TO:Andrew P. Powers, City Manager
FROM:Clifford G. Finley, Public Works Director
DATE:March 14, 2023
SUBJECT: Fuel Budget Appropriation and Fueling Station Expenditure Increase
RECOMMENDATION:
1. Authorize budget appropriation and expenditure in the amount of $710,000; $670,000 from A/C #001-5640-484-9900 (General Fund, Vehicle Fuel Reimbursement) to A/C #001-5640-631-3510 (General Fund, Vehicle Fuel) and $40,000 from A/C #621-0000-341-9900 (Wastewater Fund, Net Position) to A/C #621-8250-685-3510 (Wastewater Fund, Vehicle Fuel) for unleaded fuel, renewable diesel, and compressed natural gas from Trillium USA Company, LLC (Houston, TX) and Falcon Fuels, Inc (Paramount, CA).
2. Authorize additional expenditure in the amount of $500,000 under existing five- year Operations and Maintenance Services Agreement with Trillium USA Company, LLC (Houston, TX) for Compressed Natural Gas purchases and equipment maintenance for a revised not-to-exceed amount of $1,412,000 through June 30, 2026.
3. Authorize additional annual expenditure in the amount of $124,500 under existing five-year Operations and Maintenance Services Agreement with Trillium USA Company, LLC (Houston, TX) for Compressed Natural Gas purchases and equipment maintenance for a revised annual not-to-exceed amount of $304,500 from A/C #001-5640-631-3510 for FY 2022-23 through FY 2025-26.
4. Approve cooperative purchasing agreement with the State of California fuel contract No. 1-23-91-02C to purchase and receive unleaded gasoline and renewable diesel fuel from Falcon Fuels, Inc. (Paramount, CA) for a three-year period, beginning March 2, 2023, through March 1, 2026, with State option to extend two additional years through March 1, 2028.
5. Authorize expenditure in the amount not-to-exceed $1,200,000 for each fiscal year from A/C #001-5640-631-3510 (General Fund, Vehicle Fuel), in
Fuel Budget Appropriation and Expenditure Increase
March 14, 2023
5 4
2 accordance with the general terms and conditions set forth in the State of California Contract No. 1-23-91-02C.
6. Find that this action is not a project as defined under the California Environmental Quality Act.
FINANCIAL IMPACT:
$710,000 Increase to FY 2022-23 General Fund and Wastewater Fund Budgets, Partially Offset by $670,000 increase to FY 2022-23 General Fund Revenue. $1,810,000 is included in the Adopted FY 2022-23 General Fund Budget for unleaded fuel, renewable diesel, and compressed natural gas. This increase is requested to cover additional fuel expenses, caused by escalated fuel costs and increased consumption of Compressed Natural Gas (CNG) at the public CNG fueling station and unleaded fuel purchased at the Municipal Service Center by joint partnership agencies. Due to the increase in CNG and unleaded fuel purchased by outside entities, revenue is anticipated to increase by $670,000.
BACKGROUND:
In 2001, the City opened the first public CNG fueling station in Ventura County adjacent to the City’s Municipal Service Center (MSC). Trillium USA Company, LLC (Trillium) designed and built the original station and has subsequently completed multiple upgrades that utilize proprietary equipment. Trillium is solely qualified and most knowledgeable to operate their equipment including the smart controls and 400L compressor unit. In May 2021, City Council approved a five- year proprietary agreement with Trillium for fuel purchasing, maintenance, and operation of the public fast-fill CNG station.
From 2018 to 2021, the City’s public CNG fueling station dispensed an average of 41,430 gallons equivalent of CNG per year. In 2022, due to increased use by private commercial vehicles, the public fueling station dispensed approximately 268,473 gallons equivalent of CNG, which is more than six times the average of the previous four years. The significant increase in volume has resulted in increased services and costs with Trillium; their average monthly service cost has risen from approximately $12,000 in 2021 to $23,000 in 2022. The City is responsible for covering all operational and product cost up front, although the City recovers those costs on the back end and does not subsidize the cost of CNG for private entities.
The City’s cost for CNG routinely fluctuates and is calculated monthly based on a variety of factors, including the cost of electricity used to operate on-site compressors at the MSC and the cost of natural gas purchased from SoCalGas.
Fuel Budget Appropriation and Expenditure Increase
March 14, 2023
5 4
2 Due to the soaring wholesale price of natural gas paid by SoCalGas that is passed through to their customers, the MSC experienced a 260 percent price increase for natural gas in a single month. The MSC’s SoCalGas natural gas bill increased from $65,000 in December 2022 to $170,000 in January 2023. This cost is up more than 300 percent from January 2022. SoCalGas and other utilities have attributed the sudden and dramatic surge in prices to unusually cold winter weather in California and the Pacific Northwest, which boosted demand for heat, as well as supply and distribution constraints. While the soaring natural gas prices of January 2023 may prove to be an anomaly, both the California Air Resources Board and the California Energy Commission expect average natural gas prices to trend higher at least through 2030.
In addition to working with Trillium to produce CNG at the MSC, the City has participated in a Cooperative Fuel Purchasing Program with the State of California since 2006 to purchase renewable diesel and unleaded fuel. The Cooperative Fuel Purchase Program allows the City and other public agencies to purchase and utilize a reliable, convenient, and efficient fueling option at a reduced cost. In 2014, City Council approved an extension to the agreement for renewable diesel and unleaded fuel purchases and in 2018, the agreement was extended through April of 2023. However, the State unexpectedly terminated its contract early, and changed vendors, entering into a new contract on March 1, 2023, with Falcon Fuels, Inc. (Falcon Fuels). This left the City without an option for purchasing fuel at reduced rates until a new agreement with the State can be executed.
The California Department of General Services, Procurement Division (DGS/PD) recently completed a competitive bid process to obtain pricing for unleaded and diesel fuel. The State of California selected the most competitive bid to provide reliable diesel and unleaded fuel to the State and participating agencies. Contract No. 1-23-91-02C (Attachment #1) was awarded to Falcon Fuels for all State of California departments and other local government agencies to use. Contract provisions allow the City the same rights and privileges as the State for purchasing bulk fuel at a reduced cost.
DISCUSSION/ANALYSIS:
The MSC has bulk fuel storage and dispensers for renewable diesel and unleaded fuels. The City fuels approximately 230 City-owned vehicles and 250 pieces of heavy and small equipment at the MSC. In addition to City-owned vehicles, the Cooperative Fuel Purchasing Program has historically been utilized to fuel 78 vehicles from Conejo Recreation and Park District (CRPD) and 38 MV Transportation (MV Transit) vehicles, which includes Thousand Oaks Transit, Moorpark Transit, Kanan Shuttle, and Dial-a-Ride. In June 2022, City Council authorized the inclusion of the Conejo Valley Unified School District (CVUSD) into Fuel Budget Appropriation and Expenditure Increase
March 14, 2023
5 4
2 the City’s Cooperative Fuel Purchasing Program, which added 83 vehicles to the total number of vehicles fueled at the MSC.
In 2022, the MSC dispensed approximately 125,000 gallons of unleaded gasoline, 35,000 gallons of renewable diesel, and over 400,000 gallons equivalent of CNG, which includes both the public fueling station and CNG dispensed inside the MSC to fuel City vehicles. Customers utilizing the City’s fueling services reimburse the City for fuel costs and a small service charge is applied. Administrative pumping fees cover the cost of fuel and offset some of the cost for permits and equipment maintenance. Operational and fuel costs are initially covered by the City; however, all third-party costs are eventually recovered by the City through a direct billing process. The City does not subsidize the cost of fuel for other agencies.
The two charts below describe the volume and approximate costs of fuel purchased and consumed by each MSC fuel customer.
MSC Annual Bulk Fuel Cost Per Gallon
Year Gallons
Unleaded
Average
Cost
Gallons
Renewable
Diesel
Average
Cost
Gallons
Equivalent
CNG City
Average
Cost
Gallons
Equivalent
CNG Public
Average
Cost
Total
Average
Cost
2018 154,674 $2.82 28,040 $3.14 191,444 $1.66 38,163 $2.35 $931,706 2019 158,902 $2.94 29,603 $3.42 193,991 $1.74 45,140 $2.35 $1,012,037 2020 * 89,011 $2.59 28,063 $3.18 133,431 $1.94 41,042 $2.35 $675,083 2021* 98,220 $2.75 36,500 $3.36 149,580 $2.17 41,377 $2.35 $814,530 2022 125,078 $4.26 35,059 $5.52 139,172 $2.55 268,473 $3.23 $1,949,000 * Covid-19 impact resulting in reduced fuel consumption 2022 MSC Bulk Fuel Cost Per Agency
It should be noted that unleaded gasoline and CNG consumption at the MSC decreased by approximately 40 percent in 2020 and 2021 due to fewer City Customer Vehicle
Quantity
Gallons
Unleaded
Average
Cost
Gallons
Renewable
Diesel
Average
Cost
Gallons
Equivalent
CNG
Average
Cost
Total Average
Cost
City 230 67,575 $287,873 30,000 $165,655 3373 $7,930 $461,458 CRPD 78 32,100 $87,000 1,520 $5,000 N/A N/A $92,000
MV Transit 38 12,895 $54,700 2,449 $14,050 132,060 $336,320 $405,070 CVUSD 83 12,507 $53,720 1,080 $6,080 N/A $59,800 $119,600 Public Site 121 N/A N/A N/A N/A 268,473 $867,167 $867,167 Fuel Budget Appropriation and Expenditure Increase
March 14, 2023
5 4
2 vehicles being driven because of the COVID-19 pandemic. However, due to the return of pre-pandemic operations and the inclusion of the CVUSD into the City’s Cooperative Fuel Purchase Program, the MSC is currently dispensing unleaded gasoline near pre-pandemic quantities, at a significantly higher cost per gallon.
Due to increased consumption at the City’s public CNG fueling station, significant price increases for natural gas, and the rising cost of unleaded and diesel fuels, City staff is requesting an approximately 40 percent increase to the current $1,810,000 fuel budget, bringing the revised fuel budget to $2,520,000 for FY 2022-23.
Due to increased services and costs with Trillium, City staff is requesting to increase the not-to-exceed amount of Trillium’s current five-year service agreement by $500,000 for a revised not-to-exceed amount of $1,412,000 through June 30, 2026, and for an increase in the annual expenditure allowance with Trillium from $179,000 to $304,000.
Staff also recommends approval of cooperative purchasing agreement No. 1-23- 91-02C to purchase unleaded gasoline and renewable diesel from Falcon Fuels.
COUNCIL GOAL COMPLIANCE:
Meets the following City Council goals:
C. Operate City government in a fiscally and managerially responsible and prudent manner to ensure that the City of Thousand Oaks remains one of California's most desirable places to live, work, visit, recreate, and raise a family.
PREPARED BY: Donald Covarrubias, Fleet Services Supervisor Attachments:
Attachment #1 – State of California Contract No. 1-23-91-02C DPW:241-20\ev\H:\Counci241-20\ev\H:\Council\2023\03142023\Trillium and Fuel Purchase staff report.docx