BILL ANALYSIS
AB 1233
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Date of Hearing: April 23, 2001
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Roderick D. Wright, Chair
AB 1233 (Pescetti) - As Amended: April 19, 2001
SUBJECT : Public utilities: transportation charges.
SUMMARY : Prohibits assessment of local transmission rates on
natural gas if it is delivered to an end-use customer through a
transmission system owned by a gas corporation, and blended with
gas supplies produced from an in-state source for the purposes
of achieving a usable thermal rate.
EXISTING LAW requires CPUC to allow a gas corporation to recover
all reasonable and prudent costs associated with ownership and
operation of the gas plant used for transportation.
FISCAL EFFECT : Unknown.
COMMENTS :
Incentives to Increase Production of Low-BTU Gas .
Currently, 15% of natural gas consumed in California comes from
in-state production. The purpose of this bill, according to the
author, is to maximize the use of in-state resources and
encourage the increased production of natural gas.
This measure seeks to assist in-state gas producers find new
markets for low-BTU gas resources.
Low-BTU gas contains a lower thermal value than required for use
in utility pipelines and must be blended off-line with propane
or other gas with a higher-BTU content in order to meet the
utility's pipeline specifications. To accomplish this, the gas
must be taken off and then put back onto the utility's primary
transmission pipelines for blending purposes. Current law
permits gas corporations to assess end-use customers for
multiple local transmission charges if the gas supplies they
contract for are brought on and off the pipeline system for
blending purposes. This adds to the cost of purchasing this gas
and acts as a disincentive to the production of low-BTU gas.
This bill prohibits assessment of local transmission rates on
natural gas if it is delivered to an end-use customer through a
transmission system owned by a gas corporation, and blended with
AB 1233
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gas supplies produced from an in-state source for the purposes
of achieving a usable thermal rate.
Proponents of this bill assert that the elimination of one
element of the tariff charge will make blended gas that utilizes
low-BTU resources a more attractive commodity, thereby resulting
in increased production of low-BTU gas and reducing our state's
dependence on out-of-state gas.
Rates Changes Would Shift Costs to Others.
The Gas Accord, a comprehensive, CPUC-approved settlement that
establishes the rates and terms and conditions of service on
Pacific Gas and Electric's (PG&E's) gas transmission system
through December 31, 2002, requires that backbone and local
transmission charges be paid by all on-system end users without
exception. This measure would overturn a portion of the Gas
Accord by exempting customers connected to the backbone
transmission system from paying transportation charges for
blended gas supplies. This restructuring of local transmission
rates would benefit a relatively small group of electric
generators and large, industrial customers while resulting in a
cost-shift to other end-use customers.
Ratemaking in Statute .
The Gas Accord was a comprehensive settlement participated in by
all stakeholders in California's gas industry and agreed to by a
majority of major stakeholders affected by gas transportation
rates. The current Gas Accord expires at the end of 2002. PG&E
recently initiated discussions with stakeholders in a process
known as Gas Accord II, which will address a wide array of
issues, including gas transmission rates. CPUC will be charged
once again with the responsibility for setting the appropriate
local transmission tariff rates. A key question for the
Committee to consider is whether it is appropriate to establish
these transportation rates in statute. A stakeholder process,
ratified by CPUC, seems a more appropriate forum for complex
ratemaking decisions such as this.
REGISTERED SUPPORT / OPPOSITION :
Support
California Independent Petroleum Association
AB 1233
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California Municipal Utilities Association
Calpine
Opposition
Pacific Gas and Electric
Analysis Prepared by : Joseph Lyons / U. & C. / (916) 319-2083