North Penn could shop for new electric contract this summer

Dan Sokil | The Reporter•

A big-ticket contract could prompt the North Penn School District to do some shopping by the end of summer.

School board members heard a preview this week of a key component of the district budget for 2024-25, and a cost that could rise starting next schoolyear.

"We are currently in a contract that expires June 30, 2024, for our electricity. That current contract is at 5.25 cents per kilowatt-hour, which is a very favorable rate,” said Director of Facilities and Operations Tom Schneider.

"Electricity needs to be locked in the next few months, before June 30th, and all indications right now are showing that electricity is expected to increase approximately 25 percent. It’s anticipated that cost per kilowatt hour will be somewhere around seven cents,” he said.

Each year the district’s various departments present detailed breakdowns of their annual budgets to the board’s finance committee in a series of public presentations ahead of preliminary budget adoption in May and final adoption in June. During the facilities and operations department presentation on Tuesday night, Schneider told the board how the district’s total energy contract will be up for renewal or contracting with a new supplier, or some combination of both.

In the department’s budget documentation, line-by-line breakdowns are given of the expenses for each school and site, including electricity costs, ranging from roughly $30,000 for the year at the district healthcare center, $40,000 to $70,000 per year annual amounts for the elementary schools, ranging from $115,000 to $200,000 for the three middle schools, and an annual electricity bill of roughly $500,000 for North Penn High School.

In recent years, the board held brief talks on the district’s electricity contracts in 2020, ahead of renovations at Knapp Elementary School in Lansdale, when the board discussed how Lansdale Electric supplies electricity to York Avenue Elementary, Penndale Middle School, the district Educational Services Center just down Church Road from Penndale, and the district Facilities department offices on West Eighth Street, and compared pricing and service levels from the borough against private utility companies.

Those conversations could happen again soon, Schneider told the committee, saying his department could have to change certain operations or find other ways to reduce demand if that cost increase is realized. He elaborated further in response to a series of questions from board member Kunbi Rudnick on how the electricity contract is handled.

"Do we shop around for electricity? How long is it fixed for? I can imagine, if PECO came to me and said there was going to be a 25 percent increase for my home, I’m going to try to figure it out,” she said.

Schneider answered that North Penn currently buys electricity from three suppliers: PECO, PPL, and Lansdale electric, which supply electricity to buildings based on where they’re located.

"We are able to shop our supply, the actual electrons that run through the wires — we can shop that supply on the open market for PPL and PECO. Lansdale Electric is a municipal power company, and those rates cannot be shopped: so whatever Lansdale charges us, that’s what we pay,” he said.

For the PPL and PECO accounts, Schneider told the committee, transmission and capacity costs are largely fixed, but the district works with a broker that "knows and keeps an eye of the market for us,” and contacts "dozens” of commercial electricity suppliers nationwide, to find the best market rate for wholesale electricity.

"We can purchase electricity from a supplier in Texas, and it doesn’t matter, because they’re just feeding the entire grid. What they supply to the grid, that’s what we would pay for,” he said.

Those contracts can go for any length that the two sides agree to, Schneider said, but capacity is only auctioned off every three years, so those contracts tend to be that length due to the uncertainty beyond that period. North Penn’s electricity contact that’s set to expire this summer was a three-year deal "which was very favorable,” but the next such contract may be shorter.

"Depending upon what the market conditions look like, and what the future looks like, it may make sense to lock for a year, or maybe two, or it may make sense to lock for three years,” Schneider said.

He and district CFO Steve Skrocki will start talks with that electricity broker on behalf of the district within the next few weeks, and report back on their findings for further talks with the committee, Schneider said.

Board member Cathy McMurtrie then asked if the pending renovations of North Penn High School have included talks on generating electricity on that site, via green-energy tactics such as solar panels or geothermal fields, which members of the high school’s Environmental Action club suggested in 2022 and 2023 could be included in a modernized high school.

"At our current rate, of 5.3 cents per kilowatt hour, solar isn’t really viable, because we’re paying so little for that (electricity). In the Lansdale area, solar would be very viable, because of the cost per kilowatt hour that we pay in Lansdale,” Schneider said.

In recent years, Lansdale Borough itself has built and activated solar panel systems atop its municipal building on Vine Street and at its electric department and wastewater plant on Ninth Street, and discussed setting up solar elsewhere in town to cut down on transmission costs. For North Penn, Schneider said, something similar could depend on the costs staff find when shopping for a new contract.

Setup costs for such solar panels systems could be partially offset by grants, he added, and the pending high school project is not in Lansdale proper, but could also qualify: "There’s quite a few things that we can start looking at” while finalizing the high school design.

"We don’t know where rates are going to be, so it could be very attractive to have something like that. We just have to see what the economics are, once we get to that point,” he said.

Natural gas costs are locked in for the 2024-25 schoolyear, Schneider told the committee, and current market conditions for that commodity are "very attractive, but we’re already locked in,” so staff will "keep an eye on market conditions” and recommend month-to-month or longer contracts for once the upcoming schoolyear ends, he said.

"Energy management is always one of our big concerns, trying to control our operations, and we’ll be continuously reviewing and adjusting that,” he said.

Zooming out to the overall facilities and operations department budget, Schneider told the committee, total expenses for 2024-25 are projected to be just over $18 million, of which just over $11 million goes to salaries and benefits for roughly 130 employees including custodians, maintenance, ground, support personnel, and supervisory staff.

Another $3.4 million of the total budget goes to utilities and waste services, which in addition to electricity also includes natural gas, water, sewer, recycling, and trash disposal costs, and another $1.25 million for custodial, maintenance and grounds supplies.

Year to year increases for 2024-25 over the prior year include a $203,000 addition for maintenance costs, largely for HVAC and boiler systems; an additional $86,000 for supply costs largely due to inflationary increases; and an additional $8,700 for professional services including inspections, Schneider told the committee.

Subtracting energy costs and salaries with mandatory increases, the facilities and operations budget has stayed largely level over the past ten years, and is roughly six percent of the overall district budget, the second-lowest such share of a district budget in Montgomery County, he said.

North Penn’s school board next meets at 7 p.m. on April 8 at the district Educational Services Center, 401 E. Hancock Street, and the finance committee next meets at 6 p.m. on April 8. For more information visit www.NPenn.org.

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