HomeMy WebLinkAbout1997-03-04 City CouncilCity of Palo Alto
City Manager’s Report
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TO:THE HONORABLE CITY COUNCIL
ATTENTION:FINANCE COMMITTEE
FROM:CITY MANAGER DEPARTMENT: UTILITIES
DATE:March 4, 1997 CMR:150:97
SUBJECT:Proposed Compressed Natural Gas Rate
REOUEST
Staff requests the Council’s approval of Gas Rate schedule G-10, a compressed natural gas rate
applicable to fuel compressed natural gas (CNG) vehicles, and a fuel permit which allows
customers to fuel their CNG vehicles at the Municipal Service Center. At their November 6,
1996 meeting, the Utilities Advisory Commission (UAC) approved staff’s recommendation with
an amendment requesting the City Council to consider whether they want an equity transfer on
the CNG station, which would be a component of the CNG rate.
RECOMMENDATION
Staff recommends that the Council:
1)Approve the attached resolution establishing Compressed Natural Gas Rate Schedule G-
10 applicable to the use of CNG to fuel CNG vehicles to become effective April 10,
1997.
2)Approve the attached Fueling Permit (Exhibit "A").
POLICY IMPLICATIONS
It is Palo Alto’s policy to charge customers based on their share of the cost. Because the CNG
fueling station is not built on the Gas Utility distribution system, staff has not included a
component of the rate to generate a transfer to the General Fund. Although staff believes this
treatment is consistent with the current ratemaking policy based on the Utility Enterprise Fund
Methodology, the UAC disagrees with staff on this matter. The UAC approved the staffs
CMR:150:97 Page 1 of 3
Council to consider whether they want an equity transfer on the CNG station, which would be a
component of the CNG rate.
DISCUSSION
The use of CNG to fuel vehicles will reduce local air pollution and lower City vehicles’ fueling
costs. The Bay Area Air Quality Management District (BAAQMD) and Pacific Gas and Electric
(PG&E) have programs in place to provide funds to assist in conversion of vehicles to CNG. In
July 1993, the Council approved the first phase of a Gas Utility CNG project, to build a CNG
compressor and fueling station (CMR:388.93). The second and third phases will result in 100 of
the City fleet vehicles operating on natural gas. Funds to install the gas compressor and for
conversion of the City fleet vehicles have been included in the Gas Utility’s capital improvement
program budgets. The Gas Utility helped finance this project to improve air quality and to
promote the use of natural gas in vehicles. Increased sales of natural gas provide an incremental
contribution to the Utility’s overhead costs. The City’s Public Works Department operates and
maintains the completed Municipal Service Center (MSC), a high-pressure, high-volume
natural gas compressor and fueling station.
In addition to fueling the City’s CNG fleet, the Palo Alto Unified School District (PAUSD) and
the Ravenswood School District have requested use of the City’s CNG fueling station for a
limited number of buses. The PAUSD has been awarded grant funding to purchase CNG-fueled
buses to be used in 1996. Presently, PAUSD has two buses ready for use. The station’s capacity
is currently sufficient to meet the needs of the City fleet and the additional school district CNG
vehicles. No other customer vehicles will use the MSC CNG station.
Development of the CNG Rate Schedule
To offer CNG to customers, a CNG rate and billing procedures have to be established.
Compressed Natural Gas Rate Schedule G-10 is designed to recover the cost of CNG service to
the Palo Alto Gas Utility. The reported construction costs of the project totaled $259,450. This
includes the compressor installation on PG&E’s high pressure pipeline service and meter costs.
To calculate the capital recovery component of the rate, a 7 percent interest rate (an expected
average future interest rate) was used over a fifteen-year period, the expected life of the project.
The total fixed and variable costs include a capital recovery component, operation and
maintenance expenses, the cost of electricity used in compressing the gas, and the cost of natural
gas supplied. The total cost was spread over projected annual dispensed fuel, yielding a cost of
$0.71 per equivalent gallon. The proposed CNG rate includes an estimated fixed cost of
approximately $0.43 per equivalent gallon, added tO a forecasted average variable cost of $0.28
per gallon of compressed gas. PG&E charges $0.95 per equivalent gallon of CNG compared to
Palo Alto’s proposed rate of $0.71.
CMR:150:97 Page 2 of 3
This project’s asset (CNG station) is not considered part of the Gas Utility rate base and has not
been included for calculating the transfer to the General Fund. This project was built to improve
local air quality and is not a part of the City Utility’s distribution system to serve gas to
customers. The CNG station receives gas from PG&E’s high pressure gas line and it is located
on the customer’s side of the meter. For these reasons, staff recommends that the cost of the
project not include a transfer to the General Fund. If the capital cost of the CNG station is
included in the rate for purposes of calculating the transfer, the G-10 rate would increase from
$0.71 to $1.00 per equivalent gallon.
FISCAL IMPACT
Approval of the proposed Compressed Natural Gas Rate Schedule G-10 will allow the Gas
Utility to fully recover the costs of providing CNG. Staff is projecting $59,000 annual sales
revenue from the CNG activities.
ENVIRONMENTAL ASSESSMENT
This is not a project under the California environmental Quality Act and, therefore, no
environmental impact assessment is necessary.
ATTACHMENTS
Resolution
Exhibit "A" Fueling Permit
Exhibit "B" Certification of Instruction
Compressed Natural Gas Rate Schedule Gol0
Memorandum report and Minutes of 11/6/96 UAC Meeting
PREPARED BY:Lucie Hirmina, Manager, Utilities Rates
APPROVED BY:
Jo
.fUtilkies
CITY MANAGER APPROVAL:
City Manager
CMR:150:97 Page 3 of 3
COMPRESSED NATURAL GAS SERVICE
UTILITY RATE SCHEDULE (3-10
APPLICABILITY:
This schedule applies to the sale of compressed natural gas (CN(3/at the City-owned natural
gas fueling stations to customer who use CNG for fueling CN(3 vehicles.
B.TERRITORY:
Applies to locations within the service area of the City of Palo Alto.
C.RATES:
Per Therm
Per Gasoline
Gallon Equivalent
Commodity Charge $.61 $0.71
For billing purposes, the number of gallons will be complied from a Summary of Transactions
recorded by the dispensing unit for the customer during the month.
D. SPECIAL CONDITIONS
Service under this schedule is subject to discontinuance in whole or in part in case of
actual or anticipated shortage of natural gas resulting from insufficient supply, inadequate
transmission or delivery capacity of facilities.
2.Service under this schedule is provided only from a designated City fueling station which
will deliver CNG at approximately 3,000 pounds per square inch (PSI).
Individuals responsible for fueling a Natural Gas Vehicle shall be required to complete
training sessions to be certified to fuel a vehicle. Each individual must sign and date the
Certificate of Instruction for Fueling Natural Gas Vehicle.
4.Customers requesting to take service under this rate schedule are required to sign a
Compressed Natural Gas Agreement before commencing service.
5.If required by local or federal law, assessed applicable taxes shall be added to charges
shown in this rate schedule.
CITY OF PALO ALTO UTILITIES
Issued by the City Council Effective April 10, 1997
Original Sheet No. G-10-1
RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THE CITY OF PALOALTO
ADOPTING UTILITY RATE SCHEDULEG-10 OF THE CITY OF
PALO ALTO UTILITIES RATES AND CHARGES PERTAINING
TO COMPRESSED NATURALGAS SERVICE
The Council of the City of Palo Alto does hereby RESOLVE as
follows:
SECTION I. Pursuant to Section 12.20.010 of the Palo Alto
Municipal Code, Schedule G-10 (Compressed Natural Gas Service) of
the Palo Alto Utilities Rates and Charges is hereby adopted to read
in accordance with Sheet G-10-1, attached hereto and incorporated
herein by reference. The foregoing Utility Rate Schedule shall
become effective April i0, 1997.
SECTION 2. The Council finds that the revenue derived from
the authorized adjustments of the general natural gas service rates
shall be used only for the purposes set forth in Article VII,
Section 2, of the Charter of the City of Palo Alto.
SECTION 3. The Council finds that the adoption of this
resolution does not constitute a project under the California
Environmental Quality Act, California Public Resources Code section
21080, subdivision (b) (8).
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:APPROVED:
City Clerk Mayor
APPROVED AS TO FORM:City Manager
Senior Asst. City Attorney ~Deputy City Manager
Administrative Services
Director of Utilities
970226 ~Jn 0071142
FUELING PERMIT NO.
This Fueling Permit ("Permit") is issued by the City.of
Palo Alto, a California municipal corporation ("City") to
, a California
with principal offices at
("Customer") .
SECTION I. The term of this Permit .shall be one (I)
month, or fraction thereof ("Initial Term"), commencing on t~e date
of its issuance by the City. The term shall be automatically
renewed for successive one-month terms, commencing on the first day
of the month immediately following the Initial Term, unless and
until this Permit is terminated for convenience upon thirty (30)
days’ prior written notice, or terminated for cause upon 24 hours’
notice. For the purposes hereof, the City’s city manager or her
designee is expressly authorized to terminate this Permit on behalf
of the City, and any default hereunder shall be a ground for
termination for cause.
SECTION 2. The City agrees to sell to the Customer and
the Customer agrees to buy from the City compressed natural gas
("CNG") fuel, subject to its availability and priority of use by the
City, at such times and dates, in such amounts, and in accordance
with such rates and charges as may be established under the~terms
and conditions of this Permit and applicable statutes, laws,
ordinances, resolutions, schedules, rates and regulations. Nothing
in this Permit shall be construed to require the City to sell any
available excess CNG fuel to any public, governmenta! or non~
governmental agency, and the City expressly reserves the right at
any time to cease any and al! sales of CNG fue! to any person.
SECTION 3. The City grants to the Customer a non-
exclusive, revocable permit and license to enter and re-enter the
City’s Municipal Services Center ("MSC") premises located at 3201
East Bayshore Road, Palo Alto, County of Santa Clara, and operate
its motor vehicles expressly identified as "Authorized Motor
Vehicles" in Exhibit "A", for the sole purpose of fueling and
refueling such motor vehicles at the City’s CNG fueling facility
("Facility") between the hours of i0:00 a.m. and 2:00 p.m., Monday
through Friday, but excluding any day of the week that is observed
as an officia!, holiday by the City, or on which the MSC is closed
for business, or on which permission to enter is temporarily
suspended by the City’s Department of Public Works, Equipment
Management Division’s fleet manager. The City is not required to
give advance written notice to the Customer of the c!osure of the
MSC.
SECTION 4. The Customer, acting by and through its
emp!oyees-motor vehicle operators, shall fuel its motor vehicles in
accordance with the City’s written instructions for the fueling of
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CNG-powered motor vehicles, as such instructions are set forthin
Exhibit "B". NO PERSON SHALL BE PERMITTED BY THE CUSTOMER TO REMAIN
IN THE MOTOR VEHICLE OF THE CUSTOMER DURING THE FUELING OF SUCH
VEHICLE, AND A FAILURE TO COMPLY WITH THIS PROVISION SHALL
CONSTITUTE A DEFAULT UNDER THIS PERMIT. Each emp!oyee-motor
vehicle operator of the Customer shall execute a certification of
instruction before a motor vehicle operated by such emp!oyee-motor "
vehicle operator may be fueled at the Facility. The initiation of
CNG fueling of such motor vehicles shall be accomplished by the use
of one (i) card key ("key"), magnetic card ("card"), or wireless
control device ("device") per motor vehicle, up to a maximum of
keys, cards, or devices as determined by the City’s fleet manage-r-?.
The Customer agrees to be responsible for the safe keeping of the
keys, cards and devices and agrees to pay for the destruction, !oss
or theft of the keys, cards and devices and the cost of their
replacements. Only "those employee-motor vehicle operators who are
issued certifications of instruction shall.be permitted .by the
Customer to use the keys, cards and devices and a failure to comply
with this provision shall constitute a default under this Permit.
~otice of the destruction, !oss or theft of any key, card or device
shall be given by the Customer to the City’s fleet mahager
immediately, and the failure of the Customer to do so shall
constitute a default under this Permit.
SECTION 5. The City’s fleet manager or his designees
will fue! the Customer’s vehicles with CNG fuel, unless and unti!
the employees-motor vehicle operators of the Customer have
successfully completed the City’s CNG fuelingtraining and executed
certifications of instruction. The City’s fleet manager or his
designees will furnish CNG fueling training to the Customer’s
employees-motor vehicle operators at the MSC at such times and
dates as may be .-established, in writing, by the City’s fleet
manager. . Nothing contained in this Permit shall be construed to
limit the right of the City’s fleet manager to refuse to fuel the
Customer’s vehicles if an emp!oyee-motor vehicle operator of the
Customer is not in possession of a valid certification of
instruction or has not applied for a certification of instruction.
SECTION 6. The Custbmer shall pay the CNG fuel rates and
charges plus fuel taxes, if applicable, as set forth in Exhibit
or under the City’s municip~l fee schedule, as may be amended. The
City is not required to give prior written notice to the. Customer
in order to effect changes to the CNG fuel rates and charges, and
such rates and charges shall take effect upon its adoption by the
City. The City wil! submit a written invoice to the Customer for
all CNG fuel chargeable to the Customer’s account not less than two
times a year, and the Customer shal! make payment to the City
within thirty (30).days of the invoice date. The failure to make
timely payment shall constitute a default under this Permit.. Any
unpaid amount not in dispute shall be subject, to an administrative
charge of $~ plus interest equal to percent (R%) -of the~
undisputed amount per month. The City reserves the right to
require a cash deposit or other form of security deposit as a
condition precedent to initiating or continuing CNG fueling
services to the Customer. The Customer acknowledges that the City
customarily amends its rates "and charges at the commencement of
every fiscal year.
SECTION 7. All notices, communications or transmittals
required under this Permit shall be made, in writing, shall be
delivered through the United States mai!, and shal! be addressed to
the following addresses, or such other address as a party may
designate, in writing, to the other party in like manner:
To City:
Copy to:
.City of Palo Alto
250 Hamilton Avenue
Palo Alto, CA 94301
Attn.: City Clerk
Director of Public Works
250 Hamilton Avenue
Palo Alto, CA 94301
To Customer:
SECTION 8. This Permit is personal to the Customer and
shall ~ot be assigned or transferred by the Customer voluntarily or
by operation of law.Any such assignment or transfer shall be
deemed null and void.
SECTION9. The Customer, at its sole cost and expense,
shall obtain and maintain in full force during the term of this
Permit the types of insurance coverage that may be required by the
City’s risk manager, including, without limitation, commercia!
general liability insurance and automobile liability insurance,
each in amounts of not less than $i,000,000. With the exception of
workers’ compensation and employer’s liability, the insurance
coverage and endorsements reflected in any certificate of insurance
shall name the City as an additional insured concerning the
Customer’s fueling activities under this Contract. The certificates
will contain an endorsement stating that the insurance is primary
coverage and will not be canceled or altered by the insurer except
after filing with the City’s city clerk thirty (30) days’ prior
written notice of such Cancellation or alteration, and shall be
furnished to the City’s fleet manager before CNG fueling of the
Customer’s motor vehicles may occur. All insurance coverage
required hereunder wil! be provided through carriers with Best’s Key
Ratinq Guide ratings of A:X or higher which are admitted to
transact insurance business in the State of California.
Notwithstanding the policies of insurance, the Customer will be
obligated for the full and total amount of any damage, injury, or
loss caused by, directly or indirectly, or arising.as a result of
the Customer’s fueling activity, including such damage, injury, or
loss arising after the Permit is terminated or the term has
expired.. The City shall not be obligated to take out insurance on
the Customer’s personal property or the persona! property of any
person performing labor or services or supplying materials or
3
equipment to the Customer. At the City’s sole election, the
Customer may provide and the City may accept proof of self-
insurance retention by the Customer.
SECTION i0.
The Customer by executing this Permit certifies that it
is aware of the provisions of the Labor Code of the State of
California which require every employer to be insured against
liability for workers’ compensation or to undertake self-insurance
in accordance with the provisions of that Code, and certifies that
it will comply with such provisions, as applicable, before
commencing fueling activities under the authority of this Permit.
SECTION II. The Customer agrees to accept all risks,
including risk of loss, related to the operation and CNG fueling of
the Customer’s motor vehicles at the Facility, agrees to pay for all
costs of cleaning up, transporting, storing, and disposing of CNG
fuel spilled at the Facility or in any other part of the city of
Palo Alto by the Customer’s employees-motor vehicle operators, and
agrees to protect, indemni2y, defend and hold harmless the City,
its Council members, officers, emp!oyees and agents from any and
all demands, claims, or liability of any nature, including death of
or injury to any person, property damage or any other loss, caused
by or arising out of the Customer’s or its officers’, agents’,
subcontractors’ or employees’ negligent acts, errors, or omissions,
or willful misconduct, or conduct for which applicable law may
impose strict liability on the Customer in the performance of or
failure to perform its obligations under this permit, under the
Comprehensive Environmental Response, Compensation and Liability
Act, the Resource Conservation and Recovery .Act, the Toxic
Substances Control Act, the Carpenter-Presley-Tanner Hazardous
Substance Account Act, the Hazardous Waste Contro! Law, the Safe
Drinking Water and Toxic Enforcement Act, and under any other
local, state, or federal law, statute, ordinance, rule or
regulation, excepting only such damage, death or injurycaused by
the sole negligence or willful misconduct of the City.
SECTION 12. Nothing contained in this Permit, nor any
act of the City, shall be interpreted or construed as creating the
relationship of third party beneficiary, limited or genera!
partnership, joint venture,.employer or. employee, or principal and
agent.between the City and the Customer or its agents, employees or
contractors. The Customer shall at all times be deemed an
independent contractor and shal! be wholly responsible for the
manner in which its employees-motor vehicle operators observe the
agreements, covenants, terms and conditions imposed on it by this
Permit. The Customer agrees to be solely responsible for its own
acts and those of its officers, partners, employees, agents,
contractors, subcontractors and representatives.
SECTION 13. Neither the failure nor the delay on the
part of the City to exercise any right, power, or privilege
hereunder shal! operate as a waiver thereof, nor shal! any single
or partial exercise of any right, power, or privilege hereunder
4
preclude any other or further exercise thereof or the exercise of
any other right, power, or privilege. Any of the requirements of
this Permit may be expressly waived by the City, in writing, but no
waiver by the City of any requirement of this Permit shall, or
shall be deemed to, extend to or affect any other provision of this
Permit.
SECTION 14. Any amendment to this Permit shall be
binding upon the parties, provided such amendment is set forth in
a writing signed by the parties. The City’s city manager or her
designee is authorized to execute any amendments to this Permit,
and confer any consents or approvals that may be provided by the
City.
SECTION 15.~ Any provision of this Permit which is
characterized as a covenant or a condition shall be deemed both a
covenant and a condition. If any provision of this Permit shall be
determined by a court of competent jurisdiction to be invalid,
illega!, void, or unenforceable in any respect, the validity of all
other provisions herein shal! remain in full force and effect.
SECTION 16. This Permit shall be deemed a contract made
under the laws of the State of California, and for the purposes
hereof shall be governed and construed by and in accordance with
the laws of the State of California. All exhibits referred to in
this Permit and any addenda, appendices, attachments, and schedules
which may, from time to time, be referred to in any duly executed
amendment hereto are by such reference incorporated in this Permit
and shall be deemed to be part hereof. This Permit may be executed
in any number of counterparts, eachof which shall be an original,
but al! of which together shall constitute one and the same
instrument.
SECTION 18. In the event that suit is brought by either
party, the parties agree that tria! of such action shal! be vested
exclusively in the state court of California in the City of San
Jose, County of Santa Clara, or in the United States District Court
for the Northern District of California in the City of San Jose.
The prevailing party in any action brought to enforce the terms of
this Permit or arising out of this Permit may recover its
reasonable costs and aitorneys’ fees expended in connection with
such an action from the other party.
DATED:
CITY OF PALO ALTO
Director of Public Works
The terms and conditions of this Fueling Permit have been
reviewed and understood by the Customer. I represent and warrant
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that, for purposes of this Fueling Permit, I am duly appointed to
certify the Certifications of Instruction on the behalf of al!
employees-motor vehicle operators of the Customer, and, as the duly
appointed representative of the Customer, I, on the behalf of the
Customer, hereby signify full acceptance of the terms and
conditions of this Fueling Permit.
CUSTOMER
ATTACHMENTS:
EXHIBIT "A":
EXHIBIT "B":
EXHIBIT "C":
By:
Titie: ,~
AUTHORIZED MOTOR VEHICLES
CERTIFICATION OF INSTRUCTION
CNG FUEL RATES
6
CERTIFICATE OF ACKNOWLEDGMENT
(Civil Code ~ 1189)
STATE OF CALIFORNIA
COUNTY OF
On , 19__, before me,,
a Notary Public in and for said County and State, personally
appeared , personally know~ to me
or proved to me on the basis of satisfactory evidence to be the
person(s) whose name(s) is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature of Notary Public
96! ! I~ svn 0071073
EXHIBIT
AUTHORIZEDMOTOR VEHICLES
The following motor vehicles which are owned, leased or
otherwise in the exclusive possession of the Customer wil! use the
Facilities at the MSC for the purposes of CNG fueling, and their
makes, models, dates of manufacture, odometer readings, vehicle
identification numbers and li~cense numbers are:
96! | 1~ s~ 007|073
8
EXHIBIT
CERTIFICATION OF INSTRUCTION
A certification of instruction shall be completed by the duly appointed representative of the Customer (named in the
Fueling Permit) and each individual who may fuel a compressed natural gas-powered motor vehicle of the Customer at
the City of Palo Alto’s Municipal Services Center compressed natural gas fueling facility. Each individual will receive
training in the proper use of the City’s fueling facility, and wil! sign and date this form at the completion of training. The
City has no obligation to fuel a motor vehicle of the Customer until this Certification of Instruction is duly executed.
~OW TO SAFELY FUEL COMPRESSED NATURAL GAS-POWERED VEHICLES
4.
5.
6.
7.
8.
9.
lO.
17.
12.
No person shall be permitted by the Customer to remair/ in the
motor vehicle while such motor vehicle is being fueled.
No smoking or open flame shall be allowed within 50 feet Of
the fueling area.
Compressed natural gas cylinders which are not in compliance
with DOT or ANSI/AGA NGV2 requirements shall not be fueled.
The motor vehicle must be shut off.
The hand brake or emergency brake of the motor vehicle must be
set.
Remove the protective cap on the vehicle fueling receptacle,
if aplPli cable.
Remove the fueling device from the dispenser.
Inspect the fueling hose and connector prior to making the
connection.
Make connection and ensure the connector is locked in place.
OlPen the fueling valve on the fueling device.
Shut off the fueling valve on the fueling device after the
fuel flow stops registering on the dispenser.
Disconnect the fueling device and retur~ to the dispenser
holder.
I HEREBY CERTIFY THAT I HAVE BEEN TRAINED TO PROPERLY FUEL
COMPRESSED NATURAL GAS-POWERED VEHICLES AS OUTLINED ABOVE.
Date of Instruction Operator’s Signature Operator’s Name (Print)
I HEREBY CERTIFY ON THE BEHALF OF THE CUSTOMER THAT THE CUSTOMER
WILL NOT PERMIT ANY NONCERTIFIED INDIVIDUAL TO USE THE CITY’S CARD
KEY(S) , I~AGNETIC CARD (S) AND WIRELESS CONTROL DEVICE(S) FOR FUELING
COMPRESSED NATUPdkL GAS-POWERED VEHICLES.
Date Naxne of Customer
Authorized Signature of Duly Appointed Representative of Customer
9
Item 6. b.Gas Issues Update.
Karla Dailey: I do not have a formal presentation prepared for the gas
issues update this evening~ I am available for your questions.
Commissioner Gruen: There was mention made of a change in the PG&E
tariffs so that they were now significantly lower than ours. Do you
have any comment on that?
Ms. Dailey: Are you referring to the transmission? (Yes) Off the top
of my head, I cannot recal! exactly what caused that to change. It
actually went up from I0 to 12¢, I believe. We used to compare I0¢ to
our 17, and now we are comparing our 17 to 12. So I think it went in
the other direction, but I can get back to you on that.
Chairman Johnston: That completes that item.
Item 7.New Business
a.~.ompressed Natural Gas Rate
Lucie Hirmina: Mr. Chair, Commissioners, I do not have any formal
presentation for this matter, but I am available for any questions.
Commissioner Gruen: I have a question that comes to mind whenever I
hear about therms, and I know all of the factors and adjustments which
go into a therm. Now I have something which smells like the same kind
of thing. It is per gasoline gallon equivalent. CoHld you give me some
idea of what one of those is? Is that the amount of natural gas you
need to go as many miles as a gal!on would take you?
Ms. Hirmina: I am not an engineer.
engineer. That is my understanding.
I got the therms from our gas
Commissioner Gruen:
what it is.
So you and I are in the same boat.We do not know
Ms. Hirmina: Yes. They have changed the therms to gallons.
Mr. Mrizek: Basically, what you said is correct. It is a calculation
that has been used in the compressed natural gas (CNG) industry to
basically equivalent gallons to therms(?). How many therms would it
take for an equivalent gallon of gasoline? How many miles would you go?
We do not have the formula with us tonight, as Lucie said, but I am sure
our engineering staff could provide that information.
Ms. Hirmina: It is a factor of 1.6.
MINUTES UAD:I1/06/96
Final Page 17
Commissioner Sahagian:I
equivalency, comparing the
natural gas. I doubt if
efficiency of the vehicle.
think it might just be
heating value of gasoline
it would take
a million btu
to compressed
into account the mileage
Mr. Mrizek: No, you are correct, it is the heating value.
Commissioner Sahaqian: It is about ii0,000 per gallon.
I have a comment. Richard zeroed in on the same general area as I was
looking at. I found it rather surprising, as I had never paid much
attention to compressed natura! gas, that it was 71 per gallon for CNG,
which is probably on the order of half of what gasoline is per gallon.
My comment is that if this is a program that we are interested in
promoting, from an air quality perspective, we ought to get out and crow
about it. It is a pretty compelling rate for people to consider vehicle
conversion, and it seems like one of those very well kept secrets, as it
is not real obvious to people in the energy business.
Commissioner Chandler: I thought the same thing, but my reaction was
exactly right on your initial comment. I am not sure it is 71¢ compared
to $1.42, because I don’t know what the efficiency is with which the
fuel is turnedinto turning wheels. That is really going to determine
whether the 71 is or is not a bargain. There would also be the capital
costs of conversion and issues of maintenance and reliability. So I am
not sure how you would ultimately measure the total cost of ownership.
I was wondering whether this is going to be limited to the school
district or whether other people convert, or are you going to be running
a fueling station for anyone who happens to show up with a vehicle? How
is that going to work?
Mr. Mrizek: When we began the compressed natural gas program
approximately three years ago, we initially started with the City fleet
only, converting approximately one-third of the City fleet to CNG. We
did this because it is a cleaner burning fue!. It is cost effective,
and our first plan was to put a CNG filling station at the municipal
service center (MSC). This we have done. Our plan, through demand side
management (DSM), is to work with some of our major customers in the
City, hopefully establishing a second station somewhere in the City in
the future. We are looking at a number of sites~ and we will be talking
with some of our major customers. PG&E has worked with the postal
service people and other major companies to convert parts of their
fleet. We want to do the same thing. The use of the fueling station at
the municipal service center will be limited to fueling only of City
vehicles and the buses we mentioned in this report. We do not plan to
open up our MSC to other customers. We would have some difficulties
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there because of traffic flow, etc. So we would not want to look at
another site in the future to open this up to future customers.
Commissioner Eyerly: Lucie, your report covers all the bases as I read
it. I note in the development of the rate schedule that you figure Palo
Alto’s rate would 71¢, and PG&E’s rate would be 84¢, putting us a little
bit under PG&E. Things like this are good for the City to move forward
on and see how it works out, perhaps expanding it depending upon what
happens. This is a small amount of money, and it seems to be priced
right. The environmentally concerned people will be pleased with it,
and I think we certainly should go ahead on it.
MOTION: Con~nissioner Eyerly: I move that we recommend to the council
that they approve the G-10 schedule that has been prepared.
SECOND: By Commissioner Chandler.
Chairman Johnston: I have a number of questions about this. One is
whether the intent here is that the pricing is done to recover the cost
of the program, or is this pricing deliberately being what one might
call subsidized as a part of the DSM program?
Ms. Hirmina:
program.
Actually, no, this is just to recover the cost of the
Chairman Johnston: Also, you have indicated construction capital costs,
and you have provided for a 7% interest rate.How is this being
financed? Are we borrowing the money for this?
Ms. Hirmina: It was included in the capital improvement program.
Chairman Johnston: Then my question is, why are we only charging 7% to
this program? Is this part of the gas utility?
Mr. Mrizek: That is correct.
Chairman Johnston: So if it is a part of the gas utility, the capital
costs are included in the CIP program which, based on the way I
understand it, returns roughly 9-1/2% to the City, yet we are doing our
calculation for the rate based on a 7% return.. Why not the full return?
It sounds like the rest of the gas utility has to subsidize the
difference.
Ms.Hirmina: What ! am using the 7% for, this is the interest on our
portfolio, so it is just like discounted cash.So I have recovered from
the cash that was spent. It is like a cost for the life of the
project.
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Chairman Johnston: But at the same time, having incurred the capital
cost, it will increase the transfer to the General Fund.
Mr. Mrizek: The CNG program I do not believe is part of the gas fund
for transfer. We have kept that separate. That is not part of the
assets that we use in calculating the transfer.
Chairman Johnston: That is what I was trying to understand. So what
exactly is our policy, then, in terms of what capita! programs add to
the rate base for transfer, and what do not? I do not quite understand
that.
Mr. Mrizek: The gas distribution system, which would be all of the gas
mains, the laterals, the meters, all of those to serve our customers,
but not the gas fueling station for the CNG.
Chairman Johnston: What I am trying to understand is, where is the
origin of that decision that the capital cost for a CNG system would not
provide a return to the General Fund. Why no.t? I do not quite
understand that.
Mr. Mrizek: Because the CNG system is on the other side of the meter,
the customer’s side. When we serve a customer, industrial or
residential, all of the distribution system up to the meter we include
as an asset. We look at a CNG progra~ basically as another customer.
We have a meter, and we are metering gas. On the other side is the CNG
pumping station at the MSC. That is the rationale that we use.
Chairman Johnston: In the case of the customer, if it is on the other
side of the meter, doesn’t the customer pay for it?
Mr. Mrizek: That is correct. And here we are collecting that asset
based on the price per gallon or price per therm that we sell our CNG to
our customers.
Chairman Johnston: It seems like a very arbitrary decision as to where
you decide the break is between what provides a return and what does
not. I do not quite see what the distinction is. I don’t see why the
City would consider this any less of an investment upon which it should
be entitled to a return.
Mr. Baldschun: You might look at this as the gas utility seeing an
opportunity to encourage natural gas use in an efficient manner that
helps the envirornnent and saves cost to the City and other agencies, and
perhaps eventually to private users. As Ed said, it is not on the gas
utility side of the meter. It is on the customer side, so it is unique
MINUTES UAD:I 1/06196
Final Page 20
in that regard that we are making an investment to encourage this
activity and are recovering it through the CNG rate over 15 years using
the opportunity cost, you might say, of the portfolio of our cash which
is 7%.
Chairman Johnston: One could argue that the meter is on the way into
the pumping station, or one could argue that the meter is on the way out
of the pumping station. When I .come in to fill up, you have a meter
there that records how much I get out, and the whole pumping station is
on the other side of the meter. It just seems very arbitray to me.
Randy, I can completely accept the logic you give, but that logic to me
then suggests that we are subsidizing this as a DSM program. And that
may be just fine, but I feel we ought to be clear as to whether this is
something we are treating differently becaue we think it is good and
deserves merit for environmental reasons as a part of the DSM program.
Why are we doing this? It seems to me that I haveheard two rationales.
One is based upon which side of the meter that it is, which seems to be,
at best, arbitrary, and the other is that it is a good thing to be
doing, which falls into the category of DSM.
Mr. Baldschun: If there are some costs we are not recovering, which, to
me, signifies a subsidy, then I am not aware of them. I think the costs
for operating and the capital costs, the only component that is not in
there really is the profit in terms of transfer to the General Fund on
this activity, but there is a good reason for that. We do not own the
asset, essentially, and it is a quasi -- who owns. it? The point is that
this breaks with tradition in the sense that we putting some money into
an activity that is not on the utility side of the meter, but we are
recovering our costs, so I cannot see it as being a subsidy.
Chairman Johnston: You raise a good question. Who does own this? It
sounded like you were going to reach the point in saying the utility
does not own it. Then I was going to ask, who does own it? Then you
probably would have to come back and say, the utility sort of owns it.
So it sounds like there isn’t much of an argument there. From the
utility standpoint, I would accept it. If the General Fund is not going
to charge the utility a transfer on it, then you are correct. The
utility is not subsidizing it. Then I guess my question is, why is the
General Fund choosing this particular program to be so generous? Maybe
that is not a question for you.
Mr. Mrizek: You are correct there. You asked another question -- why
are we doing it?-We are doing it because of the Clean Air Act. .This is
entirely a program that we see as a benefit to the community and the bay
area.
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Chairman Johnston: I am very supportive of our doing it. Don’t get me
Wrong. The question is merely a matter of whether we are doing it on
the basis that it is a DSM basis, or are we doing it on the basis of the
way we would do any other utility activity involving equity transfers.
I think, Ed, you have answered the question with regard to maintenance.
The only vehicles we are going to be fueling are fleet vehicles. Are
there particular fleet vehicles that have been identified so far?
Mr. Mrizek: This is just City vehicles. City fleet plus two buses from
the Palo Alto School District and two from the East Palo Alto School
District.
Chairman Johnston: Do you see that changing?
Mr. Mrizek: The only change we would foresee is if we would increase
the number of City fleet vehicles being converted to CNG. We do not
plan to utilize this station for other customers.
Chairman Johnston: My next question, following on what we have heard,
is why not? Maybe we should be in the business of encouraging taxi
fleets and other fleet vehicles.
Mr. Mrizek: Yes~, we want to encourage our customers to convert to CNG,
however, to do so, the MSC, as you know, is funneled through a two-lane
roadway. We would have to redo the master plan of the area, causing
considerable traffic. We would have to go through a number of things.
The decision we reached at this time is that the fueling station at the
MSC, the security at the MSC we took into consideration, and a lot of
things to make a determination that that fueling station will be
utilized just for the City vehicles. But yes, we are !ooking at other
sites in the City if we get additional customers such as Hewlett-Packard
or Varian who may want to convert some of their vehicles or the post
office. We would then look at another site for another CNG fueling
station. We need a location where there is a high pressure gas line, a
PG&E line that we can tap into. That is another criterion.
Chairman Johnston: What I would like to do is to propose an amendment
to the motion that is on the floor and see if there is support for a
second. I would like to propose that we do indeed recommend that the
City Council adopt this, but thatwe ask them to consider whether they
want to have an equity transfer on this. If so, the increase in cost
would be relatively modest and would still allow us to provide a cost
below that of PG&E. So I would propose that amendment.
Commissioner Eyerly: I accept your amendment as maker of the motion.
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Final Page 22
Commissioner Chandler: And I accept as the seconder.
MOTION PASSES: Chairman Johnston: Is there any further discussion on
the motion as amended? All those in favor, say aye. All opposed?That
passes unanimously on a vote of 5-0.
Item 7. b.Information Report, Street Liqht Conversion
Proqram.
Mr. Mrizek: The members of the Commission requested this report, and we
are providing this for the Commission information.
Commissioner Gruen: I want to make sure I understand the numbers, if I
may. First, the number which caught my attention is that by the end of
calendar year 1996, you will be completely finished with this program.
Is that accurate?
Mr.Mrizek: That is correct~
Commissioner Gruen: Grossly, the arithmetic on what your electricity
costs are that you get twice as much light in exchange for 40% of the
cost of electricity. Can you say anything about how often you have to
change the lamps or what it costs to change a lamp, things like that?
Mr. Starr: The cost to change the lamp is the same whether it is
mercury vapor or high pressure sodium. We find that the high pressure
sodium lights last for around four years, so they have a good life time.
The incandescents lasted for less than one year. So you get more light,
less electricity, and longer life.
Commissioner Gruen: So it costs us four times as much to change
incandescents because you have to change them more often. What does it
cost to send someone out to change one?
Mr. Start: If it is for just one at a time, it probably takes from 20
minutes ot a half hour, depending upon how far you have to drive to
reach the site, then set up the truck, go up and open up the fixture,
change the bulb, put the fixture back together and come back down. It
works better if we do a number of them at one time. We are also laying
out a plan to do group replacements instead of waiting for them to
actually fai!. We would just establish a lifetime on them, and then
every four years, we would replace a whole group of them.
Commissioner Gruen: I believe I see the makings of a success story here
rather than a mere report. Certainly more light for less money is a
success story. Replacing them on a longer-term basis sounds like a
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