We discuss regulatory matters in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report and provide updates to those discussions and information about new regulatory matters below. With the exception of regulatory balancing accounts, we generally do not earn a return on our regulatory assets until such time as a related cash expenditure has been made. Upon the occurrence of a cash expenditure associated with a regulatory asset, the related amounts are recoverable through a regulatory account mechanism for which we earn a return authorized by applicable regulators, which generally approximates the three-month commercial paper rate. The periods during which we recognize a regulatory asset while we do not earn a return vary by regulatory asset.


REGULATORY ASSETS (LIABILITIES)
(Dollars in millions)
	Sempra				SDG&E				SoCalGas
	September 30, 2024		December 31, 2023		September 30, 2024		December 31, 2023		September 30, 2024		December 31, 2023
Fixed-price contracts and other derivatives	$	54	$	215	$	8	$	14	$	46	$	201
Deferred income taxes recoverable in rates	1,526		1,142		780		626		660		430
Pension and PBOP plan obligations	(255)		(212)		51		48		(306)		(260)
Employee benefit costs	24		24		3		3		21		21
Removal obligations	(3,261)		(3,082)		(2,650)		(2,468)		(611)		(614)
Environmental costs	148		139		115		105		33		34
Sunrise Powerlink fire mitigation	123		124		123		124		—		—
Regulatory balancing accounts(1)(2):
Commodity – electric	(223)		(233)		(223)		(233)		—		—
Commodity – gas, including transportation	(179)		(259)		46		52		(225)		(311)
Safety and reliability	1,192		959		276		207		916		752
Public purpose programs	(442)		(273)		(200)		(144)		(242)		(129)
Wildfire mitigation plan	811		685		811		685		—		—
Liability insurance premium	107		113		79		90		28		23
Other balancing accounts	306		373		(70)		(152)		376		525
Other regulatory (liabilities) assets, net(2)	(188)		(10)		(5)		49		(181)		(58)
Total	$	(257)	$	(295)	$	(856)	$	(994)	$	515	$	614

(1) At September 30, 2024 and December 31, 2023, the noncurrent portion of regulatory balancing accounts – net undercollected for Sempra was $2,090 and $1,913, respectively, for SDG&E was $979 and $950, respectively, and for SoCalGas was $1,111 and $963, respectively.

The 2024 GRC proposed decision adopts a 2024 test year revenue requirement of $2,800 million for SDG&E’s combined operations ($2,198 million for its electric operations and $602 million for its natural gas operations), which is $207 million lower than the $3,007 million that SDG&E had requested in its updated application. The proposed 2024 combined revenue requirement, if adopted, represents an increase of $267 million (10.5%) compared to its authorized 2023 combined revenue requirement. The proposed post-test year revenue requirement, if adopted, would be annual increases of approximately 3.9% for 2025-2027 at SDG&E.

The 2024 GRC proposed decision adopts a 2024 test year revenue requirement of $4,062 million for SoCalGas, which is $372 million lower than the $4,434 million that SoCalGas had requested in its May 2022 application. The proposed 2024 revenue requirement, if adopted, represents an increase of $523 million (14.8%) over its authorized 2023 revenue requirement. The proposed post-test year revenue requirement, if adopted, would be annual increases of approximately 3.9% for 2025-2027 at SoCalGas.

Because a final decision for the 2024 GRC was not issued by September 30, 2024, SDG&E and SoCalGas recorded CPUC-authorized base revenues in the three months and nine months ended September 30, 2024 based on 2023 levels authorized under the 2019 GRC. The impact of the final decision, retroactive to January 1, 2024, as authorized by the CPUC, will be reflected in SDG&E’s and SoCalGas’ financial statements in the period in which the final decision is issued. We expect the CPUC to issue a final decision by the end of this year.

In October 2023, SDG&E submitted a separate request to the CPUC in its 2024 GRC, known as a Track 2 request. This request seeks review and recovery of $1.5 billion of wildfire mitigation plan costs incurred from 2019 through 2022 that were in addition to amounts authorized in the 2019 GRC. SDG&E expects to receive a proposed reasonableness review decision for its Track 2 request in the first half of 2025.

Revenues associated with the Track 2 request amounts described above have been recorded in a regulatory account. In February 2024, the CPUC approved an interim cost recovery mechanism that would permit SDG&E to recover in rates $194 million and $96 million of this regulatory account balance in 2024 and 2025, respectively. Such recovery of SDG&E’s wildfire mitigation plan regulatory account balance will be subject to refund, contingent on the reasonableness review decision for its Track 2 request.


AUTHORIZED COST OF CAPITAL FOR 2023

SDG&E							SoCalGas
Authorized weighting		Return on rate base		Weighted return on rate base(1)			Authorized weighting		Return on rate base		Weighted return on rate base
45.25	%	4.05	%	1.83	%	Long-Term Debt	45.60	%	4.07	%	1.86	%
2.75		6.22		0.17		Preferred Equity	2.40		6.00		0.14
52.00		9.95		5.17		Common Equity	52.00		9.80		5.10
100.00	%			7.18	%		100.00	%			7.10	%


AUTHORIZED COST OF CAPITAL FOR 2024

SDG&E							SoCalGas
Authorized weighting		Return on rate base		Weighted return on rate base			Authorized weighting		Return on rate base		Weighted return on rate base
45.25	%	4.34	%	1.96	%	Long-Term Debt	45.60	%	4.54	%	2.07	%
2.75		6.22		0.17		Preferred Equity	2.40		6.00		0.14
52.00		10.65		5.54		Common Equity	52.00		10.50		5.46
100.00	%			7.67	%		100.00	%			7.67	%

In October 2023, the CPUC issued a ruling to initiate a second phase of the 2023-2025 cost of capital proceeding to evaluate potential modifications to the CCM. In October 2024, the CPUC issued a final decision to modify the CCM. The final decision reduces the upward or downward adjustment to authorized ROE, if the CCM is triggered, to 20% of the change in the benchmark rate during the measurement period from the current 50%. The final decision adopts this change effective January 1, 2025, reducing both SDG&E’s and SoCalGas’ ROE by 42 bps to 10.23% and 10.08%, respectively, and allowing SDG&E and SoCalGas to update their respective costs of preferred equity and debt for 2025. SDG&E and SoCalGas intend to file advice letters in November 2024 to address the implementation, subject to approval, of the updated cost of capital.

SDG&E files separately with the FERC for its authorized transmission revenue requirement and ROE on FERC-regulated electric transmission operations and assets. SDG&E’s currently effective TO5 settlement provides for an ROE of 10.60%, consisting of a base ROE of 10.10% plus an additional 50 bps for participation in the California ISO (the California ISO adder). In May 2024, the CPUC and other parties filed a petition and complaint with the FERC seeking an order that directs SDG&E to remove the California ISO adder from its currently effective TO5 settlement and refund the California ISO adder retroactively from June 1, 2019. In June 2024, SDG&E exercised its right to terminate the TO5 settlement. Accordingly, in October 2024, SDG&E submitted its TO6 filing to the FERC to be effective January 1, 2025, 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% and continuation of the California ISO adder. SDG&E expects further proceedings on these two matters.

We provide below updates to ongoing matters related to SONGS, a nuclear generating facility near San Clemente, California that permanently ceased operations in June 2013, and in which SDG&E has a 20% ownership interest. We discuss SONGS further in Note 15 of the Notes to Consolidated Financial Statements in the Annual Report.

As a result of Edison’s decision to permanently retire SONGS Units 2 and 3, Edison began the decommissioning phase of the plant. Major decommissioning work began in 2020. We expect the majority of the decommissioning work to be completed around 2030. Decommissioning of Unit 1, removed from service in 1992, is largely complete. The remaining work for Unit 1 will be completed once Units 2 and 3 are dismantled and the spent fuel is removed from the site. The spent fuel is currently being stored on-site, until the DOE identifies a spent fuel storage facility and puts in place a program for the fuel’s disposal. SDG&E is responsible for approximately 20% of the total decommissioning cost.

In accordance with state and federal requirements and regulations, SDG&E has assets held in the NDT to fund its share of decommissioning costs for SONGS Units 1, 2 and 3. Amounts that were collected in rates for SONGS’ decommissioning are invested in the NDT, which is comprised of externally managed trust funds. Amounts held by the NDT are invested in accordance with CPUC regulations. SDG&E classifies debt and equity securities held in the NDT as available-for-sale. The NDT assets are presented on the Sempra and SDG&E Condensed Consolidated Balance Sheets at fair value with the offsetting credits recorded in noncurrent Regulatory Liabilities.

Except for the use of funds for the planning of decommissioning activities or NDT administrative costs, CPUC approval is required for SDG&E to access the NDT assets to fund SONGS decommissioning costs for Units 2 and 3. In December 2023, the CPUC granted SDG&E authorization to access NDT funds of up to $79 million for forecasted 2024 costs.

The following table shows the fair values and gross unrealized gains and losses for the securities held in the NDT on the Sempra and SDG&E Condensed Consolidated Balance Sheets. We provide additional fair value disclosures for the NDT in Note 8.


NUCLEAR DECOMMISSIONING TRUSTS
(Dollars in millions)
	Cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
	September 30, 2024
Short-term investments, primarily cash equivalents	$	18	$	—	$	—	$	18
Equity securities	80		241		(2)		319
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies(1)	69		1		—		70
Municipal bonds(2)	290		3		(6)		287
Other securities(3)	233		4		(6)		231
Total debt securities	592		8		(12)		588
Receivables (payables), net	(19)		—		—		(19)
Total	$	671	$	249	$	(14)	$	906

	December 31, 2023
Short-term investments, primarily cash equivalents	$	21	$	—	$	—	$	21
Equity securities	89		225		(2)		312
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	50		2		(1)		51
Municipal bonds	280		3		(8)		275
Other securities	228		3		(11)		220
Total debt securities	558		8		(20)		546
Receivables (payables), net	(7)		—		—		(7)
Total	$	661	$	233	$	(22)	$	872


SALES OF SECURITIES IN THE NUCLEAR DECOMMISSIONING TRUSTS
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Proceeds from sales	$	259	$	143	$	639	$	437
Gross realized gains	17		12		41		20
Gross realized losses	2		3		7		9

Net unrealized gains and losses, as well as realized gains and losses that are reinvested in the NDT, are included in noncurrent Regulatory Liabilities on Sempra’s and SDG&E’s Condensed Consolidated Balance Sheets. We determine the cost of securities in the trusts on the basis of specific identification.

SDG&E and the other owners of SONGS have insurance to cover claims from nuclear liability incidents arising at SONGS. Currently, this insurance provides $500 million in coverage limits, the maximum amount available, including coverage for acts of terrorism. In addition, the Price-Anderson Act provides an additional $60 million of coverage. If a nuclear liability loss occurs at SONGS and exceeds the $500 million insurance limit, this additional coverage would be available to provide a total of $560 million in coverage limits per incident.

The SONGS owners have nuclear property damage insurance of $130 million, which exceeds the minimum federal requirement of $50 million. This insurance coverage is provided through NEIL. The NEIL policies have specific exclusions and limitations that can result in reduced coverage. Insured members as a group are subject to retrospective premium assessments to cover losses sustained by NEIL under all issued policies. SDG&E could be assessed a negligible amount for retrospective premiums based on overall member claims.

The nuclear property insurance program includes an industry aggregate loss limit for non-certified acts of terrorism (as defined by the Terrorism Risk Insurance Act) of $3.24 billion. This is the maximum amount that will be paid to insured members who suffer losses or damages from these non-certified terrorist acts.