Sempra Energy (SRE) announced that its regulated subsidiary Southern California Gas Company (SoCalGas) plans to add about 1,000 new natural gas-powered trucks to its fleet over the next five years. The addition will result in substantial fuel cost savings for the company, apart from being more environmentally friendly.
Compressed natural gas currently costs about $2 per gasoline gallon equivalent, offering the company significant fuel costs savings. Another major benefit of compressed natural gas as a transportation fuel is reduced tailpipe emissions. When compared to a gasoline- or diesel-powered vehicle, a natural gas vehicle releases reduced carbon dioxide, carbon monoxide, and nitrogen oxide emissions.
Sempra Energy will purchase new natural gas-powered trucks from original equipment manufacturers as well as custom-built natural gas vehicles through a collaborative effort with local Southern California companies. Currently, SoCalGas has about 1,000 natural gas vehicles in its fleet. The trucks would be part of the utility's "green" fleet replacement program which promotes natural gas as the fuel of choice for the road.
Southern California Gas Company is U.S.'s largest natural gas distribution utility, providing services to 20.9 million consumers connected through nearly 5.8 million meters. The company's service territory encompasses approximately 20,000 square miles throughout central and Southern California. Southern California currently has nearly 300 compressed natural gas fueling stations serving more than 17,000 natural gas-powered vehicles.
Sempra Energy is a southern California-based energy services holding company involved in the sale, distribution, storage, and transportation of electricity and natural gas.
Sempra Energy’s diversified exposure is a natural hedge against regulatory rate risks. This favorable outlook is supported by stable utility earnings, the Sunrise Powerlink transmission line, ongoing installations of smart meter and renewable power projects in the Pacific Southwest.
However, we are concerned about a lack of any near-term positive triggers, along with near-term volatility in natural gas prices, and pending regulatory cases. The company presently retains a short-term Zacks #3 Rank (Hold). Over the longer run we maintain our long-term Neutral recommendation on the stock. One of its direct competitors is Energen Corporation (EGN).
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