BILL ANALYSIS �
AB 650
Page 1
ASSEMBLY THIRD READING
AB 650 (Nazarian)
As Amended May 1, 2013
2/3 vote
ADMINISTRATIVE REVIEW 12-1
APPROPRIATIONS 16-0
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|Ayes:|Frazier, Achadjian, |Ayes:|Gatto, Harkey, Bigelow, |
| |Buchanan, | |Bocanegra, Bradford, Ian |
| |Ian Calderon, Cooley, | |Calderon, Campos, Eggman, |
| |Gorell, Hagman, Nazarian, | |Gomez, Hall, Ammiano, |
| |Medina, Olsen, | |Linder, Pan, Quirk, |
| |Quirk-Silva, | |Wagner, Weber |
| |Salas | | |
| | | | |
|-----+---------------------------+-----+--------------------------|
|Nays:|Allen | | |
| | | | |
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SUMMARY : Sets parameters for the Natural Gas Services (NGS)
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 DGS Natural
Gas Services Program Fund.
EXISTING LAW authorizes the DGS to contract with suppliers for
the purchase of goods and services. This is the general
AB 650
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authority in which the program has been operating.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, the consolidated purchasing program provides
significant ongoing savings (General Fund, numerous special
funds, and to local agency funds) of at least several million
dollars annually in reduced natural gas contract costs and
streamlined administrative costs. In addition, providing
continuous appropriation authority for the funds used to pay
natural gas purchasing contracts provides more certainty to
vendors and helps to minimize contract costs.
COMMENTS : The DGS has operated the NGS Program for 25 years
under the general authority granted to DGS. The NGS program
currently provides natural gas delivery to nine executive agency
departments, eight 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
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
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largest executive branch purchaser of gas through the program.
According to the 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% 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 the 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
called the "Department of General Services Natural Gas Services
Program Fund" 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 NGS 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.
Analysis Prepared by : Scott Herbstman / A. & A.R. / (916)
319-3600
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