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Report to: General Committee Date: December 13, 2010
SUBJECT: Contract Extensions for Water Meter Reading & Billing Service and Cashiering Services
PREPARED BY: Mark Visser, Senior Manager, Financial Strategy &
Investments
Raymond Law, Senior Financial Analyst
RECOMMENDATION:
1. THAT the report entitled “Contract Extensions for Water Meter Reading & Billing Service and Cashiering Services” be received;
2. THAT the contract for Water Meter Reading & Billing Services be extended for an additional three (3) years (January 1, 2011 to December 31, 2013) with PowerStream in the amount of $1,136,862 for 2011, with 3% annual escalation for years 2012 and 2013;
3. THAT the 2011 operating budget for Water Meter Reading & Billing Services be decreased from $1,426,190 to $1,136,862 to take into account the negotiated decrease;
4. THAT subject to Council approval of the Town’s 2011 Operating Budget, funds be provided from account #760-998-5390 Water Billing/Administration;
5. THAT the contract for the Hydro Cashiering Services reimbursement to the Town be extended for an additional three (3) years (January 1, 2011 to December 31, 2013) with PowerStream in the amount of $86,920 for 2011, with 3% annual escalation for years 2012 and 2013;
6. THAT the 2011 operating budget for the Hydro Cashiering Services reimbursement be increased from $84,388 to $86,920 to take into account the negotiated increase;
7. THAT subject to Council approval of the Town’s 2011 Operating Budget, the Hydro Cashiering Services reimbursement be allocated to accounts #890-890-8399 and #410-440-3621;
8. THAT the tender process be waived in accordance with Purchasing By-Law 2004-341 Part II, Section 7(1) C which states ”when the extension of an existing contract would prove more cost effective or beneficial”;
9. THAT the Mayor and Town Clerk be authorized to execute the extension of the agreement with PowerStream in a form satisfactory to the Town Solicitor;
10. THAT the CAO be authorized to extend the contract, with the same terms and conditions, for two (2) additional years at any point during the term of the contract;
11. THAT staff be authorized and directed to do all things necessary to give effect to this resolution;
PURPOSE:
The purpose of the report is to obtain Council approval to extend the Water Metter Reading & Billing Services and Hydro Cashiering Services portions of the Shared Services contract with PowerStream for three (3) years at the negotiated pricing. The Street Light Maintenance portion of the Shared Services Agreement will be addressed in a separate report.
BACKGROUND:
Water Meter
Reading & Billing Services
The main responsibilities of this contract are:
o All water meter reading
o Billing of all water/sewer services
o Customer Account Management (initial customer service point of contact)
o Monthly Reporting
In April 1996,
Council approved an agreement between the Town of Markham and the Markham Hydro
Electric Commission, whereby the Town’s water meter reading & billing services,
previously performed by Town staff, were taken over by Hydro. The Town has provided compensation to PowerStream
for acting as the billing and collection agent on behalf of the Town of Markham.
Over the course of this arrangement, Markham Hydro became part of the PowerStream
Inc., a company that the Town of Markham, through
Markham Enterprises Corporation, owns 34.185%.
As part of the Hydro deregulation process, the Province of Ontario created an “Affiliate Relationships Code for Electricity Distributors and Transmitters”. The purpose of the Affiliate Relationships Code is to set out the standards and conditions for the interaction between electricity distributors or transmitters and their respective affiliated companies. One section of the code addresses the “Transfer Pricing”, which states “Where a utility provides a service, resource or product to an affiliate, the utility shall ensure that the sale price is no less than the fair market value of the service, resource or product”.
In 2005, the Town entered into a five (5)
year contract with PowerStream for Water Meter Reading & Billing
Services. The 2010 cost for this service
was $1,426,190. This contract is paid
entirely though the Waterworks Operating Budget (and correspondingly through
the Water Rate) and does not impact the tax rate.
Hydro Cashiering Services
PowerStream reimburses the Town for providing
cashiering services for PowerStream customers.
The cost to PowerStream for 2010 is $84,388, which relates to salary
costs and benefits, direct telephone hotline from Markham to PowerStream, three
interact lines, and courier costs for pick up between the Town and PowerStream.
Street
Lighting Maintenance
Street Lighting maintenance is being addressed through a separate report to Council on the December 13th General Committee Agenda.
Water Meter Reading & Billing Services
Throughout the second half of 2010, Staff have been negotiating with PowerStream on a contract extension. The proposal that Town staff and PowerStream have agreed to, in principle, is for a three (3) year contract extension at a price of $1,136,862 for 2011, with 3% annual escalation for years 2012 and 2013. The forecasted 2012 and 2013 costs are $1,170,968 and $1,206,097, respectively. The 2011 cost represents a 22% decrease from the existing contract.
PowerStream and the Town are currently investigating the possibility of extending the contract though 2015 at the same pricing, subject to the requirements and strategic direction of the Waterworks Department. If it is deemed advantageous to the Town to extend the contract through 2015, it is recommended that the CAO be authorized to extend the contract, with the same terms and conditions, for two (2) additional years at any point during the term of the contract.
Hydro
Cashiering Services
The recommended three (3) year extension has the cost recovery increasing by 3% per annum over the existing contract. The 2011 estimated cost to be billed to PowerStream is $86,920. The forecasted 2012 and 1013 recoveries are $89,527 and $92,213, respectively.
FINANCIAL CONSIDERATIONS AND TEMPLATE:
The award is subject to approval of 2011 operating budget. Funding for the Water Billing ($1.137 million) will be contained in the 2011 Water Department’s Operating Budget. Recovery for the Hydro Cashiering Services ($86,920) will be allocated to the 2011 Finance Department’s Operating Budget and the Corporate Items Budget.
HUMAN RESOURCES CONSIDERATIONS
Not Applicable
ALIGNMENT WITH STRATEGIC PRIORITIES:
Not Applicable
BUSINESS UNITS CONSULTED AND AFFECTED:
Operations
have reviewed the funding and budget requirements.
RECOMMENDED BY:
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