VIII. SERVICE BY ELECTRONIC MAIL

Because of the expedited schedule in this proceeding, service of the comments is to be made by electronic means to all parties providing the Commission with an electronic mail address. The assigned Administrative Law Judge and Commissioner are to be served electronically at cab@cpuc.ca.gov and lyn@cpuc.ca.gov. Service by electronic mail will be used in lieu of paper mail where an electronic address has been provided. Any party on the service list who has not provided an electronic mail address shall serve and take service by way of paper mail. Service by mail is described in Rule 2.3(a).

Therefore, IT IS ORDERED that:

1. A rulemaking is initiated on the Commission's own motion to issue proposed rules to require California's natural gas utilities and largest electric utilities to sign up for turned back capacity at appropriate El Paso delivery points and to pre-approve and find just and reasonable the California utilities' subscription to this turned back capacity.

2. California's natural gas utilities, Southern California Gas Company (SoCalGas), Pacific Gas and Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E), and Southwest Gas Corporation (Southwest Gas), as well as California's largest electric utilities, Southern California Edison (Edison), PG&E, and SDG&E are made respondents to this proceeding.

3. The Executive Director shall cause this Order Instituting Rulemaking (OIR) to be served on respondents and on the service list for Rulemaking (R.) 01-01-001.

4. An initial service list for this proceeding shall be created by the Process Office and posted on the Commission's website ( www.cpuc.ca.gov) as soon as it is practicable.

5. The category of this rulemaking is preliminarily determined to be "quasi-legislative" as that term is defined in Rule 5(d) of the Commission's Rules of Practice and Procedure.

6. Respondents shall, and interested parties may, submit comments on the issues identified in this OIR and the rules proposed in Appendix A by July 8, 2002, and reply comments, limited to ten pages, by July 12, 2002.

7. Pursuant to Commission Rules of Practice and Procedure, Rule 6 (c)(2), parties shall include with their opening comments any objections they may have regarding the categorization of this OIR or the procedural schedule.

This order is effective today.

Dated June 27, 2002, at San Francisco, California.

LORETTA M. LYNCH

President

HENRY M. DUQUE

CARL W. WOOD

GEOFFREY F. BROWN

MICHAEL R. PEEVEY

Commissioners

APPENDIX A

PROPOSED RULES

A. Definitions

1. "El Paso" as used herein means the El Paso Natural Gas Company interstate natural gas pipeline

2. "El Paso's Southern California delivery points" as used herein means El Paso's delivery points interconnecting with Southern California Gas Company's intrastate system at Topock or Ehrenberg.

3. "El Paso's PG&E-Topock delivery point" as used herein means El Paso's delivery point interconnecting with Pacific Gas and Electric Company's intrastate system at Topock.

4. "Turned back capacity" as used herein means the up to 725 MMcf/d of El Paso firm capacity right, currently held by shippers serving California that marketers decide to turn back to El Paso based upon the Federal Energy Regulatory Commission's ("FERC") May 31, 2002 order. See El Paso Natural Gas Company, et. al., 99 FERC ¶ 61,244 (2002).

5. "California replacement shippers" as used herein means any shippers (e.g., marketers or California end-users) willing to sign up for the turned back capacity and continue to use that capacity to transport natural gas to California.

6. "Proportionate amounts" as used herein means the Southern California utilities' fair share of the turned back capacity, taking into account their historic use of natural gas and El Paso capacity on behalf of all of their customers.

B. Subscription to Turned Back Capacity

1. Southern California Gas Company, Southern California Edison Company, San Diego Gas & Electric Company, and Southwest Gas Corporation shall sign up in proportionate amounts for as much El Paso turned back capacity as possible at El Paso's Southern California delivery points to the extent that California replacement shippers do not sign up for the turned back capacity.

2. Pacific Gas and Electric Company shall sign up for as much El Paso turned back capacity as possible at El Paso's PG&E-Topock delivery point to the extent that other California replacement shippers do not sign up for the turned back capacity.

3. After the above-mentioned California utilities sign up for the turned back capacity, they shall use this capacity for their own needs or offer this capacity in the short-term capacity release market to California replacement shippers. These utilities shall also file a report with Energy Division stating the amount of turned back capacity (and at which delivery points) to which they subscribed.

C. Pre-approval of subscription

The California utilities' compliance with the above-mentioned rule (i.e., B. Subscription to Turned Back Capacity) is pre-approved by the Commission and found to be just and reasonable.

(END OF APPENDIX A)