BILL NUMBER: AB 478 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 26, 2012
AMENDED IN SENATE MAY 30, 2012
AMENDED IN ASSEMBLY APRIL 7, 2011
INTRODUCED BY Assembly Member Hill
(Principal coauthor: Senator Leno)
FEBRUARY 15, 2011
An act to amend Sections 2104 and 2104.5 of the Public Utilities
Code, relating to gas corporations, and declaring the urgency
thereof, to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 478, as amended, Hill. Gas Corporations: fines and penalties.
Under existing law, the Public Utilities Commission has regulatory
authority over public utilities, as defined. The Public Utilities
Act requires the commission to investigate the cause of all accidents
occurring upon the property of any public utility or directly or
indirectly arising from or connected with its maintenance or
operation, resulting in loss of life or injury to person or property
and requiring, in the judgment of the commission, investigation by
it, and authorizes the commission to make any order or recommendation
with respect to the investigation that it determines to be just and
reasonable. The act provides that any public utility that violates
any provision of the California Constitution or the act, or that
fails or neglects to comply with any order, decision, decree, rule,
direction, demand, or requirement of the commission, where a penalty
has not otherwise been provided, is subject to a penalty of not less
than $500 and not more than $50,000 for each offense. Existing law
requires that any fine or penalty imposed by the commission and
collected from a public utility be paid to the State Treasury to the
credit of the General Fund. The act includes provisions that are
specific to gas corporations that involve safety standards for
pipeline facilities or the transportation of gas in the state.
This bill would revise the provisions that are specific to gas
corporations that involve safety standards for pipeline facilities or
the transportation of gas in the state, to authorize the commission
to order that all or a portion of a fine or penalty levied against a
gas corporation in three specified proceedings be held in a separate
account by the gas corporation to offset investments for pipeline
replacement to be undertaken within the service territory of the
corporation that would otherwise be recovered from the corporation's
ratepayers. The bill would require that moneys ordered by the
commission to be held in a separate account be used only for the
purpose of offsetting investments by the gas corporation for pipeline
safety replacement to be undertaken within the
service territory of the corporation, and only if the
expenses investments would otherwise be
recovered in rates from the utility's ratepayers. The bill would
require that any moneys not used for these purposes be paid to the
General Fund 5 years after the date of their deposit into the trust
account.
This bill would declare that it is to take effect immediately as
an urgency statute.
Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) On September 9, 2010, a natural gas transmission pipeline
owned and operated by Pacific Gas and Electric Company exploded under
the intersection of Earl Avenue and Glenview Drive in the Crestmoor
neighborhood of San Bruno, killing eight people, injuring more than
50, and destroying 38 homes.
(b) The explosion was in a section of pipeline thought by Pacific
Gas and Electric Company to be seamless. Inspection by the National
Transportation Safety Board (NTSB) determined that the pipe in fact
had a double-submerged arc weld.
(c) The revelation that the utility did not know such basic and
vital information as seam type for this pipeline led the NTSB to
issue an urgent recommendation that Pacific Gas and Electric Company
find traceable, verifiable, and complete records for all pipe in
class 3 and 4 locations, and in class 1 and 2 high consequence areas,
that had not had their maximum allowable operating pressures
established through prior hydrostatic testing. The NTSB recommended
that, should the utility not be able to comply with this
recommendation, it establish a maximum allowable operating pressure
through hydrostatic pressure testing.
(d) The Public Utilities Commission (PUC), in Decision 11-06-017,
ordered all California gas corporations to develop a plan to
implement these NTSB recommendations for all transmission pipelines.
Pacific Gas and Electric Company's plan for Phase 1, which addressed
pipelines in high-consequence areas, proposed to incur expenses of
seven hundred fifty million five hundred thousand dollars
($750,500,000) and to make capital expenditures of one million four
hundred thirty-three thousand dollars ($1,433,000) between 2011 and
2013. Pacific Gas and Electric Company officials have stated that
Phase 2 could cost between six billion eight hundred million dollars
($6,800,000,000) and nine billion dollars ($9,000,000,000).
(e) This investment will greatly exceed the total net investment
that Pacific Gas and Electric Company has placed in its pipeline
system over the past several decades. The vast majority of this cost
is proposed to be borne by the utility's ratepayers.
(f) Given Pacific Gas and Electric Company's current 11.35 percent
authorized return on equity, each dollar of capital investment in
pipeline replacement will cost ratepayers more than three dollars and
fifty cents ($3.50) in repayment of principal, debt service, return
on shareholder equity, and taxes on the return on shareholder equity
over the 45-year amortization of the investment.
(g)
(e) Pacific Gas and Electric Company is currently under
investigation in three PUC penalty proceedings related to the
pipeline accident: Investigation 11-02-016, Investigation 11-11-009,
and Investigation 12-01-007. The utility projects that fines in these
penalty proceedings will likely exceed two hundred million dollars
($200,000,000).
(h)
(f) Currently, all fines in PUC penalty proceedings are
required by statute to be deposited into the state's General Fund.
(i)
(g) Prior to the current investigations involving the
San Bruno pipeline explosion, the largest safety-related fine the PUC
had levied was a thirty-eight million dollar ($38,000,000) fine for
a fatal natural gas distribution pipeline explosion on Christmas Eve
of 2008 in Rancho Cordova.
(j)
(h) Given the unprecedented amount of pipeline
investment that Pacific Gas and Electric Company is proposing to make
in the aftermath of the San Bruno explosion and the unprecedented
size of the likely fine that the utility faces as a result of the
explosion, any fines assessed to the utility as a result of the
explosion should go toward offsetting the costs that the utility's
ratepayers would otherwise bear for safety upgrades to the utility's
pipeline system.
SEC. 2. Section 2104 of the Public Utilities Code, as amended by
Section 7 of Chapter 552 of the Statutes of 2008, is amended to read:
2104. (a) Except as provided by Sections 2100 and 2107.5, and in
addition to the remedies provided in Sections 688.020 and 688.030 of
the Code of Civil Procedure, actions to recover penalties under this
part may be brought in the name of the people of the State of
California, in the superior court in and for the county, or city and
county, in which the cause or some part thereof arose, or in which
the corporation complained of has its principal place of business, or
in which the person complained of resides. The action, if brought
pursuant to this section, shall be commenced and prosecuted to final
judgment by the attorney or agent of the commission. All fines and
penalties may be sued for and recovered. The commission may enjoin
the sale of a public utility's or common carrier's assets to satisfy
unpaid fines and penalties. The commission may use any of the
remedies afforded to a creditor under the Uniform Fraudulent Transfer
Act (Chapter 1 (commencing with Section 3439) of Title 2 of Part 2
of Division 4 of the Civil Code). Respondents who fraudulently
transfer assets to avoid paying commission-imposed fines or penalties
are subject to prosecution under Sections 154, 531, and 531a of the
Penal Code. In all of these actions, the procedure and rules of
evidence shall be the same as in ordinary civil actions, except for
prosecutions under the Penal Code or as otherwise herein provided.
Except as provided in Section 2104.5, all fines and penalties
recovered by the state in any action, together with the costs
thereof, shall be paid into the State Treasury to the credit of the
General Fund. Any action may be compromised or discontinued on
application of the commission upon the terms the court approves and
orders.
(b) This section shall remain in effect only until January 1,
2014, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2014, deletes or extends
that date.
SEC. 3. Section 2104 of the Public Utilities Code, as added by
Section 8 of Chapter 552 of the Statutes of 2008, is amended to read:
2104. (a) Except as provided by Sections 2100 and 2107.5, actions
to recover penalties under this part shall be brought in the name of
the people of the State of California, in the superior court in and
for the county, or city and county, in which the cause or some part
thereof arose, or in which the corporation complained of has its
principal place of business, or in which the person complained of
resides. The action shall be commenced and prosecuted to final
judgment by the attorney or agent of the commission. All fines and
penalties may be sued for and recovered. The commission may enjoin
the sale of a public utility's or common carrier's assets to satisfy
unpaid fines and penalties. The commission may use any of the
remedies afforded to a creditor under the Uniform Fraudulent Transfer
Act (Chapter 1 (commencing with Section 3439) of Title 2 of Part 2
of Division 4 of the Civil Code). Respondents who fraudulently
transfer assets to avoid paying commission-imposed fines or penalties
are subject to prosecution under Sections 154, 531, and 531a of the
Penal Code. In all of these actions, the procedure and rules of
evidence shall be the same as in ordinary civil actions, except for
prosecutions under the Penal Code or as otherwise herein provided.
Except as provided in Section 2104.5, all fines and penalties
recovered by the state in any action, together with the costs
thereof, shall be paid into the State Treasury to the credit of the
General Fund. Any action may be compromised or discontinued on
application of the commission upon the terms the court approves and
orders.
(b) This section shall become operative on January 1, 2014.
SEC. 4. Section 2104.5 of the Public Utilities Code is amended to
read:
2104.5. (a) Any penalty for violation of any provision of this
act, or of any rule, regulation, general order, or order of the
commission, involving safety standards for pipeline facilities or the
transportation of gas in the State of California , may be
compromised by the commission. In determining the amount of the
penalty, or the amount agreed upon in compromise, the appropriateness
of the penalty to the size of the business of the person charged,
the gravity of the violation, and the good faith of the person
charged in attempting to achieve compliance, after notification of a
violation, shall be considered. The amount of any penalty, when
finally determined, or the amount agreed upon in compromise, may be
recovered in a civil action in the name of the people of the State of
California in the superior court in and for the county, or city and
county in which the cause or some part thereof arose, or in which the
corporation complained of has its principal place of business or the
person complained of resides. In any such action, all penalties
incurred, or amounts agreed upon in compromise for violations
committed up to the time of commencing the action , may be
sued for and recovered. In all those actions, the procedure and
rules of evidence shall be the same as in ordinary civil actions,
except as otherwise herein provided. All fines and penalties
recovered by the state in any action, together with the costs
thereof, shall be paid into the State Treasury to the credit of the
General Fund, except upon order of the commission pursuant to
subdivision (b).
(b) The commission shall order that any fine or penalty levied
against a gas corporation in Investigation 11-02-016, Investigation
11-11-009, or Investigation 12-01-007, be held in a separate account
by the gas corporation to offset investments for pipeline replacement
to be undertaken within the service territory of the corporation and
that would otherwise be recovered from the corporation's ratepayers.
(c) The commission shall set a rate of interest for an account
established pursuant to subdivision (b).
(d) (1) Any moneys ordered by the commission to
be held in a separate account pursuant to subdivision (b) shall be
used , consistent with the intent of the Legislature as
stated in paragraph (2), only for the purpose of offsetting
investments by the gas corporation for pipeline replacement to be
undertaken within the service territory of the corporation, and only
if the investments would otherwise be recovered in rates from the
utility's ratepayers. Any moneys not used for these purposes shall,
five years after the date of their deposit into the trust account, be
paid to the General Fund.
(2) It is the intent of the Legislature that moneys ordered by the
commission to be held in a separate account pursuant to subdivision
(b) be used to offset investments that are to be made by a gas
corporation during the first phase of the utility's implementation
plan filed in response to Decision 11-06-017, Decision Determining
Maximum Allowable Operating Pressure Methodology and Requiring Filing
of Natural Gas Transmission Pipeline Replacement or Testing
Implementation Plans (filed June 9, 2011), if the commission
determines that the investments would otherwise be recovered in rates
from the utility's ratepayers.
SEC. 5. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
In order to address and resolve significant financial issues
presented by ongoing proceedings before the Public Utilities
Commission, it is necessary for this act to take effect immediately.