By Jason Fordney

Sempra Energy’s third-quarter financial results were hobbled by an administrative law judge’s preliminary decision to deny subsidiary San Diego Gas & Electric’s request to recoup losses stemming from wildfires a decade ago.

A California Public Utilities Commission ALJ in August recommended the commission deny SDG&E’s request to recover $208 million in costs related to the 2007 Witch, Guejito and Rice wildfires, ruling that prior to the fires, the utility “did not reasonably manage and operate its facilities.” The ALJ decision is not binding, and the PUC is due to vote Nov. 9 on SDG&E’s request to recover the costs.

During an earnings call Monday, Sempra executives said they are prepared to take the matter to court if they are not allowed to recover the money.

Traditional accounting measures require the company to reflect the preliminary decision in its financial results, but Sempra said that on an adjusted basis, earnings increased to $265 million ($1.04/share), from $259 million ($1.02/share) a year ago. Unadjusted earnings came in at $57 million, compared with $622 million last year.

For the first nine months of the year, Sempra’s earnings were $757 million, compared with $991 million over the same period last year.

Sempra is also attempting to acquire Texas-based utility Oncor in a deal worth nearly $10 billion. The Public Utility Commission of Texas last week issued a preliminary order that calls for Sempra to prove it is financially fit to own the state’s largest utility. (See Texas Regulators Seek More Details on Sempra Oncor Bid.)

SDG&E recorded a net loss of $28 million in the third quarter, compared with earnings of $183 million a year earlier, “due primarily to the $208 million after-tax impairment related to cost recovery for the 2007 San Diego wildfires.”

The utility’s earnings were $276 million for the first nine months of 2017, compared with $419 million in the same period last year. Earnings for the first nine months of 2017 included the third-quarter 2017 wildfire-related impairment. In last year’s second quarter, SDG&E recorded an after-tax charge of $31 million, refunding to ratepayers the benefits from tax deductions related to the final 2016 rate case decision.