Subject: DESIGNATE PG&E AS THE SUPPLIER OF NATURAL GAS
Adoption of a resolution authorizing the Director of General Services to designate Pacific, Gas and Electric Co. (PG&E), under the Core Rate Schedule, as the supplier for the purchase of natural gas for the Environmental Services Department/Water Pollution Control Plant, and the Convention, Arts & Entertainment Department.
BACKGROUND
Environmental Services Department/Water Pollution Control Plant (WPCP) and the Convention, Arts & Entertainment Department have requested the purchase of their annual requirements of natural gas for the Water Pollution Control Plant and the Convention Center. Both facilities use natural gas for heating and electric co-generation.
In 1990, the California Public Utilities Commission (CPUC) deregulated the sale of natural gas. Thus, natural gas became a commodity for sale on the open market from a number of independent sellers. Since deregulation, natural gas is traded on the stock market much like other commodities. Sellers offer pricing based on the monthly published index pricing for deliveries of natural gas into Northern California (PG&E Citygate) as reported by the Natural Gas Intelligence Weekly Gas Price Index. Natural gas is imported into California either from Canada or the American Southwest. The transportation of natural gas is still only available through PG&E lines.
The Water Pollution Control Plant currently uses approximately 200,000 decatherms, and the Convention Center uses 36,000 decatherms annually. One decatherm is defined as equal to one million British Thermal Units (BTU).
An informal Request for Quotation was faxed to eleven (11) vendors on April 19, 2001. Quotations were due on April 27, 2001. This effort resulted in the receipt of only one quote, which is listed below:
Quote (cost per decatherm)
Coral Energy/Pleasanton, CA PG&E Citygate Index Price Plus $0.49
Since the only quote received was considerably higher than the current contract which is the Citygate Index Price, less $0.015 per decatherm, staff decided to investigate utilizing PG&E as the supplier and transporter for the natural gas requirements. The WPCP and the Convention Center have the opportunity to become core (uninterrupted gas service) customers, rather than non-core (interruptable gas service), which is the current status. By designating PG&E as the City’s natural gas supplier under the Core Rate Schedule, PG&E will supply uninterrupted natural gas priced at the Citygate Index Price, which is $0.49 less per decatherm than quoted by Coral Energy. It is therefore, staff’s recommendation to designate PG&E as the supplier for the annual requirements of natural gas.
This Request for Quotation was placed on the City of San José web site.
This memorandum has been coordinated with the City Attorney’s Office, the Budget Office, the Environmental Services Department/Water Pollution Control and the Convention, Arts & Entertainment Department.
Funds: Treatment Plant Operating Fund-513
Convention and Cultural Affairs Fund-536
Budget Document: 2001-02 Proposed Operating Budget,
Budget Amount: Page 137 - $53,788,960
Page 87 - $19,771,425
FRANCIS B. MCVEY
Acting Director of General Services