SOUTHERN CALIFORNIA GAS CO Material Event - What Happened

Hey there! Let's break down what's going on with Southern California Gas Co. in a way that makes sense, without all the confusing business talk. Think of this as me explaining the news to you over coffee.

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1. What happened? (The actual event, in plain English)

Okay, so here's the scoop: On December 18, 2025, the California Public Utilities Commission (CPUC) made two important announcements affecting Southern California Gas Co. (SoCalGas) and its sister company, San Diego Gas & Electric (SDG&E), both owned by Sempra. First, the CPUC approved a final decision that slightly improves the amount of profit SoCalGas and SDG&E can earn on their investments. Second, the CPUC did not vote on a proposed decision for SDG&E's rates that, if approved, would hit their parent company Sempra's earnings with a big $471 million charge.

2. When did it happen?

This all happened on December 18, 2025, when the CPUC issued these decisions and non-decisions.

3. Why did it happen? (The backstory)

To understand this, you need a little background. The CPUC is like a referee for utility companies in California, setting rules and approving how much they can charge and how much profit they can make. The "Cost of Capital" decision is about how much return SoCalGas and SDG&E are allowed to make on the money they invest in things like pipelines and infrastructure. The CPUC's final decision here was a slight improvement for the companies. The other issue, the "Track 2 PD," is part of SDG&E's regular review of its rates, which determines how much it can charge customers. This proposed decision for SDG&E includes a significant charge related to past periods, from 2019 to 2024, which the CPUC chose not to vote on yet.

4. Why does this matter? (The "so what?")

Why should you care about this? Well, this isn't just some boring corporate news. For SoCalGas, the slightly better "return on equity" means they can potentially earn a bit more on their investments, which is a positive for the company's financial health. However, the proposed decision affecting SDG&E, while not directly about SoCalGas's rates, is a big deal for their parent company, Sempra. A potential $471 million charge is substantial and could impact Sempra's overall financial strength and its ability to invest in all its subsidiaries, including SoCalGas. It also shows the ongoing regulatory challenges these companies face.

5. Who is affected?

Who's feeling the heat (or relief) from this?

• Customers: For SoCalGas customers, the "Cost of Capital" decision doesn't immediately change your bill, but it sets the framework for how the company can earn money. The proposed decision for SDG&E's rates is specific to SDG&E customers, not SoCalGas customers.
• Employees: No direct impact on employees was mentioned in this specific announcement.
• Investors/Shareholders: Sempra's investors will see a significant hit to the company's reported earnings (GAAP EPS) for 2025 because of the potential $471 million charge related to SDG&E. However, the slightly improved return on equity for both utilities is a small positive. The uncertainty around the SDG&E decision will likely keep investors on edge.
• The Environment/Local Community: This event is about financial regulation, not directly about environmental impact or local community safety concerns.

6. What happens next? (The immediate and future implications)

So, what's the game plan from here?

• Immediate: The "Cost of Capital" decision is final, so that part is settled. For the SDG&E "Track 2 PD," the CPUC didn't vote, meaning the decision is still up in the air. SDG&E is actively trying to get a better outcome.
• Longer Term: A final decision on SDG&E's "Track 2 PD" is expected in 2026. Depending on that outcome, the $471 million charge could be confirmed, modified, or potentially avoided. This will continue to be a focus for Sempra and its subsidiaries.

7. What should investors/traders know? (Practical takeaways)

If you're thinking about your money or their stock, here's the lowdown:

• Watch the Stock: Sempra's stock (ticker: SRE) might see some volatility due to the significant earnings adjustment and ongoing regulatory uncertainty, especially regarding the SDG&E rate case.
• Potential Costs: The estimated $471 million after-tax charge for Sempra (due to SDG&E's rate case) is a major financial hit, impacting reported earnings. While the Cost of Capital decision is a slight positive, it's overshadowed by this larger potential charge.
• Regulatory Scrutiny: This event underscores the significant regulatory influence of the CPUC on utility companies like SoCalGas and SDG&E. Decisions can have major financial consequences, and the process can be lengthy and unpredictable.
• Long-Term View: Long-term investors in Sempra will need to monitor the final outcome of the SDG&E rate case and how Sempra manages these regulatory challenges. The ability to secure reasonable returns on investment (like the Cost of Capital decision) is crucial for long-term stability.