BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 650
Author: Nazarian (D)
Amended: 8/26/13 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 8/26/13 (1) delete the authorization
for the Department of General Services (DGS) to hire and appoint
personnel to implement the Program and (2) delete provisions in
the bill that establish protocols to be used by the Director of
DGS when hiring persons at salaries above that which have been
approved by the Department of Human Resources.
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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
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
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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
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
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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 8/26/13)
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
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MW:k 8/28/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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