
~~(1)~~	~~At measurement date of June 30, 2017. At September 30, 2017, TdM has a carrying value of $70 million, reflecting subsequent business activity, and is classified as held for sale.~~

NOTE 9. SAN ONOFRE NUCLEAR GENERATING STATION

We provide below updates to ongoing matters related to SONGS, a nuclear generating facility near San Clemente, California that permanently ceased operations in June 2013, and in which SDG&E has a ~~20-percent~~20% ownership interest. We discuss SONGS further in Note 1315 of the Notes to Consolidated Financial Statements in the Annual Report.

~~REPLACEMENT STEAM GENERATORS~~

As part of the Steam Generator Replacement Project, the steam generators were replaced in SONGS Units 2 and 3, and the Units returned to service in 2010 and 2011, respectively. Both Units were shut down in early 2012 after a water leak occurred in the Unit 3 steam generator. Edison, the majority owner and operator of SONGS, concluded that the leak was due to unexpected wear from tube-to-tube contact. At the time the leak was identified, Edison also inspected and tested Unit 2 and subsequently found unexpected tube wear in Unit 2’s steam generator. These issues with the steam generators ultimately resulted in Edison’s decision to permanently retire SONGS in June 2013.

The replacement steam generators were designed and provided by MHI. In July 2013, SDG&E filed a lawsuit against MHI seeking to recover damages SDG&E has incurred and will incur related to the design defects in the steam generators. In October 2013, Edison instituted arbitration proceedings against MHI seeking recovery of damages. The other SONGS co-owners, SDG&E and the City of Riverside, participated as claimants and respondents.

On March 13, 2017, the Tribunal overseeing the arbitration found MHI liable for breach of contract, subject to a contractual limitation of liability, and rejected claimants’ other claims. The Tribunal awarded $118 million in damages to the SONGS co-owners, but determined that MHI was the prevailing party and awarded it 95 percent of its arbitration costs. The damage award is offset by these costs, resulting in a net award of approximately $60 million in favor of the SONGS co-owners. SDG&E’s specific allocation of the

damage award is $24 million reduced by costs awarded to MHI of approximately $12 million, resulting in a net damage award of $12 million, which was paid by MHI to SDG&E in March 2017. These amounts include certain adjustments to calculations supporting the Tribunal’s findings. In accordance with the Amended Settlement Agreement discussed below, which may be modified or set aside, SDG&E recorded the proceeds from the MHI arbitration by reducing Operation and Maintenance for previously incurred legal costs of $11 million, and shared the remaining $1 million equally between ratepayers and shareholders.

~~SETTLEMENT AGREEMENT TO RESOLVE THE CPUC’S ORDER INSTITUTING INVESTIGATION INTO THE SONGS OUTAGE~~

In November 2012, in response to the outage, the CPUC issued the SONGS OII, which was intended to determine the ultimate recovery of the investment in SONGS and the costs incurred since the commencement of this outage.

In November 2014, the CPUC issued a final decision approving an Amended and Restated Settlement Agreement (Amended Settlement Agreement) in the SONGS OII proceeding executed by SDG&E along with Edison, TURN, ORA and two other intervenors. The Amended Settlement Agreement does not affect ongoing or future proceedings before the NRC, or any litigation or arbitration related to potential future recoveries from third parties (except for the allocation to ratepayers of any recoveries addressed in the final decision) or any proceedings addressing decommissioning activities and costs. We describe the terms and provisions of the Amended Settlement Agreement in Note 13 of the Notes to Consolidated Financial Statements in the Annual Report.

In May 2016, following the filing of petitions for modification by various parties, the CPUC issued a procedural ruling reopening the record of the OII to address the issue of whether the Amended Settlement Agreement is reasonable and in the public interest.

In December 2016, the CPUC issued another procedural ruling directing parties to the SONGS OII to determine whether an agreement could be reached to modify the Amended Settlement Agreement previously approved by the CPUC, to resolve allegations that unreported ~~ex parte~~ communications between Edison and the CPUC resulted in an unfair advantage at the time the settlement agreement was negotiated. Pursuant to the December ruling and a subsequent procedural ruling, the parties met to confer, engaged a mediator and held confidential mediation discussions in June, July and August of 2017.

In August 2017, the parties filed status reports providing their recommendations for resolving the OII given their unsuccessful efforts at reaching a settlement through mediation. SDG&E and Edison recommend that the Amended Settlement Agreement, as adopted by the CPUC, should be affirmed and the pending intervenor petitions dismissed. Intervening parties recommend various alternative courses of action, including modifying the Amended Settlement Agreement or rejecting it in favor of litigation. In October 2017, the CPUC issued a ruling establishing a process to bring the proceeding to a conclusion. This ruling establishes a status conference and includes a preliminary schedule for additional testimony, hearings and briefings. The CPUC has not announced the expected timing for a decision. The ruling indicates that the record is adequate to allow the CPUC to determine whether the Amended Settlement Agreement should be reaffirmed. The ruling also provides for an expedited process to further develop the record in the event that the CPUC ultimately decides not to reaffirm the Amended Settlement Agreement, and instead determines a different allocation of costs to ratepayers as a result of the premature shutdown of SONGS Units 2 and 3.

There is no assurance that the Amended Settlement Agreement will not be modified or set aside as a result of the OII proceeding, which could result in a substantial reduction in our expected recovery or in payments to customers. These outcomes could have a material adverse effect on Sempra Energy’s and SDG&E’s results of operations, financial condition and cash flows.

~~Accounting and Financial Impacts~~

Through September 30, 2017, the cumulative after-tax loss from plant closure recorded by Sempra Energy and SDG&E is $125 million. The remaining regulatory asset for the expected recovery of SONGS costs, consistent with the Amended Settlement Agreement, is $158 million ($35 million current and $123 million long-term) at September 30, 2017. ~~The amortization period prescribed for the regulatory asset is 10 years, ending in January 2022.~~

~~NUCLEAR DECOMMISSIONING AND FUNDING~~CPUC Cost of Capital

AsThe CPUC approved the following cost of capital for SDG&E and SoCalGas that became effective on January 1, 2023 and will remain in effect through December 31, 2025, subject to the CCM. The CPUC has issued a ~~result of Edison’s decision~~ruling to ~~permanently retire SONGS Units 2 and 3, Edison began the decommissioning~~initiate a second phase of this cost of capital proceeding to evaluate potential modifications to the ~~plant. Decommissioning~~CCM.


CPUC AUTHORIZED COST OF CAPITAL FOR 2023 – 2025

SDG&E							SoCalGas
Authorized weighting		Return on rate base		Weighted return on rate base(1)			Authorized weighting		Return on rate base		Weighted return on rate base
45.25	%	4.05	%	1.83	%	Long-Term Debt	45.60	%	4.07	%	1.86	%
2.75		6.22		0.17		Preferred Equity	2.40		6.00		0.14
52.00		9.95		5.17		Common Equity	52.00		9.80		5.10
100.00	%			7.18	%		100.00	%			7.10	%

(1) Total weighted return on rate base does not sum due to rounding differences.

The CCM was triggered for SDG&E and SoCalGas on September 30, 2023 and, subject to regulatory approval, would increase each of ~~Unit~~their authorized rates of return effective January 1, ~~removed from service~~2024 as follows:


PROPOSED CPUC COST OF CAPITAL FOR 2024 – 2025

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
45.25	%	4.34	%	1.96	%	Long-Term Debt	45.60	%	4.54	%	2.07	%
2.75		6.22		0.17		Preferred Equity	2.40		6.00		0.14
52.00		10.65		5.54		Common Equity	52.00		10.50		5.46
100.00	%			7.67	%		100.00	%			7.67	%

Table of Con tents

SDG&E

FERC Rate Matters

SDG&E files separately with the FERC for its authorized ROE on FERC-regulated electric transmission operations and assets. SDG&E’s currently effective TO5 settlement provides for a ROE of 10.60%, consisting of a base ROE of 10.10% plus an additional 50 bps for participation in ~~1992, is largely complete. The remaining work~~the California ISO (the California ISO adder). If the FERC issues an order ruling that California IOUs are no longer eligible for Unit 1 will be done once Units 2 and 3 are dismantled. In December 2016, Edison announced that, following a 10-month competitive bid process, it had contracted with a joint venture of AECOM and EnergySolutions (knownthe California ISO adder, SDG&E would refund the California ISO adder as ~~SONGS Decommissioning Solutions) as the general contractor to complete the dismantlement of SONGS. The majority~~ of the ~~dismantlement work~~refund effective date (June 1, 2019) if such a refund is ~~expected~~determined to ~~take 10 years. SDG&E is responsible for approximately 20 percent~~be required by the terms of the ~~total contract price.~~

~~In accordance with state~~TO5 settlement. The TO5 term is effective June 1, 2019 and ~~federal requirements and regulations,~~shall remain in effect until terminated by a notice provided at least six months before the end of the calendar year. Following such notice, SDG&E ~~has assets held in the NDT to fund its share~~would file an updated rate request with an effective date of ~~decommissioning costs for SONGS Units~~January 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. 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 Regulatory Liabilities Arising from Removal Obligations.

In ~~April 2016, the CPUC adopted a decision approving a total decommissioning cost estimate for SONGS Units 2 and 3 of $4.4 billion (in 2014 dollars), of which SDG&E’s share is $899 million.~~ 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. ~~SDG&E has received authorization from the CPUC to access NDT funds of up to~~ ~~$302 million~~ ~~for 2013 through 2017 (2017 forecasted) SONGS decommissioning costs. This includes up to~~ ~~$84 million authorized by the CPUC in February 2017 to be withdrawn from the NDT for forecasted 2017 SONGS Units 2 and 3 costs as decommissioning costs are incurred.~~

~~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; however, the IRS has stated that it will not challenge taxpayer positions consistent with the proposed regulations for taxable years ending on or after the date the proposed regulations were issued. SDG&E is seeking further clarification of the proposed regulations to confirm that the proposed regulations will allow SDG&E to access the NDT funds for reimbursement or payment of the spent fuel management costs that were or will be incurred in 2016 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 in Note 11. It is unclear when clarification of the proposed regulations might be provided or when the proposed regulations will be finalized.following year.

~~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 8.~~

NUCLEAR DECOMMISSIONING TRUSTS
(Dollars in millions)
Cost
Gross
unrealized
gains

Gross
unrealized
losses

Estimated
fair
value
At September 30, 2017:
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies(1) $ 51
$ —
$ —
$ 51
Municipal bonds(1) 238
7
—
245
Other securities(2) 207
4
(1 ) 210
Total debt securities 496
11
(1 ) 506
Equity securities 189
321
(2 ) 508
Cash and cash equivalents 27
—
—
27
Total $ 712
$ 332
$ (3 ) $ 1,041
At December 31, 2016:
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies $ 52
$ —
$ —
$ 52
Municipal bonds 203
4
(1 ) 206
Other securities 141
2
(2 ) 141
Total debt securities 396
6
(3 ) 399
Equity securities 143
366
(1 ) 508
Cash and cash equivalents 119
—
—
119
Total $ 658
$ 372
$ (4 ) $ 1,026


~~(1)~~	~~Maturity dates are 2017-2047.~~


~~(2)~~	~~Maturity dates are 2017-2066.~~

~~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
September 30, Nine months ended
September 30,
2017 2016 2017 2016
Proceeds from sales(1) $ 259
$ 282
$ 1,082
$ 486
Gross realized gains 8
24
132
32
Gross realized losses (3 ) (3 ) (11 ) (14 )


~~(1)~~	~~Excludes securities that are held to maturity.~~

Net unrealized gains and losses, as well as realized gains and losses that are reinvested in the NDT, are included in Regulatory Liabilities Arising from Removal Obligations 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. ~~In the nine months ended~~ ~~September 30, 2017~~, sale and purchase activities in our NDT increased significantly compared to the same period in 2016 as a result of continuing changes to our asset allocations initiated in the fourth quarter of 2016 to reduce our equity volatility, lower our duration risk, and increase exposure to municipal bonds and intermediate credit. This shift in our asset mix is intended to reduce the overall risk profile of the NDT in anticipation of significant cash withdrawals over the next 10 years to fund the SONGS decommissioning.

NOTE ~~10. REGULATORY MATTERS~~5. INVESTMENTS IN UNCONSOLIDATED ENTITIES

We ~~discuss regulatory matters~~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 11 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 Note 146 of the Notes to Consolidated Financial Statements in the Annual Report.

SEMPRA TEXAS UTILITIES

Oncor Holdings

We account for our 100% equity ownership interest in Oncor Holdings, which owns an 80.25% interest in Oncor, as an equity method investment. Due to the ring-fence 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 ~~provide updates to those discussions~~Oncor.

In the nine months ended September 30, 2023 and ~~information about new regulatory matters below.~~

~~CALIFORNIA UTILITIES MATTERS~~

~~CPUC General Rate Case~~

The CPUC uses a GRC proceeding to set sufficient rates to allow the California Utilities to recover their reasonable cost of O&M and to provide the opportunity to realize their authorized rates of return on their investment.

~~2019 General Rate Case~~

On October 6, 2017, SDG&E and SoCalGas filed their 2019 GRC applications requesting CPUC approval of test year revenue requirements for 2019 and attrition year adjustments for 2020 through 2022. SDG&E and SoCalGas requested revenue requirements for 2019 of $2,1992022, Sempra contributed $270 million and ~~$2,989~~$256 million, respectively, to Oncor Holdings, and Oncor Holdings distributed $323 million and $255 million, respectively, to Sempra.

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


SUMMARIZED FINANCIAL INFORMATION – ONCOR HOLDINGS
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Operating revenues	$	1,592	$	1,438	$	4,227	$	3,980
Operating expenses	(1,007)		(929)		(3,007)		(2,734)
Income from operations	585		509		1,220		1,246
Interest expense	(140)		(115)		(396)		(331)
Income tax expense	(81)		(70)		(148)		(164)
Net income	376		315		672		732
Noncontrolling interest held by Texas Transmission Investment LLC	(75)		(62)		(135)		(146)
Earnings attributable to Sempra(1)	301		253		537		586

(1) Excludes adjustments to equity earnings related to amortization of a tax sharing liability associated with a tax sharing arrangement and changes in basis differences in AOCI within the carrying value of our equity method investment.

Table of Con tents

SEMPRA INFRASTRUCTURE

Cameron LNG JV

In the nine months ended September 30, 2023 and 2022, Sempra Infrastructure contributed $11 million and $19 million, respectively, to Cameron LNG JV, and Cameron LNG JV distributed $339 million and $388 million, respectively, to Sempra Infrastructure.

Sempra Promissory Note for SDSRA Distribution

Cameron LNG JV’s debt agreements require Cameron LNG JV to maintain the SDSRA, which is an ~~increase~~additional reserve account beyond the Senior Debt Service Accrual Account, where funds accumulate from operations to satisfy senior debt obligations due and payable on the next payment date. Both accounts can be funded with cash or authorized investments. In June 2021, Sempra Infrastructure received a distribution of ~~$218~~$165 million based on its proportionate share of the SDSRA, for which Sempra provided a promissory note and letters of credit to secure a proportionate share of Cameron LNG JV’s obligation to fund the SDSRA. Sempra’s maximum exposure to loss is replenishment of the amount withdrawn by Sempra Infrastructure from the SDSRA, or $165 million. We recorded a guarantee liability of $22 million in June 2021, with an associated carrying value of $19 million at September 30, 2023, for the fair value of the promissory note, which is being reduced over the duration of the guarantee through Sempra Infrastructure’s investment in Cameron LNG JV. The guarantee will terminate upon full repayment of Cameron LNG JV’s debt, scheduled to occur in 2039, or replenishment of the amount withdrawn by Sempra Infrastructure from the SDSRA.

Sempra Support Agreement for CFIN

In July 2020, CFIN entered into a financing arrangement with Cameron LNG JV’s four project owners and received aggregate proceeds of $1.5 billion from two project owners and from external lenders on behalf of the other two project owners (collectively, the affiliate loans), based on their proportionate ownership interest in Cameron LNG JV. CFIN used the proceeds from the affiliate loans to provide a loan to Cameron LNG JV. The affiliate loans mature in 2039. Principal and interest will be paid from Cameron LNG JV’s project cash flows from its three-train natural gas liquefaction facility. Cameron LNG JV used the proceeds from its loan to return equity to its project owners. Sempra used its $753 million share of the proceeds for working capital and other general corporate purposes, including the repayment of indebtedness.

Sempra Infrastructure’s $753 million proportionate share of the affiliate loans, based on SI Partners’ 50.2% ownership interest in Cameron LNG JV, was funded by external lenders comprised of a syndicate of eight banks (the bank debt) to whom Sempra has provided a guarantee pursuant to a Support Agreement under which:

▪Sempra has severally guaranteed repayment of the bank debt plus accrued and unpaid interest if CFIN fails to pay the external lenders;

▪the external lenders may exercise an option to put the bank debt to Sempra Infrastructure upon the occurrence of certain events, including a failure by CFIN to meet its payment obligations under the bank debt;

▪the external lenders will put some or all of the bank debt to Sempra Infrastructure on the fifth, tenth, or fifteenth anniversary date of the affiliate loans, except the portion of the debt owed to any external lender that has elected not to participate in the put option six months prior to the respective anniversary date;

▪Sempra Infrastructure also has a right to call the bank debt back from, or to refinance the bank debt with, the external lenders at any time; and

▪the Support Agreement will terminate upon full repayment of the bank debt, including repayment following an event in which the bank debt is put to Sempra Infrastructure.

In exchange for this guarantee, the external lenders pay a guarantee fee that is based on the credit rating of Sempra’s long-term senior unsecured non-credit enhanced debt rating, which guarantee fee Sempra Infrastructure recognizes as interest income as earned. Sempra’s maximum exposure to loss is the bank debt plus any accrued and unpaid interest and related fees, subject to a liability cap of 130% of the bank debt, or $979 million. We measure the Support Agreement at fair value, net of related guarantee fees, on a recurring basis (see Note 8). At September 30, 2023, the fair value of the Support Agreement was $18 million, of which $7 million is included in Other Current Assets and $11 million is included in Other Long-Term Assets on Sempra’s Condensed Consolidated Balance Sheet.

TAG

In the nine months ended September 30, 2023 and 2022, TAG distributed $36 million and ~~$480~~$32 million, ~~over their respective estimated 2018 revenue requirements. The California Utilities are proposing post-test year revenue requirement changes using various adjustment factors which are estimated~~respectively, to ~~result in annual increases~~Sempra Infrastructure.

Table of ~~approximately 5 percent~~Con tents

IMG

In the nine months ended September 30, 2023, IMG distributed $6 million to ~~7 percent at SDG&E and approximately 6 percent to 8 percent at SoCalGas.~~Sempra Infrastructure.

As part of the 2019 GRC, the CPUC will review the California Utilities’ interim accountability reports which compare the authorized and actual spending for certain safety-related activities for 2014 through 2016. In June 2017, SDG&E and SoCalGas filed their first interim accountability reports comparing authorized and actual spending in 2014 and 2015 for certain safety-related activities. Similar data for 2016 was provided with the 2019 GRC filings in a second interim accountability report. The stated purpose of the interim accountability reports is to provide data and metrics for key safety and risk mitigation areas that will be considered in the 2019 GRC.

NOTE 6. DEBT AND CREDIT FACILITIES

The ~~results~~principal terms of ~~the rate case may materially~~our debt arrangements are described below and ~~adversely differ from what is contained in the GRC applications.~~

~~Risk Assessment Mitigation Phase Reporting and Impact on the 2019 GRC Filings~~

In December 2014, the CPUC issued a decision incorporating a risk-based decision-making framework into all future GRC application filings for major natural gas and electric utilities in California. The framework is intended to assist in assessing safety risks and the utilities’ plans to help ensure that such risks are adequately addressed. In advance of filing the California Utilities’ 2019 GRC applications discussed above, two proceedings occurred: the Safety Model Assessment Proceeding and the RAMP. In the Safety Model Assessment Proceeding, the California Utilities demonstrated the models used to prioritize and mitigate risks in order for the CPUC to establish guidelines and standards for these models.

In November 2016, as part of the new framework, SDG&E and SoCalGas filed their first RAMP report presenting a comprehensive assessment of their key safety risks and proposed activities for mitigating such risks. The report details these key safety risks, which include critical operational issues such as natural gas pipeline safety and wildfire safety, and addresses their classification, scoring, mitigation, alternatives, safety culture, quantitative analysis, data collection and lessons learned.

In March 2017, the CPUC’s Safety and Enforcement Division issued its evaluation report providing generally favorable feedback on the California Utilities’ RAMP report, but recommending more detailed analysis of the risks the California Utilities presented in the report. The new GRC framework does not require the CPUC to adopt the RAMP report. However, SDG&E and SoCalGas included funding requests in their respective 2019 GRC filings for proposed projects or activities outlined in their RAMP reports.

~~Senate Bill 549.~~ In September 2017, SB 549 was signed into law, requiring that SDG&E and SoCalGas (as electric and gas corporations) annually notify the CPUC when revenue authorized by the CPUC for maintenance, safety or reliability is redirected to other purposes. This requirement is effective beginning January 1, 2018. The form of this reporting is not yet defined by the CPUC, though it could be incorporated into an ongoing proceeding or report otherwise required to be submitted to the CPUC.

~~2016 General Rate Case~~

~~In June 2016, the CPUC issued the 2016 GRC FD, the details of which are discussed~~ in Note 147 of the Notes to Consolidated Financial Statements in the Annual Report. ~~The 2016 GRC FD was effective retroactive~~

SHORT-TERM DEBT

Committed Lines of Credit

At September 30, 2023, Sempra had an aggregate capacity of $9.9 billion under seven primary committed lines of credit, which provide liquidity and support commercial paper programs. Because our commercial paper programs are supported by some of these lines of credit, we reflect the amount of commercial paper outstanding, before reductions of any unamortized discounts, and any letters of credit outstanding as a reduction to ~~January 1, 2016.~~

~~The 2016 GRC FD required~~ the ~~establishment of two-way income tax expense memorandum accounts to track any revenue variances resulting from certain differences between the income tax expense forecasted~~available unused credit capacity in the ~~GRC and the income tax expense incurred by~~following table.


COMMITTED LINES OF CREDIT
(Dollars in millions)
		September 30, 2023
Borrower	Expiration date of facility	Total facility		Commercial paper outstanding		Amounts outstanding		Letters of credit outstanding		Available unused credit
Sempra	October 2028(1)	$	4,000	$	(970)	$	—	$	—	$	3,030
SDG&E	October 2028(1)	1,500		—		—		—		1,500
SoCalGas	October 2028(1)	1,200		(421)		—		—		779
SI Partners and IEnova	September 2025(2)	500		—		(350)		—		150
SI Partners and IEnova	August 2026(3)	1,000		—		—		—		1,000
SI Partners and IEnova	August 2028(4)	1,500		—		(201)		—		1,299
Port Arthur LNG	March 2030	200		—		—		(25)		175
Total		$	9,900	$	(1,391)	$	(551)	$	(25)	$	7,933

(1) In October 2023, Sempra, SDG&E and SoCalGas each amended their respective credit facility to extend the expiration date from ~~2016~~October 2027 to October 2028. Each credit facility will maintain a syndicate of 23 lenders through ~~2018.~~October 2027, at which time the syndicate of lenders for each credit facility will be reduced to 22 unless a new or existing lender agrees to assume the 23rd lender’s commitment. Such a reduction in lenders would result in a reduction to the available credit capacity to $3,845, $1,442 and $1,153 for Sempra, SDG&E and SoCalGas, respectively, through October 2028.

(2) In September 2023, the $150 facility was terminated and the $350 facility was amended to increase the commitment to $500, adjust the applicable margin to 80 bps (including credit adjustment spread), and extend the expiration date from September 2023 to September 2025.

(3) In August 2023, the facility was amended to include IEnova as a co-borrower, adjust the Term SOFR credit adjustment spread to 10 bps in all tenors, and extend the expiration date from November 2024 to August 2026. Additionally, either SI Partners or IEnova has the right to increase the total facility to $1,500, subject to lender approval.

(4) In August 2023, the facility was amended to extend the expiration date from February 2024 to August 2028.

Sempra, 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 65% at the end of each quarter. At September 30, 2023, each entity was in compliance with this ratio under its respective credit facility.

SI Partners must maintain a ratio of consolidated adjusted net indebtedness to consolidated earnings before interest, taxes, depreciation and amortization (as defined in each of the applicable credit facilities) of no more than 5.25 to 1.00 at the end of each quarter. At September 30, 2023, SI Partners was in compliance with this ratio.

In March 2023, Port Arthur LNG entered into a seven-year initial working capital facility agreement with a syndicate of lenders expiring in March 2030. The ~~variances~~credit facility permits borrowings of up to $200 million, which bear interest by reference to Term SOFR, plus the applicable margin and a credit adjustment spread. The credit facility also provides for the issuance of up to $200 million of letters of credit.

Table of Con tents

Uncommitted Line of Credit

ECA LNG Phase 1 has an uncommitted line of credit, which is generally used for working capital requirements, with an aggregate capacity of $200 million of which $37 million was outstanding at September 30, 2023. The amounts outstanding are before reductions of any unamortized discounts. Borrowings can be ~~tracked include tax expense differences relating to:~~in U.S. dollars or Mexican pesos. At September 30, 2023, outstanding amounts were borrowed in Mexican pesos and bear interest at a variable rate based on the 28-day Interbank Equilibrium Interest Rate plus 105 bps. In June 2023, the facility was amended to extend the expiration date to August 2024 and replace the London Interbank Offered Rate reference rate plus 105 bps with the SOFR reference rate plus 115 bps. As such, borrowings made in U.S. dollars bear interest at a variable rate based on the one-month or three-month SOFR plus 115 bps.

Uncommitted Letters of Credit

Outside of our domestic and foreign credit facilities, we have bilateral unsecured standby letter of credit capacity with select lenders that is uncommitted and supported by reimbursement agreements. At September 30, 2023, we had $508 million in standby letters of credit outstanding under these agreements.


▪UNCOMMITTED LETTERS OF CREDIT
(Dollars in millions)
	~~net revenue changes;~~	September 30, 2023

	Expiration date range	Uncommitted letters of credit outstanding
SDG&E	January 2024 - May 2024	$	15
▪SoCalGas	~~mandatory tax law, tax accounting, tax procedural, or tax policy changes; and~~March 2024 - November 2024

	20
▪Sempra Infrastructure	~~elective tax law, tax accounting, tax procedural, or tax policy changes.~~October 2023 - October 2043	307
Parent and other	March 2024 - September 2024	166
Total		$	508

~~Starting~~Term Loan

In July 2022, SoCalGas entered into an $800 million, 364-day term loan agreement with a maturity date of July 6, 2023. In August 2022, SoCalGas borrowed $800 million, net of negligible debt issuance costs, under the term loan agreement. The borrowing bore interest at benchmark rates plus 70 bps and was due in full upon maturity. SoCalGas used the proceeds for payment of a portion of the costs relating to litigation pertaining to the Leak. In the second quarter of ~~2016,~~2023, SoCalGas repaid the term loan in full.

Weighted-Average Interest Rates

The weighted-average interest rates on all short-term debt were as follows:


WEIGHTED-AVERAGE INTEREST RATES

	September 30, 2023		December 31, 2022
Sempra	5.86	%	5.57	%
SDG&E	—		4.76
SoCalGas	5.37		4.71

LONG-TERM DEBT

SDG&E

In March 2023, SDG&E issued $800 million aggregate principal amount of 5.35% first mortgage bonds due in full upon maturity on April 1, 2053 and received proceeds of $783 million (net of debt discount, underwriting discounts and debt issuance costs of $17 million). The first mortgage bonds are redeemable prior to maturity, subject to their terms, and in certain circumstances subject to make-whole provisions. SDG&E used the net proceeds for general corporate purposes, including repayment of commercial paper and other indebtedness.

Table of Con tents

In August 2023, SDG&E issued $600 million aggregate principal amount of 4.95% green first mortgage bonds due in full upon maturity on August 15, 2028 and received proceeds of $593 million (net of debt discount, underwriting discounts and debt issuance costs of $7 million). The first mortgage bonds are redeemable prior to maturity, subject to their terms, and in certain circumstances subject to make-whole provisions. SDG&E intends to use the net proceeds to finance or refinance investments in eligible projects that fall into one or more of the following categories: climate change adaptation, clean energy solutions and clean transportation.

SoCalGas

In May 2023, SoCalGas ~~began tracking~~issued $500 million aggregate principal amount of 5.20% first mortgage bonds due in full upon maturity on June 1, 2033 and received proceeds of $495 million (net of debt discount, underwriting discounts and debt issuance costs of $5 million), and $500 million aggregate principal amount of 5.75% first mortgage bonds due in full upon maturity on June 1, 2053 and received proceeds of $493 million (net of debt discount, underwriting discounts and debt issuance costs of $7 million). Each series of first mortgage bonds is redeemable prior to maturity, subject to its terms, and in certain circumstances subject to make-whole provisions. SoCalGas used the ~~differences~~net proceeds to repay its $300 million senior unsecured floating rate notes prior to their September 2023 scheduled maturity, a portion of its $800 million term loan and other general corporate purposes.

Sempra

In June 2023, Sempra issued $550 million aggregate principal amount of 5.40% senior unsecured notes due in full upon maturity on August 1, 2026 and received proceeds of $545 million (net of debt discount, underwriting discounts and debt issuance costs of $5 million), and $700 million aggregate principal amount of 5.50% senior unsecured notes due in full upon maturity on August 1, 2033 and received proceeds of $692 million (net of debt discount, underwriting discounts and debt issuance costs of $8 million). Each series of notes is redeemable prior to maturity, subject to its terms, and in certain circumstances subject to make-whole provisions. We used the ~~income tax expense forecasted~~net proceeds for general corporate purposes, including repayment of commercial paper and other indebtedness.

Sempra Infrastructure

ECA LNG Phase 1

ECA LNG Phase 1 has a five-year loan agreement with a syndicate of seven external lenders that matures in December 2025 for an aggregate principal amount of up to $1.3 billion. IEnova and TotalEnergies SE have provided guarantees for repayment of the ~~GRC proceedings~~loans plus accrued and ~~the income tax expense incurred.~~unpaid interest of 83.4% and 16.6%, respectively. At September 30, ~~2017, the recorded regulatory liability associated with these tracked amounts totaled $45~~2023 and December 31, 2022, $782 million and ~~$58~~$575 million, respectively, of borrowings from external lenders were outstanding under the loan agreement, with a weighted-average interest rate of 8.35% and 7.54%, respectively.

Port Arthur LNG

In March 2023, Port Arthur LNG entered into a term loan facility agreement with a syndicate of lenders for an aggregate principal amount of approximately $6.8 billion. Proceeds from the loans will be used to finance the cost of construction of the PA LNG Phase 1 project. The loans mature on March 20, 2030 and bear interest by reference to Term SOFR, plus the applicable margin and a credit adjustment spread. The applicable margin prior to completion of the PA LNG Phase 1 project (which occurs upon the satisfaction or waiver of a series of customary operational, technical, environmental and social and other tests and conditions that generally would not be fully met until after the commercial operations date) is 2.00% and on completion and thereafter is 2.25%. The principal amounts outstanding on the loans must be repaid in quarterly installments, commencing on the earlier of (i) the first quarterly payment date occurring more than three calendar months following completion of the PA LNG Phase 1 project and (ii) April 20, 2029. Under the terms of the loan agreement, at least 60% of the projected outstanding balance is required to be hedged during construction and over the underlying 20-year notional amortization period. As we discuss in Note 7, Port Arthur LNG entered into hedging instruments in satisfaction of this requirement in March 2023. An upfront equity funding amount of $4.7 billion is required to have been contributed to Port Arthur LNG for construction costs as a condition to the initial advance of term loans under the agreement (other than advances for fees, interest, expenses and certain other specified costs). Port Arthur LNG paid $200 million in debt issuance costs at closing. Additionally, the loan agreement and the related working capital facility agreement that we discuss above require payment of commitment fees calculated at a rate per annum equal to 30% of the applicable margin for Term SOFR loans multiplied by the outstanding debt commitments, and additional administrative fees. At September 30, 2023, $243 million of borrowings were outstanding under the loan agreement, with an all-in weighted-average interest rate of 5.71%.

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In connection with this loan agreement, SI Partners and ConocoPhillips have collectively provided commitments for approximately $2.8 billion in equity funding for the benefit of Port Arthur LNG for their respective affiliate’s share of the equity funding of anticipated construction costs of the PA LNG Phase 1 project in excess of the upfront equity funding amount of $4.7 billion. The amount of each commitment is based on each of SI Partners’ and ConocoPhillips’ proportionate indirect ownership interest in Port Arthur LNG of 70% and 30%, respectively, as of the March 2023 loan agreement. The obligation under these guarantees will be reduced as their respective affiliates fund their direct proportionate interest of capital calls. Such equity funding can be called upon by Port Arthur LNG to fund project costs or, upon the taking of an enforcement action under the terms of Port Arthur LNG’s finance documents, to pay its senior debt obligations.

The pari passu secured obligations under the related finance documents are secured by a first priority lien (subject to customary permitted encumbrances) in substantially all of the assets of Port Arthur LNG, including the equity interests in, and real property

interests of, Port Arthur LNG.

NOTE 7. 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 could cause our asset values to fall or our liabilities to 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 may have derivatives that are (1) cash flow hedges, (2) fair value hedges, or (3) undesignated. Depending on the applicability of hedge accounting and, for SDG&E and SoCalGas ~~respectively. The recorded liability~~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 and undesignated derivatives not subject to rate recovery). We classify cash flows from the principal settlements of cross-currency swaps that hedge exposure related to Mexican peso-denominated debt and amounts related to terminations or early settlements of interest rate swaps 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 of variability of future cash flows of a given revenue or expense item, 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:

▪SDG&E and SoCalGas use natural gas derivatives and SDG&E uses electricity derivatives, for the benefit of customers, with the objective of managing price risk and basis risk, 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 limited by company policy. SDG&E’s risk management and transacting activity plans for electricity derivatives are also required to be filed with, and have been approved by, the CPUC. SoCalGas is also subject to certain regulatory requirements and thresholds related to natural gas procurement under the GCIM. Natural gas and electricity derivative activities are recorded as commodity costs that are offset by regulatory account balances and are recovered

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in rates. Net commodity cost impacts on the Condensed Consolidated Statements of Operations are reflected in Cost of Natural Gas or in Cost of Electric Fuel and Purchased Power.

▪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 Infrastructure may use natural gas and electricity derivatives, as appropriate, in an effort to optimize the earnings of its assets which support the following businesses: LNG, natural gas pipelines and storage, and power generation. Gains and losses associated with undesignated derivatives are recognized in Energy-Related Businesses Revenues on the Condensed Consolidated Statements of Operations.

▪From time to time, our various businesses, including SDG&E and SoCalGas, may use other derivatives to hedge exposures such as GHG allowances.

The following table summarizes net energy derivative volumes.

NET ENERGY DERIVATIVE VOLUMES

(Quantities in millions)

Commodity

Unit of measure

September 30, 2023

December 31, 2022

Sempra:

Natural gas

MMBtu

441

254

Electricity

MWh

—

Congestion revenue rights

MWh

SDG&E:

Natural gas

MMBtu

Congestion revenue rights

MWh

SoCalGas:

Natural gas

MMBtu

347

224

INTEREST RATE DERIVATIVES

We are exposed to interest rates primarily as a result of our current and expected use of financing. SDG&E and SoCalGas, as well as Sempra 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.

In December 2022, Sempra Infrastructure entered into an undesignated contingent interest rate swap to lock in interest rates on up to $3.5 billion of the variable rate indebtedness from anticipated future project-level debt financing that would be used to pay for construction costs of the PA LNG Phase 1 project. The contingent interest rate swap had a 25-year tenor, and its settlement was conditional upon the closing of project-level debt financing with respect to the PA LNG Phase 1 project. In March 2023, we closed on the project-level debt financing and, shortly thereafter, paid $14 million to cash settle the contingent interest rate swap.

As we discuss in Note 6, a minimum of 60% of the projected amount of term loans outstanding is required to be hedged under the Port Arthur LNG term loan facility agreement. In March 2023, Port Arthur LNG entered into floating-to-fixed interest rate swaps with 17 counterparties to hedge the variability in cash flows related to the SOFR-based component of interest payments on forecasted loans outstanding under the agreement. The notional amounts of the interest rate swaps generally increase in proportion to the forecasted borrowings up to a maximum amount of $4.2 billion prior to the maturity of the term loans on March 20, 2030. Under the interest rate swaps, which are designated as cash flow hedges, Port Arthur LNG receives interest at Term SOFR and pays interest at a fixed rate of 3.23% based on amortizing notional amounts maturing in 2048.

The following table presents the net notional amounts of our interest rate derivatives, excluding those in our equity method investments and the contingent interest rate swap.

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INTEREST RATE DERIVATIVES

(Dollars in millions)

September 30, 2023

December 31, 2022

Notional debt

Maturities

Notional debt

Maturities

Sempra:

Cash flow hedges(1)

4,454

2023-2048

294

2023-2034

(1) At September 30, 2023 and December 31, 2022, cash flow hedges accrued interest based on a notional of $491 and $294, respectively.

FOREIGN CURRENCY DERIVATIVES

We may 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 fixed interest rates for U.S. fixed interest rates. From time to time, Sempra Infrastructure 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 may utilize foreign currency derivatives as a means to manage the risk of exposure to significant fluctuations in our income tax expense ~~incurred than~~and equity earnings from these impacts; however, we generally do not hedge our deferred income tax assets and liabilities or for inflation.

The following table presents the net notional amounts of our foreign currency derivatives, excluding those in our equity method investments.


FOREIGN CURRENCY DERIVATIVES
(Dollars in millions)
	September 30, 2023			December 31, 2022
	Notional amount		Maturities	Notional amount		Maturities
Sempra:
Cross-currency swaps	$	—	—	$	306	2023
Other foreign currency derivatives	150		2023-2025	111		2023-2024

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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. 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 because the cash collateral was in excess of liability positions.


DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30, 2023
	Current assets: Fixed-price contracts and other derivatives(1)		Other long-term assets		Other current liabilities		Deferred credits and other
Sempra:
Derivatives designated as hedging instruments:
Interest rate instruments	$	15	$	363	$	—	$	—
Foreign exchange instruments	—		1		(8)		—
Derivatives not designated as hedging instruments:
Commodity contracts not subject to rate recovery	175		25		(172)		(29)
Associated offsetting commodity contracts	(166)		(22)		166		22
Commodity contracts subject to rate recovery	22		15		(171)		(6)
Associated offsetting commodity contracts	(16)		(3)		16		3
Associated offsetting cash collateral	—		—		—		1
Net amounts presented on the balance sheet	30		379		(169)		(9)
Additional cash collateral for commodity contracts not subject to rate recovery	89		—		—		—
Additional cash collateral for commodity contracts subject to rate recovery	82		—		—		—
Total(2)	$	201	$	379	$	(169)	$	(9)
SDG&E:
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	18	$	15	$	(13)	$	(4)
Associated offsetting commodity contracts	(12)		(3)		12		3
Associated offsetting cash collateral	—		—		—		1
Net amounts presented on the balance sheet	6		12		(1)		—
Additional cash collateral for commodity contracts subject to rate recovery	80		—		—		—
Total(2)	$	86	$	12	$	(1)	$	—
SoCalGas:
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	4	$	—	$	(158)	$	(2)
Associated offsetting commodity contracts	(4)		—		4		—
Net amounts presented on the balance sheet	—		—		(154)		(2)
Additional cash collateral for commodity contracts subject to rate recovery	2		—		—		—
Total	$	2	$	—	$	(154)	$	(2)

(1) Included in Other Current Assets for SoCalGas.

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

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DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
	December 31, 2022
	Current assets: Fixed-price contracts and other derivatives(1)		Other long-term assets		Other current liabilities		Deferred credits and other
Sempra:
Derivatives designated as hedging instruments:
Interest rate instruments	$	10	$	33	$	—	$	—
Foreign exchange instruments	—		—		(7)		(1)
Interest rate and foreign exchange instruments	—		—		(105)		—
Derivatives not designated as hedging instruments:
Commodity contracts not subject to rate recovery	480		133		(399)		(132)
Associated offsetting commodity contracts	(301)		(39)		301		39
Commodity contracts subject to rate recovery	138		27		(97)		(2)
Associated offsetting commodity contracts	(27)		(2)		27		2
Interest rate instrument	33		—		—		—
Net amounts presented on the balance sheet	333		152		(280)		(94)
Additional cash collateral for commodity contracts not subject to rate recovery	451		—		—		—
Additional cash collateral for commodity contracts subject to rate recovery	18		—		—		—
Total(2)	$	802	$	152	$	(280)	$	(94)
SDG&E:
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	107	$	27	$	(13)	$	(2)
Associated offsetting commodity contracts	(12)		(2)		12		2
Net amounts presented on the balance sheet	95		25		(1)		—
Additional cash collateral for commodity contracts subject to rate recovery	17		—		—		—
Total(2)	$	112	$	25	$	(1)	$	—
SoCalGas:
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	31	$	—	$	(84)	$	—
Associated offsetting commodity contracts	(15)		—		15		—
Net amounts presented on the balance sheet	16		—		(69)		—
Additional cash collateral for commodity contracts subject to rate recovery	1		—		—		—
Total	$	17	$	—	$	(69)	$	—

(1) Included in Other Current Assets for SoCalGas.

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

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The following table 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 gain (loss) recognized in OCI					Pretax gain (loss) reclassified from AOCI into earnings
	Three months ended September 30,					Three months ended September 30,
	2023		2022		Location	2023		2022
Sempra:
Interest rate instruments	$	320	$	4	Interest Expense	$	(1)	$	(2)
Interest rate instruments	32		68		Equity Earnings(1)	12		(1)
Foreign exchange instruments	8		2		Revenues: Energy- Related Businesses	—		—
					Other Income (Expense), Net	1		—
Foreign exchange instruments	7		1		Equity Earnings(1)	1		—
Interest rate and foreign exchange instruments	—		—		Other Income (Expense), Net	—		(3)
Total	$	367	$	75		$	13	$	(6)



	Nine months ended September 30,					Nine months ended September 30,
	2023		2022		Location	2023		2022
Sempra:
Interest rate instruments	$	337	$	39	Interest Expense	$	(1)	$	(1)
Interest rate instruments	56		212		Equity Earnings(1)	33		(28)
Foreign exchange instruments	—		(1)		Revenues: Energy- Related Businesses	—		2
					Other Income (Expense), Net	(1)		(1)
Foreign exchange instruments	1		(1)		Equity Earnings(1)	(1)		1
Interest rate and foreign exchange instruments	7		13		Interest Expense	1		1
					Other Income (Expense), Net	6		3
Total	$	401	$	262		$	37	$	(23)
SoCalGas:
Interest rate instruments	$	—	$	—	Interest Expense	$	(1)	$	(1)

(1) Equity earnings at our foreign equity method investees are recognized after tax.

For Sempra, we expect that net gains before NCI of $48 million, which are net of income tax expense, that are currently recorded in AOCI (with net gains of $22 million attributable to NCI) related to cash flow hedges will be reclassified into earnings during the next 12 months as the hedged items affect earnings. SoCalGas expects that $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 September 30, 2023 is approximately 24 years for Sempra. The maximum remaining term for which we are hedging exposure to the variability of cash flows at our equity method investees is 16 years.

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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 gain (loss) on derivatives recognized in earnings
		Three months ended September 30,				Nine months ended September 30,
	Location	2023		2022		2023		2022
Sempra:
Commodity contracts not subject to rate recovery	Revenues: Energy-Related Businesses	$	83	$	(227)	$	785	$	(455)
Commodity contracts subject to rate recovery	Cost of Natural Gas	(125)		(11)		(172)		(15)
Commodity contracts subject to rate recovery	Cost of Electric Fuel and Purchased Power	23		16		5		10
Interest rate instrument	Interest Expense	—		—		(47)		—
Total		$	(19)	$	(222)	$	571	$	(460)
SDG&E:
Commodity contracts subject to rate recovery	Cost of Electric Fuel and Purchased Power	$	23	$	16	$	5	$	10
SoCalGas:
Commodity contracts subject to rate recovery	Cost of Natural Gas	$	(125)	$	(11)	$	(172)	$	(15)

CREDIT RISK RELATED CONTINGENT FEATURES

For Sempra, 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, the total fair value of this group of derivative instruments in a liability position at September 30, 2023 and December 31, 2022 was $160 million and $106 million, respectively. For SoCalGas, the total fair value of this group of derivative instruments in a liability position at September 30, 2023 and December 31, 2022 was $157 million and $69 million, respectively. SDG&E did not have this group of derivative instruments in a liability position at September 30, 2023 or December 31, 2022. At September 30, 2023, if the credit ratings of Sempra or SoCalGas were reduced below investment grade, $160 million and $157 million, respectively, of additional assets could be required to be posted as collateral for these derivative contracts.

For Sempra, 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 ~~GRC relating~~amounts above.

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NOTE 8. FAIR VALUE MEASUREMENTS

We discuss the valuation techniques and inputs we use to ~~tax repairs deductions, self-developed software deductions~~measure fair value and ~~certain book-over-tax depreciation. The tracking accounts will remain open, and we expect they will be reviewed~~the definition of the three levels of the fair value hierarchy in Note 1 of the Notes to Consolidated Financial Statements in the ~~2019 GRC proceedings.~~ 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 September 30, 2023 and December 31, 2022. 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, 2022.

The fair value of commodity derivative assets and liabilities is presented in accordance with our netting policy, as we discuss in Note 7 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:

▪Nuclear decommissioning trusts reflect the assets of SDG&E’s NDT, excluding accounts receivable and accounts payable. 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 instruments 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 – SDG&E.”

▪Rabbi Trust investments include short-term investments that consist of money market and mutual funds 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).

▪As we discuss in Note 5, in July 2020, Sempra entered into a Support Agreement for the benefit of CFIN. We measure the Support Agreement, which includes a guarantee obligation, a put option and a call option, net of related guarantee fees, at fair value on a recurring basis. We use a discounted cash flow model to value the Support Agreement, net of related guarantee fees. Because some of the inputs that are significant to the valuation are less observable, the Support Agreement is classified as Level 3, as we describe below in “Level 3 Information – Sempra Infrastructure.”

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RECURRING FAIR VALUE MEASURES – SEMPRA
(Dollars in millions)
	Level 1		Level 2		Level 3		Total
	Fair value at September 30, 2023
Assets:
Nuclear decommissioning trusts:
Short-term investments, primarily cash equivalents	$	21	$	3	$	—	$	24
Equity securities	291		4		—		295
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	27		16		—		43
Municipal bonds	—		260		—		260
Other securities	—		216		—		216
Total debt securities	27		492		—		519
Total nuclear decommissioning trusts(1)	339		499		—		838
Short-term investments held in Rabbi Trust	62		—		—		62
Interest rate instruments	—		378		—		378
Foreign exchange instruments	—		1		—		1
Commodity contracts not subject to rate recovery	—		12		—		12
Effect of netting and allocation of collateral(2)	89		—		—		89
Commodity contracts subject to rate recovery	—		—		18		18
Effect of netting and allocation of collateral(2)	76		—		6		82
Support Agreement, net of related guarantee fees	—		—		18		18
Total	$	566	$	890	$	42	$	1,498
Liabilities:
Foreign exchange instruments	$	—	$	8	$	—	$	8
Commodity contracts not subject to rate recovery	—		13		—		13
Commodity contracts subject to rate recovery	2		156		—		158
Effect of netting and allocation of collateral(2)	(1)		—		—		(1)
Total	$	1	$	177	$	—	$	178

(1) Excludes receivables (payables), net.

(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.

Table of Con tents


RECURRING FAIR VALUE MEASURES – SEMPRA (CONTINUED)
(Dollars in millions)
	Level 1		Level 2		Level 3		Total
	Fair value at December 31, 2022
Assets:
Nuclear decommissioning trusts:
Short-term investments, primarily cash equivalents	$	10	$	1	$	—	$	11
Equity securities	293		4		—		297
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	27		13		—		40
Municipal bonds	—		270		—		270
Other securities	—		227		—		227
Total debt securities	27		510		—		537
Total nuclear decommissioning trusts(1)	330		515		—		845
Short-term investments held in Rabbi Trust	55		—		—		55
Interest rate instruments	—		76		—		76
Commodity contracts not subject to rate recovery	—		273		—		273
Effect of netting and allocation of collateral(2)	451		—		—		451
Commodity contracts subject to rate recovery	82		19		35		136
Effect of netting and allocation of collateral(2)	12		—		6		18
Support Agreement, net of related guarantee fees	—		—		17		17
Total	$	930	$	883	$	58	$	1,871
Liabilities:
Foreign exchange instruments	$	—	$	8	$	—	$	8
Interest rate and foreign exchange instruments	—		105		—		105
Commodity contracts not subject to rate recovery	—		191		—		191
Commodity contracts subject to rate recovery	—		70		—		70
Total	$	—	$	374	$	—	$	374

1) Excludes receivables (payables), net.

(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.

Table of Con tents


RECURRING FAIR VALUE MEASURES – SDG&E
(Dollars in millions)
	Level 1		Level 2		Level 3		Total
	Fair value at September 30, 2023
Assets:
Nuclear decommissioning trusts:
Short-term investments, primarily cash equivalents	$	21	$	3	$	—	$	24
Equity securities	291		4		—		295
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	27		16		—		43
Municipal bonds	—		260		—		260
Other securities	—		216		—		216
Total debt securities	27		492		—		519
Total nuclear decommissioning trusts(1)	339		499		—		838
Commodity contracts subject to rate recovery	—		—		18		18
Effect of netting and allocation of collateral(2)	74		—		6		80
Total	$	413	$	499	$	24	$	936
Liabilities:
Commodity contracts subject to rate recovery	$	2	$	—	$	—	$	2
Effect of netting and allocation of collateral(2)	(1)		—		—		(1)
Total	$	1	$	—	$	—	$	1

	Fair value at December 31, 2022
Assets:
Nuclear decommissioning trusts:
Short-term investments, primarily cash equivalents	$	10	$	1	$	—	$	11
Equity securities	293		4		—		297
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	27		13		—		40
Municipal bonds	—		270		—		270
Other securities	—		227		—		227
Total debt securities	27		510		—		537
Total nuclear decommissioning trusts(1)	330		515		—		845
Commodity contracts subject to rate recovery	82		3		35		120
Effect of netting and allocation of collateral(2)	11		—		6		17
Total	$	423	$	518	$	41	$	982
Liabilities:
Commodity contracts subject to rate recovery	$	—	$	1	$	—	$	1
Total	$	—	$	1	$	—	$	1

(1) Excludes receivables (payables), net.

(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.

Table of Con tents


RECURRING FAIR VALUE MEASURES – SOCALGAS
(Dollars in millions)
	Level 1		Level 2		Level 3		Total
	Fair value at September 30, 2023
Assets:
Effect of netting and allocation of collateral(1)	$	2	$	—	$	—	$	2
Total	$	2	$	—	$	—	$	2
Liabilities:
Commodity contracts subject to rate recovery	$	—	$	156	$	—	$	156
Total	$	—	$	156	$	—	$	156

	Fair value at December 31, 2022
Assets:
Commodity contracts subject to rate recovery	$	—	$	16	$	—	$	16
Effect of netting and allocation of collateral(1)	1		—		—		1
Total	$	1	$	16	$	—	$	17
Liabilities:
Commodity contracts subject to rate recovery	$	—	$	69	$	—	$	69
Total	$	—	$	69	$	—	$	69

(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

SDG&E

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 and SDG&E.


LEVEL 3 RECONCILIATIONS(1)
(Dollars in millions)
	Three months ended September 30,
	2023		2022
Balance at July 1	$	20	$	33
Realized and unrealized losses	(2)		(35)
Allocated transmission instruments	1		2
Settlements	(1)		33
Balance at September 30	$	18	$	33
Change in unrealized gains relating to instruments still held at September 30	$	1	$	3

	Nine months ended September 30,
	2023		2022
Balance at January 1	$	35	$	54
Realized and unrealized losses	(10)		(58)
Allocated transmission instruments	(1)		(4)
Settlements	(6)		41
Balance at September 30	$	18	$	33
Change in unrealized losses relating to instruments still held at September 30	$	(8)	$	(15)

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

Table of Con tents

Inputs used to determine the fair value of CRRs and fixed-price electricity positions are reviewed and compared with market conditions to determine reasonableness.

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
2023	$	(3.09)	to	$	10.71	$	(0.56)
2022	(3.67)		to	6.96		(0.70)

The impact associated with discounting is not significant. 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 significantly higher (lower) fair value measurement. We summarize CRR volumes in Note 7.

Long-term, fixed-price electricity positions in 2022 that were valued using significant unobservable data were classified as Level 3 because the contract terms related to a delivery location or tenor for which observable market rate information was not available. The fair value of the net electricity positions classified as Level 3 was derived from a discounted cash flow model using market electricity forward price inputs. The range and weighted-average price of these inputs at September ~~2017, there have been no mandatory~~30, 2022 were $26.75 to $127.20 and $68.50, respectively. We summarize long-term, fixed-price electricity position volumes in Note 7.

Realized gains and losses associated with CRRs and long-term, fixed-price 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.

Sempra Infrastructure

The table below sets forth reconciliations of changes in the fair value of Sempra’s Support Agreement for the benefit of CFIN classified as Level 3 in the fair value hierarchy for Sempra.


LEVEL 3 RECONCILIATIONS
(Dollars in millions)
	Three months ended September 30,
	2023		2022
Balance at July 1	$	23	$	16
Realized and unrealized (losses) gains(1)	(3)		2
Settlements	(2)		(2)
Balance at September 30(2)	$	18	$	16
Change in unrealized (losses) gains relating to instruments still held at September 30	$	(2)	$	2

	Nine months ended September 30,
	2023		2022
Balance at January 1	$	17	$	7
Realized and unrealized gains(1)	7		16
Settlements	(6)		(7)
Balance at September 30(2)	$	18	$	16
Change in unrealized gains relating to instruments still held at September 30	$	7	$	15

(1) Net gains are included in Interest Income and net losses are included in Interest Expense on Sempra’s Condensed Consolidated Statements of Operations.

(2) Includes $7 in Other Current Assets and $11 in Other Long-term Assets at September 30, 2023 on Sempra’s Condensed Consolidated Balance Sheet.

Table of Con tents

The fair value of the Support Agreement, net of related guarantee fees, is based on a discounted cash flow model using a probability of default and survival methodology. Our estimate of fair value considers inputs such as third-party default rates, credit ratings, recovery rates, and risk-adjusted discount rates, which may be readily observable, market corroborated or ~~elective tax law, tax accounting, tax procedural,~~generally unobservable inputs. Because CFIN’s credit rating and related default and survival rates are unobservable inputs that are significant to the valuation, the Support Agreement, net of related guarantee fees, is classified as Level 3. We assigned CFIN an internally developed credit rating of A3 and relied on default rate data published by Moody’s to assign a probability of default. A hypothetical change in the credit rating up or ~~tax policy changes~~down one notch could result in a significant change in the fair value of the Support Agreement.

Fair Value of Financial Instruments

The fair values of certain of our financial instruments (cash, accounts receivable, amounts due to/from unconsolidated affiliates with original maturities of less than 90 days, 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 ~~give rise to a regulatory liability~~be realized under the contracts. The following table provides the carrying amounts and ~~as such, no amount has been~~fair values of certain other financial instruments that are not recorded ~~to this memorandum account~~at fair value on the Condensed Consolidated Balance Sheets.


FAIR VALUE OF FINANCIAL INSTRUMENTS
(Dollars in millions)
	Carrying amount		Fair value
			Level 1		Level 2		Level 3		Total
	September 30, 2023
Sempra:

Long-term note receivable(1)	$	330	$	—	$	—	$	295	$	295
Long-term amounts due to unconsolidated affiliates	308		—		269		—		269
Total long-term debt(2)	27,657		—		23,765		—		23,765
SDG&E:
Total long-term debt(3)	$	8,750	$	—	$	7,202	$	—	$	7,202
SoCalGas:
Total long-term debt(4)	$	6,759	$	—	$	5,953	$	—	$	5,953

	December 31, 2022
Sempra:
Long-term note receivable(1)	$	318	$	—	$	—	$	286	$	286
Long-term amounts due to unconsolidated affiliates	301		—		263		—		263
Total long-term debt(2)	24,513		—		21,549		—		21,549
SDG&E:
Total long-term debt(3)	$	7,800	$	—	$	6,726	$	—	$	6,726
SoCalGas:
Total long-term debt(4)	$	6,059	$	—	$	5,538	$	—	$	5,538

(1) Before allowances for credit losses of $6 and $7 at September 30, 2023 and December 31, 2022, respectively. Excludes unamortized transaction costs of $4 and $5 at September 30, 2023 and December 31, 2022, respectively.

(2) Before reductions of unamortized discount and debt issuance costs of $326 and $289 at September 30, 2023 and December 31, 2022, respectively, and excluding finance lease obligations of $1,346 and $1,343 at September 30, 2023 and December 31, 2022, respectively.

(3) Before reductions of unamortized discount and debt issuance costs of $90 and $70 at September 30, 2023 and December 31, 2022, respectively, and excluding finance lease obligations of $1,234 and $1,256 at September 30, 2023 and December 31, 2022, respectively.

(4) Before reductions of unamortized discount and debt issuance costs of $57 and $48 at September 30, 2023 and December 31, 2022, respectively, and excluding finance lease obligations of $112 and $87 at September 30, 2023 and December 31, 2022, respectively.

We provide the fair values for the securities held in the NDT related to ~~these items.~~SONGS in Note 9.

Table of Con tents

NOTE 9. SAN ONOFRE NUCLEAR GENERATING STATION

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

CPUC Cost of Capital

~~In July 2017,~~The CPUC approved the CPUC issued a final decision adopting, with certain modifications, the joint petition filed in February 2017 by SDG&E, SoCalGas, PG&E and Edison, along with ORA and TURN. The final decision provides a two-year extension for each of the utilities to file its next respective cost of capital application, extending the filing date to April 2019 for a 2020 test year. The final decision also reduces the ROE for SDG&E from 10.30 percent to 10.20 percent and for SoCalGas from 10.10 percent to 10.05 percent, effective from January 1, 2018 through December 31, 2019. SDG&E’s and SoCalGas’ ratemaking capital structures will remain at current levels until modified, if at all, by a future cost of capital decision by the CPUC. In September 2017, SDG&E and SoCalGas filed advice letters to update theirfollowing cost of capital for ~~the actual cost of long-term debt through August 2017 and forecasted cost through 2018.~~ SDG&E and SoCalGas ~~did not file for changes to preferred stock costs, because no issuances of preferred stock through 2018 are anticipated.~~

~~In October 2017, the CPUC approved the embedded cost of debt presented in the filed advice letters, resulting in a revised return~~that became effective on ~~rate base for SDG&E and SoCalGas of 7.55 percent and 7.34 percent, respectively, effective~~ January 1, ~~2018, as depicted in the table below:~~

AUTHORIZED COST OF CAPITAL AND RATE STRUCTURE – CPUC

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
45.25 % 4.59 % 2.08 % Long-Term Debt 45.60 % 4.33 % 1.97 %
2.75 % 6.22 % 0.17 % Preferred Stock 2.40 % 6.00 % 0.14 %
52.00 % 10.20 % 5.30 % Common Equity 52.00 % 10.05 % 5.23 %
100.00 % 7.55 % 100.00 % 7.34 %

~~As a result of the updates included in the filed advice letters, the impact of the changes to the embedded cost of debt~~2023 and ~~return on rate base is summarized below:~~

IMPACT OF THE EMBEDDED COST OF DEBT

SDG&E SoCalGas

Cost of
debt
Return on
rate base
Cost of
debt Return on
rate base
Current 5.00
% 7.79
% 5.77
% 8.02
%
Authorized, effective January 1, 2018 4.59
% 7.55
% 4.33
% 7.34
%
Differences (41 ) bps (24 ) bps (144 ) bps (68 ) bps

~~The automatic CCM will be in effect to adjust 2019 cost of capital, if necessary. Unless changed by the operation of the CCM, the updated costs of long-term debt and the new ROEs~~ will remain in effect through December 31, ~~2019.~~2025, subject to the CCM. The CPUC has issued a ruling to initiate a second phase of this cost of capital ~~changes will also apply~~proceeding to ~~capital expenditures~~evaluate potential modifications to the CCM.


CPUC AUTHORIZED COST OF CAPITAL FOR 2023 – 2025

SDG&E							SoCalGas
Authorized weighting		Return on rate base		Weighted return on rate base(1)			Authorized weighting		Return on rate base		Weighted return on rate base
45.25	%	4.05	%	1.83	%	Long-Term Debt	45.60	%	4.07	%	1.86	%
2.75		6.22		0.17		Preferred Equity	2.40		6.00		0.14
52.00		9.95		5.17		Common Equity	52.00		9.80		5.10
100.00	%			7.18	%		100.00	%			7.10	%

(1) Total weighted return on rate base does not sum due to rounding differences.

The CCM was triggered for SDG&E and SoCalGas on September 30, 2023 and, subject to regulatory approval, would increase each of their authorized rates of return effective January 1, 2024 as follows:


PROPOSED CPUC COST OF CAPITAL FOR 2024 – 2025

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
45.25	%	4.34	%	1.96	%	Long-Term Debt	45.60	%	4.54	%	2.07	%
2.75		6.22		0.17		Preferred Equity	2.40		6.00		0.14
52.00		10.65		5.54		Common Equity	52.00		10.50		5.46
100.00	%			7.67	%		100.00	%			7.67	%

Table of Con tents

SDG&E

FERC Rate Matters

SDG&E files separately with the FERC for its authorized ROE on FERC-regulated electric transmission operations and assets. SDG&E’s currently effective TO5 settlement provides for a ROE of 10.60%, consisting of a base ROE of 10.10% plus an additional 50 bps for participation in ~~2018~~the California ISO (the California ISO adder). If the FERC issues an order ruling that California IOUs are no longer eligible for the California ISO adder, SDG&E would refund the California ISO adder as of the refund effective date (June 1, 2019) if such a refund is determined to be required by the terms of the TO5 settlement. The TO5 term is effective June 1, 2019 and ~~2019 for incremental projects not funded through~~shall remain in effect until terminated by a notice provided at least six months before the ~~GRC revenue requirement.~~end of the calendar year. Following such notice, SDG&E would file an updated rate request with an effective date of January 1 of the following year.

NOTE 5. 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 11 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 Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

SEMPRA TEXAS UTILITIES

Oncor Holdings

In the nine months ended September 30, 2023 and 2022, Sempra contributed $270 million and $256 million, respectively, to Oncor Holdings, and Oncor Holdings distributed $323 million and $255 million, respectively, to Sempra.

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


SUMMARIZED FINANCIAL INFORMATION – ONCOR HOLDINGS
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Operating revenues	$	1,592	$	1,438	$	4,227	$	3,980
Operating expenses	(1,007)		(929)		(3,007)		(2,734)
Income from operations	585		509		1,220		1,246
Interest expense	(140)		(115)		(396)		(331)
Income tax expense	(81)		(70)		(148)		(164)
Net income	376		315		672		732
Noncontrolling interest held by Texas Transmission Investment LLC	(75)		(62)		(135)		(146)
Earnings attributable to Sempra(1)	301		253		537		586

Table of Con tents

SEMPRA INFRASTRUCTURE

Cameron LNG JV

Sempra Promissory Note for SDSRA Distribution

Cameron LNG JV’s debt agreements require Cameron LNG JV to maintain the SDSRA, which is an additional reserve account beyond the Senior Debt Service Accrual Account, where funds accumulate from operations to satisfy senior debt obligations due and payable on the next payment date. Both accounts can be funded with cash or authorized investments. In June 2021, Sempra Infrastructure received a distribution of $165 million based on its proportionate share of the SDSRA, for which Sempra provided a promissory note and letters of credit to secure a proportionate share of Cameron LNG JV’s obligation to fund the SDSRA. Sempra’s maximum exposure to loss is replenishment of the amount withdrawn by Sempra Infrastructure from the SDSRA, or $165 million. We recorded a guarantee liability of $22 million in June 2021, with an associated carrying value of $19 million at September 30, 2023, for the fair value of the promissory note, which is being reduced over the duration of the guarantee through Sempra Infrastructure’s investment in Cameron LNG JV. The guarantee will terminate upon full repayment of Cameron LNG JV’s debt, scheduled to occur in 2039, or replenishment of the amount withdrawn by Sempra Infrastructure from the SDSRA.

Sempra Support Agreement for CFIN

▪Sempra has severally guaranteed repayment of the bank debt plus accrued and unpaid interest if CFIN fails to pay the external lenders;

▪Sempra Infrastructure also has a right to call the bank debt back from, or to refinance the bank debt with, the external lenders at any time; and

▪the Support Agreement will terminate upon full repayment of the bank debt, including repayment following an event in which the bank debt is put to Sempra Infrastructure.

TAG

In the nine months ended September 30, 2023 and 2022, TAG distributed $36 million and $32 million, respectively, to Sempra Infrastructure.

Table of Con tents

IMG

In the nine months ended September 30, 2023, IMG distributed $6 million to Sempra Infrastructure.

NOTE ~~11.~~6. DEBT AND CREDIT FACILITIES

The principal terms of our debt arrangements are described below and in Note 7 of the Notes to Consolidated Financial Statements in the Annual Report.

SHORT-TERM DEBT

Committed Lines of Credit


COMMITTED LINES OF CREDIT
(Dollars in millions)
		September 30, 2023
Borrower	Expiration date of facility	Total facility		Commercial paper outstanding		Amounts outstanding		Letters of credit outstanding		Available unused credit
Sempra	October 2028(1)	$	4,000	$	(970)	$	—	$	—	$	3,030
SDG&E	October 2028(1)	1,500		—		—		—		1,500
SoCalGas	October 2028(1)	1,200		(421)		—		—		779
SI Partners and IEnova	September 2025(2)	500		—		(350)		—		150
SI Partners and IEnova	August 2026(3)	1,000		—		—		—		1,000
SI Partners and IEnova	August 2028(4)	1,500		—		(201)		—		1,299
Port Arthur LNG	March 2030	200		—		—		(25)		175
Total		$	9,900	$	(1,391)	$	(551)	$	(25)	$	7,933

(1) In October 2023, Sempra, SDG&E and SoCalGas each amended their respective credit facility to extend the expiration date from October 2027 to October 2028. Each credit facility will maintain a syndicate of 23 lenders through October 2027, at which time the syndicate of lenders for each credit facility will be reduced to 22 unless a new or existing lender agrees to assume the 23rd lender’s commitment. Such a reduction in lenders would result in a reduction to the available credit capacity to $3,845, $1,442 and $1,153 for Sempra, SDG&E and SoCalGas, respectively, through October 2028.

(4) In August 2023, the facility was amended to extend the expiration date from February 2024 to August 2028.

In March 2023, Port Arthur LNG entered into a seven-year initial working capital facility agreement with a syndicate of lenders expiring in March 2030. The credit facility permits borrowings of up to $200 million, which bear interest by reference to Term SOFR, plus the applicable margin and a credit adjustment spread. The credit facility also provides for the issuance of up to $200 million of letters of credit.

Table of Con tents

Uncommitted Line of Credit

ECA LNG Phase 1 has an uncommitted line of credit, which is generally used for working capital requirements, with an aggregate capacity of $200 million of which $37 million was outstanding at September 30, 2023. The amounts outstanding are before reductions of any unamortized discounts. Borrowings can be in U.S. dollars or Mexican pesos. At September 30, 2023, outstanding amounts were borrowed in Mexican pesos and bear interest at a variable rate based on the 28-day Interbank Equilibrium Interest Rate plus 105 bps. In June 2023, the facility was amended to extend the expiration date to August 2024 and replace the London Interbank Offered Rate reference rate plus 105 bps with the SOFR reference rate plus 115 bps. As such, borrowings made in U.S. dollars bear interest at a variable rate based on the one-month or three-month SOFR plus 115 bps.

Uncommitted Letters of Credit


UNCOMMITTED LETTERS OF CREDIT
(Dollars in millions)
		September 30, 2023
	Expiration date range	Uncommitted letters of credit outstanding
SDG&E	January 2024 - May 2024	$	15
SoCalGas	March 2024 - November 2024	20
Sempra Infrastructure	October 2023 - October 2043	307
Parent and other	March 2024 - September 2024	166
Total		$	508

Term Loan

Weighted-Average Interest Rates

The weighted-average interest rates on all short-term debt were as follows:


WEIGHTED-AVERAGE INTEREST RATES

	September 30, 2023		December 31, 2022
Sempra	5.86	%	5.57	%
SDG&E	—		4.76
SoCalGas	5.37		4.71

LONG-TERM DEBT

SDG&E

Table of Con tents

SoCalGas

In May 2023, SoCalGas issued $500 million aggregate principal amount of 5.20% first mortgage bonds due in full upon maturity on June 1, 2033 and received proceeds of $495 million (net of debt discount, underwriting discounts and debt issuance costs of $5 million), and $500 million aggregate principal amount of 5.75% first mortgage bonds due in full upon maturity on June 1, 2053 and received proceeds of $493 million (net of debt discount, underwriting discounts and debt issuance costs of $7 million). Each series of first mortgage bonds is redeemable prior to maturity, subject to its terms, and in certain circumstances subject to make-whole provisions. SoCalGas used the net proceeds to repay its $300 million senior unsecured floating rate notes prior to their September 2023 scheduled maturity, a portion of its $800 million term loan and other general corporate purposes.

Sempra

In June 2023, Sempra issued $550 million aggregate principal amount of 5.40% senior unsecured notes due in full upon maturity on August 1, 2026 and received proceeds of $545 million (net of debt discount, underwriting discounts and debt issuance costs of $5 million), and $700 million aggregate principal amount of 5.50% senior unsecured notes due in full upon maturity on August 1, 2033 and received proceeds of $692 million (net of debt discount, underwriting discounts and debt issuance costs of $8 million). Each series of notes is redeemable prior to maturity, subject to its terms, and in certain circumstances subject to make-whole provisions. We used the net proceeds for general corporate purposes, including repayment of commercial paper and other indebtedness.

Sempra Infrastructure

ECA LNG Phase 1

ECA LNG Phase 1 has a five-year loan agreement with a syndicate of seven external lenders that matures in December 2025 for an aggregate principal amount of up to $1.3 billion. IEnova and TotalEnergies SE have provided guarantees for repayment of the loans plus accrued and unpaid interest of 83.4% and 16.6%, respectively. At September 30, 2023 and December 31, 2022, $782 million and $575 million, respectively, of borrowings from external lenders were outstanding under the loan agreement, with a weighted-average interest rate of 8.35% and 7.54%, respectively.

Port Arthur LNG

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interests of, Port Arthur LNG.

NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS

In all other cases, we record derivatives at fair value on the Condensed Consolidated Balance Sheets. We may have derivatives that are (1) cash flow hedges, (2) fair value hedges, or (3) undesignated. Depending on the applicability of hedge accounting and, for SDG&E and SoCalGas 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 and undesignated derivatives not subject to rate recovery). We classify cash flows from the principal settlements of cross-currency swaps that hedge exposure related to Mexican peso-denominated debt and amounts related to terminations or early settlements of interest rate swaps as financing activities and settlements of other derivative instruments as operating activities on the Condensed Consolidated Statements of Cash Flows.

HEDGE ACCOUNTING

ENERGY DERIVATIVES

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in rates. Net commodity cost impacts on the Condensed Consolidated Statements of Operations are reflected in Cost of Natural Gas or in Cost of Electric Fuel and Purchased Power.

▪From time to time, our various businesses, including SDG&E and SoCalGas, may use other derivatives to hedge exposures such as GHG allowances.

The following table summarizes net energy derivative volumes.

NET ENERGY DERIVATIVE VOLUMES

(Quantities in millions)

Commodity

Unit of measure

September 30, 2023

December 31, 2022

Sempra:

Natural gas

MMBtu

441

254

Electricity

MWh

—

Congestion revenue rights

MWh

SDG&E:

Natural gas

MMBtu

Congestion revenue rights

MWh

SoCalGas:

Natural gas

MMBtu

347

224

INTEREST RATE DERIVATIVES

The following table presents the net notional amounts of our interest rate derivatives, excluding those in our equity method investments and the contingent interest rate swap.

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INTEREST RATE DERIVATIVES

(Dollars in millions)

September 30, 2023

December 31, 2022

Notional debt

Maturities

Notional debt

Maturities

Sempra:

Cash flow hedges(1)

4,454

2023-2048

294

2023-2034

(1) At September 30, 2023 and December 31, 2022, cash flow hedges accrued interest based on a notional of $491 and $294, respectively.

FOREIGN CURRENCY DERIVATIVES

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 may 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.

The following table presents the net notional amounts of our foreign currency derivatives, excluding those in our equity method investments.


FOREIGN CURRENCY DERIVATIVES
(Dollars in millions)
	September 30, 2023			December 31, 2022
	Notional amount		Maturities	Notional amount		Maturities
Sempra:
Cross-currency swaps	$	—	—	$	306	2023
Other foreign currency derivatives	150		2023-2025	111		2023-2024

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FINANCIAL STATEMENT PRESENTATION


DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30, 2023
	Current assets: Fixed-price contracts and other derivatives(1)		Other long-term assets		Other current liabilities		Deferred credits and other
Sempra:
Derivatives designated as hedging instruments:
Interest rate instruments	$	15	$	363	$	—	$	—
Foreign exchange instruments	—		1		(8)		—
Derivatives not designated as hedging instruments:
Commodity contracts not subject to rate recovery	175		25		(172)		(29)
Associated offsetting commodity contracts	(166)		(22)		166		22
Commodity contracts subject to rate recovery	22		15		(171)		(6)
Associated offsetting commodity contracts	(16)		(3)		16		3
Associated offsetting cash collateral	—		—		—		1
Net amounts presented on the balance sheet	30		379		(169)		(9)
Additional cash collateral for commodity contracts not subject to rate recovery	89		—		—		—
Additional cash collateral for commodity contracts subject to rate recovery	82		—		—		—
Total(2)	$	201	$	379	$	(169)	$	(9)
SDG&E:
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	18	$	15	$	(13)	$	(4)
Associated offsetting commodity contracts	(12)		(3)		12		3
Associated offsetting cash collateral	—		—		—		1
Net amounts presented on the balance sheet	6		12		(1)		—
Additional cash collateral for commodity contracts subject to rate recovery	80		—		—		—
Total(2)	$	86	$	12	$	(1)	$	—
SoCalGas:
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	4	$	—	$	(158)	$	(2)
Associated offsetting commodity contracts	(4)		—		4		—
Net amounts presented on the balance sheet	—		—		(154)		(2)
Additional cash collateral for commodity contracts subject to rate recovery	2		—		—		—
Total	$	2	$	—	$	(154)	$	(2)

(1) Included in Other Current Assets for SoCalGas.

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

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DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
	December 31, 2022
	Current assets: Fixed-price contracts and other derivatives(1)		Other long-term assets		Other current liabilities		Deferred credits and other
Sempra:
Derivatives designated as hedging instruments:
Interest rate instruments	$	10	$	33	$	—	$	—
Foreign exchange instruments	—		—		(7)		(1)
Interest rate and foreign exchange instruments	—		—		(105)		—
Derivatives not designated as hedging instruments:
Commodity contracts not subject to rate recovery	480		133		(399)		(132)
Associated offsetting commodity contracts	(301)		(39)		301		39
Commodity contracts subject to rate recovery	138		27		(97)		(2)
Associated offsetting commodity contracts	(27)		(2)		27		2
Interest rate instrument	33		—		—		—
Net amounts presented on the balance sheet	333		152		(280)		(94)
Additional cash collateral for commodity contracts not subject to rate recovery	451		—		—		—
Additional cash collateral for commodity contracts subject to rate recovery	18		—		—		—
Total(2)	$	802	$	152	$	(280)	$	(94)
SDG&E:
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	107	$	27	$	(13)	$	(2)
Associated offsetting commodity contracts	(12)		(2)		12		2
Net amounts presented on the balance sheet	95		25		(1)		—
Additional cash collateral for commodity contracts subject to rate recovery	17		—		—		—
Total(2)	$	112	$	25	$	(1)	$	—
SoCalGas:
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	31	$	—	$	(84)	$	—
Associated offsetting commodity contracts	(15)		—		15		—
Net amounts presented on the balance sheet	16		—		(69)		—
Additional cash collateral for commodity contracts subject to rate recovery	1		—		—		—
Total	$	17	$	—	$	(69)	$	—

(1) Included in Other Current Assets for SoCalGas.

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

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The following table 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 gain (loss) recognized in OCI					Pretax gain (loss) reclassified from AOCI into earnings
	Three months ended September 30,					Three months ended September 30,
	2023		2022		Location	2023		2022
Sempra:
Interest rate instruments	$	320	$	4	Interest Expense	$	(1)	$	(2)
Interest rate instruments	32		68		Equity Earnings(1)	12		(1)
Foreign exchange instruments	8		2		Revenues: Energy- Related Businesses	—		—
					Other Income (Expense), Net	1		—
Foreign exchange instruments	7		1		Equity Earnings(1)	1		—
Interest rate and foreign exchange instruments	—		—		Other Income (Expense), Net	—		(3)
Total	$	367	$	75		$	13	$	(6)



	Nine months ended September 30,					Nine months ended September 30,
	2023		2022		Location	2023		2022
Sempra:
Interest rate instruments	$	337	$	39	Interest Expense	$	(1)	$	(1)
Interest rate instruments	56		212		Equity Earnings(1)	33		(28)
Foreign exchange instruments	—		(1)		Revenues: Energy- Related Businesses	—		2
					Other Income (Expense), Net	(1)		(1)
Foreign exchange instruments	1		(1)		Equity Earnings(1)	(1)		1
Interest rate and foreign exchange instruments	7		13		Interest Expense	1		1
					Other Income (Expense), Net	6		3
Total	$	401	$	262		$	37	$	(23)
SoCalGas:
Interest rate instruments	$	—	$	—	Interest Expense	$	(1)	$	(1)

(1) Equity earnings at our foreign equity method investees are recognized after tax.

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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 gain (loss) on derivatives recognized in earnings
		Three months ended September 30,				Nine months ended September 30,
	Location	2023		2022		2023		2022
Sempra:
Commodity contracts not subject to rate recovery	Revenues: Energy-Related Businesses	$	83	$	(227)	$	785	$	(455)
Commodity contracts subject to rate recovery	Cost of Natural Gas	(125)		(11)		(172)		(15)
Commodity contracts subject to rate recovery	Cost of Electric Fuel and Purchased Power	23		16		5		10
Interest rate instrument	Interest Expense	—		—		(47)		—
Total		$	(19)	$	(222)	$	571	$	(460)
SDG&E:
Commodity contracts subject to rate recovery	Cost of Electric Fuel and Purchased Power	$	23	$	16	$	5	$	10
SoCalGas:
Commodity contracts subject to rate recovery	Cost of Natural Gas	$	(125)	$	(11)	$	(172)	$	(15)

CREDIT RISK RELATED CONTINGENT FEATURES

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NOTE 8. 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 fair value of commodity derivative assets and liabilities is presented in accordance with our netting policy, as we discuss in Note 7 under “Financial Statement Presentation.”

Our financial assets and liabilities that were accounted for at fair value on a recurring basis in the tables below include the following:

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RECURRING FAIR VALUE MEASURES – SEMPRA
(Dollars in millions)
	Level 1		Level 2		Level 3		Total
	Fair value at September 30, 2023
Assets:
Nuclear decommissioning trusts:
Short-term investments, primarily cash equivalents	$	21	$	3	$	—	$	24
Equity securities	291		4		—		295
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	27		16		—		43
Municipal bonds	—		260		—		260
Other securities	—		216		—		216
Total debt securities	27		492		—		519
Total nuclear decommissioning trusts(1)	339		499		—		838
Short-term investments held in Rabbi Trust	62		—		—		62
Interest rate instruments	—		378		—		378
Foreign exchange instruments	—		1		—		1
Commodity contracts not subject to rate recovery	—		12		—		12
Effect of netting and allocation of collateral(2)	89		—		—		89
Commodity contracts subject to rate recovery	—		—		18		18
Effect of netting and allocation of collateral(2)	76		—		6		82
Support Agreement, net of related guarantee fees	—		—		18		18
Total	$	566	$	890	$	42	$	1,498
Liabilities:
Foreign exchange instruments	$	—	$	8	$	—	$	8
Commodity contracts not subject to rate recovery	—		13		—		13
Commodity contracts subject to rate recovery	2		156		—		158
Effect of netting and allocation of collateral(2)	(1)		—		—		(1)
Total	$	1	$	177	$	—	$	178

(1) Excludes receivables (payables), net.

(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.

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RECURRING FAIR VALUE MEASURES – SEMPRA (CONTINUED)
(Dollars in millions)
	Level 1		Level 2		Level 3		Total
	Fair value at December 31, 2022
Assets:
Nuclear decommissioning trusts:
Short-term investments, primarily cash equivalents	$	10	$	1	$	—	$	11
Equity securities	293		4		—		297
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	27		13		—		40
Municipal bonds	—		270		—		270
Other securities	—		227		—		227
Total debt securities	27		510		—		537
Total nuclear decommissioning trusts(1)	330		515		—		845
Short-term investments held in Rabbi Trust	55		—		—		55
Interest rate instruments	—		76		—		76
Commodity contracts not subject to rate recovery	—		273		—		273
Effect of netting and allocation of collateral(2)	451		—		—		451
Commodity contracts subject to rate recovery	82		19		35		136
Effect of netting and allocation of collateral(2)	12		—		6		18
Support Agreement, net of related guarantee fees	—		—		17		17
Total	$	930	$	883	$	58	$	1,871
Liabilities:
Foreign exchange instruments	$	—	$	8	$	—	$	8
Interest rate and foreign exchange instruments	—		105		—		105
Commodity contracts not subject to rate recovery	—		191		—		191
Commodity contracts subject to rate recovery	—		70		—		70
Total	$	—	$	374	$	—	$	374

1) Excludes receivables (payables), net.

(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.

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RECURRING FAIR VALUE MEASURES – SDG&E
(Dollars in millions)
	Level 1		Level 2		Level 3		Total
	Fair value at September 30, 2023
Assets:
Nuclear decommissioning trusts:
Short-term investments, primarily cash equivalents	$	21	$	3	$	—	$	24
Equity securities	291		4		—		295
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	27		16		—		43
Municipal bonds	—		260		—		260
Other securities	—		216		—		216
Total debt securities	27		492		—		519
Total nuclear decommissioning trusts(1)	339		499		—		838
Commodity contracts subject to rate recovery	—		—		18		18
Effect of netting and allocation of collateral(2)	74		—		6		80
Total	$	413	$	499	$	24	$	936
Liabilities:
Commodity contracts subject to rate recovery	$	2	$	—	$	—	$	2
Effect of netting and allocation of collateral(2)	(1)		—		—		(1)
Total	$	1	$	—	$	—	$	1

	Fair value at December 31, 2022
Assets:
Nuclear decommissioning trusts:
Short-term investments, primarily cash equivalents	$	10	$	1	$	—	$	11
Equity securities	293		4		—		297
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	27		13		—		40
Municipal bonds	—		270		—		270
Other securities	—		227		—		227
Total debt securities	27		510		—		537
Total nuclear decommissioning trusts(1)	330		515		—		845
Commodity contracts subject to rate recovery	82		3		35		120
Effect of netting and allocation of collateral(2)	11		—		6		17
Total	$	423	$	518	$	41	$	982
Liabilities:
Commodity contracts subject to rate recovery	$	—	$	1	$	—	$	1
Total	$	—	$	1	$	—	$	1

(1) Excludes receivables (payables), net.

(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.

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RECURRING FAIR VALUE MEASURES – SOCALGAS
(Dollars in millions)
	Level 1		Level 2		Level 3		Total
	Fair value at September 30, 2023
Assets:
Effect of netting and allocation of collateral(1)	$	2	$	—	$	—	$	2
Total	$	2	$	—	$	—	$	2
Liabilities:
Commodity contracts subject to rate recovery	$	—	$	156	$	—	$	156
Total	$	—	$	156	$	—	$	156

	Fair value at December 31, 2022
Assets:
Commodity contracts subject to rate recovery	$	—	$	16	$	—	$	16
Effect of netting and allocation of collateral(1)	1		—		—		1
Total	$	1	$	16	$	—	$	17
Liabilities:
Commodity contracts subject to rate recovery	$	—	$	69	$	—	$	69
Total	$	—	$	69	$	—	$	69

(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

SDG&E


LEVEL 3 RECONCILIATIONS(1)
(Dollars in millions)
	Three months ended September 30,
	2023		2022
Balance at July 1	$	20	$	33
Realized and unrealized losses	(2)		(35)
Allocated transmission instruments	1		2
Settlements	(1)		33
Balance at September 30	$	18	$	33
Change in unrealized gains relating to instruments still held at September 30	$	1	$	3

	Nine months ended September 30,
	2023		2022
Balance at January 1	$	35	$	54
Realized and unrealized losses	(10)		(58)
Allocated transmission instruments	(1)		(4)
Settlements	(6)		41
Balance at September 30	$	18	$	33
Change in unrealized losses relating to instruments still held at September 30	$	(8)	$	(15)

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

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Inputs used to determine the fair value of CRRs and fixed-price electricity positions are reviewed and compared with market conditions to determine reasonableness.


CONGESTION REVENUE RIGHTS AUCTION PRICE INPUTS

Settlement year	Price per MWh					Median price per MWh
2023	$	(3.09)	to	$	10.71	$	(0.56)
2022	(3.67)		to	6.96		(0.70)

Long-term, fixed-price electricity positions in 2022 that were valued using significant unobservable data were classified as Level 3 because the contract terms related to a delivery location or tenor for which observable market rate information was not available. The fair value of the net electricity positions classified as Level 3 was derived from a discounted cash flow model using market electricity forward price inputs. The range and weighted-average price of these inputs at September 30, 2022 were $26.75 to $127.20 and $68.50, respectively. We summarize long-term, fixed-price electricity position volumes in Note 7.

Sempra Infrastructure

The table below sets forth reconciliations of changes in the fair value of Sempra’s Support Agreement for the benefit of CFIN classified as Level 3 in the fair value hierarchy for Sempra.


LEVEL 3 RECONCILIATIONS
(Dollars in millions)
	Three months ended September 30,
	2023		2022
Balance at July 1	$	23	$	16
Realized and unrealized (losses) gains(1)	(3)		2
Settlements	(2)		(2)
Balance at September 30(2)	$	18	$	16
Change in unrealized (losses) gains relating to instruments still held at September 30	$	(2)	$	2

	Nine months ended September 30,
	2023		2022
Balance at January 1	$	17	$	7
Realized and unrealized gains(1)	7		16
Settlements	(6)		(7)
Balance at September 30(2)	$	18	$	16
Change in unrealized gains relating to instruments still held at September 30	$	7	$	15

(1) Net gains are included in Interest Income and net losses are included in Interest Expense on Sempra’s Condensed Consolidated Statements of Operations.

(2) Includes $7 in Other Current Assets and $11 in Other Long-term Assets at September 30, 2023 on Sempra’s Condensed Consolidated Balance Sheet.

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The fair value of the Support Agreement, net of related guarantee fees, is based on a discounted cash flow model using a probability of default and survival methodology. Our estimate of fair value considers inputs such as third-party default rates, credit ratings, recovery rates, and risk-adjusted discount rates, which may be readily observable, market corroborated or generally unobservable inputs. Because CFIN’s credit rating and related default and survival rates are unobservable inputs that are significant to the valuation, the Support Agreement, net of related guarantee fees, is classified as Level 3. We assigned CFIN an internally developed credit rating of A3 and relied on default rate data published by Moody’s to assign a probability of default. A hypothetical change in the credit rating up or down one notch could result in a significant change in the fair value of the Support Agreement.

Fair Value of Financial Instruments

The fair values of certain of our financial instruments (cash, accounts receivable, amounts due to/from unconsolidated affiliates with original maturities of less than 90 days, 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. 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)
	Carrying amount		Fair value
			Level 1		Level 2		Level 3		Total
	September 30, 2023
Sempra:

Long-term note receivable(1)	$	330	$	—	$	—	$	295	$	295
Long-term amounts due to unconsolidated affiliates	308		—		269		—		269
Total long-term debt(2)	27,657		—		23,765		—		23,765
SDG&E:
Total long-term debt(3)	$	8,750	$	—	$	7,202	$	—	$	7,202
SoCalGas:
Total long-term debt(4)	$	6,759	$	—	$	5,953	$	—	$	5,953

	December 31, 2022
Sempra:
Long-term note receivable(1)	$	318	$	—	$	—	$	286	$	286
Long-term amounts due to unconsolidated affiliates	301		—		263		—		263
Total long-term debt(2)	24,513		—		21,549		—		21,549
SDG&E:
Total long-term debt(3)	$	7,800	$	—	$	6,726	$	—	$	6,726
SoCalGas:
Total long-term debt(4)	$	6,059	$	—	$	5,538	$	—	$	5,538

We provide the fair values for the securities held in the NDT related to SONGS in Note 9.

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NOTE 9. SAN ONOFRE NUCLEAR GENERATING STATION

We provide below updates to ongoing matters related to SONGS, a nuclear generating facility near San Clemente, California that permanently ceased operations in June 2013, and in which SDG&E has a 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. Major decommissioning work began in 2020. We expect the majority of the decommissioning work to be completed around 2030. 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. SDG&E is responsible for approximately 20% of the total decommissioning cost.

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. Amounts that were 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 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 December 2022, the CPUC granted SDG&E authorization to access NDT funds of up to $81 million for forecasted 2023 costs.

Table of Con tents

The following table shows the fair values and gross unrealized gains and losses for the securities held in the NDT on the Sempra and SDG&E Condensed Consolidated Balance Sheets. We provide additional fair value disclosures for the NDT in Note 8.


NUCLEAR DECOMMISSIONING TRUSTS
(Dollars in millions)
	Cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
	September 30, 2023
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies(1)	$	44	$	1	$	(2)	$	43
Municipal bonds(2)	278		—		(18)		260
Other securities(3)	234		1		(19)		216
Total debt securities	556		2		(39)		519
Equity securities	99		201		(5)		295
Short-term investments, primarily cash equivalents	24		—		—		24
Receivables (payables), net	(11)		—		—		(11)
Total	$	668	$	203	$	(44)	$	827

	December 31, 2022
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	$	40	$	1	$	(1)	$	40
Municipal bonds	283		1		(14)		270
Other securities	248		—		(21)		227
Total debt securities	571		2		(36)		537
Equity securities	111		194		(8)		297
Short-term investments, primarily cash equivalents	11		—		—		11
Receivables (payables), net	(4)		—		—		(4)
Total	$	689	$	196	$	(44)	$	841

(1) Maturity dates are 2023-2054.

(2) Maturity dates are2023-2062.

(3) Maturity dates are 2023-2072.

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 NUCLEAR DECOMMISSIONING TRUSTS
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Proceeds from sales	$	143	$	133	$	437	$	530
Gross realized gains	12		2		20		16
Gross realized losses	(3)		(3)		(9)		(14)

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’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

The present value of SDG&E’s ARO related to decommissioning costs for all three SONGS units was $512 million at September 30, 2023 and is based on a cost study prepared in 2020 that is pending CPUC approval. SDG&E expects to receive a proposed decision in the fourth quarter of 2023.

Table of Con tents

NOTE 10. 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 ~~with reasonable certainty~~ the costs and effects of resolving these matters. Accordingly, actual costs incurred may differ materially from amounts accrued, may exceed, and in some cases have exceeded, applicable insurance coverage and could materially adversely affect our business, ~~cash flows,~~ results of operations, financial condition, ~~and~~cash flows and/or prospects. Unless otherwise indicated, we are unable to reasonably estimate ~~reasonably~~ possible losses or a range of losses in excess of any amounts accrued.

At September 30, ~~2017, accrued liabilities~~2023, loss contingency accruals for legal ~~proceedings,~~matters, including associated legal fees and ~~costs of litigation,~~regulatory matters related to the Leak, that are probable and estimable were $5$203 million for Sempra, ~~Energy Consolidated,~~ including ~~$3 million for SDG&E and $1~~$127 million for SoCalGas. Amounts for Sempra ~~Energy~~ and SoCalGas include $1$125 million for matters related to the ~~Aliso Canyon natural gas storage facility gas leak,~~Leak, which we discuss below.

SDG&E

~~2007 Wildfire Litigation and Net Cost Recovery Status~~City of San Diego Franchise Agreement

~~SDG&E has resolved all litigation associated with three wildfires that occurred in October 2007, except one appeal that remains pending after judgment~~In 2021, two lawsuits were filed in the ~~trial court.~~California Superior Court challenging various aspects of the natural gas and electric franchise agreements granted by the City of San Diego to SDG&E. Both lawsuits ultimately sought to void the franchise agreements. In one of the cases, judgment was granted in favor of SDG&E ~~does not expect additional plaintiffs to file lawsuits given~~and the ~~applicable statutes~~City of ~~limitation, but could receive additional settlement demands~~San Diego, and ~~damage estimates from~~ the ~~remaining~~ plaintiff ~~until~~in that case has appealed. In the second case, ~~is resolved.~~the court ruled in favor of SDG&E ~~maintains reserves~~and the City of San Diego, upholding all terms of the franchise agreements, except for the ~~wildfire litigation and adjusts these reserves~~two-thirds City Council vote requirement for termination if the City decides to terminate under certain circumstances. Under the court’s ruling, the City can instead terminate on a majority vote, so long as ~~information becomes available and amounts are estimable.~~

~~SDG&E recorded regulatory assets for CPUC-related costs incurred to resolve wildfire claims in excess of its liability insurance coverage and~~it satisfies repayment provisions under the amounts recovered from third parties. In September 2015, SDG&E filed an application with the CPUC seeking authority to recover these CPUC-related costs in rates over a six- to ten-year period. The requested amountfranchise agreements. This matter is the net estimated CPUC-related cost incurred by SDG&E after deductions for insurance reimbursement and third-party settlement recoveries, and reflects a voluntary 10-percent shareholder contribution applied to the net regulatory asset for wildfire costs. In response to our application seeking recovery, in April 2016, the CPUC issued a ruling establishing the scope and schedule for the proceeding to be managed in two phases. Phase 1 addresses SDG&E’s operational and management prudence surrounding the 2007 wildfires. Phase 2 addresses whether SDG&E’s actions and decision-making in connection with settling legal claims in relation to the wildfires were reasonable. On August 22, 2017, two ALJs in the CPUC proceeding issued a proposed decision denying SDG&E’s request to recover the 2007 wildfire costs submitted in our application.

In consideration of the proposed decision denying recovery of these costs, and the actions taken and not taken by the CPUC subsequent to issuance of the proposed decision (including the actions not taken through the October 26, 2017 CPUC meeting), we have concluded that the wildfire regulatory asset no longer meets the probability threshold for recovery required by U.S. GAAP. Accordingly, SDG&E impaired the wildfire regulatory asset, resulting in a charge of $351 million ($208 million after-tax) in the third quarter of 2017, in Impairment of Wildfire Regulatory Asset on the Condensed Consolidated Statements of Operations for Sempra

~~Energy and SDG&E. SDG&E will continue to vigorously pursue recovery of these costs, which were incurred through settling claims brought under inverse condemnation laws.~~

If the proposed decision is adopted by the CPUC and is not overturned through rehearing or appeal, Phase 2 of the proceeding would be rendered moot and the proceeding would be closed. In such case, SDG&E would apply to the CPUC for rehearing of its decision within 30 days, upon which the CPUC may grant a rehearing, modify its decision, or deny the request and affirm its original decision. Ultimately, SDG&E has the right to file a petition with the Court of Appeal of California seeking to reverse the CPUC’s decision, and we will appeal the decision, if necessary. We expect a CPUC final decision in the fourth quarter of 2017.

~~Concluded Matter~~

SDG&E participated as a claimant and respondent in an arbitration proceeding initiated by Edison in October 2013 against MHI seeking damages stemming from the failure of the MHI replacement steam generators at the SONGS nuclear power plant. In March 2017, the Tribunal found MHI liable for breach of contract, subject to a ~~contractual limitation of liability, but determined that MHI was the prevailing party~~motion for reconsideration, and ~~awarded it 95 percent of its arbitration costs. We discuss this arbitration and decision further in Note 9.~~subsequently an appeal if not otherwise resolved.

SoCalGas

Aliso Canyon Natural Gas Storage Facility Gas Leak

OnFrom October 23, 2015 through February 11, 2016, SoCalGas ~~discovered~~experienced a natural gas leak atfrom one of ~~its~~the injection-and-withdrawal wells, SS25, at its Aliso Canyon natural gas storage facility ~~(the Leak), located in the northern part of the San Fernando Valley~~ in Los Angeles County. ~~The Aliso Canyon natural gas storage facility has been operated by SoCalGas since 1972. SS25 is one of more than 100 injection-and-withdrawal wells at the storage facility.~~

~~Stopping the Leak, and Local Community Mitigation Efforts.~~Litigation. ~~SoCalGas worked closely with several of the world’s leading experts to stop the Leak, and on February 18, 2016, DOGGR confirmed that the well was permanently sealed.~~

Pursuant to a stipulation and order by the LA Superior Court, SoCalGas provided temporary relocation support to residents in the nearby community who requested it before the well was permanently sealed. Following the permanent sealing of the well, the DPH conducted testing in certain homes in the Porter Ranch community, and concluded that indoor conditions did not present a long-term health risk and that it was safe for residents to return home. In ~~May 2016, the LA Superior Court ordered~~September 2021, SoCalGas to offer to clean residents’ homes at SoCalGas’ expense as a condition to ending the relocation program. SoCalGas completed the residential cleaning program and the relocation program ended in July 2016.

In May 2016, the DPH also issued a directive that SoCalGas additionally professionally clean (in accordance with the proposed protocol prepared by the DPH) the homes of all residents located within the Porter Ranch Neighborhood Council boundary, or who participated in the relocation program, or who are located within a five-mile radius of the Aliso Canyon natural gas storage facility and experienced symptoms from the Leak (the Directive). SoCalGas disputes the Directive, contending that it is invalid and unenforceable, and has filed a petition for writ of mandate to set aside the Directive.

The total costs incurred to remediate and stop the Leak and to mitigate local community impacts are significant and may increase, and we may be subject to potentially significant damages, restitution, and civil, administrative and criminal fines, costs and other penalties. To the extent any of these costs are not covered by insurance (including any costs in excess of applicable policy limits), or if there were to be significant delays in receiving insurance recoveries, such costs could have a material adverse effect on SoCalGas’ and Sempra ~~Energy’s cash flows, financial condition~~entered into an agreement with counsel to resolve approximately 390 lawsuits including approximately 36,000 plaintiffs (the Individual Plaintiffs) then pending against SoCalGas and ~~results of operations.~~

~~Cost Estimates and Accounting Impact.~~ As of September 30, 2017, SoCalGas recorded estimated costs of $841 million related to the Leak. Of this amount, approximately two-thirds is for the temporary relocation program (including cleaning costs and certain labor costs). Other estimated costs include amounts for efforts to control the well, stop the Leak, stop or reduce the emissions, and the estimated cost of the root cause analysis being conducted by an independent third party to investigate the cause of the Leak. The remaining portion of the $841 million includes legal costs incurred to defend litigation, the value of lost gas, the costs to mitigate the actual natural gas released, and other costs. The value of lost gas reflects the current replacement cost of volumes purchased in September 2017 and estimates of the cost to replace the remaining volumes. SoCalGas adjusts its estimated total liability associated with the Leak as additional information becomes available. The $841 million represents management’s best estimate of these costs related to the Leak. Of these costs, a substantial portion has been paid and $42 million is accrued as Reserve for Aliso Canyon Costs as of September 30, 2017 on SoCalGas’ and Sempra ~~Energy’s Condensed Consolidated Balance Sheets for amounts expected to be paid after September 30, 2017.~~

~~As of September 30, 2017, we recorded the expected recovery of the costs described in the immediately preceding paragraph~~ related to the Leak for a payment of ~~$542 million~~up to $1.8 billion. Over 99% of the Individual Plaintiffs participated and submitted valid releases, and SoCalGas paid $1.79 billion in 2022 under the agreement. The Individual Plaintiffs who have not participated in the settlement (the Remaining Individual Plaintiffs) are able to continue to pursue their claims. In addition, as ~~Insurance Receivable for Aliso Canyon Costs~~of October 31, 2023, new lawsuits related to the Leak on ~~SoCalGas’~~behalf of approximately 394 new plaintiffs have been filed against SoCalGas and Sempra ~~Energy’s Condensed Consolidated Balance Sheets. This amount is net of insurance retentions and $294 million of insurance proceeds we received through~~since the September ~~30, 2017 related to control-of-well expenses and temporary relocation costs. If we were to conclude that this receivable or a~~

portion of it was 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.2021 settlement.

The above amounts do not include any unsettled damage claims, restitution, or civil, administrative or criminal fines, costs or other penalties that may be imposed in connection with the incident or our responses thereto, as it is not possible to predict the outcome of any civil or criminal proceeding or any administrative action in which such damage awards, restitution or civil, administrative or criminal fines, costs or other penalties could be imposed,Remaining Individual Plaintiffs’ cases and any such amounts, if awarded or imposed or otherwise paid, cannot be reasonably estimated at this time. In addition, the recorded amounts above do not include the costs to clean additional homes pursuant to the Directive, future legal costs necessary to defend litigation, and other potential costs that we currently do not anticipate incurring or that we cannot reasonably estimate.

In March 2016, the CPUC ordered SoCalGas to establish a memorandum account to prospectively track its authorized revenue requirement and all revenues that it receives for its normal, business-as-usual costs to own and operate the Aliso Canyon natural gas storage facility and, in September 2016, approved SoCalGas’ request to begin tracking these revenues as of March 17, 2016. The CPUC will determine at a later time whether, and to what extent, the authorized revenues tracked in the memorandum account may be refunded to ratepayers.

~~Insurance.~~ Excluding directors and officers liability insurance, we have four kinds of insurance policies that together provide between $1.2 billion to $1.4 billion in insurance coverage, depending on the nature of the claims. We cannot predict all of the potential categories of costs or the total amount of costs that we may incur as a result of the Leak. Subject to various policy limits, exclusions and conditions, based on what we know as of the filing date of this report, we believe that our insurance policies collectively should cover the following categories of costs: costs incurred for temporary relocation (including cleaning costs and certain labor costs), costs to address the Leak and stop or reduce emissions, the root cause analysis being conducted to investigate the cause of the Leak, the value of lost natural gas, costs incurred to mitigate the actual natural gas released, costs associated with litigation and claims by nearby residents and businesses, any costs to clean additional homes pursuant to the Directive, and, in some circumstances depending on their nature and manner of assessment, fines and penalties. We have been communicating with our insurance carriers and, as discussed above, we have received insurance payments for a portion of control-of-well expenses and a portion of temporary relocation costs. We intend to pursue the full extent of our insurance coverage for the costs we have incurred or may incur. There can be no assurance that we will be successful in obtaining insurance coverage for these costs under the applicable policies, and to the extent we are not successful in obtaining coverage or these costs exceed the amount of our coverage, such costs could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.

Our recorded estimate as of September 30, 2017 of $841 million of certain costs in connection with the Leak may rise significantly as more information becomes available, and any costs not included in our estimate could be material. To the extent not covered by insurance (including any costs in excess of applicable policy limits), or if there were to be significant delays in receiving insurance recoveries, such costs could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.

~~Governmental Investigations and Civil and Criminal Litigation.~~ Various governmental agencies, including DOGGR, DPH, SCAQMD, CARB, Los Angeles Regional Water Quality Control Board, California Division of Occupational Safety and Health, CPUC, PHMSA, EPA, Los Angeles County District Attorney’s Office and California Attorney General’s Office, have investigated or are investigating this incident. Other federal agencies (e.g., the DOE and the U.S. Department of the Interior) investigated the incident as part of a joint interagency task force. In January 2016, DOGGR and the CPUC selected Blade to conduct an independent analysis under their supervision and to be funded by SoCalGas to investigate the technical root cause of the Leak. The timing of the root cause analysis is under the control of Blade, DOGGR and the CPUC.

As of October 26, 2017, 344 lawsuits, including over 43,826 plaintiffs, are pending in the LA Superior Court against SoCalGas, some of which have also named Sempra Energy. These various lawsuits assert causes of action for negligence, negligence per se, strict liability, property damage, fraud, public and private nuisance (continuing and permanent), trespass, inverse condemnation, fraudulent concealment, unfair business practices and loss of consortium, among other things, and additional litigation may be filed against us in the future related to this incident. A complaint alleging violations of Proposition 65 was also filed. These complaints seek compensatory and punitive damages, civil penalties, injunctive relief, costs of future medical monitoring and attorneys’ fees, and several seek class action status. All of thesenew plaintiffs’ 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 ~~County~~ Superior Court for pretrial management ~~(the Coordination Proceeding).~~

~~In addition to~~under a consolidated master complaint filed in November 2017, with one plaintiff’s case proceeding under a separate complaint. Both the ~~lawsuits described above, a federal securities class action alleging violation~~consolidated master complaint and the separate complaint assert negligence, negligence per se, strict liability, negligent and intentional infliction of ~~the federal securities laws has been filed against Sempra Energy~~emotional distress and certain of its officers and certain of its directors in the SDCA. In June 2017, the SDCA dismissed the federal securities class action on the grounds the plaintiff failed to plead sufficient facts to establish a claim for securities fraud. In July 2017, the plaintiff filed an amended complaint, again alleging violation of the federal securities laws, and five shareholder derivative actions are also pending in the Coordination Proceeding alleging breach of fiduciary duties against certain officers and certain

directors of Sempra Energy and/or SoCalGas, four of which were joined in a Consolidated Shareholder Derivative Complaint in August 2017. In March 2017, the SDCA dismissed a shareholder derivative action pending in that court, ruling that the plaintiff did not have standing to pursue the alleged claims; the plaintiff did not seek to amend his complaint to cure its deficiencies.

Pursuant to the Coordination Proceeding, in March 2017, the individuals and business entities asserting tort and Proposition 65 claims filed a Second Amended Consolidated Master Case Complaint for Individual Actions, through which their separate lawsuits will be managed for pretrial purposes.fraudulent concealment. The consolidated master complaint asserts additional 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 and ~~violations of Proposition 65~~wrongful death against SoCalGas ~~with certain causes also naming Sempra Energy.~~and Sempra. The ~~consolidated~~separate complaint ~~seeks~~asserts an additional cause of action for assault and battery. Both complaints seek compensatory and punitive damages for personal injuries, lost wages and/or lost profits, costs of future medical monitoring, and attorneys’ fees. The consolidated master complaint also seeks property damage and diminution in property value, injunctive relief ~~costs~~and civil penalties. In October 2023, the LA Superior Court ordered the cases of ~~future medical monitoring, civil penalties (including penalties associated with Proposition 65 claims alleging violation~~233 Remaining Individual Plaintiffs who did not respond to discovery requests to be dismissed.

Table of ~~requirements for warning about certain chemical exposures), and attorneys’ fees.~~Con tents

~~In January 2017, pursuant to the Coordination Proceeding, two consolidated class action complaints~~Four shareholder derivative actions were filed alleging breach of fiduciary duties against ~~SoCalGas~~certain officers and certain directors of Sempra ~~Energy, one on behalf of a putative class of persons and businesses who own~~ and/or ~~lease real property within a five-mile radius~~SoCalGas. Three 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). Both complaints assert claims for strict liability for ultra-hazardous activities, negligence and violation of California Unfair Competition Law. The Property Class Action also asserts claims for negligence per se, trespass, permanent and continuing public and private nuisance, and inverse condemnation. The Business Class Action also asserts a claim for negligent interference with prospective economic advantage. Both complaints seek compensatory, statutory and punitive damages, injunctive relief and attorneys’ fees.

~~Three~~four shareholder derivative actions were joined in an Amended Consolidated Shareholder Derivative Complaint filed ~~by public entities are pending, as follows. These lawsuits are also included~~ in the ~~Coordination Proceeding. First,~~same coordinated proceeding in ~~July 2016,~~ the ~~County~~LA Superior Court, which was dismissed with prejudice in January 2021, and in June 2023, the Court of ~~Los Angeles, on behalf of itself and the people~~Appeal of the State of California ~~filed a complaint against SoCalGas~~Second Appellate District Division Five affirmed the dismissal. Plaintiffs have sought review in the LA Superior Court for public nuisance, unfair competition, breach of franchise agreement, breach of lease, and damages. This suit alleges that the four natural gas storage fields operated by SoCalGas in Los Angeles County require safety upgrades, including the installation of a sub-surface safety shut-off valve on every well. It additionally alleges that SoCalGas failed to comply with the DPH Directive. It seeks preliminary and permanent injunctive relief, civil penalties, and damages for the County’s costs to respond to the Leak, as well as punitive damages and attorneys’ fees.

~~Second, in August 2016, the~~ California Attorney General, acting in an independent capacity and on behalf of the people of the State of California and the CARB, together with the Los Angeles City Attorney, filed a third amended complaint on behalf of the people of the State of California against SoCalGas alleging public nuisance, violation of the California Unfair Competition Law, violations of California Health and Safety Code sections 41700 (prohibiting discharge of air contaminants that cause annoyance to the public) and 25510 (requiring reporting of the release of hazardous material), as well as California Government Code section 12607 for equitable relief for the protection of natural resources. The complaint seeks an order for injunctive relief, to abate the public nuisance, and to impose civil penalties.

Third, in March 2017, the County of Los Angeles filed a petition for writ of mandate against DOGGR and its State Oil and Gas Supervisor, as to which SoCalGas is the real party in interest. In July 2017, the County amended the petition to add the CPUC and its Executive Director. The petition alleges that in issuing its July 19, 2017 determination that the requirements for the resumption of injection operations have been met, discussed under “Natural Gas Storage Operations and Reliability” below, DOGGR failed to comply with the provisions of SB 380, which requires a comprehensive safety review of the Aliso Canyon natural gas storage facility before injection of natural gas may resume. The County alleges, among other things, that DOGGR failed to comply with the provisions of SB 380 in declaring the safety review complete and authorizing the resumption of injection of natural gas into the facility before the root cause analysis was complete, failing to make its safety-review documents available to the public and failing to address seismic risks to the field as part of its safety review. The County further alleges that CEQA requires DOGGR to perform an Environmental Impact Review before the resumption of injection of natural gas at the facility may be approved. The petition seeks a writ of mandate requiring DOGGR and the State Oil and Gas Supervisor to comply with SB 380 and CEQA, and to produce records in response to the County’s Public Records Act request; as well as, declaratory and injunctive relief against any authorization to inject natural gas and attorneys’ fees. On July 24, 2017, the County filed an application for an immediate stay of DOGGR’s order, a temporary restraining order and order to show cause why a preliminary injunction should not be issued to stop the reopening of the facility. On July 28, 2017, the Superior Court denied the application on the ground that, pursuant to Public Utilities Code sections 714 and 1759(a), the CPUC has jurisdiction over regulating injections at the Aliso Canyon natural gas storage facility, and the Court therefore lacks jurisdiction to rule on the County’s application. On July 31, 2017, the County filed a petition for writ of mandate, prohibition, stay or other appropriate relief and a request for immediate stay in the Court of Appeal, seeking review of the Superior Court’s order denying the County’s application for a temporary restraining order. Later the same day, the Court of Appeal denied the County’s request for an immediate stay on injections.

A complaint filed by the SCAQMD against SoCalGas seeking civil penalties for alleged violations of several nuisance-related statutory provisions arising from the Leak and delays in stopping the Leak was settled in February 2017, pursuant to which SoCalGas paid $8.5 million, of which $1 million is to be used to pay for a health study. The SCAQMD’s complaint was dismissed in February 2017.

Separately, in February 2016, the Los Angeles County District Attorney’s Office filed a misdemeanor criminal complaint against SoCalGas seeking penalties and other remedies for alleged failure 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), and for allegedly violating California Health and Safety Code section 41700 prohibiting discharge of air contaminants that cause annoyance to the public. Pursuant to a settlement agreement with the Los Angeles County District Attorney’s Office, SoCalGas agreed to plead no contest to the notice charge under Health and Safety Code section 25510(a) and agreed to pay the maximum fine of $75,000, penalty assessments of approximately $233,500, and operational commitments estimated to cost approximately $5 million, reimbursement and assessments in exchange for the Los Angeles County District Attorney’s Office moving to dismiss the remaining counts at sentencing and settling the complaint (the District Attorney Settlement). In November 2016, SoCalGas completed the commitments and obligations under the District Attorney Settlement, and on November 29, 2016, the Court approved the settlement and entered judgment on the notice charge. Certain individuals residing near the Aliso Canyon natural gas storage facility who objected to the settlement have filed a notice of appeal of the judgment, as well as a petition asking the LA Superior Court to set aside the November 29, 2016 order and grant them restitution.Supreme Court. The LA Superior Court dismissed the ~~petition~~remaining fourth action with prejudice in ~~January 2017, ruling that~~November 2022. Plaintiffs appealed this dismissal, but in October 2023, abandoned the ~~petitioners have~~appeal; as a ~~remedy at law via their direct appeal.~~

The costs of defending against these civil and criminal lawsuits, cooperating with these investigations, and any damages, restitution, and civil, administrative and criminal fines, costs and other penalties, if awarded or imposed, as well asresult, the costs of mitigating the actual natural gas released, could be significant and to the extent not covered by insurance (including any costs in excess of applicable policy limits), or if there were to be significant delays in receiving insurance recoveries, such costs could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.dismissal is final.

Regulatory ~~Proceedings.~~Proceeding. In February 2017, the CPUC opened a proceeding ~~pursuant to~~ SB 380 OII 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. The proceeding will be conducted in two phases, with Phase 1 undertaking a comprehensive effort to develop the appropriate analyses and scenarios to evaluate the impact of reducing or eliminating the use of the Aliso Canyon natural gas storage facility and Phase 2 evaluating the impacts of reducing or eliminating the use of the Aliso Canyon natural gas storage facility using the scenarios and models adopted in Phase 1. In accordance with the Phase 1 schedule, public participation hearings began in April 2017, and workshops and additional public participation hearings are expected to occur later in 2017.

~~The order establishing the scope of the proceeding expressly excludes~~region, but excluding issues with respect to air quality, public health, causation, culpability or cost responsibility regarding the Leak.

~~Section 455.5~~ The first phase of the ~~California Public Utilities Code, among other things, directs regulated utilities to notify~~proceeding established a framework for the ~~CPUC if all~~hydraulic, production cost and economic modeling assumptions for the potential reduction in usage or ~~any portion~~elimination of ~~a major facility has been out of service for nine consecutive months. Although SoCalGas does not believe~~ the Aliso Canyon natural gas storage facility, as well as evaluating the impacts of reducing or any portion of that facility has been out of service for nine consecutive months, SoCalGas provided notification out of an abundance of caution to demonstrate its commitment to regulatory compliance and transparency, and because the process for obtaining authorization to resume injection operations at the facility required longer to complete than initially contemplated. In response, and as required by section 455.5, the CPUC issued an OII to address whethereliminating the Aliso Canyon natural gas storage facility using the established framework and models. The next phase of the proceeding included engaging a consultant to analyze alternative means for meeting or ~~any portion of that facility has been out of service~~avoiding the demand for ~~nine consecutive months pursuant to section 455.5, and~~the facility’s services if it ~~is determined~~were eliminated in either the 2027 or 2035 timeframe, and to ~~have been out~~address potential implementation of ~~service, whether~~alternatives to the Aliso Canyon natural gas storage facility if the CPUC determines that the Aliso Canyon natural gas storage facility should ~~adjust SoCalGas’ rates~~be permanently closed. The CPUC also added all California IOUs as parties to ~~reflect~~ the ~~period~~proceeding and encouraged all load serving entities in the ~~facility is deemed~~Los Angeles Basin to ~~have been out of service. Under section 455.5, hearings on~~join the ~~investigation are to be held, if necessary, in conjunction with SoCalGas’ 2019 GRC proceeding; however,~~proceeding.

In November 2021, the CPUC issued a ~~procedural schedule that includes an evidentiary hearing~~decision on ~~January 9, 2018, if needed. If~~ the ~~CPUC determines that all or any portion~~interim range of the facility has been out of service for nine consecutive months, the amount of any refund to ratepayers and the inability to earn a return on those assets could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.

~~Governmental Orders and Additional Regulation.~~ In January 2016, the Governor of the State of California issued an Order (the Governor’s Order) proclaiming a state of emergency to exist in Los Angeles County due to the Leak. The Governor’s Order imposes various orders with respect to: stopping the Leak; protecting public health and safety; ensuring accountability; and strengthening oversight. Most of the directives in the Governor’s Order have been fulfilled, with the following remaining open items: (1) applicable agencies must convene an independent panel of scientific and medical experts to review public health concerns stemming from the natural gas leak and evaluate whether additional measures are needed to protect public health; (2) the CPUC must ensure that SoCalGas covers costs related to the natural gas leak and its response, while protecting ratepayers, and CARB was ordered to develop a program to fully mitigate the leak’s emissions of methane by March 31, 2016, with such program to be funded by SoCalGas; and (3) DOGGR, CPUC, CARB and the CEC must submit to the Governor’s Office a report that assesses the long-term viability of natural gas storage facilities in California.

In December 2015, SoCalGas made a commitment to mitigate the actual natural gas released from the Leak and has been working on a plan to accomplish the mitigation. In March 2016, pursuant to the Governor’s Order, the CARB issued its ~~Aliso Canyon Methane Leak Climate Impacts Mitigation Program~~, which set forth its recommended approach to achieve full mitigation of the emissions from the Leak. The CARB program requires that reductions in short-lived climate pollutants and other greenhouse gases be at least equivalent to the amount of the emissions from the Leak, and that the amount of reductions required be derived using the global warming potential based on a 20-year term (rather than the 100-year term the CARB and other state and federal agencies use in regulating emissions), resulting in a target of approximately 9,000,000 metric tons of carbon dioxide equivalent. CARB’s program also calls for all of the mitigation to occur in California over the next five to ten years without the use of allowances or offsets. In October 2016, CARB issued its final report concluding that the incident resulted in total emissions from 90,350 to 108,950 metric tons of methane, and asserting that SoCalGas should mitigate 109,000 metric tons of methane to fully mitigate the greenhouse gas impacts of the Leak. We have not agreed with CARB’s estimate of methane released and continue to work with CARB on developing a mitigation plan.

~~In January 2016, the Hearing Board of the SCAQMD ordered SoCalGas to take various actions in connection with injecting and withdrawing natural gas~~inventory levels at the Aliso Canyon natural gas storage facility, ~~sealing~~setting an interim range of gas inventory levels of up to 41.16 Bcf. In August 2023, the ~~well, monitoring, reporting, safety and funding~~CPUC issued a ~~health impact study, among other things (the Abatement Order), which was agreed~~decision approving a new interim range of gas inventory levels of up to ~~be satisfied by~~68.6 Bcf. The CPUC may issue future changes to this interim range of authorized gas inventory levels before issuing a final decision within the ~~SCAQMD, and terminated by the Hearing Board in March 2017.~~SB 380 OII proceeding.

PHMSA, DOGGR, SCAQMD, EPA and CARB each commenced separate rulemaking proceedings to adopt further regulations covering natural gas storage facilities and injection wells. DOGGR issued new regulations following the Governor’s Order as described above, and in 2016, the California Legislature enacted four separate bills providing for additional regulation of natural gas storage facilities. Additional hearings in the California Legislature, as well as with various other federal and state regulatory agencies, have been or may be scheduled, additional legislation has been proposed in the California Legislature, and additional laws, orders, rules and regulations may be adopted.

Higher operating costs and additional capital expenditures incurred by SoCalGas as a result of new laws, orders, rules and regulations arising out of this incident or our responses thereto could be significant and may not be recoverable in customer rates, and such new laws, orders, rules and regulations 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, with a storage capacity of 86 Bcf (which represents 63 percent of SoCalGas’ natural gas storage inventory capacity), is the largest SoCalGas storage facility and an important element of SoCalGas’ delivery system. SoCalGas calculated that approximately 4.62 Bcf of natural gas was released fromAt September 30, 2023, the Aliso Canyon natural gas storage facility ashad a ~~result~~net book value of the Leak. SoCalGas did not inject natural gas into the Aliso Canyon natural gas storage facility after October 25, 2015, pursuant to orders by DOGGR and the Governor, and in accordance with SB 380. Limited withdrawals of natural gas from the Aliso Canyon natural gas storage facility have been made in 2017 to augment natural gas supplies during critical demand periods.

The process to begin limited injection operations at the Aliso Canyon natural gas storage facility was initiated in November 2016, when SoCalGas submitted a request to DOGGR seeking authorization to resume injection operations at the Aliso Canyon natural gas storage facility. In accordance with SB 380, DOGGR held public meetings in the affected community to provide the public an opportunity to comment on the safety review findings (the comment period has expired). Also, in April and June of 2017, SoCalGas advised the CAISO, CEC, CPUC and PHMSA of its concerns that the inability to inject natural gas into the Aliso Canyon natural gas storage facility poses a risk to energy reliability in Southern California.

On July 19, 2017, DOGGR issued its determination that the requirements of SB 380 for the resumption of injection operations, including all safety requirements, have been met. On the same date, the CPUC’s Executive Director issued his concurrence with that determination, and DOGGR issued its ~~Order to: Test and Take Temporary Actions Upon Resuming Injection: Aliso Canyon Gas Storage Facility.~~ The order lifted the prohibition on injection at the Aliso Canyon natural gas storage facility, subject to its requirements that SoCalGas conduct and report results of a leak survey and measurement of total site methane emissions before resuming injection operations, as well as other requirements after injection resumes. The CPUC additionally issued a directive to SoCalGas to maintain a range of working gas in the Aliso Canyon natural gas storage facility at a target of 23.6 Bcf (approximately 28 percent of its maximum capacity), and at all times above 14.8 Bcf. DOGGR’s findings require SoCalGas to continue to operate the facility under restrictions that limit the rate at which it is able to withdraw natural gas from the field. The County of Los Angeles has filed a petition for writ of mandate seeking declaratory and injunctive relief and stay of DOGGR’s order lifting the prohibition against injecting natural gas at the facility. We provide further detail regarding the County of Los Angeles’ suit above in “Governmental Investigations and Civil and Criminal Litigation.” Also on July 19, 2017, the CEC released a letter to the CPUC indicating that its staff is prepared to work with the CPUC and other agencies on a plan to phase out the use of the Aliso Canyon natural gas storage facility within ten years. The CEC and other stakeholders will be providing input into the SB 380 proceeding underway at the CPUC that

addresses the future of the Aliso Canyon natural gas storage facility. Having completed the steps outlined by state agencies to safely begin injections at the Aliso Canyon natural gas storage facility, as of July 31, 2017, SoCalGas resumed limited injections.

$993 million. If the Aliso Canyon natural gas storage facility were ~~determined~~ to be ~~out of service for any meaningful period of time or~~ permanently closed or if future cash flows from its operation were otherwise insufficient to recover its carrying value, ~~it could result in~~we may record an impairment of the facility, ~~and significantly~~which could be material, or we could incur materially higher than expected operating costs and/or be required to make material additional capital expenditures (any or all of which may not be recoverable in rates), and natural gas reliability and electric generation could be jeopardized.

Regulatory Proceeding – Resolved. In June 2019, the CPUC opened an OII (the Leak OII) to investigate and consider, among other things, whether SoCalGas should be sanctioned for the Leak and what damages, fines or other penalties, if any, should be imposed for any violations, unreasonable or imprudent practices or failure to cooperate sufficiently with SED, as well as to determine the amount 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 October 2022, SoCalGas executed a settlement agreement with SED and the Public Advocates Office at the CPUC to resolve all aspects of the Leak OII. The settlement agreement provides for financial penalties, certain costs that SoCalGas will reimburse, a violation of California Public Utilities Code section 451, and that SoCalGas will not seek recovery from ratepayers for costs previously incurred, among other provisions. In September 2023, the CPUC issued a final decision approving the settlement agreement.

Insurance and Accounting and Other Impacts. Since 2015, SoCalGas has incurred significant costs related to the Leak, including costs to defend against and settle civil litigation arising from the Leak. Other than insurance for directors’ and officers’ liability, we have exhausted all of our insurance for this matter. 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.

In the three months and nine months ended September 30, 2022, SoCalGas recorded total charges of $122 million ($101 million after tax) and $259 million ($199 million after tax), respectively, in Aliso Canyon Litigation and Regulatory Matters on the SoCalGas and Sempra Condensed Consolidated Statements of Operations related to the litigation and regulatory proceedings associated with the Leak.

At September 30, ~~2017, the~~2023, $126 million is accrued in Reserve for Aliso Canyon ~~natural gas storage facility has a net book value of $609~~Costs and $3 million ~~including $244 million of construction work~~is accrued in ~~progress for the project to construct a new compression station. Any significant impairment of this asset could have a material adverse effect~~Deferred Credits and Other on SoCalGas’ and ~~Sempra Energy’s results~~Sempra’s Condensed Consolidated Balance Sheets. These accruals do not include any amounts in excess of ~~operations for~~what has been estimated to resolve certain matters that we describe above in “Litigation” and “Regulatory Proceeding,” nor any amounts that may be necessary to resolve threatened litigation, other potential litigation or other costs, in each case to the ~~period in which~~extent it is ~~recorded. Higher operating~~not possible to predict at this time the outcome of these actions or reasonably estimate the possible costs ~~and additional capital expenditures incurred by SoCalGas may~~or a range of possible costs. Further, we are not able to reasonably estimate the possible loss or a range of possible losses in excess of the amounts accrued, which could be ~~recoverable in customer rates,~~significant and could have a material adverse effect on SoCalGas’ and ~~Sempra Energy’s~~Sempra’s business, results of operations, financial condition, cash flows ~~financial condition and results~~and/or prospects.

Table of ~~operations.~~Con tents

Sempra ~~Mexico~~Infrastructure

~~Property Disputes and Permit Challenges~~

Energía Costa ~~Azul.~~ Azul

We describe below certain land disputes and permit challenges affecting our ECA Regas Facility. Certain of these land disputes involve land on which portions of the ECA LNG liquefaction facilities under construction and in development are expected to be situated or on which portions of the ECA Regas Facility that would be necessary for the operation of such ECA LNG liquefaction facilities are situated. One or more unfavorable final decisions on these disputes or challenges could materially adversely affect our existing natural gas regasification operations and proposed natural gas liquefaction projects at the site of the ECA Regas Facility and have a material adverse effect on Sempra’s business, results of operations, financial condition, cash flows and/or prospects.

Land Disputes.Sempra ~~Mexico~~Infrastructure has been engaged in a long-running land dispute with a claimant relating to property adjacent to its ~~Energía Costa Azul LNG terminal near Ensenada, Mexico. A~~ECA Regas Facility that allegedly overlaps with land owned by the ECA Regas Facility (the facility, however, is not situated on the land that is the subject of this dispute), as follows:

▪The claimant to the adjacent property filed complaints in the federal Agrarian Court challenging the refusal of ~~the~~ 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 to the claimant and cause it to be registered. Both SEDATU and Sempra ~~Mexico~~Infrastructure challenged the ruling due to lack of notification of the underlying process. ~~Both challenges are~~In May 2019, a federal court in Mexico reversed the ruling and ordered a retrial, which is pending resolution.

▪In a separate proceeding, the claimant filed suit to ~~be resolved~~reinitiate an administrative procedure at SEDATU to obtain the property title that, as described above, had previously been issued in a ruling by the federal Agrarian Court and subsequently reversed by a ~~Federal~~federal court in Mexico. In April 2021, the proceeding in the Agrarian Court concluded with the court ordering that the administrative procedure be restarted. The administrative procedure at SEDATU may continue if SEDATU decides to reopen the matter.

In addition, an area of real property on which part of the ECA Regas Facility is situated is subject to a claim in the federal Agrarian Court, in ~~Mexico. Sempra Mexico expects additional proceedings regarding~~which the ~~claims.~~

plaintiff seeks to annul the property title for a portion of the land on which the ECA Regas Facility is situated and to obtain possession of a different parcel that allegedly overlaps with the site of the ECA Regas Facility. The proceeding, which seeks an order that SEDATU annul the ECA Regas Facility’s competing property ~~claimant also~~title, was initiated in 2006 and, in July 2021, a decision was issued in favor of the ECA Regas Facility. The plaintiff appealed and, in February 2022, the appellate court confirmed the ruling in favor of the ECA Regas Facility and dismissed the appeal. The plaintiff filed a ~~lawsuit in July 2010~~federal appeal against ~~Sempra Energy in Federal District Court in San Diego seeking compensatory and punitive damages as well as~~ the ~~earnings~~appellate court ruling. A ruling from the Energía Costa Azul LNG terminal based on his allegations that he was wrongfully evicted from the adjacent property and that he has been harmed by other allegedly improper actions. In September 2015, the Court granted Sempra Energy’s motion for summary judgment and closed the case. The claimant appealed the summary judgment and an earlier order dismissing certain of his causes of action. In July 2017, the NinthFederal Collegiate Circuit Court ~~of Appeal issued a ruling affirming the summary judgment~~is pending.

Environmental and ~~dismissal of his other causes of action, except one alleging theft of personal property in connection with the alleged eviction. In September 2017, the District Court dismissed the remaining claim.~~

~~Additionally, several~~Social Impact Permits. Several administrative challenges are pending ~~in Mexico~~ before ~~the~~Mexico’s Secretariat of Environment and Natural Resources (the Mexican environmental protection ~~agency~~agency) and ~~the~~ Federal Tax and Administrative Courts, seeking revocation of the environmental impact authorization issued to ~~Energía Costa Azul~~the ECA Regas 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.

~~Two real property cases have~~In 2018 and 2021, three related claimants filed separate challenges in the federal district court in Ensenada, Baja California in relation to the environmental and social impact permits issued by each of ASEA and SENER to ECA LNG authorizing natural gas liquefaction activities at the ECA Regas Facility, as follows:

▪In the first case, the court issued a provisional injunction against the permits in September 2018. In December 2018, ASEA approved modifications to the environmental permit that facilitate the development of the proposed natural gas liquefaction facility in two phases. In May 2019, the court canceled the provisional injunction. The claimant appealed the court’s decision canceling the injunction but was not successful. The claimant’s underlying challenge to the permits remains pending.

▪In the second case, the initial request for a provisional injunction against the permits was denied. That decision was reversed on appeal in January 2020, resulting in the issuance of a new injunction against the permits that were issued by ASEA and SENER. This injunction has uncertain application absent clarification by the court. The claimants petitioned the court to rule that construction of natural gas liquefaction facilities violated the injunction and, in February 2022, the court ruled in favor of the ECA Regas Facility, holding that the natural gas liquefaction construction activities did not violate the injunction. The claimants appealed this ruling but were not successful. The claimants’ underlying challenge to the permits remains pending.

▪In the third case, a group of residents filed a complaint in June 2021 against various federal and state authorities alleging deficiencies in the public consultation process for the issuance of the permits. The request for an initial injunction was denied. The claimants appealed this ruling but were not successful. The lower court’s ruling was favorable to the ECA Regas Facility, as the court determined that no harm has been ~~filed against~~caused to the plaintiffs and dismissed the lawsuit. The claimants appealed and the appellate court’s ruling is pending.

Table of Con tents

Litigation Related to Regulatory and Other Actions by the Mexican Government

Amendments to Mexico’s Electricity Industry Law. In March 2021, the Mexican government published a decree with amendments to Mexico’s Electricity Industry Law that include some public policy changes, including establishing priority of dispatch for CFE plants over privately owned plants. According to the decree, these amendments were to become effective in March 2021, and SENER, the CRE and Centro Nacional de Control de Energía ~~Costa Azul.~~(Mexico’s National Center for Energy Control) were to have 180 calendar days to modify, as necessary, all resolutions, policies, criteria, manuals and other regulations applicable to the power industry to conform with this decree. However, a Mexican court issued a suspension of the amendments later in March 2021. In ~~one,~~April 2022, the ~~plaintiffs seek~~Mexican Supreme Court resolved an action of unconstitutionality filed by a group of senators against the amended Electricity Industry Law, but the qualified majority of eight votes out of 11 as is required in matters involving constitutionality was not reached and the proceeding was dismissed, which means that the Mexican Supreme Court did not issue a binding precedent and the amended Electricity Industry Law remains in force. Sempra Infrastructure filed three lawsuits against the amendments to ~~annul~~ the ~~recorded property title for~~Electricity Industry Law and, in each of them, Sempra Infrastructure obtained a ~~parcel on which the Energía Costa Azul LNG terminal is situated and to obtain possession of a different parcel that allegedly sits~~favorable judgment in the ~~same place. A second complaint was served in April 2013 seeking to invalidate the contract by~~lower courts, which ~~Energía Costa Azul purchased another of the terminal parcels, on the grounds the purchase price was unfair. In January 2016, the second complaint was dismissed~~were challenged by the ~~Federal Agrarian Court.~~CRE. Final resolution is pending. If the proposed amendments are affirmed by the lower courts or by the Mexican Supreme Court (which in these cases would only require a simple majority vote), the CRE may be required to revoke self-supply permits granted under the former electricity law, which were grandfathered when the new Electricity Industry Law was enacted, under a legal standard that is ambiguous and not well-defined under the law. If such self-supply permits granted under the former electricity law are revoked, it may result in increased costs for Sempra Infrastructure and for its power consumers, adversely affect our ability to develop new projects, result in decreased revenues and cash flows, and negatively impact our ability to recover the carrying values of our investments in Mexico, ~~expects further proceedings~~any of which could have a material adverse effect on ~~these two matters.~~Sempra’s business, results of operations, financial condition, cash flows and/or prospects.

Sonora Pipeline – Resolved

Guaymas-El Oro ~~Segment of the Sonora Pipeline~~Segment.~~. IEnova’s~~ Sempra Infrastructure’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 ~~an amparo~~a legal challenge in Mexican ~~Federal Court~~federal court demanding the right to withhold consent for the project, ~~the stoppage of work~~resulting in ~~the Yaqui territory and damages. The judge granted~~ a suspension order in 2016 that prohibited ~~the~~ construction ~~of such segment~~ through the Bácum community territory. Because ~~the pipeline does not pass through the Bácum community, IEnova~~Sempra Infrastructure did not believe the 2016 suspension order prohibited construction in the remainder of the Yaqui ~~territory. As a result of the dispute, however, IEnova~~territory, construction was delayed in the construction of the approximately 14 kilometers of pipeline that pass through territory of the Yaqui tribe. The CFE agreed to extend the deadline for commercial operations until the second quarter of 2017. Construction of the Guaymas-El Oro segment is complete,completed, and commercial operations began in May 2017.

Following the start of commercial operations, Sempra Infrastructure reported damage to the Guaymas-El Oro segment in the Yaqui territory that has made that section inoperable since August 2017 and, as a result, Sempra Infrastructure declared a force majeure event. In 2017, an appellate court ruled that the scope of the 2016 suspension order encompassed the wider Yaqui ~~territory. The amparo remains pending. IEnova~~territory, which has ~~subsequently reported~~prevented Sempra Infrastructure from making repairs to put the pipeline back in service. In July 2019, a federal district court ruled in favor of Sempra Infrastructure 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 Sempra Infrastructure from repairing the damage ~~and declared a force majeure event for~~to the Guaymas-El Oro segment to remain in place until the appeals process was exhausted. Following a request by the CFE to dismiss the appeal based on the plan to re-route the portion of the ~~Sonora~~ pipeline that is in the Yaqui territory, in December 2022, the court of appeals reversed the federal district court’s ruling and ordered the district court to issue a new ruling that ~~has interrupted its operations since August 23, 2017. There is no economic impact as of September 30, 2017. The Sasabe-Puerto Libertad-Guaymas segment remains in full operation.~~

~~Energía Sierra Juárez.~~ ~~In December 2012, Backcountry Against Dumps, Donna Tisdale and~~takes into account the ~~Protect Our Communities Foundation filed a complaint in the SDCA seeking to invalidate the presidential permit issued by the DOE for Energía Sierra Juárez’s~~

~~cross-border generation tie line connecting the Energía Sierra Juárez wind project in Mexico to the electric grid in the United States. The suit alleged violations~~planned re-routing of the ~~NEPA,~~pipeline. In February 2023, the ~~Endangered Species Act,~~district court issued a new ruling and resolved to dismiss the ~~Migratory Bird Treaty Act and the Bald and Golden Eagle Protection Act. Plaintiffs filed a motion for summary judgment,~~case, which ~~the court largely denied in September 2015. One NEPA claim, however,~~ was not ~~resolved – whether~~appealed and, in March 2023, the Environmental Impact Statement’s assessment of alleged extraterritorial impacts of the generation tie line in the United States on the environment in Mexico was inadequate (the “extraterritorial impact issue”) – and was the subject of additional briefing in 2016. On January 30, 2017, the Court issued a ruling on the extraterritorial impact issue and, contrary to its prior ruling, ruleddistrict court declared that the ~~Environmental Impact Statement~~case was ~~deficient for not considering the effects in Mexico~~definitively concluded.

Table of both the U.S. and Mexican portion of the generation tie line and the wind farm itself. On August 29, 2017, the Court denied the plaintiffs request to vacate the presidential permit or enjoin operation of the tie line and remanded the case to the DOE for preparation of a supplemental Environmental Impact Statement that addresses the deficiencies identified by the Court, and entered judgment ending the case.Con tents

Other Litigation

RBS Sempra ~~Energy~~Commodities

Sempra holds ~~a noncontrolling interest~~an equity method investment in RBS Sempra Commodities, a limited liability partnership in the process of being liquidated. In 2015, liquidators filed a claim in the High Court of Justice against RBS (now NatWest Markets plc, our partner in the joint venture, paid an £86 million assessment 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 JP MorganJV) 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. The First-Tier Tribunal held a preliminary hearing in September 2016 to determine whether HMRC’s assessment was time-barred. In January 2017, the First-Tier Tribunal issued a decision in favor of HMRC concluding that the assessment was not time-barred. RBS has decided not to appeal the First-Tier Tribunal’s decision to the Upper Tribunal. There will be a hearing on the substantive matter regarding whether RBS knew or should have known that certain vendors in the trading chain did not remit their VAT to HMRC.

~~During 2015, liquidators, acting~~Europe Trading Limited (the Defendants) on behalf of ~~ten~~10 companies (the Liquidating Companies) that engaged in carbon credit trading via chains that included a company that traded directly with RBS SEE, ~~traded with directly, filed~~ a ~~claim in the High Court~~subsidiary of ~~Justice asserting damages of £160 million against~~ RBS ~~and Mercuria Energy Europe Trading Limited (the Defendants).~~Sempra Commodities. 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~~value-added tax liability they were unable to ~~pay. The £160 million is comprised of a claim by~~pay, and that the ~~Companies for £80 million~~Defendants are liable to provide for equitable compensation due to dishonest assistance and ~~a claim by~~compensation under the ~~Liquidators for compensation in the same amount under the~~U.K. Insolvency Act of 1986. ~~The parties have agreed that to~~Trial on the ~~extent~~matter was held in 2018. In March 2020, the ~~Companies’ claims are successful, the liquidators cannot collect under the Insolvency Act~~High Court of ~~1986, however, the award amount is ultimately determined by the Court. Trial~~Justice rendered its judgment mostly in favor of the ~~matter~~Liquidating Companies and awarded damages of approximately £45 million (approximately $55 million in U.S. dollars at September 30, 2023), plus costs and interest. In October 2020, the High Court of Justice assessed costs and interest to be approximately £21 million (approximately $26 million in U.S. dollars at September 30, 2023) as of that date, with interest continuing to accrue. The Defendants appealed and, in May 2021, the Court of Appeal set aside the High Court of Justice’s decision and ordered a retrial. In July 2022, the Supreme Court of the U.K. denied the Liquidating Companies application for permission to appeal the Court of Appeal’s decision. No date has been ~~set~~scheduled for the ~~summer of 2018. JP~~retrial. J.P. Morgan ~~has~~Chase & Co., which acquired RBS SEE and later sold it to Mercuria Energy Group, Ltd., previously notified us that Mercuria Energy Group, Ltd. has sought indemnity for the claim, and JPJ.P. Morgan Chase & Co. has in turn sought indemnity from usSempra and RBS.

~~Our remaining investment~~Asbestos Claims Against EFH Subsidiaries

Certain EFH subsidiaries that we acquired as part of the merger of EFH with an indirect subsidiary of Sempra were defendants in ~~RBS Sempra Commodities~~personal injury lawsuits brought in state courts throughout the U.S. These cases alleged illness or death as a result of ~~$67 million at September 30, 2017 is accounted~~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 sought compensatory and punitive damages. As of October 31, 2023, two lawsuits are pending. Additionally, approximately 28,000 proofs of claim were filed, but not discharged, in advance of a December 2015 deadline to file a proof of claim in the EFH bankruptcy proceeding on behalf of persons who allege exposure to asbestos under similar circumstances and assert the ~~equity method~~right to file such lawsuits in the future. The costs to defend or resolve such claims and ~~reflects remaining distributions expected to be received from~~ the ~~partnership as it is liquidated. The timing and~~ amount of ~~distributions~~damages that may be ~~impacted by these matters.~~incurred could have a material adverse effect on Sempra’s results of operations, financial condition, cash flows and/or prospects.

Ordinary Course Litigation

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.

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, energy storage and peaker plant facilities.

SDG&E entered into an energy storage agreement that commenced in the second quarter of 2023 and expires in 2033. SDG&E recorded an operating lease right-of-use asset and operating lease liability of $101 million. Undiscounted lease payments are $9 million in 2023, $13 million in each of 2024 through 2027 and $66 million thereafter.

Leases That Have Not Yet Commenced

SDG&E has entered into seven purchased-power contracts, of which SDG&E expects one will commence in the fourth quarter of 2023, two will commence in 2024, three will commence in 2025, and one will commence in 2026. SDG&E expects the future minimum lease payments to be $32 million in 2024, $61 million in 2025, $82 million in 2026, $83 million in 2027 and $919 million thereafter until expiration in 2041.

Table of Con tents

Lessor Accounting

Sempra Infrastructure is a lessor for certain of its natural gas and ethane pipelines, compressor stations, liquid petroleum gas storage facilities, a rail facility and refined products terminals, which we account for as operating or sales-type leases.

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


LESSOR INFORMATION ON THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – SEMPRA
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Sales-type leases:

Interest income	$	2	$	2	$	5	$	6
Total revenues from sales-type leases(1)	$	2	$	2	$	5	$	6

Operating leases:
Fixed lease payments	$	78	$	71	$	234	$	211
Variable lease payments	10		3		26		7
Total revenues from operating leases(1)	$	88	$	74	$	260	$	218

Depreciation expense	$	15	$	14	$	45	$	41

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

CONTRACTUAL COMMITMENTS

We discuss below significant changes in the first nine months of ~~2017~~2023 to contractual commitments discussed in ~~Notes 1 and 15~~Note 16 of the Notes to Consolidated Financial Statements in the Annual Report.

Natural Gas Contracts

Sempra ~~LNG & Midstream’s~~Infrastructure’s natural gas ~~purchase~~contracts and natural gas storage and transportation commitments have ~~decreased~~increased by ~~$188~~approximately $877 million since December 31, ~~2016,~~2022 primarily ~~due to payments on existing~~from entering into new storage and transportation contracts ~~and changes in forward natural gas prices~~ in the first nine months of ~~2017. Net~~2023. We expect future payments ~~are expected~~ to decrease by ~~$192~~$29 million in ~~2017~~2023, and increase by $3$38 million in ~~2018~~2024, $35 million in 2025, $33 million in 2026, $30 million in 2027 and $1$770 million thereafter through expiration in 2059 compared to December 31, ~~2016.~~

In May 2016, Sempra LNG & Midstream permanently released certain pipeline capacity that it held with Rockies Express and others, which we discuss in Note 15 of the Notes to Consolidated Financial Statements in the Annual Report. The effect of the permanent capacity releases resulted in a pretax charge of $206 million ($123 million after-tax) in the second quarter of 2016, recorded in Other Cost of Sales on the Sempra Energy Condensed Consolidated Statement of Operations. In May 2017, Sempra LNG & Midstream

received settlement proceeds of $57 million from a breach of contract claim against a counterparty in bankruptcy court. Of the total proceeds, $47 million related to the $206 million charge we recorded in 2016 resulting from the permanent release of certain pipeline capacity. Sempra LNG & Midstream recorded the settlement proceeds as a reduction to Other Cost of Sales on Sempra Energy’s Condensed Consolidated Statement of Operations in the second quarter of 2017.2022.

LNG Purchase Agreement

Sempra ~~LNG & Midstream~~Infrastructure has ~~a purchase agreement~~an SPA for the supply of LNG to the ~~Energía Costa Azul terminal.~~ECA Regas Facility. The commitment amount is calculated using a predetermined formula based on estimated forward prices of the index applicable from ~~2017~~2023 to 2029. At September 30, 2017, the commitment amount is expected to decrease by $425 million in 2017, $40 million in 2018, $22 million in 2019, $32 million in 2020, $37 million in 2021 and $775 million thereafter (through contract termination in 2029) compared to December 31, 2016, reflecting changes in estimated forward prices since December 31, 2016 and actual transactions for the first nine months of 2017. These LNG commitment amounts are based on the assumption that all cargoes, less those already confirmed to be diverted, under the agreement are delivered. Although this agreement specifies a number of cargoes to be delivered, under its terms, the ~~customer~~supplier may divert certain cargoes, which would reduce amounts paid under the agreement by Sempra Infrastructure. At September 30, 2023, we expect the commitment amount to decrease by $980 million in 2023, $62 million in 2024, $45 million in 2025, $47 million in 2026, $58 million in 2027 and $136 million thereafter (through contract termination in 2029) compared to December 31, 2022, reflecting changes in estimated forward prices since December 31, 2022 and actual transactions for the first nine months of 2023. These LNG ~~& Midstream.~~commitment amounts are based on the assumption that all LNG cargoes under the agreement are delivered, less those already confirmed to be diverted as of September 30, 2023. 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~~supplier electing to divert cargoes as allowed by the agreement.

~~Capital Leases~~ – ~~Power Purchase Agreements~~Purchased-Power Contracts

In 2015, SDG&E entered into a CPUC-approved 25-year PPA with a peaker power plant facility. Construction of the peaker power plant facility was completed and delivery of contracted power commenced in June 2017, at which time we recorded a $500 million capital lease obligation on SDG&E’s purchased-power contract commitments have increased by approximately $482 million since December 31, 2022 primarily from entering into energy storage, hybrid renewable energy and Sempra Energy’s Condensed Consolidated Balance Sheets. We discuss commitments related to this capital lease obligation in Note 15 of the Notes to Consolidated Financial Statements in the Annual Report.

~~In the first quarter of 2017, SDG&E satisfied all of the conditions precedent~~energy storage, and resource adequacy agreements for a CPUC-approved 20-year PPA with a 500-MW power plant facility that is under construction. Beginning with the initial delivery of the contracted power, scheduled in 2018, the PPA will be accounted for as a capital lease. Future minimum lease payments under the new PPA are as follows:

FUTURE MINIMUM PAYMENTS – POWER PURCHASE AGREEMENT
(Dollars in millions)
2017 $ —
2018 88
2019 105
2020 105
2021 105
Thereafter 1,706
Total minimum lease payments(1) 2,109
Less: interest(2) (1,559 )
Present value of net minimum lease payments $ 550


~~(1)~~	This amount will be recorded over the life of the lease as Cost of Electric Fuel and Purchased Power on Sempra Energy’s and SDG&E’s Condensed Consolidated Statements of Operations. This expense will receive ratemaking treatment consistent with purchased-power costs, which are recovered in rates.


~~(2)~~	~~Amount necessary to reduce net minimum lease payments to estimated present value at the inception of the lease.~~

The entities that own the peaker plant facilities are VIEs of which SDG&E is not the primary beneficiary. SDG&E does not have any additional implicit or explicit financial responsibility related to these VIEs.

~~Construction and Development Projects~~

~~SDG&E~~

In the first nine months of 2017, significant net increases to contractual commitments at SDG&E were $23 million, primarily for construction and infrastructure improvements for transmission systems. Net future payments under these contractual commitments are expected2023. At September 30, 2023, we expect the commitment amount to increase by $2$14 million in ~~2017 and $26~~2023, $3 million in ~~2018, decrease by $7~~2024, $13 million in ~~2019, increase by $7~~2025, $32 million in ~~2020 and $2~~2026, $33 million in ~~2021,~~2027, and ~~decrease by $7~~$387 million thereafter through expiration in 2042 compared to December 31, ~~2016.~~2022.

~~Sempra Renewables~~

Table of Con tents

ENVIRONMENTAL ISSUES

We disclose any proceeding under environmental laws to which a government authority is a party when the ~~first nine months~~potential monetary sanctions, exclusive of ~~2017, significant net increases to contractual commitments at Sempra Renewables were $155 million, primarily for contracts related to~~interest and costs, exceed the ~~construction~~lesser of ~~renewable energy projects. Net future payments under these contractual~~

~~commitments are expected to increase total commitments by $124 million in 2017, $26 million in 2018, $2 million in both 2019 and 2020 and~~ $1 million ~~in 2021 compared to December 31, 2016.~~

~~NUCLEAR INSURANCE~~

or 1% of current assets, which was $53 million for Sempra, $19 million for SDG&E and the other owners of SONGS have insurance to cover claims from nuclear liability incidents arising at SONGS. This insurance provides $450 million in coverage limits, the maximum amount available, including coverage for acts of terrorism. In addition, the Price-Anderson Act provides for up to $13 billion of SFP. If a nuclear liability loss occurring at any U.S. licensed/commercial reactor exceeds the $450 million insurance limit, all nuclear reactor owners could be required to contribute to the SFP. In such case, SDG&E’s contribution would be up to $50.9 million. This amount is subject to an annual maximum of $7.6 million, unless a default occurs by any other SONGS owner. If the SFP is insufficient to cover the liability loss, SDG&E could be subject to an additional assessment.

The SONGS owners, including SDG&E, also maintain nuclear property damage insurance that exceeds the minimum federal requirements of $1.06 billion. 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 $10.4 million of retrospective premiums based on overall member claims. All of SONGS’ insurance claims arising out of the failures of the MHI replacement steam generators have been settled with NEIL, as we discuss in Note 13 of the Notes to Consolidated Financial Statements in the Annual Report.

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). The industry aggregate loss limit for property claims arising from non-certified acts of terrorism is $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.

~~U.S. DEPARTMENT OF ENERGY NUCLEAR FUEL DISPOSAL~~

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. 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. In April 2016, Edison executed a spent fuel settlement agreement with the DOE for $162 million covering damages incurred from January 1, 2006 through December 31, 2013. In May 2016, Edison refunded SDG&E $32$14 million for its respective share of the damage award paid. In applying this refund, SDG&E recorded a $23 million reduction to the SONGS regulatory asset, an $8 million reduction of its nuclear decommissioning balancing account and a $1 million reduction in its SONGS O&M cost balancing account.SoCalGas at September 30, 2023.

In September 2016, Edison filed claims with the DOE for $56 million in spent fuel management costs incurred in 2014 and 2015 on behalf of the SONGS co-owners under the terms of the 2016 spent fuel settlement agreement. In February 2017, the DOE reduced the request to approximately $43 million primarily due to reductions to the claimed fuel canister costs. SDG&E received its $9 million respective share of the claim from Edison in May 2017 and recorded the proceeds in balancing accounts or as reductions to regulatory assets for the benefit of ratepayers.

In October 2015, the California Coastal Commission approved Edison’s application for the proposed expansion of an ISFSI at SONGS. The ISFSI expansion began construction in 2016 and is expected to be fully loaded with spent fuel by 2019 and to 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.

~~We provide additional information about SONGS in Note 9 above and in Notes 13 and 15 of the Notes to Consolidated Financial Statements in the Annual Report.~~

~~CONCENTRATION OF CREDIT RISK~~

We maintain credit policies and systems designed to manage our overall credit risk. These policies include an evaluation of potential counterparties’ financial condition and an assignment of credit limits. These credit limits are established based on risk and return considerations under terms customarily available in the industry. We grant credit to utility customers and counterparties, substantially all of whom are located in our service territory, which covers most of Southern California and a portion of central California for SoCalGas, and all of San Diego County and an adjacent portion of Orange County for SDG&E. We also grant credit to utility customers and counterparties of our other companies providing natural gas or electric services in Mexico, Chile and Peru.

As they become operational, projects owned or partially owned by Sempra LNG & Midstream, Sempra Renewables, Sempra South American Utilities and Sempra Mexico place significant reliance on the ability of their suppliers, customers and partners to perform on long-term agreements and on our ability to enforce contract terms in the event of nonperformance. We consider many factors, including the negotiation of supplier and customer agreements, when we evaluate and approve development projects.

NOTE ~~12.~~11. SEGMENT INFORMATION

We have ~~six~~four 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 80.25% interest in Oncor, a regulated electricity transmission and distribution utility serving customers in the north-central, eastern, western and panhandle regions of Texas; and our indirect, 50% interest in Sharyland Holdings L.P., which owns Sharyland Utilities, L.L.C., a regulated electric transmission utility serving customers near the Texas-Mexico border.

▪Sempra Infrastructure includes the operating companies of our subsidiary, SI Partners, as well as a holding company and certain services companies. Sempra Infrastructure develops, builds, operates and invests in energy infrastructure to help enable the energy transition in North American markets and globally.


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


▪	~~Sempra South American Utilities~~ ~~develops, owns and operates, or holds interests in, electric transmission, distribution and generation infrastructure in Chile and Peru.~~

▪

~~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. In February 2016, management approved a plan to market and sell the TdM natural gas-fired power plant located in Mexicali, Baja California, as we discuss in Note 3.


▪	~~Sempra Renewables~~ ~~develops, owns and operates, or holds interests in, wind and solar energy generation facilities serving wholesale electricity markets in the United States.~~

▪

~~Sempra LNG & Midstream~~ develops, owns and operates, or holds interests in, a terminal for the import and export of LNG and sale of natural gas, and natural gas pipelines and storage facilities, all within the United States. In September 2016, Sempra LNG & Midstream sold EnergySouth, the parent company of Mobile Gas and Willmut Gas, and in May 2016, sold its 25-percent interest in Rockies Express. We discuss these divestitures in Note 3 herein and Note 3 of the Notes to Consolidated Financial Statements in the Annual Report.

We evaluate each segment’s performance based on its contribution to ~~Sempra Energy’s~~Sempra’s reported ~~earnings. The California Utilities~~earnings and cash flows. SDG&E and SoCalGas operate in essentially separate service territories, under separate regulatory frameworks and rate structures set by the ~~CPUC. The California Utilities’ operations are based on rates 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.~~case of SDG&E, the FERC.

~~Common~~The cost of common services shared by the business segments ~~are~~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.

The following tables show selected information by segment from our Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Cash Flows and Condensed Consolidated Balance Sheets. Amounts labeled as “All other” in the following tables consist primarily of activities of parent organizations.

Table of Con tents


SEGMENT INFORMATION
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
REVENUES
SDG&E	$	1,442	$	1,569	$	4,357	$	4,413
SoCalGas	1,313		1,385		6,574		4,879
Sempra Infrastructure	629		697		2,485		1,810
All other	—		1		—		1
Adjustments and eliminations	—		—		(1)		—
Intersegment revenues(1)	(50)		(35)		(186)		(119)
Total	$	3,334	$	3,617	$	13,229	$	10,984
DEPRECIATION AND AMORTIZATION
SDG&E	$	280	$	247	$	810	$	730
SoCalGas	211		190		625		565
Sempra Infrastructure	71		67		210		199
All other	1		2		6		6
Total	$	563	$	506	$	1,651	$	1,500
INTEREST INCOME
SDG&E	$	7	$	2	$	12	$	3
SoCalGas	2		3		7		4
Sempra Infrastructure	4		7		25		37
All other	7		6		17		14
Intercompany eliminations	(1)		—		(1)		—
Total	$	19	$	18	$	60	$	58
INTEREST EXPENSE
SDG&E	$	126	$	113	$	367	$	333
SoCalGas	70		50		210		135
Sempra Infrastructure	7		39		127		98
All other	109		81		292		232
Intercompany eliminations	—		(1)		(1)		(2)
Total	$	312	$	282	$	995	$	796
INCOME TAX (BENEFIT) EXPENSE
SDG&E	$	(15)	$	35	$	(4)	$	141
SoCalGas	(5)		(28)		68		75
Sempra Texas Utilities	—		1		—		1
Sempra Infrastructure	24		58		555		219
All other	(56)		(45)		(120)		(1)
Total	$	(52)	$	21	$	499	$	435
EQUITY EARNINGS
Equity earnings, before income tax:
Sempra Texas Utilities	$	2	$	1	$	5	$	6
Sempra Infrastructure	131		133		413		430

	133		134		418		436
Equity earnings, net of income tax:
Sempra Texas Utilities	305		257		548		603
Sempra Infrastructure	41		26		120		79
	346		283		668		682
Total	$	479	$	417	$	1,086	$	1,118

(1) Revenues for reportable segments include intersegment revenues of $5, $29, and $16 for the three months ended September 30, 2023 and $14, $91, and $81 for the nine months ended September 30, 2023; $4, $24, and $7 for the three months ended September 30, 2022 and $11, $73, and $35 for the nine months ended September 30, 2022 for SDG&E, SoCalGas, and Sempra Infrastructure, respectively.

Table of Con tents

SEGMENT INFORMATION
(Dollars in millions)
Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
REVENUES
SDG&E $ 1,236
$ 1,209
$ 3,351
$ 3,192
SoCalGas 684
686
2,695
2,336
Sempra South American Utilities 376
385
1,169
1,170
Sempra Mexico 336
196
873
481
Sempra Renewables 26
12
74
25
Sempra LNG & Midstream 152
164
406
384
Adjustments and eliminations —
(1 ) —
(1 )
Intersegment revenues(1) (131 ) (116 ) (325 ) (274 )
Total $ 2,679
$ 2,535
$ 8,243
$ 7,313
INTEREST EXPENSE
SDG&E $ 53
$ 49
$ 151
$ 145
SoCalGas 26
25
77
71
Sempra South American Utilities 10
9
30
29
Sempra Mexico 21
5
73
13
Sempra Renewables 3
—
11
—
Sempra LNG & Midstream 9
11
29
33
All other 74
68
209
214
Intercompany eliminations (31 ) (31 ) (87 ) (84 )
Total $ 165
$ 136
$ 493
$ 421
INTEREST INCOME
SoCalGas $ 1
$ —
$ 1
$ —
Sempra South American Utilities 6
5
17
15
Sempra Mexico 7
2
12
5
Sempra Renewables 1
1
4
2
Sempra LNG & Midstream 14
19
43
52
All other 1
1
1
1
Intercompany eliminations (18 ) (21 ) (52 ) (56 )
Total $ 12
$ 7
$ 26
$ 19
DEPRECIATION AND AMORTIZATION
SDG&E $ 170
$ 161
$ 499
$ 478
SoCalGas 132
121
384
355
Sempra South American Utilities 14
14
40
41
Sempra Mexico 41
15
114
47
Sempra Renewables 9
1
28
4
Sempra LNG & Midstream 10
12
31
37
All other 2
4
10
8
Total $ 378
$ 328
$ 1,106
$ 970
INCOME TAX (BENEFIT) EXPENSE
SDG&E $ (72 ) $ 91
$ 72
$ 204
SoCalGas (14 ) 21
103
75
Sempra South American Utilities 18
17
57
46
Sempra Mexico 34
142
278
170
Sempra Renewables (9 ) (7 ) (25 ) (29 )
Sempra LNG & Midstream (2 ) 51
17
(77 )
All other (39 ) (33 ) (124 ) (105 )
Total $ (84 ) $ 282
$ 378
$ 284


SEGMENT INFORMATION (CONTINUED)
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
EARNINGS (LOSSES) ATTRIBUTABLE TO COMMON SHARES
SDG&E	$	274	$	271	$	716	$	681
SoCalGas	16		(82)		531		339
Sempra Texas Utilities	305		256		548		604
Sempra Infrastructure	223		114		746		392
All other	(97)		(74)		(248)		(360)
Total	$	721	$	485	$	2,293	$	1,656
EXPENDITURES FOR PROPERTY, PLANT & EQUIPMENT
SDG&E					$	1,893	$	1,651
SoCalGas					1,451		1,394
Sempra Infrastructure					2,725		489
All other					5		6
Total					$	6,074	$	3,540

					September 30, 2023		December 31, 2022
ASSETS
SDG&E					$	28,502	$	26,422
SoCalGas					23,069		22,346
Sempra Texas Utilities					14,269		13,781
Sempra Infrastructure					19,722		15,760
All other					1,205		1,376
Intersegment receivables					(1,032)		(1,111)
Total					$	85,735	$	78,574
EQUITY METHOD INVESTMENTS
Sempra Texas Utilities					$	14,260	$	13,772
Sempra Infrastructure					2,096		1,905
Total					$	16,356	$	15,677

SEGMENT INFORMATION (CONTINUED)
(Dollars in millions)
Three months ended September 30, Nine months ended September 30,
2017 2016 2017
2016
EQUITY EARNINGS (LOSSES)
Earnings (losses) recorded before tax:
Sempra Renewables $ 7
$ 12
$ 25
$ 30
Sempra LNG & Midstream 3
—
6
(26 )
Total $ 10
$ 12
$ 31
$ 4
Earnings (losses) recorded net of tax:
Sempra South American Utilities $ 1
$ 1
$ 2
$ 3
Sempra Mexico 2
18
(7 ) 66
Total $ 3
$ 19
$ (5 ) $ 69
(LOSSES) EARNINGS
SDG&E $ (28 ) $ 183
$ 276
$ 419
SoCalGas(2) 7
—
268
198
Sempra South American Utilities 42
46
134
127
Sempra Mexico 66
332
105
407
Sempra Renewables 15
17
49
43
Sempra LNG & Midstream (4 ) 77
24
(104 )
All other (41 ) (33 ) (99 ) (99 )
Total $ 57
$ 622
$ 757
$ 991
EXPENDITURES FOR PROPERTY, PLANT & EQUIPMENT
SDG&E $ 1,122
$ 959
SoCalGas 1,033
949
Sempra South American Utilities 138
133
Sempra Mexico 193
232
Sempra Renewables 361
700
Sempra LNG & Midstream 16
100
All other 17
14
Total $ 2,880
$ 3,087

September 30, 2017 December 31, 2016
ASSETS
SDG&E $ 18,629
$ 17,719
SoCalGas 13,917
13,424
Sempra South American Utilities 3,862
3,591
Sempra Mexico 8,100
7,542
Sempra Renewables 2,650
3,644
Sempra LNG & Midstream 4,849
5,564
All other 691
475
Intersegment receivables (2,569 ) (4,173 )
Total $ 50,129
$ 47,786
EQUITY METHOD AND OTHER INVESTMENTS
Sempra South American Utilities $ 22
$ —
Sempra Mexico 243
180
Sempra Renewables 807
844
Sempra LNG & Midstream 980
997
All other 76
76
Total $ 2,128
$ 2,097

~~(1)~~

Revenues for reportable segments include intersegment revenues of $1 million, $21 million, $27 million and $82 million for the three months ended September 30, 2017; $5 million, $56 million, $78 million and $186 million for the nine months ended September 30, 2017; $2 million, $21 million, $26 million and $67 million for the three months ended September 30, 2016; and $5 million, $56 million, $80 million and $133 million for the nine months ended September 30, 2016 for SDG&E, SoCalGas, Sempra Mexico and Sempra LNG & Midstream, respectively.


~~(2)~~	~~After preferred dividends.~~

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

~~You~~This combined MD&A for Sempra, SDG&E and SoCalGas should be read ~~the following discussion~~ in conjunction with the Condensed Consolidated Financial Statements and the Notes thereto ~~and Part II, Item 1A. “Risk Factors” contained~~ in this ~~Form 10-Q,~~report, and the Consolidated Financial Statements and the Notes thereto, ~~“Management’s Discussion~~“Part I – Item 1A. Risk Factors” and ~~Analysis of Financial Condition and Results of Operations” and “Risk Factors” contained~~“Part II – Item 7. MD&A” in ~~our~~the Annual Report.

OVERVIEW

Sempra ~~Energy~~ is a ~~Fortune 500 energy-services~~California-based holding company ~~whose operating units~~with energy infrastructure investments in North America. Our businesses invest in, develop and operate energy infrastructure, and provide ~~gas~~electric and ~~electricity~~gas services to their customers in North and South America. Additional information about our operating units, Sempra Utilities and Sempra Infrastructure, and their respective reportable segments is provided below and in “Management’s Discussion and Analysiscustomers.

On August 2, 2023, Sempra’s board of ~~Financial Condition and Results~~directors declared a two-for-one split of ~~Operations”~~Sempra’s common stock in the ~~Annual Report.~~form of a 100% stock dividend for shareholders of record at the close of business on August 14, 2023. Sempra’s common stock began trading on a post-split basis effective August 22, 2023. All shares and per share information related to issued and outstanding common stock have been retroactively adjusted to reflect the stock split and are presented on a post-split basis herein.

~~This report includes information for the following separate registrants:~~


▪	~~Sempra Energy and its consolidated entities~~


▪	~~SDG&E and its consolidated VIE~~


▪	~~SoCalGas~~

~~References to “we,” “our” and “Sempra Energy Consolidated”~~

Table of Con tents

We are ~~to Sempra Energy and its consolidated entities, collectively, unless otherwise indicated by its context. We refer to~~currently considering a resegmentation in which our SDG&E and SoCalGas ~~collectively as~~segments would be combined into one segment, Sempra California, resulting in three reportable segments. We intend to complete our analysis in the ~~California Utilities, which do not include our South American utilities or~~fourth quarter of 2023 and, assuming a positive determination is made, we would implement the ~~utilities~~resegmentation in our Sempra Infrastructure operating unit. All references to “Sempra Utilities” and “Sempra Infrastructure,” and to their respective reportable segments, are not intended to refer to any legal entity withannual report on Form 10-K for the ~~same or similar name.~~period ending December 31, 2023.

~~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; and~~


▪	~~the Condensed Financial Statements and related Notes of SoCalGas.~~

~~Below are summary descriptions of our operating units and their reportable segments.~~

~~SEMPRA ENERGY OPERATING UNITS AND REPORTABLE SEGMENTS~~



~~SEMPRA UTILITIES~~

~~Business summary~~	~~Market~~	~~Service territory~~
~~SDG&E~~ ~~A regulated public utility; infrastructure supports electric generation, transmission and distribution, and natural gas distribution~~	▪ ~~Provides electricity to a population of 3.6 million (1.4 million meters)~~ ▪ ~~Provides natural gas to a population of 3.3 million (0.9 million meters)~~	~~Serves the county of San Diego, California (electric and natural gas) and an adjacent portion of southern Orange County (electric only) covering 4,100 square miles~~
~~SOCALGAS~~ ~~A regulated public utility; infrastructure supports natural gas distribution, transmission and storage~~	▪ ~~Provides natural gas to a population of 21.7 million (5.9 million meters)~~	~~Southern California and portions of central California (excluding San Diego County, the city of Long Beach and the desert area of San Bernardino County) covering 20,000 square miles~~
~~SEMPRA SOUTH AMERICAN UTILITIES~~ ~~Develops, owns and operates, or holds interests in electric transmission, distribution and generation infrastructure~~	▪ ~~Provides electricity to a population of approximately 2 million (approximately 0.7 million meters) in Chile and approximately 4.9 million (approximately 1.1 million meters) in Peru~~	▪ ~~Region of Valparaiso in central Chile~~ ▪ ~~Southern zone of metropolitan Lima, Peru~~



~~SEMPRA INFRASTRUCTURE~~

~~Business summary~~	~~Market~~	~~Geographic area~~
~~SEMPRA MEXICO~~ ~~Develops, owns and operates, or holds interests in:~~ ▪ ~~natural gas transmission pipelines~~ ▪ ~~LPG and ethane systems~~ ▪ ~~a natural gas distribution utility~~ ▪ ~~electric generation facilities, including wind, solar and a natural gas-fired power plant (presently held for sale)~~ ▪ ~~a terminal for the import of LNG~~ ▪ ~~a terminal for the storage of LPG~~ ▪ ~~a marine terminal for the receipt, storage and delivery of liquid fuels~~ ▪ ~~marketing operations for the purchase of LNG and the purchase and sale of natural gas~~	▪ ~~Natural gas~~ ▪ ~~Wholesale electricity~~ ▪ ~~LNG~~ ▪ ~~LPG~~ ▪ ~~Liquid fuels~~	▪ ~~Mexico~~
~~SEMPRA RENEWABLES~~ ~~Develops, owns and operates, or holds interests in renewable energy generation projects~~	▪ ~~Wholesale electricity~~	▪ ~~Arizona~~ ▪ ~~California~~ ▪ ~~Colorado~~ ▪ ~~Hawaii~~ ▪ ~~Indiana~~ ▪ ~~Kansas~~	▪ ~~Michigan~~ ▪ ~~Minnesota~~ ▪ ~~Nebraska~~ ▪ ~~Nevada~~ ▪ ~~Pennsylvania~~
~~SEMPRA LNG & MIDSTREAM~~ ~~Develops, owns and operates, or holds interests in LNG and natural gas midstream assets:~~ ▪ ~~a terminal in the U.S. for the import and export of LNG and sale of natural gas~~ ▪ ~~natural gas pipelines and storage facilities~~ ▪ ~~marketing operations~~	▪ ~~LNG~~ ▪ ~~Natural gas~~	▪ ~~Alabama~~ ▪ ~~Louisiana~~ ▪ ~~Mississippi~~ ▪ ~~Texas~~

RESULTS OF OPERATIONS

We discuss the following in Results of Operations:


▪	~~Overall results of our operations~~


▪	~~Segment results~~


▪	~~Adjusted earnings and adjusted earnings per share~~


▪	~~Significant changes in revenues, costs and earnings between periods~~


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

▪Overall results of operations of Sempra;

▪Segment results;

▪Significant changes in revenues, costs and earnings; and

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

OVERALL RESULTS OF OPERATIONS OF SEMPRA ~~ENERGY~~

~~Our earnings decreased by $565 million to $57 million in~~Sempra’s overall results of operations for the three months (Q3) and nine months (YTD) ended September 30, 2017 compared to the prior year period, while diluted EPS decreased by $2.24 per share to $0.22 per share. For the nine months ended September 30, 2017, our earnings decreased by $234 million (24%) to $757 million compared to the prior year period, while diluted EPS decreased by $0.94 per share (24%) to $2.99 per share. 2023 and 2022 were as follows:


OVERALL RESULTS OF OPERATIONS OF SEMPRA
(Dollars and shares in millions, except per share amounts)

Our earnings and diluted EPS were impacted by variances discussed below in “Segment ~~Results” below and by the items included in the table “Sempra Energy Adjusted Earnings and Adjusted Earnings Per Share,~~Results.” ~~also below.~~

SEGMENT RESULTS

~~The following~~This section presents earnings (losses) by Sempra ~~Energy~~ segment, as well as Parent and other, and ~~the~~a related discussion of the changes in segment earnings (losses). 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 ~~noncontrolling interests,~~foreign currency and inflation effects and NCI, where applicable.


SEMPRA EARNINGS (LOSSES) BY SEGMENT
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
SDG&E	$	274	$	271	$	716	$	681
SoCalGas	16		(82)		531		339
Sempra Texas Utilities	305		256		548		604
Sempra Infrastructure	223		114		746		392
Parent and other(1)	(97)		(74)		(248)		(360)
Earnings attributable to common shares	$	721	$	485	$	2,293	$	1,656

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

SEMPRA ENERGY EARNINGS (LOSSES) BY SEGMENT
(Dollars in millions)
Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Sempra Utilities:
SDG&E $ (28 ) $ 183
$ 276
$ 419
SoCalGas(1) 7
—
268
198
Sempra South American Utilities 42
46
134
127
Sempra Infrastructure:
Sempra Mexico 66
332
105
407
Sempra Renewables 15
17
49
43
Sempra LNG & Midstream (4 ) 77
24
(104 )
Parent and other(2) (41 ) (33 ) (99 ) (99 )
Earnings $ 57
$ 622
$ 757
$ 991


~~(1)~~	~~After preferred dividends.~~


~~(2)~~	Includes after-tax interest expense ($44 million and $41 million for the three months ended September 30, 2017 and 2016, respectively, and $125 million and $128 million for the nine months ended September 30, 2017 and 2016, respectively), intercompany eliminations recorded in consolidation and certain corporate costs.

Table of Con tents

SDG&E

The ~~$28~~increase in earnings of $3 million ~~loss~~(1%) in the three months ended September 30, ~~2017~~2023 compared to ~~earnings of $183 million for~~ the same period in 2016 was primarily due to a $208 million impairment of a regulatory asset associated with wildfire costs, which we discuss in Note 11 of the Notes to Condensed Consolidated Financial Statements herein.

~~The decrease in earnings of $143 million (34%) in the first nine months of 2017~~2022 was primarily due to:


▪	~~$208 million impairment of a regulatory asset associated with wildfire costs; and~~


▪	~~$7 million income tax benefit in 2016 associated with excess tax benefits related to share-based compensation;~~ ▪$11 million higher electric transmission margin;~~offset by~~


▪	~~$31 million of charges in 2016 associated with prior years’ income tax benefits generated from income tax repairs deductions that were reallocated to ratepayers pursuant to the 2016 GRC FD;~~


▪	~~$25 million higher CPUC base operating margin authorized for 2017, and lower non-refundable operating costs;~~

▪$8 million higher CPUC base operating margin, net of operating expenses and $6 million from lower authorized cost of capital; and


▪	~~$11 million increase in AFUDC related to equity; and~~


▪	~~$8 million favorable impact in 2017 from the resolution of prior years’ income tax items.~~

~~SoCalGas~~▪$4 million higher net regulatory interest income; offset by

▪$13 million lower income tax benefit from the resolution of prior year income tax items; and

▪$6 million higher net interest expense.

The increase in earnings of $7$35 million (5%) in the nine months ended September 30, 2023 compared to the same period in 2022 was primarily due to:

▪$35 million higher CPUC base operating margin, net of operating expenses and $18 million from lower authorized cost of capital;

▪$16 million higher net regulatory interest income;

▪$12 million higher electric transmission margin; and

▪$12 million lower income tax expense primarily from flow-through items and lower associated regulatory revenues in 2022; offset by

▪$20 million higher net interest expense; and

▪$13 million lower income tax benefit from the resolution of prior year income tax items.

SoCalGas

Earnings of $16 million in the three months ended September 30, ~~2017 was~~2023 compared to losses of $82 million in the same period in 2022 were primarily due to:

▪$101 million charge in 2022 relating to $4litigation and regulatory matters pertaining to the Leak;

▪$11 million higher ~~earnings associated with the PSEP~~income tax benefits primarily from flow-through items; and ~~advanced metering assets.~~

▪$4 million higher net regulatory interest income; offset by

▪$15 million higher net interest expense.

The increase in earnings of ~~$70~~$192 million ~~(35%)~~ in the ~~first~~ nine months ~~of 2017~~ended September 30, 2023 compared to the same period in 2022 was primarily due to:


▪	~~$49 million of charges in 2016 associated with prior years’ income tax benefits generated from income tax repairs deductions that were reallocated to ratepayers pursuant to the 2016 GRC FD;~~


▪	~~$14~~ ▪$199 million charge in 2022 relating to litigation and regulatory matters pertaining to the Leak; ▪$28 million higher ~~earnings associated with the PSEP and advanced metering assets; and~~


▪	~~$13 million impairment of assets in 2016 related to the Southern Gas System Reliability Project (also referred to as the North-South Pipeline);~~ ~~offset by~~

~~$4 million~~ income tax ~~benefit in 2016 associated with excess~~benefits primarily from flow-through items, which includes $25 million related to income tax benefits in 2023 for previously unrecognized income tax benefits pertaining to gas repairs expenditures;

▪$15 million higher net regulatory interest income;

▪$13 million higher regulatory awards approved by the CPUC; and

▪$10 million in penalties in 2022 related to ~~share-based compensation.~~energy efficiency and advocacy OSCs; offset by

▪$52 million higher net interest expense; and

▪$13 million lower CPUC base operating margin, net of operating expenses and $15 million from lower authorized cost of capital.

Sempra ~~South American~~Texas Utilities

~~Because our operations~~The increase in ~~South America 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~~earnings of $49 million (19%) in ~~Sempra Energy Consolidated’s results of operations. The year-to-year variances discussed below are as adjusted for the difference in foreign currency translation rates between years.~~ ~~We discuss these and other foreign currency effects below in “Impact of Foreign Currency and Inflation Rates on Results of Operations.”~~

~~Earnings for~~ the three months ended September 30, ~~2017 were consistent with earnings for~~2023 compared to the same period in ~~2016.~~2022 was primarily due to higher equity earnings from Oncor Holdings driven by:

▪higher revenues attributable to:

◦higher customer consumption primarily attributable to weather,

◦updates to transmission billing factors,

◦new base rates implemented in May 2023,

◦interim rate updates to reflect increases in invested capital, and

◦customer growth; offset by

▪higher interest expense and depreciation expense attributable to invested capital; and

Table of Con tents

▪higher O&M.

The decrease in earnings of $56 million (9%) in the nine months ended September 30, 2023 compared to the same period in 2022 was primarily due to lower equity earnings from Oncor Holdings driven by:

▪higher interest expense and depreciation expense attributable to invested capital;

▪write-off of rate base disallowances in 2023 resulting from the PUCT’s final order in Oncor’s comprehensive base rate review; and

▪higher O&M; offset by

▪higher revenues attributable to:

◦updates to transmission billing factors,

◦new base rates implemented in May 2023,

◦customer growth, and

◦interim rate updates to reflect increases in invested capital.

Sempra Infrastructure

The increase in earnings of ~~$7 million (6%) in the first nine months of 2017 was primarily due to:~~


▪	~~$5 million higher earnings from foreign currency translation effects; and~~


▪	~~$3 million higher earnings from operations primarily at Luz del Sur, mainly driven by an increase in rates, and lower operating expenses, offset by lower volumes, and lower results at Chilquinta Energ~~ía.

~~Sempra Mexico~~

~~The decrease in earnings of $266~~$109 million in the three months ended September 30, ~~2017~~2023 compared to the same period in 2022 was primarily due to:


▪	~~$432 million noncash gain in 2016 associated with the remeasurement of our equity interest in IEnova Pipelines (formerly known as GdC);~~


▪	~~$31 million tax benefit in 2016 from a reduction to the outside basis deferred tax liability on our investment in TdM that is held for sale;~~


▪	~~$10 million lower earnings from the recognition of AFUDC related to equity associated with pipeline assets placed in service; and~~


▪	~~$6 million higher net interest expense, including $5 million at Ventika and $2 million at IEnova Pipelines related to debt assumed in their respective acquisitions;~~ ~~offset by~~


▪	~~$111 million impairment in 2016 of TdM assets held for sale;~~


▪	$35 million higher pipeline operational earnings, primarily attributable to the increase in our ownership in IEnova Pipelines from 50 percent to 100 percent in September 2016 and from other pipeline assets placed in service;


▪	~~$33 million earnings attributable to noncontrolling interests at IEnova in 2017 compared to $80 million in 2016;~~


▪	~~$10 million operational earnings in 2017 from the Ventika wind power generation facilities, which we acquired in December 2016;~~


▪	$10 million favorable impact in 2017 due to $3 million favorable foreign currency and inflation effects and $7 million gain from foreign currency derivatives, which are hedging Sempra Mexico’s foreign currency exposure from its controlling interest in IEnova. We discuss these effects below in “Impact of Foreign Currency and Inflation Rate on Results of Operations;” and


▪	~~$3 million unfavorable impact in 2016 due to a $7 million loss from foreign currency derivatives, offset by $4 million favorable foreign currency and inflation effects.~~

~~The decrease~~▪$50 million from asset and supply optimization driven by unrealized gains in 2023 compared to unrealized losses in 2022 on commodity derivatives due to changes in natural gas prices, offset by lower LNG diversion fees;

▪$50 million favorable impact from foreign currency and inflation effects on our monetary positions in Mexico, comprised of a $52 million favorable impact in 2023 compared to a $2 million favorable impact in 2022;

▪$21 million lower net interest expense due to higher capitalization of interest expense on projects under construction, offset by higher interest rates and borrowings on committed lines of credit;

▪$15 million net income tax benefit in 2023 compared to $6 million net income tax expense in 2022 primarily from outside basis differences in JV investments; and

▪$9 million from the transportation business driven by higher equity earnings ~~of $302~~from new tariffs going into effect in June 2023 for certain pipelines in Mexico; offset by

▪$122 million earnings attributable to NCI in ~~the first nine months of 2017 was~~2023 compared to $65 million earnings attributable to NCI in 2022 primarily due ~~to:~~


▪	~~$432 million noncash gain in 2016 associated with the remeasurement of our equity interest in IEnova Pipelines;~~


▪	~~$76 million unfavorable impact in 2017 due to $151 million unfavorable foreign currency and inflation effects, offset by a $75 million gain from foreign currency derivatives;~~


▪	~~$22 million favorable impact in 2016 due to $36 million favorable foreign currency and inflation effects, offset by a $14 million loss from foreign currency derivatives; and~~


▪	~~$21 million higher interest expense, including $13 million at Ventika and $6 million at IEnova Pipelines related to debt assumed in their respective acquisitions;~~ ~~offset by~~


▪	~~$92 million higher pipeline operational earnings, primarily attributable to the~~to an increase ~~in ownership in IEnova Pipelines from 50 percent to 100 percent in September 2016 and from other pipeline assets placed in service;~~


▪	~~$23 million earnings attributable to noncontrolling interests at IEnova in 2017 compared to $101 million in 2016;~~


▪	~~$71 million impairment in 2017 of TdM assets held for sale, net of a $12 million income tax benefit that has been fully reserved, compared to a $111 million impairment in 2016 of such assets;~~


▪	~~$28 million operational earnings in 2017 from Ventika, which we acquired in December 2016; and~~


▪	~~$22 million higher earnings in 2017 from the recognition of AFUDC related to equity primarily associated with the Ojinaga and San Isidro pipeline projects.~~

~~Sempra Renewables~~

~~Earnings for the three months ended September 30, 2017 were consistent with earnings for the same period~~ in ~~2016.~~SI Partners’ net income.

The increase in earnings of $6$354 million ~~(14%)~~ in the ~~first~~ nine months ~~of 2017~~ended September 30, 2023 compared to the same period in 2022 was primarily due to:


▪	~~$16 million losses attributed to tax equity investors reflected in noncontrolling interests;~~ ▪$657 million from asset and supply optimization driven by unrealized gains in 2023 compared to unrealized losses in 2022 on commodity derivatives due to changes in natural gas prices;~~offset by~~


▪	~~$6 million higher general and administrative and development costs; and~~


▪	~~$2 million lower earnings primarily due to decreased tax benefits in 2017 at our solar assets placed into service in 2016.~~

~~Sempra LNG & Midstream~~

~~The decrease~~▪$94 million from the transportation business driven by higher equity earnings and revenues, including the cumulative impact of new tariffs going into effect in June 2023 for certain pipelines in Mexico and a customer’s early termination of firm transportation agreements; and

▪$27 million higher net income tax benefit primarily from the remeasurement of certain deferred income taxes and outside basis differences in JV investments; offset by

▪$435 million earnings ~~of $81~~attributable to NCI in 2023 compared to $187 million ~~for the three months ended September 30, 2017 was~~earnings attributable to NCI in 2022 primarily due ~~to:~~


▪	~~$78 million gain on the sale of EnergySouth in September 2016, net of related expenses; and~~


▪	~~$5 million primarily due to higher results from midstream activities in 2016.~~

~~The~~to an increase in ~~earnings~~SI Partners’ net income and from the sale of ~~$128~~a 10% NCI in SI Partners to ADIA in June 2022;

▪$133 million unfavorable impact from foreign currency and inflation effects on our monetary positions in Mexico, comprised of a $244 million unfavorable impact in 2023 compared to a $111 million unfavorable impact in 2022;

▪$30 million higher net interest expense due to $27 million net unrealized losses in 2023 on a contingent interest rate swap related to the ~~first nine months~~PA LNG Phase 1 project and higher interest rates and borrowings on committed lines of ~~2017 was primarily due to:~~


▪	~~$123 million loss in 2016 on permanent release of certain pipeline capacity;~~


▪	$34 million settlement proceeds received from a breach of contract claim against a counterparty in bankruptcy court, of which $28 million is related to the charge in 2016 from the permanent release of certain pipeline capacity, as we discuss in Note 11 of the Notes to Condensed Consolidated Financial Statements herein;


▪	~~$34 million improved results due to unfavorable results from midstream activities in 2016;~~


▪	~~$27 million impairment charge in 2016 related to our investment in Rockies Express; and~~


▪	~~$10 million higher results from LNG marketing activities primarily driven by changes in natural gas prices;~~ credit, offset by higher capitalization of interest expense on projects under construction; and ▪$18 million from the LNG business driven by higher development costs and certain non-capitalized expenses from projects under construction.


▪	~~$78 million gain on the sale of EnergySouth in September 2016, net of related expenses;~~


▪	~~$11 million lower equity earnings resulting from the sale of our investment in Rockies Express in May 2016; and~~


▪	~~$6 million lower earnings due to the sale of EnergySouth in September 2016.~~

Parent and Other

The increase in losses of $8$23 million ~~(24%~~(31%) in the three months ended September 30, ~~2017~~2023 compared to the same period in 2022 was primarily due to:


▪	~~$5 million of costs in 2017 associated with foreign currency derivatives;~~


▪	~~$2 million higher net interest expense in 2017; and~~


▪	~~$2 million lower income tax benefits in 2017, including:~~


◦	~~$2 million income tax expense in 2017 compared to a $5 million income tax benefit in 2016 due to the interim timing of the application of the forecasted consolidated effective tax rate,~~ ~~offset by~~


◦	~~$4 million U.S. income tax expense in 2016 on planned repatriation of earnings~~ ▪$8 million income tax expense in 2023 compared to $23 million income tax benefit in 2022 from ~~certain non-U.S. subsidiaries,~~ ~~offset by~~


▪	$3 million higher investment gains on dedicated assets in support of our executive retirement and deferred compensation plans, offset by an increase in deferred compensation expense associated with those investments.

~~Losses for~~ the ~~first nine months~~interim period application of ~~2017 were consistent with~~an annual forecasted consolidated ETR; and

Table of Con tents

▪$22 million higher net interest expense; offset by

▪$23 million income tax benefit in 2023 from the ~~same period~~remeasurement of certain deferred income taxes; and

▪$15 million income tax benefit in ~~2016 and include~~


▪	$13 million higher investment gains on dedicated assets in support of our executive retirement and deferred compensation plans, offset by an increase in deferred compensation expense associated with those investments;


▪	~~$7 million lower net interest expense in 2017; and~~


▪	~~$4 million higher income tax benefits in 2017, including:~~


◦	~~$13 million U.S. income tax expense in 2016 on planned repatriation of earnings~~2023 from ~~certain non-U.S. subsidiaries, and~~


◦	~~$7 million income tax benefit in 2017 related to a deferred income tax liability on an outside basis difference in a subsidiary investment,~~ ~~offset by~~


◦	~~$17 million income tax benefit in 2016 associated with excess tax benefits related to share-based compensation;~~ ~~offset by~~


▪	~~$15 million of costs in 2017 associated with foreign currency derivatives; and~~


▪	~~$5 million higher proportion of operating costs retained at Parent.~~

~~ADJUSTED EARNINGS AND ADJUSTED EARNINGS PER SHARE~~

~~We prepare~~ the Condensed Consolidated Financial Statements in conformity with U.S. GAAP. However, management may use earnings and EPS adjusted to exclude certain items (referred to as adjusted earnings and adjusted EPS) internally for financial planning, for analysisresolution of performance and for reporting of results to the Board of Directors. We may also use adjusted earnings and adjusted EPS when communicating our financial results and earnings outlook to analysts and investors. Adjusted earnings and adjusted EPS are non-GAAP financial measures. Because of the significance and/or nature of the excluded items, management believes that these non-GAAP financial measures provide a meaningful comparison of the performance of business operations to prior and future periods. Non-GAAP financial measures are supplementary information that should be considered in addition to, but not as a substitute for, the information prepared in accordance with U.S. GAAP.year income tax items.

The table below reconciles Sempra Energy Adjusted Earnings and Adjusted Diluted EPS to GAAP Earnings and GAAP Diluted EPS, which we consider to be the most directly comparable financial measures calculateddecrease in ~~accordance with U.S. GAAP, for the three months and nine months ended September 30, 2017 and 2016.~~

SEMPRA ENERGY ADJUSTED EARNINGS AND ADJUSTED EPS
(Dollars in millions, except per share amounts)
Pretax amount Income tax (benefit) expense(1) Non-controlling interests Earnings
Diluted
EPS
Three months ended September 30, 2017
Sempra Energy GAAP Earnings $ 57
$ 0.22
Excluded item:
Impairment of wildfire regulatory asset $ 351
$ (143 ) $ —
208
0.82
Sempra Energy Adjusted Earnings $ 265
$ 1.04
Weighted-average number of shares outstanding, diluted (thousands)

253,364
Three months ended September 30, 2016
Sempra Energy GAAP Earnings $ 622
$ 2.46
Excluded items:
Remeasurement gain in connection with GdC acquisition $ (617 ) $ 185
$ 82
(350 ) (1.39 )
Gain on sale of EnergySouth (130 ) 52
—
(78 ) (0.31 )
Impairment of TdM assets held for sale 131
(20 ) (21 ) 90
0.36
Reduction of deferred income tax liability associated with TdM —
(31 ) 6
(25 ) (0.10 )
Sempra Energy Adjusted Earnings $ 259
$ 1.02
Weighted-average number of shares outstanding, diluted (thousands) 252,405
Nine months ended September 30, 2017
Sempra Energy GAAP Earnings $ 757
$ 2.99
Excluded items:
Impairment of wildfire regulatory asset $ 351
$ (143 ) $ —
208
0.82
Impairment of TdM assets held for sale 71
—
(24 ) 47
0.19
Deferred income tax benefit associated with TdM —
(8 ) 3
(5 ) (0.02 )
Recoveries related to 2016 permanent release of pipeline capacity (47 ) 19
—
(28 ) (0.11 )
Sempra Energy Adjusted Earnings $ 979
$ 3.87
Weighted-average number of shares outstanding, diluted (thousands) 252,987
Nine months ended September 30, 2016
Sempra Energy GAAP Earnings $ 991
$ 3.93
Excluded items:
Remeasurement gain in connection with GdC acquisition $ (617 ) $ 185
$ 82
(350 ) (1.39 )
Gain on sale of EnergySouth (130 ) 52
—
(78 ) (0.31 )
Permanent release of pipeline capacity 206
(83 ) —
123
0.49
SDG&E tax repairs adjustments related to 2016 GRC FD 52
(21 ) —
31
0.12
SoCalGas tax repairs adjustments related to 2016 GRC FD 83
(34 ) —
49
0.20
Impairment of investment in Rockies Express 44
(17 ) —
27
0.11
Impairment of TdM assets held for sale 131
(20 ) (21 ) 90
0.36
Deferred income tax expense associated with TdM —
1
—
1
—
Sempra Energy Adjusted Earnings $ 884
$ 3.51
Weighted-average number of shares outstanding, diluted (thousands) 251,976


~~(1)~~	Income taxes were calculated based on applicable statutory tax rates, except for adjustments that are solely income tax. Income taxes associated with TdM were calculated based on the applicable statutory tax rate, including translation from historic to current exchange rates. An income tax benefit of $12 million associated with the 2017 TdM impairment has been fully reserved.

~~The table below reconciles SDG&E Adjusted Earnings to GAAP (Losses) Earnings, which we consider to be the most directly comparable financial measure calculated~~losses of $112 million (31%) in ~~accordance with U.S. GAAP, for the three months and nine months ended September 30, 2017 and~~ the nine months ended September 30, ~~2016. SDG&E did not have adjusted earnings for~~2023 compared to the ~~three months ended September~~ same period in 2022 was primarily due to:

▪$120 million deferred income tax expense in 2022 associated with the change in our indefinite reinvestment assertion related to our foreign subsidiaries;

▪$44 million lower net investment losses on dedicated assets in support of our employee nonqualified benefit plan and deferred compensation plans;

▪$23 million income tax benefit in 2023 from the remeasurement of certain deferred income taxes; and

▪$15 million income tax benefit in 2023 from the resolution of prior year income tax items; offset by

▪$43 million higher net interest expense;

▪$30 ~~2016.~~million income tax benefit in 2022 from changes to a valuation allowance against certain tax credit carryforwards; and

▪$24 million lower income tax benefit from the interim period application of an annual forecasted consolidated ETR.

SDG&E ADJUSTED EARNINGS
(Dollars in millions)
Pretax amount Income tax benefit(1) (Losses) earnings
Three months ended September 30, 2017
SDG&E GAAP Losses $ (28 )
Excluded item:
Impairment of wildfire regulatory asset $ 351
$ (143 ) 208
SDG&E Adjusted Earnings $ 180
Nine months ended September 30, 2017
SDG&E GAAP Earnings $ 276
Excluded item:
Impairment of wildfire regulatory asset $ 351
$ (143 ) 208
SDG&E Adjusted Earnings $ 484
Nine months ended September 30, 2016
SDG&E GAAP Earnings $ 419
Excluded item:
Tax repairs adjustments related to 2016 GRC FD $ 52
$ (21 ) 31
SDG&E Adjusted Earnings $ 450


~~(1)~~	~~Income taxes were calculated based on applicable statutory tax rates.~~

The table below reconciles SoCalGas Adjusted Earnings to GAAP Earnings, which we consider to be the most directly comparable financial measure calculated in accordance with U.S. GAAP, for the nine months ended September 30, 2016. SoCalGas did not have adjusted earnings for the three months ended September 30, 2016 or the three months and nine months ended September 30, 2017.

SOCALGAS ADJUSTED EARNINGS
(Dollars in millions)
Pretax amount Income tax benefit(1) Earnings
Nine months ended September 30, 2016
SoCalGas GAAP Earnings $ 198
Excluded item:
Tax repairs adjustments related to 2016 GRC FD $ 83
$ (34 ) 49
SoCalGas Adjusted Earnings $ 247


~~(1)~~	~~Income taxes were calculated based on applicable statutory tax rates.~~

SIGNIFICANT CHANGES IN REVENUES, COSTS AND EARNINGS

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

Utilities Revenues and Cost of Sales

Our utilities revenues include

~~Electric revenues at:~~


▪	~~SDG&E~~


▪	~~Sempra South American Utilities’ Chilquinta Energía and Luz del Sur~~

~~Natural~~ natural gas revenues ~~at:~~


▪	~~SDG&E~~


▪	~~SoCalGas~~


▪	~~Sempra Mexico’s Ecogas~~


▪	~~Sempra LNG & Midstream’s Mobile Gas and Willmut Gas (prior to the sale of EnergySouth on September 12, 2016)~~

at SoCalGas and SDG&E and Sempra Infrastructure’s Ecogas and electric revenues at SDG&E. Intercompany revenues included in the separate revenues of each utility are eliminated in ~~the Sempra Energy~~Sempra’s Condensed Consolidated Statements of Operations.

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


▪	permits 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 in subsequent periods through rates.

▪

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 1 of the Notes to Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business” in the Annual Report.


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

▪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 and without markup. The GCIM provides for SoCalGas 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 core customers and SoCalGas.

▪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.

▪SoCalGas and SDG&E to recover certain program expenditures and other costs authorized by the CPUC, herein referred to as “refundable programs.”

Because changes in SoCalGas’ and SDG&E’s ~~and SoCalGas’~~ cost of ~~electricity~~natural gas and/or ~~natural gas is substantially~~electricity are recovered in rates, changes in these costs are ~~reflected~~offset in the changes in revenues and therefore do not impact ~~earnings.~~earnings, other than potential impacts related to the GCIM for SoCalGas that we describe above. In addition to the ~~change~~changes in cost or market prices, ~~electric~~natural gas or ~~natural gas~~electric revenues recorded during a period are impacted by ~~customer usage causing a~~the difference between customer billings and recorded or ~~authorized costs.~~CPUC-authorized amounts. 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 144 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.

SoCalGas’ and SDG&E’s revenues are decoupled from, or not tied to, actual sales volumes. SoCalGas recognizes annual authorized revenue for natural gas customers using seasonal factors established in applicable proceedings, resulting in a significant portion of SoCalGas’ earnings being 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.

Table of Con tents

The table below summarizes utilities revenues and cost of ~~sales for our utilities, net~~sales.


UTILITIES REVENUES AND COST OF SALES
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Natural gas revenues:
SoCalGas	$	1,313	$	1,385	$	6,574	$	4,879
SDG&E	188		209		1,014		741
Sempra Infrastructure	18		19		67		67
Eliminations and adjustments	(31)		(26)		(95)		(76)
Total	1,488		1,587		7,560		5,611
Electric revenues:
SDG&E	1,254		1,360		3,343		3,672
Eliminations and adjustments	(4)		(3)		(12)		(9)
Total	1,250		1,357		3,331		3,663
Total utilities revenues	$	2,738	$	2,944	$	10,891	$	9,274
Cost of natural gas(1):
SoCalGas	$	224	$	441	$	2,855	$	1,577
SDG&E	45		65		462		260
Sempra Infrastructure	4		7		5		21
Eliminations and adjustments	(13)		(8)		(68)		(23)
Total	260		505		3,254		1,835
Cost of electric fuel and purchased power(1):
SDG&E	200		316		442		806
Eliminations and adjustments	(17)		(9)		(57)		(43)
Total	183		307		385		763
Total utilities cost of sales	$	443	$	812	$	3,639	$	2,598

(1) Excludes depreciation and amortization, which are presented separately on the Sempra, SDG&E and SoCalGas Condensed Consolidated Statements of ~~intercompany activity:~~Operations.



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q



SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
SEMPRA:
Common Stock, without par value	SRE	New York Stock Exchange

5.75% Junior Subordinated Notes Due 2079, $25 par value	SREA	New York Stock Exchange

SAN DIEGO GAS & ELECTRIC COMPANY:
None

SOUTHERN CALIFORNIA GAS COMPANY:
None



Sempra ~~Energy~~			~~251,277,393~~629,328,058 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 7

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	8 9
	Notes to Condensed Consolidated Financial Statements
	Note 1. General Information and Other Financial Data	29
	Note 2. New Accounting Standards	49
	Note 3. Revenues	50
	Note 4. Regulatory Matters	53
	Note 5. Investments in Unconsolidated Entities	55
	Note 6. Debt and Credit Facilities	57
	Note 7. Derivative Financial Instruments	60
	Note 8. Fair Value Measurements	67
	Note 9. San Onofre Nuclear Generating Station	74
	Note 10. Commitments and Contingencies	76
	Note 11. Segment Information	82
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	85 84
	Overview	84
	Results of Operations	85
	Capital Resources and Liquidity	97
	Critical Accounting Estimates	110
	New Accounting Standards	110
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	~~126~~ 110
Item 4.	Controls and Procedures	~~127~~ 112

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	~~129~~ 112
Item 1A.	Risk Factors	~~129~~ 112
Item 6.5.	~~Exhibits~~Other Information	~~135~~ 113
Item 6.	Exhibits	114

Signatures		~~138~~ 117


GLOSSARY

~~GLOSSARY~~AB		California Assembly Bill
ADIA		Black Silverback ZC 2022 LP (assignee of Black River B 2017 Inc.), a wholly owned affiliate of Abu Dhabi Investment Authority
AFUDC
~~2016 GRC FD~~	~~final decision in the California Utilities’ 2016 General Rate Case~~
~~AFUDC~~	allowance for funds used during construction
~~ALJ~~		~~administrative law judge~~
Annual Report	Annual Report on Form 10-K for the year ended December 31, ~~2016~~2022
AOCI		~~Accumulated Other Comprehensive Income (Loss)~~accumulated other comprehensive income (loss)
~~ASC~~ARO		~~Accounting Standards Codification~~asset retirement obligation
~~ASU~~ASEA		~~Accounting Standards Update~~Agencia de Seguridad, Energía y Ambiente (Mexico’s National Agency for Industrial Safety and Environmental Protection)
~~Bay Gas~~ASR		~~Bay Gas Storage Company, Ltd.~~accelerated share repurchase
Bcf		billion cubic feet
~~Blade~~Bechtel		~~Blade~~Bechtel Energy ~~Partners~~Inc. (formerly known as Bechtel Oil, Gas and Chemicals, Inc.)
bps		basis points
~~CAISO~~Cameron LNG JV		Cameron LNG Holdings, LLC
Cameron LNG Phase 1 facility		Cameron LNG JV liquefaction facility
Cameron LNG Phase 2 project		Cameron LNG JV liquefaction expansion project
CCA		Community Choice Aggregation
CCM		cost of capital adjustment mechanism
CFE		Comisión Federal de Electricidad (Mexico’s Federal Electricity Commission)
CFIN		Cameron LNG FINCO, LLC, a wholly owned and unconsolidated affiliate of Cameron LNG JV
ConocoPhillips		ConocoPhillips Company
COVID-19		coronavirus disease 2019
CPUC		California Public Utilities Commission
CRE		Comisión Reguladora de Energía (Mexico’s Energy Regulatory Commission)
CRR		congestion revenue right
DOE		U.S. Department of Energy
ECA LNG		ECA LNG Phase 1 and ECA LNG Phase 2, collectively
ECA LNG Phase 1		ECA LNG Holdings B.V.
ECA LNG Phase 2		ECA LNG II Holdings B.V.
ECA Regas Facility		Energía Costa Azul, S. de R.L. de C.V. LNG regasification facility
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.)
EPC		engineering, procurement and construction
EPS		earnings per common share
ETR		effective income tax rate
Exchange Act		Securities Exchange Act of 1934, as amended
FEED		front-end engineering design
FERC		Federal Energy Regulatory Commission
Fitch		Fitch Ratings, Inc.
FTA		Free Trade Agreement
GCIM		Gas Cost Incentive Mechanism
GHG		greenhouse gas
GRC		General Rate Case
HOA		Heads of Agreement
IEnova		Infraestructura Energética Nova, S.A.P.I. de C.V.
IMG		Infraestructura Marina del Golfo
INEOS		INEOS Energy Trading LTD., a subsidiary of INEOS Ltd.
IOU		investor-owned utility
IRA		Inflation Reduction Act of 2022
IRS		U.S. Internal Revenue Service


GLOSSARY (CONTINUED)

ISO		Independent System Operator
JV		joint venture
KKR Denali		KKR Denali Holdco LLC, an affiliate of Kohlberg Kravis Roberts & Co. L.P.
KKR Pinnacle		KKR Pinnacle Investor L.P. (as successor-in-interest to KKR Pinnacle Aggregator L.P.), an affiliate of Kohlberg Kravis Roberts & Co. L.P.
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
LNG		liquefied natural gas
MD&A		Management’s Discussion and Analysis of Financial Condition and Results of Operations
MMBtu		million British thermal units (of natural gas)
Moody’s		Moody’s Investors Service, Inc.
MOU		Memorandum of Understanding
Mtpa		million tonnes per annum
MWh		megawatt hour
NCI		noncontrolling interest(s)
NDT		nuclear decommissioning trusts
O&M		operation and maintenance expense
OCI		other comprehensive income (loss)
OEIS		Office of Energy Infrastructure Safety
OII		Order Instituting Investigation
Oncor		Oncor Electric Delivery Company LLC
Oncor Holdings		Oncor Electric Delivery Holdings Company LLC
ORLEN		Polski Koncern Naftowy Orlen S.A. (formerly Polish Oil & Gas Company)
OSC		Order to Show Cause
PA LNG Phase 1 project		initial phase of the Port Arthur LNG liquefaction project
PA LNG Phase 2 project		second phase of the Port Arthur LNG liquefaction project
PBOP		postretirement benefits other than pension
Port Arthur LNG		Port Arthur LNG, LLC, an indirect subsidiary of SI Partners that owns the PA LNG Phase 1 project
PP&E		property, plant and equipment
PPA		power purchase agreement
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
RSU		restricted stock unit
S&P		S&P Global Ratings, a division of S&P Global Inc.
SB		California ~~Utilities~~Senate Bill
SDG&E		San Diego Gas & Electric Company
SDSRA		Senior Debt Service Reserve Account
SEC		U.S. Securities and Exchange Commission
SED		Safety and Enforcement Division of the CPUC
SEDATU		Secretaría de Desarrollo Agrario, Territorial y Urbano (Mexico’s agency in charge of agriculture, land and urban development)
Sempra California		San Diego Gas & Electric Company and Southern California Gas Company, collectively
~~Cameron LNG JV~~SENER		~~Cameron LNG Holdings, LLC~~
~~CARB~~	~~California Air Resources Board~~
~~CCA~~	~~Community Choice Aggregation~~
~~CCM~~	~~cost of capital adjustment mechanism~~
~~CEC~~	~~California Energy Commission~~
~~CEQA~~	~~California Environmental Quality Act~~
~~CFCA~~	~~Core Fixed Cost Account~~
~~CFE~~	~~Comisión Federal de Electricidad (Federal Electricity Commission in Mexico)~~
~~Chilquinta Energí~~Secretaría	~~Chilquinta Energía S.A. and its subsidiaries~~
~~COFECE~~	~~Comisión Federal de Competencia Económica (Mexican Competition Commission)~~
~~CPED~~	~~Consumer Protection and Enforcement Division~~
~~CPI~~	~~Consumer Price Index~~
~~CPUC~~	~~California Public Utilities Commission~~
~~CRE~~	~~Comisión Reguladora~~ de Energía ~~(Energy Regulatory Commission in Mexico)~~de México (Mexico’s Ministry of Energy)
~~CRR~~series C preferred stock		~~congestion revenue right~~Sempra’s 4.875% fixed-rate reset cumulative redeemable perpetual preferred stock, series C
DASI Partners		~~Direct Access~~Sempra Infrastructure Partners, LP, the holding company for most of Sempra’s subsidiaries not subject to California or Texas utility regulation
~~DEN~~SoCalGas		~~Ductos y Energéticos del Norte, S. de R.L. de C.V.~~Southern California Gas Company
~~DOE~~SOFR		~~U.S. Department of Energy~~Secured Overnight Financing Rate
~~DOGGR~~SONGS		~~California Department of Conservation’s Division of Oil, Gas, and Geothermal Resources~~
~~DPH~~	~~Los Angeles County Department of Public Health~~
~~Ecogas~~	~~Ecogas México, S. de R.L. de C.V.~~
~~Edison~~	~~Southern California Edison Company~~
~~EFH~~	~~Energy Future Holdings Corp.~~
~~EFIH~~	~~Energy Future Intermediate Holding Company LLC~~
~~Eletrans~~	~~Eletrans S.A., Eletrans II S.A. and Eletrans III S.A., collectively~~
~~EnergySouth~~	~~EnergySouth Inc.~~
~~EPA~~	~~U.S. Environmental Protection Agency~~
~~EPC~~	~~engineering, procurement and construction~~
~~EPS~~	~~earnings per common share~~
~~ERRA~~	~~Energy Resource Recovery Account~~
~~FERC~~	~~Federal Energy Regulatory Commission~~
~~FTA~~	~~Free Trade Agreement~~
~~GCIM~~	~~Gas Cost Incentive Mechanism~~
~~GdC~~	~~Gasoductos de Chihuahua, S. de R.L. de C.V. (now known as IEnova Pipelines)~~
~~GHG~~	~~greenhouse gas~~
~~GRC~~	~~General Rate Case~~
~~HLBV~~	~~hypothetical liquidation at book value~~
~~HMRC~~	~~United Kingdom’s Revenue and Customs Department~~
~~IEnova~~	~~Infraestructura Energética Nova, S.A.B. de C.V.~~
~~IEnova Pipelines~~	~~IEnova Pipelines, S. de R.L. de C.V. (formerly known as GdC)~~
~~IMG~~	~~Infraestructura Marina del Golfo~~
~~IRS~~	~~Internal Revenue Service~~
~~ISFSI~~	~~independent spent fuel storage installation~~
~~JP Morgan~~	~~J.P. Morgan Chase & Co.~~
kV	~~kilovolt~~
~~LA Storage~~	~~LA Storage, LLC~~
~~LA Superior Court~~	~~Los Angeles County Superior Court~~San Onofre Nuclear Generating Station


GLOSSARY (CONTINUED)

~~GLOSSARY (CONTINUED)~~SPA		sale and purchase agreement
Support Agreement		support agreement, dated July 28, 2020 and amended on June 29, 2021, among Sempra and Sumitomo Mitsui Banking Corporation
TAG		TAG Norte Holding, S. de R.L. de C.V.
~~LNG~~TdM		~~liquefied natural gas~~
~~LPG~~	~~liquid petroleum gas~~
~~Luz del Sur~~	~~Luz del Sur S.A.A. and its subsidiaries~~
~~MHI~~	~~Mitsubishi Heavy Industries, Ltd., Mitsubishi Nuclear Energy Systems, Inc., and Mitsubishi Heavy Industries America, Inc., collectively~~
~~Mississippi Hub~~	~~Mississippi Hub, LLC~~
~~MMBtu~~	~~million British thermal units (of natural gas)~~
~~Mobile Gas~~	~~Mobile Gas Service Corporation~~
~~Mtpa~~	~~million tonnes per annum~~
MW	~~megawatt~~
~~MWh~~	~~megawatt hour~~
~~NDT~~	~~Nuclear Decommissioning Trust~~
~~NEIL~~	~~Nuclear Electric Insurance Limited~~
~~NEPA~~	~~National Environmental Policy Act~~
~~NRC~~	~~Nuclear Regulatory Commission~~
~~OCI~~	~~Other Comprehensive Income (Loss)~~
~~OII~~	~~Order Instituting Investigation~~
~~O&M~~	~~operation and maintenance expense~~
~~OMEC~~	~~Otay Mesa Energy Center~~
~~OMEC LLC~~	~~Otay Mesa Energy Center LLC~~
~~OMI~~	~~Oncor Management Investment LLC~~
~~Oncor~~	~~Oncor Electric Delivery Company LLC~~
~~Oncor Holdings~~	~~Oncor Electric Delivery Holdings Company LLC~~
~~ORA~~	~~CPUC Office of Ratepayer Advocates~~
~~Otay Mesa VIE~~	~~OMEC LLC VIE~~
~~PEMEX~~	~~Petróleos Mexicanos (Mexican state-owned oil company)~~
~~PG&E~~	~~Pacific Gas and Electric Company~~
~~PHMSA~~	~~Pipeline and Hazardous Materials Safety Administration~~
~~PP&E~~	~~property, plant and equipment~~
~~PPA~~	~~power purchase agreement~~
~~PSEP~~	~~Pipeline Safety Enhancement Plan~~
~~PUCT~~	~~Public Utility Commission of Texas~~
~~RAMP~~	~~Risk Assessment Mitigation Phase~~
~~RBS~~	~~The Royal Bank of Scotland plc~~
~~RBS SEE~~	~~RBS Sempra Energy Europe~~
~~RBS Sempra Commodities~~	~~RBS Sempra Commodities LLP~~
~~Rockies Express~~	~~Rockies Express Pipeline LLC~~
~~ROE~~	~~return on equity~~
~~RSA~~	~~restricted stock award~~
~~RSU~~	~~restricted stock unit~~
SB	~~Senate Bill~~
~~SCAQMD~~	~~South Coast Air Quality Management District~~
~~SDCA~~	~~United States District Court for the Southern District of California~~
~~SDG&E~~	~~San Diego Gas & Electric Company~~
~~SEC~~	~~United States Securities and Exchange Commission~~
~~SEDATU~~	~~Secretaría de Desarrollo Agrario, Territorial y Urbano (Mexican agency in charge of agriculture, land and urban development)~~
~~SFP~~	~~secondary financial protection~~
~~SoCalGas~~	~~Southern California Gas Company~~
~~SONGS~~	~~San Onofre Nuclear Generating Station~~
~~SONGS OII~~	~~CPUC’s Order Instituting Investigation into the SONGS Outage~~
~~TdM~~	Termoeléctrica de Mexicali
~~TransCanada~~Technip Energies		~~TransCanada Corporation~~TP Oil & Gas Mexico, S. De R.L. De C.V., an affiliate of Technip Energies N.V.
~~Tribunal~~TO5		~~International Chamber of Commerce International Court of Arbitration Tribunal~~Electric Transmission Owner Formula Rate, effective June 1, 2019
~~TTI~~		~~Texas Transmission Investment LLC~~
~~TURN~~	~~The Utility Reform Network~~
U.S. GAAP	generally accepted accounting principles ~~generally accepted~~ in the United States of America
~~Valero Energy~~VIE		~~Valero Energy Corporation~~
~~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
~~Vistra~~Wildfire Fund		~~Vistra Energy Corp.~~the fund established pursuant to AB 1054
~~Willmut Gas~~Wildfire Legislation		~~Willmut Gas Company~~AB 1054 and AB 111


▪	actions and the timing of actions, including decisions, new regulations, and issuances of permits and other authorizations by the CPUC, DOE, DOGGR, FERC, EPA, PHMSA, DPH, states, cities and counties, and other regulatory and governmental bodies in the United States and other countries in which we operate;


▪	the timing and success of business development efforts and construction projects, including risks in obtaining or maintaining permits and other authorizations on a timely basis, risks in completing construction projects on schedule and on budget, and risks in obtaining the consent and participation of partners;


▪	~~the resolution of civil and criminal litigation and regulatory investigations;~~


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


▪	changes in energy markets; volatility in commodity prices; moves to reduce or eliminate reliance on natural gas; and the impact on the value of our investment in natural gas storage and related assets from low natural gas prices, low volatility of natural gas prices and the inability to procure favorable long-term contracts for storage services;


▪	risks posed by actions of third parties who control the operations of our investments, and risks that our partners or counterparties will be unable or unwilling to fulfill their contractual commitments;


▪	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;


▪	capital markets and economic conditions, including the availability of credit and the liquidity of our investments; and fluctuations in inflation, interest and currency exchange rates and our ability to effectively hedge the risk of such fluctuations;


▪	~~changes in the tax code as a result of potential federal tax reform, uncertainty as to what proposals will be enacted, if any, and if enacted, how they would be applied;~~


▪	changes in foreign and domestic trade policies and laws, including border tariffs, revisions to international trade agreements, such as the North American Free Trade Agreement, and changes that make our exports less competitive or otherwise restrict our ability to export or resolve trade disputes;


▪	~~the ability to win competitively bid infrastructure projects against a number of strong and aggressive competitors;~~


▪	~~expropriation of assets by foreign governments and title and other property disputes;~~


▪	~~the impact on reliability of SDG&E’s electric transmission and distribution system due to increased amount and variability of power supply from renewable energy sources;~~


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


▪	the risk that Sempra Energy, EFH or Oncor may be unable to obtain bankruptcy court and governmental and regulatory approvals required for the merger, or that required bankruptcy court and governmental and regulatory approvals may delay the merger or result in the imposition of conditions that could cause the parties to abandon the transaction or be onerous to Sempra Energy;


▪	~~the risk that a condition to closing of the merger may not be satisfied, including receipt of a satisfactory supplemental private letter ruling from the IRS;~~


▪	~~the risk that the transaction may not be completed for other reasons, or may not be completed on the terms or timing currently contemplated;~~


▪	~~the risk that the anticipated benefits from the transaction may not be fully realized or may take longer to realize than expected;~~


▪	~~the risk that Sempra Energy may be unable to obtain the external financing necessary to pay the consideration and expenses related to the merger on terms favorable to Sempra Energy, if at all;~~


▪	~~disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; and~~


▪	~~the diversion of management time and attention to merger-related issues and related legal, accounting and other costs, whether or not the merger is completed.~~


SEMPRA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
	(unaudited)
REVENUES
Utilities:
Natural gas	$	1,488	$	1,587	$	7,560	$	5,611
Electric	1,250		1,357		3,331		3,663
Energy-related businesses	596		673		2,338		1,710
Total revenues	3,334		3,617		13,229		10,984

EXPENSES AND OTHER INCOME
Utilities:
Cost of natural gas	(260)		(505)		(3,254)		(1,835)
Cost of electric fuel and purchased power	(183)		(307)		(385)		(763)
Energy-related businesses cost of sales	(163)		(340)		(437)		(764)
Operation and maintenance	(1,383)		(1,206)		(3,958)		(3,454)
Aliso Canyon litigation and regulatory matters	—		(122)		—		(259)
Depreciation and amortization	(563)		(506)		(1,651)		(1,500)
Franchise fees and other taxes	(169)		(162)		(509)		(474)
Other income (expense), net	3		(40)		75		(3)
Interest income	19		18		60		58
Interest expense	(312)		(282)		(995)		(796)
Income before income taxes and equity earnings	323		165		2,175		1,194
Income tax benefit (expense)	52		(21)		(499)		(435)
Equity earnings	479		417		1,086		1,118
Net income	854		561		2,762		1,877
Earnings attributable to noncontrolling interests	(122)		(65)		(435)		(187)
Preferred dividends	(11)		(11)		(33)		(33)
Preferred dividends of subsidiary	—		—		(1)		(1)
Earnings attributable to common shares	$	721	$	485	$	2,293	$	1,656

Basic EPS:
Earnings	$	1.14	$	0.77	$	3.64	$	2.63
Weighted-average common shares outstanding	630,036		629,447		629,963		630,603

Diluted EPS:
Earnings	$	1.14	$	0.77	$	3.63	$	2.62
Weighted-average common shares outstanding	632,324		632,175		632,231		632,914



SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
	(unaudited)
REVENUES
Utilities	$	2,277		$	2,264		$	7,172		$	6,700
Energy-related businesses	402			271			1,071			613
Total revenues	2,679			2,535			8,243			7,313

EXPENSES AND OTHER INCOME
Utilities:
Cost of electric fuel and purchased power	(650		)	(604		)	(1,730		)	(1,680		)
Cost of natural gas	(190		)	(208		)	(903		)	(702		)
Energy-related businesses:
Cost of natural gas, electric fuel and purchased power	(97		)	(95		)	(226		)	(213		)
Other cost of sales	(21		)	(32		)	(5		)	(293		)
Operation and maintenance	(762		)	(703		)	(2,207		)	(2,109		)
Depreciation and amortization	(378		)	(328		)	(1,106		)	(970		)
Franchise fees and other taxes	(114		)	(108		)	(325		)	(315		)
Impairment of wildfire regulatory asset	(351		)	—			(351		)	—
Other impairment losses	(1		)	(132		)	(72		)	(154		)
Gain on sale of assets	2			131			2			131
Equity earnings, before income tax	10			12			31			4
Remeasurement of equity method investment	—			617			—			617
Other income, net	41			26			301			98
Interest income	12			7			26			19
Interest expense	(165		)	(136		)	(493		)	(421		)
Income before income taxes and equity earnings (losses) of certain unconsolidated subsidiaries	15			982			1,185			1,325
Income tax benefit (expense)	84			(282		)	(378		)	(284		)
Equity earnings (losses), net of income tax	3			19			(5		)	69
Net income	102			719			802			1,110
Earnings attributable to noncontrolling interests	(45		)	(97		)	(44		)	(118		)
Preferred dividends of subsidiary	—			—			(1		)	(1		)
Earnings	$	57		$	622		$	757		$	991


Basic earnings per common share	$	0.23		$	2.48		$	3.01		$	3.96
Weighted-average number of shares outstanding, basic (thousands)	251,692			250,386			251,425			250,073

Diluted earnings per common share	$	0.22		$	2.46		$	2.99		$	3.93
Weighted-average number of shares outstanding, diluted (thousands)	253,364			252,405			252,987			251,976

Dividends declared per share of common stock	$	0.82		$	0.76		$	2.47		$	2.27


SEMPRA
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
	Sempra shareholders’ equity
	Pretax amount		Income tax benefit (expense)		Net-of-tax amount		Noncontrolling interests (after tax)		Total
	(unaudited)
	Three months ended September 30, 2023 and 2022
2023:
Net income	$	680	$	52	$	732	$	122	$	854
Other comprehensive income (loss):
Foreign currency translation adjustments	(5)		—		(5)		(2)		(7)
Financial instruments	150		(39)		111		204		315
Pension and other postretirement benefits	2		(1)		1		—		1
Total other comprehensive income	147		(40)		107		202		309
Comprehensive income	$	827	$	12	$	839	$	324	$	1,163


2022:
Net income	$	517	$	(21)	$	496	$	65	$	561
Other comprehensive income (loss):
Foreign currency translation adjustments	—		—		—		(1)		(1)
Financial instruments	60		(15)		45		21		66
Pension and other postretirement benefits	2		—		2		—		2
Total other comprehensive income	62		(15)		47		20		67
Comprehensive income	$	579	$	(36)	$	543	$	85	$	628


	Nine months ended September 30, 2023 and 2022
2023:
Net income	$	2,826	$	(499)	$	2,327	$	435	$	2,762
Other comprehensive income (loss):
Foreign currency translation adjustments	16		—		16		6		22
Financial instruments	158		(43)		115		206		321
Pension and other postretirement benefits	(8)		(2)		(10)		—		(10)
Total other comprehensive income	166		(45)		121		212		333
Comprehensive income	2,992		(544)		2,448		647		3,095
Preferred dividends of subsidiary	(1)		—		(1)		—		(1)
Comprehensive income, after preferred dividends of subsidiary	$	2,991	$	(544)	$	2,447	$	647	$	3,094

2022:
Net income	$	2,125	$	(435)	$	1,690	$	187	$	1,877
Other comprehensive income (loss):
Foreign currency translation adjustments	5		—		5		—		5
Financial instruments	227		(56)		171		56		227
Pension and other postretirement benefits	15		(2)		13		—		13
Total other comprehensive income	247		(58)		189		56		245
Comprehensive income	2,372		(493)		1,879		243		2,122
Preferred dividends of subsidiary	(1)		—		(1)		—		(1)
Comprehensive income, after preferred dividends of subsidiary	$	2,371	$	(493)	$	1,878	$	243	$	2,121


SEMPRA
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2023		2022(1)
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,149	$	370
Restricted cash	238		40
Accounts receivable – trade, net	1,939		2,635
Accounts receivable – other, net	498		685
Due from unconsolidated affiliates	42		54
Income taxes receivable	72		113
Inventories	451		403
Prepaid expenses	325		268
Regulatory assets	190		351
Fixed-price contracts and other derivatives	201		803
Greenhouse gas allowances	144		141
Other current assets	61		49
Total current assets	5,310		5,912

Other assets:
Restricted cash	104		52
Regulatory assets	3,277		2,588
Greenhouse gas allowances	1,219		796
Nuclear decommissioning trusts	827		841
Dedicated assets in support of certain benefit plans	513		505
Deferred income taxes	155		135
Right-of-use assets – operating leases	721		655
Investment in Oncor Holdings	14,148		13,665
Other investments	2,208		2,012
Goodwill	1,602		1,602
Other intangible assets	324		344
Wildfire fund	281		303
Other long-term assets	1,874		1,382
Total other assets	27,253		24,880

Property, plant and equipment:
Property, plant and equipment	70,348		63,893
Less accumulated depreciation and amortization	(17,176)		(16,111)
Property, plant and equipment, net	53,172		47,782
Total assets	$	85,735	$	78,574


SEMPRA
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
	September 30,		December 31,
	2023		2022(1)
	(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	1,977	$	3,352
Accounts payable – trade	2,234		1,994
Accounts payable – other	219		275
Due to unconsolidated affiliates	5		—
Dividends and interest payable	734		621
Accrued compensation and benefits	496		484
Regulatory liabilities	529		504
Current portion of long-term debt and finance leases	974		1,019
Reserve for Aliso Canyon costs	126		129
Greenhouse gas obligations	144		141
Other current liabilities	1,327		1,380
Total current liabilities	8,765		9,899

Long-term debt and finance leases	27,703		24,548

Deferred credits and other liabilities:
Due to unconsolidated affiliates	303		301
Regulatory liabilities	3,468		3,341
Greenhouse gas obligations	942		565
Pension and other postretirement benefit plan obligations, net of plan assets	309		410
Deferred income taxes	5,095		4,591
Asset retirement obligations	3,584		3,546
Deferred credits and other	2,308		2,117
Total deferred credits and other liabilities	16,009		14,871

Commitments and contingencies (Note 10)

Equity:
Preferred stock (50,000,000 shares authorized):
Preferred stock, series C (900,000 shares outstanding)	889		889
Common stock (1,125,000,000 shares authorized; 629,328,058 and 628,669,356 shares outstanding at September 30, 2023 and December 31, 2022, respectively; no par value)	12,038		12,160
Retained earnings	15,371		14,201
Accumulated other comprehensive income (loss)	(60)		(135)
Total Sempra shareholders’ equity	28,238		27,115
Preferred stock of subsidiary	20		20
Other noncontrolling interests	5,000		2,121
Total equity	33,258		29,256
Total liabilities and equity	$	85,735	$	78,574



	Nine months ended September 30, 2017 and 2016
	(unaudited)
2017:
Net income	$	1,136		$	(378	)	$	758		$	44		$	802
Other comprehensive income (loss):
Foreign currency translation adjustments	76			—			76			10			86
Financial instruments	(29		)	13			(16		)	6			(10		)
Pension and other postretirement benefits	16			(6		)	10			—			10
Total other comprehensive income	63			7			70			16			86
Comprehensive income	1,199			(371		)	828			60			888
Preferred dividends of subsidiary	(1		)	—			(1		)	—			(1		)
Comprehensive income, after preferred
dividends of subsidiary	$	1,198		$	(371	)	$	827		$	60		$	887
2016:
Net income	$	1,276		$	(284	)	$	992		$	118		$	1,110
Other comprehensive income (loss):
Foreign currency translation adjustments	51			—			51			(2		)	49
Financial instruments	(214		)	100			(114		)	1			(113		)
Pension and other postretirement benefits	8			(4		)	4			—			4
Total other comprehensive loss	(155		)	96			(59		)	(1		)	(60		)
Comprehensive income	1,121			(188		)	933			117			1,050
Preferred dividends of subsidiary	(1		)	—			(1		)	—			(1		)
Comprehensive income, after preferred
dividends of subsidiary	$	1,120		$	(188	)	$	932		$	117		$	1,049



SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Nine months ended September 30,
	2017			2016
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	802		$	1,110
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,106			970
Deferred income taxes and investment tax credits	302			170
Impairment of wildfire regulatory asset	351			—
Other impairment losses	72			154
Gain on sale of assets	(2		)	(131		)
Equity earnings, net	(26		)	(73		)
Remeasurement of equity method investment	—			(617		)
Fixed-price contracts and other derivatives	(142		)	39
Other	20			50
Net change in other working capital components	229			224
Insurance receivable for Aliso Canyon costs	64			(339		)
Changes in other assets	(137		)	(4		)
Changes in other liabilities	71			138
Net cash provided by operating activities	2,710			1,691

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	(2,880		)	(3,087		)
Expenditures for investments and acquisition of businesses, net of cash and cash equivalents acquired	(110		)	(1,212		)
Proceeds from sale of assets, net of cash sold	12			761
Distributions from investments	25			23
Purchases of nuclear decommissioning and other trust assets	(1,082		)	(418		)
Proceeds from sales by nuclear decommissioning and other trusts	1,082			486
Increases in restricted cash	(293		)	(53		)
Decreases in restricted cash	298			71
Advances to unconsolidated affiliates	(321		)	(12		)
Repayments of advances to unconsolidated affiliates	8			11
Other	1			(2		)
Net cash used in investing activities	(3,260		)	(3,432		)

CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid	(561		)	(510		)
Preferred dividends paid by subsidiary	(1		)	(1		)
Issuances of common stock	37			40
Repurchases of common stock	(15		)	(55		)
Issuances of debt (maturities greater than 90 days)	2,395			2,013
Payments on debt (maturities greater than 90 days)	(1,829		)	(1,298		)
Increase in short-term debt, net	475			1,636
Deposit for sale of noncontrolling interest	—			78
Net distributions to noncontrolling interests	(109		)	(43		)
Other	(11		)	(12		)
Net cash provided by financing activities	381			1,848

Effect of exchange rate changes on cash and cash equivalents	9			8

(Decrease) increase in cash and cash equivalents	(160		)	115
Cash and cash equivalents, January 1	349			403
Cash and cash equivalents, September 30	$	189		$	518