Purpose

The above Agreement commenced 26th January 2025 for an initial term of five years
(to 25th January 2030). There are an additional two extension periods of 60-months
at the sole discretion of the Council (to 25th January 2035; and 25th January 2040
respectively).

Indexation provisions in the Agreement are applied annually on 1st April (the “review
date”). Prices are reassessed at each review date using Index 1 (Consumer Price
Index “00” All Items) published by the Office for National Statistics, this applies
inflation to Contract prices based on indices calculations from January to January
(each year).

As a result of severe disruption to the global energy market due to the recent
outbreak of conflict in West Asia (Iran) - combined with the continuation of UK / EU
sanctions on Russian energy supplies - UK fuel prices have risen very sharply.

The level of disruption to the energy market is now structurally significant - the
largest oil supply disruption in modern history - it is unlikely that fuel prices / global
energy markets will return to normal in the short-term. Based on this assessment,
the current indexation mechanism and Contract pricing are unsustainable during this
period.

Discussions with the provider (Freeland) regarding the impact of disruptions to
energy supplies, indicate fuel prices are having a significant financial impact on their
business. Processing one tonne of Contract Waste uses of diesel, from
February to date diesel prices have increased by approx. 50ppL. Freeland have
applied a surcharge on their customers (gate fees) to reflect this, however, a
formal contract variation request has yet to be submitted – the surcharge is
approximately half of what would be paid under a increase (as applied to other
customers).

Officers acknowledge it is possible to maintain the existing pricing and indexation
provisions (in strict accordance with the Contract), which would protect the Council
from the sharp increase in diesel prices. Notwithstanding, the Council must
recognise the structural realities mean that fuel prices are likely to rise further, a
pragmatic assessment of the situation would indicate the providers cost base is
unsustainable.

Decision

To apply a surcharge to the Organic Waste Disposal Contract from
1st April 2026.

Alternative options considered

n/a