BOARD MEETING DATE: February 2, 2007
AGENDA NO. 13

Amend Incentive Buy-Down Program for CNG Home Refueling Appliance

SYNOPSIS:

On May 6, 2005, the Board approved matching funds with the MSRC and provided $400,000 for a buy-down incentive program for 400 natural gas home refueling appliances to broaden the consumer base for NGVs.  The program specified $100,000 to purchase 100 home refueling appliances through a contract with the home refueling appliance manufacturer, FuelMaker Corporation and $300,000 to lease 300 home refueling appliances through a contract with American Honda Motor Company, Inc. (AHMC).  AQMD and MSRC matching funds result in a $2,000 buy-down per home refueling appliance either purchased or leased.  All 100 home refueling appliance purchases and associated incentive funds are committed; and while demand for home refueling appliance purchases continues, demand for home refueling appliance leasing is currently negligible.  This action is to de-obligate $250,000 from the AHMC (or lease) contract and apportion this amount to the FuelMaker (or purchase) contract; continue the matching incentive with MSRC of $1,000 per leased home refueling appliance and commence an AQMD-only sponsored purchase incentive of $2,000 per home refueling appliance.

COMMITTEE:

Technology, January 26, 2007, Recommended for Approval

RECOMMENDED ACTIONS:

Authorize the Chairman to:

1. Amend Contract No. 06017 with American Honda Motor Company, Inc. as follows:

1. Reduce the contract value by $250,000 and return this amount to the Clean Fuels Fund leaving a total of $50,000 in the contract;
2. Continue co-sponsorship of the buy-down incentive program for leasing a home refueling appliance with the MSRC at $1,000 per unit; and
3. Extend the contract performance period by nine months to March 31, 2008.

2. Amend Contract No. 06018 with FuelMaker Corporation as follows:

1. Increase the contract value by $250,000 from the Clean Fuels Fund;
2. Commence an AQMD-only sponsored buy-down incentive program for purchasing a home refueling appliance and increase incentive from $1,000 to $2,000 per unit; and
3. Extend the contract performance period by nine months to March 31, 2008.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

On May 6, 2005, the Board approved cosponsoring and cost sharing with MSRC a buy-down incentive program for a CNG home refueling appliance and executing contracts with FuelMaker Corporation and American Honda Motor Company, Inc. (AHMC) for the purchase and lease of a home refueling appliance, respectively.  The objective of the buy-down incentive program is to reduce air pollution in the Basin by encouraging the expansion and use of alternative fuel vehicles by the general consumer. 

The buy-down incentive program comprises two sole-source contracts.  The first contract is with AHMC at a cost not to exceed $300,000 toward the lease of 300 home refueling appliances.  The other contract is with FuelMaker Corporation at a cost not to exceed $100,000 for the purchase of 100 home refueling appliances.  Both contracts provide $1,000 incentive per home refueling appliance.  Total funding for the program is $400,000 from the Clean Fuels Fund to encourage the purchase or lease of 400 home refueling appliances.  The MSRC has identical contracts and terms.  Together, the MSRC and AQMD buy-down incentives provide consumers with a $2,000 cost saving per home refueling appliance. 

The purchase incentive program has been a success, with FuelMaker securing purchases of all 100 home refueling appliances.  The lease program has not yet resulted in any invoicing of leased home refueling appliances, and the original $300,000 dedicated to this element of the buy-down incentive program remains intact.  In addition, there is a continued demand for purchasing the home refueling appliance.  The current retail price of the home refueling appliance is $3,400; the matching incentives of $2,000 reduce this cost to $1,400.

Proposal

This action requests the Board’s approval to revise the contracts with AHMC and FuelMaker by de-obligating $250,000 of the current $300,000 from the AHMC contract for the home refueling appliance lease program and transferring this amount to the FuelMaker contract for the home refueling appliance purchase program.  This action would leave $50,000 in the AHMC contract  The revised funding amounts will translate into an additional 125 home refueling appliance purchases and 50 home refueling appliance leases and would bring the program total to 275 home refueling appliances.

The lease program will continue as a co-sponsored, cost-shared program with the MSRC, providing consumers who lease a home refueling appliance with a combined buy-down incentive of $2,000.  The purchase program will continue as an AQMD-only sponsored program and the AQMD will increase the amount of buy-down incentive for purchasing a home refueling appliance from $1,000 to $2,000.  The remaining $50,000 for AHMC’s lease program will continue until such funds are depleted at which time only MSRC funds will be available at $1,000 per lease.  FuelMaker and AHMC have agreed to the proposed contract amendments.  The existing contracts are scheduled to expire on June 30, 2007.  As such, staff is requesting the Board extend the performance period of the two contracts by nine months to March 31, 2008.

Benefits to AQMD

Gasoline and diesel fueled mobile sources are a significant source of emissions in the AQMD and alternative fueled vehicles are a means of reducing these emissions.  This project will incentivize consumer interest in alternative fueled vehicles and continue the momentum and expansion of natural gas home refueling appliances and passenger car alternative fuel vehicles.

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 provision d (2) Time extension of an existing contract.

Resource Impacts

No new additional funds are requested for this proposal.  Currently there remains $300,000 of the original $400,000 awarded to this program through the Clean Fuels Fund.  All or part of these funds will continue to be cost shared with matching funds from MSRC at a rate of $1,000 per home refueling appliance leased.  However, the proposal will permit up to $2,000 per home refueling appliance purchased with no cost sharing from MSRC and will reduce the total number of home refueling appliances either purchased or leased through the buy-down incentive program from the original projection of 400 units.    

Proposed Reallocation of Clean Fuels Fund Balance for Contracts 06017 and 06018

* Additional $1,000 provided by MSRC

The Clean Fuels Fund is a special revenue fund established from the state-mandated Clean Fuels Program.  The Clean Fuels Program, under Health and Safety Code Sections 40448.5 and 40512 and Vehicle Code Section 9250.11, establishes mechanisms to collect revenues from mobile sources to support projects to increase the utilization of clean fuels, including the development of the necessary advanced enabling technologies.  Funds collected from motor vehicles are restricted, by statute, to be used for projects and program activities related to mobile sources that support the objectives of the Clean Fuels Clean Fuels Program.