Good day, and welcome to Sempra's third quarter earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Louise Bick. Please go ahead.
Good morning, and welcome to Sempra's third quarter 2026 earnings call. The live webcast of this teleconference and slide presentation are available on our website under the Events and Presentation section. We have several members of our management team with us today, including Jeff Martin, Chairman and Chief Executive Officer; Karen Sedgwick, Executive Vice President and Chief Financial Officer; Justin Bird, Executive Vice President of Sempra and Chief Executive Officer of Sempra Infrastructure;
Caroline Winn, Executive Vice President of Sempra; Allen Nye, Chief Executive Officer of Oncor; Faisel Khan, Chief Commercial Officer of Sempra; Dyan Wold, Vice President, Controller, and Chief Accounting Officer; and other members of our senior management team. Before starting, I'd like to remind everyone that we'll be discussing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those projected in any forward-looking statement we make today. The factors that could cause our actual results to differ materially are discussed in the company's most recent 10-Q filed with the SEC. Earnings per common share amounts in this presentation are shown on a diluted basis, and we'll be discussing certain non-GAAP financial measures. Please refer to the presentation slides that accompany this call for a reconciliation to GAAP measures.
We also encourage you to review our 10-Q for the quarter ended September 30, 2026. I'd also like to mention that forward-looking statements contained in this presentation speak only as of today, November 5, 2026, and it's important to note that the company does not assume any obligation to update or revise any of these forward-looking statements in the future.
We also encourage you to subscribe to the email alerts on our Corporate Updates webpage so you can remain informed of the investor-related developments. With that, please turn to slide three, and let me hand the call over to Jeff.
Thank you all for joining us today. Our business continues to execute well as we remain focused on building America's leading utility growth business, and the strength of that execution is reflected in our year-to-date financial performance, including double-digit growth in adjusted EPS at Sempra, driven primarily by strong earnings growth at Sempra Texas.
Growth in our Texas segment is in response to robust customer demand and the following three drivers: higher levels of capital investment, completion of Oncor's recent rate case, which provided a timely update to the company's cost structure, and implementation of the Unified Tracker Mechanism. Based on the strength of our financial performance, we are pleased to guide to the high end of our adjusted EPS guidance range for 2026 and affirm our EPS guidance range for 2027. Karen will cover our financial results in greater detail later in the call.
Next, I would like to walk through several developments in our business. First, an expected 20% increase over Oncor's 2026 through 2030 base capital plan. Second, an update on business activities in California. Third, an update on our pending sale of a 45% equity stake in SI Partners. Let me start with a historical perspective.
Going into 2018, Sempra had approximately $14 billion in utility rate base, all of which was located in California. Today, our business is larger, more diverse, and our earnings growth is more durable, with 2026 rate base now projected to exceed $65 billion later this year. What is also different is the significant growth in our Texas footprint.
Today, Oncor is the largest pure-play T&D business in the country and continues to experience remarkably strong demand growth, having recently reached a new peak on its system of 33 GW, a 6% increase over the prior record set last year. This increase underscores the robust economic growth that is occurring in Texas as electric demand continues to exceed expectations.
In addition, Oncor continues to build out and advance one of our industry's most robust supply chain management programs while also improving visibility to higher levels of future capital deployment. Examples include new North and Central Texas transmission upgrades. The PUCT's recent approval of both segments of Import Path 1 is part of the larger 765-kV Permian Basin Reliability Plan, with two segments comprising Import Path 2 remaining under PUCT consideration.
In combination, these are critical infrastructure projects that are needed to address reliability concerns and grid constraints in West Texas and the greater DFW metroplex. It is also important to note that Oncor remains committed to working constructively with the PUCT and all stakeholders to address landowner concerns.
This will continue to be a priority for Allen and his team as they look to help ensure Texas has the infrastructure required to maintain reliability and support future economic growth. That is why when we release fourth quarter results next February, we plan to announce a 2027 through 2031 base capital plan that is expected to reflect, among other things, a significant increase of approximately 20% over Oncor's existing $47.5 billion capital plan.
Along with the anticipated capital increase in Oncor's base plan, Allen's team is also tracking a significant opportunity set of incremental capital, which we look forward to providing additional details on in February. Before wrapping up on Oncor, I'd be remiss if I didn't say how proud we are of Allen's leadership, as well as Don Clevenger and the balance of that management team. Oncor is on a real growth footing, and it's doing a great job balancing a broad set of stakeholder interests.
Now, turning to Sempra California, we continue to invest in modernizing critical infrastructure to enhance reliability, safety, and customer service. Recent milestones include advancing compressor station modernization projects at both utilities and launching a new customer information system at SoCalGas, which is designed to strengthen customer service and digital capabilities.
Caroline Winn and her team are also excited to advance the Golden Pacific Powerlink, which is a FERC-regulated 500-kV transmission line that will extend over 100 miles across SDG&E's eastern system and form a part of Sempra California's roll-forward base capital plan that we'll discuss next year. On the regulatory front, the CPUC issued a proposed decision last week denying our petition for modification that was requested as an adjustment to the 2024 GRC capital attrition rates.
For our utilities, our petition for modification was viewed as a straightforward procedural filing to correct an error in the GRC decision and properly account for post-test year capital investment. We expect to pursue all available regulatory avenues to get to the right decision here, but absent getting this corrected, we would expect Sempra California's segment earnings in 2027 to be toward the low end of its guidance range.
It's important to note that the potential financial impact here is limited to 2027 only. That's because rates beyond 2027 will be addressed as part of our pending 2028 rate case, with new rates expected to take effect in January 2028. Turning to the SI Partners transaction, we've made significant progress and expect to close within the next two weeks.
I'd like to thank Justin for leading the effort, as well as our employees at Sempra and Sempra Infrastructure, who have helped get this transaction to the finish line. It's really been a great team effort. Looking forward, our management team is excited. Sempra's business model is getting simpler as we narrow our focus to regulated utilities.
Importantly, with the completion of the SI Partners transaction, we expect to pay down debt, strengthen the balance sheet, and lower our risk profile to support future growth, and continue making investments to grow our rate base and ultimately drive the mix of earnings increasingly toward Texas, where we aim to give our owners increased exposure to significant value creation through the end of the decade and beyond.
In conclusion, I'm really pleased with the contributions from our leadership team and all of our employees. Our financial performance is certainly benefiting from a back-to-basics utility strategy and broad-based growth with improving earnings and cash flows. With that, I'll turn it over to Karen, who will cover our financial results. Please turn to the next slide.
Thank you, Jeff. Earlier today, Sempra reported third quarter 2026 GAAP earnings of $877 million, or $1.34 per share. This compares to third quarter 2025 GAAP earnings of $77 million, or $0.12 per share. On an adjusted basis, third quarter earnings were $917 million, or $1.40 per share. This is an increase of 26% compared to our third quarter 2025 earnings of $728 million, or $1.11 per share.
As Jeff noted, we are very pleased with our year-to-date performance, which gives us the confidence to guide toward the high end of our 2026 adjusted EPS guidance range. Please turn to the next slide. Variances in the third quarter 2026 adjusted earnings compared to the same period last year can be summarized as follows.
At Sempra Texas, we are seeing remarkable growth, with $154 million of higher equity earnings from new base rates, the UTM, SRP, and higher customer consumption, primarily attributable to weather, partially offset by higher interest expense, depreciation, and O&M. Turning to Sempra California, we had $46 million of increased earnings, primarily from higher CPUC-based operating margin, net of operating expenses, and higher electric transmission margin.
Sempra California also had $44 million of lower earnings from lower income tax benefits, higher net interest expense, lower net regulatory interest income, and other. At Sempra Infrastructure, earnings increased by $53 million, primarily from lower depreciation due to assets held for sale, lower interest expense, lower O&M, and other, partially offset by lower asset optimization. At Sempra Parent, $20 million of higher losses from lower income tax benefits, net investment losses, partially offset by lower preferred dividends.
Please turn to the next slide. As this slide demonstrates, 2026 has been a year of strong financial and operational execution. As a result, we are guiding to the high end of our full-year 2026 adjusted EPS guidance range of $4.80 to $5.30, and affirming our 2027 EPS guidance range of $5.10 to $5.70, while recognizing that pending regulatory outcomes could cause results to be in the lower half of this range.
We are also affirming our projected long-term EPS growth rate of 7% to 9%. Given the growing opportunities set in front of our company, we are working to finalize our financial plan later this year, which will look to balance our updated operating cash flows with the expected increases in our capital expenditures through 2031.
As part of that process, we will continue to compete capital internally across the portfolio and execute our overall financing strategy, with a focus on prioritizing the most efficient funding sources, which could include, among other options, incremental capital recycling, proceeds received from the SI Partners transaction, the use of our established ATM program, and hybrid and debt financings.
With these options, we have a lot of flexibility to fund the expected growth ahead in an efficient way while maintaining a strong balance sheet. In closing, we continue to believe there is significant value in higher growth T&D companies, particularly those positioned to benefit from sustained investment in critical energy infrastructure. Sempra's utility businesses effectively operate as energy networks, with commodity costs passed through and significant credit risk from individual customers largely avoided.
This creates an important distinction relative to the risks you're seeing play out in other parts of the utility industry, while reinforcing the lower risk and sustainable nature of our business model. At Sempra, our growth is broad-based, supported by long-term infrastructure needs, and extends across all customer classes in two of America's largest economic markets.
Also, backed by a diverse portfolio and disciplined investment approach, we expect Sempra's lower risk, growth and income story will translate into significant value for our owners as we offer a compelling mix of current yield, durable earnings growth, and long-term capital appreciation. I'm going to pause there, and we'll open up the call for your questions.
Thank you. This concludes the prepared remarks. We will now open the line to take your questions. Please limit your questions to one question and one follow-up. If you would like to ask a question, please signal by pressing star 11 on your telephone keypad. Please make sure your mute function is turned off. We will pause for just a moment to allow everyone to signal for questions. Our first question will come from Shar Pourreza from Wells Fargo. Your line is open.
Hey, Jeff.
Hey, Shar. How you doing?
Not too bad. Not too bad. Hope all is well. Just maybe starting off on the political changes in Texas. I mean, the data center rhetoric is becoming a little bit more uncertain. I guess, what do you see is the risk to Oncor's transmission CapEx, especially as we're thinking about the state's kind of blue wave heading into a legislative window in 2027? Do you think 765-kV will be the focus, or could we see legislative action on all wires fronts? The state's, I mean, such a big driver of growth for you, so just thinking about the risks there. Thanks.
Yeah. Thank you for that question, Shar. I think there's probably two key parts to it. One is the measure of our confidence in Oncor's capital plan going forward, and I think I will take that question last. I think the other question you had embedded was really how we're thinking about the election.
So, Allen and I will tackle that first, and I'll close out, Shar, if I could, on my confidence level about the capital plan going forward. I would just start by saying we look forward to work with the new administration in Texas. Across our long history at Sempra, Shar, you'll recall that we've always really focused on running our business well for customers.
If you spend your time focused on new and better ways to serve customers, we found that that has always been a very important advice and part of our culture for a long period of time. I would say Oncor has traditionally taken the same approach, Shar. Allen, perhaps you can provide some color on how you're thinking about the political backdrop, and I'll come back to the capital plan.
Yeah, sure. Thanks, Jeff, and morning, Shar. Look, as Jeff said, we're looking forward to working with the new administration. While it's too soon to tell exactly what it all means, but generally, the way I think about it, we provide an essential service that's needed regardless of the party in power. Things like reliable, affordable, safe electric service, those are not partisan issues.
Things like economic development and job creation are not partisan issues. The things that attract people to Texas and businesses to Texas have not changed and go beyond any individual person or party. So, we believe and we continue to believe that both parties want a strong and growing Texas, and we expect that to continue. We are going to continue to provide the necessary infrastructure to support our customers and our state.
Jeff said it, but I've been around this company a long time. Throughout the history of this company, we've always worked very well with both parties, and we're going to continue to do so. We look forward to working with the new state leadership in keeping Texas strong and growing.
Thanks, Allen. I will just follow up real quickly, Shar, on the other part of your question regarding the capital plan. From my perspective, I would say that we're very confident in the capital plan at Oncor. Let me provide you a little bit of context as to why we feel that way. I would start with the convention that Don Clevenger and Allen have adopted.
Going back to February of 2025, Shar, you'll recall that they had a $36 billion capital plan, and it was their base capital plan, which is informed only by two types of projects, ones that have been endorsed by ERCOT or approved by the PUCT. If it has not been approved accordingly, it falls into what they've been tracking as an incremental bucket, and last year, they had $12 billion in that incremental bucket.
When they rolled forward to February of this year, they added in $12 billion of new capital to their base capital plan, which is currently $47.5 billion. Then, Shar, they took the next step to re-up that incremental bucket that they're tracking to $10 billion. We're using this call today to provide advanced perspective, advanced view into what we expect they'll do next February, which is again, raise their base capital plan by 20%. Shar, they'll come back and again repopulate that incremental bucket.
Here's two final points that really makes me feel great about their plan. Number one, Shar, is what it excludes. The $47.5 billion base capital plan today, we're forecasting will go up by 20%, and it will not include the SRP, which we had in the prior incremental capital plan, and it will not include the Eastern STEP 765 projects.
Those are excluded from our expected 20% step-up. The final reminder here, there's a lot of discussions around Batch Zero. That process continues to move forward. Hopefully, we'll talk about that in today's call. You will remember that the Batch Zero and all the capital and all the projects that will be associated with that will not be in Oncor's February 2027 base plan or incremental plan.
It will continue to be upside beyond the numbers that we've been presenting to the street. I would just conclude that our confidence comes from the flexibility they have inside their plan today to move projects around, and the convention and discipline that they've adopted to make sure there's certainty in how they execute.
Got it. That is perfect. Then Jeff, in terms of the California wildfire policy, the CPUC report was probably the strongest argument we have seen yet for the legislators to act outside of the Earthquake Authority report. Can we get a sense, can something get done in the remaining couple of weeks in the session, or do you expect kind of a longer and broader process in 2027 when there is kind of a cleaner slate? We just cannot get a strong sense from the hearings the past couple of weeks if something can get done or not. Thanks.
Yeah. Thank you for that question. Obviously, this is something that is important to the utilities in the state. To be honest, it is really important to our bondholders and our equity holders as well. I wish I had a definitive view to share with you, Shar, but what I would say is, there continues to be ongoing dialogue in this area.
I think the recent CPUC report, which you are referencing, is really helpful. I mean, a couple key points in that I think you probably saw was, there is a clear view that bills are unaffordable. There is a clear view that credit downgrades will constrain future utility service, and there is a clear view in that report, Shar, that capital access, or the inability to access it affordably, is definitely going to hamper the California economy.
I think it clearly underscores that inaction does not work and that there is a real need for a timely solution. Now, I cannot tell you whether it gets done and a bill gets filed before the 15th, which is the deadline, but I can tell you that whether it is action this fall or action next spring, I think there is a clear path that more and more people see it more clearly that the status quo does not serve the interests of Californians.
Got it. That is perfect. Thanks a lot, Jeff. I will see you guys in a couple days. Appreciate it.
Thank you, Shar.
Thank you. Our next question will come from Steve Fleishman from Wolfe. Your line is open.
Morning, Steve.
Hi. Good morning. Thanks. Maybe just switching back to Texas, I think we start getting legislative proposals maybe next week, and then just into the legislative session. Any color on likely areas that impact you guys? I guess particularly more on transmission and just regulatory overall.
Yeah. Look, it's a great question, and Allen's very close to this. Allen, would you like to provide some color?
Yeah, sure. Thanks, Jeff. Listen, I'm going to say there's probably a lot this morning. It's too early for me to know definitively where this is all going, having the election just a couple of days ago. But I guess a couple of things. We continue to believe that the Texas belief or ideology that growth is good for the state remains unchanged.
That's one. It appears that the debate is primarily focused around how to support growth while maintaining a reliable grid with fair cost allocation, while protecting communities and water resources and landowners. Those are all things that we support and we'll be working actively in legislation, should the legislature go that direction. The laws as they exist today provide a really constructive environment for our investments, and we're optimistic that they'll continue.
We look forward again to working with the new administration and all the stakeholders in efforts to protect affordability, reliability, and ensuring that large loads pay their fair share. But until we start seeing bills filed, I can't go much further than that.
The only thing I might add, Steve, is there's been a lot of discussion around the fact that today, roughly 5% of America's GDP is directly tied to electricity and energy production, and the view that that first 5% actually informs and powers the other 95%. This is particularly true in Texas, right? This is a state that has led the country in growth for about two decades, and I think there's a consensus, whether it's Republican or Democrat, we don't think of our business that way. But high voltage electric transmission, Steve, is one of the hardest things to build in this country, and there's a lot of scarcity of value around it.
I think from a very fundamental economic standpoint, a lot of people tend to focus on the generation side or on the load side, but that high voltage transmission is the anchor investment that allows us to get past some transmission congestion, to add new generation to the mix, and support future customer growth. There may be some mixed views about how we can do it in the most thoughtful way, but I think this is more about how we do it and not whether it happens.
Okay. I guess just maybe more specific to the, I guess it's the Import Path 2, the one that the projects that got sent back to the judge. Is there a schedule on when we're going to hear an update on that and get a commission order?
Yeah, I would just start for the broader audience to say that Path 1, which also serves the Permian, has two lines in it which have been approved by the PUC. To Steve's question, he's obviously referring to Path 2, where we have two lines that also are intended to serve the Permian. Perhaps, Allen, you could talk about what you think the procedural schedule is for that moving forward.
Sure. Path two was remanded by the PUC on two issues, reliability standards and cost congestion generally. in September and November, we filed our direct testimony of evidence with LCRA. We're waiting for a SOAH revised PFD, is basically where we are. We're hopeful in thinking that maybe that happens mid-December, and then it'll be back at the commission, and we could see the commission take oral argument again prior to issuing a ruling. But right now, we're kind of in a standstill waiting for the SOAH PFD revised.
The only thing I might add, Steve, I think we've had this conversation before, but in the $47.5 billion base capital plan, the amount of exposure to 765-kV development is limited to $5 billion. Path one, using ERCOT estimates, are close to $3.9 billion. We're pleased that Path 1 is moving forward. What you're discussing with Allen Nye has a relatively nominal part of the existing base plan, and we certainly think it's important that those projects go forward, and Allen and his team will continue to work hard in that endeavor.
Thank you.
Thanks, Steve.
Thank you. Our next question comes from David Arcaro from Morgan Stanley. Your line is open.
Good morning, David.
Hi, this is Amanda actually on for Dave. Thanks so much for taking our questions.
Hey, Amanda.
Hey. Maybe just in Texas on the affordability front, are there any kind of additional measures to pursue at Oncor to help mitigate potential customer bill pressures and exposure to data center impacts?
Yeah, it is such a great question. I mean, this is something I think that we are experiencing as a national issue. It certainly has been a big theme in the political discussions during this political season. I think Texas in general is benefiting from one thing that is helping a lot, which is growth. As you are seeing higher volumes of electricity sales, it causes the overall rate not to move up that much.
I think that a lot of investments that Oncor is making is intended to take cost out of the system, i.e., by making transmission more efficient and having less congestion. But perhaps, Allen, you could share your views on next steps regarding affordability and why that is such an important topic for your company.
Yeah, you bet, Jeff. We started this year, as we did last year, focused on two things, execution and affordability. We understand the importance of affordability and how big of an issue it is becoming nationwide. There are a number of things going on with regards to affordability that I think are going to be beneficial to our position.
The first thing is what is going on in Project 58481 at the PUC, the first of which is a potential switch from 4CP to 12CP methodology, which the PUC is scheduled to consider in December. So that is one. Two is the concept of a take-or-pay contract for new large load, a new large load tariff for loads over 75 MW, where the customer would pay based on contracted load, not actual load, which would ensure that large loads pay for the transmission investment they require, as well as lower rates for other customers.
Again, the PUC is set to consider that in December. We have talked about the impacts of UTM and the reallocation on prior calls, the fact that we can annually update who those costs are allocated to. That is certainly beneficial as well. Overall, just those potential changes or those changes, we have modeled the potential impact of the Project 58481 proposals, and we believe those changes will cover the cost of not only of the investments,
but would also reduce the residential customer bill between $15 and $35 per year, depending on the amount of total CapEx required and the amount of load that actually connects. Over 10 years, that is about a $1.4 billion savings. Again, affordability is something we focus on every day. We will continue working on it, but those things at least start to help us on the affordability front.
Thank you, Allen. Thank you, Amanda.
Thanks. On the broader earnings growth trajectory, given the expanded Texas investment opportunity and the evolving regulatory outlook in California, where within that 7%-9% long-term growth range do you expect Sempra to trend, and what factors would move you toward either end of that range?
Yeah. I appreciate the question. I think what we have currently in terms of our 2026 to 2030 plan, a couple things we zero in on. Number one is we're expecting to have approximately 11% rate base growth. Secondly, we're currently operating under a $65 billion capital plan, and we have an overall financing plan, Amanda, that we pulled together this fall.
That work is underway, and we look forward to making a pretty comprehensive presentation to our investors next February. You're on the right topics. There is remarkable growth taking place in Texas. We're seeing upticks in opportunities also in California, as well as Sempra Infrastructure. I think what we need to do is get through our planning process this fall. We normally match up our internal operating cash flows with the timing and expected quantum of increase in capital expenditures to finance that efficiently.
We currently have a long-term EPS growth rate of 7% to 9%. I think that's very solid. When you think about that relative to 11% rate-based growth, I think that should cause you to have a fair amount of confidence in that range.
Thanks so much.
Thank you.
Thank you. Our next question will come from Ross Fowler from Bank of America. Your line is open.
Hi, Ross.
Morning. Just probably delving a little deeper into a couple questions that have already been asked. So just on, Karen, maybe one for you. If we look at California, as you look at headwinds into 2027, can you kind of maybe flesh out what you are talking about there with the final year of the 2024 GRC and the PFM Track 3, TIMP, and sort of the range of outcomes that are possible there and how much of a headwind that actually is to your 2027 earnings?
Sure. Thanks for the question, Ross. The PFM is really straightforward. The commission approved a specific capital investment as part of our 2024 GRC, and unfortunately, that attrition mechanism failed to include the associated revenue requirements. The petition for modification that we are filing is just to correct that.
We see that as an error. I would note for investors that a similar issue was found in Southern California Edison's last rate case and was corrected by the commission. We think that is the same as the right outcome here. We have highlighted for you the revenue requirements in our materials that we have provided, which is $188 million. Of course, that is a revenue requirement. You can do the normal tax effect that and see what that earnings impact is. We think we are going to get this corrected now.
We think that if we cannot for some reason, California is working very hard to mitigate that. An important note is this all goes away. This is just a 2027 issue because we have a new GRC starting rates in January of 2028, so that will not carry over. We will have a whole new rate case that will not have this impact. So, it is a one-year issue. We think it is a mistake. We think it gets fixed. For any reason it could not, we are going to try to mitigate that.
I would also note, Ross, that on the corporate update part of our slide, we laid out all the numbers and impacts for both 2025, 2026, and 2027, which Karen Sedgwick just covered.
Thanks, Jeff . It has been a busy day, so I did not catch that. It is 15-minute days a lot. Anyway, back to Texas, Allen Nye, maybe to you. I know you talked about, and Jeff Martin, if I heard you right, there was $5 billion in the current plan at Oncor related to 765-kV, and $3.9 billion of that is Import Path 1. So really, beyond Import Path 1, we are just talking about a little over $1 billion. What can you flesh out? What is in the 20% upside you are talking about? Is that 765-kV, or could that revert to 345-kV? What is in that piece that you are looking to have line of sight to?
Go ahead, Ross.
Yeah, Ross, there's kind of three general categories that I'll tell you now, and then we're going to have a lot more detail when we get to the rollout next year. But in that 20% increase, one, first thing, it's the one-year roll forward, so you drop 2025 and you're adding 2031. Two, just continued strong customer and load growth from a variety of sectors, really all over our system.
And three, projects that we've moved from our incremental capital opportunities into the base capital plan. This is important, I think, to note that the overall increase is supported by projects that have received PUC approval or ERCOT endorsement, is how we plan every year. As Jeff said earlier on this call, we do not expect the 765-kV STEP program or the SRP2, they will remain in the incremental opportunities bucket beyond the base plan. That's additional upside.
Got it, Allen. Thank you. Very clear.
You bet.
Thanks, Ross.
Thank you. Our next question will come from Nicholas Campanella from Barclays. Your line is open.
Hey, good afternoon or good morning.
Hey, Nick.
Thanks. Hey. So, yeah, just on the Oncor CapEx composition, very clear, no Batch Zero is included in this 20% increase. Still a lot outside the plan that could kind of make its way in. Just how are you guys viewing the timeline for Batch under the current change in leadership? I know a lot of folks have been focused on this December 10th report, and then I think there was a 17th date for hearing. Do you expect that to all remain on track with the various shifts in leadership that just happened? Thanks.
Yeah, I'll make a couple comments. Thank you, Nick, and I'll pass it to Allen. Just remember, we're currently operating under our capital program for Oncor between 2026 and 2030. What we've indicated this morning is that when we roll forward that to 2027 to 2031, the base portion of that capital plan, we expect to go up 20%.
We will repopulate an incremental opportunity bucket as well that we'll talk about next February. I think the really important thing we wanted to emphasize today is that the Eastern STEP 765 is not part of the expected roll-forward base plan, nor is the SRP program, which we expect to file next year. To your point, Nick, which is an important one, even when we roll those plans forward next February, both base and the incremental bucket, none of that will include anything from Batch.
That's signaling to you, at least through our current visibility into 2031, we don't see any of that coming into our plan during that plan period. Obviously, that could change if things accelerate. Perhaps, Allen, you could talk a little bit more about how you're thinking about the Batch process and any potential delays.
Yeah, sure. Thanks, Jeff. Just procedurally where we are, and I think we addressed this in our appendix to the deck today, but kind of procedural deadlines, mid-December, I think December 12th, we're expecting the ERCOT verification and audit report. In April of next year, nominal Batch Zero study results. Summer of 2027, developer commitments.
Then the second half of next year, the final transmission plan. I will add one more thing. This is kind of breaking as of this morning. You all may have heard or seen that ERCOT said they're sending a second RFI to about 80% of the large load customers in Batch Zero because the responses were deemed not adequate to meet the ERCOT validation criteria. However, the important thing is that they're still aiming for a mid-December validation completion. So, I think that keeps it on track.
With regards to administrative changes and potential delays or additional delays, I hate to say it again, but we're going to have to see. We're going to have to wait and see. But while we think the outcome of the elections might influence the overall policy framework and timing here, we still believe that the fundamentals needed to serve this qualifying load remains unchanged, as does the commitment to overall growth in Texas. So, while we're not seeing any delay right now, we'll have to see what happens, but overall, we still feel very positive.
Thank you, Allen. I will just add one more kind of procedural issue for you, Nick, which is, because we expect to announce our 2027 through 2031 plan in February, that the timeline that Allen just outlined will conclude in the fall of 2027. So, none of those updates will be in our five-year plan when we roll it forward.
Very clear. Appreciate that. Maybe a wider question on capital allocation, just in light of this PFD that you got on the 2024 attrition for California. In the last roll last year, you did kind of lower the capital expenditures in that state, and I'm just kind of wondering how this informs the next roll forward. Also acknowledging that you've already kind of filed for test years in 2028 and beyond at the regulator. How can that all change into the fourth quarter? Thanks.
Yeah, Nick, I will make a couple comments. We have not scaled back capital in the state of California. In fact, our year-over-year capital plan was very, very similar, and we expect to continue to grow California. What changed was the overall rate of growth going forward for California, but our capital plans have remained very similar and continue to grow in California.
What it does inform is how we allocate capital between FERC electric investments versus state electric distribution investments versus the Southern California Gas Company, and it does cause us to prioritize capital that has been pre-approved as part of the GRC. This is probably the most important point, Nick, to take away from this question, which is traditionally, capital gets pre-approved here in California in advance as part of the GRC, unless there is a separate application.
In some of those applications, like PSEP, the track two, track three type of investments, that is where we invested prior to there being a commission approval, and there was look-back risk related to that. One of the things I think that Caroline Winn and her team have done, which is very thoughtful, Nick, is they have swept the majority of all those separate capital-approved items into the GRC.
In this case, once we get to 2028, the capital we expect to spend in the future will be pre-approved as part of an overall comprehensive rate case. We have an improving view of California long-term. We remain committed to investing capital steadily in the state.
We will compete the capital based upon where we think it can best serve customers across our gas platform, our high-voltage transmission platform, and electric distribution, but we remain strongly committed here. What is really different is we are really differentially growing the capital that has been allocated to Texas. We have got plenty of capital for either state to the extent that there is growth opportunities.
Thank you.
Thank you very much.
Thank you. Our next question will come from Carly Davenport from Goldman Sachs. Your line is open.
Hey, team. Thanks so much for taking the questions. Maybe just a couple of kind of housekeeping items. First, just in Texas, you highlighted higher O&M as a headwind for 2027. Just any sense on the magnitude of the inflation that you're seeing there that you can point to? Maybe put that into the context relative to the inflation that you saw ahead of the last rate case filing.
Yeah, sure. I'll pass this to Don Clevenger. You'll recall, Carly, he's the CFO of Oncor.
Yeah. Thanks, Carly. In Texas, we are seeing about 1%-1.5% above the national inflation average. As you can imagine, with all the growth that's going on and people moving to the state and also the need for contractors and employees alike, that's about what we're seeing and about what we're figuring.
Great. Okay. Thank you for that. Super helpful. Then, just on the SIP sale, I guess any risk of further delay there or any color that you can share on the specific items left outstanding to get that across the finish line in the next couple of weeks here?
Sure, Carly. Thank you for that question. Justin, please proceed.
Sure. Carly, since our last call, we had two remaining conditions to closing. Those were consent from the partners at Cameron.
and consent from the lending agencies in Japan. We are in great shape on both of those, and we do expect to close in the next two weeks.
Thanks so much for the time.
Thank you, Carly.
Thank you. Our next question will come from Aidan Kelly from JPMorgan. Your line is open.
Hey, jeff. Thanks for the-
Hey.
Hey. Thanks for the time today. Maybe just picking up on the funding side of the equation. Clearly, you guys outlined a lot of CapEx in the pipeline with the 20% telegraphed increase, and you got the incremental opportunities from SRP and Eastern 765-kV.
Just wondering how much additional investment can Sempra accommodate while preserving its targeted credit metrics and no common equity funding? I know you kind of mentioned you're on track to get that SIP closed in the next two weeks, but what would warrant a consideration of further monetizing that remaining interest at this time as we kind of think into the next capital plan refresh?
Right. It's a great question, and what we do is all those issues that you are raising get resolved as part of our financial planning process this fall. That's being led by both Justin and Faisel Khan on our team. They'll also look at the magnitude of capital that needs to increase across the roll-forward five-year plan. They'll also look at the timing of that capital through the lens of competing it to make sure from a risk-reward standpoint that we're funding the correct items.
The key thing there is capital actually competes inside of Sempra, and then you stitch together your financing plan that starts always with optimizing your internally generated cash flows, and then you go to all your sources of finance and then compete that for efficiency.
I think what's different this year is we just have a lot of leverage to pull, and I think Karen talked about this a little bit in our prepared remarks. We've got a staged access to the proceeds from the KKR deal. To your point, we have this option value or store of value in the remaining 25% at Sempra Infrastructure.
We have a standstill agreement on that, Aidan, until the first part of January 2029, but that will also be part of the mix. What we want to do is put together an overall financing plan that's designed to meet our growth imperatives and fund the right projects and do it in a way that's the most accretive use of capital possible. That's what we look forward to bringing back to you in February of next year.
Great. Thanks for the color, Jeff. And maybe just one
Thank you.
question on the non-data center demand. Appreciate you guys kind of highlighting disclosures there. Looks like it ticked up a little bit to 19 GW from what I believe was maybe closer to 16 GW in the past. Just curious, how has the quality and maturity of that pipeline evolved, and which industries, from your perspective, offer the greatest visibility into incremental transmission investment?
Yeah. One thing I would note is that year over year, we've seen a 23% increase in large load requests, excluding data centers. So you're on the right topic. The growth that's taken place in Texas is broad-based. The data centers are obviously the lion's share of it, but you're on a great point. There is a significant amount of non-data center growth, and I would refer you, if you don't mind, to slide 12.
And in there, we do kind of a breakout of that 19 GW. You'll see that roughly 6 GW come from the manufacturing sector. About 5 GW comes from an expansion of oil and gas fields. What's really important there is this is really a strong tailwind for both path one and path two that are part of the Permian plan.
There is a real need to get more of that growth in West Texas connected to the grids. We feel great about that. 4 GW are associated with both utility and government expansion, including military bases, and then there is 4 GW of other C&I customers. You are on a great point. There is a remarkable story for a business today that has a brand new peak at 33 GW. We have 19 GW wholly unrelated to data centers.
Right. I appreciate you clarifying that. I will leave it there. See you guys soon.
Hey, thank you for joining.
Thank you. We have time for one last question today. Our last question will come from Ian Rapp from Scotiabank. Your line is open.
Hi, Ian.
Hey, Jeff. Good morning, Jeff and team. Thank you for taking my questions here. I just wanted to maybe clarify and put a finer point on some of the other questions that were asked. In terms of the 2027 guidance indications, I appreciate the color provided in the presentation and the press release.
In terms of the guiding to the lower half of the range in 2027, just wanted to clarify if the processes in California, the factual errors that you kind of identified in the pending processes, if those are addressed, would that ameliorate or completely resolve the lower end of the range and put you back toward maybe the midpoint, or are there other drivers there that we should be thinking about?
I would say, number one, we've got a slide in the appendix that kind of walks through the puts and takes that will impact the transition of our earnings and cash flows from 2026 to 2027. I'd start by referring you to that slide. The second point I would say is, we're not lowering our outlook for 2027. We have affirmed our outlook for 2027.
I thought it was appropriate, however, to talk about one of the issues that we're monitoring that could put pressures on us next year. Right now, it's a proposed decision related to the PFM. It's not final. There's a series of regulatory avenues that we will appeal to try to get to the right answer. Most importantly, and I think Karen noted this, the commission corrected the exact same error in the Southern California Edison rate case.
We think we're on the right side of this issue, and we look forward to trying to resolve it. Now, if we don't resolve it, we thought it was important to make sure that we identified the magnitude of the headwind there, and that's why we made a corporate filing on our website, really in the form of something that's essentially an eight-K to guide the street.
The second point I would make is, we have a series of business transformation programs going on in our utilities around people, process, innovation, and technology as we continue to modernize and right-size that business. It's paid real dividends for Caroline Winn and her team in 2025 and also in 2026. If we don't get to the right outcome here, we'll be basically working really, really hard to mitigate the impacts of it. To answer your question directly, we would feel even better about our 2027 numbers if we are able to get to the right answer here with the commission in the next month or so.
Great. That's really helpful. Appreciate that, Ian. Maybe on the same point, just as a follow-up, given that the issues seem a little bit transitory, would you expect your guidance update for the long-term EPS CAGR to maybe look through some of these issues for the longer term? I don't want to front-run you too much, but just curious how you are thinking about the long-term growth in respect to some of these transitory issues.
Yeah, it's a really interesting question, and I appreciate you asking that. Currently, we talk about a long-term growth rate that is really intended to persist beyond the end of our five-year plan. So in the 2026 to 2030 plan, we have been guiding toward a 7% to 9% long-term growth rate. I commented earlier on today's call, that's backed by an 11% CAGR rate-based growth across both of our utility platforms.
So as you roll this forward, remember, it is really confined to 2027, as Karen articulated, and that absence of taxes, depreciation, and interest that's missing in the revenue requirement currently for 2027, that would be trued up as part of the overall 2028 GRC that's currently pending. So, I would view it as having no impact whatsoever on how we guide to the update to the 7% to 9% growth rate next February.
Great. Thanks again for the call. I'll see you guys in a few days.
Hey, thank you for joining us.
That concludes today's question and answer session. At this time, I'd like to turn the conference back to Jeff Martin for any additional closing remarks.
Look, I'd really like to thank everyone for joining our call today. With the expected closing of the SI Partners transaction, I wanted to remind everyone that Justin will be transitioning to his new role as Chief Financial Officer. Karen will also be transitioned to be the President and CEO of SoCalGas. I'm really very excited for both of them and expect great things.
I'm also excited to mention and welcome back Faisel Khan to Sempra in his new and expanded role as the Chief Commercial Officer. Faisel will report to Justin and oversee our overall treasury, financial services, asset management, and corporate development functions. Per custom, if you guys have any questions or follow-up items, please reach out to our IR team. We're really looking forward to seeing many of you in Arizona.
We'll be joined by Allen and Don Clevenger and Justin Bird and Caroline Winn, so we should have a fulsome group there next week, and we look forward to seeing many of you then. This concludes our call.
Thank you for your participation, and you may now disconnect.