Summary
This 8-K filing from Sempra Energy (SRE) and San Diego Gas & Electric Company (SDG&E) on December 15, 2010, details a significant settlement in the 2007 wildfire litigation. Specifically, SDG&E reached an agreement with Cox Communications for approximately $444 million to settle SDG&E's claims against Cox and its insurers related to the Guejito fire. This settlement is expected to boost SDG&E's receivables by $434 million and increase reserves for wildfire litigation by $303 million. The company also provides an update on the overall wildfire litigation, noting that substantially all homeowner insurer claims and a portion of non-insurer claims have been settled. SDG&E anticipates recovering substantially all reasonably incurred costs for resolving wildfire claims that exceed its insurance coverage and recoveries from third parties, through its utility customers via regulatory action. Consequently, Sempra and SDG&E expect no significant impact on earnings from the resolution of these claims, though cash flow may be affected by timing differences in settlements and recoveries.
Key Highlights
- 1SDG&E settled wildfire litigation claims with Cox Communications for approximately $444 million, to be received in multiple payments through March 2011.
- 2The Cox settlement is expected to increase SDG&E's wildfire litigation receivables by $434 million and increase reserves for wildfire litigation by $303 million.
- 3A net decrease of $94 million is projected for a regulatory asset, which SDG&E uses to track expected customer recovery of wildfire costs exceeding insurance and third-party recoveries.
- 4Substantially all of the 19,000 homeowner insurer claims related to the 2007 wildfires have been settled.
- 5SDG&E has settled claims with approximately 580 non-insurer plaintiffs, with ongoing negotiations for remaining claims totaling significant amounts.
- 6Sempra Energy and SDG&E anticipate recovering most wildfire-related costs above insurance and third-party settlements from utility customers through future regulatory actions.
- 7The companies expect no significant earnings impact from the resolution of remaining wildfire claims, but acknowledge potential adverse effects on cash flow due to timing.