California\u2019s three major energy utility companies reported mixed earnings for the third quarter of 2007 compared to their third quarter earnings last year. However, they remained confident of meeting their projected earnings targets for the year despite rising operating costs. Given the current economic downturn, California utilities are faring well with billions of dollars going into energy efficiency programs and advanced metering devices. Sempra Energy and PG&E Corporation\u2019s net income dipped slightly in the third quarter ending September 30 compared to the third quarter last year, while Edison International\u2019s third quarter net income rose slightly from the same period in 2006. All three utilities expect to benefit from the California Public Utilities Commission\u2019s new energy efficiency incentive mechanism, which will enable them to split the cost savings from energy conservation programs between customers and shareholders. PG&E Corp. recorded net income of $278 million in the third quarter, compared to net income of $393 million, in the third quarter of 2006. PG&E attributed last year\u2019s higher third quarter earnings to several one-time items, including the recovery of scheduling coordinator costs and disputed generator claims and the company\u2019s utilization of a tax benefit to carry forward capital losses. PG&E officials said the company still is on track to achieve its projected 8 percent growth rate in earnings for 2007-2008. \u201cWe believe that we can continue to provide investors above-average growth,\u201d said Peter Darbee, PG&E\u2019s chief executive officer, chair, and president. PG&E\u2019s third quarter earnings were driven by its regulated utility, Pacific Gas & Electric, which had operating revenues of $3.279 billion and total operating expenses of $2.697 billion. PG&E\u2019s rate-based revenue increased over 9 cents per share in the third quarter from a year earlier, largely due to the higher rate of return authorized in its California Public Utilities Commission-approved general rate case. PG&E\u2019s higher operating revenues were tempered by a $158 million increase in expenses for materials, labor, maintenance, relicensing of hydroelectric generation, as well as operating expenses for Diablo Canyon Nuclear Power Plant, and other permitting costs. Moreover, in September state regulators ordered PG&E to refund $25 million in overcharges to customers. PG&E also faces increased reliability demands from an aging infrastructure and pressures to increase operational efficiency, said Bill Morrow, the utility\u2019s chief executive officer. \u201cOur ongoing challenge is to continuously improve service to our customers amid the pressure of rising costs,\u201d Darbee stressed. Edison International also faces pressures from cost increases, but they have not affected the utility\u2019s earnings this year, said John Bryson, Edison\u2019s chief executive officer. Edison reported net earnings of $461 million for third quarter of 2007 compared to $458 million in net earnings in the third quarter last year. Because of this steady growth Edison expects its 2007 earnings to be at the high end of its guidance range. Edison Mission Group, Edison\u2019s unregulated power generation company, benefited from higher energy margins and lower net interest expense from debt repayment, resulting in $207 million in net income for the third quarter, up from $204 million in the third quarter in 2006. \u201cAt EMG, capacity markets are demonstrating higher value for our generating fleet, and we continue to place new wind projects into construction,\u201d Bryson said. Edison Mission placed 250 MW of new wind energy projects in construction this quarter to total 500 MW of wind power in construction and 500 MW in service. The company has secured 1,200 MW of wind turbines and plans to have 2,000 MW of wind capacity online by the end of 2009. Edison Mission has nearly 3,000 MW of new merchant generation projects in its pipeline and will decide how much to contract out, said Tom McGann, the company\u2019s chief financial officer. Edison hopes that the CPUC can take early action and reach a final decision on its General Rate Case, and approve the utility\u2019s large infrastructure investment, Bryson said. The CPUC has accepted Edison\u2019s notice of intent to file its General Rate Case, which the utility plans to do on November 19, far earlier than in previous years. \u201cThe [general rate case] is a step up in our campaign to provide the most reliable automated electric system,\u201d Bryson said. \u201cSince it\u2019s consistent with the CPUC\u2019s objectives and PG&E\u2019s rate case we\u2019re optimistic the CPUC will support our investment plan.\u201d Sempra Energy reported net income of $305 million in the third quarter of 2007. Sempra\u2019s third quarter 2006 net income was $653 million. However, last year\u2019s higher earnings included $318 million from asset sales. Due to strong third quarter performances by all of the company\u2019s business units, including its regulated utilities, Sempra executives raised their earnings expectations. \u201cHow well we do will depend on our commodities,\u201d said Don Felsinger, chair and chief executive officer of Sempra Energy. Sempra utility San Diego Gas & Electric\u2019s third-quarter 2007 net income increased to $123 million from $70 million in the third quarter of 2006. Those earnings include net benefits of $46 million and $9 million, respectively, from the resolution of prior-year income-tax and regulatory issues. The other Sempra utility, SoCal Gas\u2019 net income for the third quarter of 2007 increased to $63 million from $61 million in third quarter last year. Sempra executives assured investors that the company\u2019s earnings would not be adversely impacted by its emergency response to the devastating wildfires, which swept through seven counties in its utilities\u2019 service territories. SDG&E and SoCal Gas have set up catastrophic event accounts with the CPUC and the Federal Energy Regulatory Commission to recover their fire-related costs from ratepayers. On the regulatory front, Sempra expects the CPUC to issue decisions in SDG&E\u2019s Cost of Capital proceeding by the end of the year and its general rate case in the first quarter of next year if a settlement is not reached. The company also anticipates a final decision on its Sunrise Powerlink transmission project by mid-2008 and expects the line to be operational in 2011 to improve reliability for the region, Felsinger said.