To: HONORABLE MAYOR AND CITY COUNCIL	From: Ralph Tonseth
Subject: SEE BELOW	Date: June 2, 2003

COUNCIL DISTRICT: City-Wide

SUBJECT: COMPRESSED NATURAL GAS FUELING RATE RESOLUTON AT NORMAN Y. MINETA SAN JOSE INTERNATIONAL AIRPORT

RECOMMENDATION

Adoption of a resolution to establish Compressed Natural Gas (CNG) fueling rates, charges and fees at Norman Y, Mineta San Jose International Airport

BACKGROUND

In February of 2000, the Airport submitted a proposal to comply with the California Air Resources Board (CARB) Air Quality Certification Requirement. Included in the proposal was the Airport’s Alternative Fuel Policy. The policy stipulated that all new vehicles purchased by the City for use at the Airport would operate using an alternative fuel. The City subsequently determined that Compressed Natural Gas (CNG) was the most efficient and cost-effective alternative fuel for use at the Airport and, on June 13, 2002, the City issued a Request for Proposals for the design and construction of a facility capable of fueling the anticipated fleet of CNG vehicles at the Airport. In March of 2003, in accordance with the Airport Alternative Fuel Policy, the Airport replaced all twenty (20) diesel buses utilized for the Long Term Parking Shuttle with twenty (20) CNG shuttle buses.

In April 2003, final testing of the CNG fueling station was completed and the Airport CNG shuttle bus fleet began fueling on-site. The station is capable of fueling up to 5000 gallons of CNG per day, or 5 times the estimated usage by the Airport CNG shuttle bus fleet. Demand for on-site CNG fueling by vendors and the public, such as taxis, shuttles, and other private and public fleet users, is expected to increase as fleets work toward meeting the Airport’s Clean Vehicle Policy. The Policy stipulates that 15% of all fleets operating at the Airport will use an alternative fuel to operate.

To address the demand for on-site public and tenant CNG fueling, a resolution to define rates and charges for the sale of CNG is proposed.

ANALYSIS

Taking into account the costs associated with amortizing the cost of building the CNG station in addition to administrative and other operating costs, the proposed resolution seeks to establish a range of pricing that will allow the Airport the flexibility to set a competitive price relative to local CNG private distributors, while ensuring a minimum rate that will recover the costs for operation and maintenance.

The resolution allows the Airport to establish a rate that is based upon the average price for CNG fuel service as determined by a survey of no less than four (4) local CNG distributors. The resolution will allow the Director the discretion to set rates within a 10% variance of the surveyed average price. Pricing surveys will be conducted on a quarterly basis by Airport staff.

Currently, prices for local CNG fueling service range from $1.54 to $1.94 per Gasoline Gallon Equivalent (GGE). The GGE is a nationally recognized standard for pricing and distributing CNG.

The resolution gives the Director authorization to increase or decrease fueling rates, charges and fees to facilitate the optimum use of the station in a cost and revenue efficient manner, considering both volume demand and convenience to the general public.

PUBLIC OUTREACH

Airport Business Development and Operations will coordinate with the supplier, PG&E, and the station administrator, Pinnacle Systems, to promote the use of the CNG fueling station.

COORDINATION

This item has been coordinated with the City Attorney’s Office.

COST IMPLICATIONS

The Airport anticipates that distribution of CNG to the public will yield minimal revenue gains until public demand for CNG rises.

CEQA

Resolutions No. 67380 and 71451, PP 03-05-191.

RALPH G. TONSETH

Director of Aviation

Airport Department