BILL ANALYSIS �
AB 56
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Date of Hearing: March 21, 2011
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 56 (Hill) - As Amended: March 16, 2011
SUBJECT : Public utilities: rate recovery and expenditure:
intrastate pipeline safety.
SUMMARY : Implements a number of public safety measures with
regard to natural gas pipeline facilities, including requiring
the owner or operator of a gas pipeline to develop a public
safety program and a facilities modernization program, and
requiring the California Public Utilities Commission (CPUC) to
track proposed repairs to gas facilities to determine if the
repairs were made. Specifically, this bill :
1) Precludes a public utility from recovering any fine or
penalty in any rate approved by the CPUC.
2) Requires a public utility to file quarterly reports with
the CPUC and the Division of Ratepayer Advocates (DRA)
describing how the utility is spending ratepayer funds.
3) Requires the CPUC to work in conjunction with the DRA to
align ratemaking policies, practices, and incentives to
better reflect safety concerns and ensure ongoing
commitments to public safety.
4) Requires a public utility to return ratepayer funds
approved for expenditure for public safety if those funds
are not expended within a reasonable period of time.
5) Requires the CPUC to consider the safety record of the
public utility when determining a reasonable rate of
return.
6) Designates the CPUC as the state authority responsible
for the development, submission, and administration of a
state pipeline safety program certification for natural gas
pipelines.
7) Requires the CPUC to adopt and enforce compatible safety
standards for CPUC-regulated gas pipeline facilities that
requires the owner or operator to:
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a. Report annually on anomalies needing repair
that are identified during assessments;
b. Evaluate the integrity of CPUC-regulated gas
pipeline facilities;
c. Develop and implement by January 1, 2012, a
continuing public education program, which includes
emergency response plans and training;
d. Provide emergency contact information and
accurate maps of facility locations to state and local
emergency responders;
e. Conduct outreach and public education relative
to excavation dangers and the availability of the
one-call notification program to reduce dangerous
incidences caused by third-party excavations;
f. Prioritize pipeline facilities for the highest
level of safety oversight based on their proximity to
seismic active areas and develop protocols to ensure
those pipelines located within a Class 3 or Class 4
high-consequence area receive the highest priority and
are designed with the highest level of safety;
g. Comply with minimum standards established by
the CPUC, in consultation with the independent review
panel investigating the San Bruno natural gas pipeline
explosion of 2010, to install automatic or remote
shutoff valves, if feasible, by established timelines;
h. Maintain a record of tests on all pipelines to
substantiate their current maximum allowable operating
pressure, and reduce the maximum operating pressure
and report the condition to the CPUC if complete
records are not available.
i. By January 1, 2022, complete a modernization
program to upgrade key facilities located in heavily
populated and other critical areas.
8) Requires the CPUC to adopt and enforce a one-call
notification program for the state consistent with the
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requirements adopted by the federal Department of
Transportation.
9) Requires the CPUC to track proposed repairs for which
the utility received rate recovery to determine whether the
repairs are made.
10) Precludes a gas corporation from recovering in rates any
uninsured expense resulting from a fire, explosion or other
catastrophic event involving a CPUC-regulated gas pipeline
facility that resulted from negligence by the utility.
EXISTING LAW :
1) Federal law requires the U.S. 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.
2) Federal law authorizes the Secretary of Transportation
to prescribe or enforce safety standards and practices for
an intrastate pipeline facility or pipeline transportation
under certain conditions.
3) Authorizes a state authority under specified conditions
to adopt additional or more stringent safety standards for
intrastate pipeline facilities and pipeline transportation
only if those standards are compatible with the minimum
standards prescribed by PHMSA.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, the purpose of this bill is
to ensure that California develops new regulations and standards
for the safe and reliable operation of natural gas pipelines in
the state. The author notes that on September 9, 2010, a
30-inch PG&E natural gas transmission pipeline in San Bruno
exploded. The explosion claimed 8 lives and devastated a
neighborhood. Nothing can replace the loss of a loved one or
repair the trauma of a life-changing tragedy like San Bruno.
The author states, "As lawmakers, we have the opportunity and
the obligation to take every step possible to ensure that the
lessons of this tragedy are well learned and that the
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circumstances are not repeated."
The author states, "Federal and state hearings and
investigations have revealed serious flaws in existing
regulations and in how the state oversees the owner and
operators of natural gas pipelines in California." On December
7, 2010, Assemblymember Hill held a Town Hall in San Bruno to
elicit information from the CPUC, PG&E, and utility experts to
shed light on the cause of the explosion, and to try to discern
whether the integrity of the natural gas transmission pipeline
infrastructure is compromised due to age, ineffective inspection
techniques, seismic activity, or other factors, or whether this
was an unfortunate and isolated event. The Town Hall also
provided members of the public an opportunity to ask questions
of those tasked with ensuring their safety. Assemblymembers
Bradford, Ma, Ammiano, and Fong participated in the Town Hall
and visited the site. The author states that this bill seeks
to address some of the deficiencies discovered in the ensuing
meetings and informational investigations. "AB 56 seeks to
ensure that the CPUC is regulating the industry adequately; that
utilities companies are operating safely and that there is
increased accountability and transparency in how California
manages its pipeline infrastructure."
1) Horrific tragedy : On September 9, 2010, a natural gas
transmission pipeline exploded in San Bruno. The explosion
killed 8 people, injured numerous others, and leveled 37 homes.
The exact cause of the explosion is still unknown; however,
there are many circumstances that may have contributed. The
CPUC immediately had an inspector onsite in San Bruno, and has
since been working closely with the National Transportation
Safety Board (NTSB) to investigate the cause of the San Bruno
explosion.
2) The CPUC's actions: The CPUC is the agency with primary
state jurisdiction over all matters pertaining to safety and
reliability matters for investor-owned gas utilities, mobile
home parks, and propane systems. The CPUC has made numerous
directives to PG&E as part of its investigation and to ensure
public safety. The CPUC ordered PG&E to immediately reduce
pressure in the affected pipeline, inspect its natural gas
system, preserve all records, report on authorized versus actual
levels of spending on pipeline maintenance, and evaluate
customer leak complaint records. In addition, the CPUC hired
four additional gas pipeline inspectors in its Consumer
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Protection and Safety Division, ordered PG&E to provide a list
of its top 100 long-range transmission planning projects,
automatic valve information, and comprehensive data used to
determine operating pressures on all segments of pipes in its
system.
On September 23, 2010, the CPUC established an expert
Independent Review Panel to conduct a comprehensive study and
investigation of the explosion, including examining the root
causes and making recommendations for action by the CPUC to best
ensure such an accident is not repeated elsewhere. The Panel's
recommendations may include changes to design, construction,
operation, maintenance, and replacement of natural gas
facilities; management practices at PG&E in the areas of
pipeline integrity and public safety; regulatory changes by the
CPUC itself; statutory changes to be recommended by the CPUC on
the state and national level; whether there may be systemic
management problems at PG&E and whether greater resources are
needed to achieve fundamental infrastructure improvements; and
other recommendations deemed appropriate by the Panel.
On January 3, 2011, the NTSB discovered that PG&E may have
misidentified natural gas pipes. Some have suggested that may
have led to the pipeline being operated at a higher pressure
than it otherwise should have. While federal law does not
recognize a clear difference in how such pipelines should be
operated, the CPUC responded and ordered PG&E to reduce pressure
on all other pipelines that were of the same size and age as the
pipeline in San Bruno where verifiable records had not been
reviewed to determine the appropriate operating pressure. The
CPUC also directed the state's other natural gas pipeline
operators - Southern California Gas Company, San Diego Gas &
Electric Company, and Southwest Gas Corporation - to report on
the steps they were taking in response to the NTSB's
recommendations.
On February 24, 2011, the CPUC opened a proceeding to set new
rules for the safe and reliable operation of natural gas
pipelines in California, provide the public with the Independent
Review Panel's expert recommendations, develop and adopt safety
related changes to the CPUC's regulation of natural gas
transmission pipelines, including requirements for construction,
especially shut-off values, maintenance, inspections, operation,
record retention, ratemaking, and the application of penalties,
and perform other elements included in this bill.
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3) NTSB's actions: The NTSB commenced its investigation and
discovered that the ruptured pipeline segment was installed
circa 1956. The specified maximum operating pressure for the
ruptured pipeline was 375 pounds per square inch gauge (psig).
According to PG&E, the maximum allowable operating pressure for
the line was 400 psig. According to NTSB, just before the
accident, PG&E was working on their uninterruptable power supply
(UPS) system at the Milpitas Terminal, which is located about 39
miles southeast of the accident site. During the course of this
work, the power supply from the UPS system to the supervisory
control and data acquisition system malfunctioned so that
instead of supplying a predetermined output of 24 volts of
direct current, the UPS system supplied approximately 7 volts of
direct current or less to the data system. Because of this
anomaly, the electronic signal to the regulating valve was lost.
The loss of the electrical signal resulted in the regulating
valve moving from partially open to the full open position as
designed. The pressure then increased to 386 psig. The
over-protection valve, which was pneumatically activated and did
not require electronic input, maintained the pressure at 386
psig.
The NTSB also discovered that the PG&E survey sheets and charts
for the rupture location indicate that the pipeline was
constructed of 30-inch-diameter seamless steel pipe (API5L Grade
X42) with a 0.375-inch thick wall. Actual inspection indicated
the pipeline in the area of the rupture was constructed, at
least in part, with seam-welded pipe. This led to the January
3, 1011, safety recommendations, which directed PG&E to conduct
an intensive records search to identify and validate a safe
operating pressure for the pipelines.
On March 1-3, 2011, the NTSB held a 3-day public hearing to
gather additional factual information for the ongoing
investigation into the natural gas pipeline rupture and
explosion that occurred in San Bruno. The goal of the hearing
was for the NTSB to learn more about the issues identified in
the San Bruno pipeline rupture accident. The NTSB did not
provide a date by which it expects to have its investigation
complete. Instead, it states, "Analysis of the accident, along
with conclusions and a determination of probable cause, will
come at a later date when the final report on the investigation
is completed." This investigation may not be complete until
September 2011.
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4) PG&E's actions: In October 2010, PG&E announced Pipeline
2020 Program, a program with five areas of focus to strengthen
the utility's natural gas transmission system. The program has
five areas of focus, including: (1) modernizing critical
pipeline infrastructure, expanding the use of automatic or
remotely operated shut-off valves; (3) spurring the development
of next-generation inspection technologies; (4) developing
industry-leading best practices; and (5) enhancing public safety
partnerships. Some of the requirements in this bill will
facilitate the goals of the Pipeline 2020 Program, in
particular, the compatible safety standards.
5) Do you get what you pay for: Shortly after the San Bruno
explosion, The Utility Reform Network (TURN) released workpapers
that PG&E submitted to the CPUC in 2007 indicating that the cost
of repairs for a section of natural gas pipeline within miles of
the San Bruno explosion were included in rates as of 2009,
although the work has not yet been done. The section of pipe in
South San Francisco, just north of San Bruno, had been
identified as high risk. The CPUC responded that it authorizes
the recovery of expenditures for deferred maintenance; however,
it does not follow up with each project to ensure that the
project for which it authorized actually gets completed. The
CPUC provides PG&E the flexibility to use maintenance funds on
the projects PG&E deems highest priority at the time. This bill
would require the CPUC to track the repairs to ensure the
repairs either get completed, or the funds are returned to
ratepayers.
REGISTERED SUPPORT / OPPOSITION :
Support
Pacific Gas and Electric Company (PG&E) (if amended)
Opposition
San Diego Gas & Electric (SDG&E) (unless amended)
Southern California Gas Company (SoCalGas) (unless amended)
Analysis Prepared by : Gina Adams / U. & C. / (916) 319-2083
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