Business Context and Reporting Period
This Form 8-K Current Report was filed by Sempra and its subsidiaries, San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas), on December 18, 2025. The filing addresses regulatory decisions by the California Public Utilities Commission (CPUC) regarding cost of capital and general rate cases, alongside updated financial guidance for 2025 and 2026.
Key Financial Metrics and Regulatory Impacts
- Cost of Capital Decision: The CPUC approved a Final Decision (FD) for SDG&E and SoCalGas authorizing a return on equity 5 basis points higher than the original Proposed Decision (PD).
- Estimated Earnings Charge: SDG&E estimates a $471 million after-tax charge to earnings in the fourth quarter of 2025 related to the Track 2 PD in its 2024 General Rate Case.
- Charge Allocation: Of the $471 million charge, $34 million relates to the first three quarters of 2025, and $437 million relates to the 2019-2024 period.
- 2025 Adjusted EPS Guidance: Updated to the high end of the previously announced range of $4.30-$4.70.
- 2025 GAAP EPS Guidance: Updated to a range of $2.38-$2.78.
- 2026 Adjusted EPS Guidance: Affirmed at a range of $4.80-$5.30.
The filing does not provide specific values for total revenue, operating profit, cash flow, debt levels, or liquidity ratios for the reporting period.
Material Changes and Regulatory Status
While the Cost of Capital FD represented an improvement over the prior proposal, the CPUC did not vote on the Track 2 PD for SDG&E's 2024 General Rate Case as of the filing date. SDG&E is actively pursuing opportunities to improve the outcome of this pending decision. The estimated $471 million charge is contingent on the timing and outcome of the Final Decision in 2026 and may differ substantially from actual results.
Guidance, Outlook, and Risks
Management has updated its 2025 guidance to reflect the estimated regulatory charge while affirming its 2026 outlook. Key risks identified include:
- Regulatory Uncertainty: Potential for CPUC decisions to deny cost recovery or modify proposed decisions.
- Wildfire Liability: Potential liability for damages regardless of fault and the ability to recover costs from insurance or state wildfire funds.
- Market and Operational Risks: Volatility in inflation, interest rates, and commodity prices; cybersecurity threats; and climate policy changes affecting natural gas demand.
- Capital Markets: Risks related to credit rating downgrades, market instability, and the cost of capital.
Investor Verification Checklist
- Verify the final outcome of the SDG&E Track 2 request in the 2024 General Rate Case, as the $471 million charge is an estimate subject to change.
- Review Exhibit 99.1 for detailed reconciliations between Adjusted EPS and GAAP EPS guidance ranges.
- Monitor CPUC voting schedules for the Track 2 PD to assess the timing of potential earnings impacts.
- Assess the impact of the 5 basis point increase in return on equity on long-term rate base growth.
- Confirm the status of wildfire liability recoveries and insurance coverage given the highlighted risk factors.