City of Gainesville - File #: 060183.

• File #: 060183.
• Version: 0
• Name: Florida Gas Utility and Gas Supply Agreement #2 (B)
• Type: Resolution
• Status: Adopted
• File created: 8/28/2006
• In control: General Manager for Utilities
• Final action: 8/28/2006
• Title: Florida Gas Utility and Gas Supply Agreement #2 (B) Staff recommends the City join Florida Gas Utility (FGU) and enter into Gas Supply Agreement #2 with FGU for a portion of the City's future natural gas supply needs.

Date	Ver.	Action By	Action	Result
8/28/2006	0	City Commission	Adopted (Resolution)	Pass

Title
Florida Gas Utility and Gas Supply Agreement #2 (B)

Staff recommends the City join Florida Gas Utility (FGU) and enter into Gas Supply Agreement #2 with FGU for a portion of the City's future natural gas supply needs.
Explanation
Over the past several years, natural gas prices have displayed tremendous price volatility. The price volatility has been due to a number of different factors, including: 1) Changes in the supply/demand balance; 2) Storm damage from hurricanes to the production area; 3) Natural gas storage levels; 5) The fluctuations of the price of competitive fuels; and 6) Development of a liquid commodity market

GRU staff has acted to stabilize prices while attempting to reduce overall costs by implementing several gas purchasing methodologies. The methods include: 1) Develop financial strategies using commodities futures and option contracts to hedge natural gas prices; 2) Using alternate fuels when economically feasible; and 3) Pursuing physical supply or prepayment contracts that offer opportunities to stabilize pricing with prepayment discounts and reliable supply to our customers.

To reduce customer exposure to volatile pricing for spot market for natural gas, staff is recommending participation in a long-term gas pre-pay baseload supply contract for a portion of its natural gas supply requirement along with several other municipal utilities throughout the State. The supply contract will allow GRU to purchase a specified volume of natural gas for up to 20 years at savings of approximately $0.40 per MMBTU below the New York Mercantile Exchange (NYMEX) contract for Henry Hub Natural Gas.
Recommendations
The City Commission: 1) Adopt a Resolution incorporating by reference, approving the form and authorizing the execution of the Assumption Agreement for membership in Florida Gas Utility (FGU); Gas Supply Agreement #2 for the purchase and sale of gas and other gas supply related services; authorizing FGU to negotiate the te...