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REGULATORY MATTERS
3 Months Ended
Mar. 31, 2022
Regulated Operations [Abstract]  
REGULATORY MATTERS REGULATORY MATTERSWe discuss regulatory matters in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report and provide updates to those discussions and information about new regulatory matters below. With the exception of regulatory balancing accounts, we generally do not earn a return on our regulatory assets until such time as a related cash expenditure has been made. Upon the occurrence of a cash expenditure associated with a regulatory asset, the related amounts are recoverable through a regulatory account mechanism for which we earn a return authorized by applicable regulators, which generally approximates the three-month commercial paper rate. The periods during which we recognize a regulatory asset while we do not earn a return vary by regulatory asset.
REGULATORY ASSETS (LIABILITIES)
(Dollars in millions)
March 31,
2022
December 31,
2021
 
SDG&E:  
Fixed-price contracts and other derivatives$(57)$(50)
Deferred income taxes recoverable in rates151 125 
Pension and other postretirement benefit plan obligations(1)(7)
Removal obligations(2,229)(2,251)
Environmental costs61 62 
Sunrise Powerlink fire mitigation123 122 
Regulatory balancing accounts(1)(2)
Commodity – electric122 77 
Gas transportation29 49 
Safety and reliability73 67 
Public purpose programs(126)(107)
Wildfire mitigation plan
215 178 
Liability insurance premium
108 110 
Other balancing accounts36 207 
Other regulatory assets, net(2)
106 119 
Total SDG&E(1,389)(1,299)
SoCalGas:  
Deferred income taxes recoverable in rates
95 44 
Pension and other postretirement benefit plan obligations64 51 
Employee benefit costs31 31 
Removal obligations(612)(627)
Environmental costs34 34 
Regulatory balancing accounts(1)(2)
Commodity – gas, including transportation(87)(146)
Safety and reliability378 339 
Public purpose programs(234)(183)
Liability insurance premium17 16 
Other balancing accounts(109)42 
Other regulatory assets, net(2)
147 142 
Total SoCalGas(276)(257)
Sempra Infrastructure:
Deferred income taxes recoverable in rates77 77 
Total Sempra
$(1,588)$(1,479)
(1)    At March 31, 2022 and December 31, 2021, the noncurrent portion of regulatory balancing accounts – net undercollected for SDG&E was $426 and $358, respectively, and for SoCalGas was $532 and $410, respectively.
(2)    Includes regulatory assets earning a return authorized by applicable regulators, which generally approximates the three-month commercial paper rate.
SEMPRA CALIFORNIA
CPUC Cost of Capital
A CPUC cost of capital proceeding determines a utility’s authorized capital structure and authorized return on rate base. The CCM applies in the interim years between required cost of capital applications and considers changes in the cost of capital based on changes in interest rates based on the applicable utility bond index published by Moody’s (the CCM benchmark rate) for each 12-month period ending September 30 (the measurement period). The CCM benchmark rate is the basis of comparison to determine if the CCM is triggered, which occurs if the change in the applicable Moody’s utility bond index relative to the CCM benchmark rate is larger than plus or minus 1.000% at the end of the measurement period. The index applicable to SDG&E and SoCalGas is based on each utility’s credit rating. Alternatively, each of SDG&E and SoCalGas is permitted to file a cost of capital application in an interim year in which an extraordinary or catastrophic event materially impacts its cost of capital and affects utilities differently than the market as a whole to have its cost of capital determined in lieu of the CCM.
Authorized Cost of Capital, Subject to the CCM
In December 2019, the CPUC approved the cost of capital (shown in the table below) for SDG&E and SoCalGas that became effective on January 1, 2020 and will remain in effect through December 31, 2022, subject to the CCM. SDG&E’s CCM benchmark rate is 4.498% based on Moody’s Baa- utility bond index, and SoCalGas’ CCM benchmark rate is 4.029% based on Moody’s A- utility bond index.
AUTHORIZED CPUC COST OF CAPITAL, SUBJECT TO THE CCM
SDG&ESoCalGas
Authorized weightingReturn on
rate base
Weighted
return on
rate base
Authorized weightingReturn on
rate base
Weighted
return on
rate base
45.25 %4.59 %2.08 %Long-Term Debt45.60 %4.23 %1.93 %
2.75 6.22 0.17 Preferred Equity2.40 6.00 0.14 
52.00 10.20 5.30 Common Equity52.00 10.05 5.23 
100.00 %7.55 %100.00 %7.30 %
For the measurement period that ended September 30, 2021, the CCM would trigger for SDG&E, if the CPUC determines that the CCM should be implemented, because the average Moody’s Baa- utility bond index between October 1, 2020 and September 30, 2021 was 1.17% below SDG&E’s CCM benchmark rate of 4.498%. In August 2021, SDG&E filed an application with the CPUC to update its cost of capital effective January 1, 2022 through December 31, 2022 due to the ongoing effects of the COVID-19 pandemic rather than have the CCM apply. In December 2021, the CPUC established a proceeding to determine if SDG&E’s cost of capital was impacted by an extraordinary event such that the CCM should not apply. If the CPUC finds that there was not an extraordinary event, the CCM would be effective retroactive to January 1, 2022 and would automatically adjust SDG&E’s authorized ROE from 10.20% to 9.62% and adjust its authorized cost of debt to reflect the then current embedded cost and projected interest rate. If the CPUC finds that there was an extraordinary event, it will then determine whether to suspend the CCM for 2022 and preserve SDG&E’s current authorized cost of capital or hold a second phase of the proceeding to set a new cost of capital for 2022. SDG&E expects to receive a final decision in the second half of 2022. In December 2021, the CPUC granted SDG&E the establishment of memorandum accounts effective January 1, 2022 to track any differences in revenue requirement resulting from the interim cost of capital decision expected in 2022.
Proposed Cost of Capital
In April 2022, SDG&E and SoCalGas each filed applications with the CPUC to update their cost of capital (shown in the table below), which would become effective on January 1, 2023 and would remain in effect through December 31, 2025, subject to the CCM if it remains in place as proposed. SDG&E and SoCalGas expect to receive a final decision from the CPUC by the end of 2022.
PROPOSED CPUC COST OF CAPITAL
SDG&ESoCalGas
Authorized weightingReturn on
rate base
Weighted
return on
rate base
Authorized weightingReturn on
rate base
Weighted
return on
rate base
46.00 %3.87 %1.78 %Long-Term Debt45.60 %3.89 %1.77 %
— — — Preferred Equity0.40 6.00 0.02 
54.00 10.55 5.70 Common Equity54.00 10.75 5.81 
100.00 %7.48 %100.00 %7.60 %
SOCALGAS
OSCs – Energy Efficiency and Advocacy
In October 2019, the CPUC issued an OSC to determine whether SoCalGas should be sanctioned for violation of certain CPUC code sections and orders relating to energy efficiency (EE) codes and standards advocacy activities, undertaken by SoCalGas following a CPUC decision disallowing SoCalGas’ future engagement in advocacy around such EE codes and standards. In February 2022, the assigned Administrative Law Judge issued a Presiding Officer’s Decision (POD 1) that found that SoCalGas did undertake prohibited EE codes and standards advocacy activities using ratepayer funds. POD 1 imposes on SoCalGas a
financial penalty of $10 million; customer refunds for certain ratepayer expenditures and shareholder incentives that SoCalGas estimates will be negligible; and a prohibition from recovering from ratepayers costs of proposed codes and standards activities until SoCalGas demonstrates policies, practices and procedures that adhere to the CPUC’s intent for codes and standards advocacy. POD 1 became the final decision of the CPUC in March 2022. In December 2019, the CPUC issued a second OSC to determine whether SoCalGas is entitled to the EE program’s shareholder incentives for codes and standards advocacy in 2016 and 2017 (later expanded to include 2014 and 2015), whether its shareholders should bear the costs of those advocacy activities, and to address whether any other remedies are appropriate. In April 2021, the assigned Administrative Law Judge issued a Presiding Officer’s Decision (POD 2) on this second OSC. POD 2 finds no violations and assesses no fines or penalties but finds that SoCalGas spent ratepayer funds on activities that were not aligned with the CPUC’s intent for EE codes and standards advocacy, and orders customer refunds that SoCalGas estimates will be negligible. Additionally, POD 2 precludes SoCalGas from seeking cost recovery associated with EE codes and standards advocacy programs until lifted by the CPUC, and orders certain nonfinancial remedies. POD 2 was appealed by intervenors and in February 2022, a CPUC commissioner issued an alternative decision finding that there were violations of certain legal principles and imposing a financial penalty of $150,000. The alternative decision was adopted by the CPUC as the final decision in April 2022SAN ONOFRE NUCLEAR GENERATING STATION
We provide below updates to ongoing matters related to SONGS, a nuclear generating facility near San Clemente, California that permanently ceased operations in June 2013, and in which SDG&E has a 20% ownership interest. We discuss SONGS further in Note 15 of the Notes to Consolidated Financial Statements in the Annual Report.
NUCLEAR DECOMMISSIONING AND FUNDING
As a result of Edison’s decision to permanently retire SONGS Units 2 and 3, Edison began the decommissioning phase of the plant. Major decommissioning work began in 2020. We expect the majority of the decommissioning work to take approximately 10 years. Decommissioning of Unit 1, removed from service in 1992, is largely complete. The remaining work for Unit 1 will be completed once Units 2 and 3 are dismantled and the spent fuel is removed from the site. The spent fuel is currently being stored
on-site, until the DOE identifies a spent fuel storage facility and puts in place a program for the fuel’s disposal, as we discuss below. SDG&E is responsible for approximately 20% of the total decommissioning cost.
The Samuel Lawrence Foundation filed a writ petition under the California Coastal Act in LA Superior Court in December 2019 seeking to invalidate the coastal development permit and to obtain injunctive relief to stop decommissioning work. The petition was denied in September 2021. In December 2021, the foundation filed a notice of appeal. To date, decommissioning work has not been interrupted as a result of this writ petition.
In accordance with state and federal requirements and regulations, SDG&E has assets held in the NDT to fund its share of decommissioning costs for SONGS Units 1, 2 and 3. Amounts that were collected in rates for SONGS’ decommissioning are invested in the NDT, which is comprised of externally managed trust funds. Amounts held by the NDT are invested in accordance with CPUC regulations. SDG&E classifies debt and equity securities held in the NDT as available-for-sale. The NDT assets are presented on the Sempra and SDG&E Condensed Consolidated Balance Sheets at fair value with the offsetting credits recorded in noncurrent Regulatory Liabilities.
Except for the use of funds for the planning of decommissioning activities or NDT administrative costs, CPUC approval is required for SDG&E to access the NDT assets to fund SONGS decommissioning costs for Units 2 and 3. In December 2021, SDG&E received authorization from the CPUC to access NDT funds of up to $78 million for forecasted 2022 costs.
The following table shows the fair values and gross unrealized gains and losses for the securities held in the NDT on the Sempra and SDG&E Condensed Consolidated Balance Sheets. We provide additional fair value disclosures for the NDT in Note 9.
NUCLEAR DECOMMISSIONING TRUSTS
(Dollars in millions)
 CostGross
unrealized
gains
Gross
unrealized
losses
Estimated
fair
value
March 31, 2022
Debt securities:    
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies(1)
$51 $$(1)$51 
Municipal bonds(2)
309 (8)304 
Other securities(3)
264 (12)254 
Total debt securities624 (21)609 
Equity securities99 234 (4)329 
Short-term investments, primarily cash equivalents— — 
Receivables (payables), net— — 
Total$731 $240 $(25)$946 
December 31, 2021
Debt securities:    
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies$56 $— $— $56 
Municipal bonds309 13 (1)321 
Other securities255 (2)260 
Total debt securities620 20 (3)637 
Equity securities104 262 (2)364 
Short-term investments, primarily cash equivalents— — 
Receivables (payables), net— — 
Total$735 $282 $(5)$1,012 
(1)    Maturity dates are 2023-2052.
(2)    Maturity dates are 2022-2056.
(3)    Maturity dates are 2022-2072.
The following table shows the proceeds from sales of securities in the NDT and gross realized gains and losses on those sales.
SALES OF SECURITIES IN THE NUCLEAR DECOMMISSIONING TRUSTS
(Dollars in millions)
 Three months ended March 31,
 20222021
Proceeds from sales$242 $288 
Gross realized gains11 21 
Gross realized losses(4)(2)

Net unrealized gains and losses, as well as realized gains and losses that are reinvested in the NDT, are included in noncurrent Regulatory Liabilities on Sempra’s and SDG&E’s Condensed Consolidated Balance Sheets. We determine the cost of securities in the trusts on the basis of specific identification.
ASSET RETIREMENT OBLIGATION
SDG&E’s ARO related to decommissioning costs for SONGS Units 1, 2 and 3 was $561 million at March 31, 2022 and is based on a cost study prepared in 2020 that is pending CPUC approval.