BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 879|
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UNFINISHED BUSINESS
Bill No: SB 879
Author: Padilla (D), et al.
Amended: 9/1/11
Vote: 21
SENATE ENERGY, UTILITIES & COMM. COMMITTEE : 10-0, 5/3/11
AYES: Padilla, Fuller, Berryhill, Corbett, DeSaulnier,
Pavley, Rubio, Simitian, Strickland, Wright
NO VOTE RECORDED: De Le�n
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SENATE FLOOR : 38-0, 5/31/11
AYES: Alquist, Anderson, Blakeslee, Calderon, Cannella,
Corbett, Correa, De Le�n, DeSaulnier, Dutton, Evans,
Fuller, Gaines, Hancock, Harman, Hernandez, Huff, Kehoe,
La Malfa, Leno, Lieu, Liu, Lowenthal, Negrete McLeod,
Padilla, Pavley, Price, Rubio, Runner, Simitian,
Steinberg, Strickland, Vargas, Walters, Wolk, Wright,
Wyland, Yee
NO VOTE RECORDED: Berryhill, Emmerson
ASSEMBLY FLOOR : Not available
SUBJECT : Natural gas pipelines: safety
SOURCE : Author
DIGEST : This bill directs the California Public
Utilities Commission (PUC), in any ratemaking proceeding in
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which PUC 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.
Assembly Amendments (1) exempt the State Fire Marshal from
exclusively exercising safety regulatory and enforcement
authority over intrastate hazardous liquid pipelines
pursuant to the Elder California Pipeline Act of 1981, (2)
require any unspent moneys in the balancing account in the
form of an accumulated account balance at the end of each
rate case cycle, plus interest, shall be returned to
ratepayers through a true-up filing, (3) no longer
designate the PUC as the state authority responsible for
regulating and enforcing intrastate gas pipeline
transportation and pipeline facilities pursuant to federal
law, including the development, submission, and
administration of a state pipeline safety program
certification for natural gas pipelines, (4) increase the
penalty per violation from $20,000 to $50,000 for violation
of statute, commission rules, orders, or other directives,
and (5) make other clarifying changes.
ANALYSIS : 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 as standards and practices for services
to be furnished.
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Background
Natural Gas Regulation
The PUC regulates natural gas utility service for
approximately 10.7 million customers that receive natural
gas from Pacific Gas and Electric (PG&E), Southern
California Gas, San Diego Gas and Electric, Southwest Gas,
and several smaller natural gas utilities. The PUC also
regulates independent storage operators Lodi Gas Storage
and Wild Goose Storage.
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
percent 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 percent
of the natural gas delivered by California utilities in
2008.
The 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.
Most of the natural gas used in California comes from
out-of-state natural gas basins. In 2008, California
customers received 46 percent of their natural gas supply
from basins located in the Southwest, 19 percent from
Canada, 22 percent from the Rocky Mountains, and 13 percent
from basins located within California. Natural gas from
out-of-state production basins is delivered into California
via the interstate natural gas pipeline system
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
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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 in 1948. In 1956 it was relocated and
rebuilt to accommodate new housing development. The
National Transportation Safety Board (NTSB), in conjunction
with the PUC was on scene within 24 hours to investigate
the cause of the explosion. Although preliminary elements
of the investigation have been detailed, a final report on
causation is not expected until at least the fall.
The NTSB's examination of the ruptured pipe segment and
review of PG&E records revealed that although those records
marked the pipe as seamless the pipeline in the area of the
rupture was constructed with longitudinal seam-welded pipe
and was constructed of five sections of pipe, some of which
were short pieces measuring about four feet long. These
short pieces of pipe contained different seam welds of
various types, including single- and double-sided welds
that may not have been as strong as the seamless pipe
listed in PG&E's records. The NTSB has not concluded that
the faulty records or welds were the proximate cause of the
rupture.
However, the NTSB is concerned that there are other
discrepancies between installed pipe and as-built drawings
in PG&E's 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. The 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
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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 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.
Related Legislation
The following measures have been introduced in this session
in response to the San Bruno tragedy:
SB 44 (Corbett) requires the PUC to commence a proceeding
to establish emergency response standards, which include
emergency response plans, to be followed by owners or
operators of commission-regulated gas pipeline facilities.
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SB 216 (Yee) directs the PUC to adopt standards that
require the installation of automatic shut-off or remote
controlled sectionalized block valves on all
commission-regulated pipelines that are located in a high
consequence area or that traverse an active seismic
earthquake fault unless the commission determines it is
prohibited under federal law.
SB 705 (Leno) requires gas corporations to develop, adopt
and implement a service and safety plan that places safety
of the public and gas corporation employees as the top
priority.
AB 56 (Hill) implements a number of public safety measures
with regard to natural gas pipeline facilities, including
requiring the owner or operator of a gas pipeline to
develop a public safety program and a facilities
modernization program, and requiring the PUC to track
proposed repairs to gas facilities to determine if the
repairs were made.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 9/7/11)
California Public Utilities District
ARGUMENTS IN SUPPORT : According to the author's office,
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.
RM:kc 9/7/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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