To: HONORABLE MAYOR AND From: Jose Obregon
CITY COUNCIL
Subject: SEE BELOW Date: November 10, 2003
RECOMMENDATION
Adoption of a resolution authorizing the Director of General Services to:
a) Review natural gas prices and availability on an ongoing basis;
b) Assess the feasibility of purchasing natural gas from alternate sources, and
c) Execute agreements with Pacific Gas and Electric for the purchase of natural gas in support of facilities and operations throughout the City; without further Council approval other than the appropriation of funds.
BACKGROUND
Prior to 1997, California’s
natural gas supply was limited to PG&E, and the subject to California
Public Utility Commission regulated prices.
The gas industry was restructured and deregulated in 1997, allowing
customers the ability to purchase natural gas from alternate sources called gas
service providers (GSP’s). If a GSP
provided the natural gas, the local utility (PG&E for this area) was
responsible for transportation of the gas across its distribution system to the
customer’s meter. If the gas is provided by the local utility (PG&E), the
utility must charge the market price. The market price for gas fluctuates from
month-to-month, and the utility is not allowed any additional mark-up or
profit.
Since deregulation in 1997,
the City has experimented with purchasing gas from independent GSP’s to benefit
from the possible cost savings due to competition in the deregulated
environment. However, these pilots have not been successful. For example,
several years ago the City entered into an Agreement with POCO petroleum, a GSP
that guaranteed prices at 10% less than PG&E. POCO was not successful and went out of business. While under contract with POCO, there were
supply issues as well as issues over accurate invoicing. Currently, all of the natural gas that the
City purchases is from PG&E.
ANALYSIS
Recognizing that deregulation has created a competitive environment and that new and more reliable GSP’s may enter the market, General Services recommends that it be authorized to periodically monitor the prices and assess the viability of contracting with new suppliers. If the Director determines that the City should purchase natural gas from suppliers other than PG&E in an amount in excess of $100,000, the contracts will be brought to Council for approval.
Based on a recent review of the current availability and pricing of natural gas from available suppliers, General Services recommends that PG&E be maintained as the current natural gas supplier. As such PG&E will provide natural gas to various City facilities, including the new Airport CNG Fueling Station and the Water Pollution Treatment Plant.
PUBLIC
OUTREACH
N/A
COORDINATION
This memo has been coordinated with the City Attorney’s Office, City Manager’s Budget Office, Airport Department and the Environmental Services Department.
This recommendation has been place on the Treatment Plant Advisory Committee (TPAC) agenda of November 13, 2003, under the Information heading. No TPAC action is required at this time.
COST
IMPLICATIONS
This action is consistent with the Council approved Budget Strategy Memo; General Principles Item #2, “We must focus on protecting our vital core city services”.
BUDGET REFERENCE
City wide – various
2003-2004 proposed Department budgets
CEQA
Not a project
JOSE OBREGON
Director, General Services Department