BILL ANALYSIS �
AB 56
Page 1
Date of Hearing: May 27, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 56 (Hill) - As Amended: May 18, 2011
Policy Committee: UtilitiesVote:9-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill implements several safety-related measures regarding
the operation of natural gas pipeline facilities regulated by
the Public Utilities Commission (PUC). Specifically, this bill:
1)Requires a gas corporation to file semi-annual reports with
the PUC and the Division of Ratepayer Advocates regarding
expenditure of ratepayer funds approved by the commission for
safety activities.
2)Requires the PUC to require gas corporations to create a
balancing account to record the difference between a gas
corporation's approved revenue requirement for public safety
and maintenance and actual expenditures for these purposes,
and requires the gas corporation to return unexpended funds to
the balancing account with a reasonable time period following
commission approval of the expenditures.
3)Requires the PUC, in determining a reasonable rate of return,
to consider a gas corporation's safety record.
4)Requires the PUC to adopt and enforce safety standards for
commission-regulated gas pipeline facilities to accomplish
specified tasks, including:
a) Requiring annual reports to the commission regarding the
condition of gas pipeline facilities.
b) Developing a protocol to ensure the safety of pipelines
located in active and known seismic risk areas, as
determined pursuant to current law, and in "high
consequence areas" as defined in federal regulations.
AB 56
Page 2
5)Requires the PUC to develop criteria and standards for
installing sectionalized block valves and automated and remote
shutoff valves, and to require owners or operators of
regulated gas pipeline facilities to comply with minimum
installation standards for these valves in specified
circumstances.
6)Requires the PUC to require pipeline facility owners or
operators to establish the maximum allowable operating
pressure on specified natural gas lines by conducting
hydrostatic pressure tests, unless this pressure already been
established by specified methods.
7)Requires pipeline owners or operators to upgrading key
facilities located in high consequence areas by January 1,
2022, and requires the PUC to consult with owners, operators,
and interested stakeholders to develop the program
requirements and schedule for this effort.
8)Requires the PUC to adopt and enforce a one-call notification
program for the state consistent with the requirements adopted
by the federal Department of Transportation.
9)Require the PUC to track safety-related projects, for which a
gas corporation was granted compensation in a rate proceeding,
to determine if the projects are accomplished.
10)Requires the PUC to require gas corporations to provide
detailed descriptions of the projects for which they seek
compensation and, if they fail to do the projects, to provide
a public justification through a public filing.
11)Requires gas corporations, in the general rate cases, to
satisfy specified actions to the commission regarding
safety-related activities.
12)Stipulates that a gas corporation shall not recover in rates
any uninsured expense resulting from a violation of a statute,
regulation, or PUC order that caused or contributed to a fire,
explosion, or other catastrophic event involving a
commission-regulated gas pipeline facility, as specified.
13)Requires the PUC, by July 1, 2012, to open a proceeding to
establish compatible emergency response standards, to include
AB 56
Page 3
specified elements, for owners or operators of
commission-regulated gas pipeline facilities.
FISCAL EFFECT
Ongoing costs of about $900,000 ($630,000 Public Utilities
Reimbursement Account and $270,000 federal funds) for six
utility engineer positions and associated travel-related and
training costs.
(The commission indicates it would need two positions to
increase the number of annual gas-related safety audits to
ensure the new safety standards and procedures established are
properly addressed and enforced. An additional four positions
would be needed-two to enforce the One-call Notification Program
and two to track proposed safety-, reliability-, and
integrity-related projects for which the gas utilities seek
compensation.)
COMMENTS
1)Background . On September 9, 2010, a natural gas transmission
pipeline owned by PG&E exploded in San Bruno. The explosion
killed eight people, injured numerous others, and destroyed 37
homes. The exact cause of the explosion is still unknown. The
PUC immediately had an inspector onsite in San Bruno, and has
since been working closely with the National Transportation
Safety Board (NTSB) to investigate the cause of the San Bruno
explosion.
2)Purpose . According to the author, this bill is intended to
ensure that California develops new regulations and standards
for the safe and reliable operation of natural gas pipelines
in the state.
3)PUC Actions . On September 23, 2010, the PUC established an
expert Independent Review Panel to conduct a comprehensive
study and investigation of the San Bruno explosion, including
examining the root causes and making recommendations for
action by the CPUC to best ensure such an accident is not
repeated elsewhere.
On February 24, 2011, the PUC opened a proceeding to set new
rules for the safe and reliable operation of natural gas
pipelines in California, provide the public with the
AB 56
Page 4
Independent Review Panel's expert recommendations, develop and
adopt safety related changes to the PUC's regulation of
natural gas transmission pipelines, including requirements for
construction, especially shut-off values, maintenance,
inspections, operation, record retention, ratemaking, and the
application of penalties, and perform other elements included
in this bill.
On April 14, 2011, as part of its approval of PG&E's rate case
for natural gas transmission and storage costs for 2011-2014,
the PUC required PG&E to begin providing a semi-annual Gas
Transmission and Storage Safety Report, which is intended to
allow PUC staff to track PG&E's related capital expenditure
projects and operations and maintenance activities over the
four year rate cycle period. This Safety Report will also
allow staff to monitor PG&E's compliance with federal pipeline
requirements, which requires a gas transmission operator to
assess and to manage the integrity of all of its gas
transmission pipelines located in a high consequence area.
On May 10, 2011, a proposed decision was issued that would
require all California natural gas transmission operators to
develop and file for PUC consideration a Natural Gas
Transmission Pipeline Comprehensive Pressure Testing
Implementation Plan to achieve the goal of orderly and cost
effectively replacing or testing all natural gas transmission
pipelines that have not been pressure tested. The Proposed
Decision issued today provides guidance on determining the
maximum allowable operating pressure (MAOP) to pipeline
operators in the state and begins the process of evaluating
older pipelines that have been previously exempt from pressure
testing requirements.
Implementation Plans (which would be due 60 days after the
Proposed Decision is approved) for testing and replacing
pipelines may include alternatives that demonstrably achieve
the same standard of safety as pressure tests, but must
include a prioritized schedule for completing pressure testing
or replacement based on risk assessment and maintaining
service reliability, as well as cost estimates with proposed
ratemaking.
The first opportunity the CPUC's Commissioners have to vote on
this proposal is June 9, 2011.
AB 56
Page 5
4)Opposition . Sempra Energy contends the bill is premature given
current efforts of the PUC, and is concerned about "codifying
a new or different course or direction prior to conclusions or
recommendations from the various ongoing regulatory
proceedings."
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081