Who Profits — and Why This Line?

A regulated utility like SDG&E doesn't profit by selling electricity — it profits by building things. Its earnings are a guaranteed rate of return on the capital it builds and owns (its “rate base”), set by federal regulators at roughly 10.3%. So on CAISO's ~$2.3 billion estimate for this line, that's on the order of $127 million a year in shareholder profit — billed to ratepayers, every year, for the multi-decade life of the line. ^{[13] [1] [2]}

That creates a simple, legal incentive: build more, earn more. Economists named it the Averch-Johnson effect back in 1962 — guaranteed a return higher than its cost of money, a utility tends to over-build, favoring big capital projects over cheaper fixes, because every dollar it sinks into equipment it owns earns that return. It earns nothing when you put panels on your own roof. And the money isn't federal — it's billed to customers, spread across every California ratepayer through a statewide charge, with recovery made nearly automatic. ^{[3] [1] [12]}

SDG&E even reached past that 10.3%. In its federal rate case it asked for 12.25% — including a half-point bonus simply for belonging to the regional grid, which buys ratepayers nothing. FERC rejected the bonus, and the case settled near 10.28% — still above the 9.57% FERC just handed New England's utilities. ^{[4] [1] [2] [5]}

Zoom out and the pattern is unmistakable. Sempra — SDG&E's parent company — earned about $2.8 billion in profit in 2024 on roughly $13 billion in revenue, and pays shareholders a dividend every quarter. ^[6] Because it earns that money by owning infrastructure, its growth plan is simply to build more of it: a record $56 billion construction plan for 2025–2029 — over 90% of it regulated utility projects — explicitly designed to grow the capital it earns a return on by about 10% a year, since extended to roughly $65 billion through 2030. ^[7]

This line is one brick in that wall. Every mile becomes rate base the company collects a guaranteed return on — which is exactly why the incentive is always to build the big project, not to help you avoid needing it. ^{[7] [3]}

Here's a twist most people never hear: SDG&E didn't win the right to build this line — it lost. Four of the biggest names in energy infrastructure bid for it; in April 2024 the grid operator picked NextEra's Horizon West Transmission, on its own route and with a cost cap — 8.5% on any spending over its ~$1 billion estimate. SDG&E lost. Then, in summer 2025, it simply bought the line from Horizon West — and now builds and owns it at its full, uncapped ~10.3% return, with that lone cost cap of unconfirmed force after the sale. ^{[8] [9] [10]}

And the cap was weak anyway: it didn't apply during construction — when overruns happen — and capped only the profit rate, not the spending, so ratepayers would still eat a blowout. How little does that protect anyone? A near-identical 500 kV line in the same planning cycle, Serrano–Del Amo–Mesa, ran from about $1.1 billion to roughly $5 billion before the grid operator canceled it outright. ^{[9] [11]}

Because a 500 kV line is classified as “regional,” its cost isn't billed only to the people it serves. It's rolled into a statewide transmission charge spread across all California ratepayers — so Temecula residents help pay for this line whether or not it ever delivers them a single watt. ^[12]

And by the grid operator's own account, it wouldn't. The line is built to serve San Diego and the Los Angeles basin and to connect remote desert renewables — not Riverside County. The community that bears the towers, the fire risk, and the disruption is not the community that gets the power. ^[13]

A fair question follows: does any level of government come out ahead? Mostly, no — government roughly breaks even or loses a little, and the taxes it does collect on this line are folded into the cost ratepayers reimburse, not taken out of SDG&E's profit. ^[14]

The state's real reason to want the line isn't money — it's policy: California's SB 100 requires 100% clean electricity by 2045, and the grid operator's justification flows from that mandate, even though California's slice of global emissions is only about 0.7% and falling. Tellingly, SDG&E itself quietly dropped the clean-energy pitch — its project page swapped “large volumes of renewable energy” for “growing demand” and power delivered “regardless of where it is generated.” That is its own admission that it earns the same guaranteed return no matter what flows. ^{[15] [16] [17]}

Local solar, batteries, and flexible demand — “non-wires alternatives” — can meet growing demand faster, cheaper, and with far less land than a new long-distance line. But the utility earns nothing on the panels on your roof, and state policy followed that same money: in 2023 California cut the credit for rooftop-solar power by about 75–80%, and home-solar sales fell by more than half. ^{[19] [18]}

Be honest about the trade: putting solar on the million-plus homes this line is said to serve isn't cheaper upfront than its ~$2 billion sticker. The difference is what your money buys. The line is just wires — ratepayers also fund the distant plants it connects and hand SDG&E a guaranteed profit for forty years, owning nothing at the end. Local solar is generation and delivery in one: owned by the household, with no long-distance losses and no new land — and at grid scale a local-heavy build is actually cheaper, by roughly $473 billion by 2050. ^{[20] [21] [22]}

A power line isn't a one-time cost. Ratepayers pay a guaranteed return on it, plus maintenance and taxes, every year for its ~40-year life. Run the standard formula on this ~$2 billion line and it comes to $7–8 billion over 40 years — roughly $3 billion of it pure shareholder profit. The profit alone is bigger than the sticker. ^{[23] [2]}

And it lands on the highest electricity rates in the country: SDG&E already charges about 47.7¢ per kWh — more than double the national average — rising around 10% a year, with every new line added to the base those rates are built on. The line is a meter that runs forever and that ratepayers never own, while locally owned generation is bought once and caps decades of those rising bills. ^{[24] [25]}

A “clean” line still carries a heavy footprint of its own. Most of its built-in carbon is in its materials — the steel towers and concrete footings alone are more than 60% — here meaning lattice towers up to 200 feet, 84 footings bored into Temecula Creek, aluminum conductors, and a corridor more than 250 feet wide, built over months of diesel rigs, cranes, and truck convoys right where people live. ^{[22] [26]}

The bigger hidden cost is fire. Power lines cause a small share of California's ignitions but a wildly disproportionate share of the damage — six of the twenty most destructive wildfires since 2015, including the 2018 Camp Fire — and wildfire is an enormous carbon source: California's 2020 fires alone emitted more than double the entire power sector's carbon that year. One major fire started by a “clean” line can release more carbon in days than the line saves in years. ^{[27] [28] [29]}

This isn't abstract here: SDG&E's own lines caused the 2007 fires — $2.4 billion in settlements — and its own regulator rated a comparable line through this back-country a wildfire hazard it could not mitigate away. “Clean” measures only the smokestack; it hides the carbon, the land, and the fire risk — all borne by people other than the ones who get the power. ^{[30] [22]} → See SDG&E's wildfire record.

None of this means the approval was bought — and we won't claim it was. But the company has a record worth watching: a CPUC judge fined SDG&E's sister utility SoCalGas about $9.8 million for using customers' own money to lobby, and Sempra is a heavy, repeat spender before the same regulators who will decide this project. ^[31]

The incentive even shows in the lawmaking. Because the utility earns its return on the lines it builds and nothing on the cheaper alternatives, in 2024 it backed AB 2292 — which repealed the law requiring the CPUC to weigh cost-effective alternatives before approving a transmission line. So follow the money, show up to the proceedings, and demand the need, the cost, and the alternatives be tested in the open. ^{[32] [33]} → Take action.