2.0.0.10 false SEMPRA UTILITIES' REGULATORY MATTERS 010900 - Disclosure - SEMPRA UTILITIES' REGULATORY MATTERS true false false false 1 usd $ false false 2 Notes to Condensed Consolidated Financial Statements 0 sre_NotesToConsolidatedFinancialStatementsAbstract sre false na duration string No definition available. false false false false false true false false false false false false 1 false false false false 0 0 false false false No definition available. false 3 Sempra Utilities' Regulatory Matters 1 us-gaap_PublicUtilitiesDisclosureTextBlock us-gaap true na duration string No definition available. false false false false false false false false false false false false 1 false false false false 0 0 <div style="font-size:12pt">NOTE 9. SEMPRA UTILITIES' REGULATORY MATTERSPOWER PROCUREMENT AND RESOURCE PLANNINGSunrise Powerlink Electric Transmission Line In December 2008, the CPUC issued a final decision authorizing SDG&E to construct a 500-kilovolt (kV) electric transmission line between the Imperial Valley and the San Diego region (Sunrise Powerlink). This line is designed to provide 1,000 MW of increased import capability into the San Diego area. The decision allows SDG&E to construct the Sunrise Powerlink along a route that would generally run south of the Anza-Borrego Desert State Park. The decision also approves the environmental impact review conducted jointly by the CPUC and the Bureau of Land Management (BLM) and establishes a total project cost cap of $1.9 billion, including approximately $190 million for environmental mitigation costs. In January 2009, the BLM issued its decision approving the project, route and environmental review. After the issuance of the CPUC final decision, applications for rehearing before the CPUC were filed by the Utility Consumers Action Network (UCAN) and the Center for Biological Diversity/Sierra Club (CBD). The CPUC issued a final decision in July 2009 denying the requests for rehearing. UCAN and CBD jointly filed a petition with the California Supreme Court in August 2009 challenging the CPUC's decision with regard to implementation of the California Environmental Quality Act (CEQA). UCAN also filed a petition with the California Court of Appeal (Court of Appeal) challenging the decision on other legal grounds, which the Court of Appeal procedurally granted in March 2010. The UCAN/CBD appeal will be addressed by the California Supreme Court after the Court of Appeal rules on the first petition. Three appeals of the BLM decision approving the segment of the route within its jurisdiction were filed by individuals, a community organization, and the Viejas Indian tribe in March 2009. A request to stay the BLM decision was also filed. The Interior Board of Land Appeals (IBLA) dismissed the appeal filed by the individuals and issued a ruling in July 2009 denying the request for a stay. In addition, the Viejas Indian tribe withdrew its appeal in July 2009. The IBLA is still reviewing the one remaining appeal. The same project opponents who filed the BLM appeal also filed a lawsuit in Federal District Court in Sacramento, California, for Declaratory and Injunctive Relief regarding Sunrise Powerlink. The complaint alleges that the BLM failed to properly assess the environmental impacts of the approved Sunrise Powerlink route and the related potential development of renewable resources in east San Diego County and Imperial County. The complaint requests a declaration that the BLM violated Federal law in approving Sunrise Powerlink and an injunction against any construction activities.  The Sunrise Powerlink also requires approval from the United States Forest Service (USFS). SDG&E expects the USFS to issue a Record of Decision (ROD) approving the segment of the route within its jurisdiction in the first half of 2010. The USFS decision is also subject to administrative and judicial review. Sunrise Powerlink costs will be recovered in SDG&E's Electric Transmission Formula Rate, where SDG&E must demonstrate to the Federal Energy Regulatory Commission (FERC) that such costs were prudently incurred. The CPUC decision requires SDG&E to adhere to certain commitments it made during the application process, as follows: <ul><li>not to contract, for any length of term, with conventional coal generators to deliver power via the Sunrise Powerlink; </li><li>if any currently approved renewable energy contract that is deliverable via the Sunrise Powerlink fails, to replace it with a viable contract with a renewable generator located in the Imperial Valley region; and </li><li>voluntarily raise SDG&E's Renewables Portfolio Standard Program goal (discussed below under "Renewable Energy") to 33 percent by 2020. </li></ul>SDG&E commenced procurement activities for the project in 2009, but before construction can begin, additional agency permits, including the ROD, must be obtained. The total amount invested by SDG&E in the Sunrise Powerlink project as of March 31, 2010 was $289 million, which is included in Property, Plant and Equipment on the Condensed Consolidated Balance Sheets of Sempra Energy and SDG&E. SDG&E expects the Sunrise Powerlink to be in commercial operation in 2012. We provide additional information concerning Sunrise Powerlink in Note 15 of the Notes to Consolidated Financial Statements in the Annual Report.Renewable Energy Certain California electric retail sellers, including SDG&E, are required to deliver 20 percent of their retail energy sales from renewable energy sources beginning in 2010. The rules governing this requirement, administered by both the CPUC and the California Energy Commission (CEC), are generally known as the Renewables Portfolio Standard (RPS) Program. In September 2009, the Governor of California issued an Executive Order which set a target for each California utility to procure 33 percent of their annual electric energy requirements from renewable energy sources starting no later than 2020. This Executive Order designates the California Air Resources Board (CARB) as the agency responsible for establishing the compliance rules and regulations. In 2008, the CPUC issued a decision defining flexible compliance mechanisms that can be used to defer compliance with or meet the RPS Program mandates in 2010 and beyond. The decision established that a finding by the CPUC of insufficient transmission is a permissible reason to defer compliance with the RPS Program mandates. This decision also confirmed that any renewable energy procured in excess of the established targets for prior years, currently and in the future, could be applied to any shortfalls in the years 2010 and beyond. SDG&E continues to aggressively secure renewable energy supplies to achieve the RPS Program goals. A substantial number of these supply contracts, however, are contingent upon many factors, including: <ul><li>access to electric transmission infrastructure (including SDG&E's Sunrise Powerlink transmission line); </li><li>timely regulatory approval of contracted renewable energy projects; </li><li>the renewable energy project developers' ability to obtain project financing and permitting; and </li><li>successful development and implementation of the renewable energy technologies. </li></ul>SDG&E believes it will be able to comply with the RPS Program requirements based on its contracting activity and application of the flexible compliance mechanisms. SDG&E's failure to comply with the RPS Program requirements in 2010, or in any subsequent years, could subject it to a CPUC-imposed penalty of 5 cents per kilowatt hour of renewable energy under-delivery up to a maximum penalty of $25 million per year.General Rate Case (GRC) The CPUC uses a general rate case proceeding to prospectively set rates sufficient to allow the Sempra Utilities to recover their reasonable cost of operations and to provide the opportunity to realize an acceptable rate of return on their investment. The Sempra Utilities are scheduled to file their next rate case with the CPUC with a 2012 test year in the third quarter of 2010. In November 2009, SDG&E and SoCalGas, jointly with the Division of Ratepayer Advocates (DRA), a division of the CPUC representing the interests of customers, filed a petition with the CPUC to delay the filing of SDG&E's and SoCalGas' next GRC applications by one year. In April 2010, the CPUC issued a decision denying the joint petition and directing SDG&E and SoCalGas to follow their original GRC schedules. Utility Incentive Mechanisms The CPUC applies performance-based measures and incentive mechanisms to all California utilities, under which the Sempra Utilities have earnings potential above authorized base margins if they achieve or exceed specific performance and operating goals. We provide additional information regarding these incentive mechanisms in Note 15 of the Notes to Consolidated Financial Statements in the Annual Report, and updates below. Energy Efficiency In December 2009, the CPUC awarded $0.3 million and $2.1 million to SDG&E and SoCalGas, respectively, for their performance during the 2006 – 2008 program period, and held back 35 percent of the awards pending a final true-up in 2010. In February 2010, the Sempra Utilities filed a petition with the CPUC to correct errors in the computation of the awards. If adopted, the changes would increase the awards by $426,000 for SDG&E and $1.3 million for SoCalGas, net of the 35% holdback. The December 2009 decision also established a schedule for the 2010 incentive true-up. The schedule provides for the issuance of a draft verification report in second quarter 2010 and a final decision in third quarter 2010. Natural Gas Procurement In January 2010, the CPUC approved a Gas Cost Incentive Mechanism award of $12 million for SoCalGas’ procurement activities during the 12-month period ending March 31, 2009. Cost of Capital A cost of capital proceeding determines the Sempra Utilities' authorized capital structure and the authorized rate of return that the Sempra Utilities may earn on their electric and natural gas distribution and electric generation assets.In January 2010, the CPUC approved SDG&E's and the DRA's joint petition to delay SDG&E's next scheduled cost of capital application for two years. With this approval, SDG&E's next cost of capital application is scheduled to be filed in April 2012 for a 2013 test year, consistent with the schedule for cost of capital applications for each of Southern California Edison (Edison) and Pacific Gas and Electric (PG&E).Advanced Metering Infrastructure In April 2010, the CPUC issued a decision approving SoCalGas' application to upgrade approximately six million natural gas meters with an advanced metering infrastructure (AMI), subject to certain safeguards to better ensure its cost effectiveness for ratepayers. With these safeguards, the approved cost of the project is $1.05 billion (including approximately $900 million in capital investment), and SoCalGas will be subject to risk/reward sharing for costs above or below this amount. Installation of the meters is expected to begin in 2012 and continue through 2017. 2007 wildfires Cost Recovery SDG&E filed an application with the CPUC in March 2009 seeking to recover the incremental cost incurred to replace and repair company facilities under CPUC jurisdiction damaged by the October 2007 wildfires. This application was filed in accordance with the CPUC rules governing incremental costs incurred as a result of a declared emergency or catastrophic event. The DRA filed a protest to SDG&E's request for recovery of the incremental costs, requesting that the CPUC stay the proceeding until completion of the fire investigations, which we describe in Note 10. SDG&E and the DRA have reached an agreement in principle regarding the cost recovery request which, if approved by the CPUC, would result in SDG&E recovering $43 million. A formal settlement agreement is being finalized, but no specific filing date has been established. SDG&E also incurred $30.1 million of incremental costs for the replacement and repair of company facilities under FERC jurisdiction, which are currently being recovered in SDG&E's electric transmission rates. We discuss recovery of 2007 wildfire litigation costs in Note 10.INSURANCE COST RECOVERY SDG&E filed an application with the CPUC in August 2009 seeking authorization to recover higher liability insurance premiums and losses due to higher deductibles which SDG&E began incurring on July 1, 2009. Evidentiary hearings were held in April 2010 and a final CPUC decision is expected by the end of 2010. SDG&E made the filing under the CPUC’s rules allowing utilities to seek recovery of significant cost increases incurred between GRC filings resulting from unforeseen circumstances. SDG&E is requesting a $29 million revenue requirement for the 2009/2010 policy period for the incremental increase in its liability and wildfire insurance premium costs above what is currently authorized in rates. The CPUC's rules allow a utility to recover costs that meet certain criteria, subject to a $5 million deductible per event. In the three months ended March 31, 2010, SDG&E has expensed $8 million (pretax) of incremental insurance premiums associated with its wildfire coverage. </div> NOTE 9. SEMPRA UTILITIES' REGULATORY MATTERSPOWER PROCUREMENT AND RESOURCE PLANNINGSunrise Powerlink Electric Transmission LineIn December 2008, the CPUC false false false This element can be used to encapsulate the entire disclosure for public utilities (including data and tables). Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 71 false false 1 2 false UnKnown UnKnown UnKnown false true