Company: SREA
Filing Date: 2025-02-25
Form Type: 10-K
Source: 0001032208-25-000012
Chunk: 175

Company: SEMPRA
Filing Date: 2025-02-25
Form: 10-K
Item: Item 1
Chunk 175
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 period of historical costs and a forecast of capital investments, and (ii) a true-up period, similar to balancing account treatment, that is designed to provide earnings equal to SDG&E’s actual cost of service including its authorized return on investment. SDG&E makes annual filings with the FERC to update rates for the following calendar year. SDG&E may also file for ROE incentives that might apply under FERC rules. SDG&E’s debt-to-equity ratio is set annually based on the actual ratio at the end of each year.

We discuss the latest FERC rate matters in “Part I – Item 1A. Risk Factors,” “Part II – Item 7. MD&A – Capital Resources and Liquidity – Sempra California” and Note 4 of the Notes to Consolidated Financial Statements.

Incentive Mechanisms 

SoCalGas is subject to the GCIM and is eligible for financial awards or subject to financial penalties depending on its performance in relation to specific benchmarks. We discuss the GCIM in “Part II – Item 7. MD&A” and Note 3 of the Notes to Consolidated Financial Statements.

Other Cost-Based Regulatory Recovery

The CPUC, and the FERC as it relates to SDG&E, authorize SDG&E and SoCalGas to collect, or in the case of CPUC programmatic activities, to apply for additional, revenue requirements beyond base rates from customers for certain operating and capital related costs (depreciation, taxes and return on rate base), including for: 

▪costs to purchase natural gas and electricity; 

▪costs associated with administering public purpose, demand response, environmental compliance, and customer energy efficiency programs; 

▪other programmatic activities, such as gas distribution, gas transmission, gas storage integrity management and wildfire mitigation; and

▪costs associated with third party liability insurance premiums.

Authorized costs are recovered as the commodity or service is delivered. To the extent authorized amounts collected vary from actual costs, the differences are generally recovered or refunded in a subsequent period based on the nature of the balancing account mechanism. In general, the revenue recognition criteria for balanced costs billed to customers are met when the costs are incurred. Because these costs are substantially recovered in rates through a balancing account mechanism, changes in these costs are reflected as changes in revenues. The CPUC and the FERC may impose various review procedures before authorizing recovery or refund of amounts accumulated for authorized programs, including limitations on the program’s total cost, revenue requirement limits or reviews of