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
	June 30, 2024		December 31, 2023		June 30, 2024		December 31, 2023		June 30, 2024		December 31, 2023

Fixed-price contracts and other derivatives	$	49	$	215	$	12	$	14	$	37	$	201
Deferred income taxes recoverable in rates	1,401		1,142		700		626		615		430
Pension and PBOP plan obligations	(226)		(212)		54		48		(280)		(260)
Employee benefit costs	24		24		3		3		21		21
Removal obligations	(3,189)		(3,082)		(2,569)		(2,468)		(620)		(614)
Environmental costs	148		139		115		105		33		34
Sunrise Powerlink fire mitigation	122		124		122		124		—		—
Regulatory balancing accounts(1)(2):
Commodity – electric	(39)		(233)		(39)		(233)		—		—
Commodity – gas, including transportation	(249)		(259)		31		52		(280)		(311)
Safety and reliability	1,153		959		252		207		901		752
Public purpose programs	(424)		(273)		(189)		(144)		(235)		(129)
Wildfire mitigation plan	770		685		770		685		—		—
Liability insurance premium	110		113		83		90		27		23
Other balancing accounts	438		373		(86)		(152)		524		525
Other regulatory (liabilities) assets, net(2)	(106)		(10)		24		49		(128)		(58)
Total	$	(18)	$	(295)	$	(717)	$	(994)	$	615	$	614

(1) At June 30, 2024 and December 31, 2023, the noncurrent portion of regulatory balancing accounts – net undercollected for Sempra was $1,878 and $1,913, respectively, for SDG&E was $911 and $950, respectively, and for SoCalGas was $967 and $963, respectively.

In May 2022, SDG&E and SoCalGas filed their 2024 GRC applications requesting CPUC approval of test year revenue requirements for 2024 and attrition year adjustments for 2025 through 2027. SDG&E and SoCalGas requested revenue requirements for 2024 of $3.0 billion and $4.4 billion, respectively. SDG&E and SoCalGas proposed post-test year revenue requirement changes using various mechanisms that, if adopted, are estimated to result in annual increases of approximately 8% to 11% at SDG&E and approximately 6% to 8% at SoCalGas. Intervening parties have proposed various adjustments to SDG&E’s and SoCalGas’ revenue requirement requests. We expect the CPUC to issue a proposed decision in the third quarter of 2024 and a final decision by the end of this year. The CPUC has authorized SDG&E and SoCalGas to recognize the effects of the 2024 GRC final decision retroactive to January 1, 2024.

SDG&E and SoCalGas recorded CPUC-authorized base revenues in the six months ended June 30, 2024 based on 2023 levels authorized under the 2019 GRC because a final decision in the 2024 GRC remains pending. The results of the 2024 GRC may materially differ from what is contained in the GRC applications.

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 Track 2 in the first quarter of 2025.

Revenues associated with the Track 2 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 Track 2.

The CPUC approved the following cost of capital for SDG&E and SoCalGas that became effective on January 1, 2023 and was to remain in effect through December 31, 2025, subject to the CCM. The CPUC has issued a ruling to initiate a second phase of this cost of capital proceeding to evaluate potential modifications to the CCM. We expect a proposed decision on the second phase in the second half of 2024.


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	%

The CCM was triggered for SDG&E and SoCalGas on September 30, 2023. In December 2023, the CPUC approved increases to SDG&E’s and SoCalGas’ authorized rates of return effective January 1, 2024, which are in effect through December 31, 2025, subject to the CCM. Several parties submitted two separate requests for the CPUC to review such approval, both of which were denied.


AUTHORIZED COST OF CAPITAL FOR 2024 – 2025

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	%

SDG&E files separately with the FERC for its authorized ROE on FERC-regulated electric transmission operations and assets. SDG&E’s currently effective TO5 settlement provides for a 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 June 2024, SDG&E exercised its right to terminate the TO5 settlement. SDG&E expects to file with the FERC in the fourth quarter of 2024 a new rate request to be effective January 1, 2025. 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 current TO5 formula rate and refund the California ISO adder retroactively from June 1, 2019. 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
	June 30, 2024
Short-term investments, primarily cash equivalents	$	23	$	—	$	—	$	23
Equity securities	90		235		(4)		321
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies(1)	61		1		(1)		61
Municipal bonds(2)	281		1		(9)		273
Other securities(3)	235		2		(10)		227
Total debt securities	577		4		(20)		561
Receivables (payables), net	(23)		—		—		(23)
Total	$	667	$	239	$	(24)	$	882

	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 June 30,				Six months ended June 30,
	2024		2023		2024		2023
Proceeds from sales	$	199	$	138	$	380	$	294
Gross realized gains	10		6		24		8
Gross realized losses	3		3		5		6

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.