This report details the experiences of two California public transit agencies that replaced aging diesel buses with new compressed natural gas (CNG) buses in 1994. The operating characteristics and costs of 170 natural gas buses are compared with 73 older diesel buses. The natural gas bus fleets have operated well and led to cost reductions in both fleets.The findings are particularly significant because both Sacramento Regional Transit District (RT) and SunLine Transit Agency have been using the same engine-chassis configuration, thus enabling a valid method to combine cost data for a large sample fleet of buses. The data indicate that labor for diesel equipment was almost twice that for CNG vehicles, parts were 25% more and fuel costs were nearly double.In 1997, CNG buses saved RT over $1 million in fuel, maintenance, parts and hazardous waste disposal, a 38% per mile reduction over the cost of their older diesel buses. This is an approximate cost savings that year of $0.197 per mile over 5.7 million miles with 136 buses. That same year, SunLine's CNG buses saved close to $213,000, a 27% per mile reduction from the cost of RT's diesel buses. SunLine saved approximately $0.142 per mile over 1.5 million miles with 34 buses.The incremental capital costs of CNG buses run between $35,000 and $50,000 more per unit. After three years and a combined 22.2 million miles of experience, the payback appears to be realized in approximately seven years or 300,000 miles per bus. Equally important is the fact that newer buses have lower maintenance costs than older buses, regardless of fuel. Lower maintenance costs shown here are attributable to thorough mechanic training and some increased CNG durability leading to cost reduction because of reduced engine wear.With the absence of carbon deposits, the CNG engines at both agencies show no signs of needing a mid-life rebuild as usually done with transit diesel engines at approximately 250,000 miles. The Federal Transit Administration's standard 12-year replacement cycle could potentially be extended with maintenance practices concurrently improving chassis life expectancy.Even though new CNG buses were compared to older diesel buses, the data show that the margin of cost reductions continues to grow over diesel. The rate at which diesel expenses climbed from 1995 to 1997 was 16%, while RT's CNG expenses went up 11% over the same period. This is particularly significant given that RT reduced their diesel fleet by 36% and increased the new CNG fleet by 30% during that time.Particulate matter and other harmful emissions from CNG buses are greatly reduced over their diesel counterparts. Both Sacramento RT and SunLine have found a winning situation with CNG as it is a more economical fuel than diesel and their respective communities enjoy the good citizenship of transit promoting cleaner air.