BOARD MEETING DATE: March 7, 2008
AGENDA NO. 11

PROPOSAL:

Issue Program Announcement and Application for a Natural Gas Hearth Product Buy-Down Pilot Program

SYNOPSIS:

Staff has developed Proposed Rule 445 (Wood Burning Devices) to reduce emissions from fireplaces and other wood burning devices. Additional emissions reductions can be obtained from a gas log buy-down program where the public could receive financial assistance to install gas log sets into existing wood burning fireplaces. This action is to issue a Program Announcement and Application for a pilot program to hire a third party to implement a gas log buy-down program. An amount not to exceed $500,000 from AQMD Rule 1309.1 (Priority Reserve) funding will be used for this project.

COMMITTEE:

Stationary Source, February 15, 2008, Recommended for Approval

RECOMMENDED ACTIONS:

1. Designate $500,000 in presently existing Rule 1309.1 Priority Reserve Funds to implement the Natural Gas Hearth Product Buy-Down Pilot Program.
2. Approve issuance of Program Announcement & Application PA # 2008-07 to identify potential contractors with experience in sales, service and installation of natural gas hearth products.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

Residents of the South Coast Air Basin are exposed to some of the highest ambient concentrations of fine particulate matter in the nation. Emissions from wood burning for aesthetic and heating use in Southern California contribute to exceedances of State and federal air quality standards for fine particulate matter, also referred to as PM2.5. Wood burning can also produce carbon monoxide and toxic air contaminants. The 2007 Air Quality Management Plan (AQMP) included a control measure to reduce fine particulate emissions from wood burning fireplaces and wood stoves. Proposed Rule 445 (Wood Burning Devices) has been developed to reduce wood smoke emissions and assist in the attainment of State and federal fine particulate matter standards. As part of a comprehensive wood smoke reduction program, emission reductions are sought by providing monetary incentives to buy-down the cost of purchasing and installing natural gas hearth products into existing households with wood burning devices (e.g., fireplaces with natural gas plumbing).

Rule 1309.1 was amended in April 2001 to address the energy crisis of the local region. That amendment was designed to create a mechanism by which electrical generating facilities (EGF) could purchase emission reduction credits from the Priority Reserve at $25,000 per pound to mitigate emission increases necessary from power producing equipment to meet consumer demand. In conjunction with that specific amendment, approximately $34.5 million has been collected and is available for funding. Of that total amount, $27.1 million has been expended or committed, leaving a balance of approximately $7.4 million . Previously funded projects include items such as diesel engine replacements/repowering, and diesel particulate filter retrofits.

The adoption resolution to the 2001 Rule 1309.1 amendments directed staff to fund PM10 emission reduction programs¹. The Natural Gas Hearth Product Buy-Down Pilot Program achieves the directive of the Board resolution.

Proposal

Staff proposes to contract with one or more entities to implement a Natural Gas Hearth Product Buy-Down Pilot Program. Under the proposal, staff will identify potential manufacturers/suppliers that are willing to provide gas log sets and other gaseous-fueled hearth products to the public at a discounted price. The SCAQMD will give preference to contractors who, in addition to providing a qualifying product at the lowest possible price, will provide additional services to help advertise the program and organize and conduct the buy-down program, with additional consideration for providing additional incentives or services in Environmental Justice areas. The selected contractor(s) must also have a demonstrated ability to ensure that the natural gas hearth products are professionally installed in a timely manner following product purchase. Once the gas log set or other gaseous-fueled hearth product is installed into a South Coast Air Basin household with an existing wood burning device, the contractor will be eligible for a reimbursement of up to $150 per device from the AQMD. Staff will return to the Board for contract approval once the contractor(s) have been identified.

Staff is also seeking Board approval to designate $500,000 in Rule 1309.1 funds pursuant to the 2001 amendments to implement the program.

For comparison purposes, $500,000 paid into the Priority Reserve funded 20 pounds per day PM10 credits based on maximum rated capacity of the EGFs. However it should be noted that these EGFs operated at about 33% of capacity. Alternatively stated, of the 20 pounds purchased, only 7 pounds were on average actually emitted. The $500,000 used for this buy-down program would achieve, on average, 17 to 26 pounds per day additional PM10 reductions based on an incentive level of $100 to $150 per unit funded. Based on an emissions reduction level of 1.8 pounds PM10 per unit, this equates to a cost effectiveness of $19,200 to $29,400 per pound of PM10. This is generally comparable to the $25,000 per pound paid by facilities for PM10 credits under the April 2001 Rule 1309.1 amendments.

Other Air District Incentive Programs

Other air districts have developed incentive programs over the years to encourage the public to switch to cleaner hearth products. The Bay Area AQMD recently provided $100,000 in funding to implement the Change 4 Clean Air Program in which residents receive a discount on qualifying hearth products from participating retailers at the time of purchase. Under the Bay Area program, a $600 discount is provided for a gas or pellet insert and $300 is provided for an EPA Phase II-certified wood burning insert or for a gas log set. Sacramento Metropolitan AQMD also has a program where the public can receive vouchers from the air district that range in value from $75 for a gas log set, $250 for an EPA Phase II-certified wood burning stove or insert, or $350 for a pellet or gas insert or stove. Under the Sacramento program, the incentives are increased in Environmental Justice areas as follows: $200 for a gas log set, $400 for an EPA Phase II-certified wood burning stove or insert, or $500 for a pellet or gas insert or stove. Environmental Justice areas are defined by Government Code §65040.12 and Carl Moyer guidelines. The Sacramento air district then reimburses the retailer after product installation and submittal of the appropriate documentation. The San Joaquin Valley air district also has a voucher program where residents can receive up to $350 to install a gaseous-fueled freestanding stove or fireplace insert and retailers are reimbursed after product installation.

Bid Evaluation

AQMD staff will evaluate the proposals based on, but not limited to, product line, warranty period, experience with hearth products, number and experience of licensed or certificated installers, price per unit that the contractor will charge the public, the degree to which the contractor’s additional services will reduce SCAQMD expenses for advertising, organizing, and conducting the program, and the degree to which the contractor will provide additional services or incentives in environmental justice areas. Proposals will be evaluated by a diverse, technically qualified panel in accordance with the criteria outlined in the Program Announcement and Application. Each evaluation panel member will be accorded equal weight in the rating of proposals.

Outreach

In accordance with AQMD’s Procurement Policy and Procedure, a public notice advertising the Program Announcement and Application and inviting bids will be published in the Los Angeles Times, the Orange County Register, the San Bernardino Sun, and Riverside County Press Enterprise newspapers to leverage the most cost-effective method of outreach to the entire South Coast Air Basin.

Additionally, potential bidders may be notified utilizing AQMD’s own electronic listing of certified minority vendors.  Notice of the Program Announcement and Application will be mailed to the Black and Latino Legislative Caucuses and various minority chambers of commerce and business associations, and placed on the Internet at AQMD’s Web site (http://www.aqmd.gov/ where it can be viewed by making menu selections “Inside AQMD”/“Employment and Business Opportunities”/“Business Opportunities” or by going directly to http://www.aqmd.gov/rfp/index.html). Information is also available on AQMD’s bidder’s 24-hour telephone message line (909) 396-2724.

Benefits to AQMD

The successful implementation of this program will result in a net reduction in pollutant emissions including PM2.5, VOC and CO. This program is also expected to decrease the emission of toxic compounds.

Resource Impacts

The total cost of the proposed pilot program will not exceed $500,000. Sufficient funds are available from the Rule 1309.1 Priority Reserve Fund.

Attachment (doc 648kb)

Program Announcement and Application PA # 2008-07 – Natural Gas Hearth Product Buy-Down Pilot Program

¹ The resolution states:
“…the Governing Board hereby directs staff to use mitigation fee proceeds collected pursuant to paragraph (a)(4) of PAR 1309.1 – Priority Reserve to fund PM10 emission reduction programs…”