SEC Info - Sempra Energy, et al. - ‘10-Q’ for 3/31/20

Page	(sequential)		(alphabetic)	↑Top
		Alternative Formats (Word, et al.) Capital Resources and Liquidity Controls and Procedures Critical Accounting Policies and Estimates Exhibits Financial Statements Glossary Information Regarding Forward-Looking Statements Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations New Accounting Standards Note 10. San Onofre Nuclear Generating Station Note 11. Commitments and Contingencies Note 12. Segment Information Note 1. General Information and Other Financial Data Note 2. New Accounting Standards Note 3. Revenues Note 4. Regulatory Matters Note 5. Acquisitions, Divestitures and Discontinued Operations Note 6. Investments in Unconsolidated Entities Note 7. Debt and Credit Facilities Note 8. Derivative Financial Instruments Note 9. Fair Value Measurements Notes to Condensed Consolidated Financial Statements Overview Quantitative and Qualitative Disclosures About Market Risk Results of Operations Risk Factors Signatures 102 103 104 105 106 109
1	1st Page – Filing Submission
"	Glossary
"	Information Regarding Forward-Looking Statements
"	Financial Statements
"	Notes to Condensed Consolidated Financial Statements
"	Note 1. General Information and Other Financial Data
"	Note 2. New Accounting Standards
"	Note 3. Revenues
"	Note 4. Regulatory Matters
"	Note 5. Acquisitions, Divestitures and Discontinued Operations
"	Note 6. Investments in Unconsolidated Entities
"	Note 7. Debt and Credit Facilities
"	Note 8. Derivative Financial Instruments
"	Note 9. Fair Value Measurements
"	Note 10. San Onofre Nuclear Generating Station
"	Note 11. Commitments and Contingencies
"	Note 12. Segment Information
"	Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Overview
"	Results of Operations
"	Capital Resources and Liquidity
"	Critical Accounting Policies and Estimates
"	102
"	New Accounting Standards
"	Quantitative and Qualitative Disclosures About Market Risk
"	Controls and Procedures
"	103
"	Legal Proceedings
"	104
"	Risk Factors
"	105
"	Exhibits
"	106
"	Signatures
"	109

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sre:SempraMexicoSegmentMember 2020-01-01 2020-03-31 0001032208 us-gaap:OperatingSegmentsMember sre:SempraMexicoSegmentMember 2020-03-31 0001032208 us-gaap:OperatingSegmentsMember sre:SDGESegmentMember 2020-01-01 2020-03-31 0001032208 us-gaap:CorporateNonSegmentMember 2020-01-01 2020-03-31 0001032208 us-gaap:OperatingSegmentsMember sre:SempraTexasUtilitiesMember 2019-01-01 2019-03-31 0001032208 us-gaap:MaterialReconcilingItemsMember 2019-12-31 0001032208 us-gaap:OperatingSegmentsMember sre:SempraLNGMidstreamMember 2020-01-01 2020-03-31 0001032208 us-gaap:CorporateNonSegmentMember 2019-12-31 0001032208 us-gaap:OperatingSegmentsMember sre:SoCalGasSegmentMember 2020-01-01 2020-03-31 0001032208 us-gaap:OperatingSegmentsMember sre:SempraTexasUtilitiesMember 2019-12-31 0001032208 us-gaap:OperatingSegmentsMember sre:SempraTexasUtilitiesMember 2020-03-31 0001032208 us-gaap:CorporateNonSegmentMember 2020-03-31 0001032208 us-gaap:MaterialReconcilingItemsMember 2019-01-01 2019-03-31 0001032208 us-gaap:OperatingSegmentsMember sre:SoCalGasSegmentMember 2019-01-01 2019-03-31 0001032208 us-gaap:OperatingSegmentsMember sre:SDGESegmentMember 2019-01-01 2019-03-31 0001032208 us-gaap:OperatingSegmentsMember sre:SempraLNGMidstreamMember 2020-03-31 0001032208 us-gaap:OperatingSegmentsMember sre:SDGESegmentMember 2019-12-31 0001032208 us-gaap:OperatingSegmentsMember sre:SempraMexicoSegmentMember 2019-01-01 2019-03-31 0001032208 us-gaap:IntersegmentEliminationMember 2020-03-31 0001032208 us-gaap:MaterialReconcilingItemsMember 2020-03-31 0001032208 us-gaap:OperatingSegmentsMember sre:SempraRenewablesSegmentMember 2019-01-01 2019-03-31 0001032208 us-gaap:OperatingSegmentsMember sre:SempraTexasUtilitiesMember 2020-01-01 2020-03-31 0001032208 us-gaap:OperatingSegmentsMember sre:SoCalGasSegmentMember 2020-03-31 0001032208 us-gaap:MaterialReconcilingItemsMember 2020-01-01 2020-03-31 0001032208 us-gaap:IntersegmentEliminationMember 2019-12-31 0001032208 us-gaap:OperatingSegmentsMember sre:SempraRenewablesSegmentMember 2020-01-01 2020-03-31 0001032208 us-gaap:IntersegmentEliminationMember 2020-01-01 2020-03-31 0001032208 us-gaap:IntersegmentEliminationMember 2019-01-01 2019-03-31 iso4217:USD xbrli:pure iso4217:USD xbrli:shares xbrli:shares iso4217:MXN sre:segment sre:lender utreg:MWh sre:company utreg:MMBTU sre:plaintiff sre:lawsuit iso4217:GBP sre:proof_of_claim

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM i 10-Q

(Mark One)

i ☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

i March 31, 2020

i ☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File No.

Exact Name of Registrant as Specified in its Charter, Address of Principal Executive Office and Telephone Number

State of Incorporation

I.R.S. Employer Identification No.

Former name, former address and former fiscal year, if changed since last report

i 1-14201

i SEMPRA ENERGY

i California

i 33-0732627

No change

i 488 8th Avenue

i San Diego,

i California

i 92101

i (619)

i 696-2000

i 1-03779

i SAN DIEGO GAS & ELECTRIC COMPANY

i California

i 95-1184800

No change

i 8326 Century Park Court

i San Diego,

i California

i 92123

i (619)

i 696-2000

i 1-01402

i SOUTHERN CALIFORNIA GAS COMPANY

i California

i 95-1240705

No change

i 555 West Fifth Street

i Los Angeles,

i California

i 90013

i (213)

i 244-1200

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

SEMPRA ENERGY:

i Sempra Energy Common Stock, without par value

i SRE

i NYSE

i Sempra Energy 6% Mandatory Convertible Preferred Stock, Series A, $100 liquidation preference

i SREPRA

i NYSE

i Sempra Energy 6.75% Mandatory Convertible Preferred Stock, Series B, $100 liquidation preference

i SREPRB

i NYSE

i Sempra Energy 5.75% Junior Subordinated Notes Due 2079, $25 par value

i SREA

i NYSE

SAN DIEGO GAS & ELECTRIC COMPANY:

None

SOUTHERN CALIFORNIA GAS COMPANY:

None



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Sempra Energy	i Yes	☒	No	☐
San Diego Gas & Electric Company	i Yes	☒	No	☐
Southern California Gas Company	i Yes	☒	No	☐



Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Sempra Energy	i Yes	☒	No	☐
San Diego Gas & Electric Company	i Yes	☒	No	☐
Southern California Gas Company	i Yes	☒	No	☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Sempra Energy:
☒	i Large Accelerated Filer	☐	Accelerated Filer	☐	Non-accelerated Filer	i ☐	Smaller Reporting Company	i ☐	Emerging Growth Company

San Diego Gas & Electric Company:
☐	Large Accelerated Filer	☐	Accelerated Filer	☒	i Non-accelerated Filer	i ☐	Smaller Reporting Company	i ☐	Emerging Growth Company

Southern California Gas Company:
☐	Large Accelerated Filer	☐	Accelerated Filer	☒	i Non-accelerated Filer	i ☐	Smaller Reporting Company	i ☐	Emerging Growth Company



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Sempra Energy	Yes	☐	No	☐
San Diego Gas & Electric Company	Yes	☐	No	☐
Southern California Gas Company	Yes	☐	No	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Sempra Energy	Yes	i ☐	No	☒
San Diego Gas & Electric Company	Yes	i ☐	No	☒
Southern California Gas Company	Yes	i ☐	No	☒

Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date.

Common stock outstanding on April 29, 2020:



Sempra Energy	i 292,533,413	shares
San Diego Gas & Electric Company	Wholly owned by Enova Corporation, which is wholly owned by Sempra Energy
Southern California Gas Company	Wholly owned by Pacific Enterprises, which is wholly owned by Sempra Energy



SEMPRA ENERGY FORM 10-Q SAN DIEGO GAS & ELECTRIC COMPANY FORM 10-Q SOUTHERN CALIFORNIA GAS COMPANY FORM 10-Q TABLE OF CONTENTS

		Page
Glossary		4
Information Regarding Forward-Looking Statements		6

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	8
	Notes to Condensed Consolidated Financial Statements
	Note 1. General Information and Other Financial Data	27
	Note 2. New Accounting Standards	43
	Note 3. Revenues	44
	Note 4. Regulatory Matters	47
	Note 5. Acquisitions, Divestitures and Discontinued Operations	49
	Note 6. Investments in Unconsolidated Entities	51
	Note 7. Debt and Credit Facilities	54
	Note 8. Derivative Financial Instruments	56
	Note 9. Fair Value Measurements	62
	Note 10. San Onofre Nuclear Generating Station	67
	Note 11. Commitments and Contingencies	70
	Note 12. Segment Information	77
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	79
	Overview	79
	Results of Operations	80
	Capital Resources and Liquidity	89
	Critical Accounting Policies and Estimates	102
	New Accounting Standards	102
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	102
Item 4.	Controls and Procedures	103

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	104
Item 1A.	Risk Factors	105
Item 6.	Exhibits	106

Signatures		109

This combined report is separately filed by Sempra Energy, San Diego Gas & Electric Company and Southern California Gas Company. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes statements herein only as to itself and its consolidated subsidiaries and makes no statement whatsoever as to any other company.

You should read this report in its entirety as it pertains to each respective reporting company. No one section of the report deals with all aspects of the subject matter. Separate Part I – Item 1 sections are provided for each reporting company, except for the Notes to Condensed Consolidated Financial Statements. The Notes to Condensed Consolidated Financial Statements for all of the reporting companies are combined. All Items other than Part I – Item 1 are combined for the reporting companies.

The following terms and abbreviations appearing in the text of this report have the meanings indicated below.



GLOSSARY


2019 GRC FD	final decision in the California Utilities’ 2019 General Rate Case
AB	California Assembly Bill
AFUDC	allowance for funds used during construction
Annual Report	Annual Report on Form 10-K for the year ended December 31, 2019
AOCI	accumulated other comprehensive income (loss)
ARO	asset retirement obligation
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
Bay Gas	Bay Gas Storage Company, Ltd.
Bechtel	Bechtel Oil, Gas and Chemicals, Inc.
Blade	Blade Energy Partners
bps	basis points
CalGEM	California Geologic Energy Management Division (formerly known as Division of Oil, Gas, and Geothermal Resources or DOGGR)
California Utilities	San Diego Gas & Electric Company and Southern California Gas Company, collectively
Cameron LNG JV	Cameron LNG Holdings, LLC
CARB	California Air Resources Board
CCM	cost of capital adjustment mechanism
CFE	Comisión Federal de Electricidad (Federal Electricity Commission of Mexico)
Chilquinta Energía	Chilquinta Energía S.A. and its subsidiaries
COVID-19	Coronavirus disease 2019
CPPMA	COVID-19 Pandemic Protections Memorandum Account
CPUC	California Public Utilities Commission
CRR	congestion revenue right
DOE	U.S. Department of Energy
ECA LNG JV	ECA LNG Holdings B.V.
ECA LNG Regasification	Energía Costa Azul, S. de R.L. de C.V. regasification
Ecogas	Ecogas México, S. de R.L. de C.V.
Edison	Southern California Edison Company, a subsidiary of Edison International
EFH	Energy Future Holdings Corp. (renamed Sempra Texas Holdings Corp.)
Eletrans	Eletrans S.A., Eletrans II S.A. and Eletrans III S.A., collectively
EPC	engineering, procurement and construction
EPS	earnings per common share
ESJ	Energía Sierra Juarez, S. de R.L. de C.V.
ETR	effective income tax rate
FERC	Federal Energy Regulatory Commission
Fitch	Fitch Ratings
FTA	Free Trade Agreement
GCIM	Gas Cost Incentive Mechanism
GHG	greenhouse gas
GRC	General Rate Case
HMRC	United Kingdom’s Revenue and Customs Department
IEnova	Infraestructura Energética Nova, S.A.B. de C.V.
IMG JV	Infraestructura Marina del Golfo
IOU	investor-owned utility
IRS	Internal Revenue Service
ISFSI	independent spent fuel storage installation
ISO	Independent System Operator
JV	joint venture
LA Superior Court	Los Angeles County Superior Court
Leak	the leak at the SoCalGas Aliso Canyon natural gas storage facility injection-and-withdrawal well, SS25, discovered by SoCalGas on October 23, 2015
LIBOR	London Interbank Offered Rate
LIFO	last in first out
LNG	liquefied natural gas
LPG	liquid petroleum gas
Luz del Sur	Luz del Sur S.A.A. and its subsidiaries



GLOSSARY (CONTINUED)


MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Mississippi Hub	Mississippi Hub, LLC
MMBtu	million British thermal units (of natural gas)
Moody’s	Moody’s Investors Service
MOU	Memorandum of Understanding
Mtpa	million tonnes per annum
MWh	megawatt hour
NCI	noncontrolling interest(s)
NDT	nuclear decommissioning trusts
NEIL	Nuclear Electric Insurance Limited
NOL	net operating loss
OCI	other comprehensive income (loss)
OII	Order Instituting Investigation
O&M	operation and maintenance expense
Oncor	Oncor Electric Delivery Company LLC
Oncor Holdings	Oncor Electric Delivery Holdings Company LLC
Otay Mesa VIE	Otay Mesa Energy Center LLC VIE
PPA	power purchase agreement
PP&E	property, plant and equipment
PUCT	Public Utility Commission of Texas
RBS	The Royal Bank of Scotland plc
RBS SEE	RBS Sempra Energy Europe
RBS Sempra Commodities	RBS Sempra Commodities LLP
ROE	return on equity
ROU	right-of-use
RSU	restricted stock unit
SB	California Senate Bill
SDG&E	San Diego Gas & Electric Company
SEC	U.S. Securities and Exchange Commission
SEDATU	Secretaría de Desarrollo Agrario, Territorial y Urbano (Mexican agency in charge of agriculture, land and urban development)
Sempra Global	holding company for most of Sempra Energy’s subsidiaries not subject to California or Texas utility regulation
series A preferred stock	Sempra Energy’s 6% mandatory convertible preferred stock, series A
series B preferred stock	Sempra Energy’s 6.75% mandatory convertible preferred stock, series B
Sharyland Holdings	Sharyland Holdings, L.P.
Sharyland Utilities	Sharyland Utilities, L.L.C.
SoCalGas	Southern California Gas Company
SONGS	San Onofre Nuclear Generating Station
S&P	Standard & Poor’s
TAG JV	TAG Norte Holding, S. de R.L. de C.V.
TCJA	Tax Cuts and Jobs Act of 2017
TdM	Termoeléctrica de Mexicali
TechnipFMC	TP Oil & Gas Mexico, S. De R.L. De C.V., an affiliate of TechnipFMC plc
Tecnored	Tecnored S.A.
Tecsur	Tecsur S.A.
TO4	Electric Transmission Owner Formula Rate, effective through May 31, 2019
TO5	Electric Transmission Owner Formula Rate, effective June 1, 2019
TTHC	Texas Transmission Holdings Corporation
TTI	Texas Transmission Investment LLC
U.S. GAAP	accounting principles generally accepted in the United States of America
VAT	value-added tax
Ventika	Ventika, S.A.P.I. de C.V. and Ventika II, S.A.P.I. de C.V., collectively
VIE	variable interest entity
Wildfire Fund	the fund established pursuant to AB 1054
Wildfire Legislation	AB 1054 and AB 111

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

We make statements in this report that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on assumptions with respect to the future, involve risks and uncertainties, and are not guarantees of performance. Future results may differ materially from those expressed in the forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the filing date of this report. We assume no obligation to update or revise any forward-looking statement as a result of new information, future events or other factors.

In this report, forward-looking statements can be identified by words such as “believes,” “expects,” “anticipates,” “plans,” “estimates,” “projects,” “forecasts,” “should,” “could,” “would,” “will,” “confident,” “may,” “can,” “potential,” “possible,” “proposed,” “target,” “pursue,” “outlook,” “maintain,” or similar expressions, or when we discuss our guidance, strategy, goals, vision, mission, opportunities, projections or intentions.

Factors, among others, that could cause our actual results and future actions to differ materially from those described in any forward-looking statements include risks and uncertainties relating to:


▪	California wildfires and the risk that we may be found liable for damages regardless of fault and the risk that we may not be able to recover any such costs from insurance, the Wildfire Fund or in rates from customers;


▪	decisions, investigations, regulations, issuances of permits and other authorizations, renewal of franchises, and other actions by the CFE, CPUC, DOE, PUCT, regulatory and governmental bodies and jurisdictions in the U.S. and other countries in which we operate;

▪

the success of business development efforts, construction projects and major acquisitions and divestitures, including risks in (i) the ability to make a final investment decision and completing construction projects on schedule and budget; (ii) obtaining the consent of partners; (iii) counterparties’ financial or other ability to fulfill contractual commitments; (iv) the ability to complete contemplated acquisitions and/or divestitures; and (v) the ability to realize anticipated benefits from any of these efforts once completed;

▪

the impact of the COVID-19 pandemic on our (i) ability to commence and complete capital and other projects and obtain regulatory approvals, (ii) supply chain and current and prospective counterparties, contractors, customers, employees and partners, (iii) liquidity, resulting from bill payment challenges experienced by our customers, decreased stability and accessibility of the capital markets and other factors, and (iv) ability to sustain operations and satisfy compliance requirements due to social distancing measures or if employee absenteeism were to increase significantly;


▪	the resolution of civil and criminal litigation, regulatory investigations and proceedings, and arbitrations;


▪	actions by credit rating agencies to downgrade our credit ratings or to place those ratings on negative outlook and our ability to borrow at favorable interest rates;


▪	moves to reduce or eliminate reliance on natural gas and the impact of the extreme volatility and unprecedented decline of oil prices on our businesses and development projects;

▪

weather, natural disasters, accidents, equipment failures, computer system outages and other events that disrupt our operations, damage our facilities and systems, cause the release of harmful materials, cause fires and subject us to liability for property damage or personal injuries, fines and penalties, some of which may not be covered by insurance (including costs in excess of applicable policy limits), may be disputed by insurers or may otherwise not be recoverable through regulatory mechanisms or may impact our ability to obtain satisfactory levels of affordable insurance;


▪	the availability of electric power and natural gas and natural gas storage capacity, including disruptions caused by failures in the transmission grid, limitations on the withdrawal or injection of natural gas from or into storage facilities, and equipment failures;


▪	cybersecurity threats to the energy grid, storage and pipeline infrastructure, the information and systems used to operate our businesses, and the confidentiality of our proprietary information and the personal information of our customers and employees;


▪	expropriation of assets, the failure of foreign governments and state-owned entities to honor the terms of contracts, and property disputes;


▪	the impact at SDG&E on competitive customer rates and reliability due to the growth in distributed power generation and from departing retail load resulting from customers transferring to Direct Access, Community Choice Aggregation or other forms of distributed power generation and the risk of nonrecovery for stranded assets and contractual obligations;


▪	Oncor’s ability to eliminate or reduce its quarterly dividends due to regulatory and governance requirements and commitments, including by actions of Oncor’s independent directors or a minority member director;


▪	volatility in foreign currency exchange, interest and inflation rates and commodity prices and our ability to effectively hedge the risk of such volatility;


▪	changes in trade policies, laws and regulations, including tariffs and revisions to or replacement of international trade agreements, such as the North American Free Trade Agreement, that may increase our costs or impair our ability to resolve trade disputes;


▪	the impact of changes to federal and state tax laws and our ability to mitigate adverse impacts; and


▪	other uncertainties, some of which may be difficult to predict and are beyond our control.

We caution you not to rely unduly on any forward-looking statements. You should review and consider carefully the risks, uncertainties and other factors that affect our business as described herein, in our Annual Report and in other reports that we file with the SEC.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS



SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Three months ended March 31,
	2020			2019
	(unaudited)
REVENUES
Utilities	$	i 2,665		$	i 2,515
Energy-related businesses	i 364			i 383
Total revenues	i 3,029			i 2,898

EXPENSES AND OTHER INCOME
Utilities:
Cost of natural gas	( i 337		)	( i 531		)
Cost of electric fuel and purchased power	( i 229		)	( i 256		)
Energy-related businesses cost of sales	( i 59		)	( i 108		)
Operation and maintenance	( i 951		)	( i 832		)
Depreciation and amortization	( i 412		)	( i 383		)
Franchise fees and other taxes	( i 137		)	( i 130		)
Other (expense) income, net	( i 254		)	i 82
Interest income	i 27			i 21
Interest expense	( i 280		)	( i 260		)
Income from continuing operations before income taxes and equity earnings	i 397			i 501
Income tax benefit (expense)	i 207			( i 42		)
Equity earnings	i 263			i 101
Income from continuing operations, net of income tax	i 867			i 560
Income (loss) from discontinued operations, net of income tax	i 80			( i 42		)
Net income	i 947			i 518
Earnings attributable to noncontrolling interests	( i 151		)	( i 41		)
Mandatory convertible preferred stock dividends	( i 36		)	( i 36		)
Earnings attributable to common shares	$	i 760		$	i 441

Basic EPS:
Earnings from continuing operations	$	i 2.35		$	i 1.79
Earnings (losses) from discontinued operations	$	i 0.25		$	( i 0.19	)
Earnings	$	i 2.60		$	i 1.60
Weighted-average common shares outstanding	i 292,790			i 274,674

Diluted EPS:
Earnings from continuing operations	$	i 2.30		$	i 1.78
Earnings (losses) from discontinued operations	$	i 0.23		$	( i 0.19	)
Earnings	$	i 2.53		$	i 1.59
Weighted-average common shares outstanding	i 313,925			i 277,228

See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in millions)

Sempra Energy shareholders’ equity

Pretax
amount

Income tax
benefit

(expense)

Net-of-tax
amount

Noncontrolling
interests

(after-tax)

Total

(unaudited)

Three months ended March 31, 2020 and 2019

2020:

Net income

i 610

i 186

i 796

i 151

i 947

Other comprehensive income (loss):

Foreign currency translation adjustments

( i 138

)

i —

( i 138

)

( i 20

)

( i 158

)

Financial instruments

( i 188

)

i 53

( i 135

)

( i 12

)

( i 147

)

Pension and other postretirement benefits

i 24

( i 2

)

i 22

i —

i 22

Total other comprehensive loss

( i 302

)

i 51

( i 251

)

( i 32

)

( i 283

)

Comprehensive income

i 308

i 237

i 545

i 119

i 664

2019:

Net income

i 670

( i 193

)

i 477

i 41

i 518

Other comprehensive income (loss):

Foreign currency translation adjustments

i 32

i —

i 32

i 4

i 36

Financial instruments

( i 68

)

i 22

( i 46

)

( i 4

)

( i 50

)

Pension and other postretirement benefits

i 4

( i 1

)

i 3

i —

i 3

Total other comprehensive loss

( i 32

)

i 21

( i 11

)

i —

( i 11

)

Comprehensive income

i 638

( i 172

)

i 466

i 41

i 507

See Notes to Condensed Consolidated Financial Statements.



SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	March 31, 2020			December 31, 2019⁽¹⁾
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	i 2,247		$	i 108
Restricted cash	i 23			i 31
Accounts receivable – trade, net	i 1,222			i 1,261
Accounts receivable – other, net	i 369			i 455
Due from unconsolidated affiliates	i 64			i 32
Income taxes receivable	i 120			i 112
Inventories	i 217			i 277
Regulatory assets	i 210			i 222
Greenhouse gas allowances	i 79			i 72
Assets held for sale in discontinued operations	i 566			i 445
Other current assets	i 307			i 324
Total current assets	i 5,424			i 3,339

Other assets:
Restricted cash	i 3			i 3
Due from unconsolidated affiliates	i 592			i 742
Regulatory assets	i 1,837			i 1,930
Nuclear decommissioning trusts	i 987			i 1,082
Investment in Oncor Holdings	i 11,619			i 11,519
Other investments	i 2,215			i 2,103
Goodwill	i 1,602			i 1,602
Other intangible assets	i 211			i 213
Dedicated assets in support of certain benefit plans	i 413			i 488
Insurance receivable for Aliso Canyon costs	i 511			i 339
Deferred income taxes	i 265			i 155
Greenhouse gas allowances	i 515			i 470
Right-of-use assets – operating leases	i 592			i 591
Wildfire fund	i 385			i 392
Assets held for sale in discontinued operations	i 3,364			i 3,513
Other long-term assets	i 691			i 732
Total other assets	i 25,802			i 25,874

Property, plant and equipment:
Property, plant and equipment	i 50,185			i 49,329
Less accumulated depreciation and amortization	( i 13,118		)	( i 12,877		)
Property, plant and equipment, net	i 37,067			i 36,452
Total assets	$	i 68,293		$	i 65,665


⁽¹⁾	Derived from audited financial statements.

See Notes to Condensed Consolidated Financial Statements.



SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
	March 31, 2020			December 31, 2019⁽¹⁾
	(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	i 5,742		$	i 3,505
Accounts payable – trade	i 1,038			i 1,234
Accounts payable – other	i 163			i 179
Due to unconsolidated affiliates	i 8			i 5
Dividends and interest payable	i 548			i 515
Accrued compensation and benefits	i 264			i 476
Regulatory liabilities	i 444			i 319
Current portion of long-term debt and finance leases	i 2,079			i 1,526
Reserve for Aliso Canyon costs	i 284			i 9
Greenhouse gas obligations	i 79			i 72
Liabilities held for sale in discontinued operations	i 538			i 444
Other current liabilities	i 990			i 866
Total current liabilities	i 12,177			i 9,150

Long-term debt and finance leases	i 20,198			i 20,785

Deferred credits and other liabilities:
Due to unconsolidated affiliates	i 263			i 195
Pension and other postretirement benefit plan obligations, net of plan assets	i 1,085			i 1,067
Deferred income taxes	i 2,466			i 2,577
Deferred investment tax credits	i 21			i 21
Regulatory liabilities	i 3,533			i 3,741
Asset retirement obligations	i 2,945			i 2,923
Greenhouse gas obligations	i 348			i 301
Liabilities held for sale in discontinued operations	i 1,006			i 1,052
Deferred credits and other	i 2,136			i 2,048
Total deferred credits and other liabilities	i 13,803			i 13,925

Commitments and contingencies (Note 11)	i			i

Equity:
Preferred stock (50 million shares authorized):
6% mandatory convertible preferred stock, series A (17.25 million shares issued and outstanding)	i 1,693			i 1,693
6.75% mandatory convertible preferred stock, series B (5.75 million shares issued and outstanding)	i 565			i 565
Common stock (750 million shares authorized; 292 million shares outstanding; no par value)	i 7,472			i 7,480
Retained earnings	i 11,577			i 11,130
Accumulated other comprehensive income (loss)	( i 1,190		)	( i 939		)
Total Sempra Energy shareholders’ equity	i 20,117			i 19,929
Preferred stock of subsidiary	i 20			i 20
Other noncontrolling interests	i 1,978			i 1,856
Total equity	i 22,115			i 21,805
Total liabilities and equity	$	i 68,293		$	i 65,665


⁽¹⁾	Derived from audited financial statements.

See Notes to Condensed Consolidated Financial Statements.



SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Three months ended March 31,
	2020			2019
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	i 947		$	i 518
Less: (Income) loss from discontinued operations, net of income tax	( i 80		)	i 42
Income from continuing operations, net of income tax	i 867			i 560
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	i 412			i 383
Deferred income taxes and investment tax credits	( i 243		)	i 24
Equity earnings	( i 263		)	( i 101		)
Foreign currency transaction losses (gains), net	i 123			( i 7		)
Share-based compensation expense	i 22			i 21
Other	i 124			( i 7		)
Intercompany activities with discontinued operations, net	i —			i 31
Net change in other working capital components	i 217			i 169
Insurance receivable for Aliso Canyon costs	( i 172		)	( i 16		)
Changes in other noncurrent assets and liabilities, net	i 163			( i 199		)
Net cash provided by continuing operations	i 1,250			i 858
Net cash provided by discontinued operations	i 68			i 93
Net cash provided by operating activities	i 1,318			i 951

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	( i 1,010		)	( i 783		)
Expenditures for investments and acquisitions	( i 86		)	( i 94		)
Proceeds from sale of assets	i 5			i 327
Purchases of nuclear decommissioning trust assets	( i 552		)	( i 225		)
Proceeds from sales of nuclear decommissioning trust assets	i 552			i 225
Advances to unconsolidated affiliates	( i 30		)	i —
Repayments of advances to unconsolidated affiliates	i —			i 3
Intercompany activities with discontinued operations, net	( i 3		)	i —
Other	i 8			i 7
Net cash used in continuing operations	( i 1,116		)	( i 540		)
Net cash used in discontinued operations	( i 65		)	( i 70		)
Net cash used in investing activities	( i 1,181		)	( i 610		)

See Notes to Condensed Consolidated Financial Statements.



SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in millions)
	Three months ended March 31,
	2020			2019
	(unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid	( i 269		)	( i 232		)
Preferred dividends paid	( i 36		)	( i 36		)
Issuances of common stock	i 11			i 11
Repurchases of common stock	( i 57		)	( i 14		)
Issuances of debt (maturities greater than 90 days)	i 1,619			i 304
Payments on debt (maturities greater than 90 days) and finance leases	( i 1,433		)	( i 837		)
Increase in short-term debt, net	i 2,127			i 497
Advances from unconsolidated affiliates	i 64			i —
Purchases of noncontrolling interests	( i 16		)	( i 26		)
Intercompany activities with discontinued operations, net	( i 2		)	( i 2		)
Other	( i 5		)	( i 1		)
Net cash provided by (used in) continuing operations	i 2,003			( i 336		)
Net cash provided by (used in) discontinued operations	i 111			( i 45		)
Net cash provided by (used in) financing activities	i 2,114			( i 381		)

Effect of exchange rate changes in continuing operations	( i 6		)	i —
Effect of exchange rate changes in discontinued operations	( i 8		)	i 1
Effect of exchange rate changes on cash, cash equivalents and restricted cash	( i 14		)	i 1

Increase (decrease) in cash, cash equivalents and restricted cash, including discontinued operations	i 2,237			( i 39		)
Cash, cash equivalents and restricted cash, including discontinued operations, January 1	i 217			i 246
Cash, cash equivalents and restricted cash, including discontinued operations, March 31	$	i 2,454		$	i 207

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	i 263		$	i 257
Income tax payments, net of refunds	i 68			i 16

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued capital expenditures	$	i 437		$	i 388
Increase in finance lease obligations for investment in property, plant and equipment	i 20			i 7
Equitization of long-term debt for deficit held by NCI	i 22			i —
Preferred dividends declared but not paid	i 36			i 36
Common dividends issued in stock	i 14			i 13
Common dividends declared but not paid	i 306			i 265

See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Dollars in millions)

Preferred stock

Common
stock

Retained
earnings

Accumulated
other
comprehensive
income (loss)

Sempra
Energy
shareholders'
equity

Non-
controlling
interests

Total
equity

(unaudited)

Three months ended March 31, 2020

Balance at December 31, 2019

i 2,258

i 7,480

i 11,130

( i 939

)

i 19,929

i 1,876

i 21,805

Cumulative-effect adjustment from

change in accounting principle

( i 7

)

( i 7

)

( i 2

)

( i 9

)

Net income

i 796

i 151

i 947

Other comprehensive loss

( i 251

)

( i 251

)

( i 32

)

( i 283

)

Share-based compensation expense

i 22

Dividends declared:

Series A preferred stock ($1.50/share)

( i 26

)

( i 26

)

( i 26

)

Series B preferred stock ($1.69/share)

( i 10

)

( i 10

)

( i 10

)

Common stock ($1.05/share)

( i 306

)

( i 306

)

( i 306

)

Issuances of common stock

i 25

Repurchases of common stock

( i 57

)

( i 57

)

( i 57

)

Noncontrolling interest activities:

Purchases

i 2

( i 18

)

( i 16

)

Acquisition

i 1

Equitization of long-term debt for

deficit held by NCI

i 22

Balance at March 31, 2020

i 2,258

i 7,472

i 11,577

( i 1,190

)

i 20,117

i 1,998

i 22,115

Three months ended March 31, 2019

Balance at December 31, 2018

i 2,258

i 5,540

i 10,104

( i 764

)

i 17,138

i 2,110

i 19,248

Cumulative-effect adjustments from

change in accounting principles

i 57

( i 42

)

i 15

Net income

i 477

i 41

i 518

Other comprehensive loss

( i 11

)

( i 11

)

( i 11

)

Share-based compensation expense

i 21

Dividends declared:

Series A preferred stock ($1.50/share)

( i 26

)

( i 26

)

( i 26

)

Series B preferred stock ($1.69/share)

( i 10

)

( i 10

)

( i 10

)

Common stock ($0.97/share)

( i 265

)

( i 265

)

( i 265

)

Issuances of common stock

i 24

Repurchases of common stock

( i 14

)

( i 14

)

( i 14

)

Noncontrolling interest activities:

Distributions

( i 4

)

( i 4

)

Purchases

( i 3

)

( i 3

)

( i 23

)

( i 26

)

Balance at March 31, 2019

i 2,258

i 5,568

i 10,337

( i 817

)

i 17,346

i 2,124

i 19,470

See Notes to Condensed Consolidated Financial Statements.



SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended March 31,
	2020			2019
	(unaudited)
Operating revenues
Electric	$	i 1,050		$	i 940
Natural gas	i 219			i 205
Total operating revenues	i 1,269			i 1,145
Operating expenses
Cost of electric fuel and purchased power	i 231			i 258
Cost of natural gas	i 60			i 79
Operation and maintenance	i 310			i 286
Depreciation and amortization	i 201			i 186
Franchise fees and other taxes	i 78			i 74
Total operating expenses	i 880			i 883
Operating income	i 389			i 262
Other income, net	i 31			i 22
Interest income	i 1			i 1
Interest expense	( i 101		)	( i 103		)
Income before income taxes	i 320			i 182
Income tax expense	( i 58		)	( i 5		)
Net income	i 262			i 177
Earnings attributable to noncontrolling interest	i —			( i 1		)
Earnings attributable to common shares	$	i 262		$	i 176

See Notes to Condensed Consolidated Financial Statements.

SAN DIEGO GAS & ELECTRIC COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in millions)

SDG&E shareholder’s equity

Pretax

amount

Income tax expense

Net-of-tax

amount

Noncontrolling

interest

(after-tax)

Total

(unaudited)

Three months ended March 31, 2020 and 2019

2020:

Net income/Comprehensive income

i 320

( i 58

)

i 262

i —

i 262

2019:

Net income

i 181

( i 5

)

i 176

i 1

i 177

Other comprehensive income (loss):

Financial instruments

i —

i 1

Total other comprehensive income

i —

i 1

Comprehensive income

i 181

( i 5

)

i 176

i 2

i 178

See Notes to Condensed Consolidated Financial Statements.



SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	March 31, 2020			December 31, 2019⁽¹⁾
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	i 203		$	i 10
Accounts receivable – trade, net	i 411			i 398
Accounts receivable – other, net	i 111			i 119
Income taxes receivable, net	i 61			i 128
Inventories	i 93			i 94
Prepaid expenses	i 105			i 120
Regulatory assets	i 198			i 209
Fixed-price contracts and other derivatives	i 33			i 43
Greenhouse gas allowances	i 13			i 13
Other current assets	i 27			i 24
Total current assets	i 1,255			i 1,158

Other assets:
Regulatory assets	i 457			i 440
Nuclear decommissioning trusts	i 987			i 1,082
Greenhouse gas allowances	i 189			i 189
Right-of-use assets – operating leases	i 123			i 130
Wildfire fund	i 385			i 392
Other long-term assets	i 194			i 202
Total other assets	i 2,335			i 2,435

Property, plant and equipment:
Property, plant and equipment	i 22,850			i 22,504
Less accumulated depreciation and amortization	( i 5,656		)	( i 5,537		)
Property, plant and equipment, net	i 17,194			i 16,967
Total assets	$	i 20,784		$	i 20,560


⁽¹⁾	Derived from audited financial statements.

See Notes to Condensed Consolidated Financial Statements.



SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
	March 31, 2020			December 31, 2019⁽¹⁾
	(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	i —		$	i 80
Accounts payable	i 462			i 496
Due to unconsolidated affiliates	i 59			i 53
Interest payable	i 63			i 43
Accrued compensation and benefits	i 59			i 138
Accrued franchise fees	i 37			i 53
Regulatory liabilities	i 69			i 76
Current portion of long-term debt and finance leases	i 57			i 56
Customer deposits	i 74			i 74
Greenhouse gas obligations	i 13			i 13
Asset retirement obligations	i 105			i 95
Other current liabilities	i 186			i 133
Total current liabilities	i 1,184			i 1,310

Long-term debt and finance leases	i 6,687			i 6,306

Deferred credits and other liabilities:
Pension obligation, net of plan assets	i 156			i 153
Deferred income taxes	i 1,880			i 1,848
Deferred investment tax credits	i 14			i 14
Regulatory liabilities	i 2,200			i 2,319
Asset retirement obligations	i 760			i 771
Greenhouse gas obligations	i 72			i 62
Deferred credits and other	i 669			i 677
Total deferred credits and other liabilities	i 5,751			i 5,844

Commitments and contingencies (Note 11)	i			i

Shareholder's equity:
Preferred stock (45 million shares authorized; none issued)	i —			i —
Common stock (255 million shares authorized; 117 million shares outstanding; no par value)	i 1,660			i 1,660
Retained earnings	i 5,518			i 5,456
Accumulated other comprehensive income (loss)	( i 16		)	( i 16		)
Total shareholder’s equity	i 7,162			i 7,100
Total liabilities and shareholder's equity	$	i 20,784		$	i 20,560


⁽¹⁾	Derived from audited financial statements.

See Notes to Condensed Consolidated Financial Statements.



SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Three months ended March 31,
	2020			2019
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	i 262		$	i 177
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	i 201			i 186
Deferred income taxes and investment tax credits	( i 8		)	( i 28		)
Other	( i 10		)	i 1
Net change in working capital components	i 73			i 96
Changes in other noncurrent assets and liabilities, net	( i 20		)	i 11
Net cash provided by operating activities	i 498			i 443

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	( i 402		)	( i 356		)
Purchases of nuclear decommissioning trust assets	( i 552		)	( i 225		)
Proceeds from sales of nuclear decommissioning trust assets	i 552			i 225
Net cash used in investing activities	( i 402		)	( i 356		)

CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid	( i 200		)	i —
Issuances of debt (maturities greater than 90 days)	i 400			i —
Payments on debt (maturities greater than 90 days) and finance leases	( i 23		)	( i 22		)
Decrease in short-term debt, net	( i 80		)	( i 53		)
Net cash provided by (used in) financing activities	i 97			( i 75		)

Increase in cash, cash equivalents and restricted cash	i 193			i 12
Cash, cash equivalents and restricted cash, January 1	i 10			i 37
Cash, cash equivalents and restricted cash, March 31	$	i 203		$	i 49

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	i 79		$	i 86

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued capital expenditures	$	i 128		$	i 100
Increase in finance lease obligations for investment in property, plant and equipment	i 4			i 4

See Notes to Condensed Consolidated Financial Statements.

SAN DIEGO GAS & ELECTRIC COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Dollars in millions)

Common
stock

Retained
earnings

Accumulated
other
comprehensive
income (loss)

SDG&E
shareholder's
equity

Noncontrolling
interest

Total
equity

(unaudited)

Three months ended March 31, 2020

Balance at December 31, 2019

i 1,660

i 5,456

( i 16

)

i 7,100

i —

i 7,100

Net income

i 262

i —

i 262

Common stock dividends declared ($1.72/share)

( i 200

)

( i 200

)

( i 200

)

Balance at March 31, 2020

i 1,660

i 5,518

( i 16

)

i 7,162

i —

i 7,162

Three months ended March 31, 2019

Balance at December 31, 2018

i 1,338

i 4,687

( i 10

)

i 6,015

i 100

i 6,115

Cumulative-effect adjustment from

change in accounting principle

i 2

( i 2

)

i —

Net income

i 176

i 1

i 177

Other comprehensive income

i —

i 1

Balance at March 31, 2019

i 1,338

i 4,865

( i 12

)

i 6,191

i 102

i 6,293

See Notes to Condensed Consolidated Financial Statements.



SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended March 31,
	2020			2019
	(unaudited)

Operating revenues	$	i 1,395		$	i 1,361
Operating expenses
Cost of natural gas	i 278			i 455
Operation and maintenance	i 543			i 410
Depreciation and amortization	i 159			i 147
Franchise fees and other taxes	i 51			i 48
Total operating expenses	i 1,031			i 1,060
Operating income	i 364			i 301
Other income, net	i 30			i 16
Interest income	i 1			i —
Interest expense	( i 40		)	( i 34		)
Income before income taxes	i 355			i 283
Income tax expense	( i 52		)	( i 19		)
Net income/Earnings attributable to common shares	$	i 303		$	i 264

See Notes to Condensed Financial Statements.



SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
	Pretax amount		Income tax expense			Net-of-tax amount
	(unaudited)
	Three months ended March 31, 2020 and 2019
2020:
Net income/Comprehensive income	$	i 355	$	( i 52	)	$	i 303
2019:
Net income/Comprehensive income	$	i 283	$	( i 19	)	$	i 264

See Notes to Condensed Financial Statements.



SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED BALANCE SHEETS
(Dollars in millions)
	March 31, 2020			December 31, 2019⁽¹⁾
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	i 389		$	i 10
Accounts receivable – trade, net	i 669			i 710
Accounts receivable – other, net	i 74			i 87
Due from unconsolidated affiliates	i 7			i 11
Income taxes receivable, net	i 116			i 161
Inventories	i 79			i 136
Regulatory assets	i 9			i 7
Greenhouse gas allowances	i 60			i 52
Other current assets	i 48			i 44
Total current assets	i 1,451			i 1,218

Other assets:
Regulatory assets	i 1,297			i 1,407
Insurance receivable for Aliso Canyon costs	i 511			i 339
Greenhouse gas allowances	i 291			i 248
Right-of-use assets – operating leases	i 90			i 94
Other long-term assets	i 449			i 447
Total other assets	i 2,638			i 2,535

Property, plant and equipment:
Property, plant and equipment	i 19,661			i 19,362
Less accumulated depreciation and amortization	( i 6,140		)	( i 6,038		)
Property, plant and equipment, net	i 13,521			i 13,324
Total assets	$	i 17,610		$	i 17,077


⁽¹⁾	Derived from audited financial statements.

See Notes to Condensed Financial Statements.



SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
	March 31, 2020			December 31, 2019⁽¹⁾
	(unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	i —		$	i 630
Accounts payable – trade	i 331			i 545
Accounts payable – other	i 105			i 110
Due to unconsolidated affiliates	i 49			i 47
Accrued compensation and benefits	i 111			i 182
Regulatory liabilities	i 375			i 243
Current portion of long-term debt and finance leases	i 9			i 6
Customer deposits	i 73			i 71
Reserve for Aliso Canyon costs	i 284			i 9
Greenhouse gas obligations	i 60			i 52
Asset retirement obligations	i 64			i 65
Other current liabilities	i 236			i 222
Total current liabilities	i 1,697			i 2,182

Long-term debt and finance leases	i 4,442			i 3,788

Deferred credits and other liabilities:
Pension obligation, net of plan assets	i 802			i 785
Deferred income taxes	i 1,477			i 1,403
Deferred investment tax credits	i 6			i 7
Regulatory liabilities	i 1,333			i 1,422
Asset retirement obligations	i 2,144			i 2,112
Greenhouse gas obligations	i 242			i 208
Deferred credits and other	i 416			i 422
Total deferred credits and other liabilities	i 6,420			i 6,359

Commitments and contingencies (Note 11)	i			i

Shareholders’ equity:
Preferred stock (11 million shares authorized; 1 million shares outstanding)	i 22			i 22
Common stock (100 million shares authorized; 91 million shares outstanding; no par value)	i 866			i 866
Retained earnings	i 4,186			i 3,883
Accumulated other comprehensive income (loss)	( i 23		)	( i 23		)
Total shareholders’ equity	i 5,051			i 4,748
Total liabilities and shareholders’ equity	$	i 17,610		$	i 17,077


⁽¹⁾	Derived from audited financial statements.

See Notes to Condensed Financial Statements.



SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Three months ended March 31,
	2020			2019
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	i 303		$	i 264
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	i 159			i 147
Deferred income taxes and investment tax credits	i 4			( i 65		)
Other	i 6			i 5
Net change in working capital components	i 343			i 287
Insurance receivable for Aliso Canyon costs	( i 172		)	( i 16		)
Changes in other noncurrent assets and liabilities, net	i 114			( i 246		)
Net cash provided by operating activities	i 757			i 376

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	( i 388		)	( i 324		)
Net cash used in investing activities	( i 388		)	( i 324		)

CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of debt (maturities greater than 90 days)	i 649			i —
Decrease in short-term debt, net	( i 630		)	( i 66		)
Other	( i 9		)	( i 1		)
Net cash provided by (used in) financing activities	i 10			( i 67		)

Increase (decrease) in cash and cash equivalents	i 379			( i 15		)
Cash and cash equivalents, January 1	i 10			i 18
Cash and cash equivalents, March 31	$	i 389		$	i 3

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	i 37		$	i 26

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued capital expenditures	$	i 126		$	i 163
Increase in finance lease obligations for investment in property, plant and equipment	i 16			i 3

See Notes to Condensed Financial Statements.

SOUTHERN CALIFORNIA GAS COMPANY

CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Dollars in millions)

Preferred
stock

Common
stock

Retained
earnings

Accumulated
other
comprehensive
income (loss)

Total
shareholders’
equity

(unaudited)

Three months ended March 31, 2020

Balance at December 31, 2019

i 22

i 866

i 3,883

( i 23

)

i 4,748

Net income

i 303

Dividends declared:

Preferred stock ($0.38/share)

i —

Balance at March 31, 2020

i 22

i 866

i 4,186

( i 23

)

i 5,051

Three months ended March 31, 2019

Balance at December 31, 2018

i 22

i 866

i 3,390

( i 20

)

i 4,258

Cumulative-effect adjustment from

change in accounting principle

i 2

( i 4

)

( i 2

)

Net income

i 264

Dividends declared:

Preferred stock ($0.38/share)

i —

Balance at March 31, 2019

i 22

i 866

i 3,656

( i 24

)

i 4,520

See Notes to Condensed Financial Statements.

SEMPRA ENERGY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. i GENERAL INFORMATION AND OTHER FINANCIAL DATA

PRINCIPLES OF CONSOLIDATION

Sempra Energy

Sempra Energy’s Condensed Consolidated Financial Statements include the accounts of Sempra Energy, a California-based energy-services holding company, and its consolidated subsidiaries and VIEs. Sempra Global is the holding company for most of our subsidiaries that are not subject to California or Texas utility regulation. Sempra Energy’s businesses were managed within i six separate reportable segments until April 2019 and i five separate reportable segments thereafter, which we discuss in Note 12. All references in these Notes to our reportable segments are not intended to refer to any legal entity with the same or similar name.

SDG&E

SDG&E’s Condensed Consolidated Financial Statements include its accounts and the accounts of a VIE of which SDG&E was the primary beneficiary until August 23, 2019, at which time SDG&E deconsolidated the VIE. SDG&E’s common stock is wholly owned by Enova Corporation, which is a wholly owned subsidiary of Sempra Energy.

SoCalGas

SoCalGas’ common stock is wholly owned by Pacific Enterprises, which is a wholly owned subsidiary of Sempra Energy.

In this report, we refer to SDG&E and SoCalGas collectively as the California Utilities.

/ i

BASIS OF PRESENTATION

This is a combined report of Sempra Energy, SDG&E and SoCalGas. We provide separate information for SDG&E and SoCalGas as required. References in this report to “we,” “us,” “our” and “Sempra Energy Consolidated” are to Sempra Energy and its consolidated entities, unless otherwise indicated by the context. We have eliminated intercompany accounts and transactions within the consolidated financial statements of each reporting entity.

Throughout this report, we refer to the following as Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements when discussed together or collectively:


▪	the Condensed Consolidated Financial Statements and related Notes of Sempra Energy and its subsidiaries and VIEs;


▪	the Condensed Consolidated Financial Statements and related Notes of SDG&E and its VIE (until deconsolidation of Otay Mesa VIE in August 2019); and


▪	the Condensed Financial Statements and related Notes of SoCalGas.

We have prepared the Condensed Consolidated Financial Statements in conformity with U.S. GAAP and in accordance with the interim-period-reporting requirements of Form 10-Q. Results of operations for interim periods are not necessarily indicative of results for the entire year or for any other period. We evaluated events and transactions that occurred after March 31, 2020 through the date the financial statements were issued and, in the opinion of management, the accompanying statements reflect all adjustments necessary for a fair presentation. These adjustments are only of a normal, recurring nature.

All December 31, 2019 balance sheet information in the Condensed Consolidated Financial Statements has been derived from our audited 2019 Consolidated Financial Statements in the Annual Report. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the interim-period-reporting provisions of U.S. GAAP and the SEC.

We describe our significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report and the impact of the adoption of new accounting standards on those policies in Note 2 below. We follow the same accounting policies for interim period reporting purposes.

You should read the information in this report in conjunction with the Annual Report.

Discontinued Operations

In January 2019, our board of directors approved a plan to sell our South American businesses based on our strategic focus on North America. We determined that these businesses, which previously constituted the Sempra South American Utilities segment, and certain activities associated with these businesses, met the held-for-sale criteria. These businesses are presented as discontinued operations, which we discuss further in Note 5, as the planned sales represent a strategic shift that will have a major effect on our operations and financial results. Our discussions in the Notes below relate only to our continuing operations unless otherwise noted.

Regulated Operations

The California Utilities and Sempra Mexico’s natural gas distribution utility, Ecogas, prepare their financial statements in accordance with the provisions of U.S. GAAP governing rate-regulated operations. We discuss the effects of regulation and revenue recognition at our utilities in Notes 1 and 3 of the Notes to Consolidated Financial Statements in the Annual Report.

Our Sempra Texas Utilities segment is comprised of our equity method investments in holding companies that own interests in regulated electric transmission and distribution utilities in Texas and prepare their financial statements in accordance with the provisions of U.S. GAAP governing rate-regulated operations.

Our Sempra Mexico segment includes the operating companies of our subsidiary, IEnova, as well as certain holding companies and risk management activity. Certain business activities at IEnova are regulated by the Comisión Reguladora de Energía (Energy Regulatory Commission of Mexico) and meet the regulatory accounting requirements of U.S. GAAP. Pipeline projects under construction at IEnova that meet the regulatory accounting requirements of U.S. GAAP record the impact of AFUDC related to equity. We discuss AFUDC below and in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Condensed Consolidated Balance Sheets to the sum of such amounts reported on the Condensed Consolidated Statements of Cash Flows. We provide information about the nature of restricted cash in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.



RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(Dollars in millions)
	March 31,		December 31,
	2020		2019
Sempra Energy Consolidated:
Cash and cash equivalents	$	i 2,247	$	i 108
Restricted cash, current	i 23		i 31
Restricted cash, noncurrent	i 3		i 3
Cash, cash equivalents and restricted cash in discontinued operations	i 181		i 75
Total cash, cash equivalents and restricted cash on the Condensed Consolidated Statements of Cash Flows	$	i 2,454	$	i 217

CREDIT LOSSES

We are exposed to credit losses from financial assets measured at amortized cost, including trade and other accounts receivable and amounts due from unconsolidated affiliates. We are also exposed to credit losses from off-balance sheet arrangements through our guarantees of Cameron LNG JV’s debt.

We regularly monitor and evaluate credit losses and record allowances for expected credit losses, if necessary, for trade and other accounts receivable using a combination of factors, including past-due status based on contractual terms, trends in write-offs, the age of the receivable, historical and industry trends, counterparty creditworthiness, economic conditions and specific events, such as bankruptcies. We write off financial assets measured at amortized cost in the period in which we deem they are not recoverable. We record recoveries of amounts previously written off when it is known that they will be recovered.

In connection with the COVID-19 pandemic, the California Utilities have implemented certain measures to assist customers, including suspending service disconnections due to nonpayment, waiving late payment fees for business customers, and offering

flexible payment plans for customers experiencing difficulty paying their electric or gas bills. On April 16, 2020, the CPUC approved a resolution authorizing each of the California Utilities to establish a CPPMA to track and request recovery, which is not assured, of incremental costs associated with complying with residential and small business customer relief measures implemented by the CPUC related to the COVID-19 pandemic. As of March 31, 2020, the California Utilities have evaluated the impact of the COVID-19 pandemic, including the measures described above, on their respective allowances for credit losses for customer receivables, with nominal impacts. The unique nature of the COVID-19 pandemic and the relatively short amount of time in which the California Utilities had been impacted as of March 31, 2020 result in limited support for modifying our evaluation of historical experience or forecasting future economic impacts that may or may not be experienced when calculating the allowances. Our businesses will continue to monitor economic impacts and customer payment patterns when evaluating their allowances for credit losses in future reporting periods, which may increase materially due to the effects of the COVID-19 pandemic or other factors.

We provide below allowances and changes in allowances for credit losses for trade and other accounts receivable, excluding allowances related to amounts due from unconsolidated affiliates and off-balance sheet arrangements, which we discuss separately below the table.



TRADE AND OTHER ACCOUNTS RECEIVABLE – ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
	Sempra Energy Consolidated⁽¹⁾			SDG&E⁽²⁾			SoCalGas⁽³⁾
Allowances for credit losses at December 31, 2019	$	i 29		$	i 14		$	i 15
Incremental allowance upon adoption of ASU 2016-13	i 1			i —			i —
Provisions for expected credit losses	i 6			i 3			i 3
Write-offs	( i 4		)	( i 3		)	( i 1		)
Recoveries	i 1			i 1			i —
Allowances for credit losses at March 31, 2020	$	i 33		$	i 15		$	i 17


⁽¹⁾	Balance at March 31, 2020 includes $ i 9 million and $ i 24 million in Accounts Receivable – Trade, Net and Accounts Receivable – Other, Net, respectively.


⁽²⁾	Balance at March 31, 2020 includes $ i 4 million and $ i 11 million in Accounts Receivable – Trade, Net and Accounts Receivable – Other, Net, respectively.


⁽³⁾	Balance at March 31, 2020 includes $ i 4 million and $ i 13 million in Accounts Receivable – Trade, Net and Accounts Receivable – Other, Net, respectively.

For amounts due from unconsolidated affiliates and off-balance sheet arrangements, on a quarterly basis, we evaluate credit losses and record allowances for expected credit losses, if necessary, based on credit quality indicators such as external credit ratings, published default rate studies, the maturity date of the instrument and past delinquencies. However, we do not record allowances for expected credit losses related to accrued interest receivable on loans due from unconsolidated affiliates because we write off such amounts, if any, through a reversal of interest income in the period we determine such amounts are uncollectible. In the absence of external credit ratings, we may utilize an internally developed credit rating based on our analysis of a counterparty’s financial statements to determine our expected credit losses.

As we discuss below in “Transactions with Affiliates,” we have loans due from unconsolidated affiliates with varying tenors, interest rates and currencies. i We provide below the changes in allowances for credit losses for loans and other amounts due from unconsolidated affiliates.



AMOUNTS DUE FROM UNCONSOLIDATED AFFILIATES – ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
	Sempra Energy Consolidated⁽¹⁾
Allowances for credit losses at December 31, 2019	$	i —
Allowance established upon adoption of ASU 2016-13	i 6
Provisions for expected credit losses	i 1
Allowances for credit losses at March 31, 2020	$	i 7


⁽¹⁾	Balance at March 31, 2020 includes negligible amounts and $ i 7 million in Due from Unconsolidated Affiliates – Current and Due from Unconsolidated Affiliates – Noncurrent, respectively.

As we discuss in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report, Sempra LNG has provided guarantees for a maximum aggregate amount of $ i 4.0 billion associated with Cameron LNG JV’s debt obligations. We established a liability for credit losses of $ i 6 million for this off-balance sheet arrangement upon adoption of ASU 2016-13 on January 1, 2020 and we subsequently reduced this liability by $ i 1 million in the three months ended March 31, 2020 through a reduction to credit loss expense, which is included in O&M on the Sempra Energy Condensed Consolidated Statement of Operations. At March 31, 2020, expected credit losses of $ i 4 million are included in Other Current Liabilities and $ i 1 million are included in Deferred Credits and Other on the Sempra Energy Condensed Consolidated Balance Sheet.

CONCENTRATION OF CREDIT RISK

Credit risk is the risk of loss that would be incurred as a result of nonperformance by our counterparties on their contractual obligations. We have policies governing the management of credit risk that are administered by the respective credit departments at each of our segments and overseen by their separate risk management committees.

This oversight includes calculating current and potential credit risk on a regular basis and monitoring actual balances in comparison to approved limits. We establish credit limits based on risk and return considerations under terms customarily available in the industry. We avoid concentration of counterparties whenever possible, and we believe our credit policies significantly reduce overall credit risk. These policies include an evaluation of:


▪	prospective counterparties’ financial condition (including credit ratings)


▪	collateral requirements


▪	the use of standardized agreements that allow for the netting of positive and negative exposures associated with a single counterparty


▪	downgrade triggers

We believe that we have provided adequate reserves for counterparty nonperformance.

In the three months ended March 31, 2020, four customers each represented 10% or more of Sempra Mexico’s revenues (including intercompany transactions with affiliates consolidated by Sempra Energy). Additionally, for the same period, certain of our unconsolidated equity method investees (Oncor Holdings, Cameron LNG JV and IMG JV) had customers that each represented 10% or more of their respective revenues.

When our development projects become operational, we rely significantly on the ability of suppliers to perform under long-term agreements and on our ability to enforce contract terms in the event of nonperformance. Also, the factors that we consider in evaluating a development project include negotiating customer and supplier agreements and, therefore, we rely on these agreements for future performance. We also may condition our decision to go forward on development projects on first obtaining these customer and supplier agreements.

INVENTORIES

The components of inventories are as follows:

INVENTORY BALANCES

(Dollars in millions)

Natural gas

LNG

Materials and supplies

Total

March

December

March

December

March

December

March

December

31, 2020

31, 2019

31, 2020

31, 2019

31, 2020

31, 2019

31, 2020

31, 2019

Sempra Energy Consolidated

i 55

i 110

i 5

i 9

i 157

i 158

i 217

i 277

SDG&E

i 1

i —

i 92

i 93

i 94

SoCalGas

i 32

i 90

i —

i 47

i 46

i 79

i 136

WILDFIRE FUND

On July 12, 2019, the Wildfire Legislation was signed into law to address certain issues related to catastrophic wildfires in the State of California and their impact on electric IOUs. We discuss the Wildfire Legislation further in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

In a complaint filed in U.S. District Court for the Northern District of California in July 2019, plaintiffs seek to invalidate AB 1054, which established the Wildfire Fund, based on allegations that the legislation violates federal law. The California Attorney General has moved to dismiss the complaint.

Wildfire Fund Asset

In the third quarter of 2019, SDG&E recorded a Wildfire Fund asset for its commitment to make shareholder contributions totaling $ i 451.5 million, measured at present value as of July 25, 2019 (the date by which both Edison and SDG&E opted to contribute to the Wildfire Fund). SDG&E is amortizing the Wildfire Fund asset to O&M on a straight-line basis over the estimated period of benefit, as adjusted for utilization by the IOUs. The estimated period of benefit of the Wildfire Fund asset is i 15 years as of March 31, 2020.

We will periodically reevaluate the estimated period of benefit of the Wildfire Fund asset based on actual experience and changes in assumptions. SDG&E may recognize a reduction of its Wildfire Fund asset and record a charge against earnings in the period when there is a reduction of the available coverage due to recoverable claims from the IOUs. The reduction to the Wildfire Fund asset may be proportionate to the Wildfire Fund’s consumption (i.e., recoveries for outstanding wildfire claims that are recoverable from the Wildfire Fund, net of anticipated or actual reimbursement to the Wildfire Fund by the responsible IOU, would decrease the Wildfire Fund asset and remaining available coverage). In the three months ended March 31, 2020, there were no such known claims from the IOUs requiring a reduction of the Wildfire Fund asset.

At March 31, 2020 and December 31, 2019, the current portion of the Wildfire Fund asset of $ i 29 million is included in Other Current Assets on Sempra Energy’s Condensed Consolidated Balance Sheets and in Prepaid Expenses on SDG&E’s Condensed Consolidated Balance Sheets, and the noncurrent portion of $ i 385 million and $ i 392 million, respectively, is included in Wildfire Fund on Sempra Energy’s and SDG&E’s Condensed Consolidated Balance Sheets. In the three months ended March 31, 2020, SDG&E recognized $ i 7 million of amortization of the Wildfire Fund asset.

Wildfire Fund Obligation

In the third quarter of 2019, SDG&E recorded a Wildfire Fund obligation for its commitment to make shareholder contributions totaling $ i 451.5 million, measured at present value as of July 25, 2019 (the date by which both Edison and SDG&E opted to contribute to the Wildfire Fund). SDG&E accretes the present value of the Wildfire Fund obligation to O&M until the liability is settled. At both March 31, 2020 and December 31, 2019, the Wildfire Fund obligation of $ i 12.9 million is included in Other Current Liabilities and $ i 86 million is included in Deferred Credits and Other on Sempra Energy’s and SDG&E’s Condensed Consolidated Balance Sheets. In the three months ended March 31, 2020, SDG&E recognized negligible accretion of the Wildfire Fund obligation.

CAPITALIZED FINANCING COSTS

Capitalized financing costs include capitalized interest costs and AFUDC related to both debt and equity financing of construction projects. We capitalize interest costs incurred to finance capital projects and interest at equity method investments that have not commenced planned principal operations.

The table below summarizes capitalized interest and AFUDC.



CAPITALIZED FINANCING COSTS
(Dollars in millions)
	Three months ended March 31,
	2020		2019
Sempra Energy Consolidated	$	i 48	$	i 47
SDG&E	i 27		i 17
SoCalGas	i 11		i 11

VARIABLE INTEREST ENTITIES

We consolidate a VIE if we are the primary beneficiary of the VIE. Our determination of whether we are the primary beneficiary is based on qualitative and quantitative analyses, which assess:


▪	the purpose and design of the VIE;


▪	the nature of the VIE’s risks and the risks we absorb;


▪	the power to direct activities that most significantly impact the economic performance of the VIE; and


▪	the obligation to absorb losses or the right to receive benefits that could be significant to the VIE.

We will continue to evaluate our VIEs for any changes that may impact our determination of whether an entity is a VIE and if we are the primary beneficiary.

SDG&E

SDG&E’s power procurement is subject to reliability requirements that may require SDG&E to enter into various PPAs that include variable interests. SDG&E evaluates the respective entities to determine if variable interests exist and, based on the qualitative and quantitative analyses described above, if SDG&E, and thereby Sempra Energy, is the primary beneficiary.

SDG&E has agreements under which it purchases power generated by facilities for which it supplies all of the natural gas to fuel the power plant (i.e., tolling agreements). SDG&E’s obligation to absorb natural gas costs may be a significant variable interest. In addition, SDG&E has the power to direct the dispatch of electricity generated by these facilities. Based on our analysis, the ability to direct the dispatch of electricity may have the most significant impact on the economic performance of the entity owning the generating facility because of the associated exposure to the cost of natural gas, which fuels the plants, and the value of electricity produced. To the extent that SDG&E (1) is obligated to purchase and provide fuel to operate the facility, (2) has the power to direct the dispatch, and (3) purchases all of the output from the facility for a substantial portion of the facility’s useful life, SDG&E may be the primary beneficiary of the entity owning the generating facility. SDG&E determines if it is the primary beneficiary in these cases based on a qualitative approach in which we consider the operational characteristics of the facility, including its expected power generation output relative to its capacity to generate and the financial structure of the entity, among other factors. If we determine that SDG&E is the primary beneficiary, SDG&E and Sempra Energy consolidate the entity that owns the facility as a VIE.

SDG&E determined that none of its contracts resulted in SDG&E being the primary beneficiary of a VIE at March 31, 2020. In addition to tolling agreements, other variable interests involve various elements of fuel and power costs, and other components of cash flows expected to be paid to or received by our counterparties. In most of these cases, the expectation of variability is not substantial, and SDG&E generally does not have the power to direct activities that most significantly impact the economic performance of the other VIEs. If our ongoing evaluation of these VIEs were to conclude that SDG&E becomes the primary beneficiary and consolidation by SDG&E becomes necessary, the effects could be significant to the financial position and liquidity of SDG&E and Sempra Energy.

Sempra Texas Utilities

Our i 100% interest in Oncor Holdings is a VIE that owns an i 80.25% interest in Oncor. Sempra Energy is not the primary beneficiary of the VIE because of the structural and operational ring-fencing and governance measures in place that prevent us from having the power to direct the significant activities of Oncor Holdings. As a result, we do not consolidate Oncor Holdings and instead account for our ownership interest as an equity method investment. See Note 6 for additional information about our equity method investment in Oncor Holdings and restrictions on our ability to influence its activities. Our maximum exposure to loss, which fluctuates over time, from our interest in Oncor Holdings does not exceed the carrying value of our investment, which was $ i 11,619 million at March 31, 2020 and $ i 11,519 million at December 31, 2019.

Sempra Mexico

Sempra Mexico’s businesses also enter into arrangements that could include variable interests. We evaluate these arrangements and applicable entities based on the qualitative and quantitative analyses described above. Certain of these entities are service or project companies that are VIEs because the total equity at risk is not sufficient for the entities to finance their activities without additional subordinated financial support. As the primary beneficiary of these companies, we consolidate them. The assets of these VIEs totaled approximately $ i 131 million at March 31, 2020 and $ i 126 million at December 31, 2019 and consisted primarily of PP&E and other long-term assets. Our maximum exposure to loss is equal to the carrying value of these assets.

Sempra LNG

Cameron LNG JV is a VIE principally due to contractual provisions that transfer certain risks to customers. Sempra Energy is not the primary beneficiary of the VIE because we do not have the power to direct the most significant activities of Cameron LNG JV, and therefore we account for our investment in Cameron LNG JV under the equity method. The carrying value of our investment, including amounts recognized in AOCI related to interest-rate cash flow hedges at Cameron LNG JV, was $ i 1,184 million at March 31, 2020 and $ i 1,256 million at December 31, 2019. Our maximum exposure to loss, which fluctuates over time, includes the carrying value of our investment and guarantees that we discuss in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

PENSION AND OTHER POSTRETIREMENT BENEFITS

Settlement Accounting for Lump Sum Payments

In the three months ended March 31, 2020, Sempra Energy recorded settlement charges of $ i 5 million in net periodic benefit cost for lump sum payments from its nonqualified pension plan that were in excess of the plan’s service cost plus interest cost.

Net Periodic Benefit Cost

The following three tables provide the components of net periodic benefit cost.

NET PERIODIC BENEFIT COST – SEMPRA ENERGY CONSOLIDATED

(Dollars in millions)

Pension benefits

Other postretirement benefit plans

i 7

i —

i 1

RABBI TRUST

In support of its Supplemental Executive Retirement, Cash Balance Restoration and Deferred Compensation Plans, Sempra Energy maintains dedicated assets, including a Rabbi Trust and investments in life insurance contracts, which totaled $ i 413 million and $ i 488 million at March 31, 2020 and December 31, 2019, respectively.

EARNINGS PER COMMON SHARE

Basic EPS is calculated by dividing earnings attributable to common shares (from both continuing and discontinued operations) by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.



EARNINGS (LOSSES) PER COMMON SHARE COMPUTATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Three months ended March 31,
	2020			2019
Numerator for continuing operations:
Income from continuing operations, net of income tax	$	i 867		$	i 560
Earnings attributable to noncontrolling interests	( i 143		)	( i 32		)
Mandatory convertible preferred stock dividends	( i 36		)	( i 36		)
Earnings from continuing operations attributable to common shares for basic EPS	i 688			i 492
Add back dividends for dilutive mandatory convertible preferred stock⁽¹⁾	i 36			i —
Earnings from continuing operations attributable to common shares for diluted EPS	$	i 724		$	i 492

Numerator for discontinued operations:
Income (loss) from discontinued operations, net of income tax	$	i 80		$	( i 42	)
Earnings attributable to noncontrolling interests	( i 8		)	( i 9		)
Earnings (losses) from discontinued operations attributable to common shares	$	i 72		$	( i 51	)

Numerator for earnings:
Earnings attributable to common shares for basic EPS	$	i 760		$	i 441
Add back dividends for dilutive mandatory convertible preferred stock⁽¹⁾	i 36			i —
Earnings attributable to common shares for diluted EPS	$	i 796		$	i 441

Denominator:
Weighted-average common shares outstanding for basic EPS⁽²⁾	i 292,790			i 274,674
Dilutive effect of stock options and RSUs⁽³⁾	i 1,304			i 969
Dilutive effect of common shares sold forward	i —			i 1,585
Dilutive effect of mandatory convertible preferred stock	i 19,831			i —
Weighted-average common shares outstanding for diluted EPS	i 313,925			i 277,228

Basic EPS:
Earnings from continuing operations	$	i 2.35		$	i 1.79
Earnings (losses) from discontinued operations	$	i 0.25		$	( i 0.19	)
Earnings	$	i 2.60		$	i 1.60

Diluted EPS:
Earnings from continuing operations	$	i 2.30		$	i 1.78
Earnings (losses) from discontinued operations	$	i 0.23		$	( i 0.19	)
Earnings	$	i 2.53		$	i 1.59


⁽¹⁾	In the three months ended March 31, 2020, due to the dilutive effect of mandatory convertible preferred stock, the numerator used to calculate diluted EPS includes an add-back of mandatory convertible preferred stock dividends declared in that quarter.


⁽²⁾	Includes i 542 and i 613 average fully vested RSUs held in our Deferred Compensation Plan for the three months ended March 31, 2020 and 2019, respectively. These fully vested RSUs are included in weighted-average common shares outstanding for basic EPS because there are no conditions under which the corresponding shares will not be issued.


⁽³⁾	Due to market fluctuations of both Sempra Energy common stock and the comparative indices used to determine the vesting percentage of our total shareholder return performance-based RSUs, which we discuss in Note 10 of the Notes to Consolidated Financial Statements in the Annual Report, dilutive RSUs may vary widely from period-to-period.

The potentially dilutive impact from stock options and RSUs is calculated under the treasury stock method. Under this method, proceeds based on the exercise price and unearned compensation are assumed to be used to repurchase shares on the open market at the average market price for the period, reducing the number of potential new shares to be issued and sometimes causing an antidilutive effect. The computation of diluted EPS for the three months ended March 31, 2020 and 2019 excludes i 254,257 and i 316,385 potentially dilutive shares, respectively, because to include them would be antidilutive for the period. However, these shares could potentially dilute basic EPS in the future.

The potentially dilutive impact from the forward sale of our common stock pursuant to forward sale agreements that we entered into in 2018 and fully settled by the end of 2019 is reflected in our diluted EPS calculation using the treasury stock method until settlement. After settlement, those shares are included in weighted-average common shares outstanding for basic EPS.

The potentially dilutive impact from mandatory convertible preferred stock is calculated under the if-converted method. The computation of diluted EPS for the three months ended March 31, 2020 and 2019 excludes i zero and i 18,601,085 potentially dilutive shares, respectively, because to include them would be antidilutive for the period. However, these shares could potentially dilute basic EPS in the future.

In January 2020, pursuant to our Sempra Energy share-based compensation plans, the Compensation Committee of Sempra Energy’s Board of Directors granted i 154,860 nonqualified stock options that vest over a three-year period, i 258,470 performance-based RSUs and i 100,972 service-based RSUs.

We discuss share-based compensation plans and related awards and the terms and conditions of Sempra Energy’s equity securities further in Notes 10, 13 and 14 of the Notes to Consolidated Financial Statements in the Annual Report.

COMPREHENSIVE INCOME

The following tables present the changes in AOCI by component and amounts reclassified out of AOCI to net income, excluding amounts attributable to NCI.

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT⁽¹⁾

(Dollars in millions)

Foreign

currency

translation

adjustments

Financial

instruments

Pension

and other

postretirement

benefits

Total

accumulated other

comprehensive

income (loss)

Three months ended March 31, 2020 and 2019

Sempra Energy Consolidated⁽²⁾:

Balance as of December 31, 2019

( i 607

)

( i 215

)

( i 117

)

( i 939

)

OCI before reclassifications

( i 138

)

( i 154

)

i 16

( i 276

)

Amounts reclassified from AOCI

i —

i 19

i 6

i 25

Net OCI

( i 138

)

( i 135

)

i 22

( i 251

)

Balance as of March 31, 2020

( i 745

)

( i 350

)

( i 95

)

( i 1,190

)

Balance as of December 31, 2018

( i 564

)

( i 82

)

( i 118

)

( i 764

)

Cumulative-effect adjustment from change in accounting principle

i —

( i 25

)

( i 17

)

( i 42

)

OCI before reclassifications

i 32

( i 45

)

i 1

( i 12

)

Amounts reclassified from AOCI

i —

( i 1

)

i 2

i 1

Net OCI

i 32

( i 46

)

i 3

( i 11

)

Balance as of March 31, 2019

( i 532

)

( i 153

)

( i 132

)

( i 817

)

SDG&E:

Balance as of December 31, 2019 and March 31, 2020

( i 16

)

( i 16

)

Balance as of December 31, 2018

( i 10

)

( i 10

)

Cumulative-effect adjustment from change in accounting principle

( i 2

)

( i 2

)

Balance as of March 31, 2019

( i 12

)

( i 12

)

SoCalGas:

Balance as of December 31, 2019 and March 31, 2020

( i 13

)

( i 10

)

( i 23

)

Balance as of December 31, 2018

( i 12

)

( i 8

)

( i 20

)

Cumulative-effect adjustment from change in accounting principle

( i 2

)

( i 2

)

( i 4

)

Balance as of March 31, 2019

( i 14

)

( i 10

)

( i 24

)


⁽¹⁾	All amounts are net of income tax, if subject to tax, and exclude NCI.


⁽²⁾	Includes discontinued operations.



RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
Details about accumulated other comprehensive income (loss) components	Amounts reclassified from accumulated other comprehensive income (loss)						Affected line item on Condensed Consolidated Statements of Operations
	Three months ended March 31,
	2020			2019
Sempra Energy Consolidated:
Financial instruments:
Interest rate and foreign exchange instruments⁽¹⁾	$	i 2		$	i 1		Interest Expense
	i 41			( i 3		)	Other (Expense) Income, Net
Interest rate and foreign exchange instruments	i —			i 1			Equity Earnings
Foreign exchange instruments	( i 2		)	i 1			Revenues: Energy-Related Businesses
	( i 2		)	i —			Other (Expense) Income, Net
Total before income tax	i 39			i —
	( i 12		)	i —			Income Tax Benefit (Expense)
Net of income tax	i 27			i —
	( i 8		)	( i 1		)	Earnings Attributable to Noncontrolling Interests
	$	i 19		$	( i 1	)
Pension and other postretirement benefits⁽²⁾:
Amortization of actuarial loss	$	i 2		$	i 2		Other (Expense) Income, Net
Amortization of prior service cost	i 1			i 1			Other (Expense) Income, Net
Settlement charges	i 5			i —			Other (Expense) Income, Net
Total before income tax	i 8			i 3
	( i 2		)	( i 1		)	Income Tax Benefit (Expense)
Net of income tax	$	i 6		$	i 2

Total reclassifications for the period, net of tax	$	i 25		$	i 1
SDG&E:
Financial instruments:
Interest rate instruments⁽¹⁾	$	i —		$	i 1		Interest Expense
	i —			( i 1		)	Earnings Attributable to Noncontrolling Interest
Total reclassifications for the period, net of tax	$	i —		$	i —


⁽¹⁾	Amounts in 2019 include Otay Mesa VIE. All of SDG&E’s interest rate derivative activity relates to Otay Mesa VIE.


⁽²⁾	Amounts are included in the computation of net periodic benefit cost (see “Pension and Other Postretirement Benefits” above).

For the three months ended March 31, 2020 and 2019, reclassifications out of AOCI to net income were negligible for SoCalGas.

SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS

Ownership interests that are held by owners other than Sempra Energy in subsidiaries or entities consolidated by us are accounted for and reported as NCI.

SoCalGas Preferred Stock

The preferred stock at SoCalGas is presented at Sempra Energy as a noncontrolling interest. Sempra Energy records charges against income related to NCI for preferred stock dividends declared by SoCalGas. We provide additional information regarding preferred stock in Note 13 of the Notes to Consolidated Financial Statements in the Annual Report.

Other Noncontrolling Interests

Sempra Mexico

In the first quarter of 2020, IEnova purchased additional shares in ICM Ventures Holdings B.V. for $ i 9 million, increasing its ownership from i 53.7% to i 82.5%. ICM Ventures Holdings B.V. owns certain permits and land where IEnova is building terminals for the receipt, storage and delivery of liquid fuels.

In the first quarter of 2019, IEnova repurchased i 1,600,000 shares of its outstanding common stock held by NCI for approximately $ i 6 million, resulting in an increase in Sempra Energy’s ownership interest in IEnova from i 66.5% to i 66.6%.

Sempra LNG

On March 30, 2020, Sempra LNG purchased for $ i 7 million the i 24.6% minority interest in Liberty Gas Storage LLC, which owns i 100% of LA Storage, LLC, increasing Sempra LNG’s ownership in Liberty Gas Storage LLC to i 100%. Prior to the purchase, the minority partner converted $ i 22 million in notes payable due from Sempra LNG to equity. As a result of the purchase, we recorded an increase in Sempra Energy’s shareholders’ equity of $ i 2 million for the difference between the carrying value and fair value related to the change in ownership.

In February 2019, Sempra LNG purchased for $ i 20 million the i 9.1% minority interest in Bay Gas immediately prior to the sale of i 100% of Bay Gas.

Sempra LNG and IEnova are jointly developing a proposed natural gas liquefaction project at the site of IEnova’s existing ECA LNG Regasification terminal. Sempra LNG consolidates the ECA LNG JV proposed liquefaction project. Thus, Sempra Energy’s NCI in IEnova’s i 50% interest in the proposed project is reported at Sempra LNG.

The following table provides information about noncontrolling ownership interests held by others (not including preferred shareholders) recorded in Other Noncontrolling Interests in Total Equity on Sempra Energy’s Condensed Consolidated Balance Sheets.



OTHER NONCONTROLLING INTERESTS
(Dollars in millions)
	Percent ownership held by noncontrolling interests				Equity (deficit) held by noncontrolling interests
	March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
Sempra Mexico:
IEnova	i 33.4	%	i 33.4	%	$	i 1,726	$	i 1,608
IEnova subsidiaries⁽¹⁾	10.0 – 17.5		10.0 – 46.3		i 6		i 15
Sempra LNG:
Liberty Gas Storage LLC	i —		i 24.6		i —		( i 13		)
ECA LNG JV	i 16.7		i 16.7		i 14		i 12
Parent and other:
PXiSE Energy Solutions, LLC	i 20.0		i 20.0		i 1		i 1
Discontinued Operations:
Chilquinta Energía subsidiaries⁽¹⁾	19.7 – 43.4		19.7 – 43.4		i 21		i 23
Luz del Sur	i 16.4		i 16.4		i 205		i 205
Tecsur	i 9.8		i 9.8		i 5		i 5
Total Sempra Energy					$	i 1,978	$	i 1,856


⁽¹⁾	IEnova and Chilquinta Energía have subsidiaries with NCI held by others. Percentage range reflects the highest and lowest ownership percentages among these subsidiaries.

TRANSACTIONS WITH AFFILIATES

We summarize amounts due from and to unconsolidated affiliates at Sempra Energy Consolidated, SDG&E and SoCalGas in the following table.



AMOUNTS DUE FROM (TO) UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	March 31, 2020			December 31, 2019
Sempra Energy Consolidated:
Total due from various unconsolidated affiliates – current, net of negligible allowance for credit losses at March 31, 2020⁽¹⁾⁽²⁾	$	i 64		$	i 32

Sempra Texas Utilities – TTHC, net of allowance for credit losses of $1 at March 31, 2020⁽²⁾⁽³⁾	$	i 6		$	i —
Sempra Mexico – IMG JV – Note due March 15, 2022, net of allowance for credit losses of $6 at March 31, 2020⁽²⁾⁽⁴⁾	i 586			i 742
Total due from unconsolidated affiliates – noncurrent	$	i 592		$	i 742

Total due to various unconsolidated affiliates – current	$	( i 8	)	$	( i 5	)

Sempra Mexico⁽²⁾:
TAG Pipelines Norte, S. de. R.L. de C.V.:
Note due December 20, 2021⁽⁵⁾	$	( i 40	)	$	( i 39	)
5.5% Note due January 9, 2024⁽⁶⁾	( i 65		)	i —
TAG JV – 5.74% Note due December 17, 2029⁽⁶⁾	( i 158		)	( i 156		)
Total due to unconsolidated affiliates – noncurrent	$	( i 263	)	$	( i 195	)
SDG&E:
Sempra Energy	$	( i 45	)	$	( i 37	)
SoCalGas	( i 6		)	( i 10		)
Various affiliates	( i 8		)	( i 6		)
Total due to unconsolidated affiliates – current	$	( i 59	)	$	( i 53	)

Income taxes due from Sempra Energy⁽⁷⁾	$	i 64		$	i 130
SoCalGas:
SDG&E	$	i 6		$	i 10
Various affiliates	i 1			i 1
Total due from unconsolidated affiliates – current	$	i 7		$	i 11

Sempra Energy	$	( i 49	)	$	( i 45	)
Various affiliates	i —			( i 2		)
Total due to unconsolidated affiliates – current	$	( i 49	)	$	( i 47	)

Income taxes due from Sempra Energy⁽⁷⁾	$	i 104		$	i 152

⁽¹⁾

Amount at March 31, 2020 includes $ i 23 million of outstanding principal and a negligible amount of accrued interest receivable from a U.S. dollar-denominated loan from IEnova to ESJ at a variable interest rate based on 1-month LIBOR plus 196 bps ( i 3.54% at March 31, 2020) with a maturity date of June 30, 2020. Pursuant to the agreement, if ESJ is unable to meet certain conditions for an expansion project by May 13, 2020, IEnova and ESJ have the option to convert the loan to a i 10-year note.


⁽²⁾	Amounts include principal balances plus accumulated interest outstanding.


⁽³⁾	U.S. dollar-denominated loans at fixed interest rates of i 6.25% and i 6.45% with maturity dates of November 5, 2028 and November 5, 2030, respectively.

⁽⁴⁾

Mexican peso-denominated revolving line of credit for up to i 14.2 billion Mexican pesos or approximately $ i 604 million U.S. dollar-equivalent, at a variable interest rate based on the 91-day Interbank Equilibrium Interest Rate plus 220 bps ( i 8.79% at March 31, 2020), to finance construction of the natural gas marine pipeline. At March 31, 2020, $ i 2 million of accrued interest receivable is included in Due From Unconsolidated Affiliates – Current.


⁽⁵⁾	U.S. dollar-denominated loan at a variable interest rate based on 6-month LIBOR plus 290 bps ( i 4.08% at March 31, 2020).


⁽⁶⁾	U.S. dollar-denominated loan at a fixed interest rate.


⁽⁷⁾	SDG&E and SoCalGas are included in the consolidated income tax return of Sempra Energy and their respective income tax expense is computed as an amount equal to that which would result from each company having always filed a separate return.

The following table summarizes revenues and cost of sales from unconsolidated affiliates.



REVENUES AND COST OF SALES FROM UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	Three months ended March 31,
	2020		2019
Revenues:
Sempra Energy Consolidated	$	i 12	$	i 14
SDG&E	i 1		i 1
SoCalGas	i 18		i 17
Cost of Sales:
Sempra Energy Consolidated	$	i 11	$	i 14
SDG&E	i 17		i 20
SoCalGas	i —		i 4

Guarantees

Sempra Energy has provided guarantees related to the financing of the Cameron LNG JV project, as we discuss in Note 6 below and in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

OTHER (EXPENSE) INCOME, NET

Other (Expense) Income, Net on the Condensed Consolidated Statements of Operations consists of the following:



OTHER (EXPENSE) INCOME, NET
(Dollars in millions)
	Three months ended March 31,
	2020			2019
Sempra Energy Consolidated:
Allowance for equity funds used during construction	$	i 31		$	i 21
Investment (losses) gains⁽¹⁾	( i 37		)	i 26
(Losses) gains on interest rate and foreign exchange instruments, net	( i 153		)	i 13
Foreign currency transaction (losses) gains, net⁽²⁾	( i 123		)	i 7
Non-service component of net periodic benefit credit	i 26			i 24
Penalties related to billing practices OII	i —			( i 8		)
Interest on regulatory balancing accounts, net	i 2			( i 1		)
Total	$	( i 254	)	$	i 82
SDG&E:
Allowance for equity funds used during construction	$	i 21		$	i 12
Non-service component of net periodic benefit credit	i 8			i 9
Interest on regulatory balancing accounts, net	i 2			i —
Sundry, net	i —			i 1
Total	$	i 31		$	i 22
SoCalGas:
Allowance for equity funds used during construction	$	i 8		$	i 8
Non-service component of net periodic benefit credit	i 25			i 18
Penalties related to billing practices OII	i —			( i 8		)
Interest on regulatory balancing accounts, net	i —			( i 1		)
Sundry, net	( i 3		)	( i 1		)
Total	$	i 30		$	i 16


⁽¹⁾	Represents investment (losses) gains on dedicated assets in support of our executive retirement and deferred compensation plans. These amounts are partially offset by corresponding changes in compensation expense related to the plans, recorded in O&M on the Condensed Consolidated Statements of Operations.


⁽²⁾	Includes losses of $ i 149 million and gains of $ i 10 million in the three months ended March 31, 2020 and 2019, respectively, from translation to U.S. dollars of a Mexican peso-denominated loan to IMG JV, which are offset by corresponding amounts included in Equity Earnings on the Condensed Consolidated Statements of Operations.

INCOME TAXES

We provide our calculations of ETRs in the following table.



INCOME TAX (BENEFIT) EXPENSE AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
	Three months ended March 31,
	2020			2019
Sempra Energy Consolidated:
Income tax (benefit) expense from continuing operations	$	( i 207	)	$	i 42

Income from continuing operations before income taxes and equity earnings	$	i 397		$	i 501
Equity (losses) earnings, before income tax⁽¹⁾	( i 43		)	i 5
Pretax income	$	i 354		$	i 506

Effective income tax rate	( i 58		)%	i 8		%
SDG&E:
Income tax expense	$	i 58		$	i 5
Income before income taxes	$	i 320		$	i 182
Effective income tax rate	i 18		%	i 3		%
SoCalGas:
Income tax expense	$	i 52		$	i 19
Income before income taxes	$	i 355		$	i 283
Effective income tax rate	i 15		%	i 7		%


⁽¹⁾	We discuss how we recognize equity earnings in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

i Sempra Energy, SDG&E and SoCalGas record income taxes for interim periods utilizing a forecasted ETR anticipated for the full year. Unusual and infrequent items and items that cannot be reliably estimated are recorded in the interim period in which they occur, which can result in variability in the ETR.

For SDG&E and SoCalGas, the CPUC requires flow-through rate-making treatment for the current income tax benefit or expense arising from certain property-related and other temporary differences between the treatment for financial reporting and income tax, which will reverse over time. Under the regulatory accounting treatment required for these flow-through temporary differences, deferred income tax assets and liabilities are not recorded to deferred income tax expense, but rather to a regulatory asset or liability, which impacts the ETR. As a result, changes in the relative size of these items compared to pretax income, from period to period, can cause variations in the ETR. The following items are subject to flow-through treatment:


▪	repairs expenditures related to a certain portion of utility plant fixed assets


▪	the equity portion of AFUDC, which is non-taxable


▪	a portion of the cost of removal of utility plant assets


▪	utility self-developed software expenditures


▪	depreciation on a certain portion of utility plant assets


▪	state income taxes

The AFUDC related to equity recorded for regulated construction projects at Sempra Mexico has similar flow-through treatment.

We record income tax (expense) benefit from the transactional effects of foreign currency and inflation. Such effects are partially mitigated by net gains (losses) from foreign currency derivatives that are hedging Sempra Mexico parent’s exposure to movements in the Mexico peso from its controlling interest in IEnova.

In the three months ended March 31, 2019, SDG&E and SoCalGas recorded income tax benefits of $ i 31 million and $ i 35 million, respectively, from the release of a regulatory liability established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed be allocated to shareholders in a January 2019 decision.

Discontinued Operations

In January 2019, our board of directors approved a plan to sell our South American businesses, as we discuss in Note 5. Prior to this decision, our repatriation estimate excluded post-2017 earnings and other basis differences related to our South American businesses. Because of our decision to sell our South American businesses, we no longer assert indefinite reinvestment of these basis differences. Accordingly, we recorded the following income tax impacts from changes in outside basis differences in our discontinued operations in South America:


▪	$ i 103 million income tax expense in 2019 related to outside basis differences existing as of the January 25, 2019 approval of our plan to sell our South American businesses; and


▪	$ i 7 million income tax benefit in 2020 compared to $ i 13 million income tax expense in 2019 related to changes in outside basis differences from earnings and foreign currency effects since January 25, 2019.

As of March 31, 2020, we have not changed our indefinite reinvestment assertion or repatriation plan.

NOTE 2. i i NEW ACCOUNTING STANDARDS /

We describe below recent accounting pronouncements that have had or may have a significant effect on our financial condition, results of operations, cash flows or disclosures.

ASU 2016-13, “Measurement of Credit Losses on Financial Instruments”: ASU 2016-13, as amended by subsequently issued ASUs, changes how entities measure credit losses for most financial assets and certain other instruments. The standard introduces an “expected credit loss” impairment model that requires immediate recognition of estimated credit losses expected to occur over the remaining life of most financial assets measured at amortized cost, including trade and other receivables, loan receivables and commitments and financial guarantees. ASU 2016-13 also requires use of an allowance to record estimated credit losses on available-for-sale debt securities and expands disclosure requirements regarding an entity’s assumptions, models and methods for estimating the credit losses. We adopted the standard on January 1, 2020 using a modified retrospective approach through a cumulative-effect adjustment to retained earnings. The adoption primarily impacted the expected credit losses associated with accounts receivable balances, amounts due from unconsolidated affiliates and off-balance sheet financial guarantees. There was an insignificant impact to SDG&E’s or SoCalGas’ balance sheets from adoption. i The following table shows the initial (decreases) increases on Sempra Energy’s balance sheet at January 1, 2020 from adoption of ASU 2016-13.



IMPACT FROM ADOPTION OF ASU 2016-13
(Dollars in millions)
	Sempra Energy Consolidated
Accounts receivable – trade, net	$	( i 1	)
Due from unconsolidated affiliates – noncurrent	( i 6		)
Deferred income tax assets	i 4
Other current liabilities	i 4
Deferred credits and other	i 2
Retained earnings	( i 7		)
Other noncontrolling interests	( i 2		)

ASU 2017-04, “Simplifying the Test for Goodwill Impairment”: ASU 2017-04 removes the second step of the goodwill impairment test, which requires a hypothetical purchase price allocation. An entity will be required to apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill. We adopted ASU 2017-04 on January 1, 2020 and will apply the standard on a prospective basis to our goodwill impairment tests.

ASU 2019-12, “Simplifying the Accounting for Income Taxes”: ASU 2019-12 simplifies certain areas of accounting for income taxes. In addition to other changes, this standard amends ASC 740, “Income Taxes,” as follows:


▪	removes the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items, including discontinued operations or other comprehensive income;


▪	simplifies the recognition of deferred taxes related to basis differences as a result of ownership changes in investments;


▪	specifies an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements; and


▪	requires an entity to reflect the effect of an enacted change in tax laws or rates in the annual ETR computation in the interim period that includes the enactment date.

For public entities, ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods therein, with early adoption permitted. The transition method related to the amendments made by ASU 2019-12 varies based on the nature of the change. We will adopt the standard on January 1, 2021 and do not expect it will have a material impact on our financial statements.

ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting”: ASU 2020-04 provides optional expedients and exceptions for applying U.S. GAAP to contract modifications that replace LIBOR or another reference rate affected by reference rate reform and to hedging relationships that reference LIBOR or another reference rate that is affected or expected to be affected by reference rate reform. ASU 2020-04 is effective March 12, 2020 and can be applied through December 31, 2022, with certain exceptions for hedging relationships that continue to exist after this date, and may be applied from January 1, 2020. For contract modifications, the standard allows entities to account for modifications as an event that does not require reassessment or remeasurement (i.e., as a continuation of the existing contract). The standard also allows entities to amend their formal designation and documentation of hedging relationships affected or expected to be affected by reference rate reform, without having to de-designate the hedging relationship. Entities may elect the optional expedients and exceptions on an individual hedging relationship basis and independently from one another. We elected the optional expedients for contract modifications and the hedging expedient to disregard the potential discontinuation of a reference rate when assessing whether a hedged forecasted interest payment is probable. We are applying these expedients prospectively from January 1, 2020. We are still evaluating the remaining optional expedients and exceptions for hedging relationships.

NOTE 3. i REVENUES

We discuss revenue recognition for revenues from contracts with customers and from sources other than contracts with customers in Note 3 of the Notes to Consolidated Financial Statements in the Annual Report.

In connection with the COVID-19 pandemic, the California Utilities and the CPUC have implemented certain measures to assist customers, including suspending service disconnections due to nonpayment, waiving late payment fees for business customers, and offering flexible payment plans for customers experiencing difficulty paying their electric or gas bills. Additional measures could be mandated or voluntarily implemented in the future. Under the regulatory compact applicable to the California Utilities, including decoupling of rates, recovery of uncollectible expenses, and other recovery mechanisms potentially available (including the CPPMA, which we discuss in Note 4), the California Utilities have continued to recognize revenues under ASC 606, “Revenue from Contracts with Customers,” in the three months ended March 31, 2020.

The following table disaggregates our revenues from contracts with customers by major service line and market and provides a reconciliation to total revenues by segment. The majority of our revenue is recognized over time.

DISAGGREGATED REVENUES

(Dollars in millions)

SDG&E

SoCalGas

Sempra Mexico

Sempra Renewables

Sempra LNG

Consolidating adjustments and Parent and other

Sempra Energy Consolidated

Three months ended March 31, 2020

By major service line:

Utilities

i 1,259

i 1,544

i 20

i —

( i 19

)

i 2,804

Energy-related businesses

i —

i 198

i —

i 12

( i 7

)

i 203

Revenues from contracts with customers

i 1,259

i 1,544

i 218

i —

i 12

( i 26

)

i 3,007

By market:

Gas

i 254

i 1,544

i 147

i —

i 11

( i 23

)

i 1,933

Electric

i 1,005

i —

i 71

i —

i 1

( i 3

)

i 1,074

Revenues from contracts with customers

i 1,259

i 1,544

i 218

i —

i 12

( i 26

)

i 3,007

Revenues from contracts with customers

i 1,259

i 1,544

i 218

i —

i 12

( i 26

)

i 3,007

Utilities regulatory revenues

i 10

( i 149

)

i —

( i 139

)

Other revenues

i —

i 91

i —

i 111

( i 41

)

i 161

Total revenues

i 1,269

i 1,395

i 309

i —

i 123

( i 67

)

i 3,029

Three months ended March 31, 2019

By major service line:

Utilities

i 1,236

i 1,528

i 27

i —

( i 18

)

i 2,773

Energy-related businesses

i —

i 257

i 4

i 68

( i 59

)

i 270

Revenues from contracts with customers

i 1,236

i 1,528

i 284

i 4

i 68

( i 77

)

i 3,043

By market:

Gas

i 239

i 1,528

i 198

i —

i 67

( i 76

)

i 1,956

Electric

i 997

i —

i 86

i 4

i 1

( i 1

)

i 1,087

Revenues from contracts with customers

i 1,236

i 1,528

i 284

i 4

i 68

( i 77

)

i 3,043

Revenues from contracts with customers

i 1,236

i 1,528

i 284

i 4

i 68

( i 77

)

i 3,043

Utilities regulatory revenues

( i 91

)

( i 167

)

i —

( i 258

)

Other revenues

i —

i 99

i 3

i 73

( i 62

)

i 113

Total revenues

i 1,145

i 1,361

i 383

i 7

i 141

( i 139

)

i 2,898

Remaining Performance Obligations

For contracts greater than one year, at March 31, 2020, we expect to recognize revenue related to the fixed fee component of the consideration as shown below. SoCalGas did not have any such remaining performance obligations at March 31, 2020.



REMAINING PERFORMANCE OBLIGATIONS⁽¹⁾
(Dollars in millions)
	Sempra Energy Consolidated		SDG&E
2020 (excluding first three months of 2020)	$	i 306	$	i 3
2021	i 402		i 4
2022	i 403		i 4
2023	i 400		i 4
2024	i 348		i 4
Thereafter	i 4,640		i 71
Total revenues to be recognized	$	i 6,499	$	i 90


⁽¹⁾	Excludes intercompany transactions.

Contract Balances from Revenues from Contracts with Customers

Activities within Sempra Energy’s and SDG&E’s contract liabilities are presented below. There were no contract liabilities at SDG&E in the three months ended March 31, 2019 or SoCalGas in the three months ended March 31, 2020 and 2019.



CONTRACT LIABILITIES
(Dollars in millions)
	Sempra Energy Consolidated			SDG&E
Balance at January 1, 2020	$	( i 163	)	$	( i 91	)
Revenue from performance obligations satisfied during reporting period	i 1			i 1
Balance at March 31, 2020⁽¹⁾	$	( i 162	)	$	( i 90	)
Balance at January 1, 2019	$	( i 70	)
Revenue from performance obligations satisfied during reporting period	i 1
Payments received in advance	( i 2		)
Balance at March 31, 2019	$	( i 71	)


⁽¹⁾	Includes $ i 4 million and $ i 4 million in Other Current Liabilities and $ i 158 million and $ i 86 million in Deferred Credits and Other on the Sempra Energy and SDG&E Condensed Consolidated Balance Sheets, respectively.

Receivables from Revenues from Contracts with Customers

The table below shows receivable balances associated with revenues from contracts with customers on our Condensed Consolidated Balance Sheets.



RECEIVABLES FROM REVENUES FROM CONTRACTS WITH CUSTOMERS
(Dollars in millions)
	March 31, 2020		December 31, 2019
Sempra Energy Consolidated:
Accounts receivable – trade, net	$	i 1,142	$	i 1,163
Accounts receivable – other, net	i 8		i 16
Due from unconsolidated affiliates – current⁽¹⁾	i 4		i 5
Total	$	i 1,154	$	i 1,184
SDG&E:
Accounts receivable – trade, net	$	i 411	$	i 398
Accounts receivable – other, net	i 7		i 5
Due from unconsolidated affiliates – current⁽¹⁾	i 3		i 2
Total	$	i 421	$	i 405
SoCalGas:
Accounts receivable – trade, net	$	i 669	$	i 710
Accounts receivable – other, net	i 1		i 11
Total	$	i 670	$	i 721


⁽¹⁾	Amount is presented net of amounts due to unconsolidated affiliates on the Condensed Consolidated Balance Sheets, when right of offset exists.

NOTE 4. i REGULATORY MATTERS

We discuss regulatory matters in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report, and provide updates to those discussions and information about new regulatory matters below.

REGULATORY ASSETS AND LIABILITIES

i i

We show the details of regulatory assets and liabilities in the following table.



REGULATORY ASSETS (LIABILITIES)
(Dollars in millions)
	March 31, 2020			December 31, 2019

SDG&E:
Fixed-price contracts and other derivatives	$	i 23		$	i 8
Deferred income taxes refundable in rates	( i 68		)	( i 108		)
Pension and other postretirement benefit plan obligations	i 105			i 103
Removal obligations	( i 1,999		)	( i 2,056		)
Environmental costs	i 45			i 45
Sunrise Powerlink fire mitigation	i 122			i 121
Regulatory balancing accounts⁽¹⁾⁽²⁾
Commodity – electric	i 116			i 102
Gas transportation	i 9			i 22
Safety and reliability	i 75			i 77
Public purpose programs	( i 138		)	( i 124		)
2019 GRC retroactive impacts	i 98			i 111
Other balancing accounts	i 124			i 106
Other regulatory liabilities, net⁽²⁾	( i 126		)	( i 153		)
Total SDG&E	( i 1,614		)	( i 1,746		)
SoCalGas:
Deferred income taxes refundable in rates	( i 133		)	( i 203		)
Pension and other postretirement benefit plan obligations	i 416			i 400
Employee benefit costs	i 44			i 44
Removal obligations	( i 719		)	( i 728		)
Environmental costs	i 38			i 40
Regulatory balancing accounts⁽¹⁾⁽²⁾
Commodity – gas, including transportation	( i 202		)	( i 118		)
Safety and reliability	i 315			i 295
Public purpose programs	( i 269		)	( i 273		)
2019 GRC retroactive impacts	i 351			i 400
Other balancing accounts	( i 155		)	( i 7		)
Other regulatory liabilities, net⁽²⁾	( i 88		)	( i 101		)
Total SoCalGas	( i 402		)	( i 251		)
Sempra Mexico:
Deferred income taxes recoverable in rates	i 83			i 83
Other regulatory assets	i 3			i 6
Total Sempra Energy Consolidated	$	( i 1,930	)	$	( i 1,908	)


⁽¹⁾	At March 31, 2020 and December 31, 2019, the noncurrent portion of regulatory balancing accounts – net undercollected for SDG&E was $ i 123 million and $ i 108 million, respectively, and for SoCalGas was $ i 375 million and $ i 500 million, respectively.

/ /


⁽²⁾	Includes regulatory assets earning a return.

CALIFORNIA UTILITIES

COVID-19 Pandemic Protections Memorandum Account

The COVID-19 pandemic is causing a significant impact on the economy and people’s livelihoods in California. On March 4, 2020, Governor Gavin Newsom proclaimed a State of Emergency in California as a result of the threat of COVID-19. In response, on March 17, 2020, the CPUC announced that, retroactive to March 4, 2020, all energy companies under its jurisdiction, including the California Utilities, should take action to implement several emergency customer protection measures to support California customers. On April 16, 2020, the CPUC approved a resolution establishing a disaster relief plan for residential and small business customers affected by the COVID-19 pandemic. The resolution also authorizes each of the California Utilities to establish a CPPMA to track and request recovery of incremental costs associated with complying with the resolution, including, but not limited to, costs associated with suspending disconnections (such as costs that arise from customers’ failure to pay). The customer relief measures are effective March 4, 2020 and shall continue for up to one year. SDG&E extended these accommodations to all of its customers and may continue to do so, while SoCalGas provides these benefits to its core gas customers. The California Utilities expect to pursue recovery in rates of the costs associated with the consumer protections that are offered in a future proceeding, subject to CPUC approval, which is not assured.

CPUC General Rate Case

The CPUC uses GRC proceedings to set rates designed to allow the California Utilities to recover their reasonable operating costs and to provide the opportunity to realize their authorized rates of return on their investments.

2019 General Rate Case

As we discuss in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report, in September 2019, the CPUC issued a final decision in the 2019 GRC. The 2019 GRC FD was effective retroactive to January 1, 2019. In the third quarter of 2019, SDG&E and SoCalGas recorded the retroactive after-tax earnings impact of $ i 36 million and $ i 84 million, respectively, for the first quarter of 2019 and $ i 30 million and $ i 46 million, respectively, for the second quarter of 2019.

The 2019 GRC FD approved SDG&E’s and SoCalGas’ test year revenues for 2019 and attrition year adjustments for 2020 and 2021. In January 2020, the CPUC issued a final decision implementing a four-year GRC cycle for California IOUs. The California Utilities were directed to file a petition for modification to revise their 2019 GRC to add two additional attrition years, resulting in a transitional five-year GRC period (2019-2023). The California Utilities filed the petition in April 2020 and requested authorization of their post-test year ratemaking mechanism for two additional years. If adopted, the estimated incremental increase in the revenue requirement for SDG&E and SoCalGas would be approximately $ i 106 million and $ i 155 million, respectively, for 2022, and $ i 108 million and $ i 137 million, respectively, for 2023. These amounts include revenues for both O&M and capital cost attrition. The California Utilities requested a decision by the end of 2020.

The 2019 GRC FD clarified that differences between incurred and forecasted income tax expense due to forecasting differences are not subject to tracking in the income tax expense memorandum account beginning in 2019. SDG&E and SoCalGas recorded regulatory liabilities associated with the 2016 through 2018 tracked forecasting differences of $ i 86 million and $ i 89 million, respectively. In April 2020, the CPUC confirmed treatment of the two-way income tax expense memorandum account for these 2016 through 2018 balances, at which time the California Utilities released these regulatory liability balances to revenues.

CPUC Cost of Capital

In December 2019, the CPUC approved the cost of capital and rate structures (shown in the table below) for SDG&E and SoCalGas that are effective January 1, 2020 and will remain in effect through December 31, 2022. SDG&E did not propose a 2020 cost of preferred equity in this proceeding. In January 2020, SDG&E filed an advice letter to continue the cost of preferred equity for test year 2020 at i 6.22%, which the CPUC approved in March 2020.

CPUC AUTHORIZED COST OF CAPITAL AND RATE STRUCTURE

SDG&E

SoCalGas

Authorized weighting

Return on

rate base

Weighted
return on

rate base

Authorized weighting

Return on
rate base

Weighted
return on
rate base

i 45.25

i 4.59

i 2.08

Long-Term Debt

i 45.60

i 4.23

i 1.93

i 2.75

i 6.22

i 0.17

Preferred Equity

i 2.40

i 6.00

i 0.14

i 52.00

i 10.20

i 5.30

Common Equity

i 52.00

i 10.05

i 5.23

i 100.00

i 7.55

i 100.00

i 7.30

The CCM was reauthorized in the 2020 cost of capital proceeding to continue through 2022. The CCM benchmark rate for the 2020 cost of capital is the average monthly utility bond index, as published by Moody’s, for the 12-month period from October 2018 through September 2019. SDG&E’s CCM benchmark rate, based on its filing pending approval with the CPUC, is i 4.498%, based on Moody’s Baa- utility bond index. SoCalGas’ CCM benchmark rate, based on its filing pending approval with the CPUC, is i 4.029%, based on Moody’s A- utility bond index. The index applicable to each utility is based on such utility’s credit rating.

The CCM benchmark rates for SDG&E and SoCalGas are the basis of comparison to determine if future measurement periods “trigger” the CCM. The 12 months ending September 2020 will be the first “CCM Period” to determine if there has been a trigger at SDG&E or SoCalGas. The trigger occurs if the change in the applicable average Moody’s utility bond index relative to the CCM benchmark is larger than plus or minus i 1.000%. Accordingly, if a change of more than plus or minus i 1.000% occurs, SDG&E’s, SoCalGas’, or both utilities’ authorized ROE would be adjusted, upward or downward, by one half of the difference between the CCM benchmark and the 12-month average determined during the CCM Period. In addition, the authorized recovery rate for the utilities’ cost of debt and preferred equity would be adjusted to their respective actual weighted-average cost, with no change to the authorized capital structure. In the event of a CCM trigger, the CCM benchmark is also re-established. These adjustments would become effective in authorized rates on January 1 of the year following the CCM trigger.

SDG&E

FERC Formulaic Rate Filing

In October 2018, SDG&E submitted its TO5 filing to the FERC to establish its transmission revenue requirement, including rate of return, for SDG&E’s FERC-regulated electric transmission operations and assets. In December 2018, the FERC issued its order accepting and suspending SDG&E’s TO5 filing for five months, during which the existing TO4 rates remained in effect, and established hearing and settlement procedures. The suspension period ended on June 1, 2019, when the proposed TO5 rates took effect, subject to refund and the outcome of the rate filing. As a result, the TO4 ROE of i 10.05% was the basis of SDG&E’s FERC-related revenue recognition until March 2020, when the FERC approved the settlement terms that SDG&E and all settling parties reached in October 2019.

The settlement agreement provides for a ROE of i 10.60%, consisting of a base ROE of i 10.10% plus an additional 50 bps for participation in the California ISO. If the FERC issues an order ruling that California IOUs are no longer eligible for the additional California ISO ROE, SDG&E would refund the additional 50 bps of ROE associated with the California ISO as of the refund effective date (June 1, 2019) in this proceeding. The TO5 term is effective June 1, 2019 and shall remain in effect indefinitely, with parties having the annual right to terminate the agreement beginning in 2022.

In the first quarter of 2020, SDG&E recorded retroactive revenues of $ i 12 million related to 2019, and additional FERC revenues of $ i 17 million to conclude a rate base matter, net of certain refunds to be paid to CPUC-jurisdictional customers.

NOTE 5. i ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS

We consolidate assets acquired and liabilities assumed as of the purchase date and include earnings from acquisitions in consolidated earnings after the purchase date.

ACQUISITION

Sempra Texas Utilities

TTHC

In February 2020, Sempra Texas Intermediate Holding Company LLC acquired an additional indirect i 0.1975% interest in Oncor through its acquisition of a i 1% interest in TTHC from Hunt Strategic Utility Investment, L.L.C., including notes receivable due from TTHC with an aggregate outstanding balance of approximately $ i 6 million, for a total purchase price of approximately $ i 23 million in cash, bringing Sempra Energy’s indirect ownership in Oncor to approximately i 80.45%. TTHC indirectly owns i 100% of TTI, which owns i 19.75% of Oncor’s outstanding membership interests. At the acquisition date, we determined the fair value of the notes receivable was $ i 7 million based on a discounted cash flow model, and attributed $ i 16 million to the investment in TTHC. We account for our investment in TTHC as an equity method investment, which we discuss further in Note 6.

DIVESTITURE

Sempra LNG

In February 2019, Sempra LNG completed the sale of its non-utility natural gas storage assets in the southeast U.S. (comprised of Mississippi Hub and Bay Gas), which we classified as held for sale at December 31, 2018, to an affiliate of ArcLight Capital Partners and received cash proceeds of $ i 322 million, net of transaction costs. In January 2019, Sempra LNG completed the sale of other non-utility assets for $ i 5 million.

DISCONTINUED OPERATIONS

In January 2019, our board of directors approved a plan to sell our South American businesses. We determined that these businesses, which previously constituted the Sempra South American Utilities segment, and certain activities associated with those businesses, met the held-for-sale criteria. These businesses are presented as discontinued operations, as the planned sales represent a strategic shift that will have a major effect on our operations and financial results. We do not plan to have significant continuing involvement in or be able to exercise significant influence on the operating or financial policies of these operations after they are sold. Accordingly, the results of operations, financial position and cash flows for these businesses have been presented as discontinued operations for all periods presented.

Discontinued operations that were previously in the Sempra South American Utilities segment include our i 100% interest in Chilquinta Energía in Chile, our i 83.6% interest in Luz del Sur in Peru and our interests in i two energy-services companies, Tecnored and Tecsur, which provide electric construction and infrastructure services to Chilquinta Energía and Luz del Sur, respectively, as well as third parties.

On April 24, 2020, we completed the sale of our equity interests in our Peruvian businesses, including our i 83.6% interest in Luz del Sur and its interest in Tecsur, to an affiliate of China Yangtze Power International (Hongkong) Co., Limited for an aggregate base purchase price of $ i 3.59 billion, subject to post-closing adjustments.

On October 12, 2019, we entered into a Purchase and Sale Agreement with State Grid International Development Limited to sell our equity interests in our Chilean businesses, including our i 100% interest in Chilquinta Energía and Tecnored and our i 50% interest in Eletrans, for an aggregate base purchase price of $ i 2.23 billion, subject to customary adjustments for working capital and changes in net indebtedness and other adjustments. Chilquinta Energía also agreed to purchase the remaining i 50% interest in Eletrans from Sociedad Austral de Electricidad S.A., contingent on the sale of our Chilean businesses to State Grid International Development Limited. This acquisition by Chilquinta Energía, which we do not expect would have a significant economic impact on the sale of our Chilean businesses (including the net proceeds we receive from the sale), would result in State Grid International Development Limited acquiring i 100% of Eletrans. The sale of our Chilean businesses is subject to various conditions to closing, including certain Chinese regulatory approvals, but is not subject to Chilquinta Energía purchasing the remaining i 50% interest in Eletrans. We expect the sale to close in the second quarter of 2020.

Summarized results from discontinued operations were as follows:



DISCONTINUED OPERATIONS
(Dollars in millions)
	Three months ended March 31,
	2020			2019
Revenues	$	i 400		$	i 421
Cost of sales	( i 253		)	( i 265		)
Operating expenses	( i 46		)	( i 45		)
Interest and other	i —			( i 3		)
Income before income taxes and equity earnings	i 101			i 108
Income tax expense	( i 21		)	( i 151		)
Equity earnings	i —			i 1
Income (loss) from discontinued operations, net of income tax	i 80			( i 42		)
Earnings attributable to noncontrolling interests	( i 8		)	( i 9		)
Earnings (losses) from discontinued operations attributable to common shares	$	i 72		$	( i 51	)

The following table summarizes the carrying amounts of the major classes of assets and related liabilities classified as held for sale in discontinued operations.



ASSETS HELD FOR SALE IN DISCONTINUED OPERATIONS
(Dollars in millions)
	March 31, 2020		December 31, 2019
Cash and cash equivalents	$	i 180	$	i 74
Restricted cash⁽¹⁾	i 1		i 1
Accounts receivable, net	i 316		i 303
Due from unconsolidated affiliates	i 2		i 2
Inventories	i 36		i 36
Other current assets	i 31		i 29
Current assets	$	i 566	$	i 445

Due from unconsolidated affiliates	$	i 60	$	i 54
Goodwill and other intangible assets	i 748		i 801
Property, plant and equipment, net	i 2,517		i 2,618
Other noncurrent assets	i 39		i 40
Noncurrent assets	$	i 3,364	$	i 3,513

Short-term debt	$	i 158	$	i 52
Accounts payable	i 192		i 201
Current portion of long-term debt and finance leases	i 82		i 85
Other current liabilities	i 106		i 106
Current liabilities	$	i 538	$	i 444

Long-term debt and finance leases	$	i 663	$	i 702
Deferred income taxes	i 282		i 284
Other noncurrent liabilities	i 61		i 66
Noncurrent liabilities	$	i 1,006	$	i 1,052


⁽¹⁾	Primarily represents funds held in accordance with Peruvian tax law.

At March 31, 2020 and December 31, 2019, $ i 693 million and $ i 551 million, respectively, of cumulative foreign currency translation losses related to our South American businesses are included in AOCI.

NOTE 6. i INVESTMENTS IN UNCONSOLIDATED ENTITIES

We generally account for investments under the equity method when we have significant influence over, but do not have control of, these entities. Equity earnings and losses, both before and net of income tax, are combined and presented as Equity Earnings on the Condensed Consolidated Statements of Operations. See Note 12 for information on equity earnings and losses, both before and net of income tax, by segment. See Note 1 for information on how equity earnings and losses before income taxes are factored into the calculations of our pretax income or loss and ETR.

We provide additional information concerning our equity method investments in Notes 5 and 6 of the Notes to Consolidated Financial Statements in the Annual Report.

SEMPRA TEXAS UTILITIES

Oncor Holdings

We account for our i 100% ownership interest in Oncor Holdings, which owns an i 80.25% interest in Oncor, as an equity method investment. Due to the ring-fencing measures, governance mechanisms, and commitments in effect, we do not have the power to direct the significant activities of Oncor Holdings and Oncor. See Note 6 of the Notes to Consolidated Financial Statements in the

Annual Report for additional information related to the restrictions on our ability to direct the significant activities of Oncor Holdings and Oncor.

In the three months ended March 31, 2020, Sempra Energy contributed $ i 70 million to Oncor, and Oncor Holdings distributed to Sempra Energy $ i 73 million in dividends.

In the three months ended March 31, 2019, Sempra Energy contributed $ i 56 million to Oncor, and Oncor Holdings distributed to Sempra Energy $ i 54 million in dividends and $ i 3 million in tax sharing payments.

We provide summarized income statement information for Oncor Holdings in the following table.



SUMMARIZED FINANCIAL INFORMATION – ONCOR HOLDINGS
(Dollars in millions)
	Three months ended March 31,
	2020			2019
Operating revenues	$	i 1,072		$	i 1,016
Operating expense	( i 801		)	( i 775		)
Income from operations	i 271			i 241
Interest expense	( i 101		)	( i 86		)
Income tax expense	( i 28		)	( i 23		)
Net income	i 129			i 114
Noncontrolling interest held by TTI	( i 26		)	( i 23		)
Earnings attributable to Sempra Energy	i 103			i 91

TTHC

As we discuss in Note 5, in February 2020, Sempra Texas Intermediate Holding Company LLC, acquired a i 1% interest in TTHC from Hunt Strategic Utility Investment, L.L.C. for $ i 23 million in cash, of which $ i 16 million of the fair value was attributed to our investment in TTHC. TTHC indirectly owns i 100% of TTI, which owns i 19.75% of Oncor’s outstanding membership interests, resulting in Sempra Energy acquiring an additional indirect i 0.1975% interest in Oncor and bringing Sempra Energy’s indirect ownership in Oncor to approximately i 80.45%.

SEMPRA MEXICO

IMG JV

IEnova has a i 40% interest in IMG JV, a JV with a subsidiary of TC Energy Corporation, and accounts for its interest as an equity method investment. IMG JV owns and operates the Sur de Texas-Tuxpan natural gas marine pipeline, which is fully contracted under a i 35-year natural gas transportation service contract with the CFE and commenced commercial operations in September 2019.

As we discuss in “Transactions with Affiliates” in Note 1, IEnova has provided IMG JV with a Mexican peso-denominated revolving line of credit to finance construction of the natural gas marine pipeline. Due to significant fluctuation of the Mexican peso and the impact of this fluctuation on the peso-denominated loan, equity earnings from IEnova’s investment in IMG JV were higher in the three months ended March 31, 2020 compared to the same period in 2019, primarily due to $ i 149 million of foreign currency gains in 2020 compared to $ i 10 million of foreign currency losses in 2019, which are offset by corresponding amounts included in Other (Expense) Income, Net on the Condensed Consolidated Statements of Operations.

We provide summarized income statement information for IMG JV in the following table.



SUMMARIZED FINANCIAL INFORMATION – IMG JV
(Dollars in millions)
	Three months ended March 31,
	2020			2019
Operating revenues	$	i 122		$	i —
Operating expenses	( i 33		)	i —
Income from operations	i 89			i —
Other income, net	i 364			i 41
Interest expense	( i 43		)	( i 46		)
Income tax benefit (expense)	i 10			( i 4		)
Net income (loss)/Earnings (losses)	i 420			( i 8		)

SEMPRA LNG

In the three months ended March 31, 2019, Sempra LNG invested cash of $ i 25 million in Cameron LNG JV. Prior to commencing commercial operations in August 2019, Sempra LNG capitalized $ i 13 million of interest in the three months ended March 31, 2019 related to its investment in Cameron LNG JV.

RBS SEMPRA COMMODITIES

As we discuss in Note 11, in March 2020, we recorded a charge of $ i 100 million in Equity Earnings on Sempra Energy’s Condensed Consolidated Statement of Operations for losses from our investment in RBS Sempra Commodities. We recognized a corresponding liability of $ i 25 million in Other Current Liabilities and $ i 75 million in Deferred Credits and Other for our share of estimated losses in excess of the carrying value of our equity method investment.

GUARANTEES

At March 31, 2020, Sempra LNG has provided guarantees aggregating a maximum of $ i 4.0 billion with an aggregate carrying value of $ i 2 million associated with Cameron LNG JV’s debt obligations. We discuss these guarantees in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

NOTE 7. i DEBT AND CREDIT FACILITIES

LINES OF CREDIT

Primary U.S. Committed Lines of Credit

At March 31, 2020, Sempra Energy Consolidated had an aggregate capacity of $ i 6.7 billion in four primary U.S. committed lines of credit, which provide liquidity and support commercial paper. The principal terms of these committed lines of credit, which expire in May 2024, are described below and in Note 7 of the Notes to Consolidated Financial Statements in the Annual Report.

PRIMARY U.S. COMMITTED LINES OF CREDIT

(Dollars in millions)

March 31, 2020

Total facility

Commercial paper outstanding⁽¹⁾

Lines of credit outstanding

Available unused credit

Sempra Energy⁽²⁾

i 1,250

i —

( i 1,250

)

i —

Sempra Global⁽³⁾

i 3,185

( i 1,225

)

i —

i 1,960

SDG&E⁽⁴⁾

i 1,500

i —

( i 200

)

i 1,300

SoCalGas⁽⁴⁾

i 750

i —

i 750

Total

i 6,685

( i 1,225

)

( i 1,450

)

i 4,010


⁽¹⁾	Because the commercial paper programs are supported by these lines, we reflect the amount of commercial paper outstanding as a reduction to the available unused credit.

⁽²⁾

The facility also provides for issuance of $ i 200 million of letters of credit on behalf of Sempra Energy with the amount of borrowings otherwise available under the facility reduced by the amount of outstanding letters of credit. Subject to obtaining commitments from existing or new lenders and satisfaction of other specified conditions, Sempra Energy has the right to increase the letter of credit commitment up to $ i 500 million. No letters of credit were outstanding at March 31, 2020.


⁽³⁾	Commercial paper outstanding is before reductions of unamortized discount of $ i 1 million at Sempra Global.

⁽⁴⁾

The facility also provides for issuance of $ i 100 million of letters of credit on behalf of the borrowing utility with the amount of borrowings otherwise available under the facility reduced by the amount of outstanding letters of credit. Subject to obtaining commitments from existing or new lenders and satisfaction of other specified conditions, the borrowing utility has the right to increase the letter of credit commitment up to $ i 250 million. No letters of credit were outstanding at March 31, 2020.

Sempra Energy, SDG&E and SoCalGas each must maintain a ratio of indebtedness to total capitalization (as defined in each of the applicable credit facilities) of no more than i 65% at the end of each quarter. At March 31, 2020, each entity was in compliance with this ratio and all other financial covenants under its respective credit facility.

At March 31, 2020, the $ i 200 million outstanding under SDG&E’s line of credit was classified as long-term debt based on management’s intent and ability to maintain this level of borrowing on a long-term basis either supported by this credit facility or by issuing long-term debt. This classification had no impact on SDG&E’s cash flows.

Foreign Committed Lines of Credit

Our foreign operations in Mexico have additional general-purpose credit facilities aggregating $ i 1.9 billion at March 31, 2020. The principal terms of these credit facilities are described below.

FOREIGN COMMITTED LINES OF CREDIT

(U.S. dollar equivalent in millions)

March 31, 2020

Expiration date of facility

Total facility

Amounts outstanding

Available unused credit

February 2024⁽¹⁾

i 1,500

( i 1,364

)

i 136

April 2022⁽²⁾

i 100

( i 100

)

i —

September 2021⁽³⁾

i 280

( i 280

)

i —

Total

i 1,880

( i 1,744

)

i 136


⁽¹⁾	Five-year revolving credit facility with a syndicate of i 10 lenders.


⁽²⁾	Three-year revolving credit facility with Scotiabank Inverlat, S.A. Withdrawals may be made for up to one year from April 11, 2019 in either U.S. dollars or Mexican pesos.


⁽³⁾	Two-year revolving credit facility with The Bank of Nova Scotia. Withdrawals may be made for up to two years from September 23, 2019 in U.S. dollars.

Letters of Credit

Outside of our domestic and foreign committed credit facilities, we have bilateral unsecured standby letter of credit capacity with select lenders that is uncommitted and supported by reimbursement agreements. At March 31, 2020, we had approximately $ i 615 million in standby letters of credit outstanding under these agreements.

TERM LOANS

In March 2020, Sempra Energy borrowed $ i 1,524 million, net of $ i 1 million of debt issuance costs, under a 364-day term loan, which has a maturity date of March 16, 2021 with an option to extend the maturity date to September 16, 2021, subject to receiving the consent of the lenders. Borrowings bear interest at benchmark rates plus 80 bps ( i 1.72% at March 31, 2020). On April 1, 2020, Sempra Energy borrowed an additional $ i 75 million under the term loan.

In March 2020, SDG&E borrowed $ i 200 million under a 364-day term loan, which has a maturity date of March 18, 2021 with an option to extend the maturity date to September 17, 2021, subject to receiving the consent of the lenders. Borrowings bear interest at benchmark rates plus 80 bps ( i 1.73% at March 31, 2020). SDG&E classified this term loan as long-term debt based on management’s intent and ability to maintain this level of borrowing on a long-term basis by issuing long-term debt. This classification had no impact on SDG&E’s cash flows.

The term loans provide Sempra Energy and SDG&E with additional liquidity outside of their respective committed lines of credit.

WEIGHTED-AVERAGE INTEREST RATES

The weighted-average interest rates on the total short-term debt at March 31, 2020 and December 31, 2019 were as follows:



WEIGHTED-AVERAGE INTEREST RATES

	March 31, 2020		December 31, 2019
	March 31, 2020		December 31, 2019
Sempra Energy Consolidated	i 2.41	%	i 2.31	%
SDG&E	N/A		i 1.97
SoCalGas	N/A		i 1.86

LONG-TERM DEBT

SDG&E

In April 2020, SDG&E issued $ i 400 million of i 3.32% first mortgage bonds maturing in 2050 and received proceeds of $ i 395 million (net of debt discount, underwriting discounts and debt issuance costs of $ i 5 million). SDG&E used $ i 200 million of the proceeds from the offering to repay borrowings on its line of credit and expects to use the remaining proceeds for working capital and other general corporate purposes, which may include the repayment of indebtedness.

SoCalGas

In January 2020, SoCalGas issued $ i 650 million of i 2.55% first mortgage bonds maturing in 2030. We received proceeds of $ i 643 million (net of debt discount, underwriting discounts and debt issuance costs of $ i 7 million). SoCalGas used the proceeds from the offering to repay outstanding commercial paper and for other general corporate purposes.

Sempra Mexico

In November 2019, IEnova entered into a financing agreement with International Finance Corporation and North American Development Bank to finance and/or refinance the construction of solar generation projects in Mexico. Under this agreement, in April 2020, IEnova borrowed $ i 100 million from Japan International Cooperation Agency, with loan proceeds of $ i 98 million (net of debt issuance costs of $ i 2 million). The loan matures in November 2034 and bears interest based on 6-month LIBOR plus 150 bps. IEnova entered into a floating-to-fixed interest rate swap, resulting in a fixed rate of i 2.38%.

Sempra LNG

As we discuss in “Shareholders’ Equity and Noncontrolling Interests – Other Noncontrolling Interests – Sempra LNG” in Note 1, notes payable totaling $ i 22 million due October 1, 2026 were converted to equity by the minority partner in Liberty Gas Storage LLC and are no longer outstanding.

NOTE 8. i DERIVATIVE FINANCIAL INSTRUMENTS

We use derivative instruments primarily to manage exposures arising in the normal course of business. Our principal exposures are commodity market risk, benchmark interest rate risk and foreign exchange rate exposures. Our use of derivatives for these risks is integrated into the economic management of our anticipated revenues, anticipated expenses, assets and liabilities. Derivatives may be effective in mitigating these risks (1) that could lead to declines in anticipated revenues or increases in anticipated expenses, or (2) that our asset values may fall or our liabilities may increase. Accordingly, our derivative activity summarized below generally represents an impact that is intended to offset associated revenues, expenses, assets or liabilities that are not included in the tables below.

In certain cases, we apply the normal purchase or sale exception to derivative instruments and have other commodity contracts that are not derivatives. These contracts are not recorded at fair value and are therefore excluded from the disclosures below.

In all other cases, we record derivatives at fair value on the Condensed Consolidated Balance Sheets. We have derivatives that are (1) cash flow hedges, (2) fair value hedges, or (3) undesignated. Depending on the applicability of hedge accounting and, for the California Utilities and other operations subject to regulatory accounting, the requirement to pass impacts through to customers, the impact of derivative instruments may be offset in OCI (cash flow hedges), on the balance sheet (regulatory offsets), or recognized in earnings (fair value hedges). We classify cash flows from the principal settlements of cross-currency swaps that hedge exposure related to Mexican peso-denominated debt as financing activities and settlements of other derivative instruments as operating activities on the Condensed Consolidated Statements of Cash Flows.

HEDGE ACCOUNTING

We may designate a derivative as a cash flow hedging instrument if it effectively converts anticipated cash flows associated with revenues or expenses to a fixed dollar amount. We may utilize cash flow hedge accounting for derivative commodity instruments, foreign currency instruments and interest rate instruments. Designating cash flow hedges is dependent on the business context in which the instrument is being used, the effectiveness of the instrument in offsetting the risk that the future cash flows of a given revenue or expense item may vary, and other criteria.

ENERGY DERIVATIVES

Our market risk is primarily related to natural gas and electricity price volatility and the specific physical locations where we transact. We use energy derivatives to manage these risks. The use of energy derivatives in our various businesses depends on the particular energy market, and the operating and regulatory environments applicable to the business, as follows:

▪

The California Utilities use natural gas and electricity derivatives, for the benefit of customers, with the objective of managing price risk and basis risks, and stabilizing and lowering natural gas and electricity costs. These derivatives include fixed price natural gas and electricity positions, options, and basis risk instruments, which are either exchange-traded or over-the-counter financial instruments, or bilateral physical transactions. This activity is governed by risk management and transacting activity plans that have been filed with and approved by the CPUC. Natural gas and electricity derivative activities are recorded as commodity costs that are offset by regulatory account balances and are recovered in rates. Net commodity cost impacts on the Condensed Consolidated Statements of Operations are reflected in Cost of Electric Fuel and Purchased Power or in Cost of Natural Gas.

▪

SDG&E is allocated and may purchase CRRs, which serve to reduce the regional electricity price volatility risk that may result from local transmission capacity constraints. Unrealized gains and losses do not impact earnings, as they are offset by regulatory account balances. Realized gains and losses associated with CRRs, which are recoverable in rates, are recorded in Cost of Electric Fuel and Purchased Power on the Condensed Consolidated Statements of Operations.

▪

Sempra Mexico and Sempra LNG may use natural gas and electricity derivatives, as appropriate, to optimize the earnings of their assets which support the following businesses: LNG, natural gas transportation and storage, and power generation. Gains and losses associated with undesignated derivatives are recognized in Energy-Related Businesses Revenues or in Energy-Related Businesses Cost of Sales on the Condensed Consolidated Statements of Operations. Certain of these derivatives may also be designated as cash flow hedges. Sempra Mexico may also use natural gas energy derivatives with the objective of managing price risk and lowering natural gas prices at its distribution operations. These derivatives, which are recorded as commodity costs that are offset by regulatory account balances and recovered in rates, are recognized in Cost of Natural Gas on the Condensed Consolidated Statements of Operations.


▪	From time to time, our various businesses, including the California Utilities, may use other energy derivatives to hedge exposures such as the price of vehicle fuel and GHG allowances.

The following table summarizes net energy derivative volumes.



NET ENERGY DERIVATIVE VOLUMES
(Quantities in millions)
Commodity	Unit of measure	March 31, 2020	December 31, 2019
Sempra Energy Consolidated:
Natural gas	MMBtu	i 20	i 32
Electricity	MWh	i 1	i 2
Congestion revenue rights	MWh	i 45	i 48
SDG&E:
Natural gas	MMBtu	i 29	i 37
Electricity	MWh	i 2	i 2
Congestion revenue rights	MWh	i 45	i 48
SoCalGas:
Natural gas	MMBtu	i —	i 2

In addition to the amounts noted above, we use commodity derivatives to manage risks associated with the physical locations of contractual obligations and assets, such as natural gas purchases and sales.

INTEREST RATE DERIVATIVES

We are exposed to interest rates primarily as a result of our current and expected use of financing. The California Utilities, as well as Sempra Energy and its other subsidiaries and JVs, periodically enter into interest rate derivative agreements intended to moderate our exposure to interest rates and to lower our overall costs of borrowing. In addition, we may utilize interest rate swaps, typically designated as cash flow hedges, to lock in interest rates on outstanding debt or in anticipation of future financings.

The following table presents the net notional amounts of our interest rate derivatives, excluding JVs.



INTEREST RATE DERIVATIVES
(Dollars in millions)
	March 31, 2020			December 31, 2019
	Notional debt		Maturities	Notional debt		Maturities
Sempra Energy Consolidated:
Cash flow hedges	$	i 1,531	2020-2034	$	i 1,445	2020-2034

FOREIGN CURRENCY DERIVATIVES

We utilize cross-currency swaps to hedge exposure related to Mexican peso-denominated debt at our Mexican subsidiaries and JVs. These cash flow hedges exchange our Mexican peso-denominated principal and interest payments into the U.S. dollar and swap Mexican variable interest rates for U.S. fixed interest rates. From time to time, Sempra Mexico and its JVs may use other foreign currency derivatives to hedge exposures related to cash flows associated with revenues from contracts denominated in Mexican pesos that are indexed to the U.S. dollar.

We are also exposed to exchange rate movements at our Mexican subsidiaries and JVs, which have U.S. dollar-denominated cash balances, receivables, payables and debt (monetary assets and liabilities) that give rise to Mexican currency exchange rate movements for Mexican income tax purposes. They also have deferred income tax assets and liabilities denominated in the Mexican peso, which must be translated to U.S. dollars for financial reporting purposes. In addition, monetary assets and liabilities and certain nonmonetary assets and liabilities are adjusted for Mexican inflation for Mexican income tax purposes. We utilize foreign currency derivatives as a means to manage the risk of exposure to significant fluctuations in our income tax expense and equity earnings from these impacts; however, we generally do not hedge our deferred income tax assets and liabilities or for inflation.

We also utilize foreign currency derivatives to hedge exposure to fluctuations in the Peruvian sol and Chilean peso related to the sale of our operations in Peru and Chile, respectively.

The following table presents the net notional amounts of our foreign currency derivatives, excluding JVs.



FOREIGN CURRENCY DERIVATIVES
(Dollars in millions)
	March 31, 2020			December 31, 2019
	Notional amount		Maturities	Notional amount		Maturities
Sempra Energy Consolidated:
Cross-currency swaps	$	i 306	2020-2023	$	i 306	2020-2023
Other foreign currency derivatives	i 1,939		2020-2021	i 1,796		2020-2021

FINANCIAL STATEMENT PRESENTATION

The Condensed Consolidated Balance Sheets reflect the offsetting of net derivative positions and cash collateral with the same counterparty when a legal right of offset exists. i The following tables provide the fair values of derivative instruments on the Condensed Consolidated Balance Sheets, including the amount of cash collateral receivables that were not offset, as the cash collateral was in excess of liability positions.

DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

March 31, 2020

Other current assets⁽¹⁾

Other long-term assets

Other current liabilities

Deferred credits and other

Sempra Energy Consolidated:

Derivatives designated as hedging instruments:

Interest rate and foreign exchange instruments

i 15

i —

( i 29

)

( i 210

)

Derivatives not designated as hedging instruments:

Foreign exchange instruments

i 23

i —

( i 82

)

i —

Associated offsetting foreign exchange instruments

( i 23

)

i —

i 23

i —

Commodity contracts not subject to rate recovery

i 69

i 9

( i 69

)

( i 11

)

Associated offsetting commodity contracts

( i 65

)

( i 3

)

i 65

i 3

Commodity contracts subject to rate recovery

i 23

i 77

( i 47

)

( i 50

)

Associated offsetting commodity contracts

( i 2

)

( i 2

)

i 2

Associated offsetting cash collateral

i —

i 13

i —

Net amounts presented on the balance sheet

i 40

i 81

( i 124

)

( i 266

)

Additional cash collateral for commodity contracts

not subject to rate recovery

i 37

i —

Additional cash collateral for commodity contracts

subject to rate recovery

i 19

i —

Total⁽²⁾

i 96

i 81

( i 124

)

( i 266

)

SDG&E:

Derivatives not designated as hedging instruments:

Commodity contracts subject to rate recovery

i 20

i 77

( i 43

)

( i 50

)

Associated offsetting commodity contracts

( i 2

)

( i 2

)

i 2

Associated offsetting cash collateral

i —

i 13

i —

Net amounts presented on the balance sheet

i 18

i 75

( i 28

)

( i 48

)

Additional cash collateral for commodity contracts

subject to rate recovery

i 15

i —

Total⁽²⁾

i 33

i 75

( i 28

)

( i 48

)

SoCalGas:

Derivatives not designated as hedging instruments:

Commodity contracts subject to rate recovery

i 3

i —

( i 4

)

i —

Net amounts presented on the balance sheet

i 3

i —

( i 4

)

i —

Additional cash collateral for commodity contracts

subject to rate recovery

i 4

i —

Total

i 7

i —

( i 4

)

i —

⁽¹⁾ Included in Current Assets: Fixed-Price Contracts and Other Derivatives for SDG&E.

⁽²⁾ Normal purchase contracts previously measured at fair value are excluded.

DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

December 31, 2019

Other current assets⁽¹⁾

Other long-term assets

Other current liabilities

Deferred credits and other

Sempra Energy Consolidated:

Derivatives designated as hedging instruments:

Interest rate and foreign exchange instruments

i —

i 3

( i 17

)

( i 140

)

Derivatives not designated as hedging instruments:

Foreign exchange instruments

i 41

i —

( i 20

)

i —

Associated offsetting foreign exchange instruments

( i 20

)

i —

i 20

i —

Commodity contracts not subject to rate recovery

i 34

i 11

( i 41

)

( i 10

)

Associated offsetting commodity contracts

( i 32

)

( i 2

)

i 32

i 2

Commodity contracts subject to rate recovery

i 41

i 76

( i 47

)

( i 47

)

Associated offsetting commodity contracts

( i 6

)

( i 3

)

i 6

i 3

Associated offsetting cash collateral

i —

i 14

i —

Net amounts presented on the balance sheet

i 58

i 85

( i 53

)

( i 192

)

Additional cash collateral for commodity contracts

not subject to rate recovery

i 43

i —

Additional cash collateral for commodity contracts

subject to rate recovery

i 25

i —

Total⁽²⁾

i 126

i 85

( i 53

)

( i 192

)

SDG&E:

Derivatives not designated as hedging instruments:

Commodity contracts subject to rate recovery

i 30

i 76

( i 41

)

( i 47

)

Associated offsetting commodity contracts

( i 4

)

( i 3

)

i 4

i 3

Associated offsetting cash collateral

i —

i 14

i —

Net amounts presented on the balance sheet

i 26

i 73

( i 23

)

( i 44

)

Additional cash collateral for commodity contracts

subject to rate recovery

i 16

i —

Total⁽²⁾

i 42

i 73

( i 23

)

( i 44

)

SoCalGas:

Derivatives not designated as hedging instruments:

Commodity contracts subject to rate recovery

i 11

i —

( i 6

)

i —

Associated offsetting commodity contracts

( i 2

)

i —

i 2

i —

Net amounts presented on the balance sheet

i 9

i —

( i 4

)

i —

Additional cash collateral for commodity contracts

subject to rate recovery

i 9

i —

Total

i 18

i —

( i 4

)

i —

⁽¹⁾ Included in Current Assets: Fixed-Price Contracts and Other Derivatives for SDG&E.

⁽²⁾ Normal purchase contracts previously measured at fair value are excluded.

The table below includes the effects of derivative instruments designated as cash flow hedges on the Condensed Consolidated Statements of Operations and in OCI and AOCI:



CASH FLOW HEDGE IMPACTS
(Dollars in millions)
	Pretax (loss) gain recognized in OCI							Pretax (loss) gain reclassified from AOCI into earnings
	Three months ended March 31,							Three months ended March 31,
	2020			2019			Location	2020			2019
Sempra Energy Consolidated:
Interest rate and foreign exchange instruments⁽¹⁾	$	( i 92	)	$	( i 3	)	Interest Expense⁽¹⁾	$	( i 2	)	$	( i 1	)
							Other (Expense) Income, Net	( i 41		)	i 3
Interest rate and foreign exchange instruments	( i 172		)	( i 68		)	Equity Earnings	i —			( i 1		)
Foreign exchange instruments	i 21			( i 3		)	Revenues: Energy- Related Businesses	i 2			( i 1		)
							Other (Expense) Income, Net	i 2			i —
Total	$	( i 243	)	$	( i 74	)		$	( i 39	)	$	i —
SDG&E:
Interest rate instruments⁽¹⁾	$	i —		$	i —		Interest Expense⁽¹⁾	$	i —		$	( i 1	)


⁽¹⁾	Amounts include Otay Mesa VIE. All of SDG&E’s interest rate derivative activity relates to Otay Mesa VIE. On August 14, 2019, Otay Mesa Energy Center LLC paid in full its variable-rate loan and terminated its interest rate swaps.

For Sempra Energy Consolidated, we expect that net losses of $ i 69 million, which are net of income tax benefit, that are currently recorded in AOCI related to cash flow hedges will be reclassified into earnings during the next 12 months as the hedged items affect earnings. SoCalGas expects that $ i 1 million of losses, net of income tax benefit, that are currently recorded in AOCI related to cash flow hedges will be reclassified into earnings during the next 12 months as the hedged items affect earnings. Actual amounts ultimately reclassified into earnings depend on the interest rates in effect when derivative contracts mature.

For all forecasted transactions, the maximum remaining term over which we are hedging exposure to the variability of cash flows at March 31, 2020 is approximately i 15 years for Sempra Energy Consolidated. The maximum remaining term for which we are hedging exposure to the variability of cash flows at our equity method investees is i 20 years.

The following table summarizes the effects of derivative instruments not designated as hedging instruments on the Condensed Consolidated Statements of Operations.



UNDESIGNATED DERIVATIVE IMPACTS
(Dollars in millions)
		Pretax (loss) gain on derivatives recognized in earnings
		Three months ended March 31,
	Location	2020			2019
Sempra Energy Consolidated:
Foreign exchange instruments	Other (Expense) Income, Net	$	( i 114	)	$	i 10
Commodity contracts not subject to rate recovery	Revenues: Energy-Related Businesses	i 51			i —
Commodity contracts subject to rate recovery	Cost of Electric Fuel and Purchased Power	( i 9		)	i 2
Commodity contracts subject to rate recovery	Cost of Natural Gas	( i 3		)	i 2
Total		$	( i 75	)	$	i 14
SDG&E:
Commodity contracts subject to rate recovery	Cost of Electric Fuel and Purchased Power	$	( i 9	)	$	i 2
SoCalGas:
Commodity contracts subject to rate recovery	Cost of Natural Gas	$	( i 3	)	$	i 2

CONTINGENT FEATURES

For Sempra Energy Consolidated, SDG&E and SoCalGas, certain of our derivative instruments contain credit limits which vary depending on our credit ratings. Generally, these provisions, if applicable, may reduce our credit limit if a specified credit rating agency reduces our ratings. In certain cases, if our credit ratings were to fall below investment grade, the counterparty to these derivative liability instruments could request immediate payment or demand immediate and ongoing full collateralization.

For Sempra Energy Consolidated, the total fair value of this group of derivative instruments in a net liability position at March 31, 2020 and December 31, 2019 was $ i 5 million and $ i 21 million, respectively. For SoCalGas, the total fair value of this group of derivative instruments in a net liability position at both March 31, 2020 and December 31, 2019 was $ i 4 million. At March 31, 2020, if the credit ratings of Sempra Energy or SoCalGas were reduced below investment grade, $ i 5 million and $ i 4 million, respectively, of additional assets could be required to be posted as collateral for these derivative contracts.

For Sempra Energy Consolidated, SDG&E and SoCalGas, some of our derivative contracts contain a provision that would permit the counterparty, in certain circumstances, to request adequate assurance of our performance under the contracts. Such additional assurance, if needed, is not material and is not included in the amounts above.

NOTE 9. i FAIR VALUE MEASUREMENTS

We discuss the valuation techniques and inputs we use to measure fair value and the definition of the three levels of the fair value hierarchy in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

RECURRING FAIR VALUE MEASURES

The three tables below, by level within the fair value hierarchy, set forth our financial assets and liabilities that were accounted for at fair value on a recurring basis at March 31, 2020 and December 31, 2019. We classify financial assets and liabilities in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair valued assets and liabilities, and their placement within the fair value hierarchy. We have not changed the valuation techniques or types of inputs we use to measure recurring fair value since December 31, 2019.

The fair value of commodity derivative assets and liabilities is presented in accordance with our netting policy, as we discuss in Note 8 under “Financial Statement Presentation.”

The determination of fair values, shown in the tables below, incorporates various factors, including but not limited to, the credit standing of the counterparties involved and the impact of credit enhancements (such as cash deposits, letters of credit and priority interests).

Our financial assets and liabilities that were accounted for at fair value on a recurring basis in the tables below include the following (other than a $ i 5 million investment at December 31, 2019, measured at net asset value):

▪

Nuclear decommissioning trusts reflect the assets of SDG&E’s NDT, excluding cash balances. A third-party trustee values the trust assets using prices from a pricing service based on a market approach. We validate these prices by comparison to prices from other independent data sources. Securities are valued using quoted prices listed on nationally recognized securities exchanges or based on closing prices reported in the active market in which the identical security is traded (Level 1). Other securities are valued based on yields that are currently available for comparable securities of issuers with similar credit ratings (Level 2).

▪

For commodity contracts, interest rate derivatives and foreign exchange instruments, we primarily use a market or income approach with market participant assumptions to value these derivatives. Market participant assumptions include those about risk, and the risk inherent in the inputs to the valuation techniques. These inputs can be readily observable, market corroborated, or generally unobservable. We have exchange-traded derivatives that are valued based on quoted prices in active markets for the identical instruments (Level 1). We also may have other commodity derivatives that are valued using industry standard models that consider quoted forward prices for commodities, time value, current market and contractual prices for the underlying instruments, volatility factors, and other relevant economic measures (Level 2). Level 3 recurring items relate to CRRs and long-term, fixed-price electricity positions at SDG&E, as we discuss below in “Level 3 Information.”


▪	Rabbi Trust investments include marketable securities that we value using a market approach based on closing prices reported in the active market in which the identical security is traded (Level 1). These investments in marketable securities were negligible at both March 31, 2020 and December 31, 2019.

RECURRING FAIR VALUE MEASURES – SEMPRA ENERGY CONSOLIDATED

(Dollars in millions)

Fair value at March 31, 2020

Level 1

Level 2

Level 3

Total

Assets:

Nuclear decommissioning trusts:

Equity securities

i 299

i 5

i —

i 304

Debt securities:

Debt securities issued by the U.S. Treasury and other U.S.

government corporations and agencies

i 46

i 24

i —

i 70

Municipal bonds

i —

i 330

i —

i 330

Other securities

i —

i 269

i —

i 269

Total debt securities

i 46

i 623

i —

i 669

Total nuclear decommissioning trusts⁽¹⁾

i 345

i 628

i —

i 973

Interest rate and foreign exchange instruments

i —

i 15

i —

i 15

Commodity contracts not subject to rate recovery

i —

i 10

i —

i 10

Effect of netting and allocation of collateral⁽²⁾

i 37

i —

i 37

Commodity contracts subject to rate recovery

i —

i 4

i 92

i 96

Effect of netting and allocation of collateral⁽²⁾

i 14

i —

i 5

i 19

Total

i 396

i 657

i 97

i 1,150

Liabilities:

Interest rate and foreign exchange instruments

i —

i 298

i —

i 298

Commodity contracts not subject to rate recovery

i —

i 12

i —

i 12

Commodity contracts subject to rate recovery

i 13

i 4

i 76

i 93

Effect of netting and allocation of collateral⁽²⁾

( i 13

)

i —

( i 13

)

Total

i —

i 314

i 76

i 390

Fair value at December 31, 2019

Level 1

Level 2

Level 3

Total

Assets:

Nuclear decommissioning trusts:

Equity securities

i 503

i 6

i —

i 509

Debt securities:

Debt securities issued by the U.S. Treasury and other U.S.

government corporations and agencies

i 46

i 11

i —

i 57

Municipal bonds

i —

i 282

i —

i 282

Other securities

i —

i 226

i —

i 226

Total debt securities

i 46

i 519

i —

i 565

Total nuclear decommissioning trusts⁽¹⁾

i 549

i 525

i —

i 1,074

Interest rate and foreign exchange instruments

i —

i 24

i —

i 24

Commodity contracts not subject to rate recovery

i —

i 11

i —

i 11

Effect of netting and allocation of collateral⁽²⁾

i 43

i —

i 43

Commodity contracts subject to rate recovery

i 5

i 8

i 95

i 108

Effect of netting and allocation of collateral⁽²⁾

i 11

i 8

i 6

i 25

Total

i 608

i 576

i 101

i 1,285

Liabilities:

Interest rate and foreign exchange instruments

i —

i 157

i —

i 157

Commodity contracts not subject to rate recovery

i —

i 17

i —

i 17

Commodity contracts subject to rate recovery

i 14

i 4

i 67

i 85

Effect of netting and allocation of collateral⁽²⁾

( i 14

)

i —

( i 14

)

Total

i —

i 178

i 67

i 245


⁽¹⁾	Excludes cash and cash equivalents.


⁽²⁾	Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.

RECURRING FAIR VALUE MEASURES – SDG&E

(Dollars in millions)

Fair value at March 31, 2020

Level 1

Level 2

Level 3

Total

Assets:

Nuclear decommissioning trusts:

Equity securities

i 299

i 5

i —

i 304

Debt securities:

Debt securities issued by the U.S. Treasury and other U.S.

government corporations and agencies

i 46

i 24

i —

i 70

Municipal bonds

i —

i 330

i —

i 330

Other securities

i —

i 269

i —

i 269

Total debt securities

i 46

i 623

i —

i 669

Total nuclear decommissioning trusts⁽¹⁾

i 345

i 628

i —

i 973

Commodity contracts subject to rate recovery

i —

i 1

i 92

i 93

Effect of netting and allocation of collateral⁽²⁾

i 10

i —

i 5

i 15

Total

i 355

i 629

i 97

i 1,081

Liabilities:

Commodity contracts subject to rate recovery

i 13

i —

i 76

i 89

Effect of netting and allocation of collateral⁽²⁾

( i 13

)

i —

( i 13

)

Total

i —

i 76

Fair value at December 31, 2019

Level 1

Level 2

Level 3

Total

Assets:

Nuclear decommissioning trusts:

Equity securities

i 503

i 6

i —

i 509

Debt securities:

Debt securities issued by the U.S. Treasury and other U.S.

government corporations and agencies

i 46

i 11

i —

i 57

Municipal bonds

i —

i 282

i —

i 282

Other securities

i —

i 226

i —

i 226

Total debt securities

i 46

i 519

i —

i 565

Total nuclear decommissioning trusts⁽¹⁾

i 549

i 525

i —

i 1,074

Commodity contracts subject to rate recovery

i 1

i 3

i 95

i 99

Effect of netting and allocation of collateral⁽²⁾

i 10

i —

i 6

i 16

Total

i 560

i 528

i 101

i 1,189

Liabilities:

Commodity contracts subject to rate recovery

i 14

i —

i 67

i 81

Effect of netting and allocation of collateral⁽²⁾

( i 14

)

i —

( i 14

)

Total

i —

i 67


⁽¹⁾	Excludes cash and cash equivalents.


⁽²⁾	Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.

RECURRING FAIR VALUE MEASURES – SOCALGAS

(Dollars in millions)

Fair value at March 31, 2020

Level 1

Level 2

Level 3

Total

Assets:

Commodity contracts subject to rate recovery

i —

i 3

i —

i 3

Effect of netting and allocation of collateral⁽¹⁾

i 4

i —

i 4

Total

i 4

i 3

i —

i 7

Liabilities:

Commodity contracts subject to rate recovery

i —

i 4

i —

i 4

Total

i —

i 4

i —

i 4

Fair value at December 31, 2019

Level 1

Level 2

Level 3

Total

Assets:

Commodity contracts subject to rate recovery

i 4

i 5

i —

i 9

Effect of netting and allocation of collateral⁽¹⁾

i 1

i 8

i —

i 9

Total

i 5

i 13

i —

i 18

Liabilities:

Commodity contracts subject to rate recovery

i —

i 4

i —

i 4

Total

i —

i 4

i —

i 4


⁽¹⁾	Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.

Level 3 Information

The table below sets forth reconciliations of changes in the fair value of CRRs and long-term, fixed-price electricity positions classified as Level 3 in the fair value hierarchy for Sempra Energy Consolidated and SDG&E.



LEVEL 3 RECONCILIATIONS⁽¹⁾
(Dollars in millions)
	Three months ended March 31,
	2020			2019
Balance at January 1	$	i 28		$	i 179
Realized and unrealized (losses) gains	( i 5		)	i 5
Settlements	( i 7		)	( i 2		)
Balance at March 31	$	i 16		$	i 182
Change in unrealized gains (losses) relating to instruments still held at March 31	$	( i 6	)	$	i 13


⁽¹⁾	Excludes the effect of the contractual ability to settle contracts under master netting agreements.

Inputs used to determine the fair value of CRRs and fixed-price electricity positions are reviewed and compared with market conditions to determine reasonableness. SDG&E expects all costs related to these instruments to be recoverable through customer rates. As such, there is no impact to earnings from changes in the fair value of these instruments.

CRRs are recorded at fair value based almost entirely on the most current auction prices published by the California ISO, an objective source. Annual auction prices are published once a year, typically in the middle of November, and are the basis for valuing CRRs settling in the following year. For the CRRs settling from January 1 to December 31, the auction price inputs, at a given location, were in the following ranges for the years indicated below:



CONGESTION REVENUE RIGHTS AUCTION PRICE INPUTS

Settlement year	Price per MWh						Median price per MWh
2020	$	( i 3.77	)	to	$	i 6.03	$	( i 1.58	)
2019	( i 8.57		)	to	i 35.21		( i 2.94		)

The impact associated with discounting is negligible. Because these auction prices are a less observable input, these instruments are classified as Level 3. The fair value of these instruments is derived from auction price differences between two locations. Positive values between two locations represent expected future reductions in congestion costs, whereas negative values between two locations represent expected future charges. Valuation of our CRRs is sensitive to a change in auction price. If auction prices at one location increase (decrease) relative to another location, this could result in a higher (lower) fair value measurement. We summarize CRR volumes in Note 8.

Long-term, fixed-price electricity positions that are valued using significant unobservable data are classified as Level 3 because the contract terms relate to a delivery location or tenor for which observable market rate information is not available. i The fair value of the net electricity positions classified as Level 3 is derived from a discounted cash flow model using market electricity forward price inputs. The range and weighted-average price of these inputs at March 31 were as follows:



LONG-TERM, FIXED-PRICE ELECTRICITY POSITIONS PRICE INPUTS

Settlement year	Price per MWh					Weighted-average price per MWh
2020	$	i 16.51	to	$	i 52.45	$	i 35.41
2019		i 23.25	to		i 81.75		i 42.49

A significant increase (decrease) in market electricity forward prices would result in a significantly higher (lower) fair value. We summarize long-term, fixed-price electricity position volumes in Note 8.

Realized gains and losses associated with CRRs and long-term electricity positions, which are recoverable in rates, are recorded in Cost of Electric Fuel and Purchased Power on the Condensed Consolidated Statements of Operations. Because unrealized gains and losses are recorded as regulatory assets and liabilities, they do not affect earnings.

Fair Value of Financial Instruments

The fair values of certain of our financial instruments (cash, accounts and notes receivable, short-term amounts due to/from unconsolidated affiliates, dividends and accounts payable, short-term debt and customer deposits) approximate their carrying amounts because of the short-term nature of these instruments. Investments in life insurance contracts that we hold in support of our Supplemental Executive Retirement, Cash Balance Restoration and Deferred Compensation Plans are carried at cash surrender values, which represent the amount of cash that could be realized under the contracts. i The following table provides the carrying amounts and fair values of certain other financial instruments that are not recorded at fair value on the Condensed Consolidated Balance Sheets.

FAIR VALUE OF FINANCIAL INSTRUMENTS

(Dollars in millions)

March 31, 2020

Carrying
amount

Fair value

Level 1

Level 2

Level 3

Total

Sempra Energy Consolidated:

Long-term amounts due from unconsolidated affiliates⁽¹⁾

i 599

i —

i 627

i 6

i 633

Long-term amounts due to unconsolidated affiliates

i 263

i —

i 238

i —

i 238

Total long-term debt⁽²⁾

i 21,204

i —

i 22,049

i —

i 22,049

SDG&E:

Total long-term debt⁽³⁾

i 5,523

i —

i 6,281

i —

i 6,281

SoCalGas:

Total long-term debt⁽⁴⁾

i 4,459

i —

i 4,894

i —

i 4,894

December 31, 2019

Carrying
amount

Fair value

Level 1

Level 2

Level 3

Total

Sempra Energy Consolidated:

Long-term amounts due from unconsolidated affiliates

i 742

i —

i 759

i —

i 759

Long-term amounts due to unconsolidated affiliates

i 195

i —

i 184

i —

i 184

Total long-term debt⁽²⁾

i 21,247

i —

i 22,638

i 26

i 22,664

SDG&E:

Total long-term debt⁽³⁾

i 5,140

i —

i 5,662

i —

i 5,662

SoCalGas:

Total long-term debt⁽⁴⁾

i 3,809

i —

i 4,189

i —

i 4,189


⁽¹⁾	Before allowances for credit losses of $ i 7 million at March 31, 2020.


⁽²⁾	Before reductions of unamortized discount and debt issuance costs of $ i 228 million and $ i 225 million at March 31, 2020 and December 31, 2019, respectively, and excluding finance lease obligations of $ i 1,301 million and $ i 1,289 million at March 31, 2020 and December 31, 2019, respectively.


⁽³⁾	Before reductions of unamortized discount and debt issuance costs of $ i 47 million and $ i 48 million at March 31, 2020 and December 31, 2019, respectively, and excluding finance lease obligations of $ i 1,268 million and $ i 1,270 million at March 31, 2020 and December 31, 2019, respectively.


⁽⁴⁾	Before reductions of unamortized discount and debt issuance costs of $ i 41 million and $ i 34 million at March 31, 2020 and December 31, 2019, respectively, and excluding finance lease obligations of $ i 33 million and $ i 19 million at March 31, 2020 and December 31, 2019, respectively.

We provide the fair values for the securities held in the NDT related to SONGS in Note 10.

NOTE 10. SAN ONOFRE NUCLEAR GENERATING STATION

We provide below updates to ongoing matters related to SONGS, a nuclear generating facility near San Clemente, California that ceased operations in June 2013, and in which SDG&E has a i 20% ownership interest. We discuss SONGS further in Note 15 of the Notes to Consolidated Financial Statements in the Annual Report.

NUCLEAR DECOMMISSIONING AND FUNDING

As a result of Edison’s decision to permanently retire SONGS Units 2 and 3, Edison began the decommissioning phase of the plant. We expect the majority of the decommissioning work to take i 10 years after receipt of the required permits. The coastal development permit was issued in October 2019. The Samuel Lawrence Foundation filed a writ petition under the California Coastal Act in LA Superior Court in December 2019 seeking to invalidate the permit and to obtain injunctive relief to stop decommissioning work. Major decommissioning work began in 2020. Decommissioning of Unit 1, removed from service in 1992, is largely complete. The remaining work for Unit 1 will be completed once Units 2 and 3 are dismantled and the spent fuel is removed from the site. The spent fuel is currently being stored on-site, until the DOE identifies a spent fuel storage facility and puts in place a program for the fuel’s disposal, as we discuss below. SDG&E is responsible for approximately i 20% of the total contract price.

In accordance with state and federal requirements and regulations, SDG&E has assets held in the NDT to fund its share of decommissioning costs for SONGS Units 1, 2 and 3. The amounts collected in rates for SONGS’ decommissioning are invested in the NDT, which is comprised of externally managed trust funds. Amounts held by the NDT are invested in accordance with CPUC regulations. SDG&E classifies debt and equity securities held in the NDT as available-for-sale. The NDT assets are presented on the Sempra Energy and SDG&E Condensed Consolidated Balance Sheets at fair value with the offsetting credits recorded in noncurrent Regulatory Liabilities.

Except for the use of funds for the planning of decommissioning activities or NDT administrative costs, CPUC approval is required for SDG&E to access the NDT assets to fund SONGS decommissioning costs for Units 2 and 3. In March 2020, SDG&E received authorization from the CPUC to access NDT funds of up to $ i 109 million for forecasted 2020 costs.

In December 2016, the IRS and the U.S. Department of the Treasury issued proposed regulations that clarify the definition of “nuclear decommissioning costs,” which are costs that may be paid for or reimbursed from a qualified trust fund. The proposed regulations state that costs related to the construction and maintenance of independent spent fuel management installations are included in the definition of “nuclear decommissioning costs.” The proposed regulations will be effective prospectively once they are finalized. SDG&E is awaiting the adoption of, or additional refinement to, the proposed regulations before determining whether the proposed regulations will allow SDG&E to access the NDT funds for reimbursement or payment of the spent fuel management costs incurred in 2017 and subsequent years. Further clarification of the proposed regulations could enable SDG&E to access the NDT to recover spent fuel management costs before Edison reaches final settlement with the DOE regarding the DOE’s reimbursement of these costs. Historically, the DOE’s reimbursements of spent fuel storage costs have not resulted in timely or complete recovery of these costs. We discuss the DOE’s responsibility for spent nuclear fuel below. The IRS held public hearings on the proposed regulations in October 2017. It is unclear when clarification of the proposed regulations might be provided or when the proposed regulations will be finalized.

The following table shows the fair values and gross unrealized gains and losses for the securities held in the NDT. We provide additional fair value disclosures for the NDT in Note 9.

NUCLEAR DECOMMISSIONING TRUSTS

(Dollars in millions)

Cost

Gross

unrealized

gains

Gross

unrealized

losses

Estimated

fair

value

At March 31, 2020:

Debt securities:

Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies⁽¹⁾

i 68

i 2

i —

i 70

Municipal bonds⁽²⁾

i 320

i 12

( i 2

)

i 330

Other securities⁽³⁾

i 276

i 4

( i 11

)

i 269

Total debt securities

i 664

i 18

( i 13

)

i 669

Equity securities

i 141

i 185

( i 22

)

i 304

Cash and cash equivalents

i 14

i —

i 14

Total

i 819

i 203

( i 35

)

i 987

At December 31, 2019:

Debt securities:

Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies

i 57

i —

i 57

Municipal bonds

i 270

i 12

i —

i 282

Other securities

i 218

i 9

( i 1

)

i 226

Total debt securities

i 545

i 21

( i 1

)

i 565

Equity securities

i 176

i 339

( i 6

)

i 509

Cash and cash equivalents

i 8

i —

i 8

Total

i 729

i 360

( i 7

)

i 1,082


⁽¹⁾	Maturity dates are 2021-2050.


⁽²⁾	Maturity dates are 2020-2056.


⁽³⁾	Maturity dates are 2020-2072.

/ i

The following table shows the proceeds from sales of securities in the NDT and gross realized gains and losses on those sales.



SALES OF SECURITIES IN THE NDT
(Dollars in millions)
	Three months ended March 31,
	2020			2019
Proceeds from sales	$	i 552		$	i 225
Gross realized gains	i 92			i 5
Gross realized losses	( i 5		)	( i 2		)

Net unrealized gains and losses, as well as realized gains and losses that are reinvested in the NDT, are included in noncurrent Regulatory Liabilities on Sempra Energy’s and SDG&E’s Condensed Consolidated Balance Sheets. We determine the cost of securities in the trusts on the basis of specific identification.

ASSET RETIREMENT OBLIGATION AND SPENT NUCLEAR FUEL

The present value of SDG&E’s ARO related to decommissioning costs for the SONGS units was $ i 608 million at March 31, 2020. That amount includes the cost to decommission Units 2 and 3, and the remaining cost to complete the decommissioning of Unit 1, which is substantially complete. The ARO for all three units is based on a cost study prepared in 2017 that is pending CPUC approval. The ARO for Units 2 and 3 reflects the acceleration of the start of decommissioning of these units as a result of the early closure of the plant. SDG&E’s share of total decommissioning costs in 2020 dollars is approximately $ i 860 million.

U.S. DEPARTMENT OF ENERGY NUCLEAR FUEL DISPOSAL

Spent nuclear fuel from SONGS is currently stored on-site in an ISFSI licensed by the Nuclear Regulatory Commission or temporarily in spent fuel pools. In October 2015, the California Coastal Commission approved Edison’s application to expand the ISFSI. The ISFSI expansion began construction in 2016 and the transfer of the spent nuclear fuel from Units 2 and 3 to the ISFSI began in 2018. The ISFSI will operate until 2049, when it is assumed that the DOE will have taken custody of all the SONGS spent fuel. The ISFSI would then be decommissioned, and the site restored to its original environmental state. Until then, SONGS owners are responsible for interim storage of spent nuclear fuel at SONGS.

The Nuclear Waste Policy Act of 1982 made the DOE responsible for accepting, transporting, and disposing of spent nuclear fuel. However, it is uncertain when the DOE will begin accepting spent nuclear fuel from SONGS. This delay will lead to increased costs for spent fuel storage. In November 2019, Edison filed a claim for spent fuel management costs in the U.S. Court of Federal Claims for the time period from January 2017 through July 2018. It is unclear when Edison will pursue litigation claims for spent fuel management costs incurred on or after August 1, 2018. SDG&E will continue to support Edison in its pursuit of claims on behalf of the SONGS co-owners against the DOE for its failure to timely accept the spent nuclear fuel.

NUCLEAR INSURANCE

SDG&E and the other owners of SONGS have insurance to cover claims from nuclear liability incidents arising at SONGS. Currently, this insurance provides $ i 450 million in coverage limits, the maximum amount available, including coverage for acts of terrorism. In addition, the Price-Anderson Act provides an additional $ i 110 million of coverage. If a nuclear liability loss occurs at SONGS and exceeds the $ i 450 million insurance limit, this additional coverage would be available to provide a total of $ i 560 million in coverage limits per incident.

As a result of updated coverage assessments, the SONGS owners have nuclear property damage insurance of $ i 130 million, which exceeds the minimum federal requirements of $ i 50 million. This insurance coverage is provided through NEIL. The NEIL policies have specific exclusions and limitations that can result in reduced or eliminated coverage. Insured members as a group are subject to retrospective premium assessments to cover losses sustained by NEIL under all issued policies. SDG&E could be assessed up to $ i 3.5 million of retrospective premiums based on overall member claims.

The nuclear property insurance program includes an industry aggregate loss limit for non-certified acts of terrorism (as defined by the Terrorism Risk Insurance Act) of $ i 3.24 billion. This is the maximum amount that will be paid to insured members who suffer losses or damages from these non-certified terrorist acts.

NOTE 11. i COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

We accrue losses for a legal proceeding when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. However, the uncertainties inherent in legal proceedings make it difficult to reasonably estimate the costs and effects of resolving these matters. Accordingly, actual costs incurred may differ materially from amounts accrued, may exceed applicable insurance coverage and could materially adversely affect our business, cash flows, results of operations, financial condition and prospects. Unless otherwise indicated, we are unable to estimate reasonably possible losses in excess of any amounts accrued.

At March 31, 2020, loss contingency accruals for legal matters, including associated legal fees, that are probable and estimable were $ i 442 million for Sempra Energy Consolidated, including $ i 297 million for SoCalGas. Amounts for Sempra Energy Consolidated and SoCalGas include $ i 286 million for matters related to the Aliso Canyon natural gas storage facility gas leak, which we discuss below.

SoCalGas

Aliso Canyon Natural Gas Storage Facility Gas Leak

From October 23, 2015 through February 11, 2016, SoCalGas experienced a natural gas leak from one of the injection-and-withdrawal wells, SS25, at its Aliso Canyon natural gas storage facility in Los Angeles County. As described below in “Civil and Criminal Litigation” and “Regulatory Proceedings,” numerous lawsuits, investigations and regulatory proceedings have been

initiated in response to the Leak, resulting in significant costs, which together with other Leak-related costs are discussed below in “Cost Estimates, Accounting Impact and Insurance.”

Civil and Criminal Litigation. As of April 29, 2020, i 393 lawsuits, including approximately i 36,000 plaintiffs, are pending against SoCalGas related to the Leak, some of which have also named Sempra Energy. All these cases, other than a matter brought by the Los Angeles County District Attorney and the federal securities class action discussed below, are coordinated before a single court in the LA Superior Court for pretrial management.

In November 2017, in the coordinated proceeding, individuals and business entities filed a Third Amended Consolidated Master Case Complaint for Individual Actions, through which their separate lawsuits will be managed for pretrial purposes. The consolidated complaint asserts causes of action for negligence, negligence per se, private and public nuisance (continuing and permanent), trespass, inverse condemnation, strict liability, negligent and intentional infliction of emotional distress, fraudulent concealment, loss of consortium, wrongful death and violations of Proposition 65 against SoCalGas, with certain causes of action also naming Sempra Energy. The consolidated complaint seeks compensatory and punitive damages for personal injuries, lost wages and/or lost profits, property damage and diminution in property value, injunctive relief, costs of future medical monitoring, civil penalties (including penalties associated with Proposition 65 claims alleging violation of requirements for warning about certain chemical exposures), and attorneys’ fees. SoCalGas is engaged in settlement discussions in connection with these actions and has recorded a related accrual of $ i 277 million, inclusive of estimated legal costs, in Reserve for Aliso Canyon Costs on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets. The initial trial previously scheduled for June 2020 for a small number of randomly selected individual plaintiffs has been postponed, with a new trial date to be determined by the court.

In January 2017, i two consolidated class action complaints were filed against SoCalGas and Sempra Energy, i one on behalf of a putative class of persons and businesses who own or lease real property within a five-mile radius of the well (the Property Class Action), and a second on behalf of a putative class of all persons and entities conducting business within five miles of the facility (the Business Class Action). The Property Class Action asserts claims for strict liability for ultra-hazardous activities, negligence, negligence per se, violation of the California Unfair Competition Law, trespass, permanent and continuing public and private nuisance, and inverse condemnation. The Business Class Action asserts a claim for violation of the California Unfair Competition Law. Both complaints seek compensatory, statutory and punitive damages, injunctive relief and attorneys’ fees.

Three property developers filed complaints in July and October of 2018 against SoCalGas and Sempra Energy alleging causes of action for strict liability, negligence per se, negligence, continuing nuisance, permanent nuisance and violation of the California Unfair Competition Law, as well as claims for negligence against certain directors of SoCalGas. The complaints seek compensatory, statutory and punitive damages, injunctive relief and attorneys’ fees.

In October 2018 and January 2019, complaints were filed on behalf of i 51 firefighters stationed near the Aliso Canyon natural gas storage facility who allege they were injured by exposure to chemicals released during the Leak. The complaints against SoCalGas and Sempra Energy assert causes of actions for negligence, negligence per se, private and public nuisance (continuing and permanent), trespass, inverse condemnation, strict liability, negligent and intentional infliction of emotional distress, fraudulent concealment and loss of consortium. The complaints seek compensatory and punitive damages for personal injuries, lost wages and/or lost profits, property damage and diminution in property value, and attorney’s fees.

i Four shareholder derivative actions are also pending alleging breach of fiduciary duties against certain officers and certain directors of Sempra Energy and/or SoCalGas, all of which were joined in an Amended Consolidated Shareholder Derivative Complaint filed in February 2020. A fifth shareholder derivative action filed in March 2017 was dismissed in November 2019 on the grounds that the plaintiff failed to adequately plead his claims, but the court gave leave for him to amend the complaint to cure the defects.

In addition, a federal securities class action alleging violation of the federal securities laws was filed against Sempra Energy and certain of its officers in July 2017 in the U.S. District Court for the Southern District of California. In March 2018, the court dismissed the action with prejudice. The plaintiffs have appealed the dismissal.

In February 2019, the LA Superior Court approved a settlement between SoCalGas and the Los Angeles City Attorney’s Office, the County of Los Angeles, the California Office of the Attorney General and CARB of i three actions filed by these entities under which SoCalGas made payments and agreed to provide funding for environmental projects totaling $ i 120 million, including $ i 21 million in civil penalties, as well as other safety-related commitments.

In September 2016, SoCalGas settled a misdemeanor criminal complaint filed in February 2016 by the Los Angeles County District Attorney’s Office against SoCalGas, pleading no contest to a charge that it failed to provide timely notice of the Leak pursuant to California Health and Safety Code section 25510(a), Los Angeles County Code section 12.56.030, and Title 19 California Code of Regulations section 2703(a). In November 2016, the LA Superior Court approved the settlement and entered judgment on the notice charge. Under the settlement, SoCalGas paid a $ i 75,000 fine, $ i 233,500 in penalties, and $ i 246,673 to

reimburse costs incurred by Los Angeles County Fire Department’s Health and Hazardous Materials Division, as well as completed operational commitments estimated to cost approximately $ i 6 million. Certain individuals who objected to the settlement petitioned the Court of Appeal to vacate the judgment, contending they should be granted restitution. In July 2019, the Court of Appeal denied the petition in part, but remanded the matter to the trial court to give the petitioners an opportunity to prove damages stemming from only the three-day delay in reporting the Leak. Following the hearing, the trial court denied restitution. The alleged victims have asked the trial court to reconsider its order.

Regulatory Proceedings. In January 2016, CalGEM and the CPUC directed an independent analysis of the technical root cause of the Leak to be conducted by Blade. In May 2019, Blade released its report, which concluded that the Leak was caused by a failure of the production casing of the well due to corrosion and that attempts to stop the Leak were not effectively conducted, but did not identify any instances of non-compliance by SoCalGas. Blade concluded that SoCalGas’ compliance activities conducted prior to the Leak did not find indications of a casing integrity issue. Blade opined, however, that there were measures, none of which were required by gas storage regulations at the time, that could have been taken to aid in the early identification of corrosion and that, in Blade’s opinion, would have prevented or mitigated the Leak. The report also identified well safety practices and regulations that have since been adopted by CalGEM and implemented by SoCalGas, which address most of the root cause of the Leak identified during Blade’s investigation.

In June 2019, the CPUC opened an OII to consider penalties against SoCalGas for the Leak, which it later bifurcated into two phases. The first phase will consider whether SoCalGas violated California Public Utilities Code Section 451 or other laws, CPUC orders or decisions, rules or requirements, whether SoCalGas engaged in unreasonable and/or imprudent practices with respect to its operation and maintenance of the Aliso Canyon natural gas storage facility or its related record-keeping practices, whether SoCalGas cooperated sufficiently with the Safety Enforcement Division (SED) and Blade during the pre-formal investigation, and whether any of the mitigation proposed by Blade should be implemented to the extent not already done. In November 2019, SED, based largely on the Blade report, alleged a total of 330 violations, asserting that SoCalGas violated California Public Utilities Code Section 451 and failed to cooperate in the investigation and to keep proper records. Hearings in the first phase of the OII have been postponed until further notice. The second phase will consider whether SoCalGas should be sanctioned for the Leak and what penalties, if any, should be imposed for any violations proven in the first phase, as well as determine the amounts of various costs incurred by SoCalGas and other parties in connection with the Leak and the ratemaking treatment or other disposition of such costs. In a January 2016 emergency proclamation, the Governor ordered the CPUC to ensure that SoCalGas covers costs related to the Leak and its response, while protecting ratepayers. In addition, CalGEM is investigating the Leak.

In February 2017, the CPUC opened a proceeding pursuant to SB 380 to determine the feasibility of minimizing or eliminating the use of the Aliso Canyon natural gas storage facility while still maintaining energy and electric reliability for the region, but excluding issues with respect to air quality, public health, causation, culpability or cost responsibility regarding the Leak. The first phase of the proceeding established a framework for the hydraulic, production cost and economic modeling assumptions for the potential reduction in usage or elimination of the Aliso Canyon natural gas storage facility. Phase 2 of the proceeding, which will evaluate the impacts of reducing or eliminating the Aliso Canyon natural gas storage facility using the established framework and models, began in the first quarter of 2019. The CPUC has indicated that it expects to issue its report for Phase 2 in 2020. In December 2019, the CPUC added a third phase of the proceeding to consider alternative means for meeting or avoiding the demand for the facility’s services if it were eliminated in either 2027 or 2045.

If the Aliso Canyon natural gas storage facility were to be permanently closed, or if future cash flows from its operation were otherwise insufficient to recover its carrying value, it could result in an impairment of the facility and significantly higher than expected operating costs and/or additional capital expenditures, and natural gas reliability and electric generation could be jeopardized. At March 31, 2020, the Aliso Canyon natural gas storage facility had a net book value of $ i 771 million. Any significant impairment of this asset, or higher operating costs and additional capital expenditures incurred by SoCalGas that may not be recoverable in customer rates, could have a material adverse effect on SoCalGas’ and Sempra Energy’s results of operations, financial condition and cash flows.

Cost Estimates, Accounting Impact and Insurance. SoCalGas has incurred significant costs for temporary relocation of community residents; to control the well and stop the Leak; to mitigate the natural gas released; to purchase natural gas to replace what was lost through the Leak; to defend against and, in certain cases, settle, civil and criminal litigation arising from the Leak; to pay the costs of the government-ordered response to the Leak, including the costs for Blade to conduct the root cause analysis described above; to respond to various government and agency investigations regarding the Leak; and to comply with increased regulation imposed as a result of the Leak. At March 31, 2020, SoCalGas estimates the costs related to the Leak are $ i 1,408 million (the cost estimate), which includes the $ i 1,277 million of costs recovered or probable of recovery from insurance. This cost estimate may increase significantly as more information becomes available. A substantial portion of the cost estimate has been

paid, and $ i 284 million is accrued as Reserve for Aliso Canyon Costs and $ i 6 million is accrued in Deferred Credits and Other as of March 31, 2020 on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets.

Except for the amounts paid or estimated to settle certain actions, as described in “Civil and Criminal Litigation” above, the cost estimate does not include all litigation or regulatory costs to the extent it is not possible to predict at this time the outcome of these actions or reasonably estimate the costs to defend or resolve the actions or the amount of damages, restitution, or civil, administrative or criminal fines, sanctions, penalties or other costs or remedies that may be imposed or incurred. The cost estimate also does not include certain other costs incurred by Sempra Energy associated with defending against shareholder derivative lawsuits and other potential costs that we currently do not anticipate incurring or that we cannot reasonably estimate. These costs not included in the cost estimate could be significant and could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.

We have received insurance payments for many of the costs included in the cost estimate, including temporary relocation and associated processing costs, control-of-well expenses, costs of the government-ordered response to the Leak, certain legal costs and lost gas. We intend to pursue the full extent of our insurance coverage for the costs we have incurred. Other than directors’ and officers’ liability insurance, after taking into consideration the additional accrual related to litigation matters described above, we have effectively exhausted all of our insurance in this matter, except as to certain defense costs we may incur in the future, including those related to the shareholder derivative lawsuits described above. We continue to pursue other sources of insurance coverage for costs related to this matter, but we may not be successful in obtaining additional insurance recovery for any of these costs. If we are not able to secure additional insurance recovery for all or a substantial portion of these costs, if any costs we have recorded as an insurance receivable are not collected, if there are delays in receiving insurance recoveries, or if the insurance recoveries are subject to income taxes while the associated costs are not tax deductible, such amounts, which could be significant, could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.

As of March 31, 2020, we recorded the expected recovery of the cost estimate related to the Leak of $ i 511 million as Insurance Receivable for Aliso Canyon Costs on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets. This amount is exclusive of insurance retentions and $ i 766 million of insurance proceeds we received through March 31, 2020. If we were to conclude that this receivable or a portion of it is no longer probable of recovery from insurers, some or all of this receivable would be charged against earnings, which could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.

Sempra Mexico

Energía Costa Azul

IEnova has been engaged in a long-running land dispute relating to property adjacent to its ECA LNG Regasification facility near Ensenada, Mexico. A claimant to the adjacent property filed complaints in the federal Agrarian Court challenging the refusal of SEDATU in 2006 to issue a title to him for the disputed property. In November 2013, the federal Agrarian Court ordered that SEDATU issue the requested title and cause it to be registered. Both SEDATU and IEnova challenged the ruling, due to lack of notification of the underlying process. In May 2019, a federal court in Mexico reversed the ruling and ordered a retrial. IEnova expects additional proceedings regarding the claims.

Several administrative challenges are pending in Mexico before the Mexican environmental protection agency and the Federal Tax and Administrative Courts seeking revocation of the environmental impact authorization issued to the ECA LNG Regasification facility in 2003. These cases generally allege that the conditions and mitigation measures in the environmental impact authorization are inadequate and challenge findings that the activities of the terminal are consistent with regional development guidelines.

Additionally, in August 2018, a claimant filed a challenge in the federal district court in Ensenada, Baja California in relation to the environmental and social impact permits issued to ECA LNG JV for the potential liquefaction-export project in September 2017 and December 2017, respectively, to allow natural gas liquefaction activities at the ECA LNG Regasification facility. The court issued a provisional injunction in September 2018 and maintained that provisional injunction at an April 2019 hearing. In December 2018, the relevant Mexican regulators approved modifications to the environmental permit that facilitate the development of the proposed natural gas liquefaction facility by ECA LNG JV in two phases. In May 2019, the court canceled the provisional injunction. The claimant appealed the court’s decision but was not successful. The claimant’s underlying challenge to the permits remain pending.

Cases involving two parcels of real property have been filed against the ECA LNG Regasification facility. In one case, filed in the federal Agrarian Court in 2006, the plaintiffs seek to annul the recorded property title for a parcel on which the ECA LNG Regasification facility is situated and to obtain possession of a different parcel that allegedly sits in the same place. Another civil

complaint filed in the state court was served in April 2012 seeking to invalidate the contract by which the ECA LNG Regasification facility purchased another of the parcels, on the grounds the purchase price was unfair; the plaintiff filed a second complaint in 2013 in the federal Agrarian Court seeking an order that SEDATU issue title to her. In January 2016, the federal Agrarian Court ruled against the plaintiff. The plaintiff appealed the ruling and a partial retrial was ordered. We are awaiting a new decision from the Agrarian Court. In May 2018, the state court dismissed the civil complaint, and the plaintiff appealed but was not successful; however, the plaintiff can file a final federal appeal. IEnova expects further proceedings on these two matters.

An unfavorable final decision on these property disputes or permit challenges could materially and adversely affect our existing natural gas gasification operations and our planned natural gas liquefaction projects currently in development at the ECA LNG Regasification facility and potential ECA LNG JV liquefaction-export project.

Guaymas-El Oro Segment of the Sonora Pipeline

IEnova’s Sonora natural gas pipeline consists of two segments, the Sasabe-Puerto Libertad-Guaymas segment, and the Guaymas-El Oro segment. Each segment has its own service agreement with the CFE. In 2015, the Yaqui tribe, with the exception of some members living in the Bácum community, granted its consent and a right-of-way easement agreement for the construction of the Guaymas-El Oro segment of the Sonora natural gas pipeline that crosses its territory. Representatives of the Bácum community filed a legal challenge in Mexican federal court demanding the right to withhold consent for the project, the stoppage of work in the Yaqui territory and damages. In 2016, the judge granted a suspension order that prohibited the construction of such segment through the Bácum community territory. Because the pipeline does not pass through the Bácum community, IEnova did not believe the 2016 suspension order prohibited construction in the remainder of the Yaqui territory. Construction of the Guaymas-El Oro segment was completed, and commercial operations began in May 2017.

Following the start of commercial operations of the Guaymas-El Oro segment, IEnova reported damage to the Guaymas-El Oro segment of the Sonora pipeline in the Yaqui territory that has made that section inoperable since August 23, 2017 and, as a result, IEnova declared a force majeure event. In 2017, an appellate court ruled that the scope of the 2016 suspension order encompassed the wider Yaqui territory, which has prevented IEnova from making repairs to put the pipeline back in service. In July 2019, a federal district court ruled in favor of IEnova and held that the Yaqui tribe was properly consulted and that consent from the Yaqui tribe was properly received. Representatives of the Bácum community appealed this decision, causing the suspension order preventing IEnova from repairing the damage to the Guaymas-El Oro segment of the Sonora pipeline in the Yaqui territory to remain in place until the appeals process is exhausted.

IEnova exercised its rights under the contract, which included seeking force majeure payments for the two-year period such force majeure payments were required to be made, which ended on August 22, 2019.

In July 2019, the CFE filed a request for arbitration generally to nullify certain contract terms that provide for fixed capacity payments in instances of force majeure and made a demand for substantial damages in connection with the force majeure event. In September 2019, the arbitration process ended when IEnova and the CFE reached an agreement to restart natural gas transportation service on the earlier of completion of repair of the damaged pipeline or January 15, 2020, and to modify the tariff structure and extend the term of the contract by 10 years. In January 2020, IEnova and the CFE agreed to extend the January 15, 2020 new service start date to May 15, 2020. Under the revised agreement, the CFE will resume making payments only when the damaged section of the Guaymas-El Oro segment of the Sonora pipeline is repaired. If the pipeline is not repaired by May 15, 2020 and the parties do not agree on a new service start date, IEnova retains the right to terminate the contract and seek to recover its reasonable and documented costs and lost profits. The parties are currently discussing a new service start date in the event the pipeline is not repaired by May 15, 2020, but there can be no assurance that the parties will have agreed on a new service start date if the pipeline is not repaired by that date.

If IEnova is unable to make such repairs and resume operations in the Guaymas-El Oro segment of the Sonora pipeline within this time frame or if IEnova terminates the contract and is unable to obtain recovery, there may be a material adverse impact on Sempra Energy’s results of operations and cash flows and our ability to recover the carrying value of our investment. The Sasabe-Puerto Libertad-Guaymas segment of the Sonora pipeline remains in full operation and is not impacted by these developments.

Other Litigation

Sempra Energy holds an equity method investment in RBS Sempra Commodities, a limited liability partnership in the process of being liquidated. RBS, now NatWest Markets plc, our partner in the JV, paid an assessment of £ i 86 million (approximately $ i 138 million in U.S. dollars) in October 2014 to HMRC for denied VAT refund claims filed in connection with the purchase of carbon credit allowances by RBS SEE, a subsidiary of RBS Sempra Commodities. RBS SEE has since been sold to J.P. Morgan Chase & Co. and later to Mercuria Energy Group, Ltd. HMRC asserted that RBS was not entitled to reduce its VAT liability by VAT paid on certain carbon credit purchases during 2009 because RBS knew or should have known that certain vendors in the trading chain

did not remit their own VAT to HMRC. After paying the assessment, RBS filed a Notice of Appeal of the assessment with the First-Tier Tribunal. Trial on the matter, which could include the assessment of a penalty of up to 100% of the claimed amount, has been scheduled between November 2, 2020 and December 11, 2020.

In 2015, liquidators filed a claim in the High Court of Justice against RBS and Mercuria Energy Europe Trading Limited (the Defendants) on behalf of 10 companies (the Liquidating Companies) that engaged in carbon credit trading via chains that included a company that traded directly with RBS SEE. The claim alleges that the Defendants’ participation in the purchase and sale of carbon credits resulted in the Liquidating Companies’ carbon credit trading transactions creating a VAT liability they were unable to pay, and that the Defendants are liable to provide for equitable compensation due to dishonest assistance and for compensation under the U.K. Insolvency Act of 1986. Trial on the matter was held in June and July of 2018. On March 10, 2020, the High Court of Justice rendered its judgment mostly in favor of the Liquidating Companies and awarded damages of approximately £ i 45 million (approximately $ i 56 million in U.S. dollars at March 31, 2020), plus costs and interest, which will be determined after further proceedings.

Although the final outcome of both the High Court of Justice case and First-Tier Tribunal case remains uncertain, we recorded $ i 100 million in equity losses from our investment in RBS Sempra Commodities in Equity Earnings on the Sempra Energy Condensed Consolidated Statement of Operations in the three months ended March 31, 2020, which represents an estimate of our obligations to settle pending tax matters and related legal costs.

Certain EFH subsidiaries that we acquired as part of the merger of EFH with an indirect subsidiary of Sempra Energy are defendants in personal injury lawsuits brought in state courts throughout the U.S. As of April 29, 2020, i 275 such lawsuits are pending with i 182 such lawsuits having been served. These cases allege illness or death as a result of exposure to asbestos in power plants designed and/or built by companies whose assets were purchased by predecessor entities to the EFH subsidiaries, and generally assert claims for product defects, negligence, strict liability and wrongful death. They seek compensatory and punitive damages. Additionally, in connection with the EFH bankruptcy proceeding, approximately i 28,000 proofs of claim were filed on behalf of persons who allege exposure to asbestos under similar circumstances and assert the right to file such lawsuits in the future. We anticipate additional lawsuits will be filed. None of these claims or lawsuits were discharged in the EFH bankruptcy proceeding. The costs to defend or resolve these lawsuits and the amount of damages that may be imposed or incurred could have a material adverse effect on Sempra Energy’s cash flows, financial condition and results of operations.

We are also defendants in ordinary routine litigation incidental to our businesses, including personal injury, employment litigation, product liability, property damage and other claims. Juries have demonstrated an increasing willingness to grant large awards, including punitive damages, in these types of cases.

LEASES

We discuss leases further in Note 16 of the Notes to Consolidated Financial Statements in the Annual Report.

A lease exists when a contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. We determine if an arrangement is or contains a lease at inception of the contract.

Some of our lease agreements contain nonlease components, which represent activities that transfer a separate good or service to the lessee. As the lessee for both operating and finance leases, we have elected to combine lease and nonlease components as a single lease component for real estate, fleet vehicles, power generating facilities, and pipelines, whereby fixed or in-substance fixed payments allocable to the nonlease component are accounted for as part of the related lease liability and ROU asset. As the lessor, we have elected to combine lease and nonlease components as a single lease component for real estate and power generating facilities if the timing and pattern of transfer of the lease and nonlease components are the same and the lease component would be classified as an operating lease if accounted for separately.

Lessee Accounting

We have operating and finance leases for real and personal property (including office space, land, fleet vehicles, machinery and equipment, warehouses and other operational facilities) and PPAs with renewable energy and peaker plant facilities.

We provide supplemental noncash information for operating and finance leases below.



SUPPLEMENTAL NONCASH INFORMATION
(Dollars in millions)
	Three months ended March 31, 2020
	Sempra Energy Consolidated		SDG&E		SoCalGas
Increase in operating lease obligations for right-of-use assets	$	i 19	$	i —	$	i —
Increase in finance lease obligations for investment in PP&E	i 20		i 4		i 16
	Three months ended March 31, 2019
	Sempra Energy Consolidated		SDG&E		SoCalGas
Increase in operating lease obligations for right-of-use assets	$	i 552	$	i 142	$	i 117
Increase in finance lease obligations for investment in PP&E	i 7		i 4		i 3

Leases that Have Not Yet Commenced

SDG&E and SoCalGas have lease agreements for future acquisitions of fleet vehicles with an aggregate maximum lease limit of $ i 167 million. SDG&E and SoCalGas have utilized $ i 62 million and $ i 80 million, respectively, of these maximum lease limits as of March 31, 2020.

Lessor Accounting

Sempra Mexico is a lessor for certain of its natural gas and ethane pipelines, compressor stations and LPG storage facilities.

Generally, we recognize operating lease income on a straight-line basis over the lease term and evaluate the underlying asset for impairment. Certain of our leases contain rate adjustments or are based on foreign currency exchange rates that may result in lease payments received that vary from one period to the next.

We provide information below for leases for which we are the lessor.



LESSOR INFORMATION ON THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – SEMPRA ENERGY
(Dollars in millions)
	Three months ended March 31,
	2020		2019
Fixed lease payments	$	i 50	$	i 50
Variable lease payments	i —		i 4
Total revenues from operating leases⁽¹⁾	$	i 50	$	i 54

Depreciation expense	$	i 10	$	i 9


⁽¹⁾	Included in Revenues: Energy-Related Businesses on the Condensed Consolidated Statements of Operations.

OTHER CONTRACTUAL COMMITMENTS

We discuss below significant changes in the first three months of 2020 to contractual commitments discussed in Notes 1 and 16 of the Notes to Consolidated Financial Statements in the Annual Report.

Natural Gas Contracts

Sempra LNG’s natural gas storage and transportation commitments have increased by $ i 136 million since December 31, 2019, primarily from entering into new storage and transportation contracts in the first three months of 2020. We expect future payments to decrease by $ i 24 million in 2020, and increase by $ i 23 million in 2021, $ i 21 million in 2022, $ i 19 million in 2023, $ i 19 million in 2024 and $ i 78 million thereafter compared to December 31, 2019.

LNG Purchase Agreement

Sempra LNG has a sale and purchase agreement for the supply of LNG to the ECA LNG Regasification facility. The commitment amount is calculated using a predetermined formula based on estimated forward prices of the index applicable from 2020 to 2029. Although this agreement specifies a number of cargoes to be delivered, under its terms, the customer may divert certain cargoes,

which would reduce amounts paid under the agreement by Sempra LNG. At March 31, 2020, we expect the commitment amount to decrease by $ i 135 million in 2020, $ i 26 million in 2021, $ i 35 million in 2022, $ i 36 million in 2023, $ i 43 million in 2024 and $ i 174 million thereafter (through contract termination in 2029) compared to December 31, 2019, reflecting changes in estimated forward prices since December 31, 2019 and actual transactions for the first three months of 2020. These LNG commitment amounts are based on the assumption that all LNG cargoes, less those already confirmed to be diverted, under the agreement are delivered. Actual LNG purchases in the current and prior years have been significantly lower than the maximum amount provided under the agreement due to the customer electing to divert cargoes as allowed by the agreement.

NOTE 12. i SEGMENT INFORMATION

We have i five separately managed reportable segments, as follows:


▪	SDG&E provides electric service to San Diego and southern Orange counties and natural gas service to San Diego County.


▪	SoCalGas is a natural gas distribution utility, serving customers throughout most of Southern California and part of central California.

▪

Sempra Texas Utilities holds our investment in Oncor Holdings, which owns an i 80.25% interest in Oncor, a regulated electric transmission and distribution utility serving customers in the north-central, eastern, and western and panhandle regions of Texas; our indirect, i 50% interest in Sharyland Holdings, which owns Sharyland Utilities, a regulated electric transmission and distribution utility serving customers near the Texas-Mexico border; and our indirect, i 1% interest in TTHC, which owns an indirect i 19.75% interest in Oncor. As we discuss in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report, we acquired our investment in Oncor Holdings in March 2018, Sharyland Holdings in May 2019, and TTHC in February 2020.


▪	Sempra Mexico develops, owns and operates, or holds interests in, natural gas, electric, LNG, LPG, ethane and liquid fuels infrastructure, and has marketing operations for the purchase of LNG and the purchase and sale of natural gas in Mexico.


▪	Sempra LNG develops projects for the export of LNG, holds an interest in a facility for the export of LNG, owns and operates natural gas pipelines, and buys, sells and transports natural gas through its marketing operations, all within the U.S. and Mexico. In February 2019, we completed the sale of our natural gas storage assets at Mississippi Hub and Bay Gas.

In April 2019, Sempra Renewables completed the sale of its remaining wind assets and investments. Upon completion of this sale, remaining nominal business activities at Sempra Renewables were subsumed into Parent and other and the Sempra Renewables segment ceased to exist. The tables below include amounts from Sempra Renewables up until cessation of the segment.

As we discuss in Note 5, the financial information related to our businesses that constituted the Sempra South American Utilities segment has been classified as discontinued operations for all periods presented. The information in the tables below excludes amounts from discontinued operations unless otherwise noted.

We evaluate each segment’s performance based on its contribution to Sempra Energy’s reported earnings and cash flows. The California Utilities operate in essentially separate service territories, under separate regulatory frameworks and rate structures set by the CPUC and the FERC. We describe the accounting policies of all of our segments in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

The cost of common services shared by the business segments is assigned directly or allocated based on various cost factors, depending on the nature of the service provided. Interest income and expense is recorded on intercompany loans. The loan balances and related interest are eliminated in consolidation.

/ i

The following tables show selected information by segment from our Condensed Consolidated Statements of Operations and Condensed Consolidated Balance Sheets. Amounts labeled as “All other” in the following tables consist primarily of activities of parent organizations and include certain nominal amounts from our South American businesses that did not qualify for treatment as discontinued operations.



SEGMENT INFORMATION
(Dollars in millions)
	Three months ended March 31,
	2020			2019
REVENUES
SDG&E	$	i 1,269		$	i 1,145
SoCalGas	i 1,395			i 1,361
Sempra Mexico	i 309			i 383
Sempra Renewables	i —			i 7
Sempra LNG	i 123			i 141
All other	i 1			i —
Adjustments and eliminations	( i 1		)	i —
Intersegment revenues⁽¹⁾	( i 67		)	( i 139		)
Total	$	i 3,029		$	i 2,898
INTEREST EXPENSE
SDG&E	$	i 101		$	i 103
SoCalGas	i 40			i 34
Sempra Mexico	i 32			i 30
Sempra Renewables	i —			i 3
Sempra LNG	i 16			i 4
All other	i 109			i 109
Intercompany eliminations	( i 18		)	( i 23		)
Total	$	i 280		$	i 260
INTEREST INCOME
SDG&E	$	i 1		$	i 1
SoCalGas	i 1			i —
Sempra Mexico	i 18			i 19
Sempra Renewables	i —			i 10
Sempra LNG	i 22			i 14
All other	i —			i 1
Intercompany eliminations	( i 15		)	( i 24		)
Total	$	i 27		$	i 21
DEPRECIATION AND AMORTIZATION
SDG&E	$	i 201		$	i 186
SoCalGas	i 159			i 147
Sempra Mexico	i 47			i 44
Sempra LNG	i 2			i 2
All other	i 3			i 4
Total	$	i 412		$	i 383
INCOME TAX EXPENSE (BENEFIT)
SDG&E	$	i 58		$	i 5
SoCalGas	i 52			i 19
Sempra Mexico	( i 307		)	i 72
Sempra Renewables	i —			( i 10		)
Sempra LNG	i 23			i 4
All other	( i 33		)	( i 48		)
Total	$	( i 207	)	$	i 42
EQUITY EARNINGS (LOSSES)
Equity earnings (losses), before income tax:
Sempra Renewables	$	i —		$	i 3
Sempra LNG	i 57			i 2
All other	( i 100		)	i —
	( i 43		)	i 5
Equity earnings, net of income tax:
Sempra Texas Utilities	i 106			i 94
Sempra Mexico	i 200			i 2
	i 306			i 96
Total	$	i 263		$	i 101



SEGMENT INFORMATION (CONTINUED)
(Dollars in millions)
	Three months ended March 31,
	2020			2019
EARNINGS (LOSSES) ATTRIBUTABLE TO COMMON SHARES
SDG&E	$	i 262		$	i 176
SoCalGas	i 303			i 264
Sempra Texas Utilities	i 105			i 94
Sempra Mexico	i 191			i 57
Sempra Renewables	i —			i 13
Sempra LNG	i 75			i 5
Discontinued operations	i 72			( i 51		)
All other	( i 248		)	( i 117		)
Total	$	i 760		$	i 441
EXPENDITURES FOR PROPERTY, PLANT & EQUIPMENT
SDG&E	$	i 402		$	i 356
SoCalGas	i 388			i 324
Sempra Mexico	i 170			i 85
Sempra LNG	i 47			i 18
All other	i 3			i —
Total	$	i 1,010		$	i 783

	March 31, 2020			December 31, 2019
ASSETS
SDG&E	$	i 20,784		$	i 20,560
SoCalGas	i 17,610			i 17,077
Sempra Texas Utilities	i 11,741			i 11,619
Sempra Mexico	i 10,627			i 9,938
Sempra LNG	i 3,919			i 3,901
Discontinued operations	i 3,930			i 3,958
All other	i 1,826			i 749
Intersegment receivables	( i 2,144		)	( i 2,137		)
Total	$	i 68,293		$	i 65,665
EQUITY METHOD AND OTHER INVESTMENTS
Sempra Texas Utilities	$	i 11,735		$	i 11,619
Sempra Mexico	i 914			i 741
Sempra LNG	i 1,184			i 1,256
All other	i 1			i 6
Total	$	i 13,834		$	i 13,622


⁽¹⁾	Revenues for reportable segments include intersegment revenues of $ i 1 million, $ i 18 million, $ i 29 million and $ i 19 million for the three months ended March 31, 2020 and $ i 1 million, $ i 17 million, $ i 28 million and $ i 93 million for the three months ended March 31, 2019 for SDG&E, SoCalGas, Sempra Mexico and Sempra LNG, respectively.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with the Condensed Consolidated Financial Statements and the Notes thereto and “Item 1A. Risk Factors” contained in this report, and the Consolidated Financial Statements and the Notes thereto, “Item 7. MD&A” and “Item 1A. Risk Factors” contained in the Annual Report.

OVERVIEW

Sempra Energy is a California-based energy-services holding company whose businesses invest in, develop and operate energy infrastructure, and provide electric and gas services to customers in North America. As we discuss in Note 12 of the Notes to Condensed Consolidated Financial Statements, our businesses consist of five separately managed reportable segments.

In January 2019, our board of directors approved a plan to sell our South American businesses, which were previously included in our Sempra South American Utilities segment. Our South American businesses and certain activities associated with those businesses have been presented as discontinued operations for all periods presented. Nominal activities that are not classified as discontinued operations have been subsumed into Parent and other. Our discussions below exclude discontinued operations, unless otherwise noted.

We provide additional information about discontinued operations in Note 5 of the Notes to Condensed Consolidated Financial Statements and about our reportable segments in Note 12 of the Notes to Condensed Consolidated Financial Statements in this report and in “Item 1. Business” in the Annual Report.

This report includes information for the following separate registrants:


▪	Sempra Energy and its consolidated entities


▪	SDG&E and its consolidated VIE (until deconsolidation of Otay Mesa VIE in August 2019)


▪	SoCalGas

References to “we,” “us,” “our” and “Sempra Energy Consolidated” are to Sempra Energy and its consolidated entities, collectively, unless otherwise indicated by the context. We refer to SDG&E and SoCalGas collectively as the California Utilities, which do not include our Texas utilities or the utility in our Sempra Mexico segment. It also does not include utilities within our South American businesses that have been presented as discontinued operations. All references in this MD&A to our reportable segments are not intended to refer to any legal entity with the same or similar name.

Throughout this report, we refer to the following as Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements when discussed together or collectively:


▪	the Condensed Consolidated Financial Statements and related Notes of Sempra Energy and its subsidiaries and VIEs;


▪	the Condensed Consolidated Financial Statements and related Notes of SDG&E and its VIE (until deconsolidation of Otay Mesa VIE in August 2019); and


▪	the Condensed Financial Statements and related Notes of SoCalGas.

RESULTS OF OPERATIONS

We discuss the following in Results of Operations:


▪	Overall results of operations of Sempra Energy


▪	Segment results


▪	Significant changes in revenues, costs and earnings


▪	Impact of foreign currency and inflation rates on our results of operations

OVERALL RESULTS OF OPERATIONS OF SEMPRA ENERGY

In the three months ended March 31, 2020, we reported earnings of $760 million and diluted EPS of $2.53 compared to earnings of $441 million and diluted EPS of $1.59 for the same period in 2019. The change in diluted EPS in the three months ended March 31, 2020 included a decrease of $(0.34) due to an increase in weighted-average common shares outstanding. Our results and diluted EPS were impacted by variances discussed in “Segment Results” below.

SEGMENT RESULTS

This section presents earnings (losses) by Sempra Energy segment, as well as Parent and other, in the three months ended March 31, 2020 and 2019, and the related discussion of the changes in segment earnings (losses) between these periods. Throughout the MD&A, our reference to earnings represents earnings attributable to common shares. Variance amounts presented are the after-tax earnings impact (based on applicable statutory tax rates), unless otherwise noted, and before NCI, where applicable.



SEMPRA ENERGY EARNINGS (LOSSES) BY SEGMENT
(Dollars in millions)
	Three months ended March 31,
	2020			2019
SDG&E	$	262		$	176
SoCalGas	303			264
Sempra Texas Utilities	105			94
Sempra Mexico	191			57
Sempra Renewables	—			13
Sempra LNG	75			5
Parent and other⁽¹⁾	(248		)	(117		)
Discontinued operations	72			(51		)
Earnings attributable to common shares	$	760		$	441


⁽¹⁾	Includes intercompany eliminations recorded in consolidation and certain corporate costs.

Due to the delay in the issuance of the CPUC’s final decision in the California Utilities’ 2019 GRC, the California Utilities recorded revenues in the first quarter of 2019 based on levels authorized for 2018 under the 2016 GRC. The 2019 GRC FD, which was issued by the CPUC in September 2019, was effective retroactively to January 1, 2019. The California Utilities’ CPUC-authorized base revenues for the first quarter of 2020 are based on the revenues authorized for the 2019 test year plus the amount authorized for attrition for 2020. Had the 2019 GRC FD been in effect in the first quarter of 2019, SDG&E’s and SoCalGas’ earnings for the first quarter of 2019 would have been higher by $36 million and $84 million, respectively. These amounts were recorded in earnings in the third quarter of 2019. We provide additional information on the 2019 GRC FD in Note 4 of the Notes to Condensed Consolidated Financial Statements in this report and in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.

SDG&E

The increase in earnings of $86 million (49%) in the three months ended March 31, 2020 was primarily due to:


▪	$65 million higher CPUC base operating margin, net of operating expenses, including $36 million lower CPUC base operating margin in 2019 due to the delay in the issuance of the 2019 GRC FD;


▪	$38 million higher electric transmission margin, including the following impacts from the March 2020 FERC-approved TO5 settlement proceeding:


◦	$18 million to conclude a rate base matter, and


◦	$9 million favorable impact from the retroactive application of the final TO5 settlement for 2019. The settlement proceeding increased SDG&E’s authorized ROE from 10.05% to 10.60%, effective June 1, 2019; and


▪	$9 million higher AFUDC equity; offset by


▪	$31 million income tax benefit in 2019 from the release of a regulatory liability established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed to be allocated to shareholders in a January 2019 decision; and


▪	$6 million amortization of Wildfire Fund asset.

SoCalGas

The increase in earnings of $39 million (15%) in the three months ended March 31, 2020 was primarily due to:


▪	$109 million higher CPUC base operating margin, net of operating expenses, including $84 million lower CPUC base operating margin in 2019 due to the delay in the issuance of the 2019 GRC FD;


▪	$21 million higher income tax benefits from flow-through items; and


▪	$8 million penalties in 2019 related to the SoCalGas billing practices OII; offset by


▪	$72 million from impacts associated with Aliso Canyon natural gas storage facility litigation; and


▪	$35 million income tax benefit in 2019 from the impact of the January 2019 CPUC decision allocating certain excess deferred income tax balances to shareholders.

Sempra Texas Utilities

The increase in earnings of $11 million (12%) in the three months ended March 31, 2020 was primarily due to higher equity earnings from Oncor Holdings in 2020, driven mainly by the impact of Oncor’s acquisition of InfraREIT, Inc. in May 2019 and higher revenues due to rate updates to reflect increases in invested transmission capital, partially offset by higher operating costs and lower consumption due to weather.

Sempra Mexico

The increase in earnings of $134 million in the three months ended March 31, 2020 was primarily due to:


▪	$253 million favorable impact from foreign currency and inflation effects net of foreign currency derivatives effects, comprised of:


◦	in 2020, $326 million favorable foreign currency and inflation effects, offset by a $91 million loss from foreign currency derivatives, and


◦	in 2019, $25 million unfavorable foreign currency and inflation effects, offset by a $7 million gain from foreign currency derivatives; and


▪	$8 million primarily due to the start of commercial operations of the Sur de Texas-Tuxpan marine pipeline at IMG JV in the third quarter of 2019; offset by


▪	$144 million earnings attributable to NCI at IEnova in 2020 compared to $28 million earnings in 2019; and


▪	$9 million lower earnings at the Guaymas-El Oro segment of the Sonora pipeline primarily from force majeure payments that ended in August 2019.

Sempra Renewables

As we discuss in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report, Sempra Renewables sold its remaining wind assets and investments in April 2019, upon which date the segment ceased to exist.

Sempra LNG

The increase in earnings of $70 million in the three months ended March 31, 2020 was primarily due to:


▪	$43 million higher equity earnings from Cameron LNG JV primarily due to Train 1 and Train 2 commencing commercial operations under their tolling agreements in August 2019 and February 2020, respectively; and


▪	$42 million higher earnings from Sempra LNG’s marketing operations primarily driven by changes in natural gas prices; offset by


▪	$5 million higher liquefaction project development costs.

Parent and Other

The increase in losses of $131 million in the three months ended March 31, 2020 was primarily due to:


▪	$100 million equity losses from our investment in RBS Sempra Commodities to settle pending tax matters and related legal costs, which we discuss in Note 11 of the Notes to Condensed Consolidated Financial Statements; and


▪	$19 million net investment losses in 2020 compared to $15 million net investment gains in 2019 on dedicated assets in support of our employee nonqualified benefit plan and deferred compensation obligations.

Discontinued Operations

Discontinued operations that were previously in our Sempra South American Utilities segment include our 100% interest in Chilquinta Energía in Chile, our 83.6% interest in Luz del Sur in Peru and our interests in two energy-services companies, Tecnored and Tecsur, which provide electric construction and infrastructure services to Chilquinta Energía and Luz del Sur, respectively, as well as third parties. Discontinued operations also include activities, mainly income taxes related to the South American businesses, that were previously included in the holding company of the South American businesses at Parent and other.

Earnings of $72 million in the three months ended March 31, 2020 compared to losses of $51 million for the same period in 2019 was primarily due to the following income tax impacts resulting from changes in outside basis differences in our South American businesses:


▪	$103 million income tax expense in 2019 related to outside basis differences existing as of the January 25, 2019 approval of our plan to sell our South American businesses; and


▪	$7 million income tax benefit in 2020 compared to $13 million income tax expense in 2019 related to changes in outside basis differences from earnings and foreign currency effects since January 25, 2019.

SIGNIFICANT CHANGES IN REVENUES, COSTS AND EARNINGS

This section contains a discussion of the differences between periods in the specific line items of the Condensed Consolidated Statements of Operations for Sempra Energy, SDG&E and SoCalGas.

Utilities Revenues

Our utilities revenues include natural gas revenues at our California Utilities and Sempra Mexico’s Ecogas and electric revenues at SDG&E. Intercompany revenues included in the separate revenues of each utility are eliminated in the Sempra Energy Condensed Consolidated Statements of Operations.

SoCalGas and SDG&E currently operate under a regulatory framework that permits:

▪

The cost of natural gas purchased for core customers (primarily residential and small commercial and industrial customers) to be passed through to customers in rates substantially as incurred. However, SoCalGas’ GCIM provides SoCalGas the opportunity to share in the savings and/or costs from buying natural gas for its core customers at prices below or above monthly market-based benchmarks. This mechanism permits full recovery of costs incurred when average purchase costs are within a price range around the benchmark price. Any higher costs incurred or savings realized outside this range are shared between the core customers and SoCalGas. We provide further discussion in Note 3 of the Notes to Consolidated Financial Statements and in “Item 1. Business – Ratemaking Mechanisms” in the Annual Report.


▪	SDG&E to recover the actual cost incurred to generate or procure electricity based on annual estimates of the cost of electricity supplied to customers. The differences in cost between estimates and actual are recovered or refunded in subsequent periods through rates.


▪	The California Utilities to recover certain expenses for programs authorized by the CPUC, or “refundable programs.”

Because changes in SoCalGas’ and SDG&E’s cost of natural gas and/or electricity are recovered in rates, changes in these costs are offset in the changes in revenues, and therefore do not impact earnings. In addition to the changes in cost or market prices, natural gas or electric revenues recorded during a period are impacted by customer billing cycles causing a difference between customer billings and recorded or authorized costs. These differences are required to be balanced over time, resulting in over- and undercollected regulatory balancing accounts. We discuss balancing accounts and their effects further in Note 4 of the Notes to Condensed Consolidated Financial Statements in this report and in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.

The California Utilities’ revenues are decoupled from, or not tied to, actual sales volumes. SoCalGas recognizes annual authorized revenue for core natural gas customers using seasonal factors established in the Triennial Cost Allocation Proceeding. Accordingly, a significant portion of SoCalGas’ annual earnings are recognized in the first and fourth quarters of each year. SDG&E’s authorized revenue recognition is also impacted by seasonal factors, resulting in higher earnings in the third quarter when electric loads are typically higher than in the other three quarters of the year. We discuss this decoupling mechanism and its effects further in Note 3 of the Notes to Consolidated Financial Statements in the Annual Report.

The table below summarizes revenues and cost of sales for our consolidated utilities.



UTILITIES REVENUES AND COST OF SALES
(Dollars in millions)
	Three months ended March 31,
	2020			2019
Natural gas revenues:
SoCalGas	$	1,395		$	1,361
SDG&E	219			205
Sempra Mexico	20			27
Eliminations and adjustments	(17		)	(17		)
Total	1,617			1,576
Electric revenues:
SDG&E	1,050			940
Eliminations and adjustments	(2		)	(1		)
Total	1,048			939
Total utilities revenues	$	2,665		$	2,515
Cost of natural gas:
SoCalGas	$	278		$	455
SDG&E	60			79
Sempra Mexico	3			5
Eliminations and adjustments	(4		)	(8		)
Total	$	337		$	531
Cost of electric fuel and purchased power:
SDG&E	$	231		$	258
Eliminations and adjustments	(2		)	(2		)
Total	$	229		$	256

Natural Gas Revenues and Cost of Natural Gas

The table below summarizes the average cost of natural gas sold by the California Utilities and included in Cost of Natural Gas. The average cost of natural gas sold at each utility is impacted by market prices, as well as transportation, tariff and other charges.



CALIFORNIA UTILITIES AVERAGE COST OF NATURAL GAS
(Dollars per thousand cubic feet)
	Three months ended March 31,
	2020		2019
SoCalGas	$	2.54	$	3.85
SDG&E	3.75		4.60

In the three months ended March 31, 2020, Sempra Energy’s natural gas revenues increased by $41 million (3%) remaining at $1.6 billion primarily due to:


▪	$34 million increase at SoCalGas, which included:


◦	$181 million higher CPUC-authorized revenues, including $116 million lower revenues in 2019 due to the delay in the issuance of the 2019 GRC FD, and


◦	$36 million higher recovery of costs associated with CPUC-authorized refundable programs, which revenues are offset in O&M, offset by


◦	$177 million decrease in cost of natural gas sold, which we discuss below; and


▪	$14 million increase at SDG&E, which included:


◦	$29 million higher CPUC-authorized revenues, including $23 million lower revenues in 2019 due to the delay in the issuance of the 2019 GRC FD, offset by


◦	$19 million decrease in the cost of natural gas sold, which we discuss below.

In the three months ended March 31, 2020, our cost of natural gas decreased by $194 million (37%) to $337 million primarily due to:


▪	$177 million decrease at SoCalGas due to $143 million from lower average natural gas prices and $34 million from lower volumes driven by weather; and


▪	$19 million decrease at SDG&E due to lower average natural gas prices and lower volumes driven by weather.

Electric Revenues and Cost of Electric Fuel and Purchased Power

In the three months ended March 31, 2020, our electric revenues, substantially all of which are at SDG&E, increased by $109 million (12%) to $1.0 billion, including:


▪	$67 million increase in transmission operations, including the following impacts related to the March 2020 FERC-approved TO5 settlement proceeding:


◦	$26 million to settle a rate base matter, and


◦	$12 million favorable impact from the retroactive application of the final TO5 settlement for 2019; and


▪	$55 million higher recovery of costs associated with CPUC-authorized refundable programs, which revenues are offset in O&M; offset by


▪	$27 million lower cost of electric fuel and purchased power, which we discuss below.

Our utility cost of electric fuel and purchased power, substantially all of which is at SDG&E, decreased by $27 million (11%) to $229 million in the three months ended March 31, 2020, primarily due to a decrease in residential demand primarily from an increase in rooftop solar adoption.

Energy-Related Businesses: Revenues and Cost of Sales

The table below shows revenues and cost of sales for our energy-related businesses.



ENERGY-RELATED BUSINESSES: REVENUES AND COST OF SALES
(Dollars in millions)
	Three months ended March 31,
	2020			2019
REVENUES
Sempra Mexico	$	289		$	356
Sempra Renewables	—			7
Sempra LNG	123			141
Parent and other⁽¹⁾	(48		)	(121		)
Total revenues	$	364		$	383
COST OF SALES⁽²⁾
Sempra Mexico	$	69		$	121
Sempra LNG	39			103
Parent and other⁽¹⁾	(49		)	(116		)
Total cost of sales	$	59		$	108


⁽¹⁾	Includes eliminations of intercompany activity.


⁽²⁾	Excludes depreciation and amortization, which are presented separately on the Sempra Energy Condensed Consolidated Statements of Operations.

In the three months ended March 31, 2020, revenues from our energy-related businesses decreased by $19 million (5%) to $364 million primarily due to:


▪	$67 million decrease at Sempra Mexico primarily due to:


◦	$49 million from the marketing business primarily from lower natural gas prices and volumes,


◦	$26 million lower revenues at TdM primarily due to lower natural gas prices and volumes, and


◦	$10 million lower revenues primarily from force majeure payments that ended in August 2019 with respect to the Guaymas-El Oro segment of the Sonora pipeline, offset by


◦	$14 million increase primarily due to higher volumes at the Ventika wind power generation facilities and from renewable assets placed in service in 2019; and


▪	$18 million decrease at Sempra LNG primarily due to:


◦	$55 million lower natural gas sales to Sempra Mexico due to lower natural gas prices and volumes and from fewer LNG cargoes sold, offset by


◦	$44 million increase from natural gas marketing operations primarily due to changes in natural gas prices; offset by


▪	$73 million increase primarily from lower intercompany eliminations associated with sales between Sempra LNG and Sempra Mexico.

In the three months ended March 31, 2020, the cost of sales for our energy-related businesses decreased by $49 million (45%) to $59 million primarily due to:


▪	$64 million decrease at Sempra LNG mainly from natural gas marketing activities primarily from lower natural gas purchases; and


▪	$52 million decrease at Sempra Mexico mainly associated with lower revenues from the marketing business and TdM as a result of lower natural gas prices and volumes; offset by


▪	$67 million increase primarily from lower intercompany eliminations associated with sales between Sempra LNG and Sempra Mexico.

Operation and Maintenance

Our O&M increased by $119 million (14%) to $951 million in the three months ended March 31, 2020 primarily due to:


▪	$133 million increase at SoCalGas primarily due to:


◦	$100 million from impacts associated with Aliso Canyon natural gas storage facility litigation, and


◦	$36 million higher expenses associated with CPUC-authorized refundable programs for which costs incurred are recovered in revenue; and


▪	$24 million increase at SDG&E primarily due to:


◦	$57 million higher expenses associated with CPUC-authorized refundable programs, offset by


◦	$31 million lower non-refundable operating costs, including liability insurance premium costs for 2019 that were not balanced due to the delay in the 2019 GRC FD; offset by


▪	$36 million decrease at Parent and other primarily from lower deferred compensation expense.

Other (Expense) Income, Net

As part of our central risk management function, we enter into foreign currency derivatives to hedge Sempra Mexico parent’s exposure to movements in the Mexican peso from its controlling interest in IEnova. The gains/losses associated with these derivatives are included in Other (Expense) Income, Net, as described below, and partially mitigate the transactional effects of foreign currency and inflation included in Income Tax Benefit (Expense) for Sempra Mexico’s consolidated entities and in Equity Earnings for Sempra Mexico’s equity method investments. We also utilize foreign currency derivatives to hedge exposure to fluctuations in the Peruvian sol and Chilean peso related to the sale of our operations in Peru and Chile, respectively. We discuss policies governing our risk management in “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in the Annual Report.

Other expense, net, in the three months ended March 31, 2020 was $254 million compared to other income, net, of $82 million in the same period in 2019. The change was primarily due to:


▪	$276 million net losses in 2020 from interest rate and foreign exchange instruments and foreign currency transactions compared to net gains of $20 million for the same period in 2019 primarily due to:


◦	$149 million foreign currency losses in 2020 compared to $10 million foreign currency gains in 2019 on a Mexican peso-denominated loan to IMG JV, which is offset in Equity Earnings, and


◦	$125 million losses in 2020 compared to $10 million gains in 2019 on foreign currency derivatives as a result of fluctuation of the Mexican peso, offset by


◦	$11 million net gains in 2020 of foreign currency derivatives used to hedge exposure to fluctuations in the Peruvian sol and Chilean peso related to the sale of our operations in Peru and Chile; and


▪	$37 million investment losses in 2020 compared to $26 million investment gains in 2019 on dedicated assets in support of our executive retirement and deferred compensation plans; offset by


▪	$8 million in penalties in 2019 related to the SoCalGas billing practices OII.

Income Taxes

The table below shows the income tax expense and ETRs for Sempra Energy Consolidated, SDG&E and SoCalGas.



INCOME TAX (BENEFIT) EXPENSE AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
	Three months ended March 31,
	2020			2019
Sempra Energy Consolidated:
Income tax (benefit) expense from continuing operations	$	(207	)	$	42

Income from continuing operations before income taxes and equity earnings	$	397		$	501
Equity (losses) earnings, before income tax⁽¹⁾	(43		)	5
Pretax income	$	354		$	506

Effective income tax rate	(58		)%	8		%
SDG&E:
Income tax expense	$	58		$	5
Income before income taxes	$	320		$	182
Effective income tax rate	18		%	3		%
SoCalGas:
Income tax expense	$	52		$	19
Income before income taxes	$	355		$	283
Effective income tax rate	15		%	7		%


⁽¹⁾	We discuss how we recognize equity earnings in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

Sempra Energy Consolidated

Income tax benefit in the three months ended March 31, 2020 compared to an income tax expense in the same period in 2019 was due to a lower ETR and lower pretax income. The change in ETR was primarily due to:


▪	$308 million income tax benefit in 2020 compared to $23 million income tax expense in 2019 from foreign currency and inflation effects primarily as a result of fluctuation of the Mexican peso; and


▪	$19 million income tax benefit in 2020 compared to $8 million income tax expense in 2019 related to share-based compensation; offset by


▪	$66 million total income tax benefits in 2019 from the release of regulatory liabilities at SDG&E and SoCalGas established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed be allocated to shareholders in a January 2019 decision; and


▪	$10 million income tax benefit in 2019 from a reduction in a valuation allowance against certain NOL carryforwards as a result of our decision to sell our South American businesses.

We discuss the impact of foreign currency exchange rates and inflation on income taxes below in “Impact of Foreign Currency and Inflation Rates on Results of Operations.” See Note 1 of the Notes to Condensed Consolidated Financial Statements in this report and Notes 1 and 8 of the Notes to Consolidated Financial Statements in the Annual Report for further details about our accounting for income taxes and items subject to flow-through treatment.

SDG&E

The increase in SDG&E’s income tax expense in the three months ended March 31, 2020 was due to a higher ETR and higher pretax income. The change in ETR was primarily due to $31 million income tax benefit in 2019 from the release of a regulatory liability established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed be allocated to shareholders in a January 2019 decision.

SoCalGas

The increase in SoCalGas’ income tax expense in the three months ended March 31, 2020 was due to a higher ETR and higher pretax income. The change in ETR was primarily due to $35 million income tax benefit in 2019 from the release of a regulatory liability established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed be allocated to shareholders in a January 2019 decision.

Equity Earnings

In the three months ended March 31, 2020, equity earnings increased by $162 million to $263 million primarily due to:

▪

$171 million higher equity earnings at IMG JV, primarily due to foreign currency effects, including $149 million foreign currency gains in 2020 compared to $10 million foreign currency losses in 2019 on IMG JV’s Mexican peso-denominated loans from its JV owners, which is fully offset in Other (Expense) Income, Net, and the start of commercial operations of the Sur de Texas-Tuxpan marine pipeline;


▪	$55 million higher equity earnings at Cameron LNG JV primarily due to Train 1 and Train 2 commencing commercial operations under their tolling agreements in August 2019 and February 2020, respectively; and


▪	$21 million higher equity earnings at TAG JV primarily due to higher income tax benefits in 2020; offset by


▪	$100 million equity losses at RBS Sempra Commodities in 2020, which represents an estimate of our obligations to settle pending tax matters and related legal costs at our equity method investment.

Earnings Attributable to Noncontrolling Interests

Earnings attributable to NCI increased by $110 million to $151 million in the three months ended March 31, 2020 primarily due to an increase in earnings attributable to NCI at Sempra Mexico primarily from foreign currency effects as a result of fluctuation of the Mexico peso.

IMPACT OF FOREIGN CURRENCY AND INFLATION RATES ON RESULTS OF OPERATIONS

Because operations in South America and our natural gas distribution utility in Mexico use their local currency as their functional currency, revenues and expenses are translated into U.S. dollars at average exchange rates for the period for consolidation in Sempra Energy Consolidated’s results of operations. We discuss further the impact of foreign currency and inflation rates on results of operations, including impacts on income taxes and related hedging activity, in “Item 7. MD&A – Impact of Foreign Currency and Inflation Rates on Results of Operations” in the Annual Report.

Foreign Currency Translation

Any difference in average exchange rates used for the translation of income statement activity from year to year can cause a variance in Sempra Energy Consolidated’s comparative results of operations. Changes in foreign currency translation rates between periods resulted in $4 million lower earnings within discontinued operations in the first three months of 2020 compared to the same period in 2019.

Transactional Impacts

Income statement activities at our foreign operations and their JVs are also impacted by transactional gains and losses, a summary of which is shown in the table below:



TRANSACTIONAL (LOSSES) GAINS FROM FOREIGN CURRENCY AND INFLATION
(Dollars in millions)
	Total reported amounts						Transactional (losses) gains included in reported amounts
	Three months ended March 31,
	2020			2019			2020			2019
Other (expense) income, net	$	(254	)	$	82		$	(276	)	$	20
Income tax benefit (expense)	207			(42		)	308			(23		)
Equity earnings	263			101			181			(12		)
Income from continuing operations, net of income tax	867			560			242			(18		)
Income (loss) from discontinued operations, net of income tax	80			(42		)	16			—
Earnings attributable to common shares	760			441			150			(10		)

CAPITAL RESOURCES AND LIQUIDITY

OVERVIEW

The COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak to be a pandemic. President Donald Trump officially declared a national emergency on March 13, 2020. The COVID-19 pandemic is causing a significant impact on the economy and people’s livelihoods, including substantial volatility and erosion of value in financial markets and a historic surge in unemployment claims while individuals adhere to shelter-in-place mandates and practice social distancing, and has resulted in sweeping action by governments and other authorities to help address these effects. The following describes some of these government actions and their current and anticipated impact on our businesses:

▪

On March 4, 2020, Governor Gavin Newsom proclaimed a State of Emergency in California as a result of the threat of COVID-19, and on March 19, 2020, the Governor imposed a California-wide shelter-in-place directive via an Executive Order that will remain in place indefinitely. The Governor’s Executive Order requires all individuals living in California to stay home or at their place of residence except as needed to maintain the continuity of 16 critical infrastructure sectors. Our businesses that invest in, develop and operate energy infrastructure and provide electric and gas services to customers in California have been identified as critical infrastructure under the Executive Order.


▪	On March 13, 2020, the California Utilities announced that they were voluntarily instituting a suspension of all customer disconnections for nonpayment of customer bills until further notice.

▪

On March 17, 2020, the CPUC announced that, retroactive to March 4, 2020, all energy companies under its jurisdiction, including the California Utilities, should take action to implement several emergency customer protection measures to support California customers. The measures apply to all residential and small business customers affected by the COVID-19 pandemic and include suspending service disconnections due to nonpayment, waiving late payment fees, and offering flexible payment plans for all customers experiencing difficulty paying their electric or gas bills. Similarly, on March 26, 2020, the PUCT issued orders that require retail electric providers to offer a deferred payment plan to customers, upon request, and authorized customer assistance programs for certain residential customers of electric service. The continuation of these circumstances could result in a material reduction in payments received from our customers and a material increase in uncollectible accounts that we may not be able to recover in rates, which could have a material adverse effect on the cash flows, financial condition and results of operations for Sempra Energy, SDG&E and SoCalGas.

▪

On March 30, 2020, the Mexican government announced a national state of sanitary emergency, suspending all non-essential activities and urging people in Mexico to stay at home until April 30, 2020, which was subsequently extended to May 30, 2020 and may be extended further. Essential business activities that may continue to operate during the health emergency include the conservation, maintenance and repair of critical infrastructure that ensures the production and distribution of electric and gas services.

▪

On April 16, 2020, the CPUC approved a resolution authorizing each of the California Utilities to establish a CPPMA to track and request recovery of incremental costs associated with complying with measures implemented by the CPUC related to the COVID-19 pandemic. Although we are tracking these costs, which will include incremental amounts associated with customer nonpayments, CPUC approval is required to collect all or any portion of the balance of the CPPMA, which is not assured. Similarly, the PUCT has provided for the use of a regulatory asset accounting mechanism and a subsequent process through which regulated utility companies may seek future recovery of expenses resulting from the effects of the COVID-19 pandemic, as well as the creation of a COVID-19 Electricity Relief Program fund through which transmission and distribution utilities and retail electric providers may seek to recover a reasonable portion of the cost of providing uninterrupted services to customers facing financial hardship due to the effects of the COVID-19 pandemic. There can be no assurance, however, that our Texas utilities will be able to recover any of the costs they incur from their response to the COVID-19 pandemic through these programs or otherwise.

▪

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted and signed into law in response to the COVID-19 pandemic. The CARES Act contains significant business tax provisions, including a delay of payment of employer payroll taxes and an acceleration of refunds of corporate alternative minimum tax (AMT) credits. Sempra Energy, SDG&E and SoCalGas expect to benefit from deferring payment of the employer’s share of payroll taxes through the end of 2020, with half of such taxes to be paid by the end of 2021 and the other half to be paid by the end of 2022. Sempra Energy has filed a refund claim for its corporate AMT credits and expects to receive approximately $56 million in 2020 rather than in installments through 2021.

In addition, we and other companies, including our partners, are taking steps to try to protect the health and well-being of our employees and other stakeholders. As our businesses continue to operate, our priority is the safety of our employees, customers, partners and the communities we serve. For example, we have activated our business continuity plans and continue to work closely with local, state and federal authorities to provide essential services with minimum interruption to customers and in accordance with applicable shelter-in-place orders. We have implemented precautionary measures across our businesses, including requiring employees to work remotely when possible, restricting non-essential business travel, increasing facility sanitization and communicating proper health and safety protocols to employees. Additionally, SDG&E announced that it is postponing all noncritical planned outages, while continuing with those related to public safety, emergencies and wildfire mitigation, to try to protect employees and maintain service to customers as seamlessly as possible. We also have engaged an infectious disease expert to advise us during this public health crisis. Through the end of the first quarter of 2020, these actions have not required significant outlays of capital and have not had a material impact on our results of operations, but these or other measures that we may implement in the future could have a substantial effect on our liquidity, cash flows, financial position and results of operations if circumstances related to the COVID-19 pandemic worsen or continue for an extended period of time.

The COVID-19 pandemic and its widespread effects may also impact our capital plans, liquidity and asset values. For example:

▪

Our capital projects and planned expenditures could experience delays due to the COVID-19 pandemic, either because we decide to postpone certain activities in an effort to preserve cash or other resources or for other reasons related to the pandemic that are beyond our control, including supply chain and contractor performance delays or delays in the issuance of required permits. Any such delay could have a material effect on our capital plans and results of operations. We discuss the potential for these delays in further detail with respect to each of our segments below.


▪	The decline and volatility in the financial markets has had a significant impact on certain of the markets that we typically access for working capital and other liquidity requirements. See the discussion in “Liquidity” below for more information.

▪

We have significant investments in several trusts to provide for future payments of pensions and other postretirement benefits and nuclear decommissioning. Although all of our trust funds’ investments are diversified and managed in compliance with applicable laws and regulations, the value of the investments in these trusts declined significantly in the second half of the first quarter of 2020 due to a decline in the equity markets and volatility in the fixed income market triggered by the COVID-19 pandemic. These markets continue to be volatile. The decrease in asset values has not affected the funds’ ability to make their required payments; however, this could change if conditions worsen or continue for an extended period. Moreover, if asset values do not recover, our funding requirements for pension and other postretirement benefit plans in 2021 may increase. Other factors may also impact funding requirements for pension and other postretirement benefit plans, including changes to discount rates, assumed rates of return, mortality tables and regulations. Funding requirements for SDG&E’s NDT could be impacted by the value of the assets as well as the timing and amount of SONGS decommissioning costs. At the California Utilities, funding requirements are generally recoverable in rates. We discuss our employee benefit plans and SDG&E’s NDT, including our investment allocation strategies for assets in these trusts, in Notes 9 and 15, respectively, of the Notes to Consolidated Financial Statements in the Annual Report.

▪

We perform recovery testing of our recorded asset values when market conditions indicate that such values may not be recoverable. Given the current economic environment, including the significant decline in the price of our common stock, market volatility and potential reduction in customer collections, we considered whether these events or changes in circumstances triggered the need for an interim impairment analysis for our long-lived assets, intangible assets and goodwill. We determined that, given the existing headroom in our prior quantitative tests and assessment of the impact of these conditions on our businesses, there was no triggering event as of March 31, 2020. However, as the effects of the COVID-19 pandemic continue to evolve, we will continue to assess the need to perform an interim impairment test. To the extent the recorded (carrying) value is in excess of the fair value, we would record a noncash impairment charge. A significant impairment charge related to our long-lived assets, intangible assets or goodwill would have a material adverse effect on our results of operations in the period in which it is recorded.

For a further discussion of risks and uncertainties related to the COVID-19 pandemic, see below in “Item 1A. Risk Factors.”

Liquidity

We expect to meet our cash requirements through cash flows from operations, unrestricted cash and cash equivalents, proceeds from recent and planned asset sales, borrowings under our credit facilities, distributions from our equity method investments, issuances of debt, project financing and partnering in JVs. We believe that these cash flow sources, combined with available funds, will be adequate to fund our current operations, including to:


▪	finance capital expenditures


▪	meet liquidity requirements


▪	fund dividends


▪	fund new business or asset acquisitions or start-ups


▪	fund capital contribution requirements


▪	repay maturing long-term debt


▪	fund expenditures related to the natural gas leak at SoCalGas’ Aliso Canyon natural gas storage facility

Sempra Energy and the California Utilities currently have reasonable access to the long-term debt markets and are not currently constrained in any significant way in their ability to borrow money at reasonable rates from commercial banks, under existing revolving credit facilities or through public offerings registered with the SEC. There have been, however, substantial disruptions caused by the COVID-19 pandemic in the commercial paper markets during the second half of the first quarter of 2020, which have historically been a primary source of working capital for Sempra Energy and the California Utilities. In addition, the capital markets in general and the availability of financing from commercial banks also have shown periods of significant distress in the second half of the first quarter of 2020 due to the COVID-19 pandemic, and our ability to access the capital markets or obtain credit from commercial banks outside of our committed revolving credit facilities could become materially constrained, especially if these conditions worsen or continue for an extended period. In addition, our financing activities and actions by credit rating agencies, as well as many other factors, could negatively affect the availability and cost of both short-term and long-term financing. Also, cash flows from operations may be impacted by the timing of commencement and completion, and potentially cost overruns, of large projects. If cash flows from operations were to be significantly reduced or we were unable to borrow under acceptable terms, we would likely first reduce or postpone discretionary capital expenditures (not related to safety) and investments in new businesses. We monitor our ability to finance the needs of our operating, investing and financing activities in a manner consistent with our intention to maintain our investment-grade credit ratings and capital structure.

Available Funds

Our committed lines of credit provide liquidity and support commercial paper. As we discuss in Note 7 of the Notes to Condensed Consolidated Financial Statements, Sempra Energy, Sempra Global, SDG&E and SoCalGas each have five-year credit agreements expiring in 2024. The table below shows the amount of available funds at March 31, 2020, including available unused credit on these primary U.S. credit facilities. In addition, IEnova has $1.9 billion in lines of credit, with approximately $136 million available unused credit at March 31, 2020.



AVAILABLE FUNDS AT MARCH 31, 2020
(Dollars in millions)
	Sempra Energy Consolidated		SDG&E		SoCalGas
Unrestricted cash and cash equivalents⁽¹⁾	$	2,247	$	203	$	389
Available unused credit⁽²⁾⁽³⁾	4,010		1,300		750


⁽¹⁾	Amounts at Sempra Energy Consolidated include $542 million held in non-U.S. jurisdictions. We discuss repatriation in Note 1 of the Notes to Condensed Consolidated Financial Statements.


⁽²⁾	Available unused credit is the total available on Sempra Energy’s, Sempra Global’s, SDG&E’s and SoCalGas’ credit facilities that we discuss in Note 7 of the Notes to Condensed Consolidated Financial Statements.


⁽³⁾	Because the commercial paper programs are supported by these lines, we reflect the amount of commercial paper outstanding as a reduction to the available unused credit.

Short-Term Borrowings

We use short-term debt primarily to meet liquidity requirements, fund shareholder dividends, and temporarily finance capital expenditures, acquisitions or start-ups. Our California Utilities use short-term debt primarily to meet working capital needs. Commercial paper, revolving lines of credit and term loans were our primary sources of short-term debt funding in the first quarter of 2020. In an effort to protect our liquidity in light of the COVID-19 pandemic, Sempra Energy, Sempra Global, SDG&E, SoCalGas and IEnova each drew amounts under their respective credit facilities in the first quarter of 2020, a substantial portion of which were repaid through terms loans obtained in the first quarter of 2020 by Sempra Energy and SDG&E. As we discuss in Note 7 of the Notes to Condensed Consolidated Financial Statements, Sempra Energy and SDG&E obtained 364-day term loans with aggregate principal amounts outstanding at March 31, 2020, of $1,525 million and $200 million, respectively. At March 31, 2020, SDG&E classified a total of $400 million of its then outstanding revolving line of credit and term loan as long-term debt based on management’s intent and ability to maintain this level of borrowing on a long-term basis. In April 2020, SDG&E completed a $400 million public offering of first mortgage bonds maturing in 2050 and repaid the amounts borrowed under its revolving line of credit. On April 1, 2020, Sempra Energy borrowed an additional $75 million under its term loan.

Credit Ratings

We provide additional information about the credit ratings of Sempra Energy, SDG&E and SoCalGas in “Item 1A. Risk Factors” and “Item 2. MD&A – Capital Resources and Liquidity” in the Annual Report.

The credit ratings of Sempra Energy, SDG&E and SoCalGas remained at investment grade levels in the first three months of 2020.



CREDIT RATINGS AT MARCH 31, 2020

	Sempra Energy	SDG&E	SoCalGas
Moody’s	Baa1 with a negative outlook	Baa1 with a positive outlook	A1 with a negative outlook
S&P	BBB+ with a negative outlook	BBB+ with a stable outlook	A with a negative outlook
Fitch	BBB+ with a stable outlook	BBB+ with a stable outlook	A with a stable outlook

Our credit ratings may affect the rates at which borrowings bear interest and the commitment fees on available unused credit. A downgrade of Sempra Energy’s or any of its subsidiaries’ credit ratings or rating outlooks may result in a requirement for collateral to be posted in the case of certain financing arrangements and may materially and adversely affect the market prices of their equity and debt securities, the rates at which borrowings are made and commercial paper is issued, and the various fees on their outstanding credit facilities. This could make it more costly for Sempra Energy, SDG&E, SoCalGas and Sempra Energy’s other subsidiaries to issue debt securities, to borrow under credit facilities and to raise certain other types of financing.

Sempra Energy has agreed that, if the credit rating of Oncor’s senior secured debt by any of the three major rating agencies falls below BBB (or the equivalent), Oncor will suspend dividends and other distributions (except for contractual tax payments), unless otherwise allowed by the PUCT. Oncor’s senior secured debt was rated A2, A+ and A at Moody’s, S&P and Fitch, respectively, at March 31, 2020.

On April 15, 2020, Moody’s placed Sempra Energy on review for downgrade.

Loans to/from Affiliates

At March 31, 2020, Sempra Energy had $615 million in loans to unconsolidated affiliates and $263 million in loans from unconsolidated affiliates.

California Utilities

SDG&E’s and SoCalGas’ operations have historically provided relatively stable earnings and liquidity. Their future performance will depend primarily on the ratemaking and regulatory process, environmental regulations, economic conditions, actions by the California legislature and the changing energy marketplace, as well as the other matters described in this report.

SDG&E and SoCalGas expect that the available unused credit from their credit facilities described above, cash flows from operations, and debt issuances will continue to be adequate to fund their respective current operations and planned capital expenditures. The California Utilities are continuing to monitor the impacts of the COVID-19 pandemic on cash flows and results of operations. Some of our customers will likely experience diminished ability to pay their electric or gas bills, leading to slower payments and higher levels of nonpayment than has been the case historically. These impacts could be significant and could require modifications to our financing plans. The California Utilities manage their capital structure and pay dividends when appropriate and as approved by their respective boards of directors.

As we discuss in Note 4 of the Notes to Condensed Consolidated Financial Statements in this report and in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report, changes in balancing accounts for significant costs at SDG&E and SoCalGas, particularly a change between over- and undercollected status, including commodity and transportation balancing accounts, may have a significant impact on cash flows. These changes generally represent the difference between when costs are incurred and when they are ultimately recovered in rates through billings to customers.

SDG&E

Wildfire Fund

In 2019, SDG&E recorded a Wildfire Fund asset for committed shareholder contributions to the Wildfire Fund. We describe the Wildfire Legislation and related accounting treatment in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

SDG&E is exposed to the risk that the participating California electric IOUs may incur third-party wildfire claims for which they will seek recovery from the Wildfire Fund. In such a situation, SDG&E may recognize a reduction of its Wildfire Fund asset and record a charge against earnings in the period when there is a reduction of the available coverage due to recoverable claims from the IOUs. As a result, if any California electric IOU’s equipment is determined to be a cause of a fire, it could have a material adverse effect on SDG&E’s and Sempra Energy’s financial condition and results of operations up to the carrying value of our Wildfire Fund asset. In addition, the Wildfire Fund could be completely exhausted due to fires in the other California electric IOUs’ service territories, by fires in SDG&E’s service territory or by a combination thereof. In the event that the Wildfire Fund is materially diminished, exhausted or terminated, SDG&E will lose the protection afforded by the Wildfire Fund, and as a consequence, a fire in SDG&E’s service territory could cause a material adverse effect on SDG&E’s and Sempra Energy’s cash flows, results of operations and financial condition.

SoCalGas

SoCalGas’ performance will also depend on the resolution of legal, regulatory and other matters concerning the Leak at the Aliso Canyon natural gas storage facility, which we discuss further in Note 11 of the Notes to Condensed Consolidated Financial Statements in this report, and in “Item 1A. Risk Factors” in the Annual Report.

Aliso Canyon Natural Gas Storage Facility Gas Leak

From October 23, 2015, through February 11, 2016, SoCalGas experienced a natural gas leak from one of the injection-and-withdrawal wells, SS25, at its Aliso Canyon natural gas storage facility located in Los Angeles County. In February 2016, CalGEM confirmed that the well was permanently sealed.

Cost Estimates, Accounting Impact and Insurance. At March 31, 2020, SoCalGas estimates the costs related to the Leak are $1,408 million (the cost estimate). This cost estimate may increase significantly as more information becomes available. A substantial portion of the cost estimate has been paid, and $284 million is accrued as Reserve for Aliso Canyon Costs and $6 million is accrued in Deferred Credits and Other as of March 31, 2020 on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets.

Except for the amounts paid or estimated to settle certain actions, the cost estimate does not include all litigation or regulatory costs to the extent it is not possible to predict at this time the outcome of these actions or reasonably estimate the costs to defend or resolve the actions or the amount of damages, restitution, or civil, administrative or criminal fines, sanctions, penalties or other costs or remedies that may be imposed or incurred. The cost estimate also does not include certain other costs incurred by Sempra Energy associated with defending against shareholder derivative lawsuits and other potential costs that we currently do not anticipate incurring or that we cannot reasonably estimate. These costs not included in the cost estimate could be significant and could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.

We have received insurance payments for many of the costs included in the cost estimate, including temporary relocation and associated processing costs, control-of-well expenses, costs of the government-ordered response to the Leak, certain legal costs and lost gas. We intend to pursue the full extent of our insurance coverage for the costs we have incurred. Other than directors’ and officers’ liability insurance, after taking into consideration the additional accrual related to litigation matters described in Note 11 of the Notes to Condensed Consolidated Financial Statements, we have effectively exhausted all of our insurance in this matter, except as to certain defense costs we may incur in the future, including those related to the shareholder derivative lawsuits. We continue to pursue other sources of insurance coverage for costs related to this matter, but we may not be successful in obtaining additional insurance recovery for any of these costs. If we are not able to secure additional insurance recovery for all or a substantial portion of these costs, if any costs we have recorded as an insurance receivable are not collected, if there are delays in receiving insurance recoveries, or if the insurance recoveries are subject to income taxes while the associated costs are not tax deductible, such amounts, which could be significant, could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.

As of March 31, 2020, we recorded the expected recovery of the cost estimate related to the Leak of $511 million as Insurance Receivable for Aliso Canyon Costs on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets. This amount is exclusive of insurance retentions and $766 million of insurance proceeds we received through March 31, 2020. If we were to conclude that this receivable or a portion of it is no longer probable of recovery from insurers, some or all of this receivable would be charged against earnings, which could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.

Natural Gas Storage Operations and Reliability. Natural gas withdrawn from storage is important for service reliability during peak demand periods, including peak electric generation needs in the summer and heating needs in the winter. The Aliso Canyon natural gas storage facility is the largest SoCalGas storage facility and an important element of SoCalGas’ delivery system. As a result of the Leak, SoCalGas suspended injection of natural gas into the Aliso Canyon natural gas storage facility beginning in October 2015 and, following a comprehensive safety review and authorization by CalGEM and the CPUC’s Executive Director, resumed limited injection operations in July 2017.

During the suspension period, SoCalGas advised the California ISO, California Energy Commission, CPUC and Pipeline and Hazardous Materials Safety Administration of its concerns that the inability to inject natural gas into the Aliso Canyon natural gas storage facility posed a risk to energy reliability in Southern California. The CPUC has issued a series of directives to SoCalGas specifying the range of working gas to be maintained in the Aliso Canyon natural gas storage facility as well as protocols for the withdrawal of gas, to help ensure safe and reliable natural gas service, while helping to maintain stable energy prices in Southern California. Limited withdrawals of natural gas from the facility were made in 2018, 2019 and 2020 to augment natural gas supplies during critical demand periods.

In February 2017, the CPUC opened a proceeding pursuant to SB 380 to determine the feasibility of minimizing or eliminating the use of the Aliso Canyon natural gas storage facility. If the Aliso Canyon natural gas storage facility were to be permanently closed, or if future cash flows from its operation were otherwise insufficient to recover its carrying value, it could result in an impairment of the facility and significantly higher than expected operating costs and/or additional capital expenditures, and natural gas reliability and electric generation could be jeopardized. At March 31, 2020, the Aliso Canyon natural gas storage facility had a net book value of $771 million. Any significant impairment of this asset, or higher operating costs and additional capital expenditures incurred by SoCalGas that may not be recoverable in customer rates, could have a material adverse effect on SoCalGas’ and Sempra Energy’s results of operations, financial condition and cash flows.

Sempra Texas Utilities

Oncor’s business is capital intensive, and it relies on external financing as a significant source of liquidity for its capital requirements. In the past, Oncor has financed a substantial portion of its cash needs from operations and with proceeds from indebtedness. In the event that Oncor fails to meet its capital requirements, we may be required to make additional capital contributions to Oncor, or if Oncor is unable to access sufficient capital to finance its ongoing needs, we may elect to make additional capital contributions to Oncor which could be substantial and which would reduce the cash available to us for other purposes, could increase our indebtedness and could ultimately materially adversely affect our results of operations, financial condition and prospects. In that regard, our commitments to the PUCT prohibit us from making loans to Oncor. As a result, if Oncor requires additional financing and cannot obtain it from other sources, we may elect to make a capital contribution to Oncor.

Oncor’s ability to pay dividends may be limited by factors such as its credit ratings, regulatory capital requirements, debt-to-equity ratio approved by the PUCT and other restrictions. In addition, Oncor will not pay dividends if a majority of Oncor’s independent directors or any minority member director determines it is in the best interests of Oncor to retain such amounts to meet expected future requirements.

Sempra Mexico

Sempra Mexico is currently building or developing terminals for the receipt, storage, and delivery of liquid fuels in the new port of Veracruz and vicinity of Mexico City, Puebla, Topolobampo, Manzanillo, and Ensenada. Sempra Mexico is also developing new solar facilities in Juárez, Chihuahua, and Benjamin Hill, Sonora, through which it will supply renewable energy to several private companies. We expect the projects to commence commercial operations on various dates in 2020 and 2021, but these expected commencement dates could be delayed by worsening or extended disruptions of project construction or development caused by the COVID-19 pandemic. See “Item 1A. Risk Factors” below. We expect to fund these capital expenditures and investments, operations and dividends at IEnova with available funds, including credit facilities, and funds internally generated by the Sempra Mexico businesses, as well as funds from project financing, sales of securities, interim funding from the parent or affiliates, and partnering in JVs. Sempra Mexico is continuing to monitor the impacts of the COVID-19 pandemic on cash flows and results of operations.

As we discuss in Note 11 of the Notes to Condensed Consolidated Financial Statements, IEnova received force majeure payments for the Guaymas-El Oro segment of the Sonora pipeline from August 2017 to August 2019. Under an agreement between IEnova and the CFE, the CFE will resume making payments only when the damaged section of the Guaymas-El Oro segment of the Sonora pipeline is repaired. If the pipeline is not repaired by May 15, 2020 and the parties do not agree on a new service start date, IEnova retains the right to terminate the contract and seek to recover its reasonable and documented costs and lost profits. The parties are currently discussing a new service start date in the event the pipeline is not repaired by May 15, 2020, but there can be no assurance that the parties will have agreed on a new service start date if the pipeline is not repaired by that date. If IEnova is unable to make such repairs (which have not commenced) and resume operations in the Guaymas-El Oro segment of the Sonora pipeline or if IEnova terminates the contract and is unable to obtain recovery, there may be a material adverse impact on Sempra Energy’s results of operations and cash flows and our ability to recover the carrying value of our investment.

The ability to successfully complete major construction projects is subject to a number of risks and uncertainties. For a discussion of these risks and uncertainties, see “Item 1A. Risk Factors” in the Annual Report.

Sempra LNG

Sempra LNG develops and builds natural gas liquefaction facilities and is pursuing the development of five strategically located LNG projects in North America with a long-term goal of enabling the delivery of natural gas to the largest world markets. We expect Sempra LNG to require funding for the development and expansion of its portfolio of projects, which may be financed through a combination of operating cash flows, funding from the parent, project financing and participating in JVs, including ECA LNG JV with IEnova.

North American natural gas prices, when in decline, negatively affect profitability at Sempra LNG. Also, a reduction in projected global demand for LNG could result in increased competition among those developing projects in an environment of declining LNG demand, such as the Sempra Energy-sponsored LNG export initiatives. Our LNG projects currently under development could be delayed by the worldwide economic slowdown as a result of the COVID-19 pandemic, by the current uncertainty in the global oil and gas markets as a result of the unprecedented decline in oil prices or by a combination of these factors. For a discussion of these risks and other risks involving changing commodity prices, see “Item 1A. Risk Factors” in the Annual Report and in “Item 1A. Risk Factors” below.

Cameron LNG JV Three-Train Liquefaction Project (Phase 1)

Sempra LNG, through its interest in Cameron LNG JV, is constructing a three-train natural gas liquefaction export facility with an expected export capability of 12 Mtpa of LNG. Construction on the three-train liquefaction project began in the second half of 2014 under an EPC contract with a JV between CB&I, LLC (as assignee of CB&I Shaw Constructors, Inc.), a wholly owned subsidiary of McDermott International, Inc., and Chiyoda International Corporation, a wholly owned subsidiary of Chiyoda Corporation. The majority of the construction is project-financed at the JV, with most or all of the remainder of the capital requirements provided by the project partners, including Sempra Energy, through equity contributions under the project equity agreements. We expect that our remaining equity requirements to complete the project will be met by a combination of our share of cash generated from the first two liquefaction trains that have commenced operations and, if required, additional cash contributions. Sempra Energy signed guarantees for 50.2% of Cameron LNG JV’s financing obligations for a maximum amount of up to $4.0 billion. The guarantees will terminate upon satisfaction of certain conditions, including all three trains achieving financial completion by September 30, 2021 (with up to an additional 365-day extension beyond such date permitted in cases of force majeure). However, if Cameron LNG JV fails to satisfy the financial completion criteria, a demand could be made under the guarantee for Sempra Energy’s 50.2% share of Cameron LNG JV’s obligations under the financing arrangements then due and payable, which could have a material adverse impact on Sempra Energy’s liquidity.

Cameron LNG JV achieved commercial operations of Train 1 and Train 2 under its tolling agreements in August 2019 and February 2020, respectively. We expect Train 3 will commence commercial operations in the third quarter of 2020. However, the expected commencement of Train 3’s commercial operations could be delayed by worsening or extended disruptions of project construction and commissioning caused by the COVID-19 pandemic.

Large-scale construction projects such as the design, development and construction of the Cameron LNG JV liquefaction facility involve numerous risks and uncertainties, including among others, the potential for unforeseen engineering challenges, severe weather events, global pandemics, substantial construction delays and increased costs. In addition, once completed, the facility may be subject to design flaws, equipment failures and other operational issues, which could cause the facility to suspend operations or operate at a reduced capacity.

Cameron LNG JV has a lump-sum, turnkey EPC contract, and if the contractor becomes unwilling or unable to perform according to the terms and timetable of the EPC contract, the project could face substantial construction delays and potentially significantly increased costs. In January 2020, McDermott International, Inc. filed for bankruptcy protection under Chapter 11 of the U.S. bankruptcy code. McDermott International, Inc. has stated that it expects all of its projects, including the three-train liquefaction project at Cameron LNG JV, to continue on an uninterrupted basis. However, we cannot be certain the Cameron LNG JV project will not be interrupted. If the contractor defaults under the EPC contract due to the bankruptcy of McDermott International, Inc. or for any other reason, such default could result in Cameron LNG JV’s engagement of a substitute contractor. The inability to complete the project in a timely manner or within our current expectations, cost overruns, and the other risks described above could have a material adverse effect on our business, results of operations, cash flows, financial condition, credit ratings and/or prospects.

For a discussion of our investment in Cameron LNG JV, JV financing, Sempra Energy guarantees, the risks discussed above and other risks relating to the development of the Cameron LNG JV liquefaction project that could adversely affect our future performance, see Note 6 of the Notes to Consolidated Financial Statements and “Item 1A. Risk Factors” in the Annual Report.

Proposed Cameron Liquefaction Expansion (Phase 2)

Cameron LNG JV has received the major permits and FTA and non-FTA approvals necessary to expand the current configuration of the Cameron LNG JV liquefaction project beyond Phase 1. The permits obtained for Phase 2 include up to two additional liquefaction trains and up to two additional full containment LNG storage tanks (one of which was permitted with the original three-train project).

Expansion of the Cameron LNG liquefaction facility beyond the first three trains is subject to certain restrictions and conditions under the JV project financing agreements, including among others, timing restrictions on expansion of the project unless appropriate prior consent is obtained from the project lenders. Under the Cameron LNG JV equity agreements, the expansion of the project requires the unanimous consent of all the partners, including with respect to the equity investment obligation of each partner. Discussions among all the Cameron LNG JV partners have been taking place regarding how an expansion may be structured and we expect that discussions will continue. There can be no assurance that the Cameron LNG JV members will unanimously agree on an expansion structure, which, if not accomplished in a timely manner, could materially and adversely impact the development of the expansion project. In light of this, we are unable to predict whether or when Cameron LNG JV might be able to move forward on expansion of the Cameron LNG liquefaction facility beyond the first three trains.

In November 2018, Sempra Energy and TOTAL S.A. entered into an MOU that provides a framework for cooperation for the development of the potential Cameron LNG JV expansion project and the potential ECA LNG JV liquefaction-export project that we describe below in “ECA LNG JV Liquefaction Export Project.” The MOU contemplates TOTAL S.A. potentially contracting for up to approximately 9 Mtpa of LNG offtake across these two development projects and provides TOTAL S.A. the option to acquire an equity interest in the proposed ECA LNG JV project. In addition, in October 2019, Sempra Energy and Mitsui & Co., Ltd. entered into an MOU that provides a framework for potential offtake by Mitsui & Co., Ltd. from the potential Cameron LNG JV expansion project and the second phase of the potential ECA LNG JV project, as well as Mitsui & Co., Ltd.’s potential acquisition of an equity interest in the second phase of the potential ECA LNG JV project. In May 2020, Sempra Energy and Mitsubishi Corporation entered into an MOU that provides a framework for development of and potential offtake by Mitsubishi Corporation from the potential Cameron LNG JV expansion project. The ultimate participation of and offtake by TOTAL S.A., Mitsui & Co., Ltd. and Mitsubishi Corporation remains subject to negotiation and finalization of definitive agreements, among other factors, and TOTAL S.A., Mitsui & Co., Ltd. and Mitsubishi Corporation have no commitment to participate in and offtake from the projects.

The development of the potential Cameron LNG expansion project is subject to numerous other risks and uncertainties, including securing binding customer commitments; obtaining a number of permits and regulatory approvals; securing financing; negotiating and completing suitable commercial agreements, including a definitive EPC contract, equity acquisition and governance agreements; reaching a final investment decision; and other factors associated with this potential investment. For a discussion of these risks, see “Item 1A. Risk Factors” in the Annual Report.

ECA LNG JV Liquefaction Export Project

Through a JV agreement, Sempra LNG and IEnova are developing a proposed natural gas liquefaction project at IEnova’s existing ECA LNG Regasification facility. The proposed liquefaction facility project, which is planned for development in two phases (a mid-scale project referred to as ECA LNG JV Phase 1 and a large-scale project referred to as ECA LNG JV Phase 2), is being developed to provide buyers with direct access to west coast LNG supplies. The ECA LNG Regasification facility currently has profitable long-term regasification contracts for 100% of the regasification facility’s capacity through 2028, making the decisions on whether and how to pursue the ECA LNG JV Phase 2 liquefaction project dependent in part on whether the investment in a large-scale liquefaction facility would, over the long term, be more beneficial financially than continuing to supply regasification services under our existing contracts. We do not believe that the development of ECA LNG JV Phase 1 will disrupt operations at the ECA LNG Regasification facility.

In March 2019, ECA LNG JV received two authorizations from the DOE to export U.S.-produced natural gas to Mexico and to re-export LNG to non-FTA countries from its ECA LNG JV Phase 1 project, a one-train natural gas liquefaction export facility with a nameplate capacity of 3.25 Mtpa and initial offtake capacity of approximately 2.5 Mtpa, and its ECA LNG JV Phase 2 project, each of which is in development.

On February 27, 2020, we entered into an EPC contract with TechnipFMC for the engineering, procurement and construction of ECA LNG JV Phase 1. We have no obligation to move forward on the EPC contract, and we may release TechnipFMC to perform portions of the work pursuant to limited notices to proceed. We plan to fully release TechnipFMC to perform all of the work to construct ECA LNG JV Phase 1 only after we reach a final investment decision with respect to the project and after certain other conditions are met. The total price of the EPC contract for ECA LNG JV Phase 1 is estimated at approximately $1.5 billion. We estimate that capital expenditures for ECA LNG JV Phase 1 will approximate $1.9 billion, including capitalized interest and project contingency. The actual cost of the EPC contract and the actual amount of these capital expenditures may differ, perhaps substantially, from our estimates.

In November 2018, Sempra LNG and IEnova signed Heads of Agreements with affiliates of TOTAL S.A., Mitsui & Co., Ltd. and Tokyo Gas Co., Ltd. for ECA LNG JV Phase 1 in respect of LNG sales of approximately 2.5 Mtpa in the aggregate. In April 2020, ECA LNG JV executed definitive 20-year LNG sale and purchase agreements with Mitsui & Co., Ltd. and an affiliate of TOTAL S.A. for approximately 0.8 Mtpa of LNG and 1.7 Mtpa of LNG, respectively. Each agreement remains subject to certain customary conditions of effectiveness, including our final investment decision for the project.

We continue to work towards reaching a final investment decision for ECA LNG JV Phase 1 in the second quarter of 2020. However, this project is contingent on the receipt of an export permit from the Mexican government. The closure of non-essential activities in Mexico in response to the COVID-19 pandemic has added to the uncertainty of the timing of the receipt of this permit and could delay our final investment decision beyond the second quarter of 2020.

The development of both the ECA LNG JV Phase 1 and ECA LNG JV Phase 2 projects is subject to numerous risks and uncertainties, including obtaining binding customer commitments for Phase 2; the receipt of a number of permits and regulatory approvals; obtaining financing; negotiating and completing suitable commercial agreements, including a definitive EPC contract for Phase 2, equity acquisition and governance agreements, LNG sales agreements and gas supply and transportation agreements; reaching a final investment decision; and other factors associated with this potential investment. In addition, as we discuss in Note 11 of the Notes to Condensed Consolidated Financial Statements, an unfavorable decision on certain property disputes and permit challenges could materially and adversely affect the development of these projects. For a discussion of these risks, see “Item 1A. Risk Factors” in the Annual Report.

Port Arthur LNG Liquefaction Project

Sempra LNG is developing a proposed natural gas liquefaction project on a greenfield site that it owns in the vicinity of Port Arthur, Texas, located along the Sabine-Neches waterway. Sempra LNG received authorizations from the DOE in August 2015 and May 2019 that collectively permit the LNG to be produced from the proposed Port Arthur LNG project to be exported to all current and future FTA and non-FTA countries.

In April 2019, the FERC approved the siting, construction and operation of the proposed Port Arthur LNG liquefaction facility, along with certain natural gas pipelines, including the Louisiana Connector Pipeline, that could be used to supply feed gas to the liquefaction facility, assuming the project is completed.

On February 28, 2020, we entered into an EPC contract with Bechtel for the proposed Port Arthur LNG liquefaction project. The EPC contract contemplates the construction of two liquefaction trains with a nameplate capacity of approximately 13.5 Mtpa, two LNG storage tanks, a marine berth and associated loading facilities and related infrastructure necessary to provide liquefaction services. We have no obligation to move forward on the EPC contract, and we may release Bechtel to perform portions of the work pursuant to limited notices to proceed. We plan to fully release Bechtel to perform all of the work to construct the Port Arthur LNG liquefaction project only after we reach a final investment decision with respect to the project and after certain other conditions are met, including obtaining project financing. If we issue the full notice to proceed by July 15, 2020, the price under the fixed-price EPC contract is estimated to be approximately $8.9 billion. This does not include costs associated with changes to the project’s scope or the occurrence of certain events that would entitle Bechtel to relief under the contract, including customary events for similar agreements of this type such as force majeure events, certain changes in law, the discovery of certain differing site conditions, and certain delays to the work that we may cause. If we issue the full notice to proceed after July 15, 2020, the price will be subject to price escalations. If the full notice to proceed is not issued by October 15, 2020, then the EPC contract, including the price, will be subject to renegotiation. Any changes to the EPC contract will require the agreement of both parties, which cannot be assured.

In December 2018, Polish Oil & Gas Company (PGNiG) and Port Arthur LNG entered into a definitive 20-year agreement for the sale and purchase of 2 Mtpa of LNG per year from the Port Arthur LNG liquefaction project. Under the agreement, LNG purchases by PGNiG from Port Arthur LNG will be made on a free-on-board basis, with PGNiG responsible for shipping the LNG from the Port Arthur facility to the final destination. Port Arthur LNG will manage the gas pipeline transportation, liquefaction processing and cargo loading. The agreement is subject to certain conditions precedent, including Port Arthur LNG making a positive final investment decision within certain agreed timelines. The failure of these conditions precedent to be satisfied or waived within the agreed timelines could result in the termination of the agreement.

In May 2019, Aramco Services Company and Sempra LNG signed a Heads of Agreement for the negotiation and finalization of a definitive 20-year LNG sale and purchase agreement for 5 Mtpa of LNG offtake. The Heads of Agreement also includes the negotiation and finalization of a 25% equity investment in the project. In January 2020, Aramco Services Company and Sempra LNG signed an Interim Project Participation Agreement, which sets forth certain mechanisms for the parties to work towards receipt of corporate approvals to enter into and proceed with the transaction, execution of the transaction agreements and the fulfillment or waiver of the conditions precedent contemplated by these agreements, making a final investment decision and other pre-final investment decision activities. The Heads of Agreement and Interim Project Participation Agreement do not obligate the parties to ultimately execute any agreements or participate in the project.

In February 2020, Sempra LNG filed a FERC application for the siting, construction and operation of a second phase at the proposed Port Arthur LNG facility, including the potential addition of two liquefaction trains.

In November 2019, Port Arthur LNG commenced the relocation and upgrade of approximately three miles of highway where the Port Arthur LNG liquefaction project would be located.

We continue to work on completing all necessary milestones so that we are prepared to make a final investment decision for the proposed Port Arthur LNG liquefaction project when appropriate. The impact of the COVID-19 pandemic on the global economy and the current uncertainty in the financial and energy markets has delayed the expected timing of our final investment decision from 2020 to 2021.

Development of the Port Arthur LNG liquefaction project is subject to a number of risks and uncertainties, including obtaining additional customer commitments; completing the required commercial agreements, such as equity acquisitions and governance agreements, LNG sales agreements and gas supply and transportation agreements; completing construction contracts; securing all necessary permits and approvals; obtaining financing and incentives; reaching a final investment decision; and other factors associated with the potential investment. For a discussion of these risks, see “Item 1A. Risk Factors” in the Annual Report.

Discontinued Operations

As we discuss in Note 5 of the Notes to Condensed Consolidated Financial Statements, in January 2019, our board of directors approved a plan to sell our South American businesses. On April 24, 2020, we completed the sale of our equity interests in our Peruvian businesses for an aggregate base purchase price of $3.59 billion, subject to post-closing adjustments. In October 2019, we entered into an agreement to sell our equity interests in our Chilean businesses for an aggregate base purchase price of $2.23 billion, subject to customary adjustments for working capital and changes in net indebtedness and other adjustments. We expect the sale to close in the second quarter of 2020, subject to satisfaction of conditions to closing.

Our utilities in South America have historically provided relatively stable earnings and liquidity. We intend to use the proceeds from the sales to focus on capital investment in North America to support additional growth opportunities and strengthen our balance sheet by reducing debt. We expect the cash provided by earnings from our capital investment will exceed the absence of cash flows from these discontinued operations. However, there can be no assurance that we will derive these anticipated benefits. Further, there can be no assurance that we will be able to redeploy the capital that we obtain from such sales, if completed, in a way that would result in cash flows or earnings exceeding those historically generated by these businesses.

SOURCES AND USES OF CASH

The following tables include only significant changes in cash flow activities for each of our registrants.



CASH FLOWS FROM OPERATING ACTIVITIES
(Dollars in millions)
Three months ended March 31,	Sempra Energy Consolidated			SDG&E			SoCalGas
2020	$	1,318		$	498		$	757
2019	951			443			376
Change	$	367		$	55		$	381

Net increase in Reserve for Aliso Canyon Costs primarily due to $276 higher accruals and $98 lower payments	$	375					$	375
Higher net income, adjusted for noncash items included in earnings	169			$	109		121
Change in long-term GHG obligations	49						42
Higher distributions of earnings from Oncor Holdings	19
Net increase in Insurance Receivable for Aliso Canyon Costs primarily due to $176 higher accruals offset by $19 insurance proceeds received	(156		)				(156		)
Deferred revenue due to the TCJA at the California Utilities in 2019	(43		)	(20		)	(23		)
Change in intercompany activities with discontinued operations	(31		)
Change in net undercollected regulatory balancing accounts (including long-term amounts in regulatory assets)				(46		)	47
Other	10			12			(25		)
Change in net cash flows from discontinued operations	(25		)
	$	367		$	55		$	381

100



CASH FLOWS FROM INVESTING ACTIVITIES
(Dollars in millions)
Three months ended March 31,	Sempra Energy Consolidated			SDG&E			SoCalGas
2020	$	(1,181	)	$	(402	)	$	(388	)
2019	(610		)	(356		)	(324		)
Change	$	(571	)	$	(46	)	$	(64	)

Net proceeds from the February 2019 sale of Sempra LNG’s non-utility natural gas storage assets	$	(322	)
Increase in capital expenditures	(227		)	$	(46	)	$	(64	)
Other	(27		)
Change in net cash flows from discontinued operations	5
	$	(571	)	$	(46	)	$	(64	)



CASH FLOWS FROM FINANCING ACTIVITIES
(Dollars in millions)
Three months ended March 31,	Sempra Energy Consolidated			SDG&E			SoCalGas
2020	$	2,114		$	97		$	10
2019	(381		)	(75		)	(67		)
Change	$	2,495		$	172		$	77

Increase (decrease) in short-term debt, net	$	1,630		$	(27	)	$	(564	)
Higher issuances of long-term debt	1,048			400			649
Higher issuances of commercial paper and other short-term debt with maturities greater than 90 days	267
Higher payments on long-term debt and finance leases	(503		)
Higher payments for commercial paper and other short-term debt with maturities greater than 90 days	(93		)
Higher common dividends paid				(200		)
Other	(10		)	(1		)	(8		)
Change in net cash flows from discontinued operations mainly due to a net increase in short-term debt	156
	$	2,495		$	172		$	77

Capital Expenditures and Investments and Acquisitions



EXPENDITURES FOR PP&E AND INVESTMENTS AND ACQUISITIONS
(Dollars in millions)
	Three months ended March 31,
	2020		2019
SDG&E	$	402	$	356
SoCalGas	388		324
Sempra Texas Utilities	86		56
Sempra Mexico	170		85
Sempra LNG	47		56
Parent and other	3		—
Total	$	1,096	$	877

101

The amounts and timing of capital expenditures and certain investments are generally subject to approvals by various regulatory and other governmental and environmental bodies, including the CPUC, the FERC and the PUCT. Excluding discontinued operations, in 2020, we expect to make capital expenditures and investments of approximately $5.7 billion, a decrease from the $5.9 billion summarized in “Item 7. MD&A – Capital Resources and Liquidity” in the Annual Report. The decrease is primarily attributable to Phase 1 of the ECA LNG JV liquefaction export project at Sempra LNG.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We view certain accounting policies as critical because their application is the most relevant, judgmental, and/or material to our financial position and results of operations, and/or because they require the use of material judgments and estimates. We discuss these accounting policies in “Item 7. MD&A” in the Annual Report.

We describe our significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report. We follow the same accounting policies for interim reporting purposes.

NEW ACCOUNTING STANDARDS

We discuss the relevant pronouncements that have recently been issued or become effective and have had or may have an impact on our financial statements and/or disclosures in Note 2 of the Notes to Condensed Consolidated Financial Statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We provide disclosure regarding derivative activity in Note 8 of the Notes to Condensed Consolidated Financial Statements. We discuss our market risk and risk policies in detail in “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in the Annual Report.

COMMODITY PRICE RISK

In the first quarter of 2020, there were no significant changes in our exposure to commodity price risk.

102

INTEREST RATE RISK

The table below shows the nominal amount of our debt:



NOMINAL AMOUNT OF DEBT⁽¹⁾
(Dollars in millions)
	March 31, 2020						December 31, 2019
	Sempra Energy Consolidated		SDG&E		SoCalGas		Sempra Energy Consolidated		SDG&E		SoCalGas
Short-term:
California Utilities	$	—	$	—	$	—	$	710	$	80	$	630
Other	5,744		—		—		2,798		—		—
Long-term:
California Utilities fixed-rate	$	9,582	$	5,123	$	4,459	$	8,949	$	5,140	$	3,809
California Utilities variable-rate	400		400		—		—		—		—
Other fixed-rate	10,485		—		—		11,561		—		—
Other variable-rate	746		—		—		746		—		—


⁽¹⁾	After the effects of interest rate swaps. Before the effects of acquisition-related fair value adjustments and reductions for unamortized discount and debt issuance costs, and excluding finance lease obligations.

An interest rate risk sensitivity analysis measures interest rate risk by calculating the estimated changes in earnings that would result from a hypothetical change in market interest rates. Earnings are affected by changes in interest rates on short-term debt and variable long-term debt. If weighted-average interest rates on short-term debt outstanding at March 31, 2020 increased or decreased by 10%, the change in earnings over the next 12-month period ended March 31, 2021 would be approximately $14 million. If interest rates increased or decreased by 10% on all variable-rate long-term debt at March 31, 2020, after considering the effects of interest rate swaps, the change in earnings over the next 12-month period ended March 31, 2021 would be approximately $2 million.

FOREIGN CURRENCY AND INFLATION RATE RISK

We discuss our foreign currency and inflation exposure in “Item 2. MD&A – Impact of Foreign Currency and Inflation Rates on Results of Operations” in this report and in “Item 7. MD&A – Impact of Foreign Currency and Inflation Rates on Results of Operations” in the Annual Report. At March 31, 2020, there were no significant changes to our exposure to foreign currency rate risk since December 31, 2019.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Sempra Energy, SDG&E and SoCalGas maintain disclosure controls and procedures designed to ensure that information required to be disclosed in their respective reports is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to the management of each company, including each respective principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. In designing and evaluating these controls and procedures, the management of each company recognizes that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives; therefore, the management of each company applies judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of the principal executive officers and principal financial officers of Sempra Energy, SDG&E and SoCalGas, each such company’s management evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of March 31, 2020, the end of the period covered by this report. Based on these evaluations, the principal executive officers and principal financial officers of Sempra Energy, SDG&E and SoCalGas concluded that their respective company’s disclosure controls and procedures were effective at the reasonable assurance level as of such date.

103

INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes in Sempra Energy’s, SDG&E’s or SoCalGas’ internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the companies’ internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not party to, and our property is not the subject of, any material pending legal proceedings (other than ordinary routine litigation incidental to our businesses) except for the matters (1) described in Notes 10 and 11 of the Notes to Condensed Consolidated Financial Statements in this report and in Notes 15 and 16 of the Notes to Consolidated Financial Statements in the Annual Report, or (2) referred to in “Item 7. MD&A” in the Annual Report.

104

ITEM 1A. RISK FACTORS

When evaluating our company and its subsidiaries, you should consider carefully the risk factors and all other information contained in this report, including the factors discussed above in “Item 2. MD&A” and in this section, and in the other documents we file with the SEC, including the factors disclosed in “Item 1A. Risk Factors” in the Annual Report. Except as set forth below, there have been no material changes from the risk factors as previously disclosed in the Annual Report. Any of the risk factors and other information discussed in this report or any of the risk factors disclosed in “Item 1A. Risk Factors” in the Annual Report, as well as additional risks and uncertainties not currently known to us or that we currently deem to be immaterial, could materially and adversely affect our businesses, cash flows, results of operations, financial condition, prospects and/or the trading prices of our securities or those of our subsidiaries.

Risks Related to All Sempra Energy Businesses

Our business faces risks related to the COVID-19 pandemic.

The COVID-19 pandemic is currently materially impacting countries, communities, supply chains and markets around the world. The U.S. economy is experiencing a significant slowdown and claims for unemployment are increasing to historic levels. To date, the COVID-19 pandemic has not had a material impact on our results of operations. However, we are conducting business with substantial modifications to employee travel, employee work locations, and virtualization or cancellation of certain business activities, among other modifications. If these or other similar measures were to increase or continue for an extended period, we could experience employee absenteeism, decreased efficiency and productivity by our workforce and other similar impacts that could jeopardize our ability to sustain operations and satisfy compliance requirements. We also have observed other companies, including our current and prospective counterparties, customers and partners, as well as many governments, including our regulators and other governing bodies that affect our businesses, taking precautionary, preemptive and responsive actions to address the effects of the COVID-19 pandemic, and they may take further actions that alter their normal operations. These actions by third parties could impact our operations, results, liquidity and ability to pursue capital projects and strategic initiatives. For example, the CPUC has requested that all energy companies under its jurisdiction take action to implement several emergency customer protection measures to support California customers. The measures apply to all residential and small business customers affected by the COVID-19 pandemic and include suspending service disconnections due to nonpayment, waiving late payment fees, and offering flexible payment plans for all customers experiencing difficulty paying their electric or gas bills. These actions could result in a material reduction in payments received from our customers and a material increase in uncollectible accounts that we may not be able to recover in rates, which could have a material adverse effect on the cash flows, financial condition and results of operations for Sempra Energy, SDG&E and SoCalGas.

In addition, the economic slowdown caused by the COVID-19 pandemic, together with the increase of the supply of oil in world markets, has caused a material and unprecedented decline in oil prices and the demand for energy. These conditions, as well as potential disruptions of construction and development activity if our project counterparties implement or are required to implement stay-at-home or limited workforce measures in response to the pandemic, could result in increased competition among LNG project developers and substantial delays of some of our LNG and other projects currently under development. With respect to Phase 1 of the Cameron LNG JV liquefaction project currently under construction, although the project is considered a critical infrastructure project and is 99.5% complete, the impacts of the COVID-19 pandemic could cause unanticipated delays in completing the project.

Further, the COVID-19 pandemic has adversely affected conditions in the capital markets and may adversely affect our cost of and access to capital, including from the capital markets generally, from commercial paper markets and from commercial banks. Although Sempra Energy, SDG&E and SoCalGas are not currently constrained in any significant way in their ability to borrow money at reasonable rates, these circumstances could change if conditions worsen or continue for an extended period, which could have a material negative effect on our results of operations and on our strategic initiatives and prospects. To date, the COVID-19 pandemic has resulted in a slowdown of our capital spending, which could worsen if conditions deteriorate or fail to improve in the near term and which could have a material adverse effect on Sempra Energy’s, SDG&E’s and SoCalGas’ results of operations and prospects.

We will continue to actively monitor the effects of the COVID-19 pandemic and may take further actions that alter our business operations as may be required by federal, state or local authorities, or that we determine are in the best interests of our employees, customers, partners and suppliers. However, we cannot at this time predict the extent to which the COVID-19 pandemic will further impact our liquidity, financial condition, results of operations and prospects.

105

ITEM 6. EXHIBITS

The exhibits listed below relate to each registrant as indicated. Unless otherwise indicated, the exhibits that are incorporated by reference herein were filed under File Number 1-14201 (Sempra Energy), File Number 1-40 (Pacific Lighting Corporation), File Number 1-03779 (San Diego Gas & Electric Company) and/or File Number 1-01402 (Southern California Gas Company).

106



			Incorporated by Reference
Exhibit Number	Exhibit Description	Filed or Furnished Herewith	Form	Exhibit or Appendix	Filing Date

EXHIBIT 3 -- ARTICLES OF INCORPORATION AND BYLAWS
Sempra Energy
3.1	Amended and Restated Articles of Incorporation of Sempra Energy effective May 23, 2008.		10-K	3.1	02/27/20

3.2	Bylaws of Sempra Energy (as amended through April 14, 2020).		8-K	3.1	04/14/20

3.3	Certificate of Determination of the 6% Mandatory Convertible Preferred Stock, Series A, of Sempra Energy (including the form of certificate representing the 6% Mandatory Convertible Preferred Stock, Series A), filed the Secretary of State of the State of California and effective January 5, 2018.		8-K	3.1	01/09/18

3.4	Certificate of Determination of the 6.75% Mandatory Convertible Preferred Stock, Series B, of Sempra Energy (including the form of certificate representing the 6.75% Mandatory Convertible Preferred Stock, Series B) filed with the Secretary of State of the State of California and effective July 11, 2018.		8-K	3.1	07/13/18

San Diego Gas & Electric Company
3.5	Amended and Restated Articles of Incorporation of San Diego Gas & Electric Company effective August 15, 2014.		10-K	3.4	02/26/15

3.6	Bylaws of San Diego Gas & Electric Company (as amended through October 26, 2016).		10-Q	3.1	11/02/16

Southern California Gas Company
3.7	Restated Articles of Incorporation of Southern California Gas Company effective October 7, 1996.		10-K	3.01	03/28/97

3.8	Bylaws of Southern California Gas Company (as amended through January 30, 2017).		8-K	3.1	01/31/17

EXHIBIT 10 -- MATERIAL CONTRACTS

Sempra Energy
10.1*	Engineering, Procurement and Construction Contract, dated as of February 28, 2020, between Port Arthur LNG, LLC, PALNG Common Facilities Company, LLC (but only for the limited purpose set forth therein), and Bechtel Oil, Gas and Chemicals, Inc.	X

Management Contract or Compensatory Plan, Contract or Arrangement
Sempra Energy/San Diego Gas & Electric/Southern California Gas Company
10.2	Severance Agreement and Mutual Release, dated March 30, 2020, between Sempra Energy and George Bilicic.	X

10.3	Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Nonqualified Stock Option Award Agreement.		10-K	10.5	02/27/20

10.4	Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Time-Based Restricted Stock Unit Award - Three Year Ratable Vest.		10-K	10.6	02/27/20

10.5	Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Performance-Based Restricted Stock Unit Award - EPS Growth Performance Measure.		10-K	10.7	02/27/20

10.6	Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Performance-Based Restricted Stock Unit Award - Relative to Shareholder Return Performance Measure - S&P 500 Index.		10-K	10.8	02/27/20

10.7	Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Performance-Based Restricted Stock Unit Award - Relative Total Shareholder Return Performance Measure - S&P 500 Utilities Index.		10-K	10.9	02/27/20

* Portions of the exhibit have been omitted in accordance with applicable SEC rules.

107



Exhibit Number	Exhibit Description	Filed or Furnished Herewith

EXHIBIT 31 -- SECTION 302 CERTIFICATIONS

Sempra Energy
31.1	Certification of Sempra Energy’s Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.	X

31.2	Certification of Sempra Energy’s Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.	X

San Diego Gas & Electric Company
31.3	Certification of San Diego Gas & Electric Company’s Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.	X

31.4	Certification of San Diego Gas & Electric Company’s Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.	X

Southern California Gas Company
31.5	Certification of Southern California Gas Company’s Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.	X

31.6	Certification of Southern California Gas Company’s Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.	X

EXHIBIT 32 -- SECTION 906 CERTIFICATIONS

Sempra Energy
32.1	Certification of Sempra Energy’s Principal Executive Officer pursuant to 18 U.S.C. Sec. 1350.	X

32.2	Certification of Sempra Energy’s Principal Financial Officer pursuant to 18 U.S.C. Sec. 1350.	X

San Diego Gas & Electric Company
32.3	Certification of San Diego Gas & Electric Company’s Principal Executive Officer pursuant to 18 U.S.C. Sec. 1350.	X

32.4	Certification of San Diego Gas & Electric Company’s Principal Financial Officer pursuant to 18 U.S.C. Sec. 1350.	X

Southern California Gas Company
32.5	Certification of Southern California Gas Company’s Principal Executive Officer pursuant to 18 U.S.C. Sec. 1350.	X

32.6	Certification of Southern California Gas Company’s Principal Financial Officer pursuant to 18 U.S.C. Sec. 1350.	X

EXHIBIT 101 -- INTERACTIVE DATA FILE

101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.	X

101.SCH	Inline XBRL Taxonomy Extension Schema Document.	X

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.	X

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.	X

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.	X

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.	X

EXHIBIT 104 -- COVER PAGE INTERACTIVE DATA FILE

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

108

SIGNATURES



Sempra Energy:
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
		SEMPRA ENERGY, (Registrant)

Date: May 4, 2020		By: /s/ *Peter R. Wall*
		Peter R. Wall Senior Vice President, Controller and Chief Accounting Officer (Duly Authorized Officer)



San Diego Gas & Electric Company:
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
		SAN DIEGO GAS & ELECTRIC COMPANY, (Registrant)

Date: May 4, 2020		By: /s/ *Bruce A. Folkmann*
		Bruce A. Folkmann Senior Vice President, Controller, Chief Financial Officer and Chief Accounting Officer (Duly Authorized Officer)



Southern California Gas Company:
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
		SOUTHERN CALIFORNIA GAS COMPANY, (Registrant)

Date: May 4, 2020		By: /s/ *Mia L. DeMontigny*
		Mia L. DeMontigny Vice President, Controller, Chief Financial Officer and Chief Accounting Officer (Duly Authorized Officer)

109

Sempra Energy, et al. – ‘10-Q’ for 3/31/20

On: Monday, 5/4/20, at 3:43pm ET · For: 3/31/20 · Accession #: 1032208-20-22 · File #s: 1-01402, 1-03779, 1-14201

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		List all Filings

Sempra Energy, et al. – ‘10-Q’ for 3/31/20

On: Monday, 5/4/20, at 3:43pm ET · For: 3/31/20 · Accession #: 1032208-20-22 · File #s: 1-01402, 1-03779, 1-14201

Quarterly Report — Form 10-Q — Sect. 13 / 15(d) – SEA’34Filing Table of Contents

‘10-Q’ — Quarterly ReportDocument Table of Contents

This is an HTML Document rendered as filed. [ Alternative Formats ]

Dates Referenced Herein and Documents Incorporated by Reference

21 Subsequent Filings that Reference this Filing

Quarterly Report — Form 10-Q — Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

‘10-Q’ — Quarterly Report
Document Table of Contents