BILL ANALYSIS                                                                                                                                                                                                    Ó


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                                    THIRD READING

          Bill No:  AB 650
          Author:   Nazarian (D)
          Amended:  6/19/13 in Senate
          Vote:     27

          AYES:  Wright, Nielsen, Berryhill, Calderon, Cannella, Correa,  
            De León, Galgiani, Hernandez, Lieu, Padilla
          AYES:  De León, Walters, Gaines, Hill, Lara, Steinberg
          NO VOTE RECORDED:  Padilla
          ASSEMBLY FLOOR  :  72-0, 5/16/13 - See last page for vote

           SUBJECT  :    State government:  general services:  Natural Gas  
          Services Program

           SOURCE  :     Department of General Services

           DIGEST  :    This bill sets parameters for the Natural Gas  
          Services Program (Program) and requires most executive branch  
          agencies to purchase gas through the Program.

           ANALYSIS  :    Existing law generally authorizes Department of  
          General Services (DGS) to contract with suppliers for the  
          purchase of a wide range of goods and services.

          This bill sets parameters for the Program and requires most  
          executive branch agencies to purchase gas through the Program.


                                                                     AB 650

          Specifically, this bill:

          1. Requires the Director of DGS to operate the 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.

          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. Requires executive branch agencies, except the Department of  
             Water Resources, to use the DGS 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  

          6. 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.

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

          The DGS has operated the Program for 25 years pursuant to its  
          general statutory authority.  Currently, the Program provides  



                                                                     AB 650

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

          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.

          This 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  

           FISCAL EFFECT  :    Appropriation:  Yes   Fiscal Com.:  Yes    
          Local:  No

          According to the Senate Appropriations Committee, no new costs  
          or savings are expected, as this bill codifies an existing  
          procurement program operated by DGS.  DGS indicates that this  
          bill ensures continued annual savings of approximately $7.5  
          million for numerous state and local entities that participate  
          in the Program (General Fund, various special funds, local  
          funds).  These savings are primarily derived from bulk purchase  
          opportunities, as well as consolidated bidding and contract  
          administration through DGS.

           SUPPORT  :   (Verified  7/2/13)



                                                                     AB 650

          Department of General Services (source)
          Sacramento Regional Transit District

           ARGUMENTS IN SUPPORT  :    The bill's sponsor, Department of  
          General Services, indicates that its existing customers  
          experience annual savings of approximately $1.7 million from  
          collective bulk purchases, $5.3 million from consolidated  
          procurement bidding and contract administration, and $400,000 to  
          $800,000 from purchases of intrastate pipeline capacity.  Nine  
          executive branch agencies currently utilize the program for  
          non-core gas purchases, and this bill will not compel  
          participation by state agencies that are not current  

           ASSEMBLY FLOOR  :  72-0, 5/16/13
          AYES:  Achadjian, Alejo, Ammiano, Atkins, Bigelow, Bloom,  
            Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,  
            Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway,  
            Cooley, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier,  
            Beth Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray,  
            Hagman, Hall, Harkey, Roger Hernández, Jones, Jones-Sawyer,  
            Levine, Linder, Logue, Lowenthal, Maienschein, Mansoor,  
            Medina, Mitchell, Mullin, Muratsuchi, Nazarian, Nestande,  
            Olsen, Pan, Patterson, Perea, V. Manuel Pérez, Quirk,  
            Quirk-Silva, Rendon, Salas, Skinner, Ting, Torres, Wagner,  
            Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, John A.  
          NO VOTE RECORDED:  Allen, Donnelly, Grove, Holden, Melendez,  
            Morrell, Stone, Vacancy

          MW:k  7/2/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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