8-KOther Events

SEMPRA 8-K Report, Corporate Update (Apr 24, 2006)

Filed April 24, 2006For Securities:SRESREA

Summary

This 8-K filing from Sempra Energy (SRE), dated April 24, 2006, reports on the outcome of an arbitration proceeding initiated by the California Department of Water Resources (DWR) against Sempra Generation, a subsidiary. While the arbitration panel rejected the DWR's request to rescind the contract and ruled against most of its claims, it did find in favor of the DWR on certain specific contractual issues, disallowing pass-throughs of fuel taxes, transmission losses, and gas transportation charges. Sempra Generation will record a $15 million after-tax charge in Q1 2006 to cover the remaining amounts for these disallowed charges applicable to deliveries through March 31, 2006. Importantly, Sempra Energy stated that its previously issued estimates of future annual earnings already accounted for a comparable arbitration outcome, thus these estimates remain unchanged. However, investors should note that other legal proceedings and arbitrations between Sempra Generation and the DWR are still ongoing and unresolved, including civil litigation and appeals related to power delivery disputes. Further details can be found in Sempra's 2005 10-K filing.

Key Highlights

  • 1Arbitration panel ruled against the California Department of Water Resources' (DWR) attempt to rescind the electricity sales contract with Sempra Generation.
  • 2The panel largely ruled against the DWR's most significant claims in the arbitration.
  • 3However, the panel sided with the DWR on specific contractual issues, disallowing Sempra Generation's pass-through of certain fuel taxes, electricity transmission losses, and gas transportation charges.
  • 4Sempra Generation will incur an additional after-tax charge of $15 million in Q1 2006 to cover the balance of disallowed charges for deliveries up to March 31, 2006.
  • 5Sempra Energy's previously announced estimates for future annual earnings remain unchanged as they anticipated a similar arbitration outcome.
  • 6Other legal proceedings and arbitration matters between Sempra Generation and the DWR are still ongoing and unresolved.
  • 7The DWR has also initiated a separate arbitration proceeding regarding payments for claimed undelivered power.

Frequently Asked Questions