Company: SREA
Filing Date: 2025-02-25
Form Type: 10-K
Source: 0001032208-25-000012
Chunk: 216

Company: SEMPRA
Filing Date: 2025-02-25
Form: 10-K
Item: Item 1
Chunk 216
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 Sempra California – Cost of Capital Proceedings,” and in Note 4 of the Notes to Consolidated Financial Statements.

The FERC regulates electric transmission rates, the transmission and wholesale sales of electricity in interstate commerce, transmission access, the rates of return on investments in electric transmission assets, and other similar matters involving SDG&E. These ratemaking mechanisms are subject to many risks similar to those described above regarding the CPUC ratemaking proceedings. In particular, SDG&E’s authorized TO5 settlement provided for an ROE of 10.60%, consisting of a base ROE of 10.10% plus the California ISO adder. In December 2024, the FERC issued an order, which SDG&E has appealed, finding that SDG&E is not eligible for the California ISO adder and that the TO5 adder refund provision has been triggered, requiring SDG&E to refund customers the California ISO adder retroactively from June 1, 2019. In October 2024, SDG&E submitted its TO6 filing to the FERC, requested to be effective January 1, 2025, and subject to refund. SDG&E’s TO6 filing proposes, among other items, an increase to SDG&E’s currently authorized base ROE from 10.10% to 11.75% plus the California ISO adder, for a total ROE of 12.25%. In December 2024, the FERC accepted SDG&E’s TO6 filing but suspended the effective date to June 1, 2025 and disallowed the inclusion of the California ISO adder, which SDG&E has appealed. Any unfavorable outcome in these proceedings, such as the discontinuation of the California ISO adder or not being successful in our appeal of the FERC decision finding that the TO5 adder refund provision was triggered, could have a material adverse effect on SDG&E’s and Sempra’s results of operations, financial condition, cash flows and/or prospects.

CPUC Authority Over Operational Matters

Our operations are subject to CPUC rules (and similar FERC rules), commonly referred to as “affiliate rules,” relating to transactions among SDG&E, SoCalGas and other Sempra businesses. These rules primarily impact market transactions and marketing activities involving transmission supply and capacity, including sales or other trades of natural gas or electricity within or among SDG&E and SoCalGas and Sempra and its covered affiliates. Noncompliance with these rules, as well as any changes