BOARD MEETING DATE: January 8, 2010
AGENDA NO. 3

PROPOSAL:

Amend Contracts for the Natural Gas Hearth Product Buy-Down Program

SYNOPSIS:

In July 2008, the Board approved a $500,000 contract with the team of Robert H. Peterson Company and Rasmussen Iron Works to implement the Natural Gas Hearth Product Buy-Down Program. This action is to amend the contracts to increase funding by an amount not to exceed $250,000 from interest earned in the AQMD Rule 1309.1 (Priority Reserve) which will increase the number of program participants by 2,500. This action is also to request extending the current contracts from March 31 to June 30, 2010. The total cost of the amended contracts would be $750,000.

COMMITTEE:

Administrative, December 11, 2009, Recommended for Approval

RECOMMENDED ACTIONS:

1. Authorize the Chairman to amend contracts with Robert H. Peterson Company in an amount not to exceed $125,000 and Rasmussen Iron Works for an amount not to exceed $125,000. The total amount of the contracts will not exceed $750,000.

2. Authorize the Executive Officer to reallocate funding between the contractors based on sales.
   

Barry R. Wallerstein, D.Env.
Executive Officer

Background

Residents of the South Coast Air Basin are exposed to some of the highest ambient concentrations of fine particulate matter pollution (commonly referred to as PM2.5) in the nation. Rule 445 – Wood Burning Devices was adopted by the Governing Board on March 7, 2008 to implement control measure BCM-03 from the 2007 AQMP. At that time, the Governing Board also designated $500,000 in Rule 1309.1 Priority Reserve Interest Funds and approved release of a Program Announcement to hire one or more contractors to implement a Natural Gas Hearth Product Buy-Down Program. The program goal was to provide the public with financial incentives to encourage the installation of gas log systems to replace existing wood burning fireplaces.

Two bids were received in response to the Program Announcement and the review panel recommended selection of the team of Robert H. Peterson Company and Rasmussen Iron Works (Peterson/Rasmussen) to implement the program. In July 2008 the Board directed AQMD staff to execute contracts with the Peterson/Rasmussen team to implement the Natural Gas Hearth Product Buy-Down Program in an amount not to exceed $500,000 from interest earned in the Rule 1309.1 Priority Reserve Fund (36). The original one-year contracts were subsequently extended through March 31, 2010 or until funding is expended.

Contract Summary and Accomplishments

The Peterson/Rasmussen team has organized 63 retailers throughout the Basin to implement the program and has conducted training classes for the product installers. Under the program, the AQMD provides $100 in incentive funding and participating retailers provide an additional $25 for a total of $125 off the purchase and installation of a gas log or similar system in households with existing wood burning fireplaces. The contractors also promote and advertise the program.

Program administration includes processing invoices from participating retailers, bundling invoices for AQMD billing, submitting reimbursements back to retailers, and training installers. All of this is absorbed by the Peterson/Rasmussen team under the current contract. In addition to the program administration, the team has initiated a widespread outreach campaign that is summarized as follows:

• Development and printing of a four page advertising flyer describing the program that was subsequently delivered to a total of 245,000 households during the winter of 2008/2009;

• Establishment of links to the AQMD Healthy Hearths web page from the team’s corporate web sites;

• Inclusion of an article describing the program in the Hearths and Home magazine;

• Booth staffing and a gas log set door prize giveaway at the City of South Pasadena Clean Air/Green Car exposition;

• Creation and distribution of the following products for use by participating retailers:

• Counter cards and program flyers for display;

• An informational program DVD;

• Full and half page template ads with an offer from the R.H. Peterson Company to cost share seventy-five percent of ad cost to applicable retailers; and

• Circulation of a subsequent direct mail advertising campaign by the R.H. Peterson Company to 130,000 households in November 2009.

The natural gas log incentive program has been very successful with nearly 4,400 installations in the South Coast Air Basin. The following table presents the number of product installations by County as of December 8, 2009.

Proposal

AQMD staff has been pleased with the experience and performance of the current contractors. It is anticipated, however, that current program funding ($500,000) will likely be expended prior to the end of the 2010 contract period. Staff is requesting that an additional $250,000 in Rule 1309.1 funds be provided for the Natural Gas Hearth Product Buy-Down Program to allow the public to participate in the program through the winter and spring of 2010. Sufficient interest earnings are currently available in the Rule 1309.1 Priority Reserve Fund (36) to support this request. A contract extension is also proposed to June 30, 2010 to fulfill orders made through the 2010 winter/spring season. In addition to the team’s absorption of the program’s administrative and advertising costs, the team’s extensive local experience with gas hearth products has been a tremendous asset to successful program implementation. Providing additional contract funding at this time will allow continuous public participation in this important program through the winter and spring of 2009 and 2010 when interest is traditionally greater.

Benefits to AQMD

The continued successful implementation of this program would result in a net reduction of approximately six tons of PM2.5 per year based on the conversion of 7,500 fireplaces and an estimated Basinwide wood burning rate of 110 pounds per household per year. A net decrease in emissions of VOC, CO and toxic compounds would also be expected. Rule 1309.1 program funding will directly be used for the incentive program and associated emission reductions since advertising and administrative costs would be absorbed by the contractor (who also provides additional incentive funds).  

Resource Impacts

The total cost of the Natural Gas Hearth Product Buy-Down Program will not exceed $750,000, which consists of the $500,000 in previously designated funds and the additional requested $250,000. Sufficient funds are available from interest earnings in the Rule 1309.1 Priority Reserve Fund.

Schedule

With approval of the staff recommendation, it is anticipated that the contract could be amended to provide a seamless transition to extend public participation in the program through the 2010 winter/spring season up to and including June 30, 2010.