As an outgrowth of the winter-spring energy price and supply crunch that spawned a statewide emergency and two special sessions of the state legislature, California wound up this week with two new bills designed to promote cheaper, more reliable natural gas supplies. Gov. Gray Davis signed the bills (AB 1233 and AB 21XX) over the weekend.

While facing skyrocketing natural gas prices, that dwarfed increases elsewhere in the nation — particularly at the California-Arizona border — and seeking relief from federal regulators, California lawmakers sought to bolster in-state gas production, which accounts for about 15% of the state’s annual load or about 1 Bcf/d.

Thus, AB 1233, which passed the lower legislative house of the state Assembly without a dissenting vote, was intended to “maximize the use of in-state gas supplies and encourage the increased production of natural gas,” according to its author Assemblyman Anthony Pescetti.

The new law removes local gas transmission pipeline transportation charges for supplies delivered to an end-use customer through a transmission system owned by a regulated natural gas corporation, if the supplies are “blended” with local in-state supplies for purposes of creating a higher (pipeline quality) heating rate for the gas.

The new law is designed to remove current “disincentives” to the storage and blending of supplies, as well as “the construction of pipelines by non-utility entities,” Pescetti said.

Local pipeline transportation rates charged going into and coming out of storage supposedly discouraged in-state gas-fired generation plants or their suppliers from using blending of interstate and local supplies to make use of low-Btu gas.

The second new law (AB 21XX) streamlines the process of gas utilities exercising eminent domain by combining the process of having state regulators provide approval for constructing new facilities at the same time it deals with eminent domain being in the public interest. If a utility has obtained the okay to build, it can evoke eminent domain without a separate “public interest” approval.

Historically, public utilities have had broad authority to exert power of eminent domain, including condemnation of property, for purposes of building infrastructure deemed necessary to their providing essential services. When competition was injected into telecommunications, an additional requirement was imposed on all utilities in the state-including gas and electric monopolies.

Requirements for a construction certificate and a separate public interest determination remain, but they can be determined in the same California Public Utilities Commission hearing process under the new law.

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