Business Context and Reporting Period
This Form 8-K, filed on November 14, 2025, reports regulatory developments for Sempra and its subsidiaries, San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas). The filing details Proposed Decisions (PDs) issued by the California Public Utilities Commission (CPUC) regarding SDG&E's wildfire mitigation costs and the cost of capital for both utilities.
Key Financial Metrics and Regulatory Decisions
SDG&E Track 2 Wildfire Mitigation Costs
- Total Costs Requested: $1,472 million (incurred 2019-2022).
- Total Costs Approved: $1,036 million.
- Operation & Maintenance (O&M): $91 million approved; $193 million denied.
- Capital Costs: $945 million approved; $242 million denied.
- Revenue Requirement (2019-2027): $721 million authorized (vs. $1,148 million requested).
- Collection Schedule: $194 million collected in 2024 and $96 million in 2025 via interim mechanism. Remaining $431 million to be collected from 2026 through 2028.
Cost of Capital (Effective Jan 1, 2026 - Dec 31, 2028)
| Component | SDG&E Weight | SDG&E Return | SoCalGas Weight | SoCalGas Return |
|---|---|---|---|---|
| Long-Term Debt | 45.25% | 4.59% | 45.60% | 5.02% |
| Preferred Equity | 2.75% | 6.22% | 2.40% | 6.00% |
| Common Equity | 52.00% | 9.88% | 52.00% | 9.73% |
| Weighted Return on Rate Base | 7.39% | 7.49% |
The PD maintains the current 52% equity layer but authorizes a return on common equity that is 35 basis points lower than the current authorized rate for both utilities.
Material Changes and Outlook
The filing represents a material reduction in the revenue requirement SDG&E can recover for wildfire mitigation costs, with the authorized amount ($721 million) being $427 million lower than requested. Additionally, the proposed cost of capital represents a decrease in the return on common equity for both SDG&E and SoCalGas compared to current authorizations. These decisions are not yet final; the CPUC may adopt, modify, or reject the PDs after a public comment period.
Risks and Contingencies
- Regulatory Uncertainty: The PDs are subject to public comment (due December 4, 2025) and reply comments (due December 9, 2025). The earliest vote is scheduled for December 18, 2025.
- Wildfire Liability: Risks include potential liability for damages regardless of fault and the inability to recover costs from insurance or regulatory mechanisms.
- Capital Markets: Risks related to credit rating downgrades, interest rate fluctuations, and the ability to raise capital on favorable terms.
- Operational Risks: Cybersecurity threats, natural disasters, and supply chain disruptions.
Investor Verification Checklist
- Verify the final CPUC vote on the Track 2 PD and Cost of Capital PD scheduled for December 18, 2025, or later.
- Confirm the specific line items denied in the $242 million capital cost rejection and $193 million O&M rejection to assess future operational budgeting.
- Monitor the impact of the 35 basis point reduction in return on common equity on projected earnings per share for SDG&E and SoCalGas.
- Review the status of the interim cost recovery mechanism to ensure the $194 million (2024) and $96 million (2025) collections were executed as authorized.
- Assess the timeline for collecting the remaining $431 million revenue requirement between 2026 and 2028.