What is the main impact of the Proposed Decision on Sempra's subsidiaries?

The Proposed Decision from the CPUC effectively extends the deadline for SDG&E and SoCalGas to file their next cost of capital application by approximately one year, meaning their current cost of capital will remain in effect longer. It also mandates certain adjustments to their cost of capital, including lower Returns on Equity, and estimates a reduction in annual revenue requirements beginning in 2018.

When will the new cost of capital adjustments take effect, and for how long?

The adjustments to the cost of capital, including updated debt costs and revised ROEs, will become effective on January 1, 2018, and will remain in effect through December 31, 2018. The next Cost of Capital proceeding, to be filed on March 22, 2018, will determine the rates effective January 1, 2019.

What are the estimated financial impacts of these proposed changes on revenue requirements?

SDG&E estimates a reduction in its annual revenue requirements between $12 million and $20 million, while SoCalGas estimates a reduction between $40 million and $48 million, both beginning in 2018, as a result of these proposed cost of capital changes.

Is the Proposed Decision final, or are there further steps?

The Proposed Decision is subject to the final approval of the CPUC, with the earliest potential adoption date being June 15, 2017. Sempra Energy is currently evaluating the PD and expects to file comments in response.

SRE/SREA 8-K SEC Disclosure

Summary

Sempra Energy (SRE) is reporting on a Proposed Decision (PD) issued by the California Public Utilities Commission (CPUC) regarding a modification to the cost of capital filing deadline. The PD, if approved, will extend the deadline for San Diego Gas & Electric (SDG&E) and Southern California Gas Company (SoCalGas) to file their next cost of capital application from April 22, 2019, to March 22, 2018. This effectively grants a roughly one-year extension for the current cost of capital to remain in place. Furthermore, the PD outlines specific adjustments to be made in the cost of capital update scheduled for January 1, 2018. These include true-ups for long-term debt and preferred stock costs, as well as a modest reduction in the authorized Return on Equity (ROE) for SDG&E and SoCalGas. The PD also states that the Cost of Capital Adjustment Mechanism (CCM) will not be in effect for 2018. The estimated annual revenue requirement reductions for SDG&E and SoCalGas are within the range of $12 million to $20 million and $40 million to $48 million, respectively, starting in 2018.

Key Highlights

1Proposed Decision (PD) issued by CPUC regarding cost of capital filing deadline extension.
2Next cost of capital filing deadline extended to March 22, 2018, from April 22, 2019.
3Effective January 1, 2018, cost of capital will be updated, including true-ups for long-term debt and preferred stock.
4Authorized Return on Equity (ROE) to be adjusted downwards for SDG&E and SoCalGas.
5Cost of Capital Adjustment Mechanism (CCM) will not be in effect for 2018.
6Estimated annual revenue requirement reductions of $12M-$20M for SDG&E and $40M-$48M for SoCalGas, starting 2018.

SEMPRA 8-K Report, Corporate Update (May 11, 2017)

Summary

Key Highlights

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