BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair


          AB 1456 (Hill) - Gas corporations: safety performance standards: 
          rate incentive program. 
          
          Amended: May 25, 2012           Policy Vote: E,U&C 9-0
          Urgency: No                     Mandate: No
          Hearing Date: August 16, 2012                     Consultant: 
          Bob Franzoia  
          
          SUSPENSE FILE.  AS PROPOSED TO BE AMENDED.


          Bill Summary: AB 1456 would require the Public Utilities 
          Commission (commission) to perform an analysis of benchmark data 
          and adopt safety performance standards for pipeline safety and 
          reliability and require the commission to evaluate a gas 
          corporation's safety performance based on those standards.  This 
          bill would authorize the commission to implement a rate 
          incentive program that could contain penalties based on safety 
          performance.

          Fiscal Impact: Up to $418,000 in 2013-14 from the Public 
          Utilities Reimbursement Account for a rulemaking to revise the 
          utilities' rate case plan.
              Up to $267,000 annually from the Public Utilities 
              Reimbursement Account to conduct an initial analysis and 
              then subsequent updating of benchmark data, define 
              performance metrics and performance standards, and develop 
              rates based on safety.

          Background: The National Transportation Safety Board, which has 
          primary jurisdiction for investigating pipeline failures, issued 
          its Pipeline Accident Report on the San Bruno tragedy in August, 
          2011 and found that:

          Because PG&E, as the operator of its pipeline system, and the 
          CPUC, as the pipeline safety regulator within the state of 
          California, have not incorporated the use of effective and 
          meaningful metrics as part of their performance-based pipeline 
          safety management programs, neither PG&E nor the CPUC is able to 
          effectively evaluate or assess the integrity of PG&E's pipeline 
          system.









          AB 1456 (Hill)
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          The commission has created incentive programs for energy 
          efficiency, system reliability, customer service and worker 
          safety.

          Proposed Law: This bill adds Public Utilities Code 960, to read:

          960. (a) The commission shall perform an analysis of benchmark 
          data and adopt safety performance standards for pipeline safety 
          and reliability.

          (b) The commission shall evaluate a gas corporation's safety 
          performance based on the safety performance standards adopted 
          pursuant to subdivision (a) and may implement a rate incentive 
          program. The rate incentive program may contain penalties based 
          on safety performance.

          Related Legislation: AB 56 (Hill) Chapter 519/20011 implements 
          safety related measures relating to the operation of natural gas 
          pipeline facilities regulated by the commission.

          SB 705 (Leno) Chapter 522/2011 requires gas corporations to 
          develop a safety plan for the safe and reliable operation of gas 
          pipeline facilities.

          Staff Comments: It is estimated the commission would require one 
          senior utilities engineer specialist ($156,335) and one public 
          utilities regulatory analyst ($110,392) permanently and one 
          administrative law judge ($151,281) for a limited term to 
          implement the provisions of this bill.

          In July 2011, the commission established a Risk Assessment Unit 
          to research, develop, and propose tools to improve pipeline 
          safety and oversight in the state and announced it was 
          augmenting its pipeline inspector team by five staff (this would 
          result in a total of
          nine new staff positions; four in the unit, and five pipeline 
          inspectors).  The unit is to focus on performance in natural gas 
          safety.  Some of the work of this unit may assist the commission 
          in implementing the provisions of this bill resulting in a 
          reduction in non-proceeding related costs.

          The proposed amendments would revise Section 2, as follows:

          Section  960  965 is added to the Public Utilities Code, to read:








          AB 1456 (Hill)
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          965. (a) The commission shall perform an analysis of benchmark 
          data and adopt safety performance  standards  metrics for pipeline 
          safety and reliability.

            (b) The commission shall consider the following principles 
          when adopting safety performance metrics:
          (1) Each safety performance metric shall be designed to be an 
          indicator of safety performance. 
          (2) Each safety performance metric shall be designed so that it 
          may be re-evaluated within a useful timeframe.
          (3) Each safety performance metric shall be designed so that the 
          data inputs to the metric are verifiable.
          (4) The adopted set of safety performance metrics shall be 
          robust enough to serve as a useful indicator of pipeline safety 
          and reliability.

             (b)  (c) The commission shall evaluate a gas corporation's 
          safety performance  based on  using the safety performance 
           standards  metrics adopted pursuant to subdivision (a) and may 
          implement a rate incentive program. The rate incentive program 
          may contain penalties based on safety performance.