Oncor (Sempra Texas) (SRE) Q4 2025 earnings review
Historic Load Growth Fuels $47.5B Capital Plan and Earnings Surge
Oncor (Sempra's Texas utility engine) delivered an exceptional quarter, with Net Income surging 49% YoY to $250 million on 18% revenue growth. The financial beat is entirely overshadowed by the sheer scale of the Texas load growth narrative. Driven by an exploding data center queue and Permian Basin electrification, Oncor upgraded its 5-year base capital plan by $11.4 billion to a record $47.5 billion. While the newly settled base rate review locked in a slightly lower-than-requested Return on Equity, the implementation of the Unified Tracker Mechanism (UTM) and accelerating power volumes cement Oncor as a premier utility growth vehicle.
🐂 Bull Case
The 2026-2030 base capital plan jumped to $47.5B, with an additional $10B in incremental opportunities. This guarantees a multi-year supercycle of compounding rate base growth.
The new Unified Tracker Mechanism (UTM) is already contributing to Q4's revenue beat, allowing Oncor to recover capital costs faster and significantly reduce regulatory lag on its massive investments.
🐻 Bear Case
Oncor originally filed its rate case requesting a 10.55% ROE and a 45% equity layer. The unopposed settlement landed at a 9.75% ROE and 43.5% equity. While removing uncertainty, the returns are lower than management's initial ambitions.
Stepping up from $4.7B in capital expenditures in 2024 to a guided $9.0B in 2026 represents a 91% increase in annual deployment, bringing severe supply chain and labor execution risks.
⚖️ Verdict: 🟢
Bullish. The 49% Net Income growth validates the thesis that Texas is the ultimate utility growth engine. The structural step-up in capital plans and exploding interconnection queue heavily outweigh the slightly softer rate case settlement.
Key Themes
Data Center Interconnection Queue is Accelerating
The Large Commercial & Industrial (LC&I) queue metrics are staggering. Oncor's data center interconnection queue has grown from 156 GW in 25Q1 to 255 GW at the end of 25Q4. To contextualize, this queue represents multiples of Oncor's historical system peak load. While not all of this will be built, it provides an almost unlimited backlog of high-confidence infrastructure demand.
Capital Plan Supercycle
Management announced a new 2026-2030 base capital plan of $47.5B, an $11.4B increase from the 2025-2029 plan. The breakdown of this increase shows a shift from planning to execution: $6B for the Permian Basin Reliability Plan (PBRP), $2B for new transmission, $2B for distribution, and $1B for the Delaware Basin. This locks in accelerating rate base growth through the end of the decade.
Rate Case Settlement Falls Short of Initial Ask
On January 29, 2026, Oncor filed an unopposed stipulation for its base rate review. It secured an estimated $560M revenue increase (8.8%), a 9.75% ROE, and a 43.5% equity layer. While an $560M bump is highly positive, investors should note this is Stable compared to historicals, but a downgrade from management's ambitious Q2 requests (10.55% ROE, 45% equity). This puts more pressure on volume growth and the UTM to drive earnings.
UTM Revenues Begin Flowing
The Unified Tracker Mechanism (UTM) authorized by HB 5247 is working as designed. In 25Q4, Oncor recognized $49 million in UTM revenues (totaling $104 million for the year). This legislative win is critical as it fundamentally reduces regulatory lag, allowing Oncor to recognize revenues on capital put into service during the calendar year prior to full rate case integration.
Rising Operational and Debt Costs
Growth is not free. In Q4, operation and maintenance (O&M) expenses grew 16% YoY to $419M, and interest expense spiked 22% to $210M. While total revenue growth comfortably absorbed these hits this quarter, the massive debt issuances required to fund the $47.5B capital plan mean interest expenses will be a persistent headwind.
Other KPIs
Accelerating. Up 5.0% YoY. Residential volumes grew 4.4% to 9,745 GWh, while Commercial and Industrial volumes grew 5.2% to 31,037 GWh. This strong underlying physical volume growth validates the broader thesis of Texas economic expansion.
Accelerating. Up 31.5% YoY from $321 million. This illustrates high-quality flow-through; the top-line revenue beat successfully navigated the higher O&M and wholesale transmission costs to deliver stellar operating margins.
Accelerating. Up 17.8% from $1.99 billion in 2024. Despite the strong OCF generation, it only covers roughly a third of the $6.76 billion spent on capital expenditures, necessitating the $3.46 billion in new senior secured notes issued during the year.
Guidance
Accelerating. This represents a massive step up from the $6.76 billion spent on CapEx in 2025 and the $4.68 billion spent in 2024. The sheer doubling of CapEx over a 24-month period will be the defining execution test for management.
Estimated 8.8% increase over the 2024 test year adjusted annualized revenues. The PUCT is expected to rule on the stipulation in the coming months, which will lock in a major structural step-up for Oncor's top line in 2026.
Key Questions
ROE Settlement Impact
With the unopposed base rate stipulation coming in at 9.75% ROE and 43.5% equity (versus the initial 10.55% / 45% ask), how does this impact parent company Sempra's confidence in its broader 7-9% EPS CAGR guidance?
Supply Chain Preparedness
Scaling capital deployment from $4.7B in 2024 to $9.0B in 2026 is an extreme operational shift. What specific supply chain and labor procurement steps have been secured to prevent bottlenecks in this deployment?
Filtering the Data Center Queue
The LC&I queue contains an astounding 255 GW of data center requests. Given the physical limits of grid expansion, what percentage of this 255 GW queue is currently considered 'high confidence' or realistically actionable within the 2026-2030 capital plan window?