BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 650| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 650 Author: Nazarian (D) Amended: 8/15/13 in Senate Vote: 27 SENATE GOVERNMENTAL ORGANIZATION COMMITTEE : 11-0, 6/11/13 AYES: Wright, Nielsen, Berryhill, Calderon, Cannella, Correa, De León, Galgiani, Hernandez, Lieu, Padilla SENATE APPROPRIATIONS COMMITTEE : 6-0, 7/1/13 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. Senate Floor Amendments of 8/15/13 state that funding for the costs of the Program shall be provided for in the annual Budget Act. ANALYSIS : Existing law generally authorizes Department of General Services (DGS) to contract with suppliers for the CONTINUED AB 650 Page 2 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. 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. Provides that DGS will 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 requirement. 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. 8. States that funding for DGS' administrative costs in CONTINUED AB 650 Page 3 overseeing the Program is to be provided in the annual Budget Act. Background The DGS has operated the 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' 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. 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 expenses. 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 CONTINUED AB 650 Page 4 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 8/19/13) 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 participants. 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. Pérez NO VOTE RECORDED: Allen, Donnelly, Grove, Holden, Melendez, Morrell, Stone, Vacancy MW:k 8/19/13 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED AB 650 Page 5 CONTINUED