South Coast Air Quality Management District

Execute Interagency Agreement with State of California Department of General Services to Purchase Natural Gas for Operation of Microturbines at AQMD Headquarters

SYNOPSIS: 

At its November 2001 meeting, the Board approved the installation of four 60-kW microturbines for combined heat and power generation at AQMD Headquarters. With the installation of these microturbines the AQMD is required to purchase natural gas from a non-core provider. Staff is recommending that it utilize the State of California Department of General Services Natural Gas Services Program to provide this non-core gas. The estimated cost is $110,000 annually, but the heat recovery and $250,000 per year of electricity savings should result in a combined electricity and gas cost savings of more than $100,000 per year, based on current gas and electricity rates.

COMMITTEE: 

Technology, June 28, 2002, Recommended for Approval

RECOMMENDED ACTION:

Authorize the Chairman to execute an Interagency Agreement with the State of California Department of General Services to purchase natural gas for the operation of microturbines at AQMD Headquarters for a one-year period with the option to renew annually for four additional years.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

At its November 2001 meeting, the Board approved the installation of four 60-kW, natural gas-fired, microturbines for electric generation at AQMD Headquarters. AQMD is currently a core customer of Southern California Gas Company (SoCalGas), purchasing natural gas from SoCalGas for building hot water and heating needs. However, as a result of the deregulated natural gas market, electric generation using more than 250,000 therms per year is a non-core service. This means that AQMD must purchase this natural gas from one of several natural gas marketers approved by the Public Utilities Commission, rather than from SoCalGas.

Proposal

Staff is recommending that AQMD enter into a one-year contract, with the option to renew on an annual basis for four additional years, with the State of California Department of General Services (DGS) Natural Gas Services Program to provide this non-core gas service. The DGS Program has about 125 customers in the state, all of whom are state or local government agencies. By pooling together the gas demands of many users, DGS can purchase gas at competitive rates. The current cost of gas, which changes monthly, is more than 10% less than gas AQMD purchases from SoCalGas. The DGS fee is less than 1.7% of the current cost of gas.

Sole Source Justification

Section VIII.B.2 of the Procurement Policy and Procedure identifies four major provisions under which a sole source award may be justified. This request for sole source awards is made under provision B.2.d: Other circumstances exist which in the determination of the Executive Officer require such waiver in the best interest of the AQMD. These circumstances are as follows:
 

(1)	After a survey of gas marketers, staff recommends DGS for procurement of natural gas due to their competitive rates and because they were the only marketer we found willing to provide service for our relatively small natural gas requirement.
(2)	DGS provides this service exclusively to public entities.

Resource Impacts

The estimated cost of this one-year contract is $110,000 based on full use of the microturbines and the current cost of gas. 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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