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SAN ONOFRE NUCLEAR GENERATING STATION
6 Months Ended
Jun. 30, 2021
Regulated Operations [Abstract]  
SAN ONOFRE NUCLEAR GENERATING STATION REGULATORY MATTERS
We 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.
REGULATORY ASSETS AND LIABILITIES
We show the details of regulatory assets and liabilities in the following table.
REGULATORY ASSETS (LIABILITIES)
(Dollars in millions)
June 30,
2021
December 31,
2020
 
SDG&E:  
Fixed-price contracts and other derivatives$(82)$(53)
Deferred income taxes recoverable in rates86 22 
Pension and other postretirement benefit plan obligations41 50 
Removal obligations(2,199)(2,121)
Environmental costs55 56 
Sunrise Powerlink fire mitigation120 121 
Regulatory balancing accounts(1)(2)
Commodity – electric175 72 
Gas transportation10 35 
Safety and reliability61 67 
Public purpose programs(110)(158)
2019 GRC retroactive impacts28 56 
Other balancing accounts328 233 
Other regulatory assets, net(2)
95 72 
Total SDG&E(1,392)(1,548)
SoCalGas:  
Deferred income taxes recoverable (refundable) in rates
13 (82)
Pension and other postretirement benefit plan obligations406 417 
Employee benefit costs37 37 
Removal obligations(662)(685)
Environmental costs35 36 
Regulatory balancing accounts(1)(2)
Commodity – gas, including transportation(127)(56)
Safety and reliability305 335 
Public purpose programs(176)(253)
2019 GRC retroactive impacts101 202 
Other balancing accounts(52)(58)
Other regulatory assets, net(2)
121 75 
Total SoCalGas(32)
Sempra Mexico:
Deferred income taxes recoverable in rates80 80 
Total Sempra
$(1,311)$(1,500)
(1)    At June 30, 2021 and December 31, 2020, the noncurrent portion of regulatory balancing accounts – net undercollected for SDG&E was $256 million and $139 million, respectively, and for SoCalGas was $388 million and $218 million, respectively.
(2)    Includes regulatory assets earning a return.
CALIFORNIA UTILITIES
COVID-19 Pandemic Protections
In March 2020, the CPUC required that all energy companies under its jurisdiction, including the California Utilities, take action to implement several emergency customer protection measures to support California customers affected by the COVID-19 pandemic for up to one year. The customer protection measures were mandatory for all residential and small business customers. In February 2021, the CPUC extended the customer protection measures through June 2021. In June 2021, the CPUC further extended the suspension of service disconnections for nonpayment by these customers through September 2021, which provides time for the California Utilities to notify residential and small business customers in arrears and enroll such customers in long-term repayment plans. The CPUC is continuing to consider the impacts of any state or federal relief programs on customer arrearages and if further debt relief is warranted.
In April 2021, the CPUC expanded suspension of service disconnections to medium-large commercial and industrial customers through June 2021, thereby including the entire customer population except SoCalGas’ noncore customers. The measures were effective December 30, 2020. In June 2021, the CPUC extended suspensions of service disconnections for nonpayment by these customers through September 2021.
Each of the California Utilities has been authorized to track and request recovery of incremental costs associated with complying with customer protection measures implemented by the CPUC related to the COVID-19 pandemic, including costs associated with suspending service disconnections and uncollectible expenses that arise from customers’ failure to pay. The California Utilities expect to pursue recovery of small and medium-large commercial and industrial customers’ tracked costs in rates in a future CPUC proceeding, which recovery is not assured. Uncollectible expenses related to residential customers are recorded in a two-way balancing account as we discuss below.
Disconnection OIR
In June 2020, the CPUC issued a decision to adopt certain customer protections to reduce residential customer disconnections and improve reconnection processes, including, among other things, imposing limitations on service disconnections, elimination of deposit requirements and reconnection fees, establishment of the AMP that provides successfully participating, income-qualified residential customers with relief from outstanding utility bill amounts, and increased outreach and marketing efforts. As permitted by the decision, each of the California Utilities has established a two-way balancing account to record the uncollectible expenses associated with residential customers’ inability to pay their electric or gas bills, including as a result of the relief from outstanding utility bill amounts provided under the AMP.
CPUC GRC
The CPUC uses GRCs to set rates designed to allow the California Utilities to recover their reasonable operating costs and to provide the opportunity to realize their authorized rates of return on their investments.
In January 2020, the CPUC issued a final decision implementing a four-year GRC cycle for California IOUs and the California Utilities were directed to file a petition for modification to revise their 2019 GRC to add two additional attrition years, resulting in a transitional five-year GRC period (2019-2023). The California Utilities filed the petition in April 2020.
In May 2021, the CPUC issued a final decision approving the California Utilities’ request to continue their authorized post-test year mechanisms for 2022 and 2023. For SDG&E, the decision authorizes revenue requirement increases of $87 million (3.92%) for 2022 and $86 million (3.70%) for 2023. For SoCalGas, the decision authorizes revenue requirement increases of $142 million (4.53%) for 2022 and $130 million (3.97%) for 2023.
The 2019 GRC FD clarified that differences between incurred and forecasted income tax expense due to forecasting differences are not subject to tracking in the income tax expense memorandum account beginning in 2019. SDG&E and SoCalGas previously recorded regulatory liabilities, inclusive of interest, associated with the 2016 through 2018 tracked forecasting differences of $86 million and $89 million, respectively. In April 2020, the CPUC confirmed treatment of the two-way income tax expense memorandum account for these 2016 through 2018 balances, at which time the California Utilities released these regulatory liability balances to revenues and regulatory interest.
We provide additional information concerning the 2019 GRC FD in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.
SDG&E
FERC Rate Matters and Cost of Capital
SDG&E files separately with the FERC for its authorized ROE on FERC-regulated electric transmission operations and assets.
SDG&E’s TO4 ROE of 10.05% was the basis of SDG&E’s FERC-related revenue recognition until March 2020, when the FERC approved the settlement terms that SDG&E and all settling parties reached in October 2019 on SDG&E’s TO5 filing. The settlement agreement provided for a ROE of 10.60%, consisting of a base ROE of 10.10% plus an additional 50 bps for participation in the California ISO (the California ISO adder). If the FERC issues an order ruling that California IOUs are no longer eligible for the California ISO adder, SDG&E would refund the California ISO adder as of the refund effective date (June 1, 2019) if such a refund is determined to be required by the terms of the TO5 settlement. The TO5 term is effective June 1, 2019 and shall remain in effect each calendar year until terminated by a notice at least six months before the end of a calendar year. In the first quarter of 2020, SDG&E recorded retroactive revenues of $12 million related to 2019, and additional FERC revenues of $17 million to conclude a rate base matter, net of certain refunds to be paid to CPUC-jurisdictional customers.
Energy Efficiency Program Inquiry
In January 2020, the CPUC issued a ruling seeking comments on a report prepared by its consultant regarding SDG&E’s Upstream Lighting Program for the program year 2017. The CPUC subsequently expanded the scope of the comments to cover the program year 2018. The Upstream Lighting Program was one of SDG&E’s Energy Efficiency Programs designed to produce energy efficiency savings for which SDG&E could earn a performance-based incentive.
Pursuant to the CPUC ruling, intervenors representing ratepayers questioned SDG&E’s management of the program and alleged that certain program expenditures did not benefit the purpose of the program. As a result of the inquiry, SDG&E voluntarily expanded its review to include the program year 2019. Based on this review, SDG&E concluded some concessions were appropriate, which included refunding certain costs to customers and reducing certain performance-based incentives. Accordingly, in the second quarter of 2020, SDG&E reduced revenues by $15 million for aggregate amounts recognized in program years 2017, 2018 and 2019. In the third quarter of 2020, SDG&E reduced revenues by an additional $36 million and recorded a fine of $6 million. The after-tax impact for the year ended December 31, 2020 was $44 million. In October 2020, SDG&E executed a settlement agreement with intervenors consistent with these concessions. In August 2021, the CPUC issued a proposed decision approving the settlement agreement.
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. The OSC stemmed from a short period of transitional energy efficiency (EE) codes and standards advocacy activities undertaken by SoCalGas in 2018, following a CPUC decision disallowing SoCalGas’ future engagement in EE statewide codes and standards advocacy. We expect a CPUC decision on this OSC in the fourth quarter of 2021.
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, whether its shareholders should bear the costs of those advocacy activities, and to address whether any other remedies are appropriate. The scope of this OSC was later expanded to include EE program years 2014 and 2015, and SoCalGas’ engagement with local governments on proposed reach codes. In April 2021, the assigned Administrative Law Judge issued a Presiding Officer’s Decision (POD) on the second OSC. The POD 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. The POD, which is currently under appeal by intervenors, orders customer refunds that SoCalGas expects will be negligible (subject to a CPUC audit). Additionally, the POD proposed precluding SoCalGas from seeking cost recovery associated with EE codes and standards advocacy programs until lifted by the CPUC, and orders certain nonfinancial remedies.
Intervenors in these OSCs have suggested the CPUC order various financial and non-financial penalties. If the CPUC were to assess fines or penalties on SoCalGas associated with these OSCs, they could be material.
SAN 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. A tentative ruling was issued in June 2021, denying the petition. In September 2020, the foundation filed another writ petition under the California Coastal Act in LA Superior Court seeking to set aside the California Coastal Commission’s July 2020 approval of the
inspection and maintenance plan for the SONGS’ canisters and to obtain injunctive relief to stop decommissioning work. A trial date for this petition has been set for April 2022. To date, decommissioning work has not been interrupted as a result of these writ petitions.
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. The amounts 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 2020, SDG&E received authorization from the CPUC to access NDT funds of up to $89 million for forecasted 2021 costs.
The following table shows the fair values and gross unrealized gains and losses for the securities held in the NDT. 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
At June 30, 2021:    
Debt securities:    
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies(1)
$61 $— $— $61 
Municipal bonds(2)
308 16 — 324 
Other securities(3)
257 12 (1)268 
Total debt securities626 28 (1)653 
Equity securities104 264 (1)367 
Cash and cash equivalents— — 
Payables, net(4)— — (4)
Total$734 $292 $(2)$1,024 
At December 31, 2020:    
Debt securities:    
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies$64 $$— $65 
Municipal bonds308 18 — 326 
Other securities253 17 — 270 
Total debt securities625 36 — 661 
Equity securities112 254 (2)364 
Cash and cash equivalents— — 
Payables, net(9)— — (9)
Total$731 $290 $(2)$1,019 
(1)    Maturity dates are 2022-2051.
(2)    Maturity dates are 2021-2056.
(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 NDT
(Dollars in millions)
 Three months ended June 30,Six months ended June 30,
 2021202020212020
Proceeds from sales$254 $245 $542 $797 
Gross realized gains18 39 99 
Gross realized losses(1)(6)(3)(11)
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 AND SPENT NUCLEAR FUEL
The present value of SDG&E’s ARO related to decommissioning costs for the SONGS units was $563 million at June 30, 2021. That amount includes the cost to decommission Units 2 and 3, and the remaining cost to complete the decommissioning of Unit 1, which is substantially complete. The ARO for all three units is based on a cost study prepared in 2017 that is pending CPUC approval. The ARO for Units 2 and 3 reflects the acceleration of the start of decommissioning of these units as a result of the early closure of the plant. SDG&E’s share of total decommissioning costs in 2021 dollars is approximately $886 million.
NUCLEAR INSURANCE
SDG&E and the other owners of SONGS have insurance to cover claims from nuclear liability incidents arising at SONGS. Currently, this insurance provides $450 million in coverage limits, the maximum amount available, including coverage for acts of terrorism. In addition, the Price-Anderson Act provides an additional $110 million of coverage. If a nuclear liability loss occurs at SONGS and exceeds the $450 million insurance limit, this additional coverage would be available to provide a total of $560 million in coverage limits per incident.
The SONGS co-owners have nuclear property damage insurance of $130 million, which exceeds the minimum federal requirements of $50 million. This insurance coverage is provided through NEIL. The NEIL policies have specific exclusions and limitations that can result in reduced coverage. Insured members as a group are subject to retrospective premium assessments to cover losses sustained by NEIL under all issued policies. SDG&E could be assessed up to $4.3 million of retrospective premiums based on overall member claims.
The nuclear property insurance program includes an industry aggregate loss limit for non-certified acts of terrorism (as defined by the Terrorism Risk Insurance Act) of $3.24 billion. This is the maximum amount that will be paid to insured members who suffer losses or damages from these non-certified terrorist acts.