Sempra's Texas grid plan grows 20%; California's $188 million rate denial pushes 2027 toward the low end

Sempra▼−2.08% — Sempra, down 2.08 percent today, the San Diego-based utility holding company (NYSE: SRE), answered the question our November 1 preview asked: the Texas load queue behind the AI buildout is real, and it is already producing earnings ¹². Third-quarter adjusted earnings of $1.40 a share beat the $1.20 consensus↗, and management guided 2026 to the high end of its $4.80–$5.30 range ¹². The same call, on November 5, put a price on California: a proposed decision at the California Public Utilities Commission denies a $188 million rate correction for 2027 ¹³.

Sempra affirmed its 2027 range of $5.10–$5.70 but said the denial, unless corrected on appeal, pushes the year toward the range's lower half ²⁴. The shares closed at $82.90 before the November 5 report, 7.2% below their 200-day average of $89.37, so the market had not yet paid for the Texas growth ¹. The report supplies the numbers to test whether that discount still fits.

The AI buildout arrives as a queue, not yet as load

The demand is data centers. Oncor, the Dallas utility that delivers power to more than 4 million Texas homes and businesses and is majority-owned by Sempra, ended September with roughly 293 gigawatts of data-center interconnection requests↗ ⁵. Its system set a record peak of 33.3 gigawatts on August 24 ⁵. That was 6% above the prior record ⁵.

Governor Greg Abbott's August 3 directive ordered verification of every data center advancing through the state's interconnection process; the Electric Reliability Council of Texas, the state's grid operator, paused Batch Zero, its new process for classifying large loads, and will not let big projects energize until the audit finishes ⁶.

Twenty-four gigawatts hangs on a December audit

About 24 gigawatts in Oncor's territory is conditionally classified as base load, a status Sempra said reflects customer commitment through financial security, site control and other ERCOT qualification requirements, and it holds only if an ERCOT audit expected in December confirms it ²⁵. ERCOT has already sent second information requests to roughly 80% of Batch Zero customers whose first answers failed validation ⁷.

Verified load becomes wires, and wires become earnings

This is the link that turns AI demand into utility earnings. Load that survives the audit becomes transmission and distribution capital earning a regulated return, and Oncor is the builder being paid to close that gap. New base rates took effect June 1, and the year-over-year increase in Sempra's Texas equity earnings grew every quarter of 2026 ⁵¹. Oncor will spend about $9 billion this year, its largest annual plan ever, and in February finalizes a five-year plan it expects to land about 20% above the current $47.5 billion↗ ⁵⁷.

The step-up leaves its biggest upside uncounted

That step-up excludes the Eastern STEP 765-kilovolt transmission projects, a system resiliency program and all Batch Zero load ⁷¹. The Permian Basin Reliability Plan sits on a separate track: the state commission approved both segments of Import Path 1, worth about $3.9 billion, in August, though rehearing motions have been filed ²¹. The private-equity firm KKR's purchase of a 45% stake in Sempra Infrastructure Partners, Sempra's infrastructure arm, is expected to close within two weeks, paying down debt ahead of the build ².

California's bottleneck is the regulator itself

Texas's bottleneck is verification, with a December deadline; California's is the commission. The proposed decision, issued October 29, denies correction of how the 2024 rate case accounted for capital invested after its test year ².

Management frames it as a one-year error: rates reset in January 2028 under the next rate case, the decision is not final, and further regulatory avenues remain open ³⁷. The quarter's reported results already absorbed a $149 million after-tax charge from related proposed decisions ¹, and Sempra's filing warns that damages from the January 2025 Eaton▲+4.49% — Eaton, up 4.49 percent today fire could materially reduce or exhaust the wildfire fund backing its California utilities ³.

The discount now has a size and a calendar

ERCOT's audit report is due December 10↗ and goes to the Public Utility Commission on December 17 ⁸. Measured against the build, the $188 million item is about 2% of the roughly $9.5 billion the Oncor step-up adds to the five-year plan ¹². That is the trade in plain terms: if the audit confirms the queue and the commission corrects what management calls an accounting error, 2027 moves back toward the top of its range; if neither happens, the discount was earned ¹².