Phase 2 Ratemaking and Performance-based Financial Incentives

In 2014, California passed Senate Bill (SB) 1371, which requires the CPUC to adopt rules and procedures to minimize natural gas leakage from the natural gas pipelines it regulates.


In January 2015, the CPUC initiated a Rulemaking to implement the bill. The purpose of this effort is for the CPUC to:  

  • Mitigate hazardous leaks consistent with PU Code 961
  • Reduce GHG emissions in conjunction with the California Air Resources Board (CARB)

In 2017, the CPUC issued a ruling establishing the scope and schedule of Phase 2 of the proceeding. The second phase of the proceeding will include:

  • Determining what data is needed in order for the CPUC to consider a “cost-effectiveness” framework.
  • Establishing how the CPUC’s Annual Report Requirements and 26 Best Practices should be harmonized with information or action required by other government entities.
  • Determining how the rules and procedures established in Phase 1 should be incorporated in general orders.
  • Evaluating the ratemaking treatment for lost and unaccounted for natural gas.