BILL NUMBER: AB 56	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  MAY 27, 2011
	AMENDED IN ASSEMBLY  MAY 18, 2011
	AMENDED IN ASSEMBLY  MARCH 16, 2011
	AMENDED IN ASSEMBLY  FEBRUARY 23, 2011

INTRODUCED BY   Assembly Member Hill

                        DECEMBER 6, 2010

   An act to add Sections 746, 770.5, and 770.6 to the Public
Utilities Code, relating to gas corporations.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 56, as amended, Hill. Gas corporations: rate recovery and
expenditure: intrastate pipeline safety.
   (1) Under existing law, the Public Utilities Commission has
regulatory authority over public utilities. Existing law authorizes
the commission to fix the rates and charges for every public utility,
and requires that those rates and charges be just and reasonable.
   This bill would prohibit a gas corporation from recovering any
fine or penalty in any rate approved by the commission. The bill
would require a gas corporation to file semiannual reports with the
commission and the Division of Ratepayer Advocates describing how the
utility is spending moneys that the commission has authorized to be
collected from ratepayers to reimburse the utility for public safety
activities. The bill would require the commission, in consultation
with the commission's Division of Ratepayer Advocates, to work to
align ratemaking policies, practices, and incentives to better
reflect safety concerns and ensure ongoing commitments to public
safety. If the commission authorizes a gas corporation to recover
expenses incurred for public safety, the bill would require the
commission to require the gas corporation to establish and maintain a
balancing account to record the difference between the approved
revenue requirements for public safety and the actual expenditures
made by the utility. The bill would require a gas corporation to
return moneys approved for expenditure for public safety by the
commission to the balancing account, if those funds are not expended
within a reasonable period of time after the commission grants
approval of the public safety expenditure, as determined by the
commission. The bill would require the commission to consider the
safety record of a gas corporation in determining what constitutes a
reasonable rate of return for the utility.
   (2) The Public Utilities Act authorizes the commission to
ascertain and fix just and reasonable standards, classifications,
regulations, practices, measurements, or service to be furnished,
imposed, observed, and followed by specified public utilities,
including gas corporations, as defined.
   Existing federal law requires the United States Department of
Transportation Pipeline and Hazardous Materials Safety Administration
(PHMSA) to adopt minimum safety standards for pipeline
transportation and for pipeline facilities, including an interstate
gas pipeline facility and intrastate gas pipeline facility, as
defined. Existing law authorizes the Secretary of Transportation to
prescribe or enforce safety standards and practices for an intrastate
pipeline facility or intrastate pipeline transportation to the
extent that the safety standards and practices are regulated by a
state authority that submits to the secretary annually a
certification for the facilities and transportation or alternatively
authorizes the secretary to make an agreement with a state authority
authorizing it to take necessary action to meet certain pipeline
safety requirements. Existing law prohibits a state authority from
adopting or continuing in force safety standards for interstate
pipeline facilities or interstate pipeline transportation. Existing
law authorizes a state authority that has submitted a current
certification to adopt additional or more stringent safety standards
for intrastate pipeline facilities and intrastate pipeline
transportation only if those standards are compatible with the
minimum standards prescribed by PHMSA.
   This bill would designate the commission as the state authority
responsible for development, submission, and administration of a
state pipeline safety program certification for natural gas
pipelines. The bill would require the commission to adopt and enforce
compatible safety standards, as defined, for commission-regulated
gas pipeline facilities, as defined, to accomplish specified results.
The bill would require the commission to track proposed safety,
reliability, and facility integrity-related projects and activities
for which a gas corporation requested compensation in any rate
request that was granted by the commission in order to determine if
the project or activity was undertaken and completed and to require
any gas corporation that fails to undertake or complete safety,
reliability, and facility integrity-related projects and activities
for which the commission granted recovery in rates to promptly make a
public filing as to the justification for failing to undertake or
complete the proposed project or activity.  The bill would
prohibit a gas corporation from recovering in rates any uninsured
expense resulting from a fire, explosion, or other catastrophic event
involving a commission-regulated gas pipeline facility when that
event results from acts or omissions engaged in or directed by any
officer or employee of the gas corporation with either the intent to
cause harm, or with knowledge that harm was substantially certain to
result. 
   The bill would require the commission, by July 1, 2012, to open an
appropriate proceeding or expand the scope of an existing proceeding
to establish compatible emergency response standards, as defined,
that owners or operators of certain commission-regulated gas pipeline
facilities, as defined, would be required to follow. The standards
would require owners or operators of intrastate transmission and
distribution lines to implement emergency response plans, with
specified requirements, that are compatible with PHMSA's regulations
concerning emergency plans. The bill would require the owners of
intrastate transmission lines to provide the State Fire Marshal and
the chief fire official of the applicable local government with
instructions on how to access and utilize the National Pipeline
Mapping System developed by PHMSA to improve local response
capabilities for pipeline emergencies. The bill would require the
commission to report to the Legislature on the status of establishing
the compatible emergency response standards on or before January 1,
2013.
   (3) Under existing law, a violation of the Public Utilities Act or
any order, decision, rule, direction, demand, or requirement of the
commission is a crime.
   Because the provisions of this bill would be a part of the act and
because a violation of an order or decision of the commission
implementing its requirements would be a crime, the bill would impose
a state-mandated local program by creating a new crime.
   (4) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 746 is added to the Public Utilities Code, to
read:
   746.  (a) A gas corporation shall not recover any fine or penalty
in any rate approved by the commission.
   (b) A gas corporation shall file semiannual reports with the
commission and the Division of Ratepayer Advocates describing how the
utility is spending moneys that the commission has authorized to be
collected from ratepayers to reimburse the utility for public safety
activities.
   (c) The commission, in consultation with the Division of Ratepayer
Advocates, shall work to align ratemaking policies, practices, and
incentives to better reflect safety concerns and ensure ongoing
commitments to public safety.
   (d) If the commission authorizes a gas corporation to recover
expenses incurred for public safety, the commission shall require the
gas corporation to establish and maintain a balancing account to
record the difference between the approved revenue requirements for
public safety and the actual expenditures made by the utility. A gas
corporation shall return moneys approved for expenditure for public
safety by the commission, to the balancing account, if those funds
are not expended within a reasonable period of time after the
commission grants approval of the public safety expenditure, as
determined by the commission.
   (e) In determining what constitutes a reasonable rate of return,
the commission shall consider the safety record of the gas
corporation.
  SEC. 2.  Section 770.5 is added to the Public Utilities Code, to
read:
   770.5.  (a) For purposes of this section the following terms have
the following meanings:
   (1) "Class 1 location," "class 2 location," "class 3 location,"
and "class 4 location" have those meanings as defined in the
regulations adopted by the United States Department of Transportation
pursuant to Chapter 601 (commencing with Section 60101) of Subtitle
VIII of Title 49 of the United States Code (49 C.F.R. 192.5, as
adopted January 1, 2011, or a successor regulation).
   (2) "Commission-regulated gas pipeline facility" means an
intrastate gas pipeline facility, as defined in Section 60101 of
Title 49 of the United States Code and in the regulations adopted by
the Department of Transportation (49 C.F.R. 192.3, as adopted October
1, 2010, or a successor regulation), that transports natural gas and
is subject to the regulatory authority of the commission, including
a pipeline that the commission, pursuant to subsection (c) of Section
717 of Title 15 of the United States Code, has certified to the
Federal Energy Regulatory Commission as being subject to the
regulatory jurisdiction of the commission over rates and service.
"Commission-regulated gas pipeline facility" does not include those
pipelines that are excluded from regulation by the Federal Energy
Regulatory Commission pursuant to subsection (b) of Section 717 of
Title 15 of the United States Code because they are facilities used
for the distribution of natural gas.
   (3) "Compatible safety standards" means additional or more
stringent safety standards for commission-regulated gas pipeline
facilities that are compatible with the minimum safety standards
adopted by the Department of Transportation pursuant to Chapter 601
(commencing with Section 60101) of Subtitle VIII of Title 49 of the
United States Code and which the commission is authorized to adopt
pursuant to subsection (c) of Section 60104 of that chapter.
   (4) "High consequence area" has the same meaning as defined in the
regulations adopted by the United States Department of
Transportation pursuant to Chapter 601 (commencing with Section
60101) of Subtitle VIII of Title 49 of the United States Code (49
C.F.R. 192.903, as adopted January 1, 2011, or a successor
regulation).
   (b) The commission shall be the state authority responsible for
the development, submission, and administration of a state pipeline
safety program certification for natural gas pipelines pursuant to
Chapter 601 (commencing with Section 60101) of Subtitle VIII of Title
49 of the United States Code.
   (c) The commission shall adopt and enforce compatible safety
standards for commission-regulated gas pipeline facilities to
accomplish all of the following:
   (1) Require the owner or operator to make an annual performance
measure report to the commission concerning the condition of
commission-regulated gas pipeline facilities. The performance measure
report shall include the total number of anomalies identified as a
result of safety assessments, the total number of conditions
repaired, and the actual anomalies needing repair that are identified
by the pipeline owner or operator during the inspections, the
conditions requiring repair, and any other information the commission
determines is necessary to evaluate the safety and performance of
the pipeline facilities. The annual performance measure reports shall
be made publicly available on the Internet to the extent that doing
so does not create a public safety risk. The commission shall consult
with the federal Department of Homeland Security in determining what
information may be made available without creating a public safety
risk.
   (2) Require the owner or operator to evaluate the integrity of all
commission-regulated gas pipeline facilities outside high
consequence areas and to include this evaluation as part of their
safety assessment reports.
   (3) Require the owner or operator of commission-regulated gas
pipeline facilities to conduct outreach and public education relative
to excavation dangers and the availability of the one-call
notification program in order to reduce dangerous incidences caused
by third-party excavations.
   (4) Require the owner or operator of commission-regulated gas
pipeline facilities to prioritize those facilities that, because of
their proximity to an earthquake fault zone delineated by the State
Geologist pursuant to the Alquist-Priolo Earthquake Fault Zoning Act
(Chapter 7.5 (commencing with Section 2621) of Division 2 of the
Public Resources Code), should be subject to heightened safety
oversight. The commission shall develop protocol to ensure the safety
of those pipelines that are located in an earthquake fault zone and
in a high consequence area.
   (5) The commission, in consultation with the independent review
panel appointed to investigate the San Bruno natural gas pipeline
explosion of 2010, shall develop minimum criteria and standards for
the installation of sectionalized block valves and automated and
remote shutoff valves, taking into consideration weather-related and
outside faces, operating pressure, the rate of potential release of
natural gas, the potential for ignition of the gas, and
accessibility. The commission shall establish a timeline by which the
owner or operator of a commission-regulated gas pipeline facility
shall meet the minimum criteria and standards established by the
commission, unless technically unfeasible, for each of the following:

   (A) Each commission-regulated gas pipeline facility that is first
placed in service or replaced.
   (B) Each commission-regulated gas pipeline facility that traverses
an earthquake fault zone designated by the State Geologist pursuant
to the Alquist-Priolo Earthquake Fault Zoning Act (Chapter 7.5
(commencing with Section 2621) of Division 2 of the Public Resources
Code).
   (C) Each commission-regulated gas pipeline facility that is in a
class 3 location, class 4 location, or high consequence area.
   (6) Require the owner or operator of all commission-regulated gas
pipeline facilities that are in a class 3 location, class 4 location,
or high consequence area to establish a maximum allowable operating
pressure for the facility. The maximum allowable operating pressure
shall be established by conducting a hydrostatic pressure test,
unless the commission determines that the owner or operator has
adequately established a maximum allowable operating pressure using
either of the following:
   (A) Prior hydrostatic testing.
   (B) Thorough documentation, including as-built drawings, alignment
sheets and specifications, design, construction, testing, and
maintenance records, demonstrating that the maximum allowable
operating pressure has been accurately established based on the
weakest pipeline section or facility component.
   (7) Require owners and operators of commission-regulated gas
pipeline facilities to complete, by January 1, 2022, a modernization
program to upgrade key facilities located in high consequence areas.
The commission shall consult with owners and operators and interested
stakeholders in developing the program requirements and schedule.
The program shall contain criteria for prioritizing critical gas
pipeline facilities and ensure that all upgraded facilities can
accommodate state-of-the-art inspections, including internal
corrosion inspection methods. It is the intent of the Legislature
that state agencies expedite any necessary permit work or approval
that is necessary for any demolition, construction, repair,
replacement, inspection, or testing activity that may be required
pursuant to this paragraph.
   (d) The commission shall adopt and enforce a one-call notification
program for the state consistent with the requirements adopted by
the Department of Transportation pursuant to Chapter 601 (commencing
with Section 60101) of Subtitle VIII of Title 49 of the United States
Code.
   (e) The commission shall track proposed safety, reliability, and
facility integrity-related projects and activities for which a gas
corporation requested compensation in any rate request that was
granted by the commission in order to determine if the project or
activity was undertaken and completed. The commission shall require
any gas corporation that fails to undertake or complete safety,
reliability, and facility integrity-related projects and activities
for which the commission granted recovery in rates to promptly make a
public filing as to the justification for failing to undertake or
complete the proposed project or activity.
   (f) In its general rate case, a gas corporation shall demonstrate,
to the satisfaction of the commission, each of the following:
   (1) That its proposed rates will be sufficient to enable the gas
corporation to fund those projects and activities necessary to
maintain safe and reliable service and to meet federal and state
safety requirements in a cost-effective manner.
   (2) If rate recovery was previously approved by the commission for
safety-related projects or activities, and the gas corporation seeks
to reprioritize use of the moneys for other safety-related projects
or activities, that the reprioritization is based on sound risk
management principles.
   (3) If rate recovery is sought for safety-related projects or
activities, that an adequate safety assessment has been undertaken on
the gas pipeline facilities on which the projects or activities are
to be undertaken so that the projects and activities can be
undertaken in a thorough, yet cost-effective, manner without
incurring cost overruns.
   (4) That any settlement agreement filed in the case that
encompasses safety-related projects or activities identifies those
projects and activities with specificity and allocates funding for
those projects and activities on a project-by-project, or
activity-by-activity basis. 
   (g) A gas corporation shall not recover in rates any uninsured
expense resulting from a fire, explosion, or other catastrophic event
involving a commission-regulated gas pipeline facility when that
event results from acts or omissions engaged in or directed by any
officer or employee of the gas corporation with either the intent to
cause harm, or with knowledge that harm was substantially certain to
result. 
  SEC. 3.  Section 770.6 is added to the Public Utilities Code, to
read:
   770.6.  (a) For purposes of this section, the following terms have
the following meanings:
   (1) "Commission-regulated gas pipeline facility" has the same
meaning as defined in Section 770.5.
   (2) "Compatible emergency response standards" means emergency
response standards that are applicable to intrastate transmission and
distribution lines that are in addition to, or more stringent than,
the minimum safety standards adopted by the United States Department
of Transportation pursuant to Chapter 601 (commencing with Section
60101) of Subtitle VIII of Title 49 of the United States Code and
that the commission is authorized to adopt pursuant to Section 60104
(c) of that chapter.
   (b) On or before July 1, 2012, the commission shall open an
appropriate proceeding or expand the scope of an existing proceeding
to establish compatible emergency response standards that owners or
operators of commission-regulated gas pipeline facilities shall be
required to follow for intrastate transmission and distribution
lines. The commission shall establish the standards to ensure that
intrastate transmission and distribution lines have emergency
response plans that adequately prepare them for a natural disaster or
malfunction that could cause injury to human life or property, with
the purpose of minimizing the occurrence of both.
   (c) The commission shall establish the compatible emergency
response standards in consultation with the California Emergency
Management Agency and members of California's first responder
community, including, but not limited to, members of the California
Fire Chiefs Association.
   (d) The compatible emergency response standards shall require
owners or operators of intrastate transmission and distribution lines
to implement emergency response plans that are compatible with the
United States Department of Transportation Pipeline and Hazardous
Materials Safety Administration's regulations concerning emergency
plans contained in Section 192.615 of Title 49 of the Code of Federal
Regulations, and those plans shall include, but not be limited to,
all of the following requirements:
   (1) Emergency shutdown and pressure reduction shall be utilized
whenever deemed necessary and appropriate by the owners or operators
to minimize hazards to life or property. An owner or operator shall
notify appropriate first responders of emergency shutdown and
pressure reduction.
   (2) During an emergency response effort, the incident commander
may direct coordination between first responders and owners or
operators to ensure timely and ongoing communication on decisions for
emergency shutdown and pressure reduction.
   (3) Owners or operators of intrastate transmission and
distribution lines shall establish and maintain liaison with
appropriate fire, police, and other public officials to do all of the
following:
   (A) Learn the responsibility and resources of each government
organization that may respond to a gas pipeline emergency, including,
but not limited to, the role of the incident commander in an
emergency.
   (B) Acquaint the officials with the owner's or operator's ability
in responding to a gas pipeline emergency.
   (C) Identify the types of gas pipeline emergencies of which the
owner or operator notifies the officials.
   (D) Plan how the owner or operator and officials can engage in
mutual assistance to minimize hazards to life or property, or both.
   (E) Identify and update information on individual personnel
responsible for the liaison with the appropriate first responder
organizations.
   (4) Owners and operators of intrastate transmission lines shall
provide the State Fire Marshal and the chief fire official of the
applicable city, county, city and county, or fire protection district
with instructions on how to access and utilize the National Pipeline
Mapping System developed by the United States Department of
Transportation, Pipeline and Hazardous Materials Safety
Administration, utilizing data submitted pursuant to Section 60132 of
Title 49 of the United States Code, to improve local response
capabilities for pipeline emergencies.
   (e) (1) The commission shall report to the Legislature on the
status of establishing the compatible emergency response standards on
or before January 1, 2013.
   (2) A report to be submitted pursuant to paragraph (1) shall be
submitted in compliance with Section 9795 of the Government Code.
  SEC. 4.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.