Title
Recommendation to Authorize the Interim City Manager to Execute a Five-Year Gas Service Operations and Maintenance Agreement for Alameda Point with Pacific Gas and Electric Company in an Amount Not-to-Exceed $550,000, with up to Three One-Year Options to Renew, for a Total Not-to-Exceed $880,000 over Eight Years, Substantially in the Form of the Attached Agreement.
In accordance with the California Environmental Quality Act (CEQA), this action is categorically exempt from further environmental review pursuant to CEQA Guidelines Section 15301(b) (Existing Facilities) and 15061(b)(3) (Common Sense Exemption). (Base Reuse and Economic Development 29061822, 29161822)
Body
To: Honorable Mayor and Members of the City Council
From: Adam W. Politzer, Interim City Manager
EXECUTIVE SUMMARY
Pacific Gas & Electric (PG&E) operates and maintains the existing natural gas distribution system at Alameda Point including a legacy system that was built by the Navy and transferred to the City of Alameda (City) and is still in use. PG&E performs work on the legacy system pursuant to an agreement that expires on May 14, 2026 (2017 Agreement). The proposed new agreement (New Agreement) would allow PG&E to continue to operate and maintain the legacy system for the duration of the new agreement, and extension options included therein, through mid-2034 and be compensated based on a schedule of estimated actual costs for time and materials.
BACKGROUND
The existing natural gas lines constructed by the Navy at Alameda Point were not designed or constructed to PG&E standards and specifications (Legacy Gas Lines). The City took ownership of the Legacy Gas Lines from the Navy in 1997 upon the Navy’s decommissioning of the former Naval Air Station Alameda. The Alameda Point Master Infrastructure Plan (MIP) includes the phased replacement of all Navy outdated and substandard utility infrastructure, including the Legacy Gas Lines. When new PG&E facilities are installed, they will be owned and operated by PG&E.
Since the City lacks in-house expertise on how to manage a public gas system, it entered into an operations and maintenance agreement with PG&E in 1997 when the City took ownership of the Legacy Gas Lines. The City and PG&E entered into the current operations and maintenance agreement in 2017, and it was ratified by the California Public Utilities Commission (CPUC) in May 2018 and expires in May 2026.
Key terms of the 2017 Agreement:
• Operations and Maintenance. PG&E operates and maintains the Legacy Gas Lines comparable to PG&E’s other gas facilities, including routine maintenance and extraordinary expenditures, such as repairing any line, valve or other equipment that suffers a leak or other failure. PG&E seeks to deactivate Legacy Gas Lines that lack active service addresses and are not necessary for leasing, to minimize the number of unnecessary active gas lines. Any new gas lines installed by PG&E are constructed consistent with PG&E standards and connected to an existing PG&E system.
• Modernization. The City’s new development and adaptive reuse plans will replace Legacy Gas Lines with new PG&E gas lines constructed to their standards. Additionally, PG&E may abandon Legacy Gas Lines that are no longer needed and/or replace Legacy Gas Lines with new PG&E facilities based on safety and risk assessment. All modernization work is done in accordance with the MIP and the Alameda Point Site Management Plan.
• Indemnity and Release. The City releases PG&E for the interim period between the expiration of the 1997 agreement in 2004 and the effective date of the 2017 Agreement and indemnifies PG&E for its work as part of the New Agreement.
• Compensation. The City compensates PG&E for all associated costs of operating and maintaining the existing gas lines, which PG&E estimated to be approximately $100,000 annually.
Since 2021, PG&E’s costs for repair work performed on the Legacy Gas Lines under the 2017 Agreement have fluctuated from year to year.
Both 2021 and 2025 exceeded PG&E’s estimated costs under the 2017 Agreement, however, on average over this 5-year time period PG&E’s annual costs were approximately $56,600 due to the much lower costs PG&E incurred from 2022 through 2024.
Since the 2017 Agreement went into effect, the Public Works Department has completed the first backbone infrastructure improvement project in Alameda Point’s Adaptive Reuse Area. The project installed new PG&E facilities and abandoned Legacy Gas Lines along Pan Am Way, West Midway Ave., Saratoga St. and West Tower Ave. In addition, the Site A development installed new PG&E facilities within the development area, north of W. Atlantic and south of W. Midway. New PG&E facilities will also be installed as the West Midway and RESHAP development projects move forward.
DISCUSSION
The new Agreement updates the annual cost schedule for work performed, consistent with PG&E’s actual costs, which have increased by approximately $10,000 per year, and caps PG&E’s costs at $110,000 per year, with higher amounts requiring additional written authorization from the City Manager. For projects initiated by PG&E, the new Agreement shifts the obligation to perform excavation work and environmental testing from the City’s Public Works Department to PG&E.
The new Agreement also makes a few other minor modifications that reflect current operating practices at Alameda Point.
It does not otherwise differ significantly from the 2017 Agreement and must also be approved by the California Public Utilities Commission.
Exhibits A and B of the new Agreement are detailed maps of the existing gas infrastructure facilities at Alameda Point and have been omitted from the publicly available version of this contract attached to this staff report as they are critical infrastructure facilities.
ALTERNATIVES
• Authorize the Interim City Manager to execute a Gas Service Operations and Maintenance Agreement with PG&E at Alameda Point consistent with terms negotiated by Staff.
• Authorize the Interim City Manager to negotiate alternative terms, as directed by City Council, and execute an alternative agreement, should PG&E agree to the alternative terms.
• Do not authorize the agreement and provide other direction to staff. Under this alternative, the City could be responsible for the operation and maintenance of the Legacy Gas Lines, which are not built to modern standards. The City lacks in-house expertise on how to operate and maintain a gas system. Staff does not recommend this alternative.
FINANCIAL IMPACT
The City will compensate PG&E for its actual costs to perform operations and maintenance activity, and related services, up to $110,000 per agreement year unless otherwise authorized in writing by the City Manager. This work is funded through funds collected from Alameda Point leasing and licensing activities and budgeted in the Alameda Point Facilities Maintenance Division (29041590) and Alameda Point Tidelands Facilities Maintenance Division (29141590). Pending City Council approval of the new agreement, staff will continue budgeting for this expense and will adjust the budgeted amount to $110,000. There is no impact to the General Fund as a result of this action.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This agreement is consistent with the Alameda Municipal Code, and Strategic Plan Project TIE 20 to continue infrastructure improvements at the Base. This action is subject to the Levine Act.
ENVIRONMENTAL REVIEW
In accordance with the California Environmental Quality Act (CEQA), this action is categorically exempt from further environmental review pursuant to CEQA Guidelines Section 15301(b) (Existing Facilities) and 15061(b)(3) (Common Sense Exemption).
CLIMATE IMPACT
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Authorize the Interim City Manager to execute a five (5)-year gas service Operations and Maintenance Agreement for Alameda Point with Pacific Gas and Electric Company, in an amount Not-to-Exceed $550,000, with up to three (3) one (1)-year options to renew, for a total not-to-exceed $880,000 over eight (8) years, substantially in the form of the attached agreement
Respectfully submitted,
Erin Smith, Public Works Director
Abigail Thorne-Lyman, Base Reuse and Economic Development Director,
By,
Alexis Krieg, Management Analyst
Financial Impact section reviewed,
Ross McCarthy, Finance Director
Exhibit
1. Operations and Maintenance Agreement