Utility to Make Vehicles Fueled by Natural Gas : Environment: A joint venture is planned in East L.A. to outfit and convert vans and trucks to the lower-emission power source.
Seeking to tap into the growing market for low-emission automobiles, Southern California Gas Co. will unveil plans today for a joint venture in East Los Angeles to produce vehicles powered by natural gas.
The $10-million project, known as Ecotrans, will outfit and convert commercial vans and light trucks to be sold to large businesses and government agencies starting in December, gas company officials said.
The factory will initially create 30 jobs at a site just east of Downtown and could add 70 more skilled and semiskilled positions by the end of 1994.
“We believe natural gas vehicles provide an excellent solution for the unique problems facing Southern California,” said Warren I. Mitchell, president of the gas company. “We saw it as a great opportunity to help the environment and to help the central city and create jobs.”
The gas company’s partners in the venture include: PAS Inc. of Troy, Mich., and NGV Systems Inc. of Long Beach, both of which were involved in the development of the gas vehicle technology, and 4E Technologies Inc. of Los Angeles, a marketing firm. General Motors has agreed to supply the base vehicles and use its fleet dealerships to provide sales and service.
The plant’s primary business, known as “upfitting,” will be to install fuel systems on delivery trucks and vans already designed to run on compressed natural gas.
A secondary operation at the facility will convert gasoline- and diesel-powered vehicles to the new technology.
The company said the factory could produce 17,000 vehicles, known as NGVs, by 1996.
Funding for the project will include $3 million from ratepayer funds and $5 million from other gas company funds. Another $2 million will come from the three other partners in the venture.
Gas customers won’t pay higher rates for the facility, Mitchell said. Instead, the gas company has asked the state Public Utilities Commission for permission to use left-over funds originally collected for new construction.
But consumer advocates have raised concerns over the use of ratepayer funds for the program.
“Ratepayers aren’t investors in the car business,” said Eugene Coyle, an economist with Toward Utility Rate Normalization, a San Francisco-based consumer group. “The money should be returned to ratepayers or used for its original purpose.”
Gas company officials, however, said ratepayers would receive indirect benefits because the company intends to use profits from the venture to offset future rate hikes.
The operation is expected to break even within the first 18 months on sales to fleet operators in the private and public sectors, Mitchell said.
“You’ve got a built-in market with the federal government and municipal fleets because of clean-air mandates for 1996,” Mitchell said. “We’re going to benefit from getting in the market early.”
Installing the new technology on a vehicle designed to run on natural gas will add $5,000 to $7,500 to the purchase price, while conversions will cost between $2,500 and $4,000. The cost of “upfitting” is higher than the cost of conversion because the fuel systems are part of the original equipment and must undergo more stringent testing, project managers said.
Because of the relatively high costs, the program will not initially target individual consumers, Mitchell said.
The company is promoting natural gas, which costs about 70 cents a gallon, as an environmentally sound and convenient alternative to gasoline and diesel fuel. Natural gas can lower emissions of carbon monoxide by as much as 86% compared to gasoline, according to the California Air Resources Board.
Unlike electric cars, NGVs are already in widespread use, with an estimated 1,000 operating in Southern California and 500,000 worldwide.
In addition, NGVs can travel distances comparable to what conventional vehicles can travel, the company said.
Local economists hailed the placement of the plant in East Los Angeles as a hopeful sign for the area’s struggling economy.
“I compare this type of venture to the early days of the horseless carriage,” said Jack Kyser, chief economist for the Economic Development Corp. of Los Angeles.
“This is a growing industry. By locating the plant in a distressed part of the city, they are allowing people to get in on the ground floor.”
The company said it is negotiating with the Los Angeles Unified School District and others to craft a job-training program for local workers.
The Southern California Gas project follows the announcement of a plan last month by Ford Motor Co. to sell NGV cars and trucks through Ford dealerships.
