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Sempra (market capitalization: $48.3 billion), a utility company with a strong track record of maintaining dividend payments for 28 consecutive years according to InvestingPro, announced today that Texas House Bill 5247, establishing a "unified tracker mechanism" (UTM) for electric utilities, was signed into law on June 20. The new mechanism will allow qualifying utilities to apply for interim rate adjustments annually to recover costs for transmission and distribution capital expenditures.
Oncor Electric Delivery Company LLC, in which Sempra holds an 80.25% interest, expects to qualify for this alternative capital recovery method. Under the UTM, eligible utilities can defer costs associated with transmission and distribution investments as a regulatory asset, including depreciation expenses and carrying costs.
The Public Utility Commission of Texas must review UTM filings within 120 days, with utilities able to implement temporary rates if no final order is issued within 165 days.
According to Sempra, the UTM is expected to improve Oncor's earnings, cash flows, and credit metrics compared to existing capital trackers. The company anticipates this will enhance Oncor's annual returns on equity by approximately 50 to 100 basis points, though this range may vary over time. With Sempra currently trading at a P/E ratio of 16.2 and maintaining a solid dividend yield of 3.48%, InvestingPro analysis suggests the stock is currently fairly valued based on its proprietary Fair Value model.
Oncor plans to make its first UTM filing in the first half of 2026 to recover costs for eligible investments placed into service after December 31, 2024. In the interim, the company will begin recognizing accrued revenues and regulatory assets for eligible capital investments.
Sempra affirmed that the impact of Oncor's use of the UTM is expected to fall within its previously announced earnings-per-share guidance ranges for 2025 and 2026.
The information was disclosed in an 8-K filing with the Securities and Exchange Commission. For investors seeking deeper insights into Sempra's financial health and growth prospects, InvestingPro offers a comprehensive research report with detailed analysis of the company's fundamentals, along with 12+ additional exclusive ProTips and advanced metrics.
In other recent news, Sempra Energy (NYSE:SRE) reported its Q1 2025 earnings, revealing an adjusted earnings per share (EPS) of $1.44, surpassing analysts' expectations of $1.35. However, the company's revenue of $3.8 billion fell short of the forecasted $3.87 billion. BMO Capital Markets responded to this financial performance by raising Sempra Energy's stock target to $81 while maintaining an Outperform rating, citing the company's positive EPS results as a significant factor. Additionally, Sempra Energy reaffirmed its guidance ranges for 2025 and 2026, projecting EPS between $4.30 and $4.70 for 2025, and between $4.80 and $5.30 for 2026. The company also confirmed a projected compound annual growth rate (CAGR) of 7-9% for EPS from 2025 through 2029. Jefferies, another analyst firm, adjusted its price target for Sempra Energy to $78 from $75, retaining a Hold rating. This adjustment was made amid expectations for the Strategic Infrastructure Partners sale to bring in approximately $5 billion, significantly higher than initial projections. Both analyst firms highlighted the importance of Sempra's strategic execution and macroeconomic factors influencing the company's outlook.
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