8-KOther Events

SEMPRA 8-K Report, Corporate Update (Jul 17, 2017)

Filed July 17, 2017For Securities:SRESREA

Summary

Sempra Energy's subsidiaries, San Diego Gas & Electric (SDG&E) and Southern California Gas Company (SoCalGas), have received a final decision from the California Public Utilities Commission (CPUC) that grants a two-year extension for filing their next Cost of Capital application. This decision, based on a joint petition filed with consumer advocates, modifies the utilities' cost of capital structure and return on equity. Notably, for SDG&E and SoCalGas, the authorized Return on Equity (ROE) will be reduced effective January 1, 2018, to 10.20% and 10.05% respectively, from their current rates. These updated costs and ROEs are expected to remain in effect through December 31, 2019, unless adjusted by a Cost of Capital Mechanism (CCM). This regulatory outcome is anticipated to result in a reduction of annual revenue requirements for SDG&E and SoCalGas, estimated between $12 million to $20 million and $40 million to $48 million, respectively, beginning in 2018. Additionally, the utilities have agreed to a combined $5 million contribution towards a program assisting low-income customers with Section 8 housing, with SDG&E and SoCalGas contributing approximately $1.2 million of this total.

Key Highlights

  • 1CPUC issued a final decision approving a joint petition, granting a two-year extension for SDG&E and SoCalGas to file their next Cost of Capital application.
  • 2The decision mandates updated cost of capital calculations effective January 1, 2018, including true-ups for long-term debt and updates for preferred stock.
  • 3Authorized Return on Equity (ROE) for SDG&E will decrease from 10.30% to 10.20%, and for SoCalGas from 10.10% to 10.05%, effective January 1, 2018, through December 31, 2019.
  • 4These updated rates are expected to reduce annual revenue requirements for SDG&E by an estimated $12 million to $20 million and for SoCalGas by $40 million to $48 million, commencing in 2018.
  • 5The Cost of Capital Mechanism (CCM) will be in place to adjust 2019 costs of capital if necessary.
  • 6IOUs, including SDG&E and SoCalGas, have agreed to a $5 million combined contribution to a program supporting low-income customers in obtaining Section 8 housing, with their share being approximately $1.2 million.

Frequently Asked Questions

The primary impact is a two-year extension for San Diego Gas & Electric (SDG&E) and Southern California Gas Company (SoCalGas) to file their next Cost of Capital application. The decision also mandates a reduction in their authorized Return on Equity (ROE) effective January 1, 2018, and is expected to lead to lower annual revenue requirements.

Effective January 1, 2018, SDG&E's authorized ROE will be adjusted to 10.20% from 10.30%, and SoCalGas's authorized ROE will be adjusted to 10.05% from 10.10%. These adjusted ROEs are set to remain in effect through December 31, 2019, unless modified by the Cost of Capital Mechanism (CCM).

The decision is projected to reduce annual revenue requirements. SDG&E's revenue requirements are estimated to decrease by $12 million to $20 million annually, and SoCalGas's by $40 million to $48 million annually, starting in 2018.

Yes, the Investor-Owned Utilities (IOUs), including SDG&E and SoCalGas, have agreed to collectively contribute $5 million towards a program that helps low-income customers access Section 8 subsidized housing. SDG&E and SoCalGas's combined share of this contribution is approximately $1.2 million.