COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Department of Public Works

DATE:

November 2, 2007,

BOARD MEETING DATE:

November 27, 2007

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

James C. Porter, Director of Public Works

SUBJECT:

Hearing to Consider a Facility Ground Lease and Agreement with Northstar Power Ltd. to Design, Engineer, Construct, Operate, and Maintain a Cogeneration System at the San Mateo County Health Campus and to Purchase Energy Produced by the System.

RECOMMENDATION:

Adopt a resolution setting a time and date for a public hearing to consider a facility ground lease and agreement with Northstar Power to design, engineer, construct, operate, and maintain a cogeneration system at the San Mateo County Health Campus and to purchase energy produced by the system.

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 at the San Mateo County Health Campus will result in long-term energy cost savings and reduction of green house gases.

BACKGROUND:

Cogeneration is a widely accepted method of reducing energy costs and is currently operational at Maguire Correctional Facility and the Youth Services Center. Energy cost savings may also be realized at the San Mateo County Health Campus by constructing a cogeneration system at its central plant. The California Energy Commission confirmed that cogeneration at the Health Campus would be cost effective in a 2006 feasibility study.

DICUSSION:

Government Code Section 4217.12 provides that a public agency may enter into an energy service contract and any necessarily related facility ground lease on terms that its governing body determines are in the best interests of the public agency. The decision must be made at a regularly scheduled public hearing, public notice of which is given at least two weeks in advance. The agreement will require a finding that the cost for energy under the contract will be less than the anticipated marginal cost of energy that would otherwise have been consumed.

We are recommending that your Board set a date for a public hearing to consider entering into a ten-year agreement with Northstar Power. Under the terms of the proposed agreement, Northstar will agree to design, engineer, construct, operate, and maintain the proposed cogeneration system at the San Mateo County Health Campus. Northstar will obtain all permits required to construct and operate the proposed cogeneration system and will comply with applicable codes and regulations, including the current City of San Mateo noise ordinance. In exchange, the County agrees to lease a portion of the campus to Northstar for the purpose of construction, operation, maintenance, and repair of the cogeneration system. The County further agrees to purchase energy (electrical and thermal) produced by the cogeneration system at ten percent (10%) less than would have been paid to the County’s regular utility providers. Other proposals reviewed by staff involve increased cost or risk to the County.

Estimated annual energy cost savings exceed $100,000. In terms of environmental benefits, the increased efficiency of the proposed cogeneration system offsets
3,763 tons of carbon-dioxide emissions each year, which is the equivalent of removing approximately 500 cars from the road.

A resolution has been approved as to form by County Counsel.

FISCAL IMPACT;

There is no impact to the General Fund or any fund by entering into this agreement. The agreement grants the County the option to purchase the cogeneration system from Northstar following the first year of operation and at any time thereafter during the ten-year term. Upon completion of the ten-year term Northstar will turn the entire cogeneration system over to the County free and clear of all liens and encumbrances. The Project may qualify for a PG&E rebate that Northstar will keep as the original owner of the cogeneration system.