REGULATORY MATTERS (Tables)

12 Months Ended

Dec. 31, 2018

We show the details of regulatory assets and liabilities in the following table and discuss them below.



REGULATORY ASSETS (LIABILITIES)
(Dollars in millions)
	December 31,
	2018			2017
SDG&E:
Fixed-price contracts and other derivatives	$	(150	)	$	96
Deferred income taxes refundable in rates	(236		)	(281		)
Pension and other postretirement benefit plan obligations	186			153
Removal obligations	(1,848		)	(1,846		)
Unamortized loss on reacquired debt	7			9
Environmental costs	28			29
Sunrise Powerlink fire mitigation	120			119
Regulatory balancing accounts⁽¹⁾
Commodity – electric	(8		)	82
Gas transportation	45			22
Safety and reliability	70			48
Public purpose programs	(62		)	(70		)
Other balancing accounts	145			233
Other regulatory liabilities, net⁽²⁾	(177		)	(70		)
Total SDG&E	(1,880		)	(1,476		)
SoCalGas:
Pension and other postretirement benefit plan obligations	470			513
Employee benefit costs	49			45
Removal obligations	(833		)	(924		)
Deferred income taxes refundable in rates	(336		)	(437		)
Unamortized loss on reacquired debt	7			8
Environmental costs	28			22
Workers’ compensation	9			12
Regulatory balancing accounts⁽¹⁾
Commodity – gas, including transportation	196			151
Safety and reliability	332			266
Public purpose programs	(325		)	(274		)
Other balancing accounts	(68		)	(114		)
Other regulatory liabilities, net⁽²⁾	(130		)	(64		)
Total SoCalGas	(601		)	(796		)
Sempra Mexico:
Deferred income taxes recoverable in rates	81			83
Other regulatory assets	6			—
Total Sempra Energy Consolidated	$	(2,394	)	$	(2,189	)


⁽¹⁾	At December 31, 2018 and 2017, the noncurrent portion of regulatory balancing accounts – net undercollected for SDG&E was $78 million and $63 million, respectively. At December 31, 2018 and 2017, the noncurrent portion of regulatory balancing accounts – net undercollected for SoCalGas was $185 million and $118 million, respectively.


⁽²⁾	Includes regulatory assets earning a rate of return.

Schedule of Regulatory Liabilities

We show the details of regulatory assets and liabilities in the following table and discuss them below.



REGULATORY ASSETS (LIABILITIES)
(Dollars in millions)
	December 31,
	2018			2017
SDG&E:
Fixed-price contracts and other derivatives	$	(150	)	$	96
Deferred income taxes refundable in rates	(236		)	(281		)
Pension and other postretirement benefit plan obligations	186			153
Removal obligations	(1,848		)	(1,846		)
Unamortized loss on reacquired debt	7			9
Environmental costs	28			29
Sunrise Powerlink fire mitigation	120			119
Regulatory balancing accounts⁽¹⁾
Commodity – electric	(8		)	82
Gas transportation	45			22
Safety and reliability	70			48
Public purpose programs	(62		)	(70		)
Other balancing accounts	145			233
Other regulatory liabilities, net⁽²⁾	(177		)	(70		)
Total SDG&E	(1,880		)	(1,476		)
SoCalGas:
Pension and other postretirement benefit plan obligations	470			513
Employee benefit costs	49			45
Removal obligations	(833		)	(924		)
Deferred income taxes refundable in rates	(336		)	(437		)
Unamortized loss on reacquired debt	7			8
Environmental costs	28			22
Workers’ compensation	9			12
Regulatory balancing accounts⁽¹⁾
Commodity – gas, including transportation	196			151
Safety and reliability	332			266
Public purpose programs	(325		)	(274		)
Other balancing accounts	(68		)	(114		)
Other regulatory liabilities, net⁽²⁾	(130		)	(64		)
Total SoCalGas	(601		)	(796		)
Sempra Mexico:
Deferred income taxes recoverable in rates	81			83
Other regulatory assets	6			—
Total Sempra Energy Consolidated	$	(2,394	)	$	(2,189	)


⁽¹⁾	At December 31, 2018 and 2017, the noncurrent portion of regulatory balancing accounts – net undercollected for SDG&E was $78 million and $63 million, respectively. At December 31, 2018 and 2017, the noncurrent portion of regulatory balancing accounts – net undercollected for SoCalGas was $185 million and $118 million, respectively.


⁽²⁾	Includes regulatory assets earning a rate of return.

Proposed Revenue Requirements

In October 2017, the CPUC approved the embedded cost of debt presented in advice letters filed by SDG&E and SoCalGas, resulting in a revised return on rate base for SDG&E of 7.55 percent and for SoCalGas of 7.34 percent, effective January 1, 2018, as depicted in the table below:



AUTHORIZED COST OF CAPITAL AND RATE STRUCTURE – CPUC

SDG&E							SoCalGas
Authorized weighting		Return on rate base		Weighted return on rate base			Authorized weighting		Return on rate base		Weighted return on rate base
45.25	%	4.59	%	2.08	%	Long-Term Debt	45.60	%	4.33	%	1.97	%
2.75		6.22		0.17		Preferred Stock	2.40		6.00		0.14
52.00		10.20		5.30		Common Equity	52.00		10.05		5.23
100.00	%			7.55	%		100.00	%			7.34	%

The changes to the embedded cost of debt and return on rate base resulting from the updates included in the filed advice letters are summarized below:



CHANGES TO THE EMBEDDED COST OF DEBT

	SDG&E						SoCalGas
	Cost of debt			Return on rate base			Cost of debt			Return on rate base
Previously	5.00		%	7.79		%	5.77		%	8.02		%
Authorized, effective January 1, 2018	4.59		%	7.55		%	4.33		%	7.34		%
Differences	(41	)	bps	(24	)	bps	(144	)	bps	(68	)	bps

Schedule Of FERC Cost Of Capital Table

SDG&E’s current estimated FERC return on rate base under the TO4 formula rate request filing is 7.51 percent based on its capital structure as follows:



SDG&E COST OF CAPITAL AND RATE STRUCTURE – FERC

	Weighting		Return on rate base		Weighted return on rate base
Long-Term Debt	43.44	%	4.21	%	1.83	%
Common Equity	56.56		10.05		5.68
	100.00	%			7.51	%