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