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HomeMy WebLinkAboutFIN 060 Commodity Price Hedging PolicyPICKERING City Policy Policy Title: Commodity Price Hedging Policy Policy Number: FIN 060 Reference: Municipal Act, 2001, Res. #88/10 Date Originated: April 1, 2010 Date Revised: Approval: Chief Ad finis tive Officer Point of Contact: Director, Corporate Services & Treasurer Policy Objective The purpose of this policy is to conform to the regr-nents of the Municipal Act, 2001 (and any regulations passed thereunder) as it relates to Commodity Price Hedging Agreements. Section 6(1) of 0. Reg 653.05 of the Act requires the adoption of this policy before the City may enter into a Commodity Price Hedging. Scope This policy applies to all commodity price hedging agreements and provides the framework for the consideration of commodity hedge pricing by the City. Index 01 Definitions 02 Statement of Commodity Hedging Policies and Goals 03 Authority 04 Responsibility 05 Reporting Requirements 01 Definitions 01.01 Contract Agent - means an individual or organization acting on behalf of the City as an independent contractor, external to the City to provide advice on a price hedging strategy and/or to execute agreements and transactions to acquire a Commodity. 01.02 Commodity - means, a product or products bought and sold in commerce, including but not limited to electricity, natural gas and foreign currencies. 01.03 Price Hedging Agreement — means a financial agreement to provide price stability and/or minimize the cost, financial and other risks associated with the procurement of a Commodity. 01.04 Hedge - means, the purchase of a commitment to acquire a specified quantity of a commodity, at a specific price, at some future point in time. 02 Statement of Commodity Price Hedging Policies and Goals The City will consider commodity price hedging agreements as a means of fixing, directly or indirectly, or enabling the City to fix the price or range of prices to be paid by the City for the future delivery of some or all of the commodity or the future cost to the City of an equivalent quantity of the commodity, where it is advantageous for the City to do so. The Director, Corporate Services & Treasurer is responsible for determining whether a particular commodity price hedging agreement is advantageous for the City, whereby the following considerations will be taken into account: (i) any and all projects of the City are projects for which commodity price hedging agreements will be appropriate; (ii) if, at the time, it is the opinion that fixed costs and estimated costs of the City will be reduced by virtue of the use of such an agreement; (iii) if, at the time, it is the opinion that the future price or cost to the City of the applicable commodity will be lower or more stable than it would be without the agreement; (iv) if, at the time, the project includes a detailed estimate of the expected result of using such an agreement; (v) if, at the time, it is the opinion that the financial and other risks to the City that would exist with the use of such an agreement, will be lower than the Policy Title: Commodity Price Hedging Policy Page 2 of 3 Policy Number: FIN 060 financial and other risks to the City that would exist without such an agreement; (vi) if, at the time, it is the opinion that the agreement contains adequate risk control measures relating to such an agreement, such as: a) limited credit exposure based on credit ratings and/or on the degree of regulatory; b) oversight and/or on the regulatory capital of the other party to the agreement; c) a standard agreement; or d) ongoing monitoring with respect to the agreement. 03 Authority The Director, Corporate Services & Treasurer, or designate, is authorized to enter into contracts for the purpose of engaging a Contract Agent to acquire a Commodity. 04 Responsibility The Director, Corporate Services & Treasurer or Manager, Supply & Services, in conjunction with the Senior Purchasing Analyst, are responsible for the application, implementation and interpretation of this policy. 05 Reporting Requirements The Director, Corporate Services & Treasurer shall report to Council at least once each fiscal year with respect to any and all commodity price hedging agreements in place. The report shall contain, as a minimum, all requirements as set out in 0. Reg. 653/05 of the Municipal Act. Policy Title: Commodity Price Hedging Policy Page 3 of 3 Policy Number: FIN 060