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<ns0:Description>
<ns0:Id>20250SB__135998AMD</ns0:Id>
<ns0:VersionNum>98</ns0:VersionNum>
<ns0:History>
<ns0:Action>
<ns0:ActionText>INTRODUCED</ns0:ActionText>
<ns0:ActionDate>2026-02-20</ns0:ActionDate>
</ns0:Action>
<ns0:Action>
<ns0:ActionText>AMENDED_SENATE</ns0:ActionText>
<ns0:ActionDate>2026-03-25</ns0:ActionDate>
</ns0:Action>
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<ns0:LegislativeInfo>
<ns0:SessionYear>2025</ns0:SessionYear>
<ns0:SessionNum>0</ns0:SessionNum>
<ns0:MeasureType>SB</ns0:MeasureType>
<ns0:MeasureNum>1359</ns0:MeasureNum>
<ns0:MeasureState>AMD</ns0:MeasureState>
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<ns0:AuthorText authorType="LEAD_AUTHOR">Introduced by Senator Stern</ns0:AuthorText>
<ns0:Authors>
<ns0:Legislator>
<ns0:Contribution>LEAD_AUTHOR</ns0:Contribution>
<ns0:House>SENATE</ns0:House>
<ns0:Name>Stern</ns0:Name>
</ns0:Legislator>
</ns0:Authors>
<ns0:Title> An act to amend Sections 451 and 977 of, to add the heading of Article 1 (commencing with Section 328) to, and to add Article 2 (commencing with Section 329) to, Chapter 2.2 of Part 1 of Division 1 of, the Public Utilities Code, relating to natural gas. </ns0:Title>
<ns0:RelatingClause>natural gas</ns0:RelatingClause>
<ns0:GeneralSubject>
<ns0:Subject>Gas Transition Responsibility and Electrification Act.</ns0:Subject>
</ns0:GeneralSubject>
<ns0:DigestText>
<html:p>Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including gas corporations. Existing law authorizes the commission to fix the rates and charges for every public utility and requires that those rates and charges be just and reasonable.</html:p>
<html:p>This bill would require that the obligation of a gas corporation to furnish service under these provisions be interpreted consistent with the state’s greenhouse gas emission reduction mandates and policies promoting building electrification, and would authorize the commission to authorize the retirement or discontinuation of natural gas distribution infrastructure where the
commission finds that continued operation is inconsistent with the public interest, as provided.</html:p>
<html:p>Existing law requires the commission, in order to achieve transparency and accountability for rate revenues and best value for ratepayers, to consider, among other things, providing revenues for all activities identified and required by certain rules and procedures governing the operation, maintenance, repair, and replacement of commission-regulated gas pipeline facilities, including any adjustment of allowance for lost and unaccounted for natural gas related to actual leakage volumes.</html:p>
<html:p>This bill would require the commission, in determining just and reasonable rates, to ensure that costs associated with avoidable
natural gas leakage, including methane emissions resulting from inadequate maintenance or infrastructure replacement delays, are not recovered from ratepayers. The bill would, beginning January 1, 2030, prohibit the commission, when establishing rates for a gas corporation, from allowing recovery from ratepayers for the value of natural gas lost to the atmosphere from facilities under the control of the gas corporation, as specified.</html:p>
<html:p>This bill would require the commission, before approving any capital investment by a gas corporation for natural gas distribution infrastructure exceeding $5,000,000, to determine that the proposed investment is consistent with the state’s greenhouse gas emission reduction targets, and would require a gas corporation seeking approval of an investment to demonstrate certain requirements are satisfied. The bill would require the
commission to develop a framework for the orderly and equitable transition of the natural gas distribution system, as provided. The bill would prohibit the commission from approving a gas corporation to recover from ratepayers the costs of hydrogen blending, as defined, in a gas distribution system unless the commission makes a written finding that specified conditions are met. The bill would require each gas corporation to establish a Gas Infrastructure Decommissioning Trust, require the trust to be funded through shareholder contributions, and prohibit contributions to the trust from being recovered from ratepayers. The bill would require each gas corporation, beginning January 1, 2030, to annually file with the commission a climate transition risk report, as specified. The bill would prohibit a gas corporation, beginning January 1, 2030, from extending new natural gas service to residential or mixed-use developments unless the applicant pays the full cost of the extension, including a surcharge reflecting
the expected cost of future decommissioning. The bill would require the commission to initiate a rulemaking to implement the above-described provisions on or before July 1, 2029.</html:p>
<html:p>Under existing law, a violation of the Public Utilities Act or an order, decision, rule, direction, demand, or requirement of the commission is a crime.</html:p>
<html:p>Because the above provisions would be part of the Public Utilities Act and a violation of a commission action implementing this bill’s requirements would be a crime, the bill would impose a state-mandated local program.</html:p>
<html:p>The California Constitution requires the state to reimburse local agencies and school districts for certain
costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.</html:p>
<html:p>This bill would provide that no reimbursement is required by this act for a specified reason.</html:p>
</ns0:DigestText>
<ns0:DigestKey>
<ns0:VoteRequired>MAJORITY</ns0:VoteRequired>
<ns0:Appropriation>NO</ns0:Appropriation>
<ns0:FiscalCommittee>YES</ns0:FiscalCommittee>
<ns0:LocalProgram>YES</ns0:LocalProgram>
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<ns0:ImmediateEffect>NO</ns0:ImmediateEffect>
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<ns0:Bill id="bill">
<ns0:Preamble>The people of the State of California do enact as follows:</ns0:Preamble>
<ns0:BillSection id="id_86BFB39E-A6E7-4CDC-894B-B4B2C0BBC5CD">
<ns0:Num>SECTION 1.</ns0:Num>
<ns0:Content>
<html:p>This act shall be known, and may be cited, as the Gas Transition Responsibility and Electrification Act.</html:p>
</ns0:Content>
</ns0:BillSection>
<ns0:BillSection id="id_CCBEF5C7-E223-4BD5-A30B-CAB47F2A52A9">
<ns0:Num>SEC. 2.</ns0:Num>
<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
The Legislature finds and declares all of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
California has binding statutory obligations to reduce greenhouse gas emissions pursuant to Senate Bill 32 of the 2015–16 Regular Session (Chapter 249 of the Statutes of 2016) and subsequent statutes.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
California’s natural gas distribution system is experiencing structural load decline due to building electrification, energy efficiency improvements, and climate policy.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Continued capital investment in natural gas infrastructure under conditions of declining demand creates significant risk of stranded assets and escalating costs for ratepayers.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
Electrification of buildings is widely recognized as the lowest cost and lowest emission pathway for providing space heating, water heating, and cooking services.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
Hydrogen blending into natural gas distribution systems has been proposed as a means of extending the operational life of natural gas infrastructure despite significant unresolved concerns regarding safety, cost-effectiveness, infrastructure compatibility, and life-cycle emissions.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
The state must establish a managed transition of the natural gas distribution system, ensuring that financial risks associated
with declining natural gas use are appropriately borne by utility shareholders rather than ratepayers.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
It is the intent of the Legislature to direct the Public Utilities Commission to prioritize electrification and nonpipeline alternatives, ensure prudent depreciation of natural gas infrastructure, and facilitate the orderly retirement of portions of the natural gas system.
</html:p>
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<ns0:Num>SEC. 3.</ns0:Num>
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The heading of Article 1 (commencing with Section 328) is added to Chapter 2.2 of Part 1 of Division 1 of the
<ns0:DocName>Public Utilities Code</ns0:DocName>
, to read:
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<ns0:LawHeading id="id_4BF71B8D-A57B-4BE2-9B6F-54AC3A080F0C" type="ARTICLE">
<ns0:Num>1.</ns0:Num>
<ns0:LawHeadingVersion id="id_CFCFCD23-A34E-4856-87F2-E43352394F5D">
<ns0:LawHeadingText>General Provisions</ns0:LawHeadingText>
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<ns0:BillSection id="id_1588F7FE-BC9C-492E-950F-539229BDC242">
<ns0:Num>SEC. 4.</ns0:Num>
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Article 2 (commencing with Section 329) is added to Chapter 2.2 of Part 1 of Division 1 of the
<ns0:DocName>Public Utilities Code</ns0:DocName>
, to read:
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<ns0:Fragment>
<ns0:LawHeading id="id_ED8F99B1-4B82-40DD-BD52-4851F2C4D77C" type="ARTICLE">
<ns0:Num>2.</ns0:Num>
<ns0:LawHeadingVersion id="id_6ECABD35-2AA8-4BD7-9D2B-001714653E2A">
<ns0:LawHeadingText>Natural Gas Transition</ns0:LawHeadingText>
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<ns0:LawSection id="id_E7648A4A-1CFA-4073-B6D6-6750268FEE08">
<ns0:Num>329.</ns0:Num>
<ns0:LawSectionVersion id="id_7C071F23-0B96-4760-9E58-8B575676EE3E">
<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
Before approving any capital investment by a gas corporation for natural gas distribution infrastructure exceeding five million dollars ($5,000,000), the commission shall determine that the proposed investment is consistent with the state’s greenhouse gas emission reduction targets.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
A gas corporation seeking approval of an investment described in subdivision (a) shall demonstrate all of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Electrification alternatives are infeasible or demonstrably more costly over the life cycle of the project.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
A nonpipeline alternative has been evaluated.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The proposed investment will not create stranded asset risk within a 20-year planning horizon.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
The investment is consistent with the state’s climate policy framework.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
The commission shall not approve an investment described in subdivision (a) if a nonpipeline alternative achieves equivalent or greater benefits at a lower life-cycle cost.
</html:p>
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</ns0:LawSectionVersion>
</ns0:LawSection>
<ns0:LawSection id="id_BF3D7F75-33F5-40AC-8075-BF2F7DB9DD89">
<ns0:Num>329.1.</ns0:Num>
<ns0:LawSectionVersion id="id_BBAE988E-C78F-4C6D-A886-30A768217AA3">
<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
The commission shall develop a framework for the orderly and equitable transition of the natural gas distribution system.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
The framework developed pursuant to subdivision (a) shall include all of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Identification of electrification priority zones where building electrification is cost effective.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
A process for retiring natural gas infrastructure in the electrification priority zones identified pursuant to paragraph (1).
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
A minimum notice period of five years before discontinuation of service.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
The commission shall ensure that at least 50 percent of unrecovered net book value associated with infrastructure retired due to load decline or climate policy compliance is borne by gas corporation shareholders.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
In determining depreciation schedules, the commission shall assume a default remaining useful life of 10 to 15 years for natural gas distribution assets unless the gas corporation demonstrates otherwise.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
The commission shall not use hydrogen blending, as defined in Section 329.2, or future hydrogen conversion as justification for extending the useful life of natural gas infrastructure.
</html:p>
</ns0:Content>
</ns0:LawSectionVersion>
</ns0:LawSection>
<ns0:LawSection id="id_9990EA17-0CFA-4AE3-8254-BA3BE1E80E35">
<ns0:Num>329.2.</ns0:Num>
<ns0:LawSectionVersion id="id_3D7937E8-63B5-4E26-8C43-5E7A9E608390">
<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
For purposes of this section, “hydrogen blending” means the intentional introduction of hydrogen gas into a natural gas distribution system so that the resultant mixture is delivered to end-use customers.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
The commission shall not approve a gas corporation to recover from ratepayers the costs of hydrogen blending in a natural gas distribution system unless the commission makes a written finding that all of the following conditions are met:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Hydrogen blending is more cost effective than electrification alternatives.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Hydrogen blending achieves greater life-cycle greenhouse gas emission reductions than
electrification.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The use of ratepayer funds would result in just and reasonable rates pursuant to Section 451.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
Safety and reliability standards are met.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
Hydrogen blending shall not be used to justify any of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Extension of the useful life of natural gas distribution assets.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Approval of natural gas infrastructure investments.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Avoidance of accelerated depreciation or asset retirement.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
Recovery of stranded asset costs from ratepayers.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
Hydrogen blending shall
not qualify as a nonpipeline alternative.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
Costs associated with hydrogen blending shall not be recovered through affiliates, subsidiaries, balancing accounts, or memorandum accounts.
</html:p>
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</ns0:LawSection>
<ns0:LawSection id="id_72BE8A85-694A-4B2A-AFEE-217AC5F0A32E">
<ns0:Num>329.3.</ns0:Num>
<ns0:LawSectionVersion id="id_E69BCFD8-7E94-4A7D-A802-3FF44C9085C2">
<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
Each gas corporation shall establish a Gas Infrastructure Decommissioning Trust.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
The trust shall be funded through shareholder contributions.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
The trust shall be used exclusively for all of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Decommissioning natural gas infrastructure.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Environmental remediation.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Workforce transition programs.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
Contributions to the trust shall not be recovered from
ratepayers.
</html:p>
</ns0:Content>
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</ns0:LawSection>
<ns0:LawSection id="id_A8424BF6-B8F6-40CD-9613-B4393595877D">
<ns0:Num>329.4.</ns0:Num>
<ns0:LawSectionVersion id="id_05242CB6-1CAF-469C-9835-2AE17D822887">
<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
Beginning January 1, 2030, each gas corporation shall annually file with the commission a climate transition risk report that includes all of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Long-term natural gas demand forecasts.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Scenario analysis assuming up to 90 percent reduction in natural gas demand by 2045.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Estimated stranded asset exposure.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
The commission shall use the reports submitted pursuant to subdivision (a) when determining authorized rates of return.
</html:p>
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</ns0:LawSection>
<ns0:LawSection id="id_7656537E-86DA-4541-BFAC-B23AFC88E7BB">
<ns0:Num>329.5.</ns0:Num>
<ns0:LawSectionVersion id="id_DD5F04B9-8521-4B5C-A78D-7DF24A8E80C6">
<ns0:Content>
<html:p>Beginning January 1, 2030, a gas corporation shall not extend natural gas service to residential or mixed-use developments unless the applicant pays the full cost of the extension, including a surcharge reflecting the expected cost of future decommissioning.</html:p>
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</ns0:LawSection>
<ns0:LawSection id="id_ED1AE40C-5E06-4ABF-8157-B5CDB30798DF">
<ns0:Num>329.6.</ns0:Num>
<ns0:LawSectionVersion id="id_2FFEF7AF-8097-4C74-8021-A0CEA9A21512">
<ns0:Content>
<html:p>The commission shall initiate a rulemaking to implement this article on or before July 1, 2029.</html:p>
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<ns0:BillSection id="id_A06C2152-BE69-4FC2-ABE4-4A8558C0FCFA">
<ns0:Num>SEC. 5.</ns0:Num>
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Section 451 of the
<ns0:DocName>Public Utilities Code</ns0:DocName>
is amended to read:
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<ns0:LawSection id="id_029D16E9-B941-4794-9810-2F2D916ECF66">
<ns0:Num>451.</ns0:Num>
<ns0:LawSectionVersion id="id_81ECCFE2-1C07-4CE3-8B5C-EF7860A81FA9">
<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
All charges demanded or received by any public utility, or by any two or more public utilities, for any product or commodity furnished or to be furnished or any service rendered or to be rendered shall be just and reasonable. Every unjust or unreasonable charge demanded or received for that product, commodity, or service is unlawful.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
Every
public utility shall furnish and maintain adequate, efficient, just, and reasonable service, instrumentalities, equipment, and facilities, including telephone facilities, as defined in Section 54.1 of the Civil Code, as are necessary to promote the safety, health, comfort, and convenience of its patrons, its employees, and the public.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
All
rules made by a public utility affecting or pertaining to its charges or service to the public shall be just and reasonable.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
The obligation of a gas corporation to furnish service under this section shall be interpreted consistent with the state’s greenhouse gas emission reduction mandates and policies promoting building electrification. The commission may authorize the retirement or discontinuation of natural gas distribution infrastructure where the commission finds that continued operation is inconsistent with the public interest, including where electrification alternatives are cost effective or necessary to achieve state climate targets.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
This section does not require a gas corporation to extend or continue natural gas service where the commission determines that doing so would impose unreasonable costs on ratepayers or create stranded asset risk.
</html:p>
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<ns0:Num>SEC. 6.</ns0:Num>
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Section 977 of the
<ns0:DocName>Public Utilities Code</ns0:DocName>
is amended to read:
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<ns0:LawSection id="id_DD123D52-117D-41BB-BF79-04DCB2D83BFE">
<ns0:Num>977.</ns0:Num>
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<html:p>
(a)
<html:span class="EnSpace"/>
In order to achieve transparency and accountability for rate revenues and best value for ratepayers, and consistent with the commission’s existing ratemaking procedures and authority to establish just and reasonable rates, the commission shall consider all of the following:
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<html:p>
(1)
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Providing an adequate workforce to achieve the objectives of reducing hazards and emissions from leaks,
including leak avoidance, reduction, and repair.
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<html:p>
(2)
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Providing revenues for all activities identified and required pursuant to Section 975, including any adjustment of allowance for lost and unaccounted for gas related to actual leakage volumes.
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(3)
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Providing guidance for treatment of expenditures as being either an item of expense
or a capital investment.
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(4)
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The impact on affordability of gas service for vulnerable customers as a result of the incremental costs of compliance with the adopted rules and procedures.
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(b)
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In determining just and reasonable rates pursuant to Section 451, the commission shall ensure that costs associated with avoidable natural gas leakage, including methane emissions resulting from inadequate maintenance or infrastructure replacement delays, are not recovered from ratepayers.
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(c)
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(1)
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Beginning January 1, 2030, when establishing rates for a gas corporation, the commission shall not allow recovery from ratepayers for the value of natural gas lost to the atmosphere from facilities under the control of the gas corporation, including all of the following:
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(A)
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Commission-regulated gas pipeline facilities.
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(B)
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Aboveground storage facilities.
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(C)
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Underground storage facilities.
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(D)
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Processing facilities.
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(E)
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Facilities used for the transportation of natural gas.
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(F)
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Facilities used for the delivery of natural gas.
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(2)
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Paragraph (1) does not apply to natural gas lost due to an act of God.
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<ns0:BillSection id="id_26AB8023-17DD-487B-8EF0-A61BE303EAA7">
<ns0:Num>SEC. 7.</ns0:Num>
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No reimbursement is required by this act pursuant to Section 6 of Article XIII
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B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII
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B of the California Constitution.
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