Subject
title
Award and authorize the City Manager to Execute Electricity Supply Agreements with WGL Energy Services, Inc., with terms consistent with the Baltimore Regional Cooperative Purchasing Committee (BRCPC)/Howard County Contract PA-023-2026 and authorize the City Manager to exercise optional renewals for terms between September 2026 and September 2036end
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 electricity supply accounts in a form approved by the Office of the City Attorney and substantially similar to the sample confirmation agreement (Attachment 2), by utilizing the Baltimore Regional Cooperative Purchasing Committee (BRCPC)/Howard County Contract PA-023-2026 for an initial term beginning September 2026 and authorize the City Manager to exercise optional renewals through September 2036, subject to annual appropriations by the Mayor and Council.
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 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 (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 rides 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 City historically utilized a contract from the Baltimore Regional Cooperative Purchasing Committee (BRCPC), a purchasing consortium that 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 term of the current BRCPC contract ends in September 2026. BRCPC issued a new solicitation for an Electric Supply Services Contract under RFP No. 22-2025 that includes BRCPC (24 entities) as well as the Maryland Educational Consortium Energy Trust, Frederick Area Cooperative Team, Montgomery College and Montgomery County Boards of Education (BRCPC et al.). The BRCPC solicitation for Electric Supply Services Contract under RFP No. 22-2025 and Agreement No. PA-023-2026 was hosted by Howard County and awarded to WGL Energy Services, Inc. with an initial term effective September 1, 2026, through August 31, 2027, and includes nine additional one-year renewals through August 2036.
WGL provided indicative pricing for each rate schedule on June 29, 2026. Table 1 summarizes the current rate, WGL indicative pricing for a 12-month and 24-month term, and anticipated Pepco SOS rates for comparison. The Pepco SOS rates listed below factors in both generation and transmission rates to be comparable with WGL indicative pricing. Indicative pricing is an estimated or preliminary price provided before final contract and is not binding. Final pricing is subject to change due to market conditions or utility regulatory changes. The goal is for final supply pricing to be below the SOS rate for each category. Staff will need to continue to monitor GS pricing to determine when it is below the SOS rate.
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.
Table 1: Electricity Supply Option Summary
|
Account Type |
Current Contract Electricity Supply Pricing (Fixed Price $ per kWh) |
WGL Indicative Electricity Supply Pricing for 12 Months (Fixed Price $ per kWh)** |
WGL Indicative Electricity Supply Pricing for 24 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) |
$0.12479 |
$0.13985 |
$0.13990 |
Variable |
|
Sandy Landing/Water Treatment Plant Account Pepco Time Meter Medium GS Prim Svc III (MGT III) Rate |
$0.11015 |
$0.12373 |
$0.12385 |
Variable hourly rates |
|
Small Usage Accounts Pepco General Service (GS) Rate |
$0.12307 |
$0.14323 |
$0.14345 |
$0.13708 GS Rate generation + transmission from 10/2026 through 5/2027 |
|
Streetlight Accounts Pepco Street Lighting (SL) Rate |
$0.09167 |
$0.11017 |
$0.11012 |
$0.11976 SL Rate generation + transmission from 10/2026 through 5/2027 |
* 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 June 29, 2026.
Given the September 2026 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, higher capacity prices, and growing electricity demand from data centers.
The City’s utility consultant recommends the City be in the position to monitor pricing and take advantage of favorable 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 PA-023-2026 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 2). Additionally, providing authority for the City Manager to exercise nine optional one-year renewals through 2036, subject to annual appropriations by the Mayor and Council, allows the city to more nimbly lock-in to favorable pricing when it exists to better manage electricity costs under volatile market conditions.
Pepco meters electricity usage and issues utility bills as well as collects all distribution, transmission, and 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 renewals on October 28, 2024, and February 23, 2026. 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 because the solicitation was done in a manner consistent with a City competitive procurement and is therefore authorized under 17-71(b).
The BRCPC/Howard County Solicitation No. 22-2025 for electric supply services was opened on June 18, 2025, and awarded to WGL Energy Services, Inc. with an initial term effective September 1, 2026, through August 31, 2027, and the option for nine additional one-year renewals through August 2036. The contract and the solicitation are linked below. The entire solicitation package is not attached because much of the material contains confidential and proprietary information.
WGL Energy Services, Inc. is a non-Minority, Female, Disabled or Veteran (non-MFD-V) business.
To view the BRCPC contract and the solicitation, click the links below:
1. BRCPC Contract and solicitation <https://rockvillemd.legistar.com/View.ashx?M=AO&ID=179420&GUID=c808d335-c0d7-4ed3-b593-4e4b6ad0f7f2&N=MS4JQlJDUEMgQ29udHJhY3QgYW5kIHNvbGljaXRhdGlvbg%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 2027 electricity budget for all funds is $3.4 million. When final rates are secured the Budget Office will evaluate impacts for each fund for the remainder of 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.
Given that the indicative rates are higher than the previous rates used for budget planning, staff will coordinate with the city’s energy utility consultant to monitor usage and determine whether any budgetary adjustments are required.
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) to lock in the rates for the initial term, in a form approved by the Office of the City Attorney and substantially similar to the sample confirmation agreement (Attachment 2). Staff will monitor the renewal options and pricing through September 2036 in a similar manner.