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 SB 1371 (Leno) Page 1 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 SB 1371 (Leno) Page 2 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.