland Fuels and Midwest Industrial Fuel. Spot Prices for Gasoline and Diesel Purchases Gallons Per Month Gallons per Year Price Per Gallon Estimated Total Cost 87 Octane Gasoline 1375 17875 $ 3.60 $ 64,265.09 Diesel (Summer & Winter Blends) 575 7475 $ 3.78 $ 28,287.27 Total 253501 $ 92,552.36 2010 Budget Savings The preliminary budget savings for 2010 was approximately $46,000.00. 2011 Budget Savings Based on the fixed fuel pricing and the spot pricing (25% over the fixed fuel pricing), the projected 2011 fuel dollars will be at the 2011 fuel budget dollars. It is important to note that the 2011 budget usage includes a 4% increase over the average of the past three years. The 2011 budget savings will depend if the usage is less than the budgeted amount and the cost of fuel prices on the spot pricing (open market). Fuel usage typically increases if the city receives a significant snowstorm or other operations that require more fuel usage. The City is continuously evaluating the purchase of more sustainable replacement vehicles to improve the fuel efficiencies of city fleet. The 2012 Preliminary Budget contains $3.05 per gallon estimate that will have to be reviewed during future budget discussions in July. FIXED PRICE PROGRAM - PRICE SCHEDULE - Effective 2/1/11 thru 1/31/12 All applicable tax credits will be deducted from the fixed price. The deduction (credit) will be shown as a separate line item on the invoice. January 2011 NYMEX Futures Price - Settlement Values 12/14/10 $2.4679 /GALLON - Heating Oil Futures Price $2.2964 /GALLON - RBOB Gasoline Futures Price Total Delivered Price = Prod uct /Profit/Overhead /AII Expenses and Delivery Costs BIO- DIESEL - DYED - SUMMER BLENDS - PER SPECIFICATIONS FIXED DELIVERED PRICE - BASED ON 2,417,150 GALLON COMMITMENT PRODUCT Estimated purchase amount of total commitment. Delivered Price 500- 999 Gallons Delivered Price 1000- 1999 Gallons Delivered Price 2000- 2999 Gallons Delivered Price 3000- 3999 Gallons Delivered Price 4000- 4999 Gallons Delivered Price 5000- 5999 Gallons Delivered Price 6000- 6999 Gallons Delivered Price 7000 - 7500 TANKER B5 59% $2.9640 $2.9211 $2.9051 $2.8982 $2.8944 $2.8920 $2.8879 $2.8856 B10 6% $3.0540 $3.0111 $2.9951 $2.9882 . $2.9820 $2.9679 $2.9656 ®_ B15 1% 1 $3.1240 1 $3.0811 1 $3.0651 1 $3.0582 1 $3.0544 1 $3.0520 1 $3.0479 $3.0456 B20 16% $3.0640 1 $3.0211 $3.0051 $2.9982 $2.9944 $2.9920 $2.9879 $2.9856 Premium 18% 1 $2.9040 1 $2.8611 $2.8451 $2.8382 $2.8344 $2.8320 $2.8279 1 $2.8256 BIO- DIESEL - DYED - WINTER BLENDS - PER SPECIFICATIONS FIXED DELIVERED PRICE - BASED ON 1,555,250 GALLON COMMITMENT PRODUCT Estimated purchase amount of total commitment. Delivered Price 500- 999 Gallons Delivered Price 1000- 1999 Gallons Delivered Price 2000- 2999 Gallons Delivered Price 3000- 3999 Gallons Delivered Price 4000- 4999 Gallons Delivered Price 5000- 5999 Gallons Delivered Price 6000- 6999 Gallons Delivered Price 7000 - 7500 TANKER B5 82% $2.9640 $2.9211 $2.9051 $2.8982 $2.8944 $2.8920 $2.8879 $2.8856 B10 9% $3.0540 $3.0111 $2.9951 $2.9882 $2.9844 $2.9820 $2.9679 $2.9656 B20 7% 1 $3.1240 1 $3.0811 1 $3.0651 1 $3.0582 1 $3.0544 1 $3.0520 1 $3.0479 $3.0456 Premium 2% $2.9640 1 $2.9211 1 $2.9051 1 $2.8982 1 $2.8944 1 $2.8920 1 $2.8879 $2.8856 GASOLINE - 87 OCTANE FIXED DELIVERED PRICE - BASED ON 4,068,575 GALLONS COMMITMENT Delivered Delivered Delivered Delivered Price Delivered Price 3000- Delivered Delivered Delivered Delivered Price 8000+ Price 500- 1000 -1999 Price 2000- 3999 Price 4000- Price 5000- Price 6000- Price 7000- Gallons 999 Gallons Gallons 2999 Gallons Gallons 4999 Gallons 5999 Gallons 6999 Gallons 7999 Gallons Tanker $2.5519 $2.5090 $2.4930 1 1 $2.4862 $2.4824 $2.4800 $2.4758 $2.4736 $2.4719 GASOLINE - E -85 FIXED DELIVERED PRICE - BASED ON 152,000 GALLONS COMMITMENT Delivered Delivered Delivered Delivered Price Delivered Price 3000- Delivered Delivered Delivered Delivered Price 8000+ Price 500- 1000 -1999 Price 2000- 3999 Price 4000- Price 5000- Price 6000- Price 7000- Gallons 999 Gallons Gallons 2999 Gallons Gallons 4999 Gallons 5999 Gallons 6999 Gallons 7999 Gallons Tanker $2.5519 $2.5090 $2.4930 $2.4862 $2.4824 $2.4800 $2.4758 $2.4736 $2.4719 All applicable tax credits will be deducted from the fixed price. The deduction (credit) will be shown as a separate line item on the invoice. DROP CHARGE TO MULTIPLE LOCATIONS AFTER INITIAL DELIVERY - $15.00 /PER DROP SPOT PRICE PROGRAM - PRICE SCHEDULE - EFFECTIVE 2/1111 THRU 1/31/12 SPOT PRICE PROGRAM FOR ALL FIXED FUEL PROGRAM PARTICIPANTS IN METROPOLITAN AREA ORDER MAY BE FOR ANY FUEL PRODUCT TYPE POSTED ON DTN EXCEPT PROPANE PRICE FORMULA: Total Bid Constant (TBC) - (Bid Constant + Delivery Cost) + Daily Contract Average Rack Price (DTN) per Gallon x Number of Gallons Delivered Total Delivered Price All applicable tax credits will be deducted from the total price. The deduction (credit) will be shown as a separate line item on the invoice. IF REQUESTED, THE CONTRACT VENDOR MUST PROVIDE PRODUCT IN ANY QUANTITY REQUESTED * ** 500 GALLON MINIMUM ORDER DESIGNATED TERMINAL: MINNEAPOLIS 500 - 999 Gal /ons TBC = 1 $0.1109 1000 - 1999 Gallons TBC = 1 $0.0680 2000. 2999 Gallons TBC = 1 $0.0520 4000 -4999 Cations TBC = 1 $0.0413 3_000_3999 Ga llons TBC = 1 $0.0451 5000 - 5999 Gallons TBC = 1 $0.0389 6000 + Gallons TBC = 1 $0.0226 All applicable tax credits will be deducted from the total price. The deduction (credit) will be shown as a separate line item on the invoice.