BILL ANALYSIS Ó 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 879 - Padilla Hearing Date:
May 3, 2011 S
As Introduced: February 18, 2011 FISCAL B
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DESCRIPTION
Current Federal law and general orders of the California Public
Utilities Commission (CPUC) require the commission to regulate
gas transmission, distribution and gathering pipeline facilities
which include investor-owned utilities, master-metered mobile
home parks, storage facilities, and propane operators.
Current Federal law and general orders of the CPUC establish
safety requirements pertaining to the design, construction,
testing, operation, and maintenance of utility gas gathering,
transmission, and distribution piping systems, and for the safe
operation of such lines and equipment.
Current law vests regulatory authority over gas corporations to
the CPUC and authorizes it to fix the rates and charges for
service as well as standards and practices for services to be
furnished.
This bill directs the California Public Utilities Commission
(CPUC), in any ratemaking proceeding in which the commission
authorizes a gas corporation to recover expenses for the
inspection, maintenance, or repair of natural gas transmission
pipelines, to establish and maintain a one-way balancing account
for the recovery of those expenses.
BACKGROUND
Natural Gas Regulation - The CPUC regulates natural gas utility
service for approximately 10.7 million customers that receive
natural gas from Pacific Gas and Electric (PG&E), Southern
California Gas, San Diego Gas & Electric, Southwest Gas, and
several smaller natural gas utilities. The CPUC also regulates
independent storage operators Lodi Gas Storage and Wild Goose
Storage.
The vast majority of California's natural gas customers are
residential and small commercial customers, referred to as
"core" customers, who accounted for approximately 40% of the
natural gas delivered by California utilities in 2008. Large
consumers, like electric generators and industrial customers,
referred to as "noncore" customers, accounted for approximately
60% of the natural gas delivered by California utilities in
2008.
The CPUC regulates the California utilities' natural gas rates
and natural gas services, including in-state transportation over
the utilities' transmission and distribution pipeline systems,
storage, procurement, metering and billing.
Most of the natural gas used in California comes from
out-of-state natural gas basins. In 2008, California customers
received 46% of their natural gas supply from basins located in
the Southwest, 19% from Canada, 22% from the Rocky Mountains,
and 13% from basins located within California. Natural gas from
out-of-state production basins is delivered into California via
the interstate natural gas pipeline system
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 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 CPUC
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.
The NTSB's examination of the ruptured pipe segment and review
of PG&E records revealed that although those records marked the
pipe as seamless the pipeline in the area of the rupture was
constructed with longitudinal seam-welded pipe and was
constructed of five sections of pipe, some of which were short
pieces measuring about 4 feet long. These short pieces of pipe
contained different seam welds of various types, including
single- and double-sided welds that may not have been as strong
as the seamless pipe listed in PG&E's records. The NTSB has not
concluded that the faulty records or welds were the proximate
cause of the rupture.
However, the NTSB is concerned that there are other
discrepancies between installed pipe and as-built drawings in
PG&E's gas transmission system. It is critical to know all the
characteristics of a pipeline in order to establish a valid
operating pressure below which the pipeline can be safely
operated. The NTSB is concerned that these inaccurate records
may lead to incorrect operating pressures.
COMMENTS
1. Author's Purpose . In the aftermath of the San Bruno
tragedy questions were raised as to whether PG&E had been
redirecting funds authorized for pipeline maintenance and
repair to non-safety uses or company profits.
Investigation showed that as part of the PG&E's spending
authorization they submit a list of potential safety work
to be done and related locations to the CPUC. There was no
evidence that PG&E redirected the funds from pipeline
safety as approved by the CPUC but some of those funds were
used for other repairs for other pipeline segments that at
the time were deemed more critical. However, a shadow of
doubt was cast on the budgeting of these critical needs.
The purpose of this bill is to improve the transparency of
that process.
2. PG&E's Gas Accord V . Through the CPUC's ratemaking
process a gas corporation's budget for a specified period
(usually three or four years) is submitted, subject to
public hearings, modified, and approved. That budget
includes funding for maintenance and repair but the gas
corporations have always had the latitude to use the
funding for the repairs deemed most necessary during the
funding cycle and have not been required to justify the
change in spending or needed repairs to the CPUC.
The CPUC recently approved PG&E's natural gas transmission
and storage application for 2011 through 2014 which is
commonly referred to as Gas Accord V and includes revenue
requirement and rates. As part of this proceeding and in
response to San Bruno, the CPUC will now require PG&E to
provide a semi-annual "Gas Transmission and Storage Safety
Report" beginning October 1, 2011 to the directors of the
Energy Division and the Consumer Protection and Safety
Division. That report will provide details about the
pipeline-related and storage safety, reliability, and
integrity capital projects and maintenance activities that
are being undertaken by PG&E and to track the amounts spent
on such projects and activities. In addition, the Safety
Report will provide Commission staff with details of
whether the gas transmission pipeline projects that PG&E
has identified as "high risk" by PG&E are being carried
out, whether other replacement projects have been
undertaken instead, and to determine PG&E's rationale for
the reprioritization of these projects
Consistent with and perhaps in response to this bill, the
action also requires a one-way balancing account to be
established to ensure that PG&E spends all of the
designated operation and maintenance funds for pipeline
integrity management activities. This action calls into
question the necessity of this bill. In response the
author advises that if he finds that this recent action,
and subsequent actions of the CPUC expected in the coming
months, secures the transparency and safeguards necessary
for replacement and maintenance funding, he will revise
this bill or drop it in its entirety.
3. Technical Amendments . This committee has adopted three
other bills which require increased regulation by the CPUC
to address pipeline safety. As a result of committee
action, in an effort to clarify the authority of the CPUC
over gas pipelines and to establish one clear body of law
on gas safety and service, SB 44 (Corbett), SB 216 (Yee)
and SB 705 (Leno) were amended into a newly established
division (Chapter 4.5 (commencing with Section 950). The
author and committee should consider similar conforming
amendments to this bill.
4. Related Measures . The following measures have been
introduced in this session in response to the San Bruno
tragedy:
SB 44 (Corbett) requires the CPUC to commence a
proceeding to establish emergency response standards,
which include emergency response plans, to be followed by
owners or operators of commission-regulated gas pipeline
facilities. Status: Pending hearing in Senate
Appropriations Committee.
SB 216 (Yee) directs the CPUC to adopt standards
that require the installation of automatic shut-off or
remote controlled sectionalized block valves on all
commission-regulated pipelines that are located in a high
consequence area or that traverse an active seismic
earthquake fault unless the commission determines it is
prohibited under federal law. Status: Pending hearing
in the Senate Appropriations Committee.
SB 705 (Leno) requires gas corporations to develop,
adopt and implement a service and safety plan that places
safety of the public and gas corporation employees as the
top priority. Status: Passed by Senate Energy,
Utilities & Communications Committee April 28, 2011.
AB 56 (Hill) 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 CPUC
to track proposed repairs to gas facilities to determine
if the repairs were made. Status: Pending hearing in
the Assembly Appropriations Committee.
POSITIONS
Sponsor:
Author
Support:
None on file
Oppose:
None on file
Kellie Smith
SB 879 Analysis
Hearing Date: May 3, 2011