BILL ANALYSIS Ó
SB 879
Page 1
Date of Hearing: July 5, 2011
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
SB 879 (Padilla) - As Amended: May 11, 2011
SENATE VOTE : 29-8
SUBJECT : Natural Gas Pipelines: Safety.
SUMMARY : This bill directs the California Public Utilities
Commission (PUC), 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.
EXISTING LAW :
1)Requires the PUC to regulate gas transmission, distribution
and gathering pipeline facilities which include investor-owned
utilities, master-metered mobile home parks, storage
facilities, and propane operators.
2)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.
3)Vests regulatory authority over gas corporations to the PUC
and authorizes it to fix the rates and charges for service as
well as standards and practices for services to be furnished.
FISCAL EFFECT : Unknown
COMMENTS :
1)According to the author this bill is intended to increase the
transparency of funding of the maintenance, repair and safety
of gas transmission pipelines by requiring that funds
authorized for that use stay in one account and can only be
used for that purpose going forward without further PUC
review.
2)Background. The PUC regulates natural gas utility service for
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approximately 10.7 million natural gas customers Pacific Gas
and Electric (PG&E), Southern California Gas, San Diego Gas &
Electric (SDG&E), Southwest Gas, and several smaller natural
gas utilities. The CPUC also regulates independent storage
operators Lodi Gas Storage and Wild Goose Storage and mobile
home park operators with natural gas service.
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 PUC 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.
Other pipelines are owned and operated by the oil refining
industry and several publicly owned utilities (Los Angeles
Department of Water and Power, the Sacramento Municipal
Utility District, Long Beach Oil and Gas Department, and
several others). These pipelines are not within the
jurisdiction of the PUC.
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
PG&E and originally built in 1948. Although preliminary
elements of the investigation have been detailed, a final
report on causation is not expected until at least the fall.
One of the elements of the investigation has focused on the
operating pressure capabilities of this particular pipeline.
The National Transportation Safety Board (NTSB), investigating
the San Bruno Tragedy has expressed concerns about
discrepancies between installed pipe and as-built drawings in
PG&E's records of its 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
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can be safely operated. The NTSB is concerned that these
inaccurate records may lead to incorrect operating pressures.
4)Budgeting for Maintenance. Through the PUC'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 PUC.
The PUC recently approved PG&E's natural gas transmission and
storage application for 2011 through 2014 (referred to as Gas
Accord V) and includes revenue requirement and rates. As part
of this proceeding and in response to San Bruno, the PUC 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
Gas Accord V 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. The purpose of a A "one-way" balancing
account is to track the difference between the customer
portion of the total revenue over- or undercollections and
track expenditures for designated activities. In the case of
Gas Accord V, the one-way balancing account will serve to
track expenditures for pipeline integrity management
activities.
5)Discussion. The PUC and investor-owned utilities have
expressed concerns regarding the clarity of the language with
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respect to the one-way balancing account. In addition, this
Committee recommended amendments to SB 44, SB 216, and SB 705
in order to conform references to federal and state laws and
regulations and clarify that the scope of the PUC's
jurisdiction is limited to the gas corporations it currently
regulates.
The author may wish to consider the following amendments:
Amendment 1: 962 . " 969 In any ratemaking proceeding in
which the commission authorizes a gas corporation to recover
expenses for the inspection, maintenance, or repair of
transmission pipelines the gas corporation's transmission
pipeline integrity management program, established pursuant to
Part 192, Subpart O of Title 49 of the United States Code or
capital expenditures for the maintenance and repair of
transmission pipelines , the commission shall require the gas
corporation to establish and maintain a one-way balancing
account for the recovery of those expenses. Any unspent funds
in the form of accumulated account balance at the end of each
rate-case cycle, plus interest, will be returned to customers
through a true-up filing."
Amendment 2: Page 3, line 13, after "commission" insert: "to
the extent authorized by the certification between the
California Public Utilities Commission and the United States
Secretary of Transportation,"
Amendment 3: Page 4, strike lines 20-25.
RELATED LEGISLATION :
AB 56 (Hill) requires the operators of natural gas
pipelines to institute safety programs and facilities
modernization programs and requires the Public Utilities
Commission to oversee those programs.
SB 44 (Corbett) requires the Public Utilities Commission to
set emergency response standards for PUC-regulated gas
pipeline and distribution systems and requires that access
to pipeline maps be made accessible to the State Fire
Marshal and the local fire marshal.
SB 216 (Yee) requires the Public Utilities Commission to
evaluate current safety practices with regard to intrastate
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natural gas transmission pipelines. The bill requires
operators of natural gas transmission pipelines to install
automatic or remote-controlled shut off valves in areas of
high population density or where pipelines cross active
seismic faults.
SB 705 (Leno) requires natural gas utilities regulated by
the Public Utilities Commission to develop service and
safety plans.
REGISTERED SUPPORT / OPPOSITION :
Support
California Public Utilities Commission (CPUC) (with amendments)
Opposition
None on file.
Analysis Prepared by : Susan Kateley / U. & C. / (916)
319-2083