Karen L. Sedgwick
Executive Vice President & Chief Financial Officer at Sempra
Thank you, Allen.
I'd first like to provide some background on the proposed decision we received in our general rate cases last month. To start, the proposed decision increases the revenue requirement in 2024 by 10.5% for SDG&E and 14.8% for SoCalGas. Moving to rate base. The PD recommends 2024 authorized rate base of $8.4 billion for SDG&E and $12.8 billion for SoCalGas. There are, however, critical aspects of the PD that require additional work, particularly in areas that impact our ability to manage the system safely. Examples include needed investments for integrity management of our natural gas distribution system and selective undergrounding of our electrical system to support wildfire mitigation efforts.
On the positive side, you'll recall that our GRC addresses a broad range of topics that are important to the growth of our business. For example, the PD adopted certain infrastructure and technology capital projects that were not included in the base attrition year percentages, but are also important because they will be placed in rates upon completion. Also as a reminder, the proposed decision makes available a process that allows for certain changes to be considered before a final decision is issued. On November 4, the CPUC heard oral arguments, the records of which are open to the public.
SDG&E and SoCalGas' subject matter experts are engaged in the regulatory process and working collaboratively towards reaching a final outcome that's beneficial for all stakeholders. During the quarter, our California Utilities also received a final decision in Phase 2 of the cost of capital proceeding, which has a negative impact on the CCM for 2025. This onetime formulaic modification lowers ROEs by 42 basis points and reduces the authorized adjustment percentage for future triggers to 20%. The silver lining here is that the declining interest rate environment, such as the one we now find ourselves in, limits the magnitude of subsequent reductions in ROE in off-cycle years. For planning purposes, I'd also like to note that we expect to file our cost of capital application for the years 2026 to 2028 in March of next year.
Turning to the Federal Energy Regulatory Commission, SDG&E submitted a new TO6 filing on October 30, where we updated our formulaic rate and made the case for a constructive improvement in the authorized ROE to 12.25%. This consists of a base ROE of 11.75% plus a 50 basis point adder. We believe this proposal reflects current market conditions and we look forward to working through the regulatory process to achieve a productive results. Additionally, at Sempra California, we're excited to share that the SDG&E service territory has seen electric demand growth, hitting a new all-time record peak demand of over 5 gigawatts in September. This reflects growing demand from roughly 160,000 EVs connected to our system, one of the highest EV penetration rates in the country and from continued electrification of the Southern California economy.
Please turn to the next slide. Turning to Sempra Infrastructure. We continue to witness geopolitical developments around the world, which strengthen the value proposition of our infrastructure franchise. The US is the largest exporter of LNG in the world. And as a leader in the sector, Sempra Infrastructure remains well positioned to supply new customers in European and Asian markets. As Europe continues to reduce its energy imports from Russia, we believe there is a growing need for stable, lower-cost gas supply, which would further drive demand for North American LNG. A few examples include: The EU has recently banned reexports to third-party countries taking effect in March 2025. Ukraine rejected a deal to extend Russian gas through Ukrainian pipelines beyond 2024.
The EU's incoming Energy Commissioner has intensified efforts to independence on Russian gas imports. A number of EU member states are demanding tagging of LNG by source as it enters its ports to further cut back on Russian LNG imports, and this is all on top of the major natural gas pipeline capacity that was taken offline at the start of the war in Ukraine. Meanwhile, there are strong market consensus that Asian LNG demand will continue to grow dramatically through the next 15 years, with growth estimates range between 70% and 100% from 2023 levels. Much of this demand is tied to the displacement of more carbon-intensive fuels such as coal and refined products from the energy mix of emerging economies in South and Southeast Asia as well as continued demand growth in China and India.
Bottom line, Sempra Infrastructure is well positioned to be a preferred provider to establish counterparties seeking to match long-term LNG supply with growing demand in Europe and Asia. Alongside these macroeconomic tailwinds, Cameron LNG Phase 1 continues to perform well. Year-to-date, the facility has already loaded 140 cargoes, and lifetime to date, Cameron has now surpassed 840 cargoes. Notably, the current 2024 production level exceeds the average annual run rate implied since COD. So we continue to witness strong and improving results from this facility.
Turning to construction updates. We're advancing work on a series of major projects. ECA LNG Phase 1 construction continues to make progress. The project is now focusing on finishing above-ground piping installation and our time line to bring commercial operations online in spring 2026 remains intact. Additionally, we're pleased to announce the expansion of the GRO pipeline, is expected to commence commercial operations before the end of the year. You will recall this pipeline is dedicated to support LNG exports at ECA. Port Arthur Phase 1 is also advancing as planned and is on time and on budget. Currently, work is focused on piling, dredging, foundations, structural steel and above ground piping installations. We also received a FERC letter of authorization for the Louisiana Connector pipeline, which will provide feed gas into Port Arthur from the Haynesville Basin. Mobilization activities to commence building this pipeline have already begun.
Moving to our development efforts at Port Arthur Phase 2, the focus remains on finalizing offtake arrangements and securing project financing. We continue to have discussions with potential off-takers. We've made significant commercial progress to date and are focused now on selecting the rate tester mix and improving our commercial terms. Most notably, Saudi Aramco is our anchor partner on the project, with a nonbinding HOA for 5 million tons per annum and a 25% equity participation. As a reminder, we have an EPC agreement with Bechtel to allow for continuous construction across both phases.
We also continue to wait for our DOE non-FDA export permit, which we expect to be resolved next year. As a result, we're now expecting Port Arthur Phase 2 development time line to move ahead of the Cameron expansion. The timing of an FID decision for Cameron expansion is uncertain at this point. We continue to work with our partners on the optimal timing for expansion. As we've been in the past, we'll be very disciplined in our efforts to secure quality returns and mitigate risk to capital before making any investment decision.
Please turn to the next slide. Earlier this morning, Sempra reported third quarter 2024 GAAP earnings of $638 million or $1 per share. This compares to third quarter 2023 GAAP earnings of $721 million or $1.14 per share. On an adjusted basis, third quarter 2024 earnings were $566 million or $0.89 per share. This compares to our third quarter 2023 earnings of $685 million or $1.08 per share. Because the GRC outcome remains pending, our CPUC authorized base revenues in third quarter and year-to-date 2024 are based on 2023 authorized levels. This is important because assuming we receive a final decision this year, any true-up will be retroactively applied to January 1.
Please turn to the next slide. Variances in the third quarter 2024 adjusted earnings compared to the same period last year can be summarized as followed. At Sempra, California, we had $9 million from higher CPUC base operating margin, net of operating expenses, including higher authorized cost of capital and higher regulatory interest income. This was more than offset by $52 million, primarily from lower income tax benefits and higher net interest expense.
Turning to Sempra Texas. We had $44 million of lower equity earnings from higher interest and operating expenses and lower consumption, partially offset by higher revenues from invested capital and customer growth. At Sempra Infrastructure, we had $36 million of lower revenues in the Transportation and Renewables business, higher O&M and lower asset and supply optimization, partially offset by $7 million, primarily from higher income tax benefit and lower net interest due to higher capitalized interest. At Sempra parent, the $3 million net change is primarily due to higher taxes, partially offset by net investment gains.
Please turn to the next slide. To conclude our prepared remarks, I'd like to quickly summarize our key investment highlights. As energy needs grow and evolve in North America, our commitment to operational excellence supports our focus on delivering safer, more reliable and resilient energy. And our position as a leader in North America's largest economic markets gives us unique opportunity to invest higher levels of capital in critical new energy infrastructure through the end of the decade and beyond.
For general corporate purposes and to finance our growing capital campaign, we are establishing an at-the-market equity program of $3 billion. This will help us fund growth in capital expenditures in a timely and efficient manner, while continuing to maintain the strength of our balance sheet. After we received the GRC final decision, we'll be in an excellent position to roll forward our 5-year capital plan through 2029. We expect to provide that update in February on our Q4 call. And in the interim, we'll continue executing on value-accretive investments that drive sustainable, long-term growth.
Thank you for joining us. And I'd like to now open the line up for your questions.
