HomeMy WebLinkAboutGas Purchase - FIN-ACQ-560Page 1 of 3
POLICY FIN-ACQ-560
Gas Purchase Category
FIN - Finance
Sub-category
ACQ - Acquisitions
& Dispositions
Approval Type
COUNCIL
Department/Division
Infrastructure
Services/Gas and
Water Utilities
Author and Position
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Date Approved
January 19, 1998
Last
Reviewed/Amended
June 26, 2023
Next Review Date
June 26, 2026
Related Policies or Procedures
• None
1. Policy Purpose
The purpose of this policy is to allow the transaction of gas commodity and transportation
contracts in an effective and efficient manner. Gas commodity pricing is dynamic and
fluctuates with the market. The nature of these transaction do not align with th e standard
purchasing processes and policies.
2. Definitions
None.
3. Policy Scope
This policy applies to the purchase of fuel commodity and transportation contracts to be
delivered to Kitchener Utilities customers.
Application
☐ Employees (Indicate below which categories apply: All employees, Permanent full-time, Temporary full-time, Continuous part-
time, Casual, Probationary, Student, Management, Non-union)
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☐ Unions (Indicate below which categories apply: All Unions, CUPE 68 Civic, CUPE 68 Mechanics, CUPE 791, IATSE, IBEW, KPFFA)
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☐ Council
☐ Specified Positions: Click or tap here to enter text.
☐ Other: Local Boards and Advisory Committees
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4. Policy Content
That the following Market Responsive Portfolio be adopted as the Gas Purchase Policy for
the City of Kitchener, namely:
1) Utilities’ Staff, with assistance from external parties, as appropriate and subject to
periodic tendering for consulting services, shall monitor market and economic forces
to develop a prudent purchase strategy.
2) The purchase strategy shall reflect a three-year timeframe and use a disciplined
approach to acquire a blended portfolio of natural gas contracts which varies the
pricing and terms of the contracts to provide rate stability while remaining responsive
to market pricing.
3) Given the long-term nature of getting natural gas to the City, acquiring transportation
or storage contracts should include a longer-term view with contract terms of up to
twenty (20) years.
4) The ongoing performance of the purchase portfolio in meeting its strategic objectives
and customers’ rate expectations shall be periodically reviewed, not less than every
three years and not more than annually and revised as needed and approved by
Council.
5) To ensure market competition is used and balanced with contracting costs, the City's
expected natural gas supply needs will be placed with no less than four (4) primary
suppliers. At no time should more than 50% of the City's annual supply be placed with
one supplier.
6) The natural gas supply contracts will only be placed with large, financially secure
suppliers with a proven industry track record. Before supply contracts are placed, the
City must ensure that the supplier has a strong financial rating as evaluated by an
independent evaluator. The minimum rating with Standard & Poor’s be BBB or
equivalent Moody's rating Baa for transactions that fall into Year 2 or later. For
transactions falling in less than year 2, the minimum rating will be Standard &
Poor’s BB+ or equivalent Moody's rating Ba1.
7) The natural gas supply contracts will provide the City with the flexibility to swap
between indexed and fixed prices at market-based transaction fees.
8) The financial exposure of the City will be minimized by seeking financial assurances
in circumstances of high risk of supplier default. These assurances will be
maintained commensurate with exposure of the contracts to an individual supplier.
When dealing with a marketing entity for supply, assurances will be sought from the
corporate parent.
9) All natural gas purchase transactions will be authorized by the CFO & City Treasurer,
Financial Services Department or in his/her absence one of the City’s signing
officers and the Director, Gas and Water Utilities or in his/her absence, Utilities’
Manager, Gas Supply and Engineering.
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10) Separate accounting for the supply, transportation and delivery programs should be
maintained, audited and reported to Council on a regular basis with other City financial
statements.
5. Results of Review
☐ No Edits Required
☐ Housekeeping Edits
☒ Substantial Edits
☐ Repeal/Replace
6. Policy History
Administrative and Housekeeping Changes
Date Nature of Change
2016-06 Policy I-560 template re-formatted to new numbering system and given
number FIN-ACQ-560
Substantial Changes
Date Council/CLT Directive
2001-08-27 As Per Council/CLT Directive
2002-05-27 As Per Council/CLT Directive
2006-10-06 As Per Council/CLT Directive
2014-06-16 As Per Council/CLT Directive
2023-06-26 As Per Council/CLT Directive - Report # INS-2023-247