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Sempra Utilities Rate Settlements Approved

State regulators last Thursday adopted new general rate settlements for both Sempra Energy California utilities -- San Diego Gas and Electric Co. (SDG&E) and Southern California Gas Co. (SoCalGas) -- authorizing separate annual revenue requirements that combined amount to slightly more than $3 billion annually.

The revenue increases are effective Jan. 1, 2008, which was one of two changes the California Public Utilities Commission (CPUC) made it the recommendation of Administrative Law Judge Doug Long.

A key provision of the decision is that not only are the rates this year higher, but pre-set annual rate increases of 2.9-3.1% annually, during the subsequent three years (2009-2011) were established for each utility. The move to lock in annual rate increases over a subsequent period is a new approach for the five-member commission.

For SDG&E rates go up $150 million (12.4%) this year and another $41 million (3%), $44 million (3.1%) and $44 million (3%), in 2009 through 2011, respectively. For SoCalGas, rates increase $59 (3.6%) in 2008, with additional hikes of $52 million (3.1%), $50 million (2.9%) and $53 million (3%) in 2009-2011, respectively.

Overall, the CPUC adopted eight separate settlements related to the Sempra utilities' joint general rate filings that were consolidated by the regulators' ruling in January last year. The regulators also rejected two settlements -- a six-year leadership agreement with the nonprofit Greenlining Institute on corporate philanthropy and diversity issues, and a labor union agreement for SoCalGas.

The Greenlining pact was viewed as something the utilities should do on their own but outside the CPUC's sphere, and the labor deal was seen as giving one union local preferential treatment and therefore "not in the public interest."

As part of their original requests, SDG&E asked for 2008 revenues of $1.785 billion and SoCalGas asked for $1.425 billion; Thursday's CPUC decision collectively cut $164 million from the 2008 test year request, and another $213 million requested in the rest of the somewhat unprecedented four-year rate cycle.

This decision requires the two utilities to file a new general rate case for the test year 2012.

In addition to changing Long's proposed effective date, the decision also rejected his suggestion that an earnings cap be placed on both utilities as part of the settlements. The settlements all dropped current earnings sharing mechanisms for both utilities, and the CPUC concluded it was better not to change provisions in the rate deals by inserting a limit on earnings levels.

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