COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Department of Public Works

DATE:

September 6, 2006

BOARD MEETING DATE:

September 12, 2006

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

Neil R. Cullen, Director of Public Works

SUBJECT:

County’s Participation in the Association of Bay Area Governments, (ABAG POWER) Natural Gas Program for the Youth Services Center - San Mateo Area

Recommendation

Adopt a resolution:

a.

authorizing the President of the Board to execute a noncore Natural Gas and Aggregation Agreement with ABAG POWER to provide natural gas to the Youth Services Center (YSC); and

b.

authorizing the President of the Board, or in the President’s absence, the County Manager, to execute addendums to the agreement to include other facilities that may be provided natural gas by ABAG POWER.

Vision Alignment

Commitment: Responsive, effective and collaborative government.

Goal 20: Government decisions are based on careful consideration of future impacts rather than temporary relief or immediate gain.

The proposed agreement with ABAG POWER is anticipated to provide the County with lower cost natural gas than can be purchased from the Pacific Gas and Electric Company (PG&E).

Background

Previous Board Action

Entered into an agreement in 2005 to purchase natural gas from ABAG POWER, a joint powers authority of the Association of Bay Area Governments (ABAG).

History

ABAG POWER was created by ABAG to provide lower cost electricity and natural gas to local agencies by aggregating electric and gas purchases for local governments in PG&E’s service territory. The Electric Aggregation Program was suspended in July 2001, due to the high and unstable price of electricity at that time. However, the Natural Gas Purchase Program, which the County participates in, has continued to provide natural gas at a lower cost to ABAG POWER’s member agencies.

We are proposing that ABAG POWER serve the YSC. However, a separate agreement is necessary as the YSC is classified as a noncore end user as it is estimated to use over 250,000 therms of energy per year.

Discussion

The proposed agreement is similar to the agreement previously executed with ABAG POWER except that it provides that the County must submit an annual usage form and update the form to keep ABAG POWER apprised of operation changes that will affect gas usage. In addition, Public Utility Commission rules provide that noncore facilities are subject to gas being involuntary withheld (diverted) if the demand for gas for core users exceeds supplies. However, it is our understanding that this is highly unlikely in the Bay Area.

ABAG POWER expects that it will continue to provide gas at a rate at least five percent (5%) below PG&E’s cost of natural gas.

We are also recommending that the President of the Board or the County Manager, in the absence of the President, be authorized to approve addendums to the agreement, which is anticipated to include additional accounts such as a replacement facility for the existing Women’s Jail.

The agreement also provides that the Deputy Director of Facilities is the County’s representative on the ABAG POWER’s Board of Directors, and this was approved by your Board as part of the previously executed agreement.

An agreement and resolution has been approved as to form by County Council.

Fiscal Impact

The agreement provides that each participating agency advance a refundable deposit to provide working capital for ABAG POWER equal to twice the estimated monthly cost of gas. Energy costs are estimated at $31,240 per month; therefore the first month’s bill is estimated at $93,720 (a refundable deposit of $62,480 plus $31,240 in gas usage).

The incremental cost avoidance based on a five percent (5%) differential in gas rates is estimated to save approximately $21,000 per year.

The deposit and the charges for energy will be paid for with Facilities fees. The cost avoidance savings will be shared by all County Departments, including General Fund financed departments, as energy costs are currently part of the facility fees paid by County Departments housed in County facilities.

There is no additional impact to the General Fund.