BILL ANALYSIS                                                                                                                                                                                                    






                                                       Bill No:  AB  
          650
          
                 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
                       Senator Roderick D. Wright, Chair
                           2013-2014 Regular Session
                                 Staff Analysis



          AB 650  Author:  Nazarian
          As Amended:  June 4, 2013
          Hearing Date:  June 11, 2013
          Consultant:  Paul Donahue


                                     SUBJECT  

            State government: general services: Natural gas services  
                                    program.

                                   DESCRIPTION
           

          Sets parameters for the Natural Gas Services Program and  
          requires most 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 consolidate and address the needs of multiple  
            state agencies for the procurement of natural gas and  
            related services.

          2)Requires DGS to make its services with respect to the  
            acquisition of natural gas and related services available  
            by way of interagency agreements, to any city, county,  
            city and county, district, or other local governmental  
            body, and to any nonprofit hospital or educational  
            institution that expends public funds. 

          3)Authorizes DGS to buy, sell, exchange, transfer, or  
            otherwise dispose of natural gas it acquires, and permits  
            DGS to recover acquisition and other costs to operate the  
            program through customer charges or fees.





          AB 650 (Nazarian) continued                              
          Page 2
          


          4)Allows DGS to enter into gas purchase transactions for a  
            term longer than five years, if specifically approved by  
            the director of DGS.

          5)Exempts DGS from including disabled veteran business  
            enterprise requirements for the purchase of natural gas  
            and related services unless DGS determines it is  
            necessary.

          6)Requires executive branch agencies, except the Department  
            of Water Resources, to use the DGS natural gas program  
            for noncore gas purchases of natural gas to ensure  
            maximum participation resulting in the best discounts and  
            prices for the commodity, but allows the director of DGS  
            to allow exemptions from this requirement. 

          7)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 related services, including, but not  
            limited to, gas storage, gas transportation, and forward  
            purchases of natural gas as related to the program.

          8)Changes fiscal management practices by establishing the  
            DGS Natural Gas Services Program Fund.

                                   EXISTING LAW

           The existing law generally authorizes DGS to contract with  
          suppliers for the purchase of a wide range of goods and  
          services. 

                                    BACKGROUND
           
          The DGS has operated the natural gas services program for  
          25 years pursuant to its general statutory authority.  
          Currently, the program 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. 

          Although the program has been operating pursuant to DGS'  




          AB 650 (Nazarian) continued                              
          Page 3
          


          general purchasing authority for more than two decades, DGS  
          is seeking to codify the program and enact statutory  
          parameters for its operation. 

          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 establishes a separate fund in the State Treasury  
          into which revenues payable to DGS for natural gas and  
          related services would be deposited. In addition, funds in  
          the account would be continuously appropriated regardless  
          of fiscal year. 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 program expenses.

           SUPPORT:   

          Department of General Services

           OPPOSE:   

          None on file

           FISCAL COMMITTEE:   Senate Appropriations Committee

                                   **********