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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
Date of Report: July 15, 1998
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SEMPRA ENERGY
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(Exact name of registrant as specified in its charter)
CALIFORNIA 1-14201 33-0732627
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(State of incorporation (Commission (I.R.S. Employer
or organization) File Number) Identification No.
101 ASH STREET, SAN DIEGO, CALIFORNIA 92101
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(Address of principal executive offices) (Zip Code)
(619) 696-2000
Registrant's telephone number, including area code-------------------
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(Former name or former address, if changed since last report.)
FORM 8-K
Item 5. Other Events.
As described in the 1997 Annual Reports on Form 10-K of Enova
Corporation and San Diego Gas & Electric Company, the March 31,
1998 Quarterly Reports on Form 10-Q of Enova Corporation and San
Diego Gas & Electric Company, the June 30, 1998 Current Report on
Form 8-K of Sempra Energy, and/or the July 7, 1998 Current Report
on Form 8-K of SDG&E Funding LLC:
In December 1997, the California Supreme Court dismissed a
petition submitted by a coalition of consumer groups to
overturn the CPUC's Rate-Reduction Bond financing orders.
A related coalition of consumer groups has also put
together a California ballot initiative (the Voter
Initiative) that, among other things, could result in an
additional 10-percent rate reduction, require that this
rate reduction be achieved through the elimination or
reduction of payments associated with recovery by the
California investor-owned utilities (IOUs) of investments
in certain generation-related assets and purchased-power
contracts in conjunction with the transition to a
competitive market (CTC charges), and prohibit the
collection of the charge on customer bills that is
intended to finance the 10-percent rate reduction that
became effective January 1, 1998.
In June 1998, the coalition of consumer groups received
verification that the Voter Initiative received the needed
signatures to qualify for the November 1998 California
ballot.
In May 1998, a statewide coalition of California's
investor-owned electric utilities and business groups
known as "Californians for Affordable and Reliable
Electric Services" (CARES) filed a lawsuit with the Third
District Court of Appeal to block the Voter Initiative
(Californians for Affordable and Reliable Electric
Services v. Bill Jones, et al., No. 3 Civ. C029528). The
CARES petition challenges the Voter Initiative as illegal
and unconstitutional on its face, and seeks to remove the
Voter Initiative from the November 1998 ballot. On July 2,
the Third District Court of Appeal issued a one-sentence
order refusing to grant review of the CARES petition at
the present time. Such ruling did not represent a ruling
on the merits of the arguments presented; rather, the
ruling was a decision by the court not to consider the
merits of the CARES petition prior to the November
balloting.
On July 6, CARES filed a petition in the California
Supreme Court seeking to overturn the Third District Court
of Appeal's denial. No assurance can be given as to
whether the Voter Initiative will be excluded from the
November 1998 ballot.
The Voter Initiative seeks to amend or repeal Assembly Bill 1890,
Chapter 854, California Statutes of 1996 (the Statute) in various
respects, including requiring utilities to provide a 10-percent
reduction in electricity rates charged to residential and small
commercial customers in addition to the 10-percent rate reduction
that became effective on January 1, 1998. Among other things, the
Voter Initiative would prohibit a utility from collecting the
separate nonbypassable charges payable by residential and small
commercial customers (FTA Charges) for the payment of Rate
Reduction Bonds. If this prohibition against collecting these
charges were found to be unenforceable by a court of competent
jurisdiction, the Voter Initiative would require the utility to
offset any such FTA Charge by crediting back to the customer the
amount of such charge.
According to the Voter Initiative, the rate reductions would be
achieved through cutting payments to the IOUs for their nuclear and
other uneconomic generation and purchased-power costs. Costs for
nuclear generation plants and related assets and obligations would
not be paid for by electric utility customers, except to the extent
that such costs are recovered by the sale of electricity at
competitive market prices as reflected in independent Power
Exchange revenues or in contracts with the Independent System
Operator. Reasonable nuclear decommissioning costs (as referenced
in Section 379 of the Public Utilities Code) would not be affected.
Costs for non-nuclear generation plants and related assets and
obligations would not be recovered from electric utility customers
under the cost-recovery mechanism provided for by sections 367
through 376 of the Public Utilities Code, except to the extent that
such costs are recovered by the sale of electricity at competitive
market rates from independent Power Exchange revenues or from
contracts with the Independent System Operator, unless the electric
utility first demonstrates to the satisfaction of the Commission at
a public hearing that failure to recover such costs would deprive
it of the opportunity to earn a fair rate of return.
The Voter Initiative filed with the California Attorney General is
incorporated (as Exhibit 99.1) by reference to the July 7, 1998
Current Report on Form 8-K of SDG&E Funding LLC (Commission File
No. 333-30761).
If the Voter Initiative is not removed from the November 1998
ballot as requested in the CARES petition and is voted into law,
further litigation would ensue.
Registrant is unable to predict the outcome of this matter, but if
the Voter Initiative were to be voted into law, and not immediately
stayed and ultimately invalidated by the courts, it could have a
material adverse effect on Registrant's results of operations and
financial position. Upon voter approval of the Voter Initiative, a
write-down of a portion of Registrant's generation-related assets
might be required under applicable accounting principles, depending
on Registrant's assessment of both the probability that the Voter
Initiative would be struck down by the courts and the manner in
which it would be interpreted and applied to Registrant. The
meaning of many provisions of the Voter Initiative is unclear and,
if all or part of the Voter Initiative is upheld by the courts,
will be subject to judicial and regulatory interpretation. If the
most onerous interpretations of the provisions are applied, and it
is assumed that Registrant's nuclear-generation facilities have
zero market value and that Registrant's fossil-generation assets
have a market value equal to their carrying amounts, the potential
write-down of Registrant's generation-related assets could amount
to as much as approximately $400 million after taxes.
Additionally, if the Voter Initiative were passed and survived
legal challenges, Registrant could suffer impacts on its annual
earnings, including the possibility of being required to offset
customer charges necessary to pay the principal and interest
related to the financing of the rate reduction. If the same
interpretations and assumptions are made as in the preceding
paragraph, the annual after-tax earnings reductions could be as
large as approximately $50 million in 1999, followed by declining
amounts for some years thereafter.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
99.1 Voter Initiative (No. SA 97 RF 0064), incorporated
by reference to Exhibit 99.1 to the July 7, 1998 Current
Report on Form 8-K of SDG&E Funding LLC (Commission File No.
333-30761).
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrants have duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SEMPRA ENERGY
(Registrant)
Date: July 15, 1998 By: /s/ F.H. Ault
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F.H. AULT
Vice President and Controller