BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 56 (Hill)
Hearing Date: 08/15/2011 Amended: 07/13/2011
Consultant: Brendan McCarthy Policy Vote: EU&C 8-3
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BILL SUMMARY: AB 56 makes several changes to the laws governing
the safe delivery of natural gas in the state.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Public Utilities Commission $390 $780
$780Special *
oversight
Ratepayer impacts to state Unknown costs, likely in the
low millions Various
agencies
* Public Utilities Commission Utilities Reimbursement Account.
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
Federal law and general orders of the Public Utilities
Commission require the Commission to regulate natural gas
transmission, distribution, and other pipelines. Natural gas
corporations are required to develop emergency response plans.
Federal law also requires gas corporations to provide
information to the federal Department of Transportation on the
location of gas pipelines. While federal law and Commission
orders generally give the Commission oversight responsibility
for natural gas pipelines, the scope of this oversight is
ambiguous.
AB 56 makes a variety of changes to the state's regulation of
the natural gas transmission system, in an effort to improve
safety.
AB 56 (Hill)
Page 1
Specifically, the bill explicitly grants the Public Utilities
Commission the responsibility to regulate intrastate
transmission lines, intrastate distribution lines, intrastate
gathering lines, mobile home park distribution systems, and
propane distribution systems.
The bill requires natural gas corporations to meet annually with
local fire departments to review emergency response plans.
The bill requires the Commission to require natural gas
corporations to install automatic or remote-controlled shut off
valves on natural gas pipelines in areas of high population
density or which cross active seismic faults, provided the
Commission determines that those valves are necessary to protect
public safety. Natural gas corporations are authorized under the
bill to recover the costs of these upgrades from natural gas
ratepayers.
The bill requires natural gas corporations to develop and submit
to the Commission a plan for the comprehensive testing of the
operator's natural gas transmission system.
The bill requires natural gas corporations to report annually to
the Commission on safety issues.
The bill prohibits natural gas corporations from recovering any
fines or penalties through rates. The bill requires natural gas
corporations to demonstrate that the rates they are authorized
to collect from consumers are sufficient to maintain safe and
reliable service. The bill requires natural gas corporations to
use "balancing accounts" to ensure that funds allocated for
safety are used properly.
Staff notes that this bill addresses natural gas safety issues
also addressed by several Senate bills currently pending in the
Assembly (see below).
The Public Utilities Commission has already opened a proceeding
to address the oversight and regulation of natural gas
pipelines. The Commission indicates that expanding that
proceeding to include the requirements of this bill, and to
implement those requirements, will necessitate five additional
positions at a total annual cost of about $780,000 per year.
AB 56 (Hill)
Page 2
By requiring operators to install new valves or upgrade existing
valves at ratepayer expense, the bill will impose additional
costs on natural gas ratepayers. Currently, there are about
2,400 manually-operated valves on natural gas transmission
pipelines in the state. The average cost to upgrade such a valve
to a remote-controlled or automatic valve is about $500,000.
Depending on the number of upgrades or new values that are
installed under the bill, the costs to ratepayers could range
anywhere from the low tens of millions to several hundred
million dollars over the next few years. State agencies consume
about 1.7 percent of the natural gas used in the state. Thus,
state agencies would likely face increased natural gas costs
from the hundreds of thousands to several million dollars over
the next few years.
SB 44 (Corbett) requires the Public Utilities Commission to
develop emergency response standards for natural gas
transmission systems. That bill is pending in the Assembly
Appropriations Committee.
SB 216 (Yee) requires natural gas corporations to install
automatic or remote-controlled shut off valves in areas of high
population density or where pipelines cross active seismic
faults, provided that the Public Utilities Commission finds such
upgrades are necessary to protect public safety. That bill is
pending in the Assembly Appropriations Committee.
SB 705 (Leno) requires natural gas corporations to develop and
implement natural gas safety plans, with specified elements.
That bill is pending in the Assembly Appropriations Committee.
SB 879 (Padilla) requires the Public Utilities Commission to
require natural gas utilities to account for ratepayer funds
designated for pipeline maintenance and repair in a more
transparent way. That bill is pending in the Assembly
Appropriations Committee.