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East Aurora delays energy contract recommendation

Updated: March 14, 2014 8:48AM

AURORA — The selection of who will provide natural gas and electricity to East Aurora School District has been delayed as the district works to gather more information from possible vendors.

The district’s energy contracts came under scrutiny last month after Ralph Padron, a consultant hired by the district to look into past natural gas and electric contracts, said the district had wasted money when it was locked into higher-than-average market rates for natural gas for almost a decade.

Padron said at last week’s school board meeting that the district had again made a “costly mistake” by not locking in rates before winter hit.

At last week’s Buildings and Grounds Committee meeting, a different financial consultant recommended that the committee put out a second request for proposals to collect updated and more comparable energy prices.

The district first sought proposals from energy providers and brokers — who negotiate rates on behalf of the district — in October and was considering five.

“It’s very difficult to put apples-to-apples pricing together with what they have here,” said Mark Sheahan, who works for the Steger-based Crystal Financial Consultants and reviewed the five proposals. “The whole energy market is totally different with this winter. Gas prices have about doubled…. Electricity is up 30 percent. So the pricing here is outdated.”

Crystal Financial was hired by the school board last week to assist with business office duties.

The Buildings and Grounds Committee was scheduled on Feb. 6. to pick which energy provider to recommend to the full school board.

The committee voted instead to let Sheahan put together another request for proposals that would ask companies for specific fixed prices, which are locked in for a set contract term, and index prices, which vary with the market.

With better financial comparisons, Sheahan said, the district could move on to looking at the companies’ strengths, reputation with other schools and years in business.

Last month, the district’s attorney, Bernard Weiler, said East Aurora hoped to have the new energy contracts approved in late February or early March, but that process will likely get pushed back. The Buildings and Grounds Committee has yet to review the new pricing information, Weiler said on Wednesday.

After the committee does, it will recommend to the school board which energy provider or broker to choose.

The district is currently on month-to-month contracts for natural gas and electricity.

Weiler said the first request for proposals was designed for energy companies “to come with a proposal of how they would serve us.”

“What they proposed didn’t give us an idea of what the cost might be,” Weiler said.

At the time, Weiler said, no one on the district’s staff had the capability to prepare a bid that would result in more specific prices. The second request for proposals written by the financial consultant will fix that, he added.

All five companies who originally responded were given the chance to send more pricing information, Weiler said, as well as some additional vendors.

Sheahan recommended that the district not lock into a fixed rate now because the abnormally snowy and cold winter has led to a shortage of natural gas and rising rates.

“Nobody wants to lock in a price when it’s probably at it’s highest,” he said. “It’s too bad we didn’t lock in in December.”

Last month Weiler said the district was told it was “well-placed in the market” and did not “have to scramble.”

“We were given the confidence that we could take the time to do a really good job to pick the person to develop the best relationship,” he said.

Weiler said on Wednesday that the district was “always worried about the flexibility of this market” and rates have changed since proposals were first requested in October.

“This is a very complex area,” he said. “It’s constantly changing…. There are so many factors.”

He said the district has to look not only at pricing but how much energy will be consumed and the cost of yearly storage rates.

Weiler said the committee could have picked an energy provider or broker at the last meeting, but “exercised the additional precaution” now that the district has a consultant at its disposal.

Weiler said the added focus on the energy contract and that there are “people out there saying we’re doing it wrong” has been frustrating.

“We’re got one chance to get this right,” he said. “We want to get this correct.”

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