Subject
title
Award and authorize the City Manager to Execute Natural Gas Supply Agreements with WGL Energy Services, Inc. with terms consistent with the University of Maryland Contract 00038892 for an Initial Term Between August 1, 2026, through July 31, 2027, and authorize the City Manager to exercise optional renewals through June 30, 2031end
Department
Rec & Parks - Parks & Facilities
Recommendation
Staff recommends that the Mayor and Council award and authorize the City Manager to execute the sample base agreement (Attachment 1) with WGL Energy Service, Inc. and monitor and execute agreements to lock-in prices for City natural gas supply accounts in a form approved by the Office of the City Attorney and substantially similar to the sample confirmation agreement (Attachment 2), by riding the University of Maryland Contract 00038892 for an initial term between August 1, 2026 and July 31, 2027, and authorize the City Manager to exercise optional renewals through June 30, 2031, subject to annual appropriations by the Mayor and Council.
Discussion
Background
Maryland operates under a deregulated energy market where the natural gas industry is separated into two main functions:
1) Supply services, which is competitive and provided by various companies that generate and sell natural gas supply; 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 natural gas to customers through infrastructure such as pipelines, meters, and related equipment.
Washington Gas (WG) is a regulated utility that operates under the oversight of the Maryland Public Service Commission and is the sole natural gas distributor serving City of Rockville (City) facilities and infrastructure. While WG is the City’s only natural gas utility, the City can contract separately with a competitive supply provider. WG is responsible for metering natural gas usage and issuing utility bills for all applicable charges, including the supply, distribution and transmission fees, taxes, surcharges and taxes.
The City historically rides and bridges energy contracts competitively bid and awarded by other state/local governments or public agencies. The City is currently riding a competitively bid natural gas supply contract through the University of Maryland (Contract 91878). The contract award was made to WGL Energy Service, LLC. (WGL). The City’s term for pricing ends July 31, 2026 and the term of the cooperative contract ends December 2026. Therefore, a new supply contract is needed to lock into rates to avoid price volatility and support future budget planning.
Natural Gas Supply
The City has approximately 30 Washington Gas accounts associated with City-owned and operated buildings. If the City does not enter into a new supply contract, prices will vary monthly depending on the standard price that Washington Gas utility pays.
The University of Maryland, College Park (UMCP) issued request for proposals (RFP No. 00033925) on March 6, 2026, for Natural Gas Supply Full Requirements on Small Accounts, for the firm accounts within the University System and the State of Maryland, Department of General Services. Proposals were due on April 1, 2026. The University of Maryland awarded the competitive bid natural gas supply contract (Contract 00038892) to WGL Energy Service, LLC. on May 20, 2026. The term of this contract is for 60 months (from June 1, 2026, through June 30, 2031). Because the solicitation documents contain account information and confidential and proprietary information, they are not attached to this agenda item.
Through the agreement awarded on May 20, 2026, indicative pricing was obtained on June 29, 2025 for the term of August 1, 2026, through July 31, 2027, at a cost of $0.5880 per therm. This rate is 6% less than the Washington Gas standard rate of $0.6256 per therm referenced for June of 2026. Future standard rates vary monthly and typically rise in winter due to peak demand for heating. According to the U.S. Energy Information Administration’s short-term energy outlook, natural gas prices are forecasted to remain close to recent seasonal norms.
|
Current Supply Price (August 1, 2025 through July 31, 2026) |
WG Standard Supply Price (varies monthly) June 2026 |
WGL Indicative Supply Pricing provided on 6/29/2026 (August 1, 2026 through July 31, 2027) |
|
$0.535 per therm |
$0.6256 per therm |
$0.5880 per therm |
The supply prices are constantly moving and are a major component of the total natural gas price; however, there are additional fees, surcharges and taxes added to the base rate that make up the total cost. The city needs to be in a position to take advantage of favorable pricing when it exists. For this reason, staff recommends that the Mayor and Council authorize the City Manager to utilize the University of Maryland Contract (Contract 00038892) to execute the sample base agreement (Attachment 1) with WGL Energy Service, Inc. and then monitor and execute a confirmation agreement to lock-in prices for City natural gas supply accounts in a form approved by the Office of the City Attorney and substantially similar to the sample confirmation agreement (Attachment 2). Additionally, providing authority for the City Manager to exercise optional renewals through June 30, 2031, subject to annual appropriations by the Mayor and Council, allows the city to more nimbly lock-in favorable pricing when it exists to better manage energy costs.
Washington Gas meters usage and issues utility bills to collect all distribution, supply charges and fees. Washington Gas bills typically include a supply charge section with the name of the third-party supplier and rate. Payments for supply are incorporated in the Washington Gas billing and payment process.
Mayor and Council History
The Mayor and Council have delegated authority to the City Manager to ride and bridge competitively-bid natural gas supply contracts to lock into favorable pricing on several occasions (January 11, 2021, July 15, 2019; October 24, 2016; June 8, 2015; April 29, 2013; and May 7, 2012). This enables the City to take advantage of favorable market commodity rates when they are available, to secure rates to inform future budgets, and to protect the City against significant price spikes.
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 UMCP contract which contract was procured via a competitive procurement consistent with a competitive procurement process as authorized under Section 17-71(b) of the Code which allows the City to contract with any contractor who offers goods, services, insurance, or construction on the same terms as provided other state or local governments or agencies thereof who have arrived at those terms through a competitive procurement procedure similar to the procedure used by the City .
The University of Maryland, College Park (UMCP) issued RFP No. 00033925 for Natural Gas Supply Full Requirements on Small Accounts, for the firm accounts within the University System and the State of Maryland, Department of General Services. The University of Maryland awarded the competitive bid natural gas supply contract (Contract 00038892) to WGL Energy Service, LLC. on May 20, 2026. The term of this contract is for 60 months (from June 1, 2026 through June 30, 2031).
WGL Energy Services, Inc. is a non-Minority, Female, Disabled or Veterans (non-MFD-V) business.
To view the contract, click the link below:
Contract between University of Maryland and WGL <https://rockvillemd.legistar.com/View.ashx?M=AO&ID=179260&GUID=b3026e45-a37f-4833-9501-f3b88266a564&N=QWdlbmRhIEZpbGUgIyAyNi0yMjg0IENvbnRyYWN0IFVuaXZlcnNpdHkgb2YgTWFyeWxhbmQgYW5kIFdHTA%3d%3d>
Fiscal Impact
Funds for the purchase of natural gas are budgeted in various operating accounts in the Department of Recreation and Parks and the Department of Public Works. The total adopted FY 2027 budget for heating fuel (includes natural gas and heating oil) is $300,640.
Based on the aforementioned indicative price data, acting now will help to limit rate increases over the standard supply pricing and improves the City’s ability to accurately budget for natural gas costs for FY 2027. Actual natural gas costs are dependent on the lock in price, additional fees added to the base rate, and future usage.
Given that the rate is higher than the previous rate used for budget planning, staff will coordinate with the City’s energy utility consultant to monitor usage and the winter heating outlook to determine if a FY 2027 budget amendment is needed to accommodate the new rate.
Next Steps
Upon Mayor and Council approval, the City Manager will execute the base agreement, in a form approved by the Office of the City Attorney and substantially similar to the sample agreement with WGL (Attachment 1). The City’s utility consultant will monitor the market and notify staff when to seek indicative prices from WGL Energy Service. 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), in a form approved by the Office of the City Attorney and substantially similar to the sample agreement with WGL (Attachment 2). Staff will monitor the renewal options and pricing through July 30, 2031 in a similar manner.