Sempra Seeks 10.5% ROE in Rate Case as Utility Returns Face Wider Regulatory Pushback
Sempra's proposed 100-basis-point return hike lands as state regulators and consumer advocates across the U.S. move to cap utility profits on affordability grounds.
Sempra has proposed a 10.5% return on equity in its current rate case, up from the 9.5% the utility is presently allowed to earn, according to reporting published Monday (2026-07-27). The Maryland Office of People's Counsel has countered with a proposal of 7.7%, leaving a 280-basis-point gap between the utility and its most aggressive adversary in the proceeding.6
The spread is unusually wide and arrives at an awkward moment for utilities seeking higher authorized returns. State governments and consumer offices around the country have grown more assertive on rate requests, with leaders in Virginia, New Jersey, and Pennsylvania explicitly asking regulators to scrutinize filings carefully, according to Utility Dive. That shift in political tone gives rate-case intervenors more cover to push aggressive counterproposals.6
Indiana went further still. The Indiana Utility Regulatory Commission launched formal investigations on Wednesday (2026-07-15) into both utility ROEs and the use of so-called trackers — mechanisms that allow utilities to recover certain costs automatically between rate cases — as part of a broader affordability review, the IURC confirmed. Jefferies equity analysts said on Thursday (2026-07-17) that the tracker review could tighten rider recovery and that the commission's guidance on infrastructure plans likely raises the bar on demonstrating cost-benefit justification.5
The Indiana action and the Sempra filing are separate proceedings in different jurisdictions, but they reflect the same dynamic: regulators and consumer advocates treating utility ROE as a variable to compress rather than a floor to defend. For years, the authorized return at large U.S. utilities drifted upward alongside rising interest rates and capital demands. The current political environment is testing how durable that trend is.6,5
Sempra's ask of 10.5% would represent a meaningful lift in its regulated earnings base. Allowed ROE directly sets the return a utility earns on the equity portion of its rate base, which in turn determines how much of its capital spending flows through to customer bills. A regulator landing closer to the People's Counsel's 7.7% figure would cut into that earnings potential considerably and set a reference point that other parties in other jurisdictions might cite.6
The company is simultaneously managing a significant expansion on its infrastructure side. Sempra Infrastructure's ECA LNG Phase 1 project in Ensenada, Mexico, loaded and dispatched its first cargo on July 8, 2026, with TotalEnergies confirmed as the joint venture partner on that shipment, according to both Sempra Infrastructure and Rigzone. Commercial operations under long-term sale and purchase agreements are expected to reach substantial completion in the summer of 2026, per earlier company guidance. That business sits outside the regulated utility structure and earns returns set by contract rather than regulator order, providing some earnings buffer regardless of how the rate case resolves.3,4,2
The regulated side remains where the bulk of Sempra's customer-facing political exposure sits. Affordability has become the lens through which most U.S. utility rate proceedings are being filtered in 2026, and the gap between what utilities are requesting and what consumer advocates are proposing has widened as energy bills have climbed. Whether commissions ultimately split the difference or land closer to one end of the range will shape not just Sempra's outcome but the expectation set for pending rate cases elsewhere.6,5
Broader U.S. utility sector consolidation adds another layer of context. The proposed all-stock merger between NextEra Energy and Dominion Energy, announced on Monday (2026-05-18) and valued at approximately $249 billion based on NextEra's $195 billion market cap and Dominion's $54 billion valuation, has put utility scale and capital access at the center of investor discussion. Deloitte analysts noted that scale is becoming increasingly important for utilities to compete and execute capital programs efficiently. But scale does not insulate a utility from an adverse ROE ruling, and any commission decision that anchors expectations at the lower end of the current range would carry through to capital cost assumptions across the sector.1
The next signal for traders and analysts following Sempra's regulated business is how quickly the commission schedules evidentiary hearings and whether any settlement discussions begin before then. A negotiated outcome near the midpoint of the 7.7%-to-10.5% range — around 9.1% — would likely be treated as roughly neutral. Anything below 9% would be read as a meaningful negative for regulated earnings visibility and could set a precedent that other consumer advocates in other states move quickly to cite.6,5