BOARD MEETING DATE: April 4, 2003
AGENDA NO. 5

Execute Contract for Maintenance and Management Services for Fast Fill Compressed Natural Gas Fueling Station at AQMD Headquarters

SYNOPSIS:

AQMD has upgraded its natural gas fueling station to accommodate the growing alternative fuel vehicle fleet. The station requires periodic preventive maintenance and service as well as management services to ensure efficient and continuous operation of the station. Pinnacle CNG Company, the vendor of the CNG fueling equipment, is recommended to provide CNG maintenance and management services.

COMMITTEE:

Administrative, March 14, 2003, Recommended for Approval

RECOMMENDED ACTIONS:

Authorize the Chairman to execute a contract with Pinnacle CNG Company for maintenance and management services for a fast fill compressed natural gas fueling station at AQMD headquarters. Pinnacle will be paid based upon a cost of $0.40 per Gasoline Gallon Equivalent (GGE) of CNG pumped, cost adjusted annually based upon the California Consumer Price Index (CPI), for a period of five years. Costs are payable from the Fast Fill CNG Fueling Station Enterprise Fund established to recover fuel costs, taxes, and overhead from the revenue generated from the sale of CNG.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

Air quality and health impacts of diesel exhaust have led the AQMD and others to focus attention on reducing diesel exhaust emissions from heavy-duty vehicles. In addition, light-duty alternative fuel vehicles, such as natural gas vehicles (NGVs), have demonstrated significantly lower VOC, NOx, CO and toxic emissions than gasoline vehicles.

At its September 21, 2001 meeting, the Board approved the execution of a contract to build and operate a new natural gas fueling station at its Diamond Bar facility that can accommodate the growing AQMD alternative fuel vehicle fleet. This project was completed in January 2003 and provides a fast fill CNG fueling station for AQMD as well as third party CNG vehicles. On May 3, 2002 the Board approved the execution of a contract with Pinnacle CNG Company for management and maintenance of this CNG refueling station. That contract will end on June 30, 2003.

Proposal

Staff recommends that the Board approve the proposed contractor, Pinnacle CNG Company (Pinnacle), to provide maintenance and management services for the AQMD CNG fueling station for a period of five years. The contractor will be completely responsible for the equipment maintenance and any repairs or replacements due to equipment failures or breakdown. These maintenance and management services agreements must be in place before the current management and maintenance agreement ends (June 30, 2003).

A cost proposal for maintenance services was submitted with the fueling station construction bid by Pinnacle. Pinnacle CNG Company has also proposed to manage the fueling operations of the AQMD station. The cost for these maintenance and management services is based upon the amount of fuel used. The proposed cost is $0.40 per gasoline equivalent gallon (GEG) pumped with annual review and adjustment based upon the California Consumer Price Index (CPI). One GEG is equal to 1.2 Therms or 120,000 BTUs. The AQMD CNG vehicle fleet currently consists of 170 cars with plans to convert the remainder of the car and medium-duty vehicles to CNG over the next three years resulting in a CNG fleet of more than 260 vehicles. FY 2002-03 CNG usage will be about 50,000 GEG per year.

Included in this station management proposal are the following:

• 24 Hrs auto-dialing "Help Phone" at the fueling dispenser area
• Automated notice (3-minute) to Pinnacle of CNG service interruption
• 2 Hr response time for fueling service interruption
• Remote video monitoring access of CNG fueling island
• Remote computer telemetry monitoring
• Detailed SCAQMD vehicle fueling reports (paper and electronic)
• Monthly SCAQMD fleet summary reports (paper and electronic)
• Total station monthly summary reports (paper and electronic)
• Public access CNG marketing and billing services
• Calculation and tracking of state and federal CNG fuel taxes
• Monthly reconciliation of all CNG receipts and utility billings
• Free station and billing software upgrades during the term of the contract

An enterprise fund was established to account for the various CNG fueling activities, costs and credits. This fund allows the recovery of taxes, gas costs and overhead from the public sales of CNG. Management and maintenance fees as well as credit card transaction charges for CNG fueling will also come from this enterprise fund. The complete management of this fund and the various activities, transactions, records and payments associated with CNG fueling operations would require significant AQMD resources. Therefore, outsourcing these functions to Pinnacle provides a more cost effective solution.

The replacement of the fueling station and planned fleet growth this year could increase CNG usage to more than 100,000 GEG per year. Costs for the proportionate share of maintenance services associated with public access fueling will be incorporated into the fuel prices. This proposal is to execute a contract for maintenance and management services for the new fast-fill CNG vehicle fueling station with Pinnacle CNG Company for five years at a total cost for management and maintenance fees based upon a cost of $0.40 for each Gasoline Equivalent Gallon (GEG) of CNG delivered by the station. This cost is within the range seen at other stations for similar services.

Benefits to AQMD

The project covered by this management and maintenance agreement is included in the March 2001 update of the Technology Advancement Plan under Project 2001 CFM3-1 "Development and Demonstration of Advanced Natural Gas Systems for Refueling Stations." The AQMP relies on the expedited implementation of advanced technologies and clean–burning fuels in Southern California to achieve air quality standards. While not providing any direct emission reductions, the CNG refueling station will assist in the commercialization of natural gas heavy-duty vehicles by providing a reliable source of fuel.

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 a sole source award is made under the provisions B.2.c.(2): the project involves the use of proprietary technology; and B.2.c.(3): the contractor has ownership of key assets required for project performance (replacement parts and system components). It is in the best interests of the AQMD to contract with Pinnacle CNG Company for maintenance and management services for the AQMD fast-fill CNG fueling station.

Pinnacle CNG Company, based in Midland, Texas has developed and owns several patents to its unique hybrid compressor as well as its overall fueling station design. They are well qualified to service and maintain this equipment and they are the only source with direct access to the necessary parts and first-hand experience with the operation and repair of that equipment.

Resource Impacts

There is no impact on AQMD’s budget, as service costs are paid from the previously described enterprise fund that was established to account for CNG fueling activities and sales, and to recover fuel costs, taxes, and overhead from the revenue generated from the sale of CNG. It is estimated that AQMD costs for this maintenance service agreement will be approximately $25,000 the first year, increasing by $5,000 each subsequent year through the five-year agreement. These cost projections are summarized in the following table:

Estimated Maintenance & Management (M&M) Services Costs
 

Revenue derived from the sale of fuel to the AQMD, the public and other government agencies will include the of equipment maintenance and management fees, AQMD overhead, taxes, natural gas and other related costs.

/ / /