ALJ/MAB/gd2 Date of Issuance 2/25/2011

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking on the Commission's Own Motion to Adopt New Safety and Reliability Regulations for Natural Gas Transmission and Distribution Pipelines and Related Ratemaking Mechanisms.

FILED PUBLIC UTILITIES COMMISSION FEBRUARY 24, 2011 SAN FRANCISCO OFFICE RULEMAKING 11-02-019

ORDER INSTITUTING RULEMAKING

1. Overview

On September 9, 2010, a 30-inch diameter natural gas transmission pipeline owned and operated by Pacific Gas and Electric Company (PG&E) ruptured and caught fire in the city of San Bruno, California, causing the death of eight persons, injury of many others, as well as massive property damage. The explosion left a crater 72 feet long by 26 feet wide and propelled a 28 feet long section of the pipeline about 100 feet away from crater.

The human suffering caused by these events is overwhelming. Families lost loved ones and an entire community endured widespread destruction. The depth of this tragedy is the source of our resolve to take all actions necessary to ensure that it never happens again.

This rulemaking is a forward-looking effort to establish a new model of natural gas pipeline safety regulation applicable to all California pipelines. Specific investigations of PG&E's conduct and any penalties will take place in a different docket.

In this proceeding, the Commission will obtain public input, as well as collect and analyze the data and conclusions from the on-going internal and external investigations and reports of the San Bruno pipeline explosion. Recommendations from the Independent Review Panel will be presented, considered, and implemented. The result of this proceeding will be new rules for the safe and reliable operation of natural gas pipelines in California. We also consider the important role of ratemaking for safety related operations.