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.

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