Subject
title
Authorize the City Manager to Enter into Electricity Supply Agreements with WGL Energy Services, Inc. for a Term between December 2025 and September 2026
end
Department
Rec & Parks - Parks & Facilities
Recommendation
Staff recommends that the Mayor and Council authorize the City Manager to monitor and execute agreements to lock-in prices for City electricity supply accounts from WGL Energy Service, Inc. in a form approved by the Office of the City Attorney and substantially similar to the sample agreement with WGL for SL Accounts (Attachment 1), by utilizing the Baltimore Regional Cooperative Purchasing Committee (BRCPC) RFP No P-146 Contract #00003312 for a term between December 2025 and September 2026.
Discussion
Background
Maryland operates under a deregulated electricity market where the industry is separated into two main functions:
1) Supply services, which is competitive and provided by various companies that generate and sell power; and
2) Distribution services, which is a regulated monopoly managed by local utilities within a defined geographic service area and involves the physical delivery of electricity to customers through infrastructure such as power lines, poles, wires, meters, and related equipment.
Potomac Electric Power Company (PEPCO) operates under the oversight of the Maryland Public Service Commission and is the sole electricity distributor serving City of Rockville (City) facilities and infrastructure. While PEPCO is the City’s only electricity utility, the City can contract separately with a competitive electricity supply provider. PEPCO is responsible for metering electricity usage and issuing utility bills that collect all applicable charges, including the supply, distribution and transmission fees, taxes, surcharges and taxes.
Electricity Supply
The City has approximately 120 Pepco accounts within four Pepco Maryland commercial rate schedules. Each schedule has different rates and pricing conditions, as follows:
• Commercial large usage accounts: Pepco Maryland Medium General Service Low Voltage Type II (MGT LV II) rate schedule.
• Water Treatment Plant account: Pepco Maryland Time Meter Medium General Service Primary Service Type III (MGT III) rate schedule.
• Small usage accounts: Pepco Maryland General Service (GS) rate schedule.
• Street light accounts: Pepco Maryland Street List Service (SL) rate schedule.
For each rate schedule type listed above, the City can enter into a contract with an electricity supply provider or return the accounts to Pepco. If the accounts are returned, Pepco will buy electricity for City electric accounts and charge the City according to rates approved by the Maryland Public Service Commission. This is called the "Standard Offer Service" (SOS) program and is administered under rules established by the Commission. Pepco updates the SOS rates in each rate schedule every few months and some rate schedules vary by hour or by time of day.
While Section 17-87(3) of the Rockville City Code (Code) exempts purchases of electricity from competitive procurement; historically, the City utilizes energy supply contracts that are competitively bid and awarded by other state/local governments or public agencies for standard terms and conditions and competitive rates. This allows the city to enter into fixed price agreements to protect against price volatility and support budget planning.
The BRCPC manages electricity supply for various Maryland county, city and local government jurisdictions, boards of education, and other government entities; leveraging collective buying power to get lower prices. The BRCPC solicitation for Electric Supply Services Contract under RFP No. P-146 and Contract #00003312 was hosted by Baltimore County and awarded to WGL Energy Services, Inc. with a start date of August 1, 2016, and renewals through September 2026. Under the terms and conditions of this contract, the City entered into an electricity supply service contracts with WGL in 2022 and renewed in 2024 for a term through December 2025 meter read dates. Through this agenda, staff is requesting renewal of the WGL contracts retroactively for the December 2025 meter read dates through the September 2026 meter read dates.
WGL provided indicative pricing for each rate schedule type listed above through the end of September 2026. Table 1 summarizes the current rate, WGL 9-month indicative pricing retroactive to the December 2025 meter dates for continuity of service, and Pepco SOS rates for comparison. The recommended option for each electricity account type is highlighted in blue. The Pepco SOS rates listed below factor in both generation and transmission rates to be comparable with WGL indicative pricing.
The City’s utility consultant recommends the City consider a fixed price agreement with WGL to protect against price volatility. The Pepco SOS prices for large commercial accounts and the water treatment plant are variable and either change every couple of months or hourly (for MGT III). MGT III hourly prices are unknown and will fluctuate each hour of the day with no price ceiling. This volatility associated with SOS pricing can have significant budget impacts; therefore, it is not recommended to take a chance on hourly prices for the larger meter accounts. WGL indicative pricing for streetlights and small accounts are below Pepco’s SOS rate, but higher than current rates.
Table 1: Electricity Supply Option Summary and Recommended Approach (highlighted in blue)*
|
Account Type |
Current Contract Electricity Supply Pricing (Fixed Price $ per kWh) |
WGL Indicative Electricity Supply Pricing for 9 Months (Fixed Price $ per kWh)** |
PEPCO Maryland Standard Offer Service (SOS) ($ per kWh) |
|
Large Commercial Accounts (Pepco MGT LV II Accounts) (such as City Hall and various community centers, facilities and parks) |
$0.09575 to 12/25 |
$0.11198 to 9/26 |
$0.12696 MGTLV Rate generation + transmission from 12/2025 through 2/2026 |
|
Sandy Landing/Water Treatment Plant Account Pepco Time Meter Medium GS Prim Svc III (MGT III) Rate |
$0.08625 to 12/25 |
$0.10185 to 9/26 |
Variable hourly rates |
|
Small Usage Accounts Pepco General Service (GS) Rate |
$0.09495 to 12/25 |
$0.1123 to 9/26 |
$0.12252 GS Rate generation + transmission from 10/2025 through 5/2026 |
|
Streetlight Accounts Pepco Street Lighting (SL) Rate |
$0.07227 to 12/25 |
$0.08367 to 9/26 |
$0.12226 SL Rate generation + transmission from 10/2025 through 5/2026 |
* These rates are a main component of electricity prices; however, there are additional fees added to the contract rate by Pepco, such as distribution fees and other charges that make up the total electricity cost.
** Rates are based upon indicative prices obtained by WGL Energy Services on January 13, 2026.
Given the December 2025 expiration of the City’s electricity rate contracts with WGL and the volatile energy market, the City needs a strategy to minimize costs and risks for all electricity accounts. The electricity market can be quite volatile and requires contracts to be signed to lock-in prices within one to three hours of receiving final prices. According to the City’s utility consultant, there are several drivers for the price volatility: natural gas is a global commodity, there is increased demand for natural gas as the fuel source for electric power generation, and the production of natural gas has not kept pace with increased global demand. The U.S. Energy Information Administration (EIA) forecasts natural gas prices will rise through 2026.
The City’s utility consultant recommends the City be in the position to monitor pricing and take advantage of pricing when it exists for the different account types. For this reason, staff recommends that the Mayor and Council authorize the City Manager to utilize the BRCPC electricity supply contract #00003312 and execute agreements in a form approved by the Office of the City Attorney, at the most appropriate opportunity for accounts in each of the four rate schedules. A sample agreement with WGL for SL Accounts is attached, and staff does not believe this will substantially change (Attachment A).
Pepco meters electricity usage and issues utility bills collect all distribution, transmission, supply charges. Pepco bills typically include a supply charge section with the name of the third-party supplier and rate. Payments for electricity supply are incorporated in the Pepco billing and payment process.
Mayor and Council History
The Mayor and Council have authorized the City Manager to utilize competitively bid electricity supply contracts to lock into favorable pricing on several occasions. The Mayor and Council initially authorized the BRCPC Contract #00003312 on October 3, 2022, and a renewal on October 28, 2024. Other historic authorizations occurred on July 15, 2019; October 24, 2016; April 4, 2016; June 16, 2014; and October 17, 2011. This practice enables the City to take advantage of favorable market commodity rates when they are available, to secure electricity supply rates for future budgets, and to protect against variable price increases.
Procurement
Section 17-87(3) of the Rockville City Code (Code) exempts purchases of water, sewer, electric, postage, or other utility services and motor vehicle license plates from competitive procurement.
Section 17-38 of the Code states that "except for the purchase of goods and equipment, formal written contracts signed by the City Manager and the contractor shall be required for procurements exceeding fifty thousand dollars ($50,000.00), including requirements contracts estimated to exceed fifty thousand dollars ($50,000.00) in any given fiscal year."
Section 17-39 (a) of the Code requires all contracts involving more than two hundred fifty thousand dollars ($250,000) to be awarded by the Council.
Although competitive procurement is not required for the purchase of utility services, staff proposes to utilize the terms and conditions of the BRCPC contract described above in a manner consistent with a competitive procurement authorized under 17-71(b). The BRCPC/Baltimore County Solicitation No. P-146 for electric supply services was opened on February 29, 2016, and awarded to WGL Energy Services, Inc. The solicitation resulted in twenty-three separate contract awards, one for each BRCPC member. WGL agreed to make the effective date for the contract September 2016 for all entities and maintain staggered end dates of September 2026, December 2026 and February 2027 for different entities so that in the future if there is a change of suppliers, all accounts for each group would not be enrolled at one time.
In 2022, the City entered into an electricity supply service contract with WGL Energy Services, Inc. through Baltimore Regional Cooperative Purchasing Committee Electric (BRCPC) Supply Services Solicitation No. P-146 and Master Agreement ID #00003312 with amendments, together referenced as the “BRCPC Contract.” The City renewed this Contract in 2024 for pricing through December 2025. In order to lock-in rates through September of 2026, the City can utilize the underlying BRCPC contract which has an annual automatic renewal term remaining.
WGL Energy Services, Inc. is a non-Minority, Female, Disabled or Veterans (non-MFD-V) business.
To view the BRCPC contract and associated documents, click the links below:
BRCP Master Agreement with Exhibits <https://rockvillemd.legistar.com/View.ashx?M=AO&ID=172309&GUID=502175e2-80e0-4f89-b09a-aee851a7082b&N=QlJDUCBNYXN0ZXIgQWdyZWVtZW50IHdpdGggRXhoaWJpdHMucGRm>
-BCRP Master Agreement clarification of term <https://rockvillemd.legistar.com/View.ashx?M=AO&ID=172307&GUID=cd12ed8d-9d46-4ae3-ba3f-e3c2e529f3aa&N=QlJDUCBNYXN0ZXIgQWdyZWVtZW50IC0gY2xhcmlmaWNhdGlvbiBvZiB0ZXJtLnBkZg%3d%3d>
WGL and City of Rockville Base Agreement <https://rockvillemd.legistar.com/View.ashx?M=AO&ID=172308&GUID=a4431a64-733d-4f32-913b-1e4454676e48&N=TmF0dXJhbCBHYXMsIEVsZWN0cmljIFBvd2VyIGFuZCBSZW5ld2FibGUgRW5lcmd5IFByb2R1Y3RzIFB1cmNoYXNlIGFuZCBTYWxlcyBCYXNlIEFncmVlbWVudCBXR0wgJmFtcA%3d%3d>
Fiscal Impact
Funds for the purchase of electricity are budgeted annually in various operating accounts in the Department of Recreation and Parks and the Department of Public Works. The FY 2026 electricity budget for all funds is $3.1 million. Upon contract execution, the Budget Office will evaluate impacts for each fund for the remainder of FY 2026 and FY 2027.
The electricity supply contract accounts for roughly 50 percent of the electricity costs and does not include distribution charges, energy charges and taxes, and other charges by Pepco. Actual costs will be dependent on the lock-in price, additional fees and charges added to the supply rate, and future usage.
Next Steps
Upon Mayor and Council approval, the utility consultant will monitor the market and notify staff
when to seek indicative prices from WGL Energy Service for each type of rate category. When the City, in consultation with the utility consultant, decides that prices reflect a favorable time to lock-in pricing, a final set of firm prices will be obtained. Once firm prices are received, the City Manager will execute the appropriate agreement(s) to lock in the rates from December 2025 to September 2026, in a form approved by the Office of the City Attorney and substantially similar to the sample agreement with WGL for SL Accounts (Attachment 1).