REPORT TO COUNCIL
SUBJECT
Title
Action on an Amendment to an Existing Agreement with Smart Energy Systems, Inc. and a New Agreement with Smart Energy Systems, Inc. for a Utility Billing Customer Self Service Portal
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure
BACKGROUND
The City’s Utility Billing System, provided by N. Harris Computer Corporation (Harris), serves as the backbone of the City’s utility billing operations, supporting 10 interconnected user applications that enable seamless integration between meter reading, service orders, meter data management, utility bill generation, payment collection across multiple channels, and customer service delivery, including both a call center and an online self-service web portal.
To provide customers with modern online access to billing information, the City partnered with Smart Energy Systems, Inc. (SEW) to implement a new cloud-hosted Customer Self Service (CSS) Portal. This new portal will replace the outdated Harris CSS portal, which is no longer compatible with the Windows operating system, does not meet current security standards, lacks modern functionality, and no longer meets the public’s needs and expectations.
On December 11, 2018, the City Council approved an agreement with Smart Energy Systems, Inc. (2018 Agreement) for the purchase and implementation of a new cloud-hosted Customer Self-Service Portal for Electric, Water, Sewer, and Solid Waste Disposal utility services for both residents and businesses. The Agreement was the result of a competitive Request for Proposal (RFP) in accordance with the City’s purchasing policies.
On October 26, 2021, the City Council authorized the City Manager to execute Amendment No. 1 to the 2018 Agreement to extend the agreement by three years, through December 31, 2024, and to increase the maximum compensation by $396,194 for a revised not to exceed amount of $1,653,343. The City Council also authorized the City Manager to execute future amendments to extend the term, adjust compensation if actual usage exceeded staff’s original estimate, and to cover any necessary system requirement changes.
Following this approval, staff executed three subsequent amendments. Amendment No. 2 incorporated required fees for commercial credit card transactions. Amendment No. 3 added services for live, agent-assisted payments and training for City staff to further improve the City’s customer service options. Amendment No. 4 extended the term further to allow additional time to complete customized design features and implementation, with the City’s Utility Billing System.
DISCUSSION
While design and implementation of the SEW CSS portal has experienced several delays and has required multiple amendments to address changing needs and conditions, the planned system remains a critical part of the City’s strategy to provide our customers with an improved utility customer service experience which is convenient, offers access to information to allow management of usage, and a variety of bill payment options. SEW’s platform will offer key functionality to significantly improve the self-service experience for both residents and businesses. The SEW portal will provide:
• Full-service mobile and web platforms
• 24/7 self-service tools
• Secure Payment Card Industry-compliant payment processing
• Provides the utility customer visibility to their energy and water usage and costs.
• Email and text alerts for notifications such as usage thresholds, payment reminders, overdue notices, and service requests
To support the transition, staff is seeking authority to negotiate and execute Amendment No. 5, which will retroactively (a) extend the agreement through January 31, 2026, (b) update terms related to the City’s revised Payment Card Processing Policy, (c) include SEW’s live technical support and point-of-sale device support, and (d) allow a one-year option to extend at the City’s sole discretion.
No changes to the agreement’s maximum compensation are being made at this time, as subscription fee payments are due only upon successful user acceptance testing and successful launch of the portal.
SEW and City staff have continued working toward finalizing design features, testing various elements of functionality, and full system implementation, with the portal’s public release targeted for Fall 2025. To support a smooth launch, SEW has offered live technical support services at no additional cost from launch date through January 31, 2026. This support will assist customers in creating accounts and navigating the new system and enable faster resolution of issues through direct access to SEW’s development team. This will help reduce the volume of customers services calls to the City.
Although the 2018 Agreement included options for renewal, SEW has since restructured its service and pricing model and has requested to negotiate a new agreement rather than exercising the renewal provisions. As a result, the agreement was not extended. Approval of Amendment No. 5 provides an extension while a long-term replacement agreement is negotiated.
The long-term replacement agreement currently under discussion proposes a 10-year term with an annual subscription fee of $222,631 for standard platform-hosting services in Year 1. As of the date of this report SEW has committed to capping annual fee increases to 3%.
Transaction based services such as text notifications, automated Interactive Voice Response (IVR) calls, and live agent-assisted payments will vary month to month based on actual usage. Initial estimates anticipate that these services will cost $250,000 per year or less, in addition to the annual subscription fees. Therefore, in a 10-year term, transaction-based services may cost up to $2,500,000.
The table below breaks down the total estimated cost of SEW services in a new 10-year agreement.
|
|
SEW Annual Subscription Fee with 3% Annual Increase |
Transaction-Based Services Estimated Cost |
|
Year 1 |
$222,631 |
$250,000 |
|
Year 2 |
$229,310 |
$250,000 |
|
Year 3 |
$236,189 |
$250,000 |
|
Year 4 |
$243,275 |
$250,000 |
|
Year 5 |
$250,573 |
$250,000 |
|
Year 6 |
$258,090 |
$250,000 |
|
Year 7 |
$265,833 |
$250,000 |
|
Year 8 |
$273,808 |
$250,000 |
|
Year 9 |
$282,022 |
$250,000 |
|
Year 10 |
$290,483 |
$250,000 |
|
Total |
$2,552,215 |
$2,500,000 |
|
Maximum Compensation (10 years) |
$5,052,215 |
The total maximum compensation for the ten-year agreement, inclusive of annual subscription fees with price adjustments and actual usage of transaction-based fees, is projected to be $5,052,215. Staff is therefore requesting City Council authorization for the City Manager to negotiate and execute a new agreement with SEW for a ten-year term, starting on or around February 1, 2026 with a total maximum compensation not-to-exceed $5,052,215. The current extension under Amendment No. 5 will ensure continuity of services while giving both parties time to finalize the long-term agreement.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a "project" within the meaning of a California Environmental Quality Act ("CEQA") pursuant to the CEQA Guidelines section 15378(a) as it has no potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment.
FISCAL IMPACT
The project implementation costs are funded by the Utility Management Information System (UMIS) Enhancements project in the General Government Capital Fund. The FY 2025/26 Adopted Operating Budget in the Finance Department includes ongoing funding for the SEW contract, which totals $418,000 in FY 2025/26. As the utility billing system goes live, if additional funding is required, it will be brought back to Council in a future budget action. Funding for the long-term agreement will be factored into the budget as part of the budget process.
COORDINATION
This report has been coordinated with the Finance and Information Technology Departments and the City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Authorize the City Manager or designee to negotiate and execute Amendment No.5 to the agreement with Smart Energy Systems, LLC dba Smart Energy Water to retroactively extend the term from March 31, 2025 through January 31, 2026, with no change to the maximum compensation amount of $1,653,343, subject to the appropriation of funds and review and approval as to form by the City Attorney; and
2. Authorize the City Manager or designee to negotiate and execute a new agreement with Smart Energy Systems, LLC dba Smart Energy Water for a ten-year term beginning on or around February 1, 2026 and ending on or around February 1, 2036, with a total maximum compensation not-to-exceed $5,052,215, and to execute future amendments to (a) add, modify, or delete services, including software subscription or support services, (b) adjust rates, including subscription fees, as necessary to reflect market conditions or service changes, and (c) make de minimis changes, all subject to the total maximum compensation, appropriation of funds, and review and approval as to form by the City Attorney.
Staff
Reviewed by: Kenn Lee, Director of Finance
Approved by: Jovan Grogan, City Manager
ATTACHMENTS
1. RTC 18-1284
2. Original Agreement with SEW
3. RTC 21-1049
4. Amendment No. 1 to the Agreement with SEW
5. Amendment No. 2 to the Agreement with SEW
6. Amendment No. 3 to the Agreement with SEW
7. Amendment No. 4 to the Agreement with SEW
8. Amendment No. 5 to the Agreement with SEW