What is the financial impact on Sempra Energy (SRE) and SDG&E from this agreement?

As of December 31, 2017, SDG&E and Sempra Energy recorded a receivable of $152 million from Edison. This represents the compensation Edison will provide for SONGS costs that SDG&E will not recover from ratepayers. The companies state they do not expect a material adverse impact on their financial condition or operations if the settlement is approved.

What is the timeline and condition for this agreement to become effective?

The Revised Settlement Agreement is subject to approval by the CPUC. The Utility Shareholder Agreement, which outlines Edison's compensation to SDG&E, is not subject to CPUC approval but only becomes effective upon the CPUC's approval of the Revised Settlement Agreement.

What happens if the CPUC does not approve the Revised Settlement Agreement?

If the CPUC does not approve the Revised Settlement Agreement, the proceeding will remain open, and the prior "Amended and Restated Settlement Agreement" will continue to be in effect, unless modified or set aside by the CPUC. There can be no assurance that the proceeding will conclude as contemplated by SDG&E and Sempra Energy, and alternative outcomes could have a material adverse effect.

SRE/SREA 8-K SEC Disclosure

Q: What is the main purpose of the Revised Settlement Agreement?

The Revised Settlement Agreement, if approved by the California Public Utilities Commission (CPUC), aims to resolve all issues related to the San Onofre Nuclear Generating Station (SONGS) proceeding. It modifies a prior settlement and involves Edison compensating SDG&E for certain costs it will no longer recover from ratepayers.

Summary

Sempra Energy (SRE), through its subsidiary San Diego Gas & Electric Company (SDG&E), has entered into a Revised Settlement Agreement concerning the San Onofre Nuclear Generating Station (SONGS) proceeding. This agreement, if approved by the California Public Utilities Commission (CPUC), aims to resolve all outstanding issues related to SONGS. A key component is a "Utility Shareholder Agreement" where Southern California Edison (Edison) will compensate SDG&E for revenue it would have recovered from ratepayers under a previous settlement but will forgo under the new agreement. Under the proposed settlement, SDG&E will cease rate recovery of SONGS costs once its remaining regulatory assets reach $775 million, with an estimated cessation date around late 2017 or early 2018, depending on CPUC decisions. Edison has agreed to pay SDG&E for these unrecovered amounts. As of December 31, 2017, SDG&E and Sempra Energy recorded a receivable from Edison of $152 million, reflecting this arrangement. The companies do not anticipate a material adverse impact on their financial condition or results of operations if the settlement is approved, although significant uncertainty remains until CPUC approval.

Key Highlights

1San Diego Gas & Electric (SDG&E) and Southern California Edison (Edison) entered into a Revised Settlement Agreement for the San Onofre Nuclear Generating Station (SONGS) proceeding, subject to CPUC approval.
2A related Utility Shareholder Agreement dictates that Edison will compensate SDG&E for SONGS costs that SDG&E will no longer recover from ratepayers under the revised settlement.
3Rate recovery of SONGS costs will cease once SDG&E's remaining regulatory assets reach $775 million; the estimated cessation date is around December 2017 or April 2018.
4SDG&E and Sempra Energy have recorded a $152 million receivable from Edison as of December 31, 2017, representing amounts to be paid by Edison under the Utility Shareholder Agreement.
5The companies expect no material adverse impact on their financial condition or operations if the settlement is approved by the CPUC.
6The settlement is contingent on CPUC approval, and without it, the proceeding remains open and previous agreements could continue or be modified by the CPUC.
7The Utility Shareholder Agreement becomes effective only upon CPUC approval of the Revised Settlement Agreement.

SEMPRA 8-K Report, Corporate Update (Jan 31, 2018)

Summary

Key Highlights

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