COM/LYN/hkr _ _ Mailed 4/4/2001

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Investigation whether Pacific Gas and Electric Company, Southern California Edison Company, San Diego Gas & Electric Company, and their respective holding companies, PG&E Corporation, Edison International, and Sempra Energy, respondents, have violated relevant statutes and Commission decisions, and whether changes should be made to rules, orders, and conditions pertaining to respondents' holding company systems.

FILED PUBLIC UTILITIES COMMISSION APRIL 3, 2001 SAN FRANCISCO OFFICE INVESTIGATION 01-04-002

ORDER INSTITUTING INVESTIGATION

I. Summary

We issue this Order Instituting Investigation to determine whether respondent utilities and their respective holding companies have complied with relevant statutes and Commission decisions in the management and oversight of their companies. As more fully set forth below, we are concerned that respondents' management and Board of Directors actions, including but not limited to (1) the utilities' transfer of billions of dollars to their holding companies since deregulation of the electric industry commenced, including during times when the utilities were experiencing financial distress; (2) the failure of the holding companies to financially assist the utilities when needed, leaving the utilities with insufficient reserves to address or mitigate their need for capital; (3) the transfer by the holding companies of billions of dollars in assets to unregulated subsidiaries;¹ and (4) the actions of some of the holding companies to "ring fence" their unregulated subsidiaries, have violated Commission decisions, rules, or orders, and/or applicable statutes.

We also will determine whether additional rules, conditions, or changes are needed to adequately protect ratepayers and the public from dangers of abuse stemming from the holding company structure.

In conjunction with opening this proceeding, we reopen the respective proceedings authorizing holding company formation, and consolidate them together with this docket for the purpose of addressing the issues raised in this proceeding.