COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Department of Public Works

DATE:

November 22, 2006

BOARD MEETING DAT

December 5, 2006

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

Neil R. Cullen, Director of Public Works

SUBJECT:

Hearing to Consider an Agreement with BluePoint Energy, Inc., for Engineering, Procurement, and the Construction of a Cogeneration System at the San Mateo County Health Campus (San Mateo County Medical Center and Health Services Building)

Recommendation

Hold a hearing, receive any and all comments, close the hearing and then adopt resolutions authorizing:

1)

The President of the Board to execute an agreement on behalf of the County with BluePoint Energy, Inc. (BluePoint) for the engineering, procurement, and the construction of the above referenced project; and

2)

The Director of Public Works to submit an application to the California Energy Commission (CEC) for funding to finance the above referenced project.

Vision Alignment:

Commitment: Responsive, effective, and collaborative government.

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

The construction of a cogeneration system to serve both the Medical Center and the Health Services Building will result in long-term energy savings and the reduction of green house gases.

Background

Previous Board Action

Adopted a resolution setting a time and date of a public hearing to consider the above referenced agreement.

History

The County has taken several actions over the years to reduce energy consumption and the environmental impacts of county facilities and activities, and to improve air quality. In December 2004, the Public Works Department and the San Mateo Medical Center initiated a request for proposal (RFP) to explore the options for a performance-based design/build project to reduce annual utility costs at the San Mateo Medical Center. Several energy service companies submitted proposals in response to the RFP. However, fees appeared to be excessive and the corresponding recommendations in the proposals were not consistent with conclusions in a prior California Energy Commission (CEC) study. Therefore, staff concluded it was best to reject all proposals and request the CEC update their evaluation.

Your Board then authorized us to contact the CEC for technical and financial assistance. The CEC concluded their evaluation and determined that a cogeneration system at the Health Campus would be eligible for CEC funding and provided a cost benefit analysis for this project.

We then contacted the manufactures of cogeneration systems on the premise that dealing directly with manufacturers would result in lower costs. Two firms responded, United Technologies and BluePoint Energy. BluePoint’s submittal was considered the most responsive based on the low initial cost, superior technology, high operating efficiency and compliance with Bay Area Air Quality Management District’s year 2007 CARB requirements.

Discussion

Section 4217.10 et seq. of the Government Code provides that a governmental agency may enter into an agreement to install energy saving systems (i.e. a cogeneration plant) after considering said agreement during a regularly scheduled public hearing, and after making a finding that the anticipated cost for electrical energy or conservation services provided by the energy saving systems will be less than the anticipated cost for electrical energy or other energy that would have been consumed in the absence of the energy saving systems.

We believe your Board can make the necessary findings as the CEC study as referenced in the History Section of this report concluded that there is an estimated savings of approximately $391,000 per year by using the cogeneration plant to produce electricity and hot water as compared to continuing with the current systems.

We are recommending that an agreement be entered into with BluePoint to provide a cogeneration system on a “turnkey basis” as we believe that this is the most cost effective way of constructing this project.

BluePoint was, at the writing of this report, still reviewing the provisions of the agreement and the costs associated with meeting:

Ø

the noise abatement standards for the project since it will be located at the Health Campus which is within a residential area in the City of San Mateo;

Ø

the permitting requirements associated with receiving an Office of Statewide Planning and Development (OSHPD) permit; and

Ø

possible additional PG&E requirements associated with connecting the cogeneration system to PG&E service.

We will report on the status of the agreement at the public hearing and will recommend that the hearing and your Board’s consideration of the agreement be continued if BluePoint has not resolved the cost issues by the public hearing date.

Resolutions have been approved as to form by County Counsel and we will have the agreement reviewed by County Counsel as soon as we receive the agreement back from BluePoint.

The Director of the Medical Center and the Health Services Director concur in our recommendation.

Fiscal Impact

The “not-to-exceed” cost of the work, including a ten percent (10%) contingency is estimated to be $2,200,000. However this cost also needs to be finalized and we will report the final negotiated cost to you at the public hearing. An appropriation has been established in the 2006/07 Capital Projects Budget that is proposed to be financed by a CEC loan. The loan will be reimbursed from the savings, estimated to be $391,000 per year, by generating hot water and electricity with the cogeneration system. The Project may also qualify for a PG&E rebate of $414,000 at the completion of the project, which will further reduce the net initial cost.

There is no net impact to the General Fund.