BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 56| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 56 Author: Hill (D) Amended: 8/30/11 in Senate Vote: 21 SENATE ENERGY, UTILITIES & COMMUNIC. COMM. : 8-3, 07/05/11 AYES: Padilla, Corbett, De León, DeSaulnier, Pavley, Rubio, Simitian, Wright NOES: Fuller, Berryhill, Strickland SENATE APPROPRIATIONS COMMITTEE : 6-3, 08/25/11 AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg NOES: Walters, Emmerson, Runner ASSEMBLY FLOOR : 54-21, 06/02/11 - See last page for vote SUBJECT : Gas corporations: rate recovery and expenditure: intrastate pipeline safety SOURCE : Author DIGEST : This bill implements numerous safety-related measures regarding the operation of natural gas pipeline facilities regulated by the Public Utilities Commission (PUC). ANALYSIS : Federal Law and general orders of the PUC requires the PUC to regulate gas transmission, distribution and gathering pipeline facilities which include gas CONTINUED AB 56 Page 2 corporations, master-metered mobile home parks, and propane operators. Federal law also requires gas corporations to provide information to the federal Department of Transportation on the location of gas pipelines. While federal law and PUC orders generally give the PUC oversight responsibility for natural gas pipelines, the scope of this oversight is ambiguous. This bill: 1.Requires natural gas corporations to develop and submit to the PUC a plan for the comprehensive testing of the operator's natural gas transmission system. 2.Requires natural gas corporations to report annually to the PUC on safety issues. 3.Requires a gas corporation to demonstrate in its rate cases that proposed rates will be sufficient to maintain safe and reliable service in a cost-effective manner and restricts a gas corporation from recovering any fine or penalty in rates. 4.Requires natural gas corporations to meet annually with local fire departments to review emergency response plans. 5.Requires the PUC to require natural gas corporations to install automatic or remote-controlled shut off valves on natural gas pipelines in areas of high population density or which cross active seismic faults, provided the PUC determines that those valves are necessary to protect public safety. Natural gas corporations are authorized under the bill to recover the costs of these upgrades from natural gas ratepayers. 6.Requires natural gas corporations to use "balancing accounts" to ensure that funds allocated for safety are used properly. Background CONTINUED AB 56 Page 3 San Bruno Tragedy - On the evening of September 9, 2010 a 30-inch natural gas transmission line ruptured in a residential neighborhood in the City of San Bruno. The rupture caused an explosion and fire which took the lives of eight people and injured dozens more; destroyed 37 homes and damaged dozens more. Gas service was also disrupted for 300 customers. The pipeline in question is owned and operated by Pacific Gas & Electric (PG&E) and originally built in 1948. In 1956 it was relocated and rebuilt to accommodate new housing development. The National Transportation Safety Board (NTSB), in conjunction with the PUC was on scene within 24 hours to investigate the cause of the explosion. Although preliminary elements of the investigation have been detailed, a final report on causation is not expected until at least the fall. Regulatory Action - The NTSB has principal jurisdiction over the investigation into San Bruno and is expected to release its final report on causation later this summer. Preliminary findings have been released and the NTSB has "identified both the material and the fabrication welds of the section of pipeline that failed did not meet either: (1) the engineering consensus standards applicable to natural gas transmission pipelines at the time, or (2) the PG&E specifications in effect at the time of construction." It has also been determined that PG&E has inadequate records and knowledge of its aging gas pipeline infrastructure to allow the utility or the PUC to make informed and sound decisions on the steps necessary to operate a safe and reliable natural gas system. Complacency appears to be a significant factor. PG&E records had incorrectly characterized fundamental aspects of the line that ruptured but piping engineers for the utility were aware that the segment was double-submerged arc welded rather than seamless. The inadequacy of records is also the result of a "grandfathering" or exemption under federal law from pressure test requirements for pipelines placed in service before 1970. Federal regulations allowed pipeline operators to operate a segment at the highest actual operating pressure of the segment during the five-year period between July 1, 1965 and June 30, 1970. CONTINUED AB 56 Page 4 As a consequence, the NTSB recommended that PG&E obtain "traceable, verifiable, and complete" records and, with reliably accurate data, calculate a dependable pressure level for pipe operation. PG&E has been unable to meet that recommendation for hundreds of miles of its transmission pipelines most of which were laid prior to 1970. Southern California Gas and San Diego Gas & Electric are under the same orders and have also been unable to produce records for a significant portion of its pipelines as well, especially for the older vintage pipelines. In response the PUC has ordered all California gas transmission operators to develop and file for PUC consideration a Natural Gas Transmission Pipeline Comprehensive Pressure Testing Implementation Plan to achieve the goal of orderly and cost effectively replacing or testing all natural gas transmission pipeline that have not been pressure tested. The PUC has also started a penalty consideration phase into whether PG&E's gas transmission pipeline recordkeeping was unsafe, whether it violated the law, and if so whether deficient PG&E recordkeeping caused or contributed to the pipeline rupture in San Bruno. Independent Review Panel - On September 23, 2010, the PUC created an Independent Review Panel of experts to conduct a comprehensive study and investigation of the September 9, 2010, explosion and fire. The PUC directed the panel to make a technical assessment of the events, determine the root causes, and offer recommendations for action by the PUC to best ensure such an accident is not repeated elsewhere. The PUC encouraged the panel to make such recommendations as necessary. Such recommendations could 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 PUC itself, and statutory changes to be recommended by the PUC. The panel released its findings on June 9 and concluded that the pipeline rupture was "a consequence of multiple weaknesses in PG&E's management and oversight of the safety CONTINUED AB 56 Page 5 of its gas transmission system," and that the PUC "did not have the resources to monitor PG&E's performance in pipeline integrity management adequately or the organizational focus that would have elevated concerns about PG&E's performance in a meaningful way." Comments According to the author's office, 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 represents the community of San Bruno and has witnessed first-hand the life-changing tragedy of the San Bruno explosion. The author believes that the Legislature has the opportunity and the obligation to take every step possible to ensure that the lessons of this tragedy are well learned and that the circumstances are not repeated. The author further reports that 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. This bill seeks to address some of the deficiencies in the regulation of natural gas transmission pipelines that have been discovered in community meetings, and NTSB and PUC investigations. The bill seeks to ensure that the PUC 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. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes According to the Senate Appropriations Committee: Fiscal Impact (in thousands) Major Provisions 2011-12 2012-13 2013-14 Fund PUC oversight $390 $780 $780 Special* Ratepayer impacts to stateunknown costs, likely in the low CONTINUED AB 56 Page 6 millions Various agencies * PUC Utilities Reimbursement Account SUPPORT : (Unable to verify at time of writing) Pacific Gas and Electric Company (if amended) OPPOSITION : (Unable to verify at time of writing) San Diego Gas and Electric (unless amended) Southern California Gas Company (unless amended) ASSEMBLY FLOOR : 54-21, 06/02/11 AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, Brownley, Buchanan, Butler, Charles Calderon, Campos, Carter, Cedillo, Chesbro, Davis, Dickinson, Eng, Feuer, Fong, Fuentes, Furutani, Galgiani, Gatto, Gordon, Harkey, Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman, Lara, Bonnie Lowenthal, Ma, Mendoza, Mitchell, Monning, Pan, Perea, V. Manuel Pérez, Portantino, Skinner, Solorio, Swanson, Torres, Wieckowski, Williams, Yamada, John A. Pérez NOES: Conway, Cook, Donnelly, Garrick, Grove, Hagman, Halderman, Jeffries, Jones, Knight, Logue, Mansoor, Miller, Morrell, Nielsen, Norby, Olsen, Silva, Smyth, Valadao, Wagner NO VOTE RECORDED: Fletcher, Beth Gaines, Gorell, Hall, Nestande RM:nl 8/30/11 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED