BILL ANALYSIS �
SB 879
Page 1
SENATE THIRD READING
SB 879 (Padilla)
As Amended September 1, 2011
Majority vote
SENATE VOTE :38-0
UTILITIES & COMMERCE 13-0
APPROPRIATIONS 17-0
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|Ayes:|Bradford, Fletcher, |Ayes:|Fuentes, Harkey, |
| |Buchanan, Fong, Fuentes, | |Blumenfield, Bradford, |
| |Furutani, Beth Gaines, | |Charles Calderon, Campos, |
| |Roger Hern�ndez, Huffman, | |Davis, Donnelly, Gatto, |
| |Knight, Nestande, | |Hall, Hill, Lara, |
| |Skinner, Valadao | |Mitchell, Nielsen, Norby, |
| | | |Solorio, Wagner |
| | | | |
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SUMMARY : This bill directs the California Public Utilities
Commission (PUC), in any ratemaking proceeding in which the
commission authorizes a gas corporation to recover expenses for
the inspection, maintenance, or repair of natural gas
transmission pipelines, to establish and maintain a one-way
balancing account for the recovery of those expenses. This bill
also increases the penalty per violation from $20,000 to $50,000
for violation of statute, commission rules, orders, or other
directives.
EXISTING LAW :
1)Requires PUC to regulate gas transmission, distribution and
gathering pipeline facilities which include investor-owned
utilities, master-metered mobile home parks, storage
facilities, and propane operators.
2)Establish safety requirements pertaining to the design,
construction, testing, operation, and maintenance of utility
gas gathering, transmission, and distribution piping systems,
and for the safe operation of such lines and equipment.
3)Vests regulatory authority over gas corporations to PUC and
authorizes it to fix the rates and charges for service as well
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as standards and practices for services to be furnished.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, any costs to PUC would be minor and absorbable.
COMMENTS : According to the author this bill is intended to
increase the transparency of funding of the maintenance, repair
and safety of gas transmission pipelines by requiring that funds
authorized for that use stay in one account and can only be used
for that purpose going forward without further PUC review.
Background . PUC regulates natural gas utility service for
approximately 10.7 million natural gas customers Pacific Gas and
Electric (PG&E), Southern California Gas, San Diego Gas &
Electric (SDG&E), Southwest Gas, and several smaller natural gas
utilities. PUC also regulates independent storage operators
Lodi Gas Storage and Wild Goose Storage and mobile home park
operators with natural gas service.
The vast majority of California's natural gas customers are
residential and small commercial customers, referred to as
"core" customers, who accounted for approximately 40% of the
natural gas delivered by California utilities in 2008. Large
consumers, like electric generators and industrial customers,
referred to as "noncore" customers, accounted for approximately
60% of the natural gas delivered by California utilities in
2008. PUC regulates the California utilities' natural gas rates
and natural gas services, including in-state transportation over
the utilities' transmission and distribution pipeline systems,
storage, procurement, metering and billing.
Other pipelines are owned and operated by the oil refining
industry and several publicly owned utilities (Los Angeles
Department of Water and Power, the Sacramento Municipal Utility
District, Long Beach Oil and Gas Department, and several
others). These pipelines are not within the jurisdiction of
PUC.
San Bruno tragedy . On the evening of September 9, 2010, a
30-inch natural gas transmission line ruptured in a residential
neighborhood in the City of San Bruno. The rupture caused an
explosion and fire which took the lives of eight people and
injured dozens more; destroyed 37 homes and damaged dozens more.
Gas service was also disrupted for 300 customers. The pipeline
in question is owned and operated by PG&E and originally built
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in 1948. Although preliminary elements of the investigation
have been detailed, a final report on causation is not expected
until at least the fall. One of the elements of the
investigation has focused on the operating pressure capabilities
of this particular pipeline. The National Transportation Safety
Board (NTSB), investigating the San Bruno tragedy has expressed
concerns about discrepancies between installed pipe and as-built
drawings in PG&E's records of its gas transmission system. It
is critical to know all the characteristics of a pipeline in
order to establish a valid operating pressure below which the
pipeline can be safely operated. NTSB is concerned that these
inaccurate records may lead to incorrect operating pressures.
Budgeting for maintenance . Through PUC's ratemaking process a
gas corporation's budget for a specified period (usually three
or four years) is submitted, subject to public hearings,
modified, and approved. That budget includes funding for
maintenance and repair but the gas corporations have always had
the latitude to use the funding for the repairs deemed most
necessary during the funding cycle and have not been required to
justify the change in spending or needed repairs to PUC.
PUC recently approved PG&E's natural gas transmission and
storage application for 2011 through 2014 (referred to as Gas
Accord V) and includes revenue requirement and rates. As part
of this proceeding and in response to San Bruno, PUC will now
require PG&E to provide a semi-annual "Gas Transmission and
Storage Safety Report" beginning October 1, 2011, to the
directors of the Energy Division and the Consumer Protection and
Safety Division. That report will provide details about the
pipeline-related and storage safety, reliability, and integrity
capital projects and maintenance activities that are being
undertaken by PG&E and to track the amounts spent on such
projects and activities. In addition, the Safety Report will
provide PUC staff with details of whether the gas transmission
pipeline projects that PG&E has identified as "high risk" by
PG&E are being carried out, whether other replacement projects
have been undertaken instead, and to determine PG&E's rationale
for the reprioritization of these projects
Gas Accord V also requires a one-way balancing account to be
established to ensure that PG&E spends all of the designated
operation and maintenance funds for pipeline integrity
management activities. The purpose of a "one-way" balancing
account is to track the difference between the customer portion
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of the total revenue over- or undercollections and track
expenditures for designated activities. In the case of Gas
Accord V, the one-way balancing account will serve to track
expenditures for pipeline integrity management activities.
Analysis Prepared by : Susan Kateley / U. & C. / (916)
319-2083
FN: 0002542