BILL ANALYSIS
AB 14 X2
Page 1
ASSEMBLY THIRD READING
AB 14 X2 (Canciamilla)
As Introduced May 16, 2001
Majority vote
SUMMARY : Exempts certain natural gas producers, suppliers and
transporters from the definition of a public utility as
described in Public Utilities Code Sections 216, 222 and 228.
Specifically, this bill :
1)Provides that a public utility does not include a gas
producer, supplier or transporter if the gas produced is of
insufficient quality or heating value to make it acceptable
for introduction into the gas line, plant or system of a gas
corporation and if the natural gas is not provided for sale to
more than five end users.
2)Provides that a "gas corporation" does not include a producer,
supplier or transporter as defined in item #1 above.
3)Provides that a "pipeline corporation" does not include a
producer, supplier or transporter as defined in item #1 above.
4)Establishes that entities covered by the exemption from public
utility status as gas suppliers, producers or transporters are
subject to jurisdiction of the California Public Utilities
Commission (CPUC) with regard to safety, service quality, and
consumer protection.
5)Requires these exempt entities to apply the public goods
charge to end use customers, as applicable.
EXISTING LAW defines a public utility, gas corporation and a
pipeline corporation, in Public Utilities Code Section 216, 222
and 228, for purposes of the Public Utilities Act.
FISCAL EFFECT : Negligible fiscal impact to CPUC.
COMMENTS : California has recently been in the grips of a
natural gas supply and price crisis. While prices are beginning
to stabilize, the long-term supply, storage and price situation
for California and the continued availability of clean natural
gas, the fuel source for much electricity generation, remains
uncertain. Much of California's natural gas supply comes from
AB 14 X2
Page 2
out of state, and recently much attention has been focused on
determining what resources for production, transportation and
storage of natural gas exist and how to improve the existing
natural gas infrastructure within the state to remove some of
the reliance on uncertain supply and prices for out of state
gas.
This bill would remove regulatory oversight from gas producers,
transporters and suppliers of lower quality (so-called "dirty
gas") or low heating value [(low British Thermal Unit (BTU)
gas)] natural gas if the gas is not sold to more than five end
users. Among the requirements of regulatory oversight over
public utilities are safety standards, rate setting and service
quality/consumer protection. As amended in the Assembly policy
committee, the suppliers, producers and transporters of low BTU
or dirty gas for sale to end use customers would be subject to
CPUC oversight regarding safety, service quality and consumer
protection, but would not be subject to broad ratemaking
authority. This bill also provides that gas cannot be supplied
to more than five end users, so it is presumed that this measure
will not result in widespread distribution and use of lower
quality or lower heating value natural gas.
This measure is aimed at helping to provide additional supply of
lower grade natural gas for mostly agricultural and rural areas
within the state, thus removing some of the burden these
customers pose on the existing supply of clean natural gas. The
environmental impacts of increased use and transportation of
lower grade natural gas are not addressed in the measure, nor is
the volume of customers likely to reduce their use of clean
natural gas for the presumably lower cost dirty or low BTU gas
specified or estimated. Currently only proprietary use and
transportation of low BTU gas is common, and that would continue
under the current parameters set forth, but this type of gas for
sale to end-use customers would now be possible under reduced
regulatory requirements to those of public utilities.
Low quality and low BTU gas generally exists in rather remote
wells throughout the state. It is not likely that enactment of
this bill is going to result in widespread use of dirty gas or
low BTU gas in the state and present widespread environmental or
safety concerns. However, since the measure allows for sale of
the gas to five end users, it should be pointed out that the
term end user is fairly open ended. In most markets, including
the natural gas market, many end users are also suppliers.
AB 14 X2
Page 3
As currently written this bill is limited to sale to five
end-use customers, with no re-sale provisions, to keep the
proliferation of this type of gas on a small scale.
Essentially, this measure may allow for provision of low quality
or low heating value natural gas to a small group of users in
largely remote and rural areas. There remain a number of issues
with the scope of distribution and sale of the lower quality
natural gas covered by the bill that are unresolved. There is
also a concern by existing operators of proprietary pipelines
that additional regulatory oversight and perhaps even the public
goods charge may now apply to them. These issues remain
unresolved at this time.
Analysis Prepared by : Kelly Boyd / E. C. & A. / (916) 319-2083
FN: 0001089