Detailed narrative
Oncor Regulatory Progress
Oncor secured PUCT approval for its base rate review, increasing authorized equity layer to 43.5%, ROE to 9.75%, and cost of debt to 4.94%. This decision, along with the inaugural UTM filing for $4.4 billion of T&D assets, is expected to reduce regulatory lag and align rates with current costs, supporting financial strength during elevated capital investment.
The UTM filing, which can be made every 365 days, is expected to result in a final order and updated rates in H2 2026, with interim rates possible by October 4.
SDG&E Regulatory Progress
SDG&E filed an uncontested offer of settlement in its TO6 proceeding with FERC. If approved, this settlement would increase SDG&E's authorized base ROE to 10.28% with a hypothetical capital structure of 54% equity, retroactive to June 1, 2025. FERC approval is anticipated in the second half of this year, further improving financial returns.
Sempra Infrastructure Project Updates
Cimarron wind declared Commercial Operation Date (COD) during the quarter. At ECA LNG Phase 1, feed gas was introduced from the GRO pipeline, initiating the start-up process. First LNG production is expected next month, with substantial completion targeted for summer, leading to revenue recognition from long-term contracted sales.
Port Arthur LNG Phase 1 and Phase 2 construction projects continue to progress on time and on budget.
Strategic Simplification and Capital Recycling
Sempra is advancing its capital recycling program, including the SI Partners transaction and the EcoGas sale, both expected to close in Q2 or Q3 2026. Proceeds from these divestitures will be reinvested in utility businesses, supporting a strategy to concentrate future investments on U.S. utilities and simplify the business model.
This will also strengthen the balance sheet through parent debt paydown and deconsolidation of SI Partners, improving the credit profile.
Texas Large Load & Capital Opportunities
Oncor's 2026 RTP filing included 122 GW of large load (75 MW or higher) and 5.2 GW of medium load (25-75 MW), totaling 127.2 GW of substantiated load. This substantial pipeline, with 271 GW of the total 289 GW queue being data center related, represents significant upside beyond the existing $65 billion capital plan and $9 billion incremental capital, potentially leading to
California Wildfire Liability & Affordability
Management expressed reasonable confidence in legislative progress on wildfire liability (SB 254) this session, citing the CEA's report framing wildfire risk as a "whole of society problem" and acknowledging the current framework's inadequacy. Priorities include putting wildfire victims first, implementing a coordinated statewide risk mitigation approach, and making meaningful progress this legislative session to improve affordability and safety.
Informational hearings are scheduled to begin next week.
Supply Chain and Labor Management
Oncor has proactively managed its supply chain, diversifying its base, securing labor and materials, and expanding logistics. This proactive planning, supported by the Board, has created a competitive advantage, securing needs for the first three years of the base plan and line of sight for the outer two.
The large and consistent future flow of work at Oncor is attractive to contract labor, helping to mitigate potential labor constraints, with contract labor having almost tripled over the years.