Sempra Energy executives recently joined other utilities in praising wildfire-related legislation signed earlier this year by Gov. Gavin Newsom, saying it improves the operating environment and financial health of the state’s investor-owned utilities.
“Governor Newsom’s leadership was critical in passing new legislation that helps return California to a premier regulatory jurisdiction,” Sempra Chairman and CEO Jeff Martin said Aug. 2 as the parent company of San Diego Gas & Electric and Southern California Gas Co. issued its second-quarter earnings report.
San Diego-based Sempra reported second-quarter earnings of $354 million, or $1.26 per diluted share, compared with a loss of $561 million in the same period a year ago. This year’s quarter included a $45-million gain on the sales of renewable-energy assets.
Subsidiary SDG&E reported earnings from continuing operations of $143 million in the period, compared with $146 million a year ago. Earnings for SoCal Gas were $30 million, compared with $33 million in the second quarter of 2018.
Sempra said notable events in the second quarter were completing the sale of its U.S. wind, solar and certain nonutility natural gas storage assets for $2.5 billion and closing Oncor’s acquisition of InfraREIT and Sempra’s acquisition of a 50-percent interest in Sharyland. The company also produced its first liquefied natural gas and expects commercial operations to commence under tolling agreements in mid-August at Cameron LNG Train 1. Sempra also executed a “heads of agreement” with Aramco Services Co. at Port Arthur LNG, and advanced the planned sale of its South American businesses.
It also expects a proposed decision soon on its general rate case filed at the California Public Utilities Commission for SDG&E and SoCal Gas, and a final decision by the end of the year. Sempra also is in litigation over its cost-of-capital filing at the Federal Energy Regulatory Commission for SDG&E.
Sempra President and Chief Operating Officer Joe Householder said there are five key areas of AB 1054 that “materially improve the operating environment for California’s electric utilities.” These include a new $21-billion wildfire fund, partially funded by ratepayers, which coupled with insurance-related language in the new law could cover $40 billion to $50 billion of wildfire damages, he said. SDG&E’s contribution would be 4.3 percent of the fund, or about $323 million, and then $13 million each year over the next decade.
Householder also mentioned the annual safety-certification process and presumption that utilities had acted prudently if they are certified, which SDG&E was on July 26. Third was a new prudency standard of review more in line with FERC’s standard.
“This is important as it clarifies that any utility conduct considered in the prudency review must have been related to the ignition of the wildfire. This review must also take into account factors outside the utility’s control, like wind speed, humidity and temperature,” Householder said.
The fourth key factor cited by Householder was a rolling three-year shareholder liability cap for any potential future wildfire damages allocated to a utility under the prudency review. SDG&E’s current liability cap is about $825 million, based on its 2018 electric transmission and distribution rate base. The fifth key factor was $5 billion of required wildfire safety expenditures via the wildfire mitigation plans filed by IOUs, he said.
SDG&E has not suffered as much wildfire liability as some other utilities, but it does have $379 million of liability for 2007 fires that is currently at the U.S. Supreme Court, after the CPUC in 2017 turned down ratepayer recovery of that money.
Separately, SDG&E on Aug. 7 announced a series of new efforts to address wildfires, including contracting for an additional fire-suppression helicopter; a new tactical command vehicle; evacuation planning-map books for first responders; and two new information and response centers in Ramona and Valley Center.