BILL ANALYSIS Ó
AB 650
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Date of Hearing: April 17, 2013
ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW
Jim Frazier, Chair
AB 650 (Nazarian) - As Amended: March 20, 2013
SUBJECT : State Government: General Services
SUMMARY : Sets parameters for the Natural Gas Services program
and requires executive branch agencies to purchase through the
program.
Specifically, this bill :
1)Requires the Director of the Department of General Services
(DGS) to operate the Natural Gas Services Program to address
the needs of multiple state agencies for the procurement of
natural gas and related services.
2)Requires executive branch agencies to purchase natural gas for
certain kinds of purchases through the Natural Gas Services
program.
3)Authorizes DGS to buy and sell natural gas and related
services.
4)Defines meaning of "natural gas" as related to the program.
5)Implements accounting changes by establishing the Department
of General Services Natural Gas Services Program Account.
EXISTING LAW Existing law authorizes the Department of General
Services to contract with suppliers for the purchase of goods
and services. This is the general authority in which the program
has been operating.
FISCAL EFFECT : Unknown
COMMENTS : The Department of General Services (DGS) has
operated the Natural Gas Services (NGS) Program for 25 years
under the general authority granted to DGS. The NGS program
currently provides natural gas delivery to 9 executive agency
departments, 8 University of California campuses, 21 California
State University campuses, 13 community college districts, 15
counties, 11 cities, and 16 special districts. Total gas
delivered through the program, which supplies state and local
government agencies, in Fiscal Year 2012/13 was valued at more
than $180 million.
While the NGS program has operated under DGS' general purchasing
AB 650
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authority for more than two decades, DGS is seeking to clarify
in the Public Contract Code the authority and parameters of the
program. According to the department, doing so will help add
credibility and stability as NGS continues to purchase and sell
natural gas.
This bill would add a section to the Public Contract Code to set
the parameters for the program's operation. Specifically, it
would state that the aim of the program is to operate to address
the needs of multiple state agencies for the procurement of
natural gas. It would provide the program with the authority to
enter into agreements with agencies and suppliers for the
purchase, sale, and transfer of natural gas. Also, it would
provide DGS with the authority to hire employees for the program
as needed.
Additionally, the bill requires agencies in the executive branch
of state government to buy their noncore gas purchases through
the NGS program. Noncore customers are large gas buyers like
industrial customers or large-facility operators. The California
Department of Corrections and Rehabilitation is the largest
executive branch purchaser of gas through the program.
According to DGS, all but one executive branch agency (the
Department of Water Resources) that are noncore gas purchasers
buy through the NGS program. However, the bill would allow the
Director of DGS to allow exemptions to the requirement.
Currently, approximately 16 percent of gas purchased through the
program is bought by state executive agencies. If the law
changed, as proposed, to mandate purchases by these agencies,
DGS explained that it would have more certainty when entering
into contracts for longer-term gas purchases. This certainty
could mean reduced costs.
The bill also defines natural gas to include "natural gas,
methane, biomethane, compressed natural gas, liquefied natural
gas, and other energy commodity that is similar to natural gas"
and authorizes DGS to provide services related to the
environmental aspects of energy use. DGS is seeking such a
definition to provide flexibility under the program to help
customers meet greenhouse gas reduction requirements.
Currently the NGS program's revenues and expenses are processed
through DGS' Service Revolving Fund. The bill would change the
accounting for the NGS program by establishing a separate fund
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called the "Department of General Services Natural Gas Services
Program Account" with the State Treasury. Revenues payable to
DGS for natural gas and related services would be deposited into
the account. Also, funds in the account would be continuously
appropriated regardless of fiscal year. The Program's customer
fee revenues in the account could not be shifted or borrowed
from and unexpended revenues at year end would be retained in
the account and be reserved for future NGS Program expenses.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Scott Herbstman / A. & A.R. / (916)
319-3600