BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 1371 (Leno) - Natural gas: leakage abatement.
          
          Amended: May 7, 2014            Policy Vote: EU&C 8-1
          Urgency: No                     Mandate: Yes (see staff comment)
          Hearing Date: May 19, 2014      Consultant: Marie Liu
          
          This bill meets the criteria for referral to the Suspense File.
          
          
          Bill Summary: SB 1371 would require the California Public  
          Utilities Commission (CPCU) to adopt rules and procedures to  
          minimize leaks on commission-regulated intrastate gas pipeline  
          facilities for the protection of public and worker safety and to  
          reduce the state's greenhouse gas (GHG) emissions.
           
          Fiscal Impact: 
              One-time costs of $508,000 from the California Public  
              Utilities Commission Reimbursement Account (special) in FY  
              2015-16 to the CPUC for the required proceeding to develop  
              rules and procedures for leak minimization.
              Ongoing costs of $163,000 from the California Public  
              Utilities Commission Reimbursement Account (special),  
              beginning in FY 2016-17, to the CPUC to perform ongoing  
              evaluation of operations, maintenance, and repair practices  
              of gas pipeline facilities.

          Background:  Existing law (PUC §955 and §963) directs the CPUC  
          to regulate intrastate gas pipeline facilities pursuant to  
          federal law in a manner that prioritizes the safety of the  
          public and gas corporation employees. Each gas corporation is  
          required to develop, adopt, and implement a plan for the safe  
          and reliable operation of its gas pipeline facilities that  
          provides for the effective inspection of leak detection and  
          timely repairs.

          The CPUC under existing law is required to determine the  
          reasonableness of operational costs and to design rates for  
          public utilities.

          The California Global Warming Solutions Act of 2006 (aka AB 32)  
          (Health and Safety Code §38500 et seq.) requires the ARB to  
          adopt GHG reduction measures by regulations to reduce the  








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          statewide GHG emissions to 1990 levels by 2020.

          Proposed Law: This bill would require the CPUC to adopt rules  
          and procedures governing the operation, maintenance, repair, and  
          replacement of commission-regulated intrastate transmission and  
          distribution lines to minimize leaks to both (1) protect public  
          and worker safety and (2) reduce natural gas emissions as a GHG  
          pursuant to AB 32. A proceeding to adopt these rules and  
          procedures into the utilities' safety plan would be required to  
          commence by January 15, 2015. The CPUC would be required to  
          consult with the State Air Resources Board and other relevant  
          agencies in its proceeding.

          The rules and procedures would be required to achieve specified  
          objectives, which include, among other things, the following: 
           To provide for the maximum technologically feasible and  
            cost-effective repair of leaks within a reasonable time frame  
            after discovery.
           To provide for the ongoing repair of leaks that are in the top  
            20 percent of gas volumes leaked on an annual basis.
           The establishment of a baseline systemwide leak rate, based on  
            reports from pipeline owners.
           To establish and require the use of best practices for leak  
            surveys, patrols, leak survey technology, leak prevention, and  
            leak reduction.

          This bill would additionally require the CPUC, when approving  
          rates, to consider specified information including:
           Providing an adequate workforce to be able to reduce hazards  
            and emissions from leaks.
           Directing revenues from reducing natural gas leaks to further  
            leak avoidance, reduction, and repair.
           The impact on affordability of gas for vulnerable customers.
           The social and public costs associated with climate change and  
            air pollution.

          Staff Comments: The CPUC estimates that the required proceeding  
          in this bill will have one-time costs of $508,000 for the  
          necessary staff (1 administrative law judge II, 1 legal analyst,  
          1 public utilities counsel IV, and one utility engineer). Once  
          the proceeding is concluded, the CPUC anticipates transferring  
          the one utility engineer to evaluate operations, maintenance,  
          and repair practices to determine whether alternative practices  
          may be appropriate, as required by the bill. This would result  








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          in an ongoing cost of $163,000.



          This bill contains codified findings and declarations.  In the  
          interest of code clarity and efficiency, staff recommends this  
          bill be amended to place the findings and declarations in an  
          uncodified section of the bill.

          This bill is a state mandate because it modifies creates a new  
          crime as violations of the Public Utilities Code are crimes.  
          However, under the state constitution, this mandate is not  
          reimbursable.