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$4 Billion Rate Case Settlement Proposed For Sempra's California Utilities

California state regulators on Thursday issued a proposed settlement totaling nearly $4 billion in the combined general rate cases for Sempra Energy's two utilities in the state: Southern California Gas Co. (SoCalGas) and San Diego Gas and Electric Co. (SDG&E).

While some major natural gas transmission pipeline and infrastructure projects are included in the settlement, the projected $665 million costs associated with the prolonged leak and mitigation measures at SoCalGas' Aliso Canyon underground storage facility in Los Angeles are not part of this regulatory proceeding, which dates back two years.

The proposed decision does require SoCalGas to separate Aliso Canyon costs to ensure that no such costs are reflected the next time it files a rate case, which is scheduled for next year.

Noting that the California Public Utilities Commission's (CPUC) first chance to vote on the proposed rate case settlement will be June 23, a CPUC spokesperson said that under the proposal, SoCalGas will have a $2.199 billion revenue requirement for all of this year, which is $132 million lower than what the gas-only utility asked for in November 2014.

Part of the settlement for SoCalGas includes $38 million for operations and maintenance and another $236 million for capital improvements in its four underground storage facilities, one of which is Aliso Canyon, the state's largest gas storage field. The capital dollars are expected to provide an early detection and repair system.

In November 2013, the CPUC approved a $201 million compressor replacement program at Aliso, coming after the Sempra gas-only utility reached a settlement with nearby Porter Ranch residents to address safe operation of the underground storage facility in what is designated as a high fire risk area (see Daily GPINov. 18, 2013).

In the other part of the proposed general rate settlement, SDG&E is authorized a $1.79 billion revenue requirement this year, most of which deals with it utility electric system, but also includes $307 million for gas utility operations. In total, the revenue requirement would be $106 million lower than the combination utility requested.

Both Sempra California utilities are mandated to provide two types of "accountability" reports to the CPUC coming out of the rate case: an accounting of how closely expenditures align with approved revenues, and an assessment measuring the safety impact of the expenditures.

For example, as part of the proposed rate settlement, both utilities are allotted funds to "perform pipeline inspection, testing and maintenance work on their gas transmission and distribution pipeline systems that are part of ongoing state and federal requirements.

There are also prohibitions related to executive compensation that for SoCalGas prevent awarding of bonus compensation for activities related to its underground storage operations, including Aliso Canyon, unless that compensation meets certain criteria related to Aliso Canyon and/or CPUC requirements.

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