South Coast Air Quality Management District

Recognize Revenue and Amend Contract to Install Heat Recovery Equipment at AQMD Headquarters

SYNOPSIS: 

AQMD has an existing contract with C-4, Inc. to install microturbines at AQMD Headquarters. Staff recommends that the Board authorize the Executive Officer to: a) amend this contract to also install heat recovery equipment; b) contract with a vendor to provide maintenance on the microturbine system; and c) apply for incentive money from Southern California Gas Company. This will enable AQMD to reduce its energy costs and receive an incentive that will more than pay for the equipment and installation costs of the heat recovery equipment.

COMMITTEE: 

Technology, October 26, 2001. Reviewed by consent. Since less than a quorum was present during this meeting; the Chair and Vice Chair communicated their concurrence and recommendation that this item be forwarded for Board consideration with no approval or disapproval recommendation from the Committee.

RECOMMENDED ACTION:

1. Appropriate $80,336 from the Undesignated Fund Balance to the FY 2001-02 Budget in Science and Technology Advancement, Professional and Special Services Account for installation of heat recovery equipment.
   
   
2. Authorize the Executive Officer to:

• Amend the existing contract and task order with C-4, Inc. in an amount not to exceed $80,336 to install heat recovery equipment at AQMD headquarters;
  
  
• Contract with a vendor to provide necessary maintenance on the microturbine system, to address Southern California Gas Company (SoCalGas) Self-Generation Incentive Program requirements at a cost to the General Fund of no more than $31,000 for a three-year period;
  
  
• Execute a Self-Generation Incentive Program Contract with SoCalGas and apply for the incentive equal to 30% of the project costs.

3. Recognize Revenue of $111,400 to $120,000, based on final project costs, from the Southern California Gas Company Self-Generation Incentive Program.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

On June 15, 2001, the Board established the LADWP Settlement Projects Fund and authorized the Executive Officer to expend up to $1 million from the Fund to install microturbines in Los Angeles County. After an RFP and competitive process, the Board established a list of qualified bidders for the projects by signing contracts with C-4, Inc. and MWH Constructors.

Only C-4, Inc. submitted a bid within the required deadline to install microturbines at AQMD Headquarters. The bid included a microturbines only proposal and an option for microturbines with heat recovery. C-4, Inc. was issued a task order to install four 60-kW microturbines without heat recovery for $81,044, because the $1 million from the LADWP Settlement Fund was not enough to cover the additional expense of the heat recovery.

The Southern California Gas Company (SoCalGas) recently instituted a Self Generation Incentive Program to encourage installation of energy-efficient electrical generating equipment at its customers' facilities. SoCalGas will pay $1,000 per kW, up to 30% of the project cost, for new microturbines installed with heat recovery equipment to utilize waste heat from the microturbines. AQMD can qualify for an estimated $111,354 incentive if heat recovery equipment is included with the AQMD microturbines. The additional cost to install the heat recovery equipment is only $80,366.

Another requirement of SoCalGas's incentive program is that the equipment have a warranty or maintenance contract for at least three years.

Proposal

Staff requests that the Board authorize the Executive Officer to: a) Amend the existing contract and task order with C-4, Inc. in an amount not to exceed $80,336 to install heat recovery equipment at AQMD headquarters, and b) contract with a vendor to provide maintenance on the microturbines at a cost not to exceed $31,000. These actions will enable AQMD to qualify for the $111,354 self-generation incentive from SoCalGas. The incentive should pay for the additional costs of the heat recovery equipment and the maintenance contract. The incentive may be somewhat higher than $111,354 once final project costs are determined.

Staff also requests authority for the Executive Officer to apply for the SoCalGas incentive and execute the required Self-Generation Incentive Program Contract with SoCalGas.

The heat recovery equipment will produce hot water that will be supplied to AQMD's hot water system. This will reduce the amount of natural gas burned by AQMD's hot water boilers and reduce AQMD's natural gas costs by at least $25,000 per year.

Because the incentive is paid in the form of a rebate after the system is installed, staff proposes that the additional equipment and installation cost of $80,366 and the $31,000 maintenance contract be temporarily paid from AQMD's General Fund. Once the incentive payment is received from SoCalGas, it will be deposited in the General Fund and make up for the expenditures.

Resource Impacts

This project will temporarily draw from the General Fund $80,366 plus $31,000, but will eventually result, when the SoCalGas incentive payment is received, in no cost to the General Fund. The heat recovery equipment should actually reduce AQMD's natural gas costs by at least $25,000 per year. Staff estimates that after all maintenance costs, fuel costs and electricity savings are considered, the microturbines will save AQMD over $100,000 per year.

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