Summary
Sempra Energy (SRE) filed an 8-K on July 11, 2019, to report on the California Legislature's approval of Assembly Bills 1054 and 111, collectively referred to as the "Wildfire Legislation." This new legislation aims to address critical issues surrounding catastrophic wildfires in California, particularly impacting investor-owned electric utilities (IOUs) like Sempra's subsidiary, San Diego Gas & Electric Company (SDG&E). Notably, gas distribution utilities are excluded. The legislation introduces a framework for wildfire mitigation plans, a wildfire recovery fund, a cap on liability, and a wildfire safety board, signifying a significant shift in how wildfire-related costs and risks will be managed.
Key Highlights
- 1California Legislature approved Wildfire Legislation (AB 1054 and AB 111) impacting investor-owned electric utilities (IOUs).
- 2Legislation establishes a Wildfire Safety Division and advisory board to review utility Wildfire Mitigation Plans (WMPs).
- 3A Liquidity Fund, initially state-administered, will provide funds for wildfire-related claims, subject to review.
- 4IOUs are required to make $5 billion in capital investments for wildfire mitigation, with SDG&E's share expected to be $215 million (4.3%).
- 5An Annual Safety Certification (ASC) will be issued by the CPUC to utilities meeting certain requirements.
- 6The legislation introduces an optional Wildfire Fund with shareholder liability caps and modified prudency review standards, offering potential protection to IOUs.
- 7SDG&E is evaluating participation in the optional Wildfire Fund and must decide within 15 days of the legislation's effective date.
Frequently Asked Questions
The Wildfire Legislation will significantly impact Sempra's subsidiary, San Diego Gas & Electric Company (SDG&E), by establishing new frameworks for wildfire mitigation, cost recovery, and liability. While gas distribution utilities are excluded, SDG&E, as an IOU, will be subject to new safety oversight, capital investment requirements, and potential participation in a wildfire recovery fund.
SDG&E is required to make capital investments of approximately $215 million towards wildfire mitigation, with securitized financing costs recoverable without a return on equity. Furthermore, SDG&E is evaluating participation in an optional Wildfire Fund, which could involve an initial shareholder contribution of around $450 million, with a significant portion due within 60 days of the law's enactment. This fund offers a liability cap for imprudently incurred losses.
No, the legislation explicitly states that investor-owned gas distribution utilities, such as Southern California Gas Company (a Sempra subsidiary), are not covered by this Wildfire Legislation.
Sempra Energy, through SDG&E, is currently evaluating the optional features of the Wildfire Legislation. The company anticipates making a decision on whether to participate in the Wildfire Fund within 15 days following the effective date of the Wildfire Legislation, as mandated by the legislation itself.