BILL ANALYSIS �
AB 1456
Page 1
ASSEMBLY THIRD READING
AB 1456 (Hill)
As Amended May 25, 2012
Majority vote
UTILITIES & COMMERCE 15-0
APPROPRIATIONS 17-0
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|Ayes:|Bradford, Fletcher, |Ayes:|Fuentes, Harkey, |
| |Buchanan, Fong, Fuentes, | |Blumenfield, Bradford, |
| |Furutani, Gorell, | |Charles Calderon, Campos, |
| |Roger Hern�ndez, Huffman, | |Davis, Donnelly, Gatto, |
| |Knight, Ma, Nestande, | |Ammiano, Hill, Lara, |
| |Skinner, Swanson, Valadao | |Mitchell, Nielsen, Norby, |
| | | |Solorio, Wagner |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Requires the California Public Utilities Commission
(PUC) with regard to natural gas pipeline safety and
reliability, to:
1)Perform an analysis of benchmark data and adopt safety
performance standards.
2)Evaluate a regulated gas corporation's safety performance
based on the standards adopted per 1) above. The PUC is
further authorized to implement a rate incentive program that
may contain penalties based on a gas corporation's
performance.
EXISTING LAW states that:
1)The PUC has regulatory authority over public utilities,
including gas corporations, authorizes the commission to fix
the rates and charges for every public utility, and requires
that those rates and charges be just and reasonable.
2)The Natural Gas Pipeline Safety Act of 2011, among other
things, prohibits a gas corporation from recovering any fine
or penalty in any rate approved by the commission.
FISCAL EFFECT : According to the Assembly Appropriations
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Committee, the PUC would incur one-time special fund costs of
around $140,000 for an administrative law judge to conduct a
rulemaking to revise the utilities' rate case plan and ongoing
special fund costs of around $250,000 for two positions to
conduct the initial analysis and subsequent updating of
benchmark data, define performance metrics and performance
standards, and develop rates based on safety. �Public Utilities
Reimbursement Account]
COMMENTS :
Background : The impetus of this bill stems from the September
9, 2010, explosion and fire
that occurred in the City of San Bruno. A 30-inch natural gas
transmission pipeline, owned and operated by Pacific Gas and
Electric Company (PG&E), ruptured and caused an explosion and
fire which claimed the lives of eight people and injured dozens
more; destroyed 37 homes and damaged dozens more. Natural gas
pipeline accidents in California, particularly the explosion in
the City of San Bruno, have called for a re-evaluation of
pipeline safety in the Legislature and regulatory enforcement
agencies.
The investigation : The National Transportation and Safety Board
(NTSB) had principal
jurisdiction over the investigation into the San Bruno explosion
and released its final report on the causation last year. NTSB
determined that the probable cause of the accident was the
Pacific Gas and Electric Company's: 1) inadequate quality
assurance and quality control in 1956 during its Line 132
relocation project, which allowed the installation of a
substandard and poorly welded pipe section with a visible seam
weld flaw that, over time grew to a critical size, causing the
pipeline to rupture during a pressure increase stemming from
poorly planned electrical work at the Milpitas Terminal; and, 2)
inadequate pipeline integrity management program, which failed
to detect and repair or remove the defective pipe section.
The report notes that contributing to the accident were PUC's
and the U.S. Department of Transportation's exemptions of
existing pipelines from the regulatory requirement for pressure
testing, which likely would have detected the installation
defects. Also contributing to the accident was PUC's failure to
detect the inadequacies of PG&E's pipeline integrity management
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program.
Furthermore, contributing to the severity of the accident were
the lack of either automatic
shutoff valves or remote control valves on the line and PG&E's
flawed emergency response procedures and delay in isolating the
rupture to stop the flow of gas.
PUC review panel : The PUC formed its own review panel based on
authority it cited in its
resolution to "do all things, whether specifically designated in
... �the Public Utilities Code] or in addition thereto, which
are necessary and convenient" to our regulation of public
utilities, including, though not limited to, adopting necessary
rules and requirements in furtherance of our constitutional and
statutory duties to regulate and oversee public utilities
operating in California."
In September 2010, PUC's Independent Review Panel (IRP) was
formed to examine
contributing factors to the San Bruno disaster. The PUC
directed the panel to make a technical assessment of the events,
determine the root causes, and offer recommendations for action
by the PUC to best ensure such an accident is not repeated
elsewhere.
IRP findings and recommendations : IRP released its findings on
June 9, 2011. Important
findings related to this bill are:
1)A recommendation that "Upon thorough analysis of benchmark
data, adopt performance standards for pipeline safety and
reliability for PG&E, including the possibility of rate
incentives and penalties based on achievement of specified
levels of performance."
2)A finding that "PUC did not have the resources to monitor
PG&E's performance in pipeline integrity management adequately
or the organizational focus that would have elevated concerns
about PG&E's performance in a meaningful way."
IRP did not recommend that safety performance be a consideration
in PUC's rate of return assessment.
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Natural gas pipeline safety and reliability : The bill requires
the PUC to perform an analysis of
benchmark data and adopt safety performance standards. The PUC
is also required to evaluate a regulated gas corporation's
safety performance based on the standards adopted and is further
authorized to implement a rate incentive program that may
contain penalties based on a gas corporation's performance.
Internal PUC reform : It is unclear whether, since June 2011,
the PUC has had sufficient time to
reorganize itself in a manner that will ensure that pipeline
integrity management is adequately monitored. The PUC is
currently soliciting bids to analyze and evaluate the Gas Safety
and Reliability Branch of the PUC in the context of their
effectiveness in adhering to existing federal safety regulations
and provide the PUC with new ideas and insight as to how the
program could evolve into one that is more proactive in
addressing future gas safety issues. The PUC is not expected to
award this contract until May 2012.
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083
FN: 0003913