BILL ANALYSIS Ó AB 1456 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1456 (Hill) As Amended August 21, 2012 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |78-0 |(May 30, 2013) |SENATE: |34-0 |(August 22, | | | | | | |2012) | ----------------------------------------------------------------- Original Committee Reference: U. & C. SUMMARY : Requires the California Public Utilities Commission (PUC) with regard to natural gas pipeline safety to: 1)Perform an analysis of benchmark data and adopt safety performance metrics. 2)Consider specified principles when adopting safety performance metrics: a) Each safety performance metric shall be designed to be an indicator of safety performance, reevaluated within a useful timeframe, and that the data inputs to the metric are verifiable. The adopted set of safety performance metrics shall be robust enough to serve as a useful indicator of pipeline safety. 3)Evaluate a regulated gas corporation's safety performance based on the standards adopted per 1) above. The PUC is further authorized to implement a rate incentive program that may contain penalties based on a gas corporation's performance. The Senate amendments specify principles the PUC should consider when adopting safety performance metrics. AS PASSED BY THE ASSEMBLY , this bill was substantially similar to the version passed by the Senate. FISCAL EFFECT : According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs. COMMENTS : AB 1456 Page 2 Background : The impetus of this bill stems from the September 9, 2010, explosion and fire that occurred in the City of San Bruno. A 30-inch natural gas transmission pipeline, owned and operated by Pacific Gas and Electric Company (PG&E), ruptured and caused an explosion and fire which claimed the lives of eight people and injured dozens more; destroyed 37 homes and damaged dozens more. Natural gas pipeline accidents in California, particularly the explosion in the City of San Bruno, have called for a re-evaluation of pipeline safety in the Legislature and regulatory enforcement agencies. The investigation : The National Transportation and Safety Board (NTSB) had principal jurisdiction over the investigation into the San Bruno explosion and released its final report on the causation last year. NTSB determined that the probable cause of the accident was PG&E: 1) inadequate quality assurance and quality control in 1956 during its Line 132 relocation project, which allowed the installation of a substandard and poorly welded pipe section with a visible seam weld flaw that, over time grew to a critical size, causing the pipeline to rupture during a pressure increase stemming from poorly planned electrical work at the Milpitas Terminal; and, 2) inadequate pipeline integrity management program, which failed to detect and repair or remove the defective pipe section. The report notes that contributing to the accident were PUC's and the U.S. Department of Transportation's exemptions of existing pipelines from the regulatory requirement for pressure testing, which likely would have detected the installation defects. Also contributing to the accident was PUC's failure to detect the inadequacies of PG&E's pipeline integrity management program. Furthermore, contributing to the severity of the accident were the lack of either automatic shutoff valves or remote control valves on the line and PG&E's flawed emergency response procedures and delay in isolating the rupture to stop the flow of gas. PUC review panel : The PUC formed its own review panel based on authority it cited in its resolution to "do all things, whether specifically designated in ... Ýthe Public Utilities Code] or in addition thereto, which are necessary and convenient" to our regulation of public AB 1456 Page 3 utilities, including, though not limited to, adopting necessary rules and requirements in furtherance of our constitutional and statutory duties to regulate and oversee public utilities operating in California." In September 2010, PUC's Independent Review Panel (IRP) was formed to examine contributing factors to the San Bruno disaster. 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. IRP findings and recommendations : IRP released its findings on June 9, 2011. Important findings related to this bill are: 1)A recommendation that "Upon thorough analysis of benchmark data, adopt performance standards for pipeline safety and reliability for PG&E, including the possibility of rate incentives and penalties based on achievement of specified levels of performance." 2)A finding that "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." IRP did not recommend that safety performance be a consideration in PUC's rate of return assessment. Analysis Prepared by : DaVina Flemings / U. & C. / (916) 319-2083 FN: 0005284