CITY COUNCIL AGENDA ITEM
ACTION REQUESTED:
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Consider whether to direct staff to discontinue, for the time being, negotiations for a successor power sales agreement with the Illinois Municipal Electric Agency (IMEA)
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DEPARTMENT: Electric Utility
SUBMITTED BY: Brian Groth, Electric Utility Director
BOARD/COMMISSION REVIEW:
N/A
BACKGROUND:
The Naperville Electric Utility's (Utility) current power provider, the Illinois Municipal Electric Agency (IMEA), has been providing services to the City since 2007 and electricity since 2011. The IMEA serves 32 municipal electric utilities across the state by securing the required capacity and energy for its member communities. In addition to providing power, the IMEA also handles several administrative, legal, and regulatory services for the Utility.
IMEA has served as the City's non-profit wholesale power provider for nearly 15 years, during which time it has diversified its portfolio with significant renewable resource procurements, including over 300 MW of wind and solar resources sourced in Illinois since 2009. These investments in renewable resources will yield 20% of the agency’s energy being renewable by the end of 2026.
IMEA has committed to a net-zero future by 2050, through its board approved sustainability plan, and has provided power at costs that have resulted in Naperville's residential retail bills being approximately 20% less expensive than those of investor-owned utilities. IMEA has also provided stable and predictable power supply costs, shielding members from market volatility, such as recent capacity cost increases in the PJM region.
Beyond power supply, IMEA has delivered value-added services to Naperville, including energy efficiency incentives totaling over $4.2 million to Naperville Electric customers from 2011 through 2025, EV charger incentives supporting over 500 installations since 2023, renewable energy credit purchases at cost, and legal assistance, such as aiding the City's de-registration from certain NERC regulatory requirements as a Transmission Owner.
The City's existing contract with IMEA expires on September 30, 2035. Planning to acquire adequate capacity and energy to meet Naperville's needs and operational and administrative services beyond this timeframe is a multi-year effort and will involve a state mandated Integrated Resource Plan (IRP) which will begin in 2026. The IRP will include exploration of existing and new power procurement options and resources, as various options will likely require a multi-year ramp-up of resources in advance of the 2035 contract end date.
The IMEA presented the City with a contract extension offer in early 2024. Numerous discussions have taken place since then, including a series of educational presentations to the City Council in the Spring of 2024.
The City Council approved hiring a consultant to evaluate its options in December of 2024.
In the Spring of 2025, three Public Utilities Advisory Board (PUAB) meetings were held to hear the findings from Customized Energy Solutions (consultant), CJT Law (consultant), IMEA, and Naperville Environment & Sustainability Task Force (NEST).
On July 28, 2025, a Long-Term Energy Options workshop was held with the Naperville City Council so Customized Energy Solutions, CJT Law, PUAB, and NEST could present findings and recommendations.
On August 19, 2025, the Naperville City Council directed staff to negotiate with IMEA on 8 contract points as follows:
1. Contract Length
2. Member Directed Resources (MDR)
3. Carbon Free Milestones
4. Peak Shaving
5. Local Generation Rights
6. Voting Rights
7. Transparency
8. Retirement Costs
Additionally, Council directed staff to issue a Request for Proposal (RFP) to obtain options and pricing for MDR if the City were to enter into a successor agreement with IMEA.
The following documents are attached for reference: (1) Current IMEA agreement; (2) IMEA's proposed successor agreement; (3) Naperville's proposed addendum to IMEA's proposed successor agreement; (4) IMEA's response to the City's addendum proposal; and (5) IMEA's January 22, 2026 letter.
DISCUSSION:
Following the August 19, 2025 direction, staff prepared and shared a proposed addendum to the IMEA contract on September 5, 2025, addressing the eight identified points.
On September 16, 2025, the Naperville City Council approved the RFP text, which was shared with and received feedback from the community, for MDR to be issued by staff.
On October 29, 2025, the City of Naperville received four responses to its RFP for MDR opportunities. The RFP was broadcast to 552 potential suppliers with 34 entities electing to download the full text of the RFP. In addition to the four complete responses, one no bid was received along with one incomplete response. The responsive RFP responders tendered their responses under a claim of confidentiality concerning sensitive trade secrets and proprietary information. As such, the City is not at liberty to publicly disclose the information, which necessitated the closed session discussion with Council on December 16, 2025.
Also on October 29, 2025, the City received IMEA's counterproposal addressing the eight points raised by Council at its August 19th meeting. This response addressed each item outlined by the Naperville City Council and included an increase in MDR percentage by right as well as the addition of existing nuclear to the definition of MDR. Agency staff agreed to work with the board to develop fair compensation metrics for energy storage resources and address several other Naperville requests through the adoption of policies by the IMEA board of directors.
On November 21, 2025, staff from various City departments including Legal, Electric, Community Services (Sustainability), and Procurement met to review the proposals and determine if the responses met the objectives of the RFP.
On December 16, 2025, a closed session was held to discuss the IMEA contract negotiations and MDR proposals, providing an opportunity for Council to review progress and offer preliminary direction.
The City does not currently have the ability to procure MDR under its existing contract with IMEA and, therefore, does not have the ability to negotiate a power purchase agreement with any of the RFP responders. If the City had been able to negotiate a successor agreement with IMEA at this time, it was expected that the City would have obtained the ability to pull forward the MDR provision and procure MDR immediately.
Staff worked with a group of Naperville residents to develop a model by which MDR RFP responses could be tested against various market pricing scenarios but due to confidentiality requests from vendors the group could not utilize actual pricing received. Staff continues to explore modeling the indicative pricing provided by MDR vendors against future price curves and with the City's priorities, including reliability, cost-effectiveness, and sustainability goals in mind.
Given the complexity of contracting for long-term power supply arrangements and the need to align with Naperville's operational and environmental objectives, staff recommends Council consider whether to direct staff to discontinue, for the time being, negotiations with IMEA toward a potential best and final offer.
If the Council decides to direct staff to discontinue negotiations with IMEA for a successor contract, the City’s Chief Procurement Officer intends to reject all bids regarding the MDR RFP due to the inability to contract for MDR at this time.
Alternative next steps could include exploring competitive bidding processes, pursuing other power procurement strategies or beginning to perform the functions that IMEA is currently responsible for with new City staff, in the coming years as informed by consultant findings and market conditions.
FISCAL IMPACT:
The fiscal impact of discontinuing negotiations with IMEA for a successor power sales agreement is speculative at this time. Various factors will impact the economics of future energy prices in the market including capacity costs, transmission costs, renewable resource availability, and regulatory changes affecting municipal utilities. Many of these factors will impact IMEA and be analyzed as it undergoes its Integrated Resource Planning requirements beginning in 2026. Naperville staff will continue to monitor energy pricing and forecasts as well as evolving market conditions and options for energy procurement as outlined by its consultants as part of long-term planning efforts as we move closer towards September 2035.