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APPROVE MOTION TO AUTHORIZE THE PURCHASE OF SB 1383 PROCUREMENT COMPLIANCE ATTRIBUTES TO MEET RECOVERED ORGANIC WASTE PRODUCT PROCUREMENT REQUIREMENTS
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a motion to:
1. Approve findings pursuant to Stockton Municipal Code section 3.68.070 in support of an exception to the competitive bidding process.
2. Authorize the City Manager, or designee, to enter into an agreement for the purchase of Procurement Compliance Attributes derived from biomass electricity generation to satisfy a portion of the City’s 2025, 2026, and 2027 SB 1383 Recovered Organic Waste Product procurement requirements.
3. Authorize the City Manager, or designee, to execute any related documents necessary to implement this program.
It is also recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of this motion.
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Summary
Senate Bill (SB) 1383 requires cities and counties to annually procure a quantity of recovered organic waste products (ROWP) to meet State-provided procurement targets. The City’s annual procurement target is 25,672 tons of ROWP.
To comply with this State mandate, the City implemented several programs aimed to procure and utilize compost and mulch. After numerous free public events, local distribution for agricultural use, and usage at City facilities, approximately 15,360 tons of ROWP are expected to be procured by end of year. This amount is approximately 60 percent of the SB 1383 requirement.
To ensure SB 1383 procurement compliance in 2025, and to assist with compliance in 2026 and 2027, staff propose purchasing electricity-based Procurement Compliance Attributes (PCAs) are generated by California biomass power facilities that use qualifying organic waste feedstocks from transfer stations, composting operations, and landfills. The purchase of these PCAs is an approved method under SB 1383 regulations to comply with ROWP procurement target.
It is recommended that Council approve a motion authorizing the City Manager to execute a sales agreement with Valinor Energy, LLC in the not to exceed amount of $431,791 to purchase PCAs to assist the City in meeting its SB 1383-mandated ROWP procurement target in years 2025, 2026, and 2027 (Attachment A).
DISCUSSION
Background
SB 1383, the Short-Lived Climate Pollutants: Organic Methane Waste Emissions Reduction Act (Lara, Chapter 395, Statutes of 2016), was passed by the Legislature to reduce greenhouse gases produced by organic material in the waste stream. This legislation requires each jurisdiction in California to procure a minimum quantity of ROWP each year. The intent of this requirement is to create markets for recycled organic materials diverted from landfills.
The California Department of Resources Recycling and Recovery (CalRecycle) established detailed regulations (Title 14 CCR § 18993.1 and 18993.2) requiring cities and counties to procure a specified number of tons of ROWP annually, based on population.
Eligible products include:
• Compost
• Mulch
• Renewable gas used for transportation fuel, electricity, or heating applications
• Electricity from biomass conversion
The City’s annual procurement target is 25,672 tons of ROWP.
Present Situation
The City satisfies a portion of its procurement obligation through several programs that procure and distribute compost and mulch. After numerous free public events, location distribution or agricultural use, and internal staff use at City facilities throughout the City, these programs are expected to procure approximately 15,360 tons of ROWP by end of year. This amount is about 60 percent of the ROWP requirement under SB 1383. The City does not have the physical capacity or demand to use or distribute the full volume of compost or mulch required to satisfy the annual requirement.
Valinor Energy, LLC brokers electricity-based PCAs produced by California biomass power plants that use eligible organic waste from transfer stations, composting facilities, and landfills. Purchasing PCAs is an approved method under SB 1383 to help jurisdictions meet their procurement targets.
Although the City buys electricity through PG&E, the PCAs are purchased directly from the biomass power plant that generates the qualifying electricity. Each PCA represents 650 kilowatt-hours of renewable electricity made from recovered organic waste and is equivalent to one ton of ROWP. Jurisdictions can apply PCAs in proportion to their municipal electricity use (e.g., water treatment plants, streetlights, and other City facilities). Staff and Valinor Energy have confirmed that the City uses nearly six times the amount of electricity required to purchase the PCAs needed to satisfy the ROWP compliance requirement.
Purchasing PCAs provides several benefits:
• Immediate compliance: Documentation is provided upon purchase - no delivery, storage, or handling of material is required.
• Cost effective: Purchasing PCA’s is significantly less expensive per ton than programs to distribute or utilize compost or mulch.
• CalRecycle-approved: Biomass-generated electricity is specifically listed as an eligible ROWP.
• Auditable and verifiable: Each PCA includes certification showing the producer meets all CalRecycle requirements.
• Local environmental benefits: Supports landfill diversion by using wood waste generated in California.
The power plant participating in this program, DTE Stockton, LLC, is located within Stockton and will provide all necessary certification and reporting documentation for inclusion in the City’s annual compliance submittal to CalRecycle.
Findings
Pursuant to Stockton Municipal Code section 3.68.070, Council may approve findings which support an exception to the competitive bidding process. These findings include:
1. To promote a circular economy, SB 1383 requires the use of California-based biomass facilities. DTE Stockton, LLC, the supplier of the PCAs, is based within Stockton’s city limits, thereby also supporting the local economy.
2. Valinor Energy, LLC’s $8.00 price per PCA in years 2025 and 2026 is below the average cost of $10 per PCA currently offered to other jurisdictions.
3. Valinor Energy, LLC’s $9.00 price per PCA in year 2027 also remains below the average cost per PCA.
4. Entering into a three-year agreement with Valinor Energy, LLC will ensure favorable rates and support Stockton’s SB 1383 compliance through 2027.
FINANCIAL SUMMARY
The cost for PCAs is $8.00 per ROWP ton equivalent for 2025 and 2026. In 2027, the price increases to $9.00 per ROWP ton. The purchase quantity for 2025 is the estimated maximum amount. The actual amount purchased at the end of 2025 will be the final calculated amount required to meet the compliance requirement. The quantity for purchase in 2026 and 2027 is based on 75 percent of the compliance requirement, with the other 25 percent of the compliance target to be met by other means such as distributing or utilizing compost and mulch. This will ensure 100 percent or greater compliance and provide some contingency for potential variances in the demand and/or supply of compost and mulch.
The total not to exceed expenditure for the three-year agreement is $431,791, with each year’s cost shown below.
|
Year |
ROWP Tons |
Cost per ROWP Ton |
Annual Total |
|
2025 |
up to 12,836 |
$8.00 |
up to $102,688.00 |
|
2026 |
19,359 |
$8.00 |
$154,872.00 |
|
2027 |
19,359 |
$9.00 |
$174,231.00 |
There is sufficient funding in the SB 1383 OWR4 Fiscal Year 2022-23, Project No. WC24048, for the 2025 and 2026 PCA purchases.
Future (2027 and beyond) PCA purchases will be allocated as an ongoing expense in the Public Works Waste and Recycling Division’s special services operating account.
There is no additional impact to the City’s General Fund or any other unrestricted fund as a result of taking the recommended actions.
Attachment A - PCA Purchase Agreement