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Settlement Reached On San Onofre Plant Closure Costs

Oceanside CA- San Diego Gas & Electric (SDG&E) today executed a joint settlement with Southern California Edison (SCE), The Utility Reform Network (TURN) and the California Public Utilities Commission (CPUC) Office of Ratepayer Advocates (ORA) which, if approved, would resolve the CPUC’s current inquiry into the June 2013 retirement of the San Onofre Nuclear Generating Station (SONGS). Last year, SCE, as the majority owner and operator of SONGS, made the decision to close the plant and to seek approval to begin decommissioning activities.

The settlement calls for SDG&E and SCE to refund all revenues associated with the replacement steam generators collected since Feb. 1, 2012. In addition, the utilities will remove from rate base other SONGS-related investments after Feb. 1 and recover them at a significantly reduced rate of return over a 10-year period, which will result in ongoing benefits to customers.

“We believe this settlement is fair and reasonable and balances the interests of customers and shareholders,” said Jeffrey W. Martin, CEO of SDG&E. “The settlement ensures that customers will not have to pay for San Onofre’s faulty steam generators post-shutdown and also allows shareholders to recoup the majority of their non-steam generator investment in the plant, which provided clean, reliable, low-cost energy to the region for more than 40 years.”

The agreement requires SDG&E to use the reduction in SONGS-related rates to reduce overall energy costs for customers. As part of the settlement, SDG&E will be allowed to recover the cost of the replacement power procured for customers while SONGS was not operating. The immediate refund of costs related to the steam generators combined with the reduction in rate base costs effectively results in a $121 million offset of some of the power costs incurred in 2013 and 2014 and helps to keep future electric rates lower than they otherwise would have been.

The settlement also provides the opportunity to pursue additional cost recovery for both customers and shareholders. SDG&E intends to vigorously pursue cost recovery from the manufacturers of the SONGS steam generators, Mitsubishi Heavy Industries, Ltd. (MHI), as well as from insurance companies.

The settlement establishes a regulatory sharing mechanism that would allocate to customers a portion of any proceeds the utilities’ might receive in the future from pending claims against the international insurance consortium, Nuclear Energy Insurance Limited (NEIL), and against MHI.

As a 20-percent owner of the shuttered nuclear plant, SDG&E is entitled to 20 percent of any such recoveries and would allocate a portion of the amounts recovered with customers as prescribed in the settlement.

SDG&E and its parent company, Sempra Energy, today filed a Form 8K with the Securities and Exchange Commission with details of the financial terms of the settlement. A CPUC decision on the settlement is expected in the second quarter of this year.

About SDG&E

SDG&E is a regulated public utility that provides safe and reliable energy service to 3.4 million consumers through 1.4 million electric meters and 861,000 natural gas meters in San Diego and southern Orange counties. The utility’s area spans 4,100 square miles. SDG&E is committed to creating ways to help customers save energy and money every day. SDG&E is a subsidiary of Sempra Energy (NYSE: SRE), a Fortune 500 energy services holding company based in San Diego. Connect with SDG&E’s Customer Contact Center at 800-411-7343, on Twitter (@SDGE) and Facebook.