Summary
This SEC 8-K filing from Sempra Energy (SRE) details the final decision from the California Public Utilities Commission (CPUC) on the 2016 General Rate Case (GRC) for its subsidiaries, San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas). The final decision, issued on June 23, 2016, is largely consistent with prior settlement agreements, establishing an adopted test year 2016 revenue requirement of $1.791 billion for SDG&E and $2.204 billion for SoCalGas. These figures are slightly lower than the settlement amounts due to two income tax-related adjustments. The key impacts for investors revolve around these tax adjustments. The decision reallocates certain past income tax benefits related to repair deductions from shareholders to ratepayers, necessitating refunds totaling $72 million for SoCalGas and $37 million for SDG&E. This will result in after-tax charges to earnings of $43 million and $22 million, respectively, recognized in the second quarter of 2016. Additionally, rate base was reduced for both utilities, impacting future revenues and earnings. The GRC period will be three years through 2018, with annual revenue requirement escalations of 3.5% and continued Z-Factor mechanism for cost recovery.
Key Highlights
- 1Final decision issued by the CPUC for the 2016 General Rate Case (GRC) for SDG&E and SoCalGas on June 23, 2016.
- 2Adopted test year 2016 revenue requirement for SDG&E is $1.791 billion (electric and gas operations).
- 3Adopted test year 2016 revenue requirement for SoCalGas is $2.204 billion.
- 4Two income tax-related adjustments led to a slight reduction in revenue requirements compared to settlement agreements.
- 5Reallocation of past income tax benefits (repair deductions) from shareholders to ratepayers requires refunds totaling $109 million ($72M for SoCalGas, $37M for SDG&E).
- 6Resulting after-tax charges to earnings in Q2 2016: $43 million for SoCalGas and $22 million for SDG&E.
- 7The GRC period is set for three years (through 2018) with annual revenue escalation of 3.5% and continuation of the Z-Factor mechanism.
- 8Rate base reductions were made for both utilities, impacting future revenues and earnings.