California's new law on wildfire liability has greatly improved the operating environment and financial health of electric utilities like San Diego Gas & Electric, Sempra Energy said Friday on its second quarter earnings call.
Sempra also touted progress on its LNG export facilities, noting that the first train of its Cameron LNG project in will launch commercial operations in mid-August. The company has also signed contracts for nearly 65% of the capacity at its proposed Port Arthur facility, Sempra officials said Friday.
There are several key parts of California's new wildfire law, enacted earlier this month, that will help utilities, said Joe Householder, Sempra COO.
"We believe these new laws substantially improve the regulatory model in California," he said on the earnings call.
WILDFIRE LAW
First, the law creates a wildfire fund that will pay claims that exceed insurance coverage, he said. Of the $21 billion fund, SDG&E's share is $323 million up front, plus $13 million annually over a 10-year period, he said.
The law also outlines an annual safety certification, which SDG&E received July 26, Householder said. A utility's action is deemed reasonable if it has this certification, unless there are serious doubts about the utility's conduct, he explained in a presentation.
The law creates a new prudency standard of review, more comparable to the federal standard, he said. There is a shareholder liability cap for future wildfire damages under the prudency review, and SDG&E's liability cap is about $825 million, he said. Finally, there is increased safety spending, and SDG&E's share of this spending is $215 million, he said.
LNG PROGRESS
Regarding LNG, the first train of the Cameron LNG facility in Louisiana is expected to begin commercial operation in mid-August, said Jeff Martin, Sempra CEO. Two more trains are under construction at the site and the company is considering adding more. "We remain very excited about Cameron expansion," he said.
Sempra is continuing work on its proposed Port Arthur LNG project in Texas, Householder said. The company signed a heads of agreement with Aramco Services Company, and this deal, combined with a contract with Polish Oil & Gas, represents almost 65% of the project's offtake capacity, he said. Meanwhile, Sempra has a goal to reach a final investment decision on the first phase of the proposed Energia Costa Azul Liquefaction project in Mexico by the end of the year, he said.
Sempra also completed the sale of its US wind assets, and recycled some of the money into acquisitions in Texas, where subsidiary Oncor Electric Delivery is located, Martin said. And the company continues to work to sell its South American businesses, which will help the company move more money into its North American growth markets, he said. Earlier this year, Sempra made clear the company is relying more heavily now on three regulated businesses, Oncor, SDG&E and Southern California Gas.
