REGULATORY MATTERS (Tables)

9 Months Ended

Sep. 30, 2018

We show the details of regulatory assets and liabilities in the following table.



REGULATORY ASSETS (LIABILITIES)
(Dollars in millions)
	September 30, 2018			December 31, 2017

SDG&E:
Fixed-price contracts and other derivatives	$	47		$	96
Deferred income taxes refundable in rates	(267		)	(281		)
Pension and other postretirement benefit plan obligations	130			153
Removal obligations	(1,894		)	(1,846		)
Unamortized loss on reacquired debt	7			9
Environmental costs	28			29
Sunrise Powerlink fire mitigation	119			119
Regulatory balancing accounts⁽¹⁾
Commodity – electric	23			82
Gas transportation	22			22
Safety and reliability	64			48
Public purpose programs	(73		)	(70		)
Other balancing accounts	30			233
Other regulatory liabilities	(152		)	(70		)
Total SDG&E	(1,916		)	(1,476		)
SoCalGas:
Pension and other postretirement benefit plan obligations	378			513
Employee benefit costs	45			45
Removal obligations	(868		)	(924		)
Deferred income taxes refundable in rates	(383		)	(437		)
Unamortized loss on reacquired debt	7			8
Environmental costs	24			22
Workers’ compensation	9			12
Regulatory balancing accounts⁽¹⁾
Commodity – gas, including transportation	139			151
Safety and reliability	312			266
Public purpose programs	(276		)	(274		)
Other balancing accounts	(147		)	(114		)
Other regulatory liabilities	(110		)	(64		)
Total SoCalGas	(870		)	(796		)
Sempra Mexico:
Deferred income taxes recoverable in rates	83			83
Other regulatory assets	6			—
Total Sempra Energy Consolidated	$	(2,697	)	$	(2,189	)

⁽¹⁾

At September 30, 2018 and December 31, 2017, the noncurrent portion of regulatory balancing accounts – net undercollected for SDG&E was $79 million and $63 million, respectively. At September 30, 2018 and December 31, 2017, the noncurrent portion of regulatory balancing accounts – net undercollected for SoCalGas was $236 million and $118 million, respectively.

Schedule of Regulatory Liabilities

We show the details of regulatory assets and liabilities in the following table.



REGULATORY ASSETS (LIABILITIES)
(Dollars in millions)
	September 30, 2018			December 31, 2017

SDG&E:
Fixed-price contracts and other derivatives	$	47		$	96
Deferred income taxes refundable in rates	(267		)	(281		)
Pension and other postretirement benefit plan obligations	130			153
Removal obligations	(1,894		)	(1,846		)
Unamortized loss on reacquired debt	7			9
Environmental costs	28			29
Sunrise Powerlink fire mitigation	119			119
Regulatory balancing accounts⁽¹⁾
Commodity – electric	23			82
Gas transportation	22			22
Safety and reliability	64			48
Public purpose programs	(73		)	(70		)
Other balancing accounts	30			233
Other regulatory liabilities	(152		)	(70		)
Total SDG&E	(1,916		)	(1,476		)
SoCalGas:
Pension and other postretirement benefit plan obligations	378			513
Employee benefit costs	45			45
Removal obligations	(868		)	(924		)
Deferred income taxes refundable in rates	(383		)	(437		)
Unamortized loss on reacquired debt	7			8
Environmental costs	24			22
Workers’ compensation	9			12
Regulatory balancing accounts⁽¹⁾
Commodity – gas, including transportation	139			151
Safety and reliability	312			266
Public purpose programs	(276		)	(274		)
Other balancing accounts	(147		)	(114		)
Other regulatory liabilities	(110		)	(64		)
Total SoCalGas	(870		)	(796		)
Sempra Mexico:
Deferred income taxes recoverable in rates	83			83
Other regulatory assets	6			—
Total Sempra Energy Consolidated	$	(2,697	)	$	(2,189	)

⁽¹⁾

Proposed Revenue Requirements

In October 2017, the CPUC approved the embedded cost of debt presented in advice letters filed by SDG&E and SoCalGas, resulting in a revised return on rate base for SDG&E of 7.55 percent and for SoCalGas of 7.34 percent, effective January 1, 2018, as depicted in the table below:



AUTHORIZED COST OF CAPITAL AND RATE STRUCTURE – CPUC

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	%	4.59	%	2.08	%	Long-Term Debt	45.60	%	4.33	%	1.97	%
2.75		6.22		0.17		Preferred Stock	2.40		6.00		0.14
52.00		10.20		5.30		Common Equity	52.00		10.05		5.23
100.00	%			7.55	%		100.00	%			7.34	%

The changes to the embedded cost of debt and return on rate base resulting from the updates included in the filed advice letters are summarized below:



CHANGES TO THE EMBEDDED COST OF DEBT

	SDG&E						SoCalGas
	Cost of debt			Return on rate base			Cost of debt			Return on rate base
Previously	5.00		%	7.79		%	5.77		%	8.02		%
Authorized, effective January 1, 2018	4.59		%	7.55		%	4.33		%	7.34		%
Differences	(41	)	bps	(24	)	bps	(144	)	bps	(68	)	bps