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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549 
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549 
FORM 10-Q 
(Mark One)
[X]☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended
March 31, 2019
2020
  
 or
  
[   ]☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to 
Commission File No.Exact Name of RegistrantsRegistrant as Specified in their Charters,its Charter, Address of Principal Executive Office and Telephone NumberState of IncorporationI.R.S. Employer Identification Nos.No.Former name, former address and former fiscal year, if changed since last report
1-14201SEMPRA ENERGY
sempraenergya02.jpg
California33-0732627No change
 
488 8th8th Avenue
   
 San Diego,California92101   
 (619)696-2000   
     
1-03779SAN DIEGO GAS & ELECTRIC COMPANY
sdgea01.jpg
California95-1184800No change
 8326 Century Park Court   
 San Diego,California92123   
 (619)696-2000   
     
1-01402SOUTHERN CALIFORNIA GAS COMPANY
scga01.jpg
California95-1240705No change
 555 West Fifth Street   
 Los Angeles,California90013   
 (213)244-1200   
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class   Trading SymbolName of Each Exchange on Which Registered
SEMPRA ENERGY:
Sempra Energy Common Stock, without par value   SRENYSE
 
Sempra Energy 6% Mandatory Convertible Preferred Stock, Series A,SRE.PRANYSE
$100 $100 liquidation preferenceSREPRANYSE
 
Sempra Energy 6.75% Mandatory Convertible Preferred Stock, Series B, $100 liquidation preferenceSRE.PRBSREPRBNYSE
$100 liquidation preference
Sempra Energy 5.75% Junior Subordinated Notes Due 2079, $25 par valueSREANYSE
SAN DIEGO GAS & ELECTRIC COMPANY:
None   
SOUTHERN CALIFORNIA GAS COMPANY:
None     


Indicate by check mark whether the registrantsregistrant (1) havehas filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants wereregistrant was required to file such reports), and (2) havehas been subject to such filing requirements for the past 90 days.
 
Sempra EnergyYesX☒No☐
San Diego Gas & Electric CompanyYes☒No☐
Southern California Gas CompanyYes☒No☐

Indicate by check mark whether the registrants haveregistrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants wereregistrant was required to submit such files).
 
Sempra EnergyYesX☒No☐
San Diego Gas & Electric CompanyYes☒No☐
Southern California Gas CompanyYes☒No☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Sempra Energy:
☒Large Accelerated Filer☐Accelerated Filer☐Non-accelerated Filer☐Smaller Reporting Company☐Emerging Growth Company
 
Large
accelerated filer
Accelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company
Sempra Energy[  X  ][      ][       ][      ][      ]
San Diego Gas & Electric Company:
☐Large Accelerated Filer☐Accelerated Filer☒Non-accelerated Filer☐Smaller Reporting Company[       ]☐[      ]Emerging Growth Company
[  X  ][      ][      ]��
Southern California Gas Company:
☐Large Accelerated Filer☐Accelerated Filer☒Non-accelerated Filer☐Smaller Reporting Company[       ]☐[      ][  X  ][      ][      ]Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Sempra EnergyYes☐No☐
San Diego Gas & Electric CompanyYes☐No☐
Southern California Gas CompanyYes☐No☐
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Sempra EnergyYes☐NoX☒
San Diego Gas & Electric CompanyYes☐NoX☒
Southern California Gas CompanyYes☐NoX☒
 
 
Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date.
 
Common stock outstanding on May 2, 2019:April 29, 2020:
Sempra Energy274,388,245 292,533,413
shares
San Diego Gas & Electric CompanyWholly owned by Enova Corporation, which is wholly owned by Sempra Energy
Southern California Gas CompanyWholly 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
76
  
PART I – FINANCIAL INFORMATION 
Item 1.
Financial Statements
98
Notes to Condensed Consolidated Financial Statements
Note 1. General Information and Other Financial Data
27
Note 2. New Accounting Standards
43
Note 3. Revenues
44
Note 4. Regulatory Matters
47
Note 5. Acquisitions, Divestitures and Discontinued Operations
49
Note 6. Investments in Unconsolidated Entities
51
Note 7. Debt and Credit Facilities
54
Note 8. Derivative Financial Instruments
56
Note 9. Fair Value Measurements
62
Note 10. San Onofre Nuclear Generating Station
67
Note 11. Commitments and Contingencies
70
Note 12. Segment Information
77
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
8279
Overview
79
Results of Operations
80
Capital Resources and Liquidity
89
Critical Accounting Policies and Estimates
102
New Accounting Standards
102
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
108102
Item 4.
Controls and Procedures
109103
   
PART II – OTHER INFORMATION 
Item 1.
Legal Proceedings
110104
Item 1A.
Risk Factors
110105
Item 6.
Exhibits
110106
   
Signatures
113109

This combined Form 10-Qreport is separately filed by Sempra Energy, San Diego Gas & Electric Company and Southern California Gas Company. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes representationsstatements herein only as to itself and its consolidated subsidiaries and makes no other representationstatement whatsoever as to any other company.
You should read this report in its entirety as it pertains to each respective reporting company. No one section of the report deals with all aspects of the subject matter. Separate Part I – Item 1 sections are provided for each reporting company, except for the Notes to Condensed Consolidated Financial Statements. The Notes to Condensed Consolidated Financial Statements for all of the reporting companies are combined. All Items other than Part I – Item 1 are combined for the reporting companies.

The following terms and abbreviations appearing in the text of this report have the meanings indicated below.
GLOSSARY
 
  
20162019 GRC FDfinal decision in the California Utilities’ 20162019 General Rate Case
ABCalifornia Assembly Bill
AFUDCallowance for funds used during construction
Annual ReportAnnual Report on Form 10-K for the year ended December 31, 20182019
AOCIaccumulated other comprehensive income (loss)
AROasset retirement obligation
ASCAccounting Standards Codification
Asset Exchange Agreementagreement and plan of merger among Oncor, SDTS and SU
ASUAccounting Standards Update
Bay GasBay Gas Storage Company, Ltd.
BcfBechtelbillion cubic feetBechtel Oil, Gas and Chemicals, Inc.
BladeBlade Energy Partners
bpsbasis points
Cal PACalGEMCalifornia Public Advocates OfficeGeologic Energy Management Division (formerly known as Division of Oil, Gas, and Geothermal Resources or DOGGR)
California UtilitiesSan Diego Gas & Electric Company and Southern California Gas Company, collectively
Cameron LNG JVCameron LNG Holdings, LLC
CARBCalifornia Air Resources Board
CECCCMCalifornia Energy Commission
CEQACalifornia Environmental Quality Actcost of capital adjustment mechanism
CFEComisión Federal de Electricidad (Federal Electricity Commission inof Mexico)
Chilquinta EnergíaChilquinta Energía S.A. and its subsidiaries
COVID-19Coronavirus disease 2019
CPPMACOVID-19 Pandemic Protections Memorandum Account
CPUCCalifornia Public Utilities Commission
CRRcongestion revenue right
DOEU.S. Department of Energy
DOGGRECA LNG JVCalifornia Department of Conservation’s Division of Oil, Gas, and Geothermal Resources
DPHLos Angeles County Department of Public HealthECA LNG Holdings B.V.
ECA LNG RegasificationEnergía Costa Azul, S. de R.L. de C.V. regasification
EcogasEcogas México, S. de R.L. de C.V.
EdisonSouthern California Edison Company, a subsidiary of Edison International
EFHEnergy Future Holdings Corp. (renamed Sempra Texas Holdings Corp.)
EFIHEletransEnergy Future Intermediate Holding Company LLC (renamed Sempra Texas Intermediate Holding Company LLC)
EPAU.S. Environmental Protection AgencyEletrans S.A., Eletrans II S.A. and Eletrans III S.A., collectively
EPCengineering, procurement and construction
EPSearnings per common share
ESJEnergía Sierra Juarez, S. de R.L. de C.V.
ETReffective income tax rate
EVelectric vehicle
FASBFinancial Accounting Standards Board
FERCFederal Energy Regulatory Commission
FitchFitch Ratings
FTAFree Trade Agreement
GCIMGas Cost Incentive Mechanism
GHGgreenhouse gas
GRCGeneral Rate Case
HLBVhypothetical liquidation at book value
HMRCUnited Kingdom’s Revenue and Customs Department
IEnovaInfraestructura Energética Nova, S.A.B. de C.V.
IMG JVInfraestructura Marina del Golfo
InfraREITIOUInfraREIT, Inc.
InfraREIT Merger Agreementagreement and plan of merger among Oncor, 1912 Merger Sub LLC (a wholly owned subsidiary of Oncor), Oncor T&D Partners, LP (a wholly owned indirect subsidiary of Oncor), InfraREIT and InfraREIT Partners
InfraREIT PartnersInfraREIT Partners, LPinvestor-owned utility
IRSInternal Revenue Service
ISFSIindependent spent fuel storage installation
ISOIndependent System Operator
JP MorganJ.P. Morgan Chase & Co.
JVjoint venture
LA Superior CourtLos Angeles County Superior Court
Leakthe leak at the SoCalGas Aliso Canyon natural gas storage facility injection-and-withdrawal well, SS25, discovered by SoCalGas on October 23, 2015
LIBORLondon Interbank Offered Rate
LIFOlast in first out
LNGliquefied natural gas
LPGliquid petroleum gas
Luz del SurLuz del Sur S.A.A. and its subsidiaries

GLOSSARY (CONTINUED)
 
  
LPGliquid petroleum gas
Luz del SurLuz del Sur S.A.A. and its subsidiaries
MD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations
MergerThe merger of EFH with an indirect subsidiary of Sempra Energy, with EFH continuing as the surviving company and as an indirect, wholly owned subsidiary of Sempra Energy
Merger AgreementAgreement and Plan of Merger dated August 21, 2017, as supplemented by a Waiver Agreement dated October 3, 2017 and an amendment dated February 15, 2018, between Sempra Energy, EFH, EFIH and an indirect subsidiary of Sempra Energy
Merger ConsiderationPursuant to the Merger Agreement, Sempra Energy paid consideration of $9.45 billion in cash
Mississippi HubMississippi Hub, LLC
MMBtumillion British thermal units (of natural gas)
Moody’sMoody’s Investors Service
MOUMemorandum of Understanding
Mtpamillion tonnes per annum
MWmegawatt
MWhmegawatt hour
NCInoncontrolling interest(s)
NDTnuclear decommissioning trusts
NEILNuclear Electric Insurance Limited
NOLnet operating loss
OCIother comprehensive income (loss)
OIIOrder Instituting Investigation
OIROrder Instituting a Rulemaking
O&Moperation and maintenance expense
OMECOtay Mesa Energy Center
OMEC LLCOtay Mesa Energy Center LLC
OMIOncor Management Investment LLC
OncorOncor Electric Delivery Company LLC
Oncor HoldingsOncor Electric Delivery Holdings Company LLC
Otay Mesa VIEOMECOtay Mesa Energy Center LLC VIE
PHMSAPipeline and Hazardous Materials Safety Administration
PPApower purchase agreement
PP&Eproperty, plant and equipment
PSEPPipeline Safety Enhancement Plan
PUCTPublic Utility Commission of Texas
RBSThe Royal Bank of Scotland plc
RBS SEERBS Sempra Energy Europe
RBS Sempra CommoditiesRBS Sempra Commodities LLP
ROEreturn on equity
ROUright-of-use
RSUrestricted stock unit
SBCalifornia Senate Bill
SCAQMDSouth Coast Air Quality Management District
SDCAU.S. District Court for the Southern District of California
SDG&ESan Diego Gas & Electric Company
SDTSSharyland Distribution & Transmission Services, L.L.C. (a subsidiary of InfraREIT)
SECU.S. Securities and Exchange Commission
Securities Purchase Agreement

securities purchase agreement among SU, SU Investment Partners, L.P., Sempra Texas
Utilities Holdings I, LLC (a wholly owned subsidiary of Sempra Energy) and Sempra Energy
SEDATUSecretaría de Desarrollo Agrario, Territorial y Urbano (Mexican agency in charge of agriculture, land and urban development)
Sempra Globalholding company for most of Sempra Energy’s subsidiaries not subject to California or Texas utility regulation
series A preferred stockSempra Energy’s 6% mandatory convertible preferred stock, series A
series B preferred stockSempra Energy’s 6.75% mandatory convertible preferred stock, series B
Sharyland HoldingsSharyland Holdings, L.P.
Sharyland UtilitiesSharyland Utilities, L.L.C.
SoCalGasSouthern California Gas Company
SONGSSan Onofre Nuclear Generating Station
S&PStandard & Poor’s
SUSharyland Utilities, LP
TAG JVTAG Pipelines Norte Holding, S. de R.L. de C.V.

GLOSSARY (CONTINUED)
TCJATax Cuts and Jobs Act of 2017
TdMTermoeléctrica de Mexicali
TechnipFMCTP Oil & Gas Mexico, S. De R.L. De C.V., an affiliate of TechnipFMC plc
TecnoredTecnored S.A.
TecsurTecsur S.A.
TO4Electric Transmission Owner Formula Rate, effective through May 31, 2019
TO5Electric Transmission Owner Formula Rate, effective June 1, 2019
TTHCTexas Transmission Holdings Corporation
TTITexas Transmission Investment LLC
TURNThe Utility Reform Network
U.S. GAAPaccounting principles generally accepted in the United States of America
VATvalue-added tax
VentikaVentika, S.A.P.I. de C.V. and Ventika II, S.A.P.I. de C.V., collectively
VIEvariable interest entity
Wildfire Fundthe fund established pursuant to AB 1054
Wildfire LegislationAB 1054 and AB 111



     
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
We make statements in this report that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on assumptions with respect to the future, involve risks and uncertainties, and are not guarantees of performance. Future results may differ materially from those expressed in the forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the filing date of this report. We assume no obligation to update or revise any forward-looking statement as a result of new information, future events or other factors.
In this report, when we useforward-looking statements can be identified by words such as “believes,” “expects,” “anticipates,” “plans,” “estimates,” “projects,” “forecasts,” “contemplates,” “assumes,” “depends,” “should,” “could,” “would,” “will,” “confident,” “may,” “can,” “potential,” “possible,” “proposed,” “target,” “pursue,” “outlook,” “maintain,” or similar expressions, or when we discuss our guidance, strategy, plans, goals, vision, mission, opportunities, projections initiatives, objectives or intentions, we are making forward-looking statements.intentions.
Factors, among others, that could cause our actual results and future actions to differ materially from those described in any forward-looking statements include risks and uncertainties relating to:
▪the greater degree and prevalence ofCalifornia wildfires in California in recent years and the risk that we may be found liable for damages regardless of fault such as where inverse condemnation applies, and the risk that we may not be able to recover any such costs from insurance, the Wildfire Fund or in rates from customers in California;customers;
▪actions and the timing of actions, including decisions, newinvestigations, regulations, and issuances of permits and other authorizations, renewal of franchises, and other actions by the CFE, CPUC, DOE, DOGGR, DPH, EPA, FERC, PHMSA, PUCT, states, cities and counties, and other regulatory and governmental bodies and jurisdictions in the U.S. and other countries in which we operate;
▪the success of business development efforts, construction projects and major acquisitions divestitures and internal structural changes,divestitures, including risks in (i) obtaining or maintaining authorizations; (ii)the ability to make a final investment decision and completing construction projects on schedule and budget; (iii)(ii) obtaining the consent of partners; (iv)(iii) counterparties’ financial or other ability to fulfill contractual commitments; (v) winning competitively bid infrastructure projects; (vi) disruption caused by the announcement of contemplated acquisitions and/or divestitures or internal structural changes; (vii)(iv) the ability to complete contemplated acquisitions and/or divestitures; and (viii)(v) the ability to realize anticipated benefits from any of these efforts once completed;
▪the impact of the COVID-19 pandemic on our (i) ability to commence and complete capital and other projects and obtain regulatory approvals, (ii) supply chain and current and prospective counterparties, contractors, customers, employees and partners, (iii) liquidity, resulting from bill payment challenges experienced by our customers, decreased stability and accessibility of the capital markets and other factors, and (iv) ability to sustain operations and satisfy compliance requirements due to social distancing measures or if employee absenteeism were to increase significantly;
▪the resolution of civil and criminal litigation, and regulatory investigations and proceedings;proceedings, and arbitrations;
▪actions by credit rating agencies to downgrade our credit ratings or those of our subsidiaries or to place those ratings on negative outlook and our ability to borrow at favorable interest rates;
▪deviations from regulatory precedent or practice that result in a reallocation of benefits or burdens among shareholders and ratepayers; denial of approvals of proposed settlements; delays in, or denial of, regulatory agency authorizations to recover costs in rates from customers or regulatory agency approval for projects required to enhance safety and reliability; and moves to reduce or eliminate reliance on natural gas;
▪the availability of electric power and natural gas and natural gas storage capacity, including disruptions caused by failures in the transmission grid, limitationsimpact of the extreme volatility and unprecedented decline of oil prices on the withdrawal or injection of natural gas from or into storage facilities,our businesses and equipment failures;
▪risks posed by actions of third parties who control the operations of our investments;development projects;
▪weather, conditions, natural disasters, accidents, equipment failures, computer system outages explosions, terrorist attacks and other events that disrupt our operations, damage our facilities and systems, cause the release of harmful materials, cause fires and subject us to third-party liability for property damage or personal injuries, fines and penalties, some of which may not be covered by insurance (including costs in excess of applicable policy limits), may be disputed by insurers or may otherwise not be recoverable through regulatory mechanisms or may impact our ability to obtain satisfactory levels of affordable insurance;
▪the availability of electric power and natural gas and natural gas storage capacity, including disruptions caused by failures in the transmission grid, limitations on the withdrawal or injection of natural gas from or into storage facilities, and equipment failures;
▪cybersecurity threats to the energy grid, storage and pipeline infrastructure, the information and systems used to operate our businesses, and the confidentiality of our proprietary information and the personal information of our customers and employees;
▪actionsexpropriation of activist shareholders, which could impactassets, the market pricefailure of our securitiesforeign governments and disrupt our operations as a resultstate-owned entities to honor the terms of among other things, requiring significant time by managementcontracts, and our board of directors;property disputes;
▪changesthe impact at SDG&E on competitive customer rates and reliability due to the growth in capital markets, energy marketsdistributed power generation and economic conditions,from departing retail load resulting from customers transferring to Direct Access, Community Choice Aggregation or other forms of distributed power generation and the risk of nonrecovery for stranded assets and contractual obligations;

▪Oncor’s ability to eliminate or reduce its quarterly dividends due to regulatory and governance requirements and commitments, including the availabilityby actions of credit; and Oncor’s independent directors or a minority member director;
▪volatility in foreign currency exchange, interest and inflation rates and commodity prices and our ability to effectively hedge the risk of such volatility;
▪the impact of federal or state tax reform and our ability to mitigate adverse impacts;

▪changes in foreign and domestic trade policies, laws and laws,regulations, including border tariffs and revisions to or replacement of international trade agreements, such as the North American Free Trade Agreement, or the United States-Mexico-Canada Agreement (subject to congressional approval), that may increase our costs or impair our ability to resolve trade disputes;
▪expropriation of assets by foreign governments and title and other property disputes;
▪the impact at SDG&E on competitive customer ratesof changes to federal and reliability of electric transmissionstate tax laws and distribution systems due to the growth in distributed and local power generation and from possible departing retail load resulting from customers transferring to Direct Access and Community Choice Aggregation or other forms of distributed and local power generation and the potential risk of nonrecovery for stranded assets and contractual obligations;
▪Oncor’sour ability to eliminate or reduce its quarterly dividends due to regulatory capital requirements and other regulatory and governance commitments, including the determination by a majority of Oncor’s independent directors or a minority member director to retain such amounts to meet future requirements;mitigate adverse impacts; and
▪other uncertainties, some of which may be difficult to predict and are beyond our control.
We caution you not to rely unduly on any forward-looking statements. You should review and consider carefully the risks, uncertainties and other factors that affect our business as described herein, in our most recent Annual Report and in other reports that we file with the SEC.

PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

SEMPRA ENERGY      
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts; shares in thousands)      
Three months ended March 31,Three months ended March 31,
2019 20182020 2019
(unaudited)(unaudited)
REVENUES      
Utilities$2,515
 $2,190
$2,665
 $2,515
Energy-related businesses383
 346
364
 383
Total revenues2,898
 2,536
3,029
 2,898
      
EXPENSES AND OTHER INCOME      
Utilities:      
Cost of natural gas(531) (348)(337) (531)
Cost of electric fuel and purchased power(256) (271)(229) (256)
Energy-related businesses cost of sales(108) (69)(59) (108)
Operation and maintenance(832) (741)(951) (832)
Depreciation and amortization(383) (372)(412) (383)
Franchise fees and other taxes(130) (117)(137) (130)
Other income, net82
 152
Other (expense) income, net(254) 82
Interest income21
 29
27
 21
Interest expense(260) (206)(280) (260)
Income from continuing operations before income taxes and equity earnings (losses)
of unconsolidated entities
501
 593
Income tax expense(42) (242)
Equity earnings (losses)101
 (21)
Income from continuing operations before income taxes and equity earnings397
 501
Income tax benefit (expense)207
 (42)
Equity earnings263
 101
Income from continuing operations, net of income tax560
 330
867
 560
(Loss) income from discontinued operations, net of income tax(42) 28
Income (loss) from discontinued operations, net of income tax80
 (42)
Net income518
 358
947
 518
(Earnings) losses attributable to noncontrolling interests(41) 17
Earnings attributable to noncontrolling interests(151) (41)
Mandatory convertible preferred stock dividends(36) (28)(36) (36)
Earnings attributable to common shares$441
 $347
$760
 $441
      
Basic earnings (losses) per common share:   
Earnings from continuing operations attributable to common shares$1.79
 $1.26
(Losses) earnings from discontinued operations attributable to common shares$(0.19) $0.08
Earnings attributable to common shares$1.60
 $1.34
Basic EPS:   
Earnings from continuing operations$2.35
 $1.79
Earnings (losses) from discontinued operations$0.25
 $(0.19)
Earnings$2.60
 $1.60
Weighted-average common shares outstanding274,674
 257,932
292,790
 274,674
      
Diluted earnings (losses) per common share:   
Earnings from continuing operations attributable to common shares$1.78
 $1.25
(Losses) earnings from discontinued operations attributable to common shares$(0.19) $0.08
Earnings attributable to common shares$1.59
 $1.33
Diluted EPS:   
Earnings from continuing operations$2.30
 $1.78
Earnings (losses) from discontinued operations$0.23
 $(0.19)
Earnings$2.53
 $1.59
Weighted-average common shares outstanding277,228
 259,490
313,925
 277,228

See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGYCONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(Dollars in millions)
Sempra Energy shareholders’ equity    Sempra Energy shareholders’ equity    
Pretax
amount		 Income tax
(expense) benefit		 Net-of-tax
amount		 
Noncontrolling
interests
(after-tax)
 TotalPretax
amount		 
Income tax
benefit
(expense)
 Net-of-tax
amount		 
Noncontrolling
interests
(after-tax)
 Total
(unaudited)(unaudited)
Three months ended March 31, 2019 and 2018Three months ended March 31, 2020 and 2019
2020:         
Net income$610
 $186
 $796
 $151
 $947
Other comprehensive income (loss):         
Foreign currency translation adjustments(138) —
 (138) (20) (158)
Financial instruments(188) 53
 (135) (12) (147)
Pension and other postretirement benefits24
 (2) 22
 —
 22
Total other comprehensive loss(302) 51
 (251) (32) (283)
Comprehensive income$308
 $237
 $545
 $119
 $664
2019:                  
Net income$670
 $(193) $477
 $41
 $518
$670
 $(193) $477
 $41
 $518
Other comprehensive income (loss):                  
Foreign currency translation adjustments32
 —
 32
 4
 36
32
 —
 32
 4
 36
Financial instruments(68) 22
 (46) (4) (50)(68) 22
 (46) (4) (50)
Pension and other postretirement benefits4
 (1) 3
 —
 3
4
 (1) 3
 —
 3
Total other comprehensive loss(32) 21
 (11) —
 (11)(32) 21
 (11) —
 (11)
Comprehensive income$638
 $(172) $466
 $41
 $507
$638
 $(172) $466
 $41
 $507
2018:         
Net income (loss)$664
 $(289) $375
 $(17) $358
Other comprehensive income (loss):         
Foreign currency translation adjustments24
 —
 24
 5
 29
Financial instruments88
 (30) 58
 10
 68
Pension and other postretirement benefits3
 (1) 2
 —
 2
Total other comprehensive income115
 (31) 84
 15
 99
Comprehensive income (loss)$779
 $(320) $459
 $(2) $457

See Notes to Condensed Consolidated Financial Statements.



SEMPRA ENERGYCONDENSED CONSOLIDATED BALANCE SHEETS(Dollars in millions)
March 31,
2019		 
December 31,
2018(1)
March 31,
2020		 
December 31,
2019(1)
(unaudited)  (unaudited)  
ASSETS      
Current assets:      
Cash and cash equivalents$78
 $102
$2,247
 $108
Restricted cash41
 35
23
 31
Accounts receivable – trade, net1,222
 1,215
1,222
 1,261
Accounts receivable – other, net320
 320
369
 455
Due from unconsolidated affiliates50
 37
64
 32
Income taxes receivable121
 60
120
 112
Inventories189
 258
217
 277
Regulatory assets87
 138
210
 222
Greenhouse gas allowances61
 59
79
 72
Assets held for sale374
 713
Assets held for sale in discontinued operations457
 459
566
 445
Other262
 249
Other current assets307
 324
Total current assets3,262
 3,645
5,424
 3,339
      
Other assets:      
Restricted cash21
 21
3
 3
Due from unconsolidated affiliates668
 644
592
 742
Regulatory assets1,838
 1,589
1,837
 1,930
Nuclear decommissioning trusts1,037
 974
987
 1,082
Investment in Oncor Holdings9,748
 9,652
11,619
 11,519
Other investments2,290
 2,320
2,215
 2,103
Goodwill1,602
 1,602
1,602
 1,602
Other intangible assets222
 224
211
 213
Dedicated assets in support of certain benefit plans413
 416
413
 488
Insurance receivable for Aliso Canyon costs477
 461
511
 339
Deferred income taxes139
 141
265
 155
Greenhouse gas allowances353
 289
515
 470
Right-of-use assets – operating leases612
 —
592
 591
Wildfire fund385
 392
Assets held for sale in discontinued operations3,388
 3,259
3,364
 3,513
Sundry850
 962
Other long-term assets691
 732
Total other assets23,658
 22,554
25,802
 25,874
      
Property, plant and equipment:      
Property, plant and equipment47,105
 46,615
50,185
 49,329
Less accumulated depreciation and amortization(12,407) (12,176)(13,118) (12,877)
Property, plant and equipment, net ($287 and $295 at March 31, 2019 and
December 31, 2018, respectively, related to Otay Mesa VIE)
34,698
 34,439
Property, plant and equipment, net37,067
 36,452
Total assets$61,618
 $60,638
$68,293
 $65,665

(1) 
Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGYCONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)   (Dollars in millions)
March 31,
2019		 
December 31,
2018(1)
March 31,
2020		 
December 31,
2019(1)
(unaudited)  (unaudited)  
LIABILITIES AND EQUITY      
Current liabilities:      
Short-term debt$2,523
 $2,024
$5,742
 $3,505
Accounts payable – trade989
 1,160
1,038
 1,234
Accounts payable – other166
 138
163
 179
Due to unconsolidated affiliates10
 10
8
 5
Dividends and interest payable496
 480
548
 515
Accrued compensation and benefits264
 440
264
 476
Regulatory liabilities523
 105
444
 319
Current portion of long-term debt and finance leases ($36 and $28 at March 31, 2019 and
December 31, 2018, respectively, related to Otay Mesa VIE)		2,152
 1,644
Current portion of long-term debt and finance leases2,079
 1,526
Reserve for Aliso Canyon costs60
 160
284
 9
Greenhouse gas obligations61
 59
79
 72
Liabilities held for sale in discontinued operations375
 368
538
 444
Other993
 935
Other current liabilities990
 866
Total current liabilities8,612
 7,523
12,177
 9,150
      
Long-term debt and finance leases ($182 and $190 at March 31, 2019 and December 31, 2018,
respectively, related to Otay Mesa VIE)		19,738
 20,903
Long-term debt and finance leases20,198
 20,785
      
Deferred credits and other liabilities:      
Due to unconsolidated affiliates38
 37
263
 195
Pension and other postretirement benefit plan obligations, net of plan assets1,155
 1,143
1,085
 1,067
Deferred income taxes2,622
 2,321
2,466
 2,577
Deferred investment tax credits23
 24
21
 21
Regulatory liabilities3,996
 4,016
3,533
 3,741
Asset retirement obligations2,795
 2,786
2,945
 2,923
Greenhouse gas obligations174
 131
348
 301
Liabilities held for sale in discontinued operations1,046
 1,013
1,006
 1,052
Deferred credits and other1,949
 1,493
2,136
 2,048
Total deferred credits and other liabilities13,798
 12,964
13,803
 13,925
      
Commitments and contingencies (Note 11)


 




 


      
Equity:      
Preferred stock (50 million shares authorized):      
6% mandatory convertible preferred stock, series A
(17.25 million shares issued and outstanding)
1,693
 1,693
1,693
 1,693
6.75% mandatory convertible preferred stock, series B
(5.75 million shares issued and outstanding)
565
 565
565
 565
Common stock (750 million shares authorized; 274 million shares outstanding;
no par value)
5,568
 5,540
Common stock (750 million shares authorized; 292 million shares outstanding;
no par value)
7,472
 7,480
Retained earnings10,337
 10,104
11,577
 11,130
Accumulated other comprehensive income (loss)(817) (764)(1,190) (939)
Total Sempra Energy shareholders’ equity17,346
 17,138
20,117
 19,929
Preferred stock of subsidiary20
 20
20
 20
Other noncontrolling interests2,104
 2,090
1,978
 1,856
Total equity19,470
 19,248
22,115
 21,805
Total liabilities and equity$61,618
 $60,638
$68,293
 $65,665
(1) 
Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGYCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in millions)
Three months ended March 31,Three months ended March 31,
2019 20182020 2019
(unaudited)(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income$518

$358
$947

$518
Loss (income) from discontinued operations, net of income tax42
 (28)
Less: (Income) loss from discontinued operations, net of income tax(80) 42
Income from continuing operations, net of income tax560
 330
867
 560
Adjustments to reconcile net income to net cash provided by operating activities: 
  
 
Depreciation and amortization383

372
412

383
Deferred income taxes and investment tax credits24

202
(243)
24
Equity (earnings) losses(101)
21
Equity earnings(263)
(101)
Foreign currency transaction losses (gains), net123
 (7)
Share-based compensation expense21

15
22

21
Fixed-price contracts and other derivatives(27)
(35)
Other13

7
124

(7)
Intercompany activities with discontinued operations, net31
 —
—
 31
Net change in other working capital components169

101
217

169
Insurance receivable for Aliso Canyon costs(16) (29)(172) (16)
Changes in other noncurrent assets and liabilities, net(199) (94)163
 (199)
Net cash provided by continuing operations858

890
1,250

858
Net cash provided by discontinued operations93

76
68

93
Net cash provided by operating activities951

966
1,318

951
      
CASH FLOWS FROM INVESTING ACTIVITIES      
Expenditures for property, plant and equipment(783) (979)(1,010) (783)
Expenditures for investments and acquisitions, net of cash and cash equivalents acquired(94) (9,617)
Expenditures for investments and acquisitions(86) (94)
Proceeds from sale of assets327
 —
5
 327
Purchases of nuclear decommissioning trust assets(225) (210)(552) (225)
Proceeds from sales of nuclear decommissioning trust assets225
 210
552
 225
Advances to unconsolidated affiliates—
 (81)(30) —
Repayments of advances to unconsolidated affiliates3
 1
—
 3
Intercompany activities with discontinued operations, net—
 (3)(3) —
Other7
 35
8
 7
Net cash used in continuing operations(540) (10,644)(1,116) (540)
Net cash used in discontinued operations(70) (58)(65) (70)
Net cash used in investing activities(610) (10,702)(1,181) (610)
   
CASH FLOWS FROM FINANCING ACTIVITIES   
Common dividends paid(232) (194)
Preferred dividends paid(36) —
Issuances of mandatory convertible preferred stock, net of $32 in offering costs—

1,693
Issuances of common stock, net of $24 in offering costs in 201811
 1,278
Repurchases of common stock(14) (19)
Issuances of debt (maturities greater than 90 days)304
 5,949
Payments on debt (maturities greater than 90 days) and finance leases(837) (154)
Increase in short-term debt, net497
 1,149
Purchases of and distributions to noncontrolling interests(27) (3)
Intercompany activities with discontinued operations, net(2) 67
Other—
 (82)
Net cash (used in) provided by continuing operations(336) 9,684
Net cash used in discontinued operations(45) (6)
Net cash (used in) provided by financing activities(381) 9,678

See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGYCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)(Dollars in millions)
 Three months ended March 31,Three months ended March 31,
 2019 20182020 2019
 (unaudited)(unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES   
Common dividends paid(269) (232)
Preferred dividends paid(36) (36)
Issuances of common stock11
 11
Repurchases of common stock(57) (14)
Issuances of debt (maturities greater than 90 days)1,619
 304
Payments on debt (maturities greater than 90 days) and finance leases(1,433) (837)
Increase in short-term debt, net2,127
 497
Advances from unconsolidated affiliates64
 —
Purchases of noncontrolling interests(16) (26)
Intercompany activities with discontinued operations, net(2) (2)
Other(5) (1)
Net cash provided by (used in) continuing operations2,003
 (336)
Net cash provided by (used in) discontinued operations111
 (45)
Net cash provided by (used in) financing activities2,114
 (381)
       
Effect of exchange rate changes in continuing operations —
 1
(6) —
Effect of exchange rate changes in discontinued operations 1
 —
(8) 1
Effect of exchange rate changes on cash, cash equivalents and restricted cash 1
 1
(14) 1
       
Decrease in cash, cash equivalents and restricted cash, including discontinued operations (39) (57)
Increase (decrease) in cash, cash equivalents and restricted cash, including discontinued operations2,237
 (39)
Cash, cash equivalents and restricted cash, including discontinued operations, January 1 246
 364
217
 246
Cash, cash equivalents and restricted cash, including discontinued operations, March 31 $207
 $307
$2,454
 $207
       
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION       
Interest payments, net of amounts capitalized $257
 $108
$263
 $257
Income tax payments, net of refunds 16
 18
68
 16
       
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES       
Acquisition:    
Assets acquired $—
 $9,670
Liabilities assumed —
 (104)
Cash paid $—
 $9,566
    
Accrued capital expenditures $388
 $316
$437
 $388
Accrued Merger-related transaction and financing costs —
 6
Increase in finance lease obligations for investment in property, plant and equipment 7
 5
20
 7
Equitization of long-term debt for deficit held by NCI22
 —
Preferred dividends declared but not paid 36
 28
36
 36
Common dividends issued in stock 13
 13
14
 13
Common dividends declared but not paid 265
 236
306
 265
See Notes to Condensed Consolidated Financial Statements.


SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Dollars in millions)
 Preferred stock Common
stock		 Retained
earnings		 Accumulated
other
comprehensive
income (loss)		 Sempra
Energy
shareholders'
equity		 Non-
controlling
interests		 Total
equity
 (unaudited)
 Three months ended March 31, 2019
Balance at December 31, 2018$2,258
 $5,540
 $10,104
 $(764) $17,138
 $2,110
 $19,248
Cumulative-effect adjustments from             
change in accounting principles    57
 (42) 15
   15
              
Net income    477
   477
 41
 518
Other comprehensive loss      (11) (11)   (11)
              
Share-based compensation expense  21
     21
   21
Dividends declared:             
Series A preferred stock ($1.50/share)    (26)   (26)   (26)
Series B preferred stock ($1.69/share)    (10)   (10)   (10)
Common stock ($0.97/share)    (265)   (265)   (265)
Issuances of common stock  24
     24
   24
Repurchases of common stock  (14)     (14)   (14)
Other noncontrolling interest activities:             
Distributions   
  
  
   (4) (4)
Purchases  (3)     (3) (23) (26)
Balance at March 31, 2019$2,258
 $5,568
 $10,337
 $(817) $17,346
 $2,124
 $19,470
              
 Three months ended March 31, 2018
Balance at December 31, 2017$—
 $3,149
 $10,147
 $(626) $12,670
 $2,470
 $15,140
Cumulative-effect adjustments from             
change in accounting principles    2
 (3) (1)   (1)
              
Net income (loss)    375
   375
 (17) 358
Other comprehensive income      84
 84
 15
 99
              
Share-based compensation expense  15
     15
   15
Dividends declared:             
Series A preferred stock ($1.60/share)    (28)   (28)   (28)
Common stock ($0.90/share)    (236)   (236)   (236)
Issuance of series A preferred stock1,693
       1,693
   1,693
Issuances of common stock  1,291
     1,291
   1,291
Repurchases of common stock  (19)     (19)   (19)
Other noncontrolling interest activities:             
Distributions          (7) (7)
Balance at March 31, 2018$1,693
 $4,436

$10,260

$(545) $15,844

$2,461

$18,305
See Notes to Condensed Consolidated Financial Statements.
SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Dollars in millions)
 Preferred stock Common
stock		 Retained
earnings		 Accumulated
other
comprehensive
income (loss)		 Sempra
Energy
shareholders'
equity		 Non-
controlling
interests		 Total
equity
 (unaudited)
 Three months ended March 31, 2020
Balance at December 31, 2019$2,258
 $7,480
 $11,130
 $(939) $19,929
 $1,876
 $21,805
Cumulative-effect adjustment from
change in accounting principle
    (7)   (7) (2) (9)
         

   

Net income    796
   796
 151
 947
Other comprehensive loss      (251) (251) (32) (283)
              
Share-based compensation expense  22
     22
   22
Dividends declared:        

   

Series A preferred stock ($1.50/share)    (26)   (26)   (26)
Series B preferred stock ($1.69/share)    (10)   (10)   (10)
Common stock ($1.05/share)    (306)   (306)   (306)
Issuances of common stock  25
     25
   25
Repurchases of common stock  (57)     (57)   (57)
Noncontrolling interest activities:        

   

Purchases  2
     2
 (18) (16)
Acquisition          1
 1
Equitization of long-term debt for
deficit held by NCI
          22
 22
Balance at March 31, 2020$2,258
 $7,472
 $11,577
 $(1,190) $20,117
 $1,998
 $22,115
              
 Three months ended March 31, 2019
Balance at December 31, 2018$2,258
 $5,540
 $10,104
 $(764) $17,138
 $2,110
 $19,248
Cumulative-effect adjustments from
change in accounting principles
    57
 (42) 15
   15
              
Net income    477
   477
 41
 518
Other comprehensive loss      (11) (11)   (11)
              
Share-based compensation expense  21
     21
   21
Dividends declared:             
Series A preferred stock ($1.50/share)    (26)   (26)   (26)
Series B preferred stock ($1.69/share)    (10)   (10)   (10)
Common stock ($0.97/share)    (265)   (265)   (265)
Issuances of common stock  24
     24
   24
Repurchases of common stock  (14)     (14)   (14)
Noncontrolling interest activities:             
Distributions          (4) (4)
Purchases  (3)     (3) (23) (26)
Balance at March 31, 2019$2,258
 $5,568
 $10,337
 $(817) $17,346
 $2,124
 $19,470
See Notes to Condensed Consolidated Financial Statements.


SAN DIEGO GAS & ELECTRIC COMPANYSAN DIEGO GAS & ELECTRIC COMPANY   
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
(Dollars in millions)(Dollars in millions) 
Three months ended March 31,Three months ended March 31,
2019 20182020 2019
(unaudited)(unaudited)
Operating revenues      
Electric$940
 $884
$1,050
 $940
Natural gas205
 171
219
 205
Total operating revenues1,145
 1,055
1,269
 1,145
Operating expenses      
Cost of electric fuel and purchased power258
 274
231
 258
Cost of natural gas79
 50
60
 79
Operation and maintenance286
 248
310
 286
Depreciation and amortization186
 166
201
 186
Franchise fees and other taxes74
 69
78
 74
Total operating expenses883
 807
880
 883
Operating income262
 248
389
 262
Other income, net22
 28
31
 22
Interest income1
 1
1
 1
Interest expense(103) (52)(101) (103)
Income before income taxes182
 225
320
 182
Income tax expense(5) (56)(58) (5)
Net income177
 169
262
 177
(Earnings) losses attributable to noncontrolling interest(1) 1
Earnings attributable to noncontrolling interest—
 (1)
Earnings attributable to common shares$176
 $170
$262
 $176
See Notes to Condensed Consolidated Financial Statements.


SAN DIEGO GAS & ELECTRIC COMPANYCONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(Dollars in millions)
SDG&E shareholder’s equity    SDG&E shareholder’s equity    
Pretax
amount
 Income tax expense 
Net-of-tax
amount
 
Noncontrolling
interest
(after-tax)
 Total
Pretax
amount
 Income tax expense 
Net-of-tax
amount
 
Noncontrolling
interest
(after-tax)
 Total
(unaudited)(unaudited)
Three months ended March 31, 2019 and 2018Three months ended March 31, 2020 and 2019
2020:         
Net income/Comprehensive income$320
 $(58) $262
 $—
 $262
2019:                  
Net income$181
 $(5) $176
 $1
 $177
$181
 $(5) $176
 $1
 $177
Other comprehensive income (loss):                  
Financial instruments—
 —
 —
 1
 1
—
 —
 —
 1
 1
Total other comprehensive income—
 —
 —
 1
 1
—
 —
 —
 1
 1
Comprehensive income$181
 $(5) $176
 $2
 $178
$181
 $(5) $176
 $2
 $178
2018:         
Net income (loss)$226
 $(56) $170
 $(1) $169
Other comprehensive income (loss):         
Financial instruments—
 —
 —
 4
 4
Total other comprehensive income—
 —
 —
 4
 4
Comprehensive income$226
 $(56) $170
 $3
 $173
See Notes to Condensed Consolidated Financial Statements.


SAN DIEGO GAS & ELECTRIC COMPANY      
CONDENSED CONSOLIDATED BALANCE SHEETS      
(Dollars in millions)      
March 31,
2019		 
December 31,
2018(1)
March 31,
2020		 
December 31,
2019(1)
(unaudited)  (unaudited)  
ASSETS      
Current assets:      
Cash and cash equivalents$10
 $8
$203
 $10
Restricted cash21
 11
Accounts receivable – trade, net390
 368
411
 398
Accounts receivable – other, net96
 106
111
 119
Income taxes receivable, net61
 128
Inventories99
 102
93
 94
Prepaid expenses53
 74
105
 120
Regulatory assets71
 123
198
 209
Fixed-price contracts and other derivatives66
 82
33
 43
Greenhouse gas allowances15
 15
13
 13
Other26
 5
Other current assets27
 24
Total current assets847
 894
1,255
 1,158
      
Other assets:      
Restricted cash18
 18
Regulatory assets467
 454
457
 440
Nuclear decommissioning trusts1,037
 974
987
 1,082
Greenhouse gas allowances169
 155
189
 189
Right-of-use assets – operating leases135
 —
123
 130
Sundry421
 420
Wildfire fund385
 392
Other long-term assets194
 202
Total other assets2,247
 2,021
2,335
 2,435
      
Property, plant and equipment:      
Property, plant and equipment21,950
 21,662
22,850
 22,504
Less accumulated depreciation and amortization(5,486) (5,352)(5,656) (5,537)
Property, plant and equipment, net ($287 and $295 at March 31, 2019 and
December 31, 2018, respectively, related to VIE)		16,464
 16,310
Property, plant and equipment, net17,194
 16,967
Total assets$19,558
 $19,225
$20,784
 $20,560
(1) 
Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.

SAN DIEGO GAS & ELECTRIC COMPANY      
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)      
(Dollars in millions)      
March 31,
2019		 
December 31,
2018(1)
March 31,
2020		 
December 31,
2019(1)
(unaudited)  (unaudited)  
LIABILITIES AND EQUITY      
Current liabilities:      
Short-term debt$238
 $291
$—
 $80
Accounts payable360
 439
462
 496
Due to unconsolidated affiliates63
 61
59
 53
Interest payable63
 43
Accrued compensation and benefits52
 117
59
 138
Accrued franchise fees60
 64
37
 53
Regulatory liabilities47
 53
69
 76
Current portion of long-term debt and finance leases ($36 and $28 at March 31, 2019 and
December 31, 2018, respectively, related to VIE)
89
 81
Current portion of long-term debt and finance leases57
 56
Customer deposits70
 70
74
 74
Greenhouse gas obligations15
 15
13
 13
Asset retirement obligations93
 96
105
 95
Other280
 141
Other current liabilities186
 133
Total current liabilities1,367
 1,428
1,184
 1,310
      
Long-term debt and finance leases ($182 and $190 at March 31, 2019 and December 31, 2018, respectively, related to VIE)6,113
 6,138
Long-term debt and finance leases6,687
 6,306
      
Deferred credits and other liabilities:      
Pension and other postretirement benefit plan obligations, net of plan assets217
 212
Pension obligation, net of plan assets156
 153
Deferred income taxes1,653
 1,616
1,880
 1,848
Deferred investment tax credits15
 16
14
 14
Regulatory liabilities2,470
 2,404
2,200
 2,319
Asset retirement obligations777
 778
760
 771
Greenhouse gas obligations43
 30
72
 62
Deferred credits and other610
 488
669
 677
Total deferred credits and other liabilities5,785
 5,544
5,751
 5,844
      
Commitments and contingencies (Note 11)

 


 

      
Equity:   
Shareholder's equity:   
Preferred stock (45 million shares authorized; none issued)—
 —
—
 —
Common stock (255 million shares authorized; 117 million shares outstanding;
no par value)		1,338
 1,338
1,660
 1,660
Retained earnings4,865
 4,687
5,518
 5,456
Accumulated other comprehensive income (loss)(12) (10)(16) (16)
Total SDG&E shareholder’s equity6,191
 6,015
Noncontrolling interest102
 100
Total equity6,293
 6,115
Total liabilities and equity$19,558
 $19,225
Total shareholder’s equity7,162
 7,100
Total liabilities and shareholder's equity$20,784
 $20,560
(1) 
Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.


SAN DIEGO GAS & ELECTRIC COMPANYCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in millions)
Three months ended March 31,Three months ended March 31,
2019 20182020 2019
(unaudited)(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income$177
 $169
$262
 $177
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization186
 166
201
 186
Deferred income taxes and investment tax credits(28) (11)(8) (28)
Other1
 3
(10) 1
Net change in other working capital components96
 102
Net change in working capital components73
 96
Changes in other noncurrent assets and liabilities, net11
 (25)(20) 11
Net cash provided by operating activities443
 404
498
 443
      
CASH FLOWS FROM INVESTING ACTIVITIES      
Expenditures for property, plant and equipment(356) (475)(402) (356)
Purchases of nuclear decommissioning trust assets(225) (210)(552) (225)
Proceeds from sales of nuclear decommissioning trust assets225
 210
552
 225
Net cash used in investing activities(356) (475)(402) (356)
      
CASH FLOWS FROM FINANCING ACTIVITIES      
Common dividends paid(200) —
Issuances of debt (maturities greater than 90 days)400
 —
Payments on debt (maturities greater than 90 days) and finance leases(22) (20)(23) (22)
(Decrease) increase in short-term debt, net(53) 87
Net cash (used in) provided by financing activities(75) 67
Decrease in short-term debt, net(80) (53)
Net cash provided by (used in) financing activities97
 (75)
      
Increase (decrease) in cash, cash equivalents and restricted cash12
 (4)
Increase in cash, cash equivalents and restricted cash193
 12
Cash, cash equivalents and restricted cash, January 137
 29
10
 37
Cash, cash equivalents and restricted cash, March 31$49
 $25
$203
 $49
      
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION      
Interest payments, net of amounts capitalized$86
 $39
$79
 $86
      
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES 
  
 
  
Accrued capital expenditures$100
 $97
$128
 $100
Increase in finance lease obligations for investment in property, plant and equipment4
 —
4
 4
See Notes to Condensed Consolidated Financial Statements.


SAN DIEGO GAS & ELECTRIC COMPANYCONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(Dollars in millions)
Common
stock		 Retained
earnings		 Accumulated
other
comprehensive
income (loss)		 SDG&E
shareholder's
equity		 Noncontrolling
interest		 Total
equity		Common
stock		 Retained
earnings		 Accumulated
other
comprehensive
income (loss)		 SDG&E
shareholder's
equity		 Noncontrolling
interest		 Total
equity
(unaudited)(unaudited)
Three months ended March 31, 2019Three months ended March 31, 2020
Balance at December 31, 2019$1,660
 $5,456
 $(16) $7,100
 $—
 $7,100
           
Net income  262
   262
 —
 262
           
Common stock dividends declared ($1.72/share)  (200)   (200)   (200)
Balance at March 31, 2020$1,660
 $5,518
 $(16) $7,162
 $—
 $7,162
           
Three months ended March 31, 2019
Balance at December 31, 2018$1,338
 $4,687
 $(10) $6,015
 $100
 $6,115
$1,338
 $4,687
 $(10) $6,015
 $100
 $6,115
Cumulative-effect adjustment from           
change in accounting principle  2
 (2) —
   —
Cumulative-effect adjustment from
change in accounting principle
  2
 (2) —
   —
                      
Net income  176
   176
 1
 177
  176
   176
 1
 177
Other comprehensive income      

 1
 1
    —
 —
 1
 1
                      
Balance at March 31, 2019$1,338
 $4,865
 $(12) $6,191
 $102
 $6,293
$1,338
 $4,865
 $(12) $6,191
 $102
 $6,293
           
Three months ended March 31, 2018
Balance at December 31, 2017$1,338
 $4,268
 $(8) $5,598
 $28
 $5,626
           
Net income (loss)  170
   170
 (1) 169
Other comprehensive income      

 4
 4
           
Distributions to noncontrolling interest 
  
  
   (1) (1)
Balance at March 31, 2018$1,338
 $4,438
 $(8) $5,768
 $30
 $5,798
See Notes to Condensed Consolidated Financial Statements.



SOUTHERN CALIFORNIA GAS COMPANYCONDENSED STATEMENTS OF OPERATIONS(Dollars in millions)
Three months ended March 31,Three months ended March 31,
2019 20182020 2019
(unaudited)(unaudited)
      
Operating revenues$1,361
 $1,126
$1,395
 $1,361
Operating expenses      
Cost of natural gas455
 289
278
 455
Operation and maintenance410
 384
543
 410
Depreciation and amortization147
 135
159
 147
Franchise fees and other taxes48
 40
51
 48
Total operating expenses1,060
 848
1,031
 1,060
Operating income301
 278
364
 301
Other income, net16
 33
30
 16
Interest income1
 —
Interest expense(34) (27)(40) (34)
Income before income taxes283
 284
355
 283
Income tax expense(19) (59)(52) (19)
Net Income/Earnings attributable to common shares$264
 $225
Net income/Earnings attributable to common shares$303
 $264
See Notes to Condensed Financial Statements.


SOUTHERN CALIFORNIA GAS COMPANYCONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(Dollars in millions)
Pretax
amount		 Income tax expense Net-of-tax
amount		Pretax
amount		 Income tax expense Net-of-tax
amount
(unaudited)(unaudited)
Three months ended March 31, 2019 and 2018Three months ended March 31, 2020 and 2019
2020:     
Net income/Comprehensive income$355
 $(52) $303
2019:          
Net income/Comprehensive income$283
 $(19) $264
$283
 $(19) $264
2018:     
Net income/Comprehensive income$284
 $(59) $225
See Notes to Condensed Financial Statements.



SOUTHERN CALIFORNIA GAS COMPANYCONDENSED BALANCE SHEETS(Dollars in millions)
March 31,
2019		 
December 31,
2018(1)
March 31,
2020		 
December 31,
2019(1)
(unaudited)  (unaudited)  
ASSETS      
Current assets:      
Cash and cash equivalents$3
 $18
$389
 $10
Accounts receivable – trade, net674
 634
669
 710
Accounts receivable – other, net91
 97
74
 87
Due from unconsolidated affiliates15
 7
7
 11
Income taxes receivable, net116
 161
Inventories58
 134
79
 136
Regulatory assets11
 12
9
 7
Greenhouse gas allowances39
 37
60
 52
Other39
 31
Other current assets48
 44
Total current assets930
 970
1,451
 1,218
      
Other assets:      
Regulatory assets1,286
 1,051
1,297
 1,407
Insurance receivable for Aliso Canyon costs477
 461
511
 339
Greenhouse gas allowances164
 116
291
 248
Right-of-use assets – operating leases110
 —
90
 94
Sundry356
 352
Other long-term assets449
 447
Total other assets2,393
 1,980
2,638
 2,535
      
Property, plant and equipment:      
Property, plant and equipment18,347
 18,138
19,661
 19,362
Less accumulated depreciation and amortization(5,766) (5,699)(6,140) (6,038)
Property, plant and equipment, net12,581
 12,439
13,521
 13,324
Total assets$15,904
 $15,389
$17,610
 $17,077

(1) 
Derived from audited financial statements.
See Notes to Condensed Financial Statements.

SOUTHERN CALIFORNIA GAS COMPANYCONDENSED BALANCE SHEETS (CONTINUED)(Dollars in millions)
March 31,
2019		 
December 31,
2018(1)
March 31,
2020		 
December 31,
2019(1)
(unaudited)  (unaudited)  
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Current liabilities:      
Short-term debt$190
 $256
$—
 $630
Accounts payable – trade427
 556
331
 545
Accounts payable – other98
 93
105
 110
Due to unconsolidated affiliates42
 34
49
 47
Accrued compensation and benefits101
 159
111
 182
Regulatory liabilities476
 52
375
 243
Current portion of long-term debt and finance leases3
 3
9
 6
Customer deposits71
 101
73
 71
Reserve for Aliso Canyon costs60
 160
284
 9
Greenhouse gas obligations39
 37
60
 52
Asset retirement obligations90
 90
64
 65
Other333
 217
Other current liabilities236
 222
Total current liabilities1,930
 1,758
1,697
 2,182
      
Long-term debt and finance leases3,429
 3,427
4,442
 3,788
      
Deferred credits and other liabilities:      
Pension obligation, net of plan assets773
 760
802
 785
Deferred income taxes1,204
 1,177
1,477
 1,403
Deferred investment tax credits8
 8
6
 7
Regulatory liabilities1,526
 1,612
1,333
 1,422
Asset retirement obligations1,982
 1,973
2,144
 2,112
Greenhouse gas obligations110
 86
242
 208
Deferred credits and other422
 330
416
 422
Total deferred credits and other liabilities6,025
 5,946
6,420
 6,359
      
Commitments and contingencies (Note 11)

 


 

      
Shareholders’ equity:      
Preferred stock (11 million shares authorized; 1 million shares outstanding)22
 22
22
 22
Common stock (100 million shares authorized; 91 million shares outstanding;   
no par value)866
 866
Common stock (100 million shares authorized; 91 million shares outstanding; no par value)866
 866
Retained earnings3,656
 3,390
4,186
 3,883
Accumulated other comprehensive income (loss)(24) (20)(23) (23)
Total shareholders’ equity4,520
 4,258
5,051
 4,748
Total liabilities and shareholders’ equity$15,904
 $15,389
$17,610
 $17,077
(1) 
Derived from audited financial statements.
See Notes to Condensed Financial Statements.



SOUTHERN CALIFORNIA GAS COMPANYCONDENSED STATEMENTS OF CASH FLOWS(Dollars in millions)
Three months ended March 31,Three months ended March 31,
2019 20182020 2019
(unaudited)(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income$264
 $225
$303
 $264
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization147
 135
159
 147
Deferred income taxes and investment tax credits(65) 47
4
 (65)
Other5
 21
6
 5
Net change in other working capital components287
 76
Net change in working capital components343
 287
Insurance receivable for Aliso Canyon costs(16) (29)(172) (16)
Changes in other noncurrent assets and liabilities, net(246) (56)114
 (246)
Net cash provided by operating activities376
 419
757
 376
      
CASH FLOWS FROM INVESTING ACTIVITIES      
Expenditures for property, plant and equipment(324) (403)(388) (324)
Other—
 3
Net cash used in investing activities(324) (400)(388) (324)
      
CASH FLOWS FROM FINANCING ACTIVITIES      
Issuances of debt (maturities greater than 90 days)649
 —
Decrease in short-term debt, net(66) (16)(630) (66)
Payments on finance leases(1) —
Net cash used in financing activities(67) (16)
Other(9) (1)
Net cash provided by (used in) financing activities10
 (67)
      
(Decrease) increase in cash and cash equivalents(15) 3
Increase (decrease) in cash and cash equivalents379
 (15)
Cash and cash equivalents, January 118
 8
10
 18
Cash and cash equivalents, March 31$3
 $11
$389
 $3
      
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION      
Interest payments, net of amounts capitalized$26
 $18
$37
 $26
      
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES      
Accrued capital expenditures$163
 $159
$126
 $163
Increase in finance lease obligations for investment in property, plant and equipment3
 5
16
 3
See Notes to Condensed Financial Statements.



SOUTHERN CALIFORNIA GAS COMPANYCONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY(Dollars in millions)
Preferred
stock		 Common
stock		 Retained
earnings		 Accumulated
other
comprehensive
income (loss)		 Total
shareholders’
equity		Preferred
stock		 Common
stock		 Retained
earnings		 Accumulated
other
comprehensive
income (loss)		 Total
shareholders’
equity
(unaudited)(unaudited)
Three months ended March 31, 2019Three months ended March 31, 2020
Balance at December 31, 2018$22
 $866
 $3,390
 $(20) $4,258
Cumulative-effect adjustment from         
change in accounting principle    2
 (4) (2)
Balance at December 31, 2019$22
 $866
 $3,883
 $(23) $4,748
                  
Net income    264
 

 264
    303
 

 303
                  
Preferred stock dividends declared ($0.38/share)    —
 

 —
Balance at March 31, 2019$22
 $866
 $3,656
 $(24) $4,520
Dividends declared:         
Preferred stock ($0.38/share)    —
 

 —
Balance at March 31, 2020$22
 $866
 $4,186
 $(23) $5,051
                  
Three months ended March 31, 2018Three months ended March 31, 2019
Balance at December 31, 2017$22
 $866
 $3,040
 $(21) $3,907
Balance at December 31, 2018$22
 $866
 $3,390
 $(20) $4,258
Cumulative-effect adjustment from
change in accounting principle
    2
 (4) (2)
                  
Net income    225
 

 225
    264
   264
                  
Preferred stock dividends declared ($0.38/share)    —
   —
Balance at March 31, 2018$22
 $866
 $3,265
 $(21) $4,132
Dividends declared:         
Preferred stock ($0.38/share)    —
 

 —
Balance at March 31, 2019$22
 $866
 $3,656
 $(24) $4,520
See Notes to Condensed Financial Statements.




SEMPRA ENERGY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
     
NOTE 1. GENERAL INFORMATION AND OTHER FINANCIAL DATA
PRINCIPLES OF CONSOLIDATION
Sempra Energy
Sempra Energy’s Condensed Consolidated Financial Statements include the accounts of Sempra Energy, a California-based Fortune 500 energy-services holding company, and its consolidated subsidiaries and VIEs. Sempra Global is the holding company for most of our subsidiaries that are not subject to California or Texas utility regulation. Sempra Energy’s businesses arewere managed within six6 separate reportable segments until April 2019 and 5 separate reportable segments thereafter, which we discuss in Note 12. In the first quarter of 2019, our Sempra LNG & Midstream segment was renamed “Sempra LNG.” This segment name change had no impact on our historical position, results of operations, cash flow or segment level results previously reported. All references in these Notes to our reportable segments are not intended to refer to any legal entity with the same or similar name.
SDG&E
SDG&E’s Condensed Consolidated Financial Statements include its accounts and the accounts of a VIE of which SDG&E iswas the primary beneficiary as we discuss below in “Variable Interest Entities.”until August 23, 2019, at which time SDG&E deconsolidated the VIE. SDG&E’s common stock is wholly owned by Enova Corporation, which is a wholly owned subsidiary of Sempra Energy.
SoCalGas
SoCalGas’ common stock is wholly owned by Pacific Enterprises, which is a wholly owned subsidiary of Sempra Energy.
In this report, we refer to SDG&E and SoCalGas collectively as the California Utilities.
BASIS OF PRESENTATION
This is a combined report of Sempra Energy, SDG&E and SoCalGas. We provide separate information for SDG&E and SoCalGas as required. References in this report to “we,” “us,” “our” and “Sempra Energy Consolidated” are to Sempra Energy and its consolidated entities, unless otherwise indicated by the context. We have eliminated intercompany accounts and transactions within the consolidated financial statements of each reporting entity.
Throughout this report, we refer to the following as Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements when discussed together or collectively:
▪the Condensed Consolidated Financial Statements and related Notes of Sempra Energy and its subsidiaries and VIEs;
▪the Condensed Consolidated Financial Statements and related Notes of SDG&E and its VIE;VIE (until deconsolidation of Otay Mesa VIE in August 2019); and
▪the Condensed Financial Statements and related Notes of SoCalGas.
We have prepared the Condensed Consolidated Financial Statements in conformity with U.S. GAAP and in accordance with the interim-period-reporting requirements of Form 10-Q. Results of operations for interim periods are not necessarily indicative of results for the entire year.year or for any other period. We evaluated events and transactions that occurred after March 31, 20192020 through the date the financial statements were issued and, in the opinion of management, the accompanying statements reflect all adjustments necessary for a fair presentation. These adjustments are only of a normal, recurring nature.
All December 31, 20182019 balance sheet information in the Condensed Consolidated Financial Statements has been derived from our audited 20182019 Consolidated Financial Statements in the Annual Report, which for Sempra Energy has been retrospectively adjusted for discontinued operations, as we discuss below.Report. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the interim-period-reporting provisions of U.S. GAAP and the SEC.


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


You should read the information in this Quarterly Reportreport in conjunction with the Annual Report.
Discontinued Operations
OnIn January 25, 2019, our board of directors approved a plan to sell our South American businesses based on our strategic focus on North America. We determined that these businesses, which previously constituted the Sempra South American Utilities segment, and certain activities associated with these businesses, met the held-for-sale criteria. These businesses are presented as discontinued operations, which we discuss further in Note 5, as the planned sale representssales represent a strategic shift that will have a major effect on our operations and financial results. Throughout this report, the financial information for all periods presented has been adjusted to reflect the presentation of these businesses as discontinued operations, which we discuss further in Note 5. Our discussions in the Notes below relate only to our continuing operations unless otherwise noted.
Regulated Operations
The California Utilities and Sempra Mexico’s natural gas distribution utility, Ecogas, prepare their financial statements in accordance with the provisions of U.S. GAAP governing rate-regulated operations. We discuss the effects of regulation and revenue recognition at our utilities in Notes 1 and 3 of the Notes to Consolidated Financial Statements in the Annual Report.
Our Sempra Texas UtilityUtilities segment is comprised of our equity method investmentinvestments in Oncor Holdings, which owns 80.25 percent of Oncor, as we discussholding companies that own interests in Notes 5 and 6. Oncor is a regulated electric transmission and distribution utilityutilities in Texas and prepares itsprepare their financial statements in accordance with the provisions of U.S. GAAP governing rate-regulated operations.
Our Sempra Mexico segment includes the operating companies of our subsidiary, IEnova.IEnova, as well as certain holding companies and risk management activity. Certain business activities at IEnova are regulated by the Comisión Reguladora de Energía (Energy Regulatory Commission inof Mexico) and meet the regulatory accounting requirements of U.S. GAAP. Pipeline projects under construction at IEnova that meet the regulatory accounting requirements of U.S. GAAP record the impact of AFUDC related to equity. We discuss AFUDC below and in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Condensed Consolidated Balance Sheets to the sum of such amounts reported on the Condensed Consolidated Statements of Cash Flows. We provide information about the nature of restricted cash in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH(Dollars in millions)
March 31,December 31,March 31,December 31,
2019201820202019
Sempra Energy Consolidated:   
Cash and cash equivalents$78
$102
$2,247
$108
Restricted cash, current41
35
23
31
Restricted cash, noncurrent21
21
3
3
Cash, cash equivalents and restricted cash in discontinued operations67
88
181
75
Total cash, cash equivalents and restricted cash on the Condensed Consolidated Statements of Cash Flows$207
$246
$2,454
$217
SDG&E: 
 
Cash and cash equivalents$10
$8
Restricted cash, current21
11
Restricted cash, noncurrent18
18
Total cash, cash equivalents and restricted cash on the Condensed Consolidated Statements of Cash Flows$49
$37

CREDIT LOSSES
We are exposed to credit losses from financial assets measured at amortized cost, including trade and other accounts receivable and amounts due from unconsolidated affiliates. We are also exposed to credit losses from off-balance sheet arrangements through our guarantees of Cameron LNG JV’s debt.
We regularly monitor and evaluate credit losses and record allowances for expected credit losses, if necessary, for trade and other accounts receivable using a combination of factors, including past-due status based on contractual terms, trends in write-offs, the age of the receivable, historical and industry trends, counterparty creditworthiness, economic conditions and specific events, such as bankruptcies. We write off financial assets measured at amortized cost in the period in which we deem they are not recoverable. We record recoveries of amounts previously written off when it is known that they will be recovered.
In connection with the COVID-19 pandemic, the California Utilities have implemented certain measures to assist customers, including suspending service disconnections due to nonpayment, waiving late payment fees for business customers, and offering


flexible payment plans for customers experiencing difficulty paying their electric or gas bills. On April 16, 2020, the CPUC approved a resolution authorizing each of the California Utilities to establish a CPPMA to track and request recovery, which is not assured, of incremental costs associated with complying with residential and small business customer relief measures implemented by the CPUC related to the COVID-19 pandemic. As of March 31, 2020, the California Utilities have evaluated the impact of the COVID-19 pandemic, including the measures described above, on their respective allowances for credit losses for customer receivables, with nominal impacts. The unique nature of the COVID-19 pandemic and the relatively short amount of time in which the California Utilities had been impacted as of March 31, 2020 result in limited support for modifying our evaluation of historical experience or forecasting future economic impacts that may or may not be experienced when calculating the allowances. Our businesses will continue to monitor economic impacts and customer payment patterns when evaluating their allowances for credit losses in future reporting periods, which may increase materially due to the effects of the COVID-19 pandemic or other factors.
We provide below allowances and changes in allowances for credit losses for trade and other accounts receivable, excluding allowances related to amounts due from unconsolidated affiliates and off-balance sheet arrangements, which we discuss separately below the table.
TRADE AND OTHER ACCOUNTS RECEIVABLE – ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)  
 
Sempra Energy Consolidated(1)
SDG&E(2)
SoCalGas(3)
Allowances for credit losses at December 31, 2019$29
$14
$15
Incremental allowance upon adoption of ASU 2016-131
—
—
Provisions for expected credit losses6
3
3
Write-offs(4)(3)(1)
Recoveries1
1
—
Allowances for credit losses at March 31, 2020$33
$15
$17
(1)
Balance at March 31, 2020 includes $9 million and $24 million in Accounts Receivable – Trade, Net and Accounts Receivable – Other, Net, respectively.
(2)
Balance at March 31, 2020 includes $4 million and $11 million in Accounts Receivable – Trade, Net and Accounts Receivable – Other, Net, respectively.
(3)
Balance at March 31, 2020 includes $4 million and $13 million in Accounts Receivable – Trade, Net and Accounts Receivable – Other, Net, respectively.

For amounts due from unconsolidated affiliates and off-balance sheet arrangements, on a quarterly basis, we evaluate credit losses and record allowances for expected credit losses, if necessary, based on credit quality indicators such as external credit ratings, published default rate studies, the maturity date of the instrument and past delinquencies. However, we do not record allowances for expected credit losses related to accrued interest receivable on loans due from unconsolidated affiliates because we write off such amounts, if any, through a reversal of interest income in the period we determine such amounts are uncollectible. In the absence of external credit ratings, we may utilize an internally developed credit rating based on our analysis of a counterparty’s financial statements to determine our expected credit losses.
As we discuss below in “Transactions with Affiliates,” we have loans due from unconsolidated affiliates with varying tenors, interest rates and currencies. We provide below the changes in allowances for credit losses for loans and other amounts due from unconsolidated affiliates.
AMOUNTS DUE FROM UNCONSOLIDATED AFFILIATES – ALLOWANCES FOR CREDIT LOSSES
 
(Dollars in millions)
 
Sempra Energy Consolidated(1)
Allowances for credit losses at December 31, 2019$—
Allowance established upon adoption of ASU 2016-136
Provisions for expected credit losses1
Allowances for credit losses at March 31, 2020$7
(1)
Balance at March 31, 2020 includes negligible amounts and $7 million in Due from Unconsolidated Affiliates – Current and Due from Unconsolidated Affiliates – Noncurrent, respectively.



As we discuss in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report, Sempra LNG has provided guarantees for a maximum aggregate amount of $4.0 billion associated with Cameron LNG JV’s debt obligations. We established a liability for credit losses of $6 million for this off-balance sheet arrangement upon adoption of ASU 2016-13 on January 1, 2020 and we subsequently reduced this liability by $1 million in the three months ended March 31, 2020 through a reduction to credit loss expense, which is included in O&M on the Sempra Energy Condensed Consolidated Statement of Operations. At March 31, 2020, expected credit losses of $4 million are included in Other Current Liabilities and $1 million are included in Deferred Credits and Other on the Sempra Energy Condensed Consolidated Balance Sheet.
CONCENTRATION OF CREDIT RISK
Credit risk is the risk of loss that would be incurred as a result of nonperformance by our counterparties on their contractual obligations. We have policies governing the management of credit risk that are administered by the respective credit departments at each of our segments and overseen by their separate risk management committees.
This oversight includes calculating current and potential credit risk on a regular basis and monitoring actual balances in comparison to approved limits. We establish credit limits based on risk and return considerations under terms customarily available in the industry. We avoid concentration of counterparties whenever possible, and we believe our credit policies significantly reduce overall credit risk. These policies include an evaluation of:
▪prospective counterparties’ financial condition (including credit ratings)
▪collateral requirements
▪the use of standardized agreements that allow for the netting of positive and negative exposures associated with a single counterparty
▪downgrade triggers
We believe that we have provided adequate reserves for counterparty nonperformance.
In the three months ended March 31, 2020, four customers each represented 10% or more of Sempra Mexico’s revenues (including intercompany transactions with affiliates consolidated by Sempra Energy). Additionally, for the same period, certain of our unconsolidated equity method investees (Oncor Holdings, Cameron LNG JV and IMG JV) had customers that each represented 10% or more of their respective revenues.
When our development projects become operational, we rely significantly on the ability of suppliers to perform under long-term agreements and on our ability to enforce contract terms in the event of nonperformance. Also, the factors that we consider in evaluating a development project include negotiating customer and supplier agreements and, therefore, we rely on these agreements for future performance. We also may condition our decision to go forward on development projects on first obtaining these customer and supplier agreements.
INVENTORIES
The components of inventories are as follows:
INVENTORY BALANCES
(Dollars in millions)
 Natural gas LNG Materials and supplies Total
 March December March December March December March December
 31, 2020 31, 2019 31, 2020 31, 2019 31, 2020 31, 2019 31, 2020 31, 2019
Sempra Energy Consolidated$55
 $110
 $5
 $9
 $157
 $158
 $217
 $277
SDG&E1
 1
 —
 —
 92
 93
 93
 94
SoCalGas32
 90
 —
 —
 47
 46
 79
 136



INVENTORIESWILDFIRE FUND
On July 12, 2019, the Wildfire Legislation was signed into law to address certain issues related to catastrophic wildfires in the State of California and their impact on electric IOUs. We discuss the Wildfire Legislation further in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
In a complaint filed in U.S. District Court for the Northern District of California in July 2019, plaintiffs seek to invalidate AB 1054, which established the Wildfire Fund, based on allegations that the legislation violates federal law. The following table presentsCalifornia Attorney General has moved to dismiss the componentscomplaint.
Wildfire Fund Asset
In the third quarter of inventories2019, SDG&E recorded a Wildfire Fund asset for its commitment to make shareholder contributions totaling $451.5 million, measured at present value as of July 25, 2019 (the date by segment.which both Edison and SDG&E opted to contribute to the Wildfire Fund). SDG&E is amortizing the Wildfire Fund asset to O&M on a straight-line basis over the estimated period of benefit, as adjusted for utilization by the IOUs. The estimated period of benefit of the Wildfire Fund asset is 15 years as of March 31, 2020.
INVENTORY BALANCES
(Dollars in millions)
 Natural gas  LNG  Materials and supplies  Total
 March 31, 2019 December 31, 2018  March 31, 2019 December 31, 2018  March 31, 2019 December 31, 2018  March 31, 2019 December 31, 2018
SDG&E$—
 $—
  $—
 $—
  $99
 $102
  $99
 $102
SoCalGas12
 92
  —
 —
  46
 42
  58
 134
Sempra Mexico—
 —
  7
 4
  16
 15
  23
 19
Sempra LNG9
 3
  —
 —
  —
 —
  9
 3
Sempra Energy Consolidated$21
 $95
  $7
 $4
  $161
 $159
  $189
 $258

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

At March 31, 2020 and December 31, 2019, the current portion of the Wildfire Fund asset of $29 million is included in Other Current Assets on Sempra Energy’s Condensed Consolidated Balance Sheets and in Prepaid Expenses on SDG&E’s Condensed Consolidated Balance Sheets, and the noncurrent portion of $385 million and $392 million, respectively, is included in Wildfire Fund on Sempra Energy’s and SDG&E’s Condensed Consolidated Balance Sheets. In the three months ended March 31, 2020, SDG&E recognized $7 million of amortization of the Wildfire Fund asset.
Wildfire Fund Obligation
In the third quarter of 2019, SDG&E recorded a Wildfire Fund obligation for its commitment to make shareholder contributions totaling $451.5 million, measured at present value as of July 25, 2019 (the date by which both Edison and SDG&E opted to contribute to the Wildfire Fund). SDG&E accretes the present value of the Wildfire Fund obligation to O&M until the liability is settled. At both March 31, 2020 and December 31, 2019, the Wildfire Fund obligation of $12.9 million is included in Other Current Liabilities and $86 million is included in Deferred Credits and Other on Sempra Energy’s and SDG&E’s Condensed Consolidated Balance Sheets. In the three months ended March 31, 2020, SDG&E recognized negligible accretion of the Wildfire Fund obligation.
CAPITALIZED FINANCING COSTS
Capitalized financing costs include capitalized interest costs and AFUDC related to both debt and equity financing of construction projects. We capitalize interest costs incurred to finance capital projects and interest onat equity method investments that have not commenced planned principal operations.
The table below summarizes capitalized interest and AFUDC.
CAPITALIZED FINANCING COSTS   CAPITALIZED FINANCING COSTS
(Dollars in millions)   (Dollars in millions)
Three months ended March 31,Three months ended March 31,
2019 20182020 2019
Sempra Energy Consolidated$47
 $49
$48
 $47
SDG&E17
 24
27
 17
SoCalGas11
 13
11
 11



VARIABLE INTEREST ENTITIES
We consolidate a VIE if we are the primary beneficiary of the VIE. Our determination of whether we are the primary beneficiary is based on qualitative and quantitative analyses, which assess:
▪the purpose and design of the VIE;
▪the nature of the VIE’s risks and the risks we absorb;
▪the power to direct activities that most significantly impact the economic performance of the VIE; and
▪the obligation to absorb losses or the right to receive benefits that could be significant to the VIE.
We will continue to evaluate our VIEs for any changes that may impact our determination of whether an entity is a VIE and if we are the primary beneficiary.
SDG&E
SDG&E’s power procurement is subject to reliability requirements that may require SDG&E to enter into various PPAs that include variable interests. SDG&E evaluates the respective entities to determine if variable interests exist and, based on the qualitative and quantitative analyses described above, if SDG&E, and thereby Sempra Energy, is the primary beneficiary.
Tolling Agreements
SDG&E has agreements under which it purchases power generated by facilities for which it supplies all of the natural gas to fuel the power plant (i.e., tolling agreements). SDG&E’s obligation to absorb natural gas costs may be a significant variable interest. In addition, SDG&E has the power to direct the dispatch of electricity generated by these facilities. Based on our analysis, the ability to direct the dispatch of electricity may have the most significant impact on the economic performance of the entity owning the generating facility because of the associated exposure to the cost of natural gas, which fuels the plants, and the value of electricity produced. To the extent that SDG&E (1) is obligated to purchase and provide fuel to operate the facility, (2) has the


power to direct the dispatch, and (3) purchases all of the output from the facility for a substantial portion of the facility’s useful life, SDG&E may be the primary beneficiary of the entity owning the generating facility. SDG&E determines if it is the primary beneficiary in these cases based on a qualitative approach in which we consider the operational characteristics of the facility, including its expected power generation output relative to its capacity to generate and the financial structure of the entity, among other factors. If we determine that SDG&E is the primary beneficiary, SDG&E and Sempra Energy consolidate the entity that owns the facility as a VIE.
Otay Mesa VIE
SDG&E has a tolling agreement to purchase power generated at OMEC, a 605-MW generating facility. Under the terms of a related agreement, OMEC LLC can require SDG&E to purchase the power plant (referred to as the put option) on or before October 3, 2019 for $280 million, subject to adjustments, or upon earlier termination of the PPA.
The facility owner, OMEC LLC, is a VIE, which we refer to as Otay Mesa VIE, of which SDG&E is the primary beneficiary. SDG&E has no OMEC LLC voting rights, holds no equity in OMEC LLC and does not operate OMEC. In addition to the risks absorbed under the tolling agreement, SDG&E absorbs separately through the put option a significant portion of the risk that the value of Otay Mesa VIE could decline. Accordingly, SDG&E and Sempra Energy consolidate Otay Mesa VIE. Otay Mesa VIE’s equity of $102 million at March 31, 2019 and $100 million at December 31, 2018 is included on the Condensed Consolidated Balance Sheets in Other Noncontrolling Interests for Sempra Energy and in Noncontrolling Interest for SDG&E.
In October 2018, SDG&E and OMEC LLC signed a resource adequacy capacity agreement for a term that would commence at the expiration of the current tolling agreement in October 2019 and end in August 2024. The capacity agreement was approved by OMEC LLC’s lenders and the CPUC in December 2018 and February 2019, respectively. However, given certain pending requests for rehearing of the CPUC’s decisions related to OMEC, on March 28, 2019, OMEC LLC exercised the put option requiring SDG&E to purchase the power plant by October 3, 2019. The outcome of these rehearing requests could impact the effectiveness of the resource adequacy capacity agreement and whether the OMEC facility is purchased by SDG&E.
OMEC LLC has a loan outstanding of $220 million at March 31, 2019, which we describe in Note 7 of the Notes to Consolidated Financial Statements in the Annual Report. SDG&E is not a party to the loan agreement and does not have any additional implicit or explicit financial responsibility to OMEC LLC, nor is SDG&E required to assume OMEC LLC’s loan under the put option.
The Condensed Consolidated Statements of Operations of Sempra Energy and SDG&E include the following amounts associated with Otay Mesa VIE. The amounts are net of eliminations of transactions between SDG&E and Otay Mesa VIE. The captions in the table below correspond to SDG&E’s Condensed Consolidated Statements of Operations.
AMOUNTS ASSOCIATED WITH OTAY MESA VIE    
(Dollars in millions)    
  Three months ended March 31,
  2019 2018
Operating expenses    
Cost of electric fuel and purchased power $(16) $(16)
Operation and maintenance 4
 4
Depreciation and amortization 7
 8
Total operating expenses (5) (4)
Operating income 5
 4
Interest expense (4) (5)
Income (losses) before income taxes/Net income (loss) 1
 (1)
(Earnings) losses attributable to noncontrolling interest (1) 1
Earnings attributable to common shares $—
 $—


SDG&E has determined that nonone of its contracts other than the one relating to Otay Mesa VIE described above, resulted in SDG&E being the primary beneficiary of a VIE at March 31, 2019.2020. In addition to the tolling agreements, described above, other variable interests involve various elements of fuel and power costs, and other components of cash flows expected to be paid to or received by our counterparties. In most of these cases, the expectation of variability is not substantial, and SDG&E generally does not have the power to direct activities that most significantly impact the economic performance of the other VIEs. In addition, SDG&E is not exposed to losses or gains as a result of these other VIEs, because all such variability would be recovered in rates. If our ongoing evaluation of these VIEs were to conclude that SDG&E becomes the primary beneficiary and consolidation by SDG&E becomes necessary, the effects could be significant to the financial position and liquidity of SDG&E and Sempra Energy. We


provide additional information about PPAs with power plant facilities that are VIEs of which SDG&E is not the primary beneficiary in Note 16 of the Notes to Consolidated Financial Statements in the Annual Report.
We provide additional information regarding Otay Mesa VIE in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
Sempra Texas UtilityUtilities
On March 9, 2018, we completed the acquisition of an indirect, 100-percentOur 100% interest in Oncor Holdings is a VIE that owns an 80.25-percent80.25% interest in Oncor. Sempra Energy is not the primary beneficiary of the VIE because of the structural and operational ring-fencing and governance measures in place that prevent us from having the power to direct the significant activities of Oncor Holdings. As a result, we do not consolidate Oncor Holdings and instead account for our ownership interest as an equity method investment. See Note 6 for additional information about our equity method investment in Oncor Holdings and restrictions on our ability to influence its activities. Our current maximum exposure to loss, which fluctuates over time, from our interest in Oncor Holdings does not exceed the carrying value of our investment, which was $9,748$11,619 million at March 31, 20192020 and $9,652$11,519 million at December 31, 2018. Our maximum exposure will fluctuate over time, including as a result of our commitment to contribute an estimated $1,025 million in capital (excluding Sempra Energy’s share of approximately $40 million for a management agreement termination fee, as well as other customary transaction costs incurred by InfraREIT that would be borne by Oncor as part of the acquisition) to partially fund Oncor’s pending acquisition of InfraREIT, which we discuss in Note 5.2019.
Sempra RenewablesMexico
Sempra Mexico’s businesses also enter into arrangements that could include variable interests. We evaluate these arrangements and applicable entities based on the qualitative and quantitative analyses described above. Certain of Sempra Renewables’ wind and solar power generation projects were held by limited liabilitythese entities are service or project companies whose members were Sempra Renewables andthat are VIEs because the total equity at risk is not sufficient for the entities to finance their activities without additional subordinated financial institutions. We sold the solar entities in December 2018 and the wind entities in April 2019. The financial institutions are noncontrolling tax equity investors to which earnings, tax attributes and cash flows were allocated in accordance with the respective limited liability company agreements. These entities were VIEs and Sempra Energy was the primary beneficiary, generally due to Sempra Energy’s power as the operator of the renewable energy projects to direct the activities that most significantly impacted the economic performance of these VIEs.support. As the primary beneficiary of these tax equity limited liability companies, we consolidatedconsolidate them.
Sempra Energy’s Condensed Consolidated Balance Sheets include equity The assets of $161these VIEs totaled approximately $131 million at March 31, 20192020 and $158$126 million at December 31, 20182019 and consisted primarily of Other Noncontrolling Interests associated withPP&E and other long-term assets. Our maximum exposure to loss is equal to the carrying value of these entities. Sempra Energy’s Condensed Consolidated Statements of Operations include the following amounts associated with the tax equity limited liability companies, net of eliminations of transactions between Sempra Energy and these entities.assets.

AMOUNTS ASSOCIATED WITH TAX EQUITY ARRANGEMENTS  
(Dollars in millions)   
  Three months ended March 31,
  2019 2018
REVENUES   
Energy-related businesses$6
 $17
EXPENSES   
Operation and maintenance(2) (4)
Depreciation and amortization(3) (11)
Income before income taxes1
 2
Income tax benefit (expense)1
 (5)
Net income (loss)2
 (3)
(Earnings) losses attributable to noncontrolling interests(1)
(3) 21
(Losses) earnings attributable to common shares$(1) $18
(1)
Net income or loss attributable to NCI is computed using the HLBV method and is not based on ownership percentages.

We provide additional information regarding the tax equity limited liability companies in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
Sempra LNG
Cameron LNG JV is a VIE principally due to contractual provisions that transfer certain risks to customers. Sempra Energy is not the primary beneficiary of the VIE because we do not have the power to direct the most significant activities of Cameron LNG JV, and therefore we account for our investment in Cameron LNG JV under the equity method. The carrying value of our investment, including amounts recognized in AOCI related to interest-rate cash flow hedges at Cameron LNG JV, was $1,255$1,184 million at


March 31, 20192020 and $1,271$1,256 million at December 31, 2018.2019. Our current maximum exposure to loss, which fluctuates over time, includes the carrying value of our investment and the guarantees that we discuss in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.
Other Variable Interest Entities
Sempra Energy’s other businesses also enter into arrangements that could include variable interests. We evaluate these arrangements and applicable entities based on the qualitative and quantitative analyses described above. Certain of these entities are service or project companies that are VIEs because the total equity at risk is not sufficient for the entities to finance their activities without additional subordinated financial support. As the primary beneficiary of these companies, we consolidate them. The assets of these VIEs totaled approximately $502 million at March 31, 2019 and $286 million at December 31, 2018, and consisted primarily of PP&E and other long-term assets. Sempra Energy’s exposure to loss is equal to the carrying value of these assets. In all other cases, we have determined that these arrangements are not variable interests in a VIE and therefore are not subject to the U.S. GAAP requirements concerning the consolidation or disclosures of VIEs.
PENSION AND OTHER POSTRETIREMENT BENEFITS
Settlement Accounting for Lump Sum Payments
In the three months ended March 31, 2020, Sempra Energy recorded settlement charges of $5 million in net periodic benefit cost for lump sum payments from its nonqualified pension plan that were in excess of the plan’s service cost plus interest cost.
Net Periodic Benefit Cost
The following three tables provide the components of net periodic benefit cost.
NET PERIODIC BENEFIT COST – SEMPRA ENERGY CONSOLIDATED(Dollars in millions)
Pension benefits Other postretirement benefitsPension benefits Other postretirement benefits
Three months ended March 31,Three months ended March 31,
2019 2018 2019 20182020 2019 2020 2019
Service cost$27
 $33
 $4
 $6
$33
 $27
 $5
 $4
Interest cost35
 35
 9
 9
32
 35
 8
 9
Expected return on assets(36) (42) (18) (18)(42) (36) (13) (18)
Amortization of:              
Prior service cost3
 3
 —
 —
Prior service cost (credit)3
 3
 (1) —
Actuarial loss (gain)14
 9
 (2) (1)9
 14
 (3) (2)
Settlement charges—
 14
 —
 —
5
 —
 —
 —
Net periodic benefit cost (credit)43
 52
 (7) (4)40
 43
 (4) (7)
Regulatory adjustment(36) (45) 7
 4
Regulatory adjustments(28) (36) 4
 7
Total expense recognized$7
 $7
 $—
 $—
$12
 $7
 $—
 $—
NET PERIODIC BENEFIT COST – SDG&E(Dollars in millions)
Pension benefits Other postretirement benefitsPension benefits Other postretirement benefits
Three months ended March 31,Three months ended March 31,
2019 2018 2019 20182020 2019 2020 2019
Service cost$8
 $8
 $1
 $1
$8
 $8
 $1
 $1
Interest cost9
 9
 2
 2
7
 9
 2
 2
Expected return on assets(11) (13) (3) (3)(13) (11) (3) (3)
Amortization of:
   
  
   
  
Prior service cost1
 —
 1
 1
1
 1
 —
 1
Actuarial loss (gain)4
 1
 (1) (1)1
 4
 (1) (1)
Settlement charges—
 14
 —
 —
Net periodic benefit cost11
 19
 —
 —
Regulatory adjustment(11) (19) —
 —
Net periodic benefit cost (credit)4
 11
 (1) —
Regulatory adjustments(3) (11) 1
 —
Total expense recognized$—
 $—
 $—
 $—
$1
 $—
 $—
 $—


NET PERIODIC BENEFIT COST – SOCALGAS(Dollars in millions)
Pension benefits Other postretirement benefitsPension benefits Other postretirement benefits
Three months ended March 31,Three months ended March 31,
2019 2018 2019 20182020 2019 2020 2019
Service cost$16
 $22
 $3
 $4
$22
 $16
 $3
 $3
Interest cost23
 23
 7
 7
22
 23
 6
 7
Expected return on assets(24) (26) (14) (14)(27) (24) (10) (14)
Amortization of:    
      
  
Prior service cost (credit)2
 2
 (1) (1)2
 2
 —
 (1)
Actuarial loss (gain)9
 6
 (2) —
6
 9
 (2) (2)
Net periodic benefit cost (credit)26
 27
 (7) (4)25
 26
 (3) (7)
Regulatory adjustment(25) (26) 7
 4
Regulatory adjustments(25) (25) 3
 7
Total expense recognized$1
 $1
 $—
 $—
$—
 $1
 $—
 $—

Benefit Plan Contributions
The following table shows our year-to-date contributions to pension and other postretirement benefit plans and the amounts we expect to contribute in 2019.2020.
BENEFIT PLAN CONTRIBUTIONS(Dollars in millions)
 
Sempra Energy
Consolidated
 SDG&E SoCalGas 
Sempra Energy
Consolidated
 SDG&E SoCalGas
Contributions through March 31, 2019:      
Contributions through March 31, 2020:      
Pension plans $9
 $—
 $1
 $20
 $—
 $1
Other postretirement benefit plans 2
 —
 —
 1
 —
 —
Total expected contributions in 2019:      
Total expected contributions in 2020:      
Pension plans $234
 $40
 $118
 $268
 $53
 $154
Other postretirement benefit plans 9
 —
 1
 7
 —
 1

RABBI TRUST
In support of its Supplemental Executive Retirement, Cash Balance Restoration and Deferred Compensation Plans, Sempra Energy maintains dedicated assets, including a Rabbi Trust and investments in life insurance contracts, which totaled $413 million and $416$488 million at March 31, 20192020 and December 31, 2018,2019, respectively.


EARNINGS PER COMMON SHARE
The following table provides EPS computations for the three months ended March 31, 2019 and 2018. Basic EPS is calculated by dividing earnings attributable to common shares (from both continuing and discontinued operations) by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.
EARNINGS PER COMMON SHARE COMPUTATIONS   
(Dollars in millions, except per share amounts; shares in thousands)   
 Three months ended March 31,
 2019 2018
Numerator for continuing operations:   
Income from continuing operations, net of income tax$560
 $330
(Earnings) losses attributable to noncontrolling interests(32) 24
Mandatory convertible preferred stock dividends(36) (28)
Earnings from continuing operations attributable to common shares$492
 $326
    
Numerator for discontinued operations:   
(Loss) income from discontinued operations, net of income tax$(42) $28
Earnings attributable to noncontrolling interests(9) (7)
(Losses) earnings from discontinued operations attributable to common shares$(51) $21
    
Numerator for earnings:   
Earnings attributable to common shares$441
 $347
    
Denominator:   
Weighted-average common shares outstanding for basic EPS(1)
274,674
 257,932
Dilutive effect of stock options and RSUs(2)
969
 933
Dilutive effect of common shares sold forward1,585
 625
Weighted-average common shares outstanding for diluted EPS277,228
 259,490
    
Basic EPS:   
Earnings from continuing operations attributable to common shares$1.79
 $1.26
(Losses) earnings from discontinued operations attributable to common shares$(0.19) $0.08
Earnings attributable to common shares$1.60
 $1.34
    
Diluted EPS:   
Earnings from continuing operations attributable to common shares$1.78
 $1.25
(Losses) earnings from discontinued operations attributable to common shares$(0.19) $0.08
Earnings attributable to common shares$1.59
 $1.33
EARNINGS (LOSSES) PER COMMON SHARE COMPUTATIONS   
(Dollars in millions, except per share amounts; shares in thousands)   
 Three months ended March 31,
 2020 2019
Numerator for continuing operations:   
Income from continuing operations, net of income tax$867
 $560
Earnings attributable to noncontrolling interests(143) (32)
Mandatory convertible preferred stock dividends(36) (36)
Earnings from continuing operations attributable to common shares for basic EPS688
 492
Add back dividends for dilutive mandatory convertible preferred stock(1)
36
 —
Earnings from continuing operations attributable to common shares for diluted EPS$724
 $492
    
Numerator for discontinued operations:   
Income (loss) from discontinued operations, net of income tax$80
 $(42)
Earnings attributable to noncontrolling interests(8) (9)
Earnings (losses) from discontinued operations attributable to common shares$72
 $(51)
    
Numerator for earnings:   
Earnings attributable to common shares for basic EPS$760
 $441
Add back dividends for dilutive mandatory convertible preferred stock(1)
36
 —
Earnings attributable to common shares for diluted EPS$796
 $441
    
Denominator:   
Weighted-average common shares outstanding for basic EPS(2)
292,790
 274,674
Dilutive effect of stock options and RSUs(3)
1,304
 969
Dilutive effect of common shares sold forward—
 1,585
Dilutive effect of mandatory convertible preferred stock19,831
 —
Weighted-average common shares outstanding for diluted EPS313,925
 277,228
    
Basic EPS:   
Earnings from continuing operations$2.35
 $1.79
Earnings (losses) from discontinued operations$0.25
 $(0.19)
Earnings$2.60
 $1.60
    
Diluted EPS:   
Earnings from continuing operations$2.30
 $1.78
Earnings (losses) from discontinued operations$0.23
 $(0.19)
Earnings$2.53
 $1.59
(1)
In the three months ended March 31, 2020, due to the dilutive effect of mandatory convertible preferred stock, the numerator used to calculate diluted EPS includes an add-back of mandatory convertible preferred stock dividends declared in that quarter.
(2)
Includes 613542 and 628613 average fully vested RSUs held in our Deferred Compensation Plan for the three months ended March 31, 20192020 and 2018,2019, respectively. These fully vested RSUs are included in weighted-average common shares outstanding for basic EPS because there are no conditions under which the corresponding shares will not be issued.
(2)(3) 
Due to market fluctuations of both Sempra Energy common stock and the comparative indices used to determine the vesting percentage of our total shareholder return performance-based RSUs, which we discuss in Note 10 of the Notes to Consolidated Financial Statements in the Annual Report, dilutive RSUs may vary widely from period-to-period.



The potentially dilutive impact from stock options and RSUs is calculated under the treasury stock method. Under this method, proceeds based on the exercise price and unearned compensation are assumed to be used to repurchase shares on the open market at the average market price for the period, reducing the number of potential new shares to be issued and sometimes causing an antidilutive effect. The computation of diluted EPS for the three months ended March 31, 20192020 and 20182019 excludes 316,385254,257 and 80,449316,385 potentially dilutive shares, respectively, because to include them would be antidilutive for the period. However, these shares could potentially dilute basic EPS in the future.
The potentially dilutive impact from the forward sale of our common stock pursuant to the forward sale agreements that we entered into in 2018 and fully settled by the end of 2019 is reflected in our diluted EPS calculation using the treasury stock method. We anticipate there will be a dilutive effect on our EPS when the average market price ofmethod until settlement. After settlement, those shares of ourare included in weighted-average common stock is above the applicable adjusted forward sale price, subject to increase or decrease based on the overnight bank funding rate, less a spread, and subject to decrease by


amounts related to expected dividends on shares of our common stock during the term of the forward sale agreements. Additionally, if we decide to physically settle or net share settle the forward sale agreements, delivery of our shares to the forward purchasers on any such physical settlement or net share settlement of the forward sale agreements would result in dilution to ouroutstanding for basic EPS.
The potentially dilutive impact from mandatory convertible preferred stock that we issued in 2018 is calculated under the if-converted method. The computation of diluted EPS for the three months ended March 31, 20192020 and 20182019 excludes 18,601,0850 and 15,592,57218,601,085 potentially dilutive shares, respectively, because to include them would be antidilutive for the period. However, these shares could potentially dilute basic EPS in the future.
PursuantIn January 2020, pursuant to our Sempra Energy share-based compensation plans, the Compensation Committee of Sempra Energy’s Board of Directors granted 261,075 non-qualified154,860 nonqualified stock options that are exercisablevest over a three-year period, 384,373258,470 performance-based RSUs and 214,502100,972 service-based RSUs in the three months ended March 31, 2019, primarily in January.RSUs.
We discuss share-based compensation plans and related awards and the terms and conditions of Sempra Energy’s equity securities further in NoteNotes 10, 13 and 14 of the Notes to Consolidated Financial Statements in the Annual Report.
COMPREHENSIVE INCOME
The following tables present the changes in AOCI by component and amounts reclassified out of AOCI to net income, excluding amounts attributable to NCI.

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1)
(Dollars in millions)
 
Foreign
currency
translation
adjustments
 
Financial
instruments
 
Pension
and other
postretirement
benefits
 
Total
accumulated other
comprehensive
income (loss)
 Three months ended March 31, 2019 and 2018
Sempra Energy Consolidated(2):
       
Balance as of December 31, 2018$(564) $(82) $(118) $(764)
Cumulative-effect adjustment from change in accounting principle—
 (25) (17) (42)
OCI before reclassifications32
 (45) 1
 (12)
Amounts reclassified from AOCI—
 (1) 2
 1
Net OCI32
 (46) 3
 (11)
Balance as of March 31, 2019$(532) $(153) $(132) $(817)
        
Balance as of December 31, 2017$(420) $(122) $(84) $(626)
Cumulative-effect adjustment from change in accounting principle—
 (3) —
 (3)
OCI before reclassifications24
 66
 —
 90
Amounts reclassified from AOCI—
 (8) 2
 (6)
Net OCI24
 58
 2
 84
Balance as of March 31, 2018$(396) $(67) $(82) $(545)
SDG&E:       
Balance as of December 31, 2018    $(10) $(10)
Cumulative-effect adjustment from change in accounting principle    (2) (2)
Balance as of March 31, 2019    $(12) $(12)
        
Balance as of December 31, 2017 and March 31, 2018    $(8) $(8)
SoCalGas:       
Balance as of December 31, 2018  $(12) $(8) $(20)
Cumulative-effect adjustment from change in accounting principle  (2) (2) (4)
Balance as of March 31, 2019  $(14) $(10) $(24)
        
Balance as of December 31, 2017 and March 31, 2018  $(13) $(8) $(21)

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1)
(Dollars in millions)
 
Foreign
currency
translation
adjustments
 
Financial
instruments
 
Pension
and other
postretirement
benefits
 
Total
accumulated other
comprehensive
income (loss)
 Three months ended March 31, 2020 and 2019
Sempra Energy Consolidated(2):
       
Balance as of December 31, 2019$(607) $(215) $(117) $(939)
OCI before reclassifications(138) (154) 16
 (276)
Amounts reclassified from AOCI—
 19
 6
 25
Net OCI(138) (135) 22
 (251)
Balance as of March 31, 2020$(745) $(350) $(95) $(1,190)
        
Balance as of December 31, 2018$(564) $(82) $(118) $(764)
Cumulative-effect adjustment from change in accounting principle—
 (25) (17) (42)
OCI before reclassifications32
 (45) 1
 (12)
Amounts reclassified from AOCI—
 (1) 2
 1
Net OCI32
 (46) 3
 (11)
Balance as of March 31, 2019$(532) $(153) $(132) $(817)
SDG&E:       
Balance as of December 31, 2019 and March 31, 2020    $(16) $(16)
        
Balance as of December 31, 2018    $(10) $(10)
Cumulative-effect adjustment from change in accounting principle    (2) (2)
Balance as of March 31, 2019    $(12) $(12)
SoCalGas:       
Balance as of December 31, 2019 and March 31, 2020  $(13) $(10) $(23)
        
Balance as of December 31, 2018  $(12) $(8) $(20)
Cumulative-effect adjustment from change in accounting principle  (2) (2) (4)
Balance as of March 31, 2019  $(14) $(10) $(24)

(1) 
All amounts are net of income tax, if subject to tax, and exclude NCI.
(2) 
Includes discontinued operations.




RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)(Dollars in millions)
Details about accumulated other
comprehensive income (loss) components		Amounts reclassified
from accumulated other
comprehensive income (loss)		 Affected line item on Condensed
Consolidated Statements of Operations		Amounts reclassified
from accumulated other
comprehensive income (loss)		 Affected line item on Condensed
Consolidated Statements of Operations
Three months ended March 31, Three months ended March 31, 
2019 2018 2020 2019 
Sempra Energy Consolidated:        
Financial instruments:        
Interest rate and foreign exchange instruments(1)
$1
 $(2) Interest Expense$2
 $1
 Interest Expense
(3) (18) Other Income, Net41
 (3) Other (Expense) Income, Net
Interest rate and foreign exchange instruments1
 4
 Equity Earnings (Losses)—
 1
 Equity Earnings
Foreign exchange instruments1
 —
 Revenues: Energy-Related Businesses(2) 1
 Revenues: Energy-Related Businesses
(2) —
 Other (Expense) Income, Net
Total before income tax—
 (16) 39
 —
 
—
 3
 Income Tax Expense(12) —
 Income Tax Benefit (Expense)
Net of income tax—
 (13) 27
 —
 
(1) 5
 (Earnings) Losses Attributable to Noncontrolling Interests(8) (1) Earnings Attributable to Noncontrolling Interests
$(1) $(8) $19
 $(1) 
Pension and other postretirement benefits:    
Amortization of actuarial loss(2)
$2
 $3
 Other Income, Net
Amortization of prior service cost(2)
1
 —
 Other Income, Net
Pension and other postretirement benefits(2):
    
Amortization of actuarial loss$2
 $2
 Other (Expense) Income, Net
Amortization of prior service cost1
 1
 Other (Expense) Income, Net
Settlement charges5
 —
 Other (Expense) Income, Net
Total before income tax3
 3
 8
 3
 
(1) (1) Income Tax Expense(2) (1) Income Tax Benefit (Expense)
Net of income tax$2
 $2
 $6
 $2
 
        
Total reclassifications for the period, net of tax$1
 $(6) $25
 $1
 
SDG&E:        
Financial instruments:        
Interest rate instruments(1)
$1
 $3
 Interest Expense$—
 $1
 Interest Expense
(1) (3) (Earnings) Losses Attributable to Noncontrolling Interest—
 (1) Earnings Attributable to Noncontrolling Interest
Total reclassifications for the period, net of tax$—
 $—
 $—
 $—
 

(1) 
Amounts in 2019 include Otay Mesa VIE. All of SDG&E’s interest rate derivative activity relates to Otay Mesa VIE.
(2) 
Amounts are included in the computation of net periodic benefit cost (see “Pension and Other Postretirement Benefits” above).

For the three months ended March 31, 20192020 and 2018,2019, reclassifications out of AOCI to net income were negligible for SoCalGas.

SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS
Ownership interests that are held by owners other than Sempra Energy Mandatory Convertible Preferred Stock Offerings
In January 2018, we issued 17,250,000 shares of our series A preferred stock in a registered public offering resulting in net proceeds of approximately $1.69 billion. In July 2018, we issued 5,750,000 shares of our series B preferred stock in a registered public offering resulting in net proceeds of approximately $565 million. Each share of series A preferred stock and series B preferred stock has a liquidation value of $100.00. We discuss the preferred stock offerings in Note 13 of the Notes to Consolidated Financial Statements in the Annual Report.
Sempra Energy Common Stock Offerings
In January 2018, we completed the offering of 26,869,158 shares of our common stock, no par value, in a registered public offering at $107.00 per share (approximately $105.07 per share after deducting underwriting discounts), pursuant to forward sale agreements. We received net proceeds totaling approximately $1.27 billion from the sale of shares in the January 2018 offering (including $367 million to cover overallotments) and from the settlement of forward sales in the first quarter of 2018 under the forward sale agreements. We received net proceeds of approximately $800 million from the settlement of forward sales in the second quarter of 2018 under the forward sale agreements. In July 2018, we completed the offering of 11,212,500 shares of our


common stock, no par value, in a registered public offering at $113.75 per share (approximately $111.87 per share after deducting underwriting discounts), pursuant to forward sale agreements. We received net proceeds of approximately $164 million from the sale of shares in the July 2018 offering to cover overallotments. We discuss the common stock offerings in Note 14 of the Notes to Consolidated Financial Statements in the Annual Report.
As of May 7, 2019, a total of 16,906,185 shares of Sempra Energy common stock remain subject to future settlement under these forward sale agreements, which may be settled on onesubsidiaries or more dates specifiedentities consolidated by us occurring no later than December 15, 2019, which is the final settlement date under the agreements. Although we expect to settle the forward sale agreements entirely by the physical delivery of shares of our common stock in exchangeare accounted for cash proceeds, we may, subject to certain conditions, elect cash settlement or net share settlement for all or a portion of our obligations under the forward sale agreements. The forward sale agreements are also subject to acceleration by the forward purchasers upon the occurrence of certain events.and reported as NCI.
SoCalGas Preferred Stock
The preferred stock at SoCalGas is presented at Sempra Energy as a noncontrolling interest. Sempra Energy records charges against income related to NCI for preferred stock dividends declared by SoCalGas. We provide additional information regarding preferred stock in Note 13 of the Notes to Consolidated Financial Statements in the Annual Report.


Other Noncontrolling Interests
Ownership interests that are held by owners other than Sempra Energy and SDG&E in subsidiaries or entities consolidated by them are accounted for and reported as NCI.
Sempra Mexico
In the first quarter of 2020, IEnova purchased additional shares in ICM Ventures Holdings B.V. for $9 million, increasing its ownership from 53.7% to 82.5%. ICM Ventures Holdings B.V. owns certain permits and land where IEnova is building terminals for the receipt, storage and delivery of liquid fuels.
In the first quarter of 2019, IEnova repurchased 1,600,000 shares of its outstanding common stock held by NCI for approximately $6 million, resulting in an increase in Sempra Energy’s ownership interest in IEnova from 66.5 percent at December 31, 201866.5% to 66.6 percent at March 31, 2019.
Sempra Renewables
As we discuss in Note 5, in April 2019, Sempra Renewables sold its remaining wind assets and investments, which included its wind tax equity arrangements. The remaining ownership interest in PXiSE Energy Solutions, LLC was subsumed into Parent and other.66.6%.
Sempra LNG
On March 30, 2020, Sempra LNG purchased for $7 million the 24.6% minority interest in Liberty Gas Storage LLC, which owns 100% of LA Storage, LLC, increasing Sempra LNG’s ownership in Liberty Gas Storage LLC to 100%. Prior to the purchase, the minority partner converted $22 million in notes payable due from Sempra LNG to equity. As a result of the purchase, we recorded an increase in Sempra Energy’s shareholders’ equity of $2 million for the difference between the carrying value and fair value related to the change in ownership.
In February 7, 2019, Sempra LNG purchased for $20 million the 9.1-percent9.1% minority interest in Bay Gas immediately prior to the sale of 100 percent100% of Bay Gas, which we discussGas.
Sempra LNG and IEnova are jointly developing a proposed natural gas liquefaction project at the site of IEnova’s existing ECA LNG Regasification terminal. Sempra LNG consolidates the ECA LNG JV proposed liquefaction project. Thus, Sempra Energy’s NCI in Note 5.


IEnova’s 50% interest in the proposed project is reported at Sempra LNG.
The following table provides information onabout noncontrolling ownership interests held by others (not including preferred shareholders) recorded in Other Noncontrolling Interests in Total Equity on Sempra Energy’s Condensed Consolidated Balance Sheets.
OTHER NONCONTROLLING INTERESTS
(Dollars in millions)(Dollars in millions)  (Dollars in millions)  
Percent ownership held by noncontrolling interests 
 Equity (deficit) held by
noncontrolling interests
Percent ownership held by noncontrolling interests 
 Equity (deficit) held by
noncontrolling interests
March 31,
2019		 December 31,
2018		 March 31,
2019		 December 31,
2018		March 31,
2020		 December 31,
2019		 March 31,
2020		 December 31,
2019
SDG&E:       
Otay Mesa VIE100%100%$102
 $100
Sempra Mexico:              
IEnova33.4 33.5 1,611
 1,592
33.4%33.4%$1,726
 $1,608
IEnova subsidiaries(1)
10.0 – 47.6 10.0 – 49.0 13
 13
10.0 – 17.5 10.0 – 46.3 6
 15
Sempra Renewables:    
Tax equity arrangements – wind(2)
NA  NA 161
 158
Sempra LNG:    
Liberty Gas Storage LLC— 24.6 —
 (13)
ECA LNG JV16.7 16.7 14
 12
Parent and other:    
PXiSE Energy Solutions, LLC11.1 11.1 —
 1
20.0 20.0 1
 1
Sempra LNG:    
Bay Gas— 9.1 —
 18
Liberty Gas Storage, LLC24.6 24.6 (12) (12)
Discontinued Operations:              
Chilquinta Energía subsidiaries(1)
19.7 – 43.4 19.7 – 43.4 24
 23
19.7 – 43.4 19.7 – 43.4 21
 23
Luz del Sur16.4 16.4 201
 193
16.4 16.4 205
 205
Tecsur9.8 9.8 4
 4
9.8 9.8 5
 5
Total Sempra Energy    $2,104
 $2,090
    $1,978
 $1,856
(1) 
IEnova and Chilquinta Energía have subsidiaries with NCI held by others. Percentage range reflects the highest and lowest ownership percentages among these subsidiaries.
(2)
Net income or loss attributable to NCI is computed using the HLBV method and is not based on ownership percentages.



TRANSACTIONS WITH AFFILIATES
We summarize amounts due from and to unconsolidated affiliates at Sempra Energy Consolidated, SDG&E and SoCalGas in the following table.
AMOUNTS DUE FROM (TO) UNCONSOLIDATED AFFILIATES(Dollars in millions)
March 31,
2019		 December 31,
2018		March 31,
2020		 December 31,
2019
Sempra Energy Consolidated:      
Total due from various unconsolidated affiliates – current$50
 $37
Total due from various unconsolidated affiliates – current, net of negligible allowance for credit losses at March 31, 2020(1)(2)
$64
 $32
      
Sempra Mexico(1):
   
IMG – Note due March 15, 2022(2)
$668
 $641
Energía Sierra Juárez – Note(3)
—
 3
Sempra Texas Utilities – TTHC, net of allowance for credit losses of $1 at March 31, 2020(2)(3)
$6
 $—
Sempra Mexico – IMG JV – Note due March 15, 2022, net of allowance for credit losses of $6 at March 31, 2020(2)(4)
586
 742
Total due from unconsolidated affiliates – noncurrent$668
 $644
$592
 $742
      
Total due to various unconsolidated affiliates – current$(10) $(10)$(8) $(5)
      
Sempra Mexico(1):
   
Total due to unconsolidated affiliates – noncurrent – TAG – Note due December 20, 2021(4)
$(38) $(37)
Sempra Mexico(2):
   
TAG Pipelines Norte, S. de. R.L. de C.V.:   
Note due December 20, 2021(5)
$(40) $(39)
5.5% Note due January 9, 2024(6)
(65) —
TAG JV – 5.74% Note due December 17, 2029(6)
(158) (156)
Total due to unconsolidated affiliates – noncurrent$(263) $(195)
SDG&E:      
Sempra Energy$(37) $(43)$(45) $(37)
SoCalGas(14) (6)(6) (10)
Various affiliates(12) (12)(8) (6)
Total due to unconsolidated affiliates – current$(63) $(61)$(59) $(53)
      
Income taxes due (to) from Sempra Energy(5)
$(29) $5
Income taxes due from Sempra Energy(7)
$64
 $130
SoCalGas:      
SDG&E$14
 $6
$6
 $10
Various affiliates1
 1
1
 1
Total due from unconsolidated affiliates – current$15
 $7
$7
 $11
      
Sempra Energy$(39) $(34)$(49) $(45)
Various affiliates(3) —
—
 (2)
Total due to unconsolidated affiliates – current$(42) $(34)$(49) $(47)
      
Income taxes due to Sempra Energy(5)
$(88) $(4)
Income taxes due from Sempra Energy(7)
$104
 $152
(1)
Amount at March 31, 2020 includes $23 million of outstanding principal and a negligible amount of accrued interest receivable from a U.S. dollar-denominated loan from IEnova to ESJ at a variable interest rate based on 1-month LIBOR plus 196 bps (3.54% at March 31, 2020) with a maturity date of June 30, 2020. Pursuant to the agreement, if ESJ is unable to meet certain conditions for an expansion project by May 13, 2020, IEnova and ESJ have the option to convert the loan to a 10-year note.
(2) 
Amounts include principal balances plus accumulated interest outstanding.
(2)(3)
U.S. dollar-denominated loans at fixed interest rates of 6.25% and 6.45% with maturity dates of November 5, 2028 and November 5, 2030, respectively.
(4) 
Mexican peso-denominated revolving line of credit for up to 14.2 billion Mexican pesos or approximately $729$604 million U.S. dollar-equivalent, at a variable interest rate based on the 91-day Interbank Equilibrium Interest Rate plus 220 bps (10.69 percent(8.79% at March 31, 2019)2020), to finance construction of the natural gas marine pipeline. At March 31, 2020, $2 million of accrued interest receivable is included in Due From Unconsolidated Affiliates – Current.
(3)(5) 
U.S. dollar-denominated loan at a variable interest rate based on the 30-day6-month LIBOR plus 637.5290 bps (8.89 percent(4.08% at DecemberMarch 31, 2018)2020).
(4)(6) 
U.S. dollar-denominated loan at a variablefixed interest rate based on the 6-month LIBOR plus 290 bps (5.54 percent at March 31, 2019).rate.
(5)(7) 
SDG&E and SoCalGas are included in the consolidated income tax return of Sempra Energy and are allocatedtheir respective income tax expense from Sempra Energy inis computed as an amount equal to that which would result from each company having always filed a separate return.



The following table summarizes revenues and cost of sales from unconsolidated affiliates.
REVENUES AND COST OF SALES FROM UNCONSOLIDATED AFFILIATESREVENUES AND COST OF SALES FROM UNCONSOLIDATED AFFILIATES   
(Dollars in millions)(Dollars in millions)   
Three months ended March 31,Three months ended March 31,
2019 20182020 2019
Revenues:      
Sempra Energy Consolidated$14
 $16
$12
 $14
SDG&E1
 2
1
 1
SoCalGas17
 17
18
 17
Cost of Sales:      
Sempra Energy Consolidated$14
 $12
$11
 $14
SDG&E20
 19
17
 20
SoCalGas4
 —
—
 4



Guarantees
Sempra Energy has provided guarantees to certain of its JVs, including guarantees related to the financing of the Cameron LNG JV project, as we discuss in Note 6 below and in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.
OTHER (EXPENSE) INCOME, NET
Other (Expense) Income, Net on the Condensed Consolidated Statements of Operations consistedconsists of the following:
OTHER INCOME, NET  
OTHER (EXPENSE) INCOME, NET   
(Dollars in millions)(Dollars in millions)     
Three months ended March 31,Three months ended March 31,
2019 20182020 2019
Sempra Energy Consolidated:      
Allowance for equity funds used during construction$21
 $27
$31
 $21
Investment gains (losses)(1)
26
 (1)
Gains on interest rate and foreign exchange instruments, net13
 62
Foreign currency transaction gains, net(2)
7
 30
Investment (losses) gains(1)
(37) 26
(Losses) gains on interest rate and foreign exchange instruments, net(153) 13
Foreign currency transaction (losses) gains, net(2)
(123) 7
Non-service component of net periodic benefit credit24
 32
26
 24
Penalties related to billing practices OII(8) —
—
 (8)
Interest on regulatory balancing accounts, net(1) —
2
 (1)
Sundry, net—
 2
Total$82
 $152
$(254) $82
SDG&E:      
Allowance for equity funds used during construction$12
 $18
$21
 $12
Non-service component of net periodic benefit credit9
 9
8
 9
Interest on regulatory balancing accounts, net2
 —
Sundry, net1
 1
—
 1
Total$22
 $28
$31
 $22
SoCalGas:      
Allowance for equity funds used during construction$8
 $9
$8
 $8
Non-service component of net periodic benefit credit18
 25
25
 18
Penalties related to billing practices OII(8) —
—
 (8)
Interest on regulatory balancing accounts, net(1) —
—
 (1)
Sundry, net(1) (1)(3) (1)
Total$16
 $33
$30
 $16
(1) 
Represents investment (losses) gains (losses) on dedicated assets in support of our executive retirement and deferred compensation plans. These amounts are partially offset by corresponding changes in compensation expense related to the plans, recorded in O&M on the Condensed Consolidated Statements of Operations.
(2) 
Includes losses of $149 million and gains of $10 million and $39 million in the three months ended March 31, 20192020 and 2018,2019, respectively, from translation to U.S. dollars of a Mexican peso-denominated loan to the IMG JV, which are offset by corresponding amounts included in Equity Earnings (Losses) on the Condensed Consolidated Statements of Operations.



INCOME TAXES
We provide our calculations of ETRs in the following table.
INCOME TAX EXPENSE AND EFFECTIVE INCOME TAX RATES
INCOME TAX (BENEFIT) EXPENSE AND EFFECTIVE INCOME TAX RATESINCOME TAX (BENEFIT) EXPENSE AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
Three months ended March 31,Three months ended March 31,
2019 20182020 2019
Sempra Energy Consolidated:      
Income tax expense from continuing operations$42
 $242
Income tax (benefit) expense from continuing operations$(207) $42
      
Income from continuing operations before income taxes   
and equity earnings (losses) of unconsolidated entities$501
 $593
Equity earnings, before income tax(1)
5
 5
Income from continuing operations before income taxes and equity earnings$397
 $501
Equity (losses) earnings, before income tax(1)
(43) 5
Pretax income$506
 $598
$354
 $506
      
Effective income tax rate8% 40%(58)% 8%
SDG&E:      
Income tax expense$5
 $56
$58
 $5
Income before income taxes$182
 $225
$320
 $182
Effective income tax rate3% 25%18 % 3%
SoCalGas:      
Income tax expense$19
 $59
$52
 $19
Income before income taxes$283
 $284
$355
 $283
Effective income tax rate7% 21%15 % 7%

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

Sempra Energy, SDG&E and SoCalGas record income taxes for interim periods utilizing a forecasted ETR anticipated for the full year. Unusual and infrequent items and items that cannot be reliably estimated are recorded in the interim period in which they occur, which can result in variability in the ETR.
For SDG&E and SoCalGas, the CPUC requires flow-through rate-making treatment for the current income tax benefit or expense arising from certain property-related and other temporary differences between the treatment for financial reporting and income tax, which will reverse over time. Under the regulatory accounting treatment required for these flow-through temporary differences, deferred income tax assets and liabilities are not recorded to deferred income tax expense, but rather to a regulatory asset or liability, which impacts the ETR. As a result, changes in the relative size of these items compared to pretax income, from period to period, can cause variations in the ETR. The following items are subject to flow-through treatment:
▪repairs expenditures related to a certain portion of utility plant fixed assets;assets
▪the equity portion of AFUDC, which is non-taxable;non-taxable
▪a portion of the cost of removal of utility plant assets;assets
▪utility self-developed software expenditures;expenditures
▪depreciation on a certain portion of utility plant assets; andassets
▪state income taxes.taxes
The AFUDC related to equity recorded for regulated construction projects at Sempra Mexico has similar flow-through treatment.
We record income tax (expense) benefit from the transactional effects of foreign currency and inflation. Such effects are partially mitigated by net gains (losses) from foreign currency derivatives that are hedging Sempra Mexico parent’s exposure to movements in the Mexico peso from its controlling interest in IEnova.
In the three months ended March 31, 2019, SDG&E and SoCalGas recorded income tax benefits of $31 million and $35 million, respectively, from the release of a regulatory liability established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed be allocated to shareholders in a January 2019 decision.


Discontinued Operations
OnIn January 25, 2019, our board of directors approved a plan to sell our South American businesses, as we discuss in Note 5. Prior to this decision, our repatriation estimate excluded post-2017 earnings and other basis differences related to our South American


businesses. Because of our decision to sell our South American businesses, we no longer assert indefinite reinvestment of these basis differences and havedifferences. Accordingly, we recorded the following income tax impacts from changes in outside basis differences in our discontinued operations in the three months ended March 31, 2019:South America:
▪$103 million income tax expense in 2019 related to outside basis differences existing as of the January 25, 2019 approval of our plan to sell our South American businesses; and
▪$137 million income tax benefit in 2020 compared to $13 million income tax expense in 2019 related to the increasechanges in outside basis differences from 2019 earnings and foreign currency effects since January 25, 2019.
WeAs of March 31, 2020, we have not changed our indefinite reinvestment assertion or repatriation plan for our continuing international operations.plan.
     
NOTE 2. NEW ACCOUNTING STANDARDS
We describe below recent accounting pronouncements that have had or may have a significant effect on our financial condition, results of operations, cash flows or disclosures.
ASU 2016-02, “Leases,” ASU 2018-01, “Land Easement Practical Expedient for Transition to Topic 842,” ASU 2018-10, “Codification Improvements to Topic 842, Leases,” ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” ASU 2018-20, “Narrow-Scope Improvements for Lessors” and ASU 2019-01, “Leases (Topic 842): Codification Improvements” (collectively referred to as the “lease standard”): In 2016, the FASB began issuing the first in a series of ASUs intended to increase transparency and comparability among organizations with leasing activities. The most significant provision of the lease standard is the requirement that lessees recognize operating lease ROU assets and lease liabilities on the balance sheet.
We adopted the lease standard on January 1, 2019, using the optional transition method to apply the new guidance prospectively as of January 1, 2019, rather than as of the earliest period presented. We elected the package of practical expedients that permits us to not reassess (a) whether a contract is or contains a lease, (b) lease classification or (c) determination of initial direct costs, which allows us to carry forward accounting conclusions under previous U.S. GAAP on contracts that commenced prior to adoption of the lease standard. We also elected the land easement practical expedient, which allows us to continue to account for pre-existing land easements under our accounting policy that existed before adoption of the lease standard. We did not elect the practical expedient to use hindsight in making judgments when determining the lease term.
The adoption of the lease standard did not change our previously reported financial statements. However, in accordance with the lease standard, on a prospective basis, a significant portion of finance lease costs for PPAs that have historically been presented in Cost of Electric Fuel and Purchased Power are now presented in Depreciation and Amortization Expense and Interest Expense on Sempra Energy’s and SDG&E’s statements of operations. Additionally, the adoption of the lease standard had a material impact on our balance sheets at January 1, 2019 due to the initial recognition of ROU assets and lease liabilities for operating leases. Our finance leases were already included on our balance sheets prior to adoption of the lease standard, consistent with previous U.S. GAAP for capital leases.
The following table shows the initial (decreases) increases on our balance sheets at January 1, 2019 from adoption of the lease standard.
IMPACT FROM ADOPTION OF THE LEASE STANDARD
(Dollars in millions)
 Sempra Energy Consolidated SDG&E SoCalGas
Assets held for sale$13
 $—
 $—
Sundry(71) —
 —
Property, plant and equipment, net(147) —
 —
Right-of-use assets – operating leases603
 130
 116
Deferred income tax assets(3) —
 —
Other current liabilities80
 20
 23
Long-term debt(138) —
 —
Deferred credits and other436
 110
 93
Retained earnings17
 —
 —




As a result of the adoption of the lease standard, we derecognized our corporate headquarters building lease in accordance with the transition provisions for build-to-suit arrangements. On a prospective basis, we will account for the corporate headquarters building lease as an operating lease. The initial impact is included in the above table.
We include additional disclosures about our leases in Note 11.
ASU 2016-13, “Measurement of Credit Losses on Financial Instruments”: ASU 2016-13, as amended by subsequently issued ASUs, changes how entities will measure credit losses for most financial assets and certain other instruments. The standard introduces an “expected credit loss” impairment model that requires immediate recognition of estimated credit losses expected to occur over the remaining life of most financial assets measured at amortized cost, including trade and other receivables, loan receivables and commitments and financial guarantees. ASU 2016-13 also requires use of an allowance to record estimated credit losses on available-for-sale debt securities and expands disclosure requirements regarding an entity’s assumptions, models and methods for estimating the credit losses.
For public entities, ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods therein, with early adoption permitted for fiscal years beginning after December 15, 2018. The amendments are to be applied We adopted the standard on January 1, 2020 using a modified retrospective approach through a cumulative-effect adjustment to retained earningsearnings. The adoption primarily impacted the expected credit losses associated with accounts receivable balances, amounts due from unconsolidated affiliates and off-balance sheet financial guarantees. There was an insignificant impact to SDG&E’s or SoCalGas’ balance sheets from adoption. The following table shows the initial (decreases) increases on Sempra Energy’s balance sheet at the beginning of the first reporting period in the year of adoption. We are currently evaluating the impact of the standard on our ongoing financial reporting and plan to adopt the standard on January 1, 2020.2020 from adoption of ASU 2016-13.
IMPACT FROM ADOPTION OF ASU 2016-13
(Dollars in millions)
 Sempra Energy Consolidated
Accounts receivable – trade, net$(1)
Due from unconsolidated affiliates – noncurrent(6)
Deferred income tax assets4
Other current liabilities4
Deferred credits and other2
Retained earnings(7)
Other noncontrolling interests(2)


ASU 2017-04, “Simplifying the Test for Goodwill Impairment”: ASU 2017-04 removes the second step of the goodwill impairment test, which requires a hypothetical purchase price allocation. An entity will be required to apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill. For public entities,We adopted ASU 2017-04 is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted. The amendments are to be appliedon January 1, 2020 and will apply the standard on a prospective basis. We planbasis to adopt the standard on January 1, 2020.our goodwill impairment tests.
ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”2019-12, “Simplifying the Accounting for Income Taxes”: ASU 2018-02 contains amendments that allow a reclassification from AOCI2019-12 simplifies certain areas of accounting for income taxes. In addition to retained earnings for stranded tax effects resulting from the TCJA. Under ASU 2018-02, an entity is required to provide certain disclosures regarding stranded tax effects, including its accounting policy related to releasing the income tax effects from AOCI. The amendments inother changes, this update can be applied either as of the beginning of the period of adoption or retrospectively as of the date of enactment of the TCJA and to each period in which the effect of the TCJA is recognized. We adopted ASU 2018-02 on January 1, 2019 and reclassified the income tax effects of the TCJA from AOCI to retained earnings.
The impact from adoption of ASU 2018-02 on January 1, 2019 wasstandard amends ASC 740, “Income Taxes,” as follows:
▪Sempra Energy: increase of $40 millionremoves the exception to beginning Retained Earnings, $2 million to noncurrent Regulatory Liabilitiesthe incremental approach for intraperiod tax allocation when there is a loss from continuing operations and $42 million to Accumulated Other Comprehensive Loss;income or a gain from other items, including discontinued operations or other comprehensive income;
▪SDG&E: increasesimplifies the recognition of $2 milliondeferred taxes related to beginning Retained Earningsbasis differences as a result of ownership changes in investments;


▪specifies an entity is not required to allocate the consolidated amount of current and Accumulated Other Comprehensive Loss;deferred tax expense to a legal entity that is not subject to tax in its separate financial statements; and
▪SoCalGas: increaserequires an entity to reflect the effect of $2 million to beginning Retained Earnings, $2 million to noncurrent Regulatory Liabilities and $4 million to Accumulated Other Comprehensive Loss.an enacted change in tax laws or rates in the annual ETR computation in the interim period that includes the enactment date.
For public entities, ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods therein, with early adoption permitted. The transition method related to the amendments made by ASU 2019-12 varies based on the nature of the change. We will adopt the standard on January 1, 2021 and do not expect it will have a material impact on our financial statements.
ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting”: ASU 2020-04 provides optional expedients and exceptions for applying U.S. GAAP to contract modifications that replace LIBOR or another reference rate affected by reference rate reform and to hedging relationships that reference LIBOR or another reference rate that is affected or expected to be affected by reference rate reform. ASU 2020-04 is effective March 12, 2020 and can be applied through December 31, 2022, with certain exceptions for hedging relationships that continue to exist after this date, and may be applied from January 1, 2020. For contract modifications, the standard allows entities to account for modifications as an event that does not require reassessment or remeasurement (i.e., as a continuation of the existing contract). The standard also allows entities to amend their formal designation and documentation of hedging relationships affected or expected to be affected by reference rate reform, without having to de-designate the hedging relationship. Entities may elect the optional expedients and exceptions on an individual hedging relationship basis and independently from one another. We elected the optional expedients for contract modifications and the hedging expedient to disregard the potential discontinuation of a reference rate when assessing whether a hedged forecasted interest payment is probable. We are applying these expedients prospectively from January 1, 2020. We are still evaluating the remaining optional expedients and exceptions for hedging relationships.
     
NOTE 3. REVENUES
We discuss revenue recognition for revenues from contracts with customers and from sources other than contracts with customers in Note 3 of the Notes to Consolidated Financial Statements in the Annual Report.
In connection with the COVID-19 pandemic, the California Utilities and the CPUC have implemented certain measures to assist customers, including suspending service disconnections due to nonpayment, waiving late payment fees for business customers, and offering flexible payment plans for customers experiencing difficulty paying their electric or gas bills. Additional measures could be mandated or voluntarily implemented in the future. Under the regulatory compact applicable to the California Utilities, including decoupling of rates, recovery of uncollectible expenses, and other recovery mechanisms potentially available (including the CPPMA, which we discuss in Note 4), the California Utilities have continued to recognize revenues under ASC 606, “Revenue from Contracts with Customers,” in the three months ended March 31, 2020.
The following table disaggregates our revenues from contracts with customers by major service line and market and provides a reconciliation to total revenues by segment. The majority of our revenue is recognized over time.


DISAGGREGATED REVENUES(Dollars in millions)
Three months ended March 31, 2019SDG&E SoCalGas Sempra Mexico Sempra Renewables Sempra LNG Consolidating adjustments and Parent and other Sempra Energy Consolidated
SDG&E SoCalGas Sempra Mexico Sempra Renewables Sempra LNG Consolidating adjustments Sempra Energy ConsolidatedThree months ended March 31, 2020
By major service line:                          
Utilities$1,236
 $1,528
 $27
 $—
 $—
 $(18) $2,773
$1,259
 $1,544
 $20
 $—
 $—
 $(19) $2,804
Midstream—
 —
 171
 —
 67
 (59) 179
Renewables—
 —
 20
 4
 —
 —
 24
Other—
 —
 66
 —
 1
 —
 67
Energy-related businesses—
 —
 198
 —
 12
 (7) 203
Revenues from contracts with customers$1,236
 $1,528
 $284
 $4
 $68
 $(77) $3,043
$1,259
 $1,544
 $218
 $—
 $12
 $(26) $3,007
                          
By market:                          
Gas$254
 $1,544
 $147
 $—
 $11
 $(23) $1,933
Electric$997
 $—
 $86
 $4
 $1
 $(1) $1,087
1,005
 —
 71
 —
 1
 (3) 1,074
Gas239
 1,528
 198
 —
 67
 (76) 1,956
Revenues from contracts with customers$1,236
 $1,528
 $284
 $4
 $68
 $(77) $3,043
$1,259
 $1,544
 $218
 $—
 $12
 $(26) $3,007
                          
Revenues from contracts with customers$1,236
 $1,528
 $284
 $4
 $68
 $(77) $3,043
$1,259
 $1,544
 $218
 $—
 $12
 $(26) $3,007
Utilities regulatory revenues(91) (167) —
 —
 —
 —
 (258)10
 (149) —
 —
 —
 —
 (139)
Other revenues—
 —
 99
 3
 73
 (62) 113
—
 —
 91
 —
 111
 (41) 161
Total revenues$1,145
 $1,361
 $383
 $7
 $141
 $(139) $2,898
$1,269
 $1,395
 $309
 $—
 $123
 $(67) $3,029
Three months ended March 31, 2018             
Three months ended March 31, 2019
By major service line:                          
Utilities$1,131
 $1,081
 $28
 $—
 $—
 $(19) $2,221
$1,236
 $1,528
 $27
 $—
 $—
 $(18) $2,773
Midstream—
 —
 143
 —
 54
 (21) 176
Renewables—
 —
 22
 11
 1
 (1) 33
Other—
 —
 41
 —
 2
 (2) 41
Energy-related businesses—
 —
 257
 4
 68
 (59) 270
Revenues from contracts with customers$1,131
 $1,081
 $234
 $11
 $57
 $(43) $2,471
$1,236
 $1,528
 $284
 $4
 $68
 $(77) $3,043
                          
By market:                          
Gas$239
 $1,528
 $198
 $—
 $67
 $(76) $1,956
Electric$963
 $—
 $62
 $11
 $2
 $(4) $1,034
997
 —
 86
 4
 1
 (1) 1,087
Gas168
 1,081
 172
 —
 55
 (39) 1,437
Revenues from contracts with customers$1,131
 $1,081
 $234
 $11
 $57
 $(43) $2,471
$1,236
 $1,528
 $284
 $4
 $68
 $(77) $3,043
                          
Revenues from contracts with customers$1,131
 $1,081
 $234
 $11
 $57
 $(43) $2,471
$1,236
 $1,528
 $284
 $4
 $68
 $(77) $3,043
Utilities regulatory revenues(76) 45
 —
 —
 —
 —
 (31)(91) (167) —
 —
 —
 —
 (258)
Other revenues—
 —
 74
 14
 47
 (39) 96
—
 —
 99
 3
 73
 (62) 113
Total revenues$1,055
 $1,126
 $308
 $25
 $104
 $(82) $2,536
$1,145
 $1,361
 $383
 $7
 $141
 $(139) $2,898

Remaining Performance Obligations
For contracts greater than one year, at March 31, 2019,2020, we expect to recognize revenue related to the fixed fee component of the consideration as shown below. SoCalGas did not have any such remaining performance obligations at March 31, 2019.2020.
REMAINING PERFORMANCE OBLIGATIONS(1)
    
(Dollars in millions)    
Sempra Energy ConsolidatedSDG&ESempra Energy Consolidated SDG&E
2019 (excluding first three months of 2019)$384
$2
2020512
3
2020 (excluding first three months of 2020)$306
 $3
2021513
3
402
 4
2022515
3
403
 4
2023509
3
400
 4
2024348
 4
Thereafter2,784
52
4,640
 71
Total revenues to be recognized$5,217
$66
$6,499
 $90
(1)
Excludes intercompany transactions.


Contract Balances from Revenues from Contracts with Customers


Activities within Sempra Energy’s and SDG&E’s contract liabilities are presented below. There were no contract liabilities at SDG&E or SoCalGas forin the three months ended March 31, 2019 or SoCalGas in the three months ended March 31, 2020and 2018.2019.
CONTRACT LIABILITIES    
(Dollars in millions)    
Sempra Energy Consolidated SDG&E
Balance at January 1, 2020$(163) $(91)
Revenue from performance obligations satisfied during reporting period1
 1
Balance at March 31, 2020(1)
$(162) $(90)
Balance at January 1, 2019$(70)$(70)  
Revenue from performance obligations satisfied during reporting period1
1
  
Payments received in advance(2)(2)  
Balance at March 31, 2019(1)
$(71)
 
Balance at January 1, 2018$—
Adoption of ASC 606 adjustment(61)
Revenue from performance obligations satisfied during reporting period5
Payments received in advance(7)
Balance at March 31, 2018$(63)
Balance at March 31, 2019$(71)  
(1)
Includes a negligible amount$4 million and $4 million in Other Current Liabilities and $71$158 million and $86 million in Deferred Credits and Other on the Sempra Energy and SDG&E Condensed Consolidated Balance Sheet.Sheets, respectively.
Receivables from Revenues from Contracts with Customers
The table below shows receivable balances associated with revenues from contracts with customers on our Condensed Consolidated Balance Sheets.
RECEIVABLES FROM REVENUES FROM CONTRACTS WITH CUSTOMERSRECEIVABLES FROM REVENUES FROM CONTRACTS WITH CUSTOMERS  RECEIVABLES FROM REVENUES FROM CONTRACTS WITH CUSTOMERS  
(Dollars in millions)      
March 31, 2019 December 31, 2018March 31, 2020 December 31, 2019
Sempra Energy Consolidated:      
Accounts receivable – trade, net$1,145
 $1,106
$1,142
 $1,163
Accounts receivable – other, net14
 11
8
 16
Due from unconsolidated affiliates – current(1)
6
 4
4
 5
Assets held for sale1
 6
Total$1,166
 $1,127
$1,154
 $1,184
SDG&E:      
Accounts receivable – trade, net$390
 $368
$411
 $398
Accounts receivable – other, net12
 6
7
 5
Due from unconsolidated affiliates – current(1)
3
 3
3
 2
Total$405
 $377
$421
 $405
SoCalGas:      
Accounts receivable – trade, net$674
 $634
$669
 $710
Accounts receivable – other, net2
 5
1
 11
Total$676
 $639
$670
 $721
(1)
AmountAmount is presented net of amounts due to unconsolidated affiliates on the Condensed Consolidated Balance Sheets, when right of offset exists.


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


REGULATORY ASSETS AND LIABILITIES
We show the details of regulatory assets and liabilities in the following table.
REGULATORY ASSETS (LIABILITIES)(Dollars in millions)
March 31,
2019		 December 31,
2018		March 31,
2020		 December 31,
2019
  
SDG&E:      
Fixed-price contracts and other derivatives$(144) $(150)$23
 $8
Deferred income taxes refundable in rates(171) (236)(68) (108)
Pension and other postretirement benefit plan obligations190
 186
105
 103
Removal obligations(1,946) (1,848)(1,999) (2,056)
Unamortized loss on reacquired debt6
 7
Environmental costs27
 28
45
 45
Sunrise Powerlink fire mitigation121
 120
122
 121
Regulatory balancing accounts(1)
   
Regulatory balancing accounts(1)(2)
   
Commodity – electric60
 (8)116
 102
Gas transportation13
 45
9
 22
Safety and reliability77
 70
75
 77
Public purpose programs(80) (62)(138) (124)
2019 GRC retroactive impacts98
 111
Other balancing accounts67
 145
124
 106
Other regulatory liabilities, net(2)
(199) (177)(126) (153)
Total SDG&E(1,979) (1,880)(1,614) (1,746)
SoCalGas: 
  
 
  
Deferred income taxes refundable in rates(133) (203)
Pension and other postretirement benefit plan obligations479
 470
416
 400
Employee benefit costs49
 49
44
 44
Removal obligations(804) (833)(719) (728)
Deferred income taxes refundable in rates(248) (336)
Unamortized loss on reacquired debt6
 7
Environmental costs32
 28
38
 40
Workers’ compensation9
 9
Regulatory balancing accounts(1)
   
Regulatory balancing accounts(1)(2)
   
Commodity – gas, including transportation16
 196
(202) (118)
Safety and reliability348
 332
315
 295
Public purpose programs(289) (325)(269) (273)
2019 GRC retroactive impacts351
 400
Other balancing accounts(143) (68)(155) (7)
Other regulatory liabilities, net(2)
(160) (130)(88) (101)
Total SoCalGas(705) (601)(402) (251)
Sempra Mexico:      
Deferred income taxes recoverable in rates81
 81
83
 83
Other regulatory assets9
 6
3
 6
Total Sempra Energy Consolidated$(2,594) $(2,394)$(1,930) $(1,908)
(1) 
At March 31, 20192020 and December 31, 2018,2019, the noncurrent portion of regulatory balancing accounts – net undercollected for SDG&E was $84$123 million and $78$108 million, respectively, and for SoCalGas was $405$375 million and $185$500 million, respectively. 
(2)  
Includes regulatory assets earning a rate of return.


CALIFORNIA UTILITIES
COVID-19 Pandemic Protections Memorandum Account
The COVID-19 pandemic is causing a significant impact on the economy and people’s livelihoods in California. On March 4, 2020, Governor Gavin Newsom proclaimed a State of Emergency in California as a result of the threat of COVID-19. In response, on March 17, 2020, the CPUC announced that, retroactive to March 4, 2020, all energy companies under its jurisdiction, including the California Utilities, should take action to implement several emergency customer protection measures to support California customers. On April 16, 2020, the CPUC approved a resolution establishing a disaster relief plan for residential and small business customers affected by the COVID-19 pandemic. The resolution also authorizes each of the California Utilities to establish a CPPMA to track and request recovery of incremental costs associated with complying with the resolution, including, but not limited to, costs associated with suspending disconnections (such as costs that arise from customers’ failure to pay). The customer relief measures are effective March 4, 2020 and shall continue for up to one year. SDG&E extended these accommodations to all of its customers and may continue to do so, while SoCalGas provides these benefits to its core gas customers. The California Utilities expect to pursue recovery in rates of the costs associated with the consumer protections that are offered in a future proceeding, subject to CPUC approval, which is not assured.
CPUC General Rate Case
The CPUC uses a GRC proceedingproceedings to set sufficient rates designed to allow the California Utilities to recover their reasonable cost of O&Moperating costs and to provide the opportunity to realize their authorized rates of return on their investment.investments.
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 are seeking revenue requirements for 2019 of $2.203 billion and $2.937 billion, respectively, which is an increase of $221 million and $481 million


over their respective 2018 revenue requirements (the 2019 proposed and 2018 actual revenue requirements reflect the impact of various updates made during the course of the proceeding). The California Utilities are proposing post-test year revenue requirement annual attrition percentages that are estimated to result in annual increases of approximately 5 percent to 7 percent at SDG&E and approximately 6 percent to 8 percent at SoCalGas. The original GRC applications filed in October 2017 did not reflect the impact of the TCJA, which we discuss in “2016 General Rate Case” below and in Note 8 of the Notes to Consolidated Financial Statements in the Annual Report. In April 2018, SDG&E and SoCalGas updated their applications to reflect the impact of the TCJA and filed a joint proposal to address the impacts. The TCJA impact to SDG&E is a reduction of approximately $58 million to its 2019 test year revenue requirement; however, SDG&E’s 2019 requested revenue requirement is unchanged as we evaluate potentially higher costs associated with mitigating wildfire risks. The TCJA impact to SoCalGas’ 2019 requested revenue requirement is a reduction of approximately $58 million, which is reflected in its updated request.
During the course of the proceeding, Cal PA recommended 2019 revenue requirements of $1.918 billion and $2.695 billion for SDG&E and SoCalGas, respectively, which is a net decrease of $64 million for SDG&E and a net increase of $239 million for SoCalGas compared to the 2018 revenue requirements. Cal PA proposes a three-year annual attrition percentage of 4 percent for SDG&E and a range of 4 percent to 5 percent for SoCalGas. Cal PA recommends addressing SDG&E’s potential ownership of OMEC in a separate proceeding. As a result, Cal PA’s proposed 2019 revenue requirement does not include the estimated $68 million included in SDG&E’s GRC application associated with owning and operating the generating facility. As we discuss in Note 1, on March 28, 2019, OMEC LLC exercised the put option requiring SDG&E to purchase the power plant by October 3, 2019, which is subject to the results of rehearing requests. TURN and other intervenors oppose various components of our revenue requests in the 2019 GRC applications.
The results of the rate case may materially and adversely differ from what is contained in the GRC applications.
We expect a preliminary decision from the CPUC in mid-2019.
2016 General Rate Case
As we discuss in NotesNote 4 and 8 of the Notes to Consolidated Financial Statements in the Annual Report, in September 2019, the 2016CPUC issued a final decision in the 2019 GRC. The 2019 GRC FD requiredwas effective retroactive to January 1, 2019. In the third quarter of 2019, SDG&E and SoCalGas recorded the retroactive after-tax earnings impact of $36 million and $84 million, respectively, for the first quarter of 2019 and $30 million and $46 million, respectively, for the second quarter of 2019.
The 2019 GRC FD approved SDG&E’s and SoCalGas’ test year revenues for 2019 and attrition year adjustments for 2020 and 2021. In January 2020, the CPUC issued a final decision implementing a four-year GRC cycle for California IOUs. The California Utilities were directed to each establishfile a petition for modification to revise their 2019 GRC to add two additional attrition years, resulting in a transitional five-year GRC period (2019-2023). The California Utilities filed the petition in April 2020 and requested authorization of their post-test year ratemaking mechanism for two additional years. If adopted, the estimated incremental increase in the revenue requirement for SDG&E and SoCalGas would be approximately $106 million and $155 million, respectively, for 2022, and $108 million and $137 million, respectively, for 2023. These amounts include revenues for both O&M and capital cost attrition. The California Utilities requested a decision by the end of 2020.
The 2019 GRC FD clarified that differences between incurred and forecasted income tax expense due to forecasting differences are not subject to tracking in the income tax expense memorandum account beginning in 2019. SDG&E and SoCalGas recorded regulatory liabilities associated with the 2016 through 2018 tracked forecasting differences of $86 million and $89 million, respectively. In April 2020, the CPUC confirmed treatment of the two-way income tax expense memorandum account to track certain revenue variances resulting from certain differences between the income tax expense forecasted in the GRC and the income tax expense incurred fromfor these 2016 through 2018. At March 31, 2019,2018 balances, at which time the recordedCalifornia Utilities released these regulatory liability associated with these tracked amounts totaled $90 million and $95 million for SDG&E and SoCalGas, respectively. The recorded liability is primarily relatedbalances to lower income tax expense incurred than was forecasted in the GRC relating to tax repairs deductions, self-developed software deductions and certain book-over-tax depreciation. The tracking accounts will remain open until the CPUC decides to close the accounts, which we expect will be reviewed in the 2019 GRC proceedings.
The 2016 GRC FD revenue requirement was authorized using a federal income tax rate of 35 percent. As a result of the TCJA, the federal income tax rate of 21 percent became effective January 1, 2018. Since SDG&E and SoCalGas continue to collect authorized revenues based on a 35 percent tax rate, SDG&E and SoCalGas are recording revenue deferrals, aligned with authorized seasonality factors, that reflect the estimated reduction in the revenue requirement. As of March 31, 2019, SDG&E and SoCalGas recorded regulatory liabilities of $95 million and $91 million, respectively, in anticipation of amounts that will benefit customers in future rates. SDG&E also recorded a $85 million regulatory liability at March 31, 2019, relating to its FERC jurisdictional rates, in anticipation of amounts that will benefit customers in future rates for the decrease in the federal income tax rate.revenues.
CPUC Cost of Capital
In AprilDecember 2019, the CPUC approved the cost of capital and rate structures (shown in the table below) for SDG&E and SoCalGas filed separate applications with the CPUC to update their cost of capitalthat are effective January 1, 2020.2020 and will remain in effect through December 31, 2022. SDG&E proposeddid not propose a 2020 cost of preferred equity in this proceeding. In January 2020, SDG&E filed an advice letter to adjust its authorized capital structure by increasingcontinue the amountcost of its commonpreferred equity from 52 percent to 56 percent. SDG&E also proposed to increase its authorized ROE from 10.2 percent to 14.3 percent, including a premium for wildfire risk of 3.4 percent, and to increase its authorized return on rate base from 7.55 percent to 10.03 percent. SoCalGas proposed to adjust its authorized capital structure by increasingtest year 2020 at 6.22%, which the amount of its common equity from 52 percent to 56 percent. SoCalGas also proposed to increase its authorized ROE from 10.05 percent to 10.7 percent and to increase its authorized return on rate base from 7.34 percent to 7.85 percent.CPUC approved in March 2020.
SOCALGAS
CPUC AUTHORIZED COST OF CAPITAL AND RATE STRUCTURE      
             
SDG&E SoCalGas
Authorized weighting
Return on
rate base
Weighted
return on
rate base
 Authorized weightingReturn on
rate base		Weighted
return on
rate base
45.25%4.59%2.08%Long-Term Debt45.60%4.23%1.93%
2.75 6.22 0.17 Preferred Equity2.40 6.00 0.14 
52.00 10.20 5.30 Common Equity52.00 10.05 5.23 
100.00%  7.55% 100.00%  7.30%
Billing Practices OII


In May 2017,The CCM was reauthorized in the 2020 cost of capital proceeding to continue through 2022. The CCM benchmark rate for the 2020 cost of capital is the average monthly utility bond index, as published by Moody’s, for the 12-month period from October 2018 through September 2019. SDG&E’s CCM benchmark rate, based on its filing pending approval with the CPUC, issued an OIIis 4.498%, based on Moody’s Baa- utility bond index. SoCalGas’ CCM benchmark rate, based on its filing pending approval with the CPUC, is 4.029%, based on Moody’s A- utility bond index. The index applicable to each utility is based on such utility’s credit rating.
The CCM benchmark rates for SDG&E and SoCalGas are the basis of comparison to determine whether SoCalGas violated any provisionsif future measurement periods “trigger” the CCM. The 12 months ending September 2020 will be the first “CCM Period” to determine if there has been a trigger at SDG&E or SoCalGas. The trigger occurs if the change in the applicable average Moody’s utility bond index relative to the CCM benchmark is larger than plus or minus 1.000%. Accordingly, if a change of more than plus or minus 1.000% occurs, SDG&E’s, SoCalGas’, or both utilities’ authorized ROE would be adjusted, upward or downward, by one half of the difference between the CCM benchmark and the 12-month average determined during the CCM Period. In addition, the authorized recovery rate for the utilities’ cost of debt and preferred equity would be adjusted to their respective actual weighted-average cost, with no change to the authorized capital structure. In the event of a CCM trigger, the CCM benchmark is also re-established. These adjustments would become effective in authorized rates on January 1 of the year following the CCM trigger.
SDG&E
FERC Formulaic Rate Filing
In October 2018, SDG&E submitted its TO5 filing to the FERC to establish its transmission revenue requirement, including rate of return, for SDG&E’s FERC-regulated electric transmission operations and assets. In December 2018, the FERC issued its order accepting and suspending SDG&E’s TO5 filing for five months, during which the existing TO4 rates remained in effect, and established hearing and settlement procedures. The suspension period ended on June 1, 2019, when the proposed TO5 rates took effect, subject to refund and the outcome of the rate filing. As a result, the TO4 ROE of 10.05% was the basis of SDG&E’s FERC-related revenue recognition until March 2020, when the FERC approved the settlement terms that SDG&E and all settling parties reached in October 2019.
The settlement agreement provides for a ROE of 10.60%, consisting of a base ROE of 10.10% plus an additional 50 bps for participation in the California Public Utilities Code, General Orders, CPUC decisions, or other requirements pertainingISO. If the FERC issues an order ruling that California IOUs are no longer eligible for the additional California ISO ROE, SDG&E would refund the additional 50 bps of ROE associated with the California ISO as of the refund effective date (June 1, 2019) in this proceeding. The TO5 term is effective June 1, 2019 and shall remain in effect indefinitely, with parties having the annual right to billing practices from 2014 through 2016. The CPUC examinedterminate the timelinessagreement beginning in 2022.
In the first quarter of monthly bills, extending the billing period for customers,2020, SDG&E recorded retroactive revenues of $12 million related to 2019, and issuing estimated bills, including an examinationadditional FERC revenues of SoCalGas’ gas tariff rules. In January 2019, the CPUC ordered SoCalGas to pay $8 million in penalties, including $3 million payable to California’s general fund and $5$17 million to conclude a rate base matter, net of certain refunds to be creditedpaid to customers that received delayed bills (greater than 45 days) in the form of a $100 bill credit. SoCalGas filed an appeal of the CPUC’s conclusions in the order, which, in April 2019, the CPUC denied.   CPUC-jurisdictional customers.
     
NOTE 5. ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS
We consolidate assets acquired and liabilities assumed as of the purchase date and include earnings from acquisitions in consolidated earnings after the purchase date.
ACQUISITIONSACQUISITION
Sempra Texas UtilityUtilities
On March 9, 2018,TTHC
In February 2020, Sempra Energy completed the acquisition ofTexas Intermediate Holding Company LLC acquired an additional indirect 100-percent0.1975% interest in Oncor Holdings, which owned 80.03 percent of Oncor, and other EFH assets and liabilities unrelated to Oncor, pursuant to the Merger Agreement with EFH. Under the Merger Agreement, we paid Merger Consideration of $9.45 billion in cash and an additional $31 million representing an adjustment for dividends and payments pursuant to a tax sharing agreement with Oncor and Oncor Holdings. Also on March 9, 2018, in a separate transaction, Sempra Energy, through its acquisition of a 1% interest in Oncor Holdings, acquiredTTHC from Hunt Strategic Utility Investment, L.L.C., including notes receivable due from TTHC with an additional 0.22 percentaggregate outstanding balance of the outstanding membership interests in Oncor from OMIapproximately $6 million, for a total purchase price of approximately $26$23 million in cash, bringing Sempra Energy’s indirect ownership in Oncor to 80.25 percent.approximately 80.45%. TTHC indirectly owns 100% of TTI, an investment vehicle indirectly owned by third parties unaffiliated with Oncor Holdings or Sempra Energy, continues to own 19.75 percentwhich owns 19.75% of Oncor’s outstanding membership interests.
We discuss this acquisition, including the purchase price allocation, in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report.
Sempra South American Utilities
Compañía Transmisora del Norte Grande S.A.
On December 18, 2018, Chilquinta Energía acquired a 100-percent interest in Compañía Transmisora del Norte Grande S.A. through a sales and purchase agreement with AES Gener S.A. and its subsidiary Sociedad Eléctrica Angamos S.A. We completed At the acquisition for a purchase price of $226 million and paid $208 million (net of $18 million cash acquired) with available cash on hand at Sempra South American Utilities.
We accounted for this business combination using the acquisition method of accounting. We allocated the $208 million in cash paid ($226 million purchase price less $18 million of cash acquired) to the identifiable assets acquired and liabilities assumed based on their respective fair values, with the excess recognized as goodwill, which is included in assets held for sale in discontinued operations. There were no measurement period adjustments related to this acquisition during the three months ended March 31, 2019. At March 31, 2019, the purchase price allocation was preliminary and subject to completion. Adjustments todate, we determined the fair value estimates may occurof the notes receivable was $7 million based on a discounted cash flow model, and attributed $16 million to the investment in TTHC. We account for our investment in TTHC as the process conducted for various valuations and assessments is finalized, primarily related to deferred income taxes.
Wean equity method investment, which we discuss this acquisition, including the purchase price allocation,further in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report.
PENDING ACQUISITIONS
Sempra Texas Utility
On October 18, 2018, Oncor entered into the InfraREIT Merger Agreement, whereby Oncor has agreed to acquire 100 percent of the issued and outstanding shares of InfraREIT and 100 percent of the limited partnership units of its subsidiary, InfraREIT Partners, for approximately $1,275 million, or $21 per share and unit, plus approximately $40 million for a management6.


agreement termination fee, as well as other customary transaction costs incurred by InfraREIT that would be borne by Oncor as part of the acquisition. In addition, the transaction includes InfraREIT’s outstanding debt, which as of March 31, 2019 was approximately $946 million. Consummation of the InfraREIT Merger Agreement is subject to the satisfaction of certain closing conditions, including the substantially concurrent consummation of the transactions contemplated by the Asset Exchange Agreement and Securities Purchase Agreement, discussed below.
On October 18, 2018, Oncor entered into the Asset Exchange Agreement, whereby SDTS has agreed to accept and assume certain assets and liabilities of SU in exchange for certain SDTS assets. As currently contemplated, SDTS would receive certain real property and other assets used in the electric transmission and distribution business in Central, North and West Texas, as well as the equity interests in GS Project Entity, LLC (a wholly owned subsidiary of SU) and SU would receive certain real property and other assets that are near the Texas-Mexico border. Immediately prior to completing the exchange, SDTS would become a wholly owned, indirect subsidiary of InfraREIT Partners. Consummation of the Asset Exchange Agreement is subject to the satisfaction of certain closing conditions, including the substantially concurrent consummation of the transactions contemplated by the Securities Purchase Agreement, discussed below.
On October 18, 2018, Sempra Energy entered into the Securities Purchase Agreement, whereby Sempra Texas Utilities Holdings I, LLC (a wholly owned subsidiary of Sempra Energy in our Sempra Texas Utility reportable segment) has agreed to acquire a 50-percent economic interest in Sharyland Holdings, LP for approximately $98 million, subject to customary closing adjustments. In connection with and prior to the consummation of the Securities Purchase Agreement, Sharyland Holdings, LP would own 100- percent of the membership interests in SU and SU would convert into a limited liability company, which is expected to be named Sharyland Utilities, LLC. Upon consummation of the Securities Purchase Agreement, Sempra Texas Utilities Holdings I, LLC would indirectly own and account for its 50-percent membership interest in Sharyland Utilities, LLC as an equity method investment. Consummation of the Securities Purchase Agreement is subject to the satisfaction of certain closing conditions, including the substantially concurrent consummation of the transactions contemplated by the InfraREIT Merger Agreement and the Asset Exchange Agreement.
For Oncor to fund its acquisition of interests in InfraREIT, Sempra Energy and certain indirect equity holders of TTI have committed to make capital contributions proportionate to their respective ownership interest in Oncor, with the amount estimated to be contributed by Sempra Energy equal to approximately $1,025 million, excluding Sempra Energy’s share of approximately $40 million for a management agreement termination fee, as well as other customary transaction costs incurred by InfraREIT that would be borne by Oncor as part of the acquisition. We expect to fund our capital contribution to Oncor and to purchase the 50-percent limited-partner interest in Sharyland Holdings, LP by utilizing a portion of the proceeds received from the sales of Sempra Renewables’ assets. The capital contributions are contingent on the satisfaction of customary conditions, including the substantially simultaneous closing of the transactions contemplated by the InfraREIT Merger Agreement, but are not a condition to the transactions contemplated therein.
The transactions are subject to the satisfaction of certain closing conditions, including approval by the PUCT. In December 2018, early termination of the 30-day waiting period required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, was granted. In March 2019, we received approval from the FERC and clearance from the Committee on Foreign Investment in the United States. In addition, the acquisition of InfraREIT was approved by the InfraREIT stockholders on February 7, 2019. We expect that the transactions will close in mid-2019.
DIVESTITURESDIVESTITURE
Sempra LNG
OnIn February 7, 2019, Sempra LNG completed the sale of its non-utility natural gas storage assets in the southeast U.S. (comprised of Mississippi Hub and Bay Gas), which we classified as held for sale at December 31, 2018, to an affiliate of ArcLight Capital Partners and received cash proceeds of $322 million, (subject to working capital adjustments), net of transaction costs. In January 2019, Sempra LNG completed the sale of other non-utility assets for $5 million.
ASSETS HELD FOR SALE
We classify assets as held for sale when management approves and commits to a formal plan to actively market an asset for sale and we expect the sale to close within the next 12 months. Upon classifying an asset as held for sale, we record the asset at the lower of its carrying value or its estimated fair value reduced for selling costs.


Sempra Renewables
On February 12, 2019, Sempra Renewables entered into an agreement with American Electric Power Company, Inc. (AEP) to sell its remaining wind assets and investments. On April 22, 2019, Sempra Renewables completed the sale to AEP for $584 million in cash, subject to working capital and other customary adjustments. Upon completion of the sale, remaining nominal business activities at Sempra Renewables were subsumed into Parent and other and the Sempra Renewables segment ceased to exist.
The following table summarizes the carrying amounts of the major classes of assets and related liabilities classified as held for sale.
ASSETS HELD FOR SALE
(Dollars in millions)
 Sempra Renewables’ wind assets
 At March 31, 2019
Cash and cash equivalents$4
Accounts receivable – trade, net2
Other current assets2
Property, plant and equipment, net366
Total assets held for sale$374
  
Accounts payable – trade$1
Asset retirement obligations6
Total liabilities held for sale(1)
$7
(1)
Included in Other Current Liabilities on Sempra Energy’s Condensed Consolidated Balance Sheet.

Sempra Renewables’ wind equity method investments totaling $290 million at March 31, 2019, which are included in the sale to AEP, were classified as Other Investments on Sempra Energy’s Condensed Consolidated Balance Sheet.
DISCONTINUED OPERATIONS
OnIn January 25, 2019, our board of directors approved a plan to sell our South American businesses. We launched a formal process to sell our South American businesses and expect to complete the sale by the end of 2019. We determined that these businesses, which previously constituted the Sempra South American Utilities segment, and certain activities associated with those businesses, met the held-for-sale criteria. These businesses are presented as discontinued operations, as the planned sale representssales represent a strategic shift that will have a major effect on our operations and financial results. We do not plan to have significant continuing involvement in or be able to exercise significant influence on the operating or financial policies of these operations after they are sold. Accordingly, the results of operations, financial position and cash flows for these businesses have been reclassified topresented as discontinued operations for all periods presented.
Discontinued operations that were previously in the Sempra South American Utilities segment include our 100-percent100% interest in Chilquinta Energía in Chile, our 83.6-percent83.6% interest in Luz del Sur in Peru and our interests in two2 energy-services companies, Tecnored and Tecsur, which provide electric construction and infrastructure services to Chilquinta Energía and Luz del Sur, respectively, as well as third parties. 

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

On October 12, 2019, we entered into a Purchase and Sale Agreement with State Grid International Development Limited to sell our equity interests in our Chilean businesses, including our 100% interest in Chilquinta Energía and Tecnored and our 50% interest in Eletrans, for an aggregate base purchase price of $2.23 billion, subject to customary adjustments for working capital and changes in net indebtedness and other adjustments. Chilquinta Energía also agreed to purchase the remaining 50% interest in Eletrans from Sociedad Austral de Electricidad S.A., contingent on the sale of our Chilean businesses to State Grid International Development Limited. This acquisition by Chilquinta Energía, which we do not expect would have a significant economic impact on the sale of our Chilean businesses (including the net proceeds we receive from the sale), would result in State Grid International Development Limited acquiring 100% of Eletrans. The sale of our Chilean businesses is subject to various conditions to closing, including certain Chinese regulatory approvals, but is not subject to Chilquinta Energía purchasing the remaining 50% interest in Eletrans. We expect the sale to close in the second quarter of 2020.
Summarized results from discontinued operations were as follows:
DISCONTINUED OPERATIONSDISCONTINUED OPERATIONS   
(Dollars in millions)      
Three months ended March 31,Three months ended March 31,
2019 20182020 2019
Revenues$421
 $426
$400
 $421
Cost of sales(265) (293)(253) (265)
Operating expenses(45) (54)(46) (45)
Interest and other(3) (5)—
 (3)
Income before income taxes and equity earnings of unconsolidated entities108
 74
Income before income taxes and equity earnings101
 108
Income tax expense(151) (47)(21) (151)
Equity earnings1
 1
—
 1
(Loss) income from discontinued operations, net of income tax(42) 28
Income (loss) from discontinued operations, net of income tax80
 (42)
Earnings attributable to noncontrolling interests(9) (7)(8) (9)
(Losses) earnings from discontinued operations attributable to common shares$(51) $21
Earnings (losses) from discontinued operations attributable to common shares$72
 $(51)



The following table summarizes the carrying amounts of the major classes of assets and related liabilities classified as held for sale in discontinued operations.
ASSETS HELD FOR SALE IN DISCONTINUED OPERATIONS
(Dollars in millions)      
March 31,
2019		 December 31, 2018March 31,
2020		 December 31, 2019
Cash and cash equivalents$67
 $88
$180
 $74
Restricted cash(1)
1
 1
Accounts receivable, net331
 315
316
 303
Due from unconsolidated affiliates3
 2
2
 2
Inventories41
 38
36
 36
Other current assets15
 16
31
 29
Current assets$457
 $459
$566
 $445
      
Due from unconsolidated affiliates$46
 $44
$60
 $54
Goodwill and other intangible assets834
 819
748
 801
Property, plant and equipment, net2,459
 2,357
2,517
 2,618
Other noncurrent assets49
 39
39
 40
Noncurrent assets$3,388
 $3,259
$3,364
 $3,513
      
Short-term debt$46
 $55
$158
 $52
Accounts payable188
 176
192
 201
Current portion of long-term debt and finance leases22
 29
82
 85
Other current liabilities119
 108
106
 106
Current liabilities$375
 $368
$538
 $444
      
Long-term debt and finance leases$721
 $708
$663
 $702
Deferred income taxes263
 250
282
 284
Other noncurrent liabilities62
 55
61
 66
Noncurrent liabilities$1,046
 $1,013
$1,006
 $1,052

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

At March 31, 2020 and December 31, 2019, $693 million and $551 million, respectively, of cumulative foreign currency translation losses related to our South American businesses are included in AOCI.
     
NOTE 6. 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 (Losses) on the Condensed Consolidated Statements of Operations. See Note 12 for information on equity earnings and losses, both before and net of income tax, by segment. See Note 1 for information on how equity earnings and losses before income taxes are factored into the calculations of our pretax income or loss and ETR.
Our equity method investments include various domestic and foreign entities. Our foreign equity method investees are corporations whose operations are generally taxable on a stand alone basis in the countries in which they operate, and we recognize our equity in such income or loss net of investee income tax.
Oncor is a domestic partnership for U.S. federal income tax purposes and is not included in the consolidated income tax return of Sempra Energy. Rather, only our equity earnings from our investment in Oncor Holdings (a disregarded entity for tax purposes) are included in our consolidated income tax return. A tax sharing agreement with TTI, Oncor Holdings and Oncor provides for the calculation of an income tax liability substantially as if Oncor Holdings and Oncor were taxed as corporations, and requires tax payments determined on that basis. While partnerships are not subject to income taxes, in consideration of the tax sharing agreement and Oncor being subject to the provisions of U.S. GAAP governing rate-regulated operations, Oncor recognizes amounts determined under cost-based regulatory rate-setting processes (with such costs including income taxes), as if it were taxed as a corporation. As a result, since Oncor Holdings consolidates Oncor, we recognize equity earnings from our investment in Oncor Holdings net of its recorded income tax.
We provide additional information concerning our equity method investments in Note 5 above and in Notes 5 and 6 of the Notes to Consolidated Financial Statements in the Annual Report.
SEMPRA TEXAS UTILITYUTILITIES
Oncor Holdings
We account for our 100-percent100% ownership interest in Oncor Holdings, which owns an 80.25% interest in Oncor, as an equity method investment. Due to the ring-fencing measures, governance mechanisms, and commitments in effect, following the Merger, we do not have the power to direct the significant activities of Oncor Holdings and Oncor. See Note 6 of the Notes to Consolidated Financial Statements in the


Annual Report for additional information related to the restrictions on our ability to direct the significant activities of Oncor Holdings and Oncor.
In each of the first quarter ofthree months ended March 31, 2020, Sempra Energy contributed $70 million to Oncor, and Oncor Holdings distributed to Sempra Energy $73 million in dividends.
In the three months ended March 31, 2019 and the second quarter of 2019 through May 7, 2019,, Sempra Energy contributed $56 million to Oncor, and Oncor Holdings distributed to Sempra Energy $54 million in dividends and $3 million in tax sharing payments.
We provide summarized income statement information for Oncor Holdings in the following table.
SUMMARIZED FINANCIAL INFORMATION – ONCOR HOLDINGSSUMMARIZED FINANCIAL INFORMATION – ONCOR HOLDINGS SUMMARIZED FINANCIAL INFORMATION – ONCOR HOLDINGS  
(Dollars in millions)(Dollars in millions) (Dollars in millions)  
Three months ended March 31,
Three months ended March 31, 2019March 9 - March 31, 20182020 2019
Operating revenues$1,016
$236
$1,072
 $1,016
Operating expense(775)(185)(801) (775)
Income from operations241
51
271
 241
Interest expense(86)(22)(101) (86)
Income tax expense(23)(7)(28) (23)
Net income114
19
129
 114
Noncontrolling interest held by TTI(23)(4)(26) (23)
Earnings attributable to Sempra Energy(1)
91
15
Earnings attributable to Sempra Energy103
 91

(1)
Earnings at Oncor Holdings differ from earnings at the Sempra Texas Utility segment due to amortization of a tax sharing liability associated with a tax sharing arrangement and basis differences in AOCI.
SEMPRA MEXICO
Sempra Mexico invested cash of $25 million in the IMG JV in the three months ended March 31, 2018.
SEMPRA RENEWABLESTTHC
As we discuss in Note 5, in February 2019,2020, Sempra Renewables entered intoTexas Intermediate Holding Company LLC, acquired a 1% interest in TTHC from Hunt Strategic Utility Investment, L.L.C. for $23 million in cash, of which $16 million of the fair value was attributed to our investment in TTHC. TTHC indirectly owns 100% of TTI, which owns 19.75% of Oncor’s outstanding membership interests, resulting in Sempra Energy acquiring an agreement to sell its remaining wind assetsadditional indirect 0.1975% interest in Oncor and investments. At March 31, 2019, the wind investments had a carrying value of $290 million and were included in Other


Investments onbringing Sempra Energy’s Condensed Consolidated Balance Sheets. We completedindirect ownership in Oncor to approximately 80.45%.
SEMPRA MEXICO
IMG JV
IEnova has a 40% interest in IMG JV, a JV with a subsidiary of TC Energy Corporation, and accounts for its interest as an equity method investment. IMG JV owns and operates the saleSur de Texas-Tuxpan natural gas marine pipeline, which is fully contracted under a 35-year natural gas transportation service contract with the CFE and commenced commercial operations in April 2019, asSeptember 2019.
As we discuss in “Transactions with Affiliates” in Note 5.
SEMPRA LNG
Sempra LNG capitalized $13 million1, IEnova has provided IMG JV with a Mexican peso-denominated revolving line of credit to finance construction of the natural gas marine pipeline. Due to significant fluctuation of the Mexican peso and $11 millionthe impact of interestthis fluctuation on the peso-denominated loan, equity earnings from IEnova’s investment in IMG JV were higher in the three months ended March 31, 2020 compared to the same period in 2019, and 2018, respectively, relatedprimarily due to its investment$149 million of foreign currency gains in Cameron2020 compared to $10 million of foreign currency losses in 2019, which are offset by corresponding amounts included in Other (Expense) Income, Net on the Condensed Consolidated Statements of Operations.


We provide summarized income statement information for IMG JV in the following table.
SUMMARIZED FINANCIAL INFORMATION – IMG JV
   
(Dollars in millions)   
 Three months ended March 31,
 2020 2019
Operating revenues$122
 $—
Operating expenses(33) —
Income from operations89
 —
Other income, net364
 41
Interest expense(43) (46)
Income tax benefit (expense)10
 (4)
Net income (loss)/Earnings (losses)420
 (8)

SEMPRA LNG JV, which has not commenced planned principal operations.
In the three months ended March 31, 2019, and 2018, Sempra LNG invested cash of $25 million in Cameron LNG JV. Prior to commencing commercial operations in August 2019, Sempra LNG capitalized $13 million of interest in the three months ended March 31, 2019 related to its investment in Cameron LNG JV.
RBS SEMPRA COMMODITIES
As we discuss in Note 11, in March 2020, we recorded a charge of $100 million in Equity Earnings on Sempra Energy’s Condensed Consolidated Statement of Operations for losses from our investment in RBS Sempra Commodities. We recognized a corresponding liability of $25 million in Other Current Liabilities and $29$75 million respectively, in this unconsolidated JV.Deferred Credits and Other for our share of estimated losses in excess of the carrying value of our equity method investment.
GUARANTEES
At March 31, 2019, we had outstanding2020, Sempra LNG has provided guarantees aggregating a maximum of $4.2$4.0 billion with an aggregate carrying value of $10 million.$2 million associated with Cameron LNG JV’s debt obligations. We discuss these guarantees in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.


     
NOTE 7. DEBT AND CREDIT FACILITIES
LINES OF CREDIT
Primary U.S. Committed Lines of Credit
At March 31, 2019,2020, Sempra Energy Consolidated had an aggregate capacity of approximately $5.4$6.7 billion in threefour primary U.S. committed lines of credit, for Sempra Energy, Sempra Global and the California Utilities towhich provide liquidity and to support commercial paper. The principal terms of these committed lines of credit, which expire in October 2020,May 2024, are described below and in Note 7 of the Notes to Consolidated Financial Statements in the Annual Report.
PRIMARY U.S. COMMITTED LINES OF CREDITPRIMARY U.S. COMMITTED LINES OF CREDIT  PRIMARY U.S. COMMITTED LINES OF CREDIT      
(Dollars in millions)(Dollars in millions)  (Dollars in millions)      
 March 31, 2019 March 31, 2020
 Total facility 
Commercial paper outstanding(1)
 Available unused credit Total facility 
Commercial paper outstanding(1)
 Lines of credit outstanding Available unused credit
Sempra Energy(2)
Sempra Energy(2)
 $1,250
 $—
 $1,250
Sempra Energy(2)
 $1,250
 $—
 $(1,250) $—
Sempra Global(3)
Sempra Global(3)
 3,185
 (1,289) 1,896
Sempra Global(3)
 3,185
 (1,225) —
 1,960
California Utilities(4):
      
SDG&E 750
 (238) 512
SoCalGas 750
 (190) 560
Less: subject to a combined limit of $1 billion for both utilities (500) —
 (500)
 1,000
 (428) 572
SDG&E(4)
SDG&E(4)
 1,500
 —
 (200) 1,300
SoCalGas(4)
SoCalGas(4)
 750
 —
 —
 750
TotalTotal $5,435
 $(1,717) $3,718
Total $6,685
 $(1,225) $(1,450) $4,010
(1) 
Because the commercial paper programs are supported by these lines, we reflect the amount of commercial paper outstanding as a reduction to the available unused credit.
(2) 
The facility also provides for issuance of up to $400$200 million of letters of credit on behalf of Sempra Energy with the amount of borrowings otherwise available under the facility reduced by the amount of outstanding letters of credit. Subject to obtaining commitments from existing or new lenders and satisfaction of other specified conditions, Sempra Energy has the right to increase the letter of credit commitment up to $500 million. No letters of credit were outstanding at March 31, 2019.2020.
(3) 
Commercial paper outstanding is before reductions of unamortized discount of $2 million.$1 million at Sempra Energy guarantees Sempra Global’s obligations under the credit facility.Global.
(4) 
The facility also provides for the issuance of $100 million of letters of credit on behalf of eachthe borrowing utility subject to a combined letter of credit commitment of $250 million for both utilities. Thewith the amount of borrowings otherwise available under the facility is reduced by the amount of outstanding letters of credit. Subject to obtaining commitments from existing or new lenders and satisfaction of other specified conditions, the borrowing utility has the right to increase the letter of credit commitment up to $250 million. No letters of credit were outstanding at March 31, 2019.2020.

Sempra Energy, SDG&E and SoCalGas each must maintain a ratio of indebtedness to total capitalization (as defined in each of the applicable credit facilities) of no more than 65 percent65% at the end of each quarter. At March 31, 2019,2020, each entity was in compliance with this ratio and all other financial covenants under its respective credit facility.
At March 31, 2020, the $200 million outstanding under SDG&E’s line of credit was classified as long-term debt based on management’s intent and ability to maintain this level of borrowing on a long-term basis either supported by this credit facility or by issuing long-term debt. This classification had no impact on SDG&E’s cash flows.


Foreign Committed Lines of Credit
In February 2019, IEnova revised theOur foreign operations in Mexico have additional general-purpose credit facilities aggregating $1.9 billion at March 31, 2020. The principal terms of its five-year revolvingthese credit facility by increasing the amount available under the facility from $1.17 billion to $1.5 billion, extending the expiration of the facility from August 2020 to February 2024 and increasing the syndicate of lenders from eight to 10. At March 31, 2019, available unused credit on this line was approximately $692 million.facilities are described below.
On April 11, 2019, IEnova entered into a three-year, $100 million revolving credit agreement with Scotiabank Inverlat, S.A. Under the agreement, withdrawals may be made for up to one year in either U.S. dollars or Mexican pesos.
FOREIGN COMMITTED LINES OF CREDIT
(U.S. dollar equivalent in millions)
   March 31, 2020
Expiration date of facility Total facility Amounts outstanding Available unused credit
February 2024(1)
 $1,500
 $(1,364) $136
April 2022(2)
 100
 (100) —
September 2021(3)
 280
 (280) —
Total $1,880
 $(1,744) $136
(1)
Five-year revolving credit facility with a syndicate of 10 lenders.
(2)
Three-year revolving credit facility with Scotiabank Inverlat, S.A. Withdrawals may be made for up to one year from April 11, 2019 in either U.S. dollars or Mexican pesos.
(3)
Two-year revolving credit facility with The Bank of Nova Scotia. Withdrawals may be made for up to two years from September 23, 2019 in U.S. dollars.
Letters of Credit
Outside of our domestic and foreign committed credit facilities, we have bilateral unsecured standby letter of credit capacity with select lenders that is uncommitted and supported by reimbursement agreements. At March 31, 2019,2020, we had approximately $611$615 million in standby letters of credit outstanding under these agreements.
TERM LOANS
In March 2020, Sempra Energy borrowed $1,524 million, net of $1 million of debt issuance costs, under a 364-day term loan, which has a maturity date of March 16, 2021 with an option to extend the maturity date to September 16, 2021, subject to receiving the consent of the lenders. Borrowings bear interest at benchmark rates plus 80 bps (1.72% at March 31, 2020). On April 1, 2020, Sempra Energy borrowed an additional $75 million under the term loan.
In March 2020, SDG&E borrowed $200 million under a 364-day term loan, which has a maturity date of March 18, 2021 with an option to extend the maturity date to September 17, 2021, subject to receiving the consent of the lenders. Borrowings bear interest at benchmark rates plus 80 bps (1.73% at March 31, 2020). SDG&E classified this term loan as long-term debt based on management’s intent and ability to maintain this level of borrowing on a long-term basis by issuing long-term debt. This classification had no impact on SDG&E’s cash flows.
The term loans provide Sempra Energy and SDG&E with additional liquidity outside of their respective committed lines of credit.
WEIGHTED-AVERAGE INTEREST RATES
The weighted-average interest rates on the total short-term debt at Sempra Energy Consolidated were 3.07 percent and 2.99 percent at March 31, 20192020 and December 31, 2018, respectively. The weighted-average interest rates on total short-term debt at 2019 were as follows:
WEIGHTED-AVERAGE INTEREST RATES     
       
    March 31, 2020 December 31, 2019
     
Sempra Energy Consolidated  2.41% 2.31%
SDG&E  N/A
 1.97
SoCalGas  N/A
 1.86


LONG-TERM DEBT
SDG&E were 2.80 percent and 2.97 percent at March 31, 2019 and December 31, 2018, respectively. The weighted-average interest rates on total short-term debt at SoCalGas were 2.49 percent and 2.58 percent at March 31, 2019 and December 31, 2018, respectively.
INTEREST RATE SWAPS
In FebruaryApril 2020, SDG&E issued $400 million of 3.32% first mortgage bonds maturing in 2050 and received proceeds of $395 million (net of debt discount, underwriting discounts and debt issuance costs of $5 million). SDG&E used $200 million of the proceeds from the offering to repay borrowings on its line of credit and expects to use the remaining proceeds for working capital and other general corporate purposes, which may include the repayment of indebtedness.
SoCalGas
In January 2020, SoCalGas issued $650 million of 2.55% first mortgage bonds maturing in 2030. We received proceeds of$643 million (net of debt discount, underwriting discounts and debt issuance costs of $7 million). SoCalGas used the proceeds from the offering to repay outstanding commercial paper and for other general corporate purposes.
Sempra Mexico
In November 2019, Sempra EnergyIEnova entered into a financing agreement with International Finance Corporation and North American Development Bank to finance and/or refinance the construction of solar generation projects in Mexico. Under this agreement, in April 2020, IEnova borrowed $100 million from Japan International Cooperation Agency, with loan proceeds of $98 million (net of debt issuance costs of $2 million). The loan matures in November 2034 and bears interest based on 6-month LIBOR plus 150 bps. IEnova entered into a floating-to-fixed interest rate swaps to hedge interest payments on the $850 million of variable rate notes issued in October 2017 and maturing in March 2021,swap, resulting in an all-ina fixed rate of 3.069 percent. We2.38%.
Sempra LNG
As we discuss our interest rate swaps to hedge cash flowsin “Shareholders’ Equity and Noncontrolling Interests – Other Noncontrolling Interests – Sempra LNG” in Note 8.1, notes payable totaling $22 million due October 1, 2026 were converted to equity by the minority partner in Liberty Gas Storage LLC and are no longer outstanding.
     
NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS
We use derivative instruments primarily to manage exposures arising in the normal course of business. Our principal exposures are commodity market risk, benchmark interest rate risk and foreign exchange rate exposures. Our use of derivatives for these risks is integrated into the economic management of our anticipated revenues, anticipated expenses, assets and liabilities. Derivatives may be effective in mitigating these risks (1) that could lead to declines in anticipated revenues or increases in anticipated expenses, or (2) that our asset values may fall or our liabilities may increase. Accordingly, our derivative activity summarized below generally represents an impact that is intended to offset associated revenues, expenses, assets or liabilities that are not included in the tables below.
In certain cases, we apply the normal purchase or sale exception to derivative instruments and have other commodity contracts that are not derivatives. These contracts are not recorded at fair value and are therefore excluded from the disclosures below.
In all other cases, we record derivatives at fair value on the Condensed Consolidated Balance Sheets. We designate each derivative ashave derivatives that are (1) a cash flow hedge,hedges, (2) a fair value hedge,hedges, or (3) undesignated. Depending on the applicability of hedge accounting and, for the California Utilities and other operations subject to regulatory accounting, the requirement to pass impacts through to customers, the impact of derivative instruments may be offset in OCI (cash flow hedge)hedges), on the balance sheet (fair value hedges and regulatory(regulatory offsets), or recognized in earnings.earnings (fair value hedges). We classify cash flows from the principal settlements of cross-currency swaps that hedge exposure related to Mexican peso-denominated debt as financing activities and settlements of other derivative instruments as operating activities on the Condensed Consolidated Statements of Cash Flows.
HEDGE ACCOUNTING
We may designate a derivative as a cash flow hedging instrument if it effectively converts anticipated cash flows associated with revenues or expenses to a fixed dollar amount. We may utilize cash flow hedge accounting for derivative commodity instruments, foreign currency instruments and interest rate instruments. Designating cash flow hedges is dependent on the business context in


which the instrument is being used, the effectiveness of the instrument in offsetting the risk that the future cash flows of a given revenue or expense item may vary, and other criteria.


ENERGY DERIVATIVES
Our market risk is primarily related to natural gas and electricity price volatility and the specific physical locations where we transact. We use energy derivatives to manage these risks. The use of energy derivatives in our various businesses depends on the particular energy market, and the operating and regulatory environments applicable to the business, as follows:
▪The California Utilities use natural gas and electricity derivatives, for the benefit of customers, with the objective of managing price risk and basis risks, and stabilizing and lowering natural gas and electricity costs. These derivatives include fixed price natural gas and electricity positions, options, and basis risk instruments, which are either exchange-traded or over-the-counter financial instruments, or bilateral physical transactions. This activity is governed by risk management and transacting activity plans that have been filed with and approved by the CPUC. Natural gas and electricity derivative activities are recorded as commodity costs that are offset by regulatory account balances and are recovered in rates. Net commodity cost impacts on the Condensed Consolidated Statements of Operations are reflected in Cost of Electric Fuel and Purchased Power or in Cost of Natural Gas.
▪SDG&E is allocated and may purchase CRRs, which serve to reduce the regional electricity price volatility risk that may result from local transmission capacity constraints. Unrealized gains and losses do not impact earnings, as they are offset by regulatory account balances. Realized gains and losses associated with CRRs, which are recoverable in rates, are recorded in Cost of Electric Fuel and Purchased Power on the Condensed Consolidated Statements of Operations.
▪Sempra Mexico Sempra LNG and Sempra RenewablesLNG may use natural gas and electricity derivatives, as appropriate, to optimize the earnings of their assets which support the following businesses: LNG, natural gas transportation and storage, and power generation. Gains and losses associated with undesignated derivatives are recognized in Energy-Related Businesses Revenues or in Energy-Related Businesses Cost of Sales on the Condensed Consolidated Statements of Operations. Certain of these derivatives may also be designated as cash flow hedges. Sempra Mexico may also use natural gas energy derivatives with the objective of managing price risk and lowering natural gas prices at its distribution operations. These derivatives, which are recorded as commodity costs that are offset by regulatory account balances and recovered in rates, are recognized in Cost of Natural Gas on the Condensed Consolidated Statements of Operations.
▪From time to time, our various businesses, including the California Utilities, may use other energy derivatives to hedge exposures such as the price of vehicle fuel and GHG allowances.
The following table summarizes net energy derivative volumes.
NET ENERGY DERIVATIVE VOLUMES(Quantities in millions)
CommodityUnit of measure March 31,
2019		 December 31,
2018		Unit of measure March 31, 2020 December 31, 2019
Sempra Energy Consolidated:        
Natural gasMMBtu 33
 35
MMBtu 20
 32
ElectricityMWh 2
 2
MWh 1
 2
Congestion revenue rightsMWh 50
 52
MWh 45
 48
SDG&E:        
Natural gasMMBtu 32
 33
MMBtu 29
 37
ElectricityMWh 2
 2
MWh 2
 2
Congestion revenue rightsMWh 50
 52
MWh 45
 48
SoCalGas:    
Natural gasMMBtu —
 2


In addition to the amounts noted above, we use commodity derivatives to manage risks associated with the physical locations of contractual obligations and assets, such as natural gas purchases and sales.
INTEREST RATE DERIVATIVES
We are exposed to interest rates primarily as a result of our current and expected use of financing. The California Utilities, as well as Sempra Energy and its other subsidiaries and JVs, periodically enter into interest rate derivative agreements intended to moderate our exposure to interest rates and to lower our overall costs of borrowing. In addition, we may utilize interest rate swaps, typically designated as cash flow hedges, to lock in interest rates on outstanding debt or in anticipation of future financings. Separately, Otay Mesa VIE has entered into interest rate swap agreements, designated as cash flow hedges, to moderate its exposure to interest rate changes.


The following table presents the net notional amounts of our interest rate derivatives, excluding JVs.
INTEREST RATE DERIVATIVES
(Dollars in millions)
 March 31, 2019 December 31, 2018
 Notional debt Maturities Notional debt Maturities
Sempra Energy Consolidated:       
Cash flow hedges(1)
$1,430
 2019-2032 $594
 2019-2032
SDG&E:       
Cash flow hedge(1)
142
 2019 142
 2019


INTEREST RATE DERIVATIVES
(Dollars in millions)
 March 31, 2020 December 31, 2019
 Notional debt Maturities Notional debt Maturities
Sempra Energy Consolidated:       
Cash flow hedges$1,531
 2020-2034 $1,445
 2020-2034
(1)
Includes Otay Mesa VIE. All of SDG&E’s interest rate derivatives relate to Otay Mesa VIE. In December 2018, OMEC LLC entered into new floating-to-fixed interest rate swaps with notional amounts of $159 million effective April 30, 2019 through October 31, 2019, and a swaption with a notional amount of $142 million effective October 31, 2019 through October 31, 2023.
FOREIGN CURRENCY DERIVATIVES
We utilize cross-currency swaps to hedge exposure related to Mexican peso-denominated debt at our Mexican subsidiaries and JVs. These cash flow hedges exchange our Mexican peso-denominated principal and interest payments into the U.S. dollar and swap Mexican variable interest rates for U.S. fixed interest rates. From time to time, Sempra Mexico and its JVs may use other foreign currency derivatives to hedge exposures related to cash flows associated with revenues from contracts denominated in Mexican pesos that are indexed to the U.S. dollar.
We are also exposed to exchange rate movements at our Mexican subsidiaries and JVs, which have U.S. dollar-denominated cash balances, receivables, payables and debt (monetary assets and liabilities) that give rise to Mexican currency exchange rate movements for Mexican income tax purposes. They also have deferred income tax assets and liabilities denominated in the Mexican peso, which must be translated to U.S. dollars for financial reporting purposes. In addition, monetary assets and liabilities and certain nonmonetary assets and liabilities are adjusted for Mexican inflation for Mexican income tax purposes. We utilize foreign currency derivatives as a means to manage the risk of exposure to significant fluctuations in our income tax expense and equity earnings from these impacts; however, we generally do not hedge our deferred income tax assets and liabilities or for inflation.
We also utilize foreign currency derivatives to hedge exposure to fluctuations in the Peruvian sol and Chilean peso related to the sale of our operations in Peru and Chile, respectively.
The following table presents the net notional amounts of our foreign currency derivatives, excluding JVs.
FOREIGN CURRENCY DERIVATIVES(Dollars in millions)
March 31, 2019 December 31, 2018March 31, 2020 December 31, 2019
Notional amount Maturities Notional amount MaturitiesNotional amount Maturities Notional amount Maturities
Sempra Energy Consolidated:              
Cross-currency swaps$306
 2019-2023 $306
 2019-2023$306
 2020-2023 $306
 2020-2023
Other foreign currency derivatives1,084
 2019-2020 1,158
 2019-20201,939
 2020-2021 1,796
 2020-2021
FINANCIAL STATEMENT PRESENTATION
The Condensed Consolidated Balance Sheets reflect the offsetting of net derivative positions and cash collateral with the same counterparty when a legal right of offset exists. The following tables provide the fair values of derivative instruments on the Condensed Consolidated Balance Sheets, including the amount of cash collateral receivables that were not offset, as the cash collateral was in excess of liability positions.


DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS(Dollars in millions)
March 31, 2019March 31, 2020
Current
assets:
Other(1)
 Other
assets:
Sundry		 Current liabilities:
Other		 Deferred
credits
and other
liabilities:
Deferred credits and other
Other current assets(1)
 Other long-term assets Other current liabilities Deferred credits and other
Sempra Energy Consolidated:              
Derivatives designated as hedging instruments:              
Interest rate and foreign exchange instruments(2)
$—
 $—
 $(5) $(146)$15
 $—
 $(29) $(210)
Derivatives not designated as hedging instruments:              
Foreign exchange instruments12
 —
 —
 —
23
 —
 (82) —
Associated offsetting foreign exchange instruments(23) —
 23
 —
Commodity contracts not subject to rate recovery58
 6
 (65) (5)69
 9
 (69) (11)
Associated offsetting commodity contracts(47) (2) 47
 2
(65) (3) 65
 3
Commodity contracts subject to rate recovery50
 236
 (41) (65)23
 77
 (47) (50)
Associated offsetting commodity contracts(5) (2) 5
 2
(2) (2) 2
 2
Associated offsetting cash collateral—
 —
 3
 3
—
 —
 13
 —
Net amounts presented on the balance sheet68
 238
 (56) (209)40
 81
 (124) (266)
Additional cash collateral for commodity contracts
not subject to rate recovery
25
 —
 —
 —
37
 —
 —
 —
Additional cash collateral for commodity contracts
subject to rate recovery
26
 —
 —
 —
19
 —
 —
 —
Total(3)
$119
 $238
 $(56) $(209)
Total(2)
$96
 $81
 $(124) $(266)
SDG&E:              
Derivatives not designated as hedging instruments:              
Commodity contracts subject to rate recovery$45
 $234
 $(37) $(65)$20
 $77
 $(43) $(50)
Associated offsetting commodity contracts(5) (2) 5
 2
(2) (2) 2
 2
Associated offsetting cash collateral—
 —
 3
 3
—
 —
 13
 —
Net amounts presented on the balance sheet40
 232
 (29) (60)18
 75
 (28) (48)
Additional cash collateral for commodity contracts
subject to rate recovery
25
 —
 —
 —
15
 —
 —
 —
Total(3)
$65
 $232

$(29)
$(60)
Total(2)
$33
 $75

$(28)
$(48)
SoCalGas:              
Derivatives not designated as hedging instruments:              
Commodity contracts subject to rate recovery$5
 $2
 $(4) $—
$3
 $—
 $(4) $—
Net amounts presented on the balance sheet5
 2
 (4) —
3
 —
 (4) —
Additional cash collateral for commodity contracts
subject to rate recovery
1
 —
 —
 —
4
 —
 —
 —
Total$6
 $2
 $(4) $—
$7
 $—
 $(4) $—
 
(1) Included in Current Assets: Fixed-Price Contracts and Other Derivatives for SDG&E.
(2) Includes a negligible amount for Otay Mesa VIE.
(3)Normal purchase contracts previously measured at fair value are excluded.




DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS(Dollars in millions)
December 31, 2018December 31, 2019
Current
assets:
Other(1)
 Other
assets:
Sundry		 Current liabilities:
Other		 Deferred
credits
and other
liabilities:
Deferred credits and other
Other current assets(1)
 Other long-term assets Other current liabilities Deferred credits and other
Sempra Energy Consolidated:              
Derivatives designated as hedging instruments:              
Interest rate and foreign exchange instruments(2)
$2
 $—
 $(3) $(147)$—
 $3
 $(17) $(140)
Derivatives not designated as hedging instruments:              
Foreign exchange instruments41
 —
 (20) —
Associated offsetting foreign exchange instruments(20) —
 20
 —
Commodity contracts not subject to rate recovery153
 7
 (164) (6)34
 11
 (41) (10)
Associated offsetting commodity contracts(133) (3) 133
 3
(32) (2) 32
 2
Commodity contracts subject to rate recovery64
 233
 (42) (72)41
 76
 (47) (47)
Associated offsetting commodity contracts(6) (2) 6
 2
(6) (3) 6
 3
Associated offsetting cash collateral—
 —
 —
 2
—
 —
 14
 —
Net amounts presented on the balance sheet80
 235
 (70) (218)58
 85
 (53) (192)
Additional cash collateral for commodity contracts
not subject to rate recovery
19
 —
 —
 —
43
 —
 —
 —
Additional cash collateral for commodity contracts
subject to rate recovery
33
 —
 —
 —
25
 —
 —
 —
Total(3)
$132
 $235
 $(70) $(218)
Total(2)
$126
 $85
 $(53) $(192)
SDG&E:              
Derivatives designated as hedging instruments:       
Interest rate instruments(2)
$—
 $—
 $(1) $—
Derivatives not designated as hedging instruments:              
Commodity contracts subject to rate recovery60
 233
 (37) (72)$30
 $76
 $(41) $(47)
Associated offsetting commodity contracts(6) (2) 6
 2
(4) (3) 4
 3
Associated offsetting cash collateral—
 —
 —
 2
—
 —
 14
 —
Net amounts presented on the balance sheet54
 231
 (32) (68)26
 73
 (23) (44)
Additional cash collateral for commodity contracts
subject to rate recovery
28
 —
 —
 —
16
 —
 —
 —
Total(3)
$82
 $231
 $(32) $(68)
Total(2)
$42
 $73
 $(23) $(44)
SoCalGas:              
Derivatives not designated as hedging instruments:              
Commodity contracts subject to rate recovery$4
 $—
 $(5) $—
$11
 $—
 $(6) $—
Associated offsetting commodity contracts(2) —
 2
 —
Net amounts presented on the balance sheet4
 —
 (5) —
9
 —
 (4) —
Additional cash collateral for commodity contracts
subject to rate recovery
5
 —
 —
 —
9
 —
 —
 —
Total$9
 $—
 $(5) $—
$18
 $—
 $(4) $—
(1) Included in Current Assets: Fixed-Price Contracts and Other Derivatives for SDG&E.
(2) Includes Otay Mesa VIE. All of SDG&E’s amounts relate to Otay Mesa VIE.
(3) Normal purchase contracts previously measured at fair value are excluded.



The table below includes the effects of derivative instruments designated as cash flow hedges on the Condensed Consolidated Statements of Operations and in OCI and AOCI:
CASH FLOW HEDGE IMPACTS(Dollars in millions)
Pretax gain (loss)
recognized in OCI
   
Pretax gain (loss) reclassified
from AOCI into earnings
Pretax (loss) gain
recognized in OCI
   
Pretax (loss) gain reclassified
from AOCI into earnings
Three months ended March 31,   Three months ended March 31,Three months ended March 31,   Three months ended March 31,
2019 2018 Location 2019 20182020 2019 Location 2020 2019
Sempra Energy Consolidated:                  
Interest rate and foreign
exchange instruments(1)
$(3) $54
 Interest Expense $(1) $2
$(92) $(3) 
Interest Expense(1)
 $(2) $(1)
    Other Income, Net 3
 18
    Other (Expense) Income, Net (41) 3
Interest rate and foreign
exchange instruments
(68) 70
 Equity Earnings (Losses) (1) (4)(172) (68) Equity Earnings —
 (1)
Foreign exchange instruments(3) (7) 
Revenues: Energy-
Related Businesses
 (1) —
21
 (3) Revenues: Energy-
Related Businesses		 2
 (1)
    Other (Expense) Income, Net 2
 —
Total$(74) $117
   $—
 $16
$(243) $(74)   $(39) $—
SDG&E:                  
Interest rate instruments(1)
$—
 $1
 Interest Expense $(1) $(3)$—
 $—
 
Interest Expense(1)
 $—
 $(1)
(1) 
Amounts include Otay Mesa VIE. All of SDG&E’s interest rate derivative activity relates to Otay Mesa VIE. On August 14, 2019, Otay Mesa Energy Center LLC paid in full its variable-rate loan and terminated its interest rate swaps.

For Sempra Energy Consolidated, we expect that net gainslosses of $5$69 million, which are net of income tax expense,benefit, that are currently recorded in AOCI (including $1 million of losses in NCI related to Otay Mesa VIE at SDG&E) 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 March 31, 20192020 is approximately 1315 years and less than one year for Sempra Energy Consolidated and SDG&E, respectively.Consolidated. The maximum remaining term for which we are hedging exposure to the variability of cash flows at our equity method investees is 1520 years.
The following table summarizes the effects of derivative instruments not designated as hedging instruments on the Condensed Consolidated Statements of Operations.
UNDESIGNATED DERIVATIVE IMPACTSUNDESIGNATED DERIVATIVE IMPACTSUNDESIGNATED DERIVATIVE IMPACTS   
(Dollars in millions)(Dollars in millions)(Dollars in millions)   
 Pretax gain (loss) on derivatives recognized in earnings Pretax (loss) gain on derivatives recognized in earnings
 Three months ended
March 31,		 Three months ended March 31,
Location2019 2018Location2020 2019
Sempra Energy Consolidated:        
Foreign exchange instrumentsOther Income, Net$10
 $44
Other (Expense) Income, Net$(114) $10
Commodity contracts not subject
to rate recovery
Revenues: Energy-Related
Businesses
—
 (9)
Revenues: Energy-Related
Businesses
51
 —
Commodity contracts subject
to rate recovery
Cost of Electric Fuel
and Purchased Power
2
 2
Cost of Electric Fuel
and Purchased Power
(9) 2
Commodity contracts subject
to rate recovery
Cost of Natural Gas2
 1
Cost of Natural Gas(3) 2
Total $14
 $38
 $(75) $14
SDG&E:        
Commodity contracts subject
to rate recovery
Cost of Electric Fuel
and Purchased Power
$2
 $2
Cost of Electric Fuel
and Purchased Power
$(9) $2
SoCalGas:        
Commodity contracts subject
to rate recovery
Cost of Natural Gas$2
 $1
Cost of Natural Gas$(3) $2



CONTINGENT FEATURES
For Sempra Energy Consolidated, SDG&E and SoCalGas, certain of our derivative instruments contain credit limits which vary depending on our credit ratings. Generally, these provisions, if applicable, may reduce our credit limit if a specified credit rating agency reduces our ratings. In certain cases, if our credit ratings were to fall below investment grade, the counterparty to these derivative liability instruments could request immediate payment or demand immediate and ongoing full collateralization. 
For Sempra Energy Consolidated, the total fair value of this group of derivative instruments in a net liability position at March 31, 20192020 and December 31, 20182019 was $14$5 million and $16$21 million, respectively. For SoCalGas, the total fair value of this group of derivative instruments in a net liability position at both March 31, 20192020 and December 31, 20182019 was $4 million and $5 million, respectively.million. At March 31, 2019,2020, if the credit ratings of Sempra Energy or SoCalGas were reduced below investment grade, $15$5 million and $4 million, respectively, of additional assets could be required to be posted as collateral for these derivative contracts.
For Sempra Energy Consolidated, SDG&E and SoCalGas, some of our derivative contracts contain a provision that would permit the counterparty, in certain circumstances, to request adequate assurance of our performance under the contracts. Such additional assurance, if needed, is not material and is not included in the amounts above.
     
NOTE 9. FAIR VALUE MEASUREMENTS
We discuss the valuation techniques and inputs we use to measure fair value and the definition of the three levels of the fair value hierarchy in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
RECURRING FAIR VALUE MEASURES
The three tables below, by level within the fair value hierarchy, set forth our financial assets and liabilities that were accounted for at fair value on a recurring basis at March 31, 20192020 and December 31, 2018.2019. We classify financial assets and liabilities in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair valuevalued 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, 2018.2019.
The fair value of commodity derivative assets and liabilities is presented in accordance with our netting policy, as we discuss in Note 8 under “Financial Statement Presentation.”
The determination of fair values, shown in the tables below, incorporates various factors, including but not limited to, the credit standing of the counterparties involved and the impact of credit enhancements (such as cash deposits, letters of credit and priority interests).
Our financial assets and liabilities that were accounted for at fair value on a recurring basis in the tables below include the following (other than a $7$5 million investment at MarchDecember 31, 2019, measured at net asset value):
▪Nuclear decommissioning trusts reflect the assets of SDG&E’s NDT, excluding cash balances. A third partythird-party trustee values the trust assets using prices from a pricing service based on a market approach. We validate these prices by comparison to prices from other independent data sources. Securities are valued using quoted prices listed on nationally recognized securities exchanges or based on closing prices reported in the active market in which the identical security is traded (Level 1). Other securities are valued based on yields that are currently available for comparable securities of issuers with similar credit ratings (Level 2).
▪For commodity contracts, interest rate derivatives and foreign exchange instruments, we primarily use a market or income approach with market participant assumptions to value these derivatives. Market participant assumptions include those about risk, and the risk inherent in the inputs to the valuation techniques. These inputs can be readily observable, market corroborated, or generally unobservable. We have exchange-traded derivatives that are valued based on quoted prices in active markets for the identical instruments (Level 1). We also may have other commodity derivatives that are valued using industry standard models that consider quoted forward prices for commodities, time value, current market and contractual prices for the underlying instruments, volatility factors, and other relevant economic measures (Level 2). Level 3 recurring items relate to CRRs and long-term, fixed-price electricity positions at SDG&E, as we discuss below in “Level 3 Information.”
▪Rabbi Trust investments include marketable securities that we value using a market approach based on closing prices reported in the active market in which the identical security is traded (Level 1). These investments in marketable securities were negligible at both March 31, 20192020 and December 31, 2018.2019.



RECURRING FAIR VALUE MEASURES – SEMPRA ENERGY CONSOLIDATED(Dollars in millions)
Fair value at March 31, 2019Fair value at March 31, 2020
Level 1 Level 2 Level 3 TotalLevel 1 Level 2 Level 3 Total
Assets:              
Nuclear decommissioning trusts:              
Equity securities$454
 $5
 $—
 $459
$299
 $5
 $—
 $304
Debt securities:              
Debt securities issued by the U.S. Treasury and other       
U.S. government corporations and agencies39
 9
 —
 48
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies
46
 24
 —
 70
Municipal bonds—
 279
 —
 279
—
 330
 —
 330
Other securities—
 238
 —
 238
—
 269
 —
 269
Total debt securities39
 526
 —
 565
46
 623
 —
 669
Total nuclear decommissioning trusts(1)
493
 531
 —
 1,024
345
 628
 —
 973
Interest rate and foreign exchange instruments—
 12
 —
 12
—
 15
 —
 15
Commodity contracts not subject to rate recovery—
 15
 —
 15
—
 10
 —
 10
Effect of netting and allocation of collateral(2)
25
 —
 —
 25
37
 —
 —
 37
Commodity contracts subject to rate recovery—
 8
 271
 279
—
 4
 92
 96
Effect of netting and allocation of collateral(2)
21
 —
 5
 26
14
 —
 5
 19
Total$539
 $566
 $276
 $1,381
$396
 $657
 $97
 $1,150
              
Liabilities:              
Interest rate and foreign exchange instruments$—
 $151
 $—
 $151
$—
 $298
 $—
 $298
Commodity contracts not subject to rate recovery—
 21
 —
 21
—
 12
 —
 12
Commodity contracts subject to rate recovery6
 4
 89
 99
13
 4
 76
 93
Effect of netting and allocation of collateral(2)
(6) —
 —
 (6)(13) —
 —
 (13)
Total$—
 $176
 $89
 $265
$—
 $314
 $76
 $390
              
Fair value at December 31, 2018Fair value at December 31, 2019
Level 1 Level 2 Level 3 TotalLevel 1 Level 2 Level 3 Total
Assets:              
Nuclear decommissioning trusts:              
Equity securities$407
 $4
 $—
 $411
$503
 $6
 $—
 $509
Debt securities:              
Debt securities issued by the U.S. Treasury and other       
U.S. government corporations and agencies43
 10
 —
 53
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies
46
 11
 —
 57
Municipal bonds—
 269
 —
 269
—
 282
 —
 282
Other securities—
 234
 —
 234
—
 226
 —
 226
Total debt securities43
 513
 —
 556
46
 519
 —
 565
Total nuclear decommissioning trusts(1)
450
 517
 —
 967
549
 525
 —
 1,074
Interest rate and foreign exchange instruments—
 2
 —
 2
—
 24
 —
 24
Commodity contracts not subject to rate recovery—
 24
 —
 24
—
 11
 —
 11
Effect of netting and allocation of collateral(2)
19
 —
 —
 19
43
 —
 —
 43
Commodity contracts subject to rate recovery2
 9
 278
 289
5
 8
 95
 108
Effect of netting and allocation of collateral(2)
28
 —
 5
 33
11
 8
 6
 25
Total$499
 $552
 $283
 $1,334
$608
 $576
 $101
 $1,285
              
Liabilities:              
Interest rate and foreign exchange instruments$—
 $150
 $—
 $150
$—
 $157
 $—
 $157
Commodity contracts not subject to rate recovery—
 34
 —
 34
—
 17
 —
 17
Commodity contracts subject to rate recovery2
 5
 99
 106
14
 4
 67
 85
Effect of netting and allocation of collateral(2)
(2) —
 —
 (2)(14) —
 —
 (14)
Total$—
 $189
 $99
 $288
$—
 $178
 $67
 $245
(1) 
Excludes cash balances and cash equivalents.
(2)
Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.


RECURRING FAIR VALUE MEASURES – SDG&E
(Dollars in millions)
 Fair value at March 31, 2019
 Level 1 Level 2 Level 3 Total
Assets:       
Nuclear decommissioning trusts:       
Equity securities$454
 $5
 $—
 $459
Debt securities:       
Debt securities issued by the U.S. Treasury and other       
U.S. government corporations and agencies39
 9
 —
 48
Municipal bonds—
 279
 —
 279
Other securities—
 238
 —
 238
Total debt securities39
 526
 —
 565
Total nuclear decommissioning trusts(1)
493
 531
 —
 1,024
Commodity contracts subject to rate recovery—
 1
 271
 272
Effect of netting and allocation of collateral(2)
20
 —
 5
 25
Total$513
 $532
 $276
 $1,321
        
Liabilities:       
Commodity contracts subject to rate recovery$6
 $—
 $89
 $95
Effect of netting and allocation of collateral(2)
(6) —
 —
 (6)
Total$—
 $—
 $89
 $89
        
 Fair value at December 31, 2018
 Level 1 Level 2 Level 3 Total
Assets:       
Nuclear decommissioning trusts:       
Equity securities$407
 $4
 $—
 $411
Debt securities:       
Debt securities issued by the U.S. Treasury and other       
U.S. government corporations and agencies43
 10
 —
 53
Municipal bonds—
 269
 —
 269
Other securities—
 234
 —
 234
Total debt securities43
 513
 —
 556
Total nuclear decommissioning trusts(1)
450
 517
 —
 967
Commodity contracts subject to rate recovery1
 6
 278
 285
Effect of netting and allocation of collateral(2)
23
 —
 5
 28
Total$474
 $523
 $283
 $1,280
        
Liabilities:       
Interest rate instruments$—
 $1
 $—
 $1
Commodity contracts subject to rate recovery2
 —
 99
 101
Effect of netting and allocation of collateral(2)
(2) —
 —
 (2)
Total$—
 $1
 $99
 $100
(1)
Excludes cash balances and cash equivalents.
(2) 
Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.
 


RECURRING FAIR VALUE MEASURES – SOCALGAS
RECURRING FAIR VALUE MEASURES – SDG&ERECURRING FAIR VALUE MEASURES – SDG&E
(Dollars in millions)
Fair value at March 31, 2019Fair value at March 31, 2020
Level 1 Level 2 Level 3 TotalLevel 1 Level 2 Level 3 Total
Assets:              
Nuclear decommissioning trusts:       
Equity securities$299
 $5
 $—
 $304
Debt securities:       
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies
46
 24
 —
 70
Municipal bonds—
 330
 —
 330
Other securities—
 269
 —
 269
Total debt securities46
 623
 —
 669
Total nuclear decommissioning trusts(1)
345
 628
 —
 973
Commodity contracts subject to rate recovery$—
 $7
 $—
 $7
—
 1
 92
 93
Effect of netting and allocation of collateral(1)
1
 —
 —
 1
Effect of netting and allocation of collateral(2)
10
 —
 5
 15
Total$1
 $7
 $—
 $8
$355
 $629
 $97
 $1,081
              
Liabilities:              
Commodity contracts subject to rate recovery$—
 $4
 $—
 $4
$13
 $—
 $76
 $89
Effect of netting and allocation of collateral(2)
(13) —
 —
 (13)
Total$—
 $4
 $—
 $4
$—
 $—
 $76
 $76
              
Fair value at December 31, 2018Fair value at December 31, 2019
Level 1 Level 2 Level 3 TotalLevel 1 Level 2 Level 3 Total
Assets:              
Nuclear decommissioning trusts:       
Equity securities$503
 $6
 $—
 $509
Debt securities:       
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies
46
 11
 —
 57
Municipal bonds—
 282
 —
 282
Other securities—
 226
 —
 226
Total debt securities46
 519
 —
 565
Total nuclear decommissioning trusts(1)
549
 525
 —
 1,074
Commodity contracts subject to rate recovery$1
 $3
 $—
 $4
1
 3
 95
 99
Effect of netting and allocation of collateral(1)
5
 —
 —
 5
Effect of netting and allocation of collateral(2)
10
 —
 6
 16
Total$6
 $3
 $—
 $9
$560
 $528
 $101
 $1,189
              
Liabilities:              
Commodity contracts subject to rate recovery$—
 $5
 $—
 $5
$14
 $—
 $67
 $81
Effect of netting and allocation of collateral(2)
(14) —
 —
 (14)
Total$—
 $5
 $—
 $5
$—
 $—
 $67
 $67
(1)
Excludes cash and cash equivalents.
(2)
Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.


RECURRING FAIR VALUE MEASURES – SOCALGAS
(Dollars in millions)
 Fair value at March 31, 2020
 Level 1 Level 2 Level 3 Total
Assets:       
Commodity contracts subject to rate recovery$—
 $3
 $—
 $3
Effect of netting and allocation of collateral(1)
4
 —
 —
 4
Total$4
 $3
 $—
 $7
        
Liabilities:       
Commodity contracts subject to rate recovery$—
 $4
 $—
 $4
Total$—
 $4
 $—
 $4
        
 Fair value at December 31, 2019
 Level 1 Level 2 Level 3 Total
Assets:       
Commodity contracts subject to rate recovery$4
 $5
 $—
 $9
Effect of netting and allocation of collateral(1)
1
 8
 —
 9
Total$5
 $13
 $—
 $18
        
Liabilities:       
Commodity contracts subject to rate recovery$—
 $4
 $—
 $4
Total$—
 $4
 $—
 $4
(1) 
Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.
Level 3 Information
The table below sets forth reconciliations of changes in the fair value of CRRs and long-term, fixed-price electricity positions classified as Level 3 in the fair value hierarchy for Sempra Energy Consolidated and SDG&E.
LEVEL 3 RECONCILIATIONS(1)
LEVEL 3 RECONCILIATIONS(1)
LEVEL 3 RECONCILIATIONS(1)
(Dollars in millions)
Three months ended March 31,Three months ended March 31,
2019 20182020 2019
Balance at January 1$179
 $(28)$28
 $179
Realized and unrealized gains5
 4
Allocated transmission instruments—
 3
Realized and unrealized (losses) gains(5) 5
Settlements(2) (19)(7) (2)
Balance at March 31$182
 $(40)$16
 $182
Change in unrealized gains (losses) relating to instruments still held at March 31$13
 $(8)$(6) $13
(1) 
Excludes the effect of the contractual ability to settle contracts under master netting agreements.

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


CRRs are recorded at fair value based almost entirely on the most current auction prices published by the California ISO, an objective source. Annual auction prices are published once a year, typically in the middle of November, and are the basis for valuing CRRs settling in the following year. For the CRRs settling from January 1 to December 31, the auction price inputs, at a given location, were in the following ranges for the years indicated below:
CONGESTION REVENUE RIGHTS AUCTION PRICE INPUTS
   
Settlement yearPrice per MWhMedian price per MWhPrice per MWhMedian price per MWh
2020$(3.77)to$6.03
$(1.58)
2019$(8.57)to$35.21
$(2.94)(8.57)to35.21
(2.94)
2018(7.25)to11.99
0.09



The impact associated with discounting is negligible. Because these auction prices are a less observable input, these instruments are classified as Level 3. The fair value of these instruments is derived from auction price differences between two locations. Positive values between two locations represent expected future reductions in congestion costs, whereas negative values between two locations represent expected future charges. Valuation of our CRRs is sensitive to a change in auction price. If auction prices at one location increase (decrease) relative to another location, this could result in a higher (lower) fair value measurement. We summarize CRR volumes in Note 8.
Long-term, fixed-price electricity positions that are valued using significant unobservable data are classified as Level 3 because the contract terms relate to a delivery location or tenor for which observable market rate information is not available. The fair value of the net electricity positions classified as Level 3 is derived from a discounted cash flow model using market electricity forward price inputs. The range and weighted-average price of these inputs at March 31 were as follows:
LONG-TERM, FIXED-PRICE ELECTRICITY POSITIONS PRICE INPUTSLONG-TERM, FIXED-PRICE ELECTRICITY POSITIONS PRICE INPUTS  LONG-TERM, FIXED-PRICE ELECTRICITY POSITIONS PRICE INPUTS  
     
Settlement year Price per MWh Weighted-average price per MWhPrice per MWhWeighted-average price per MWh
2020$16.51
to$52.45
$35.41
2019$23.25
to$81.75
$42.49
 23.25
to 81.75
 42.49
2018 20.00
to 47.65
 35.42

A significant increase or decrease(decrease) in market electricity forward prices would result in a significantly higher or lower(lower) fair value, respectively.value. We summarize long-term, fixed-price electricity position volumes in Note 8.
Realized gains and losses associated with CRRs and long-term electricity positions, which are recoverable in rates, are recorded in Cost of Electric Fuel and Purchased Power on the Condensed Consolidated Statements of Operations. Because unrealized gains and losses are recorded as regulatory assets and liabilities, they do not affect earnings.


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


FAIR VALUE OF FINANCIAL INSTRUMENTS(Dollars in millions)
March 31, 2019March 31, 2020
Carrying
amount		 Fair valueCarrying
amount		 Fair value
 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Sempra Energy Consolidated:                  
Long-term amounts due from unconsolidated affiliates$668
 $—
 $689
 $—
 $689
Long-term amounts due from unconsolidated affiliates(1)
$599
 $—
 $627
 $6
 $633
Long-term amounts due to unconsolidated affiliates38
 —
 37
 —
 37
263
 —
 238
 —
 238
Total long-term debt(1)(2)
20,814
 —
 20,598
 248
 20,846
Total long-term debt(2)
21,204
 —
 22,049
 —
 22,049
SDG&E:                  
Total long-term debt(2)(3)
$4,978
 $—
 $4,918
 $220
 $5,138
Total long-term debt(3)
$5,523
 $—
 $6,281
 $—
 $6,281
SoCalGas:                  
Total long-term debt(4)
$3,459
 $—
 $3,595
 $—
 $3,595
$4,459
 $—
 $4,894
 $—
 $4,894
                  
December 31, 2018December 31, 2019
Carrying
amount		 Fair valueCarrying
amount		 Fair value
 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Sempra Energy Consolidated:                  
Long-term amounts due from unconsolidated affiliates$644
 $—
 $648
 $4
 $652
$742
 $—
 $759
 $—
 $759
Long-term amounts due to unconsolidated affiliates37
 —
 35
 —
 35
195
 —
 184
 —
 184
Total long-term debt(2)(5)
21,340
 —
 20,616
 247
 20,863
Total long-term debt(2)
21,247
 —
 22,638
 26
 22,664
SDG&E:                  
Total long-term debt(6)
$4,996
 $—
 $4,897
 $220
 $5,117
Total long-term debt(3)
$5,140
 $—
 $5,662
 $—
 $5,662
SoCalGas:                  
Total long-term debt(7)
$3,459
 $—
 $3,505
 $—
 $3,505
Total long-term debt(4)
$3,809
 $—
 $4,189
 $—
 $4,189
(1)
Before allowances for credit losses of $7 million at March 31, 2020.
(2) 
Before reductions of unamortized discount and debt issuance costs of $201$228 million and $225 million at March 31, 2020 and December 31, 2019, respectively, and excluding finance lease obligations of $1,277 million.
(2)
Level 3 instruments includes $220$1,301 million and $1,289 million at both March 31, 20192020 and December 31, 2018 related to Otay Mesa VIE.2019, respectively.
(3) 
Before reductions of unamortized discount and debt issuance costs of $47 million and $48 million at March 31, 2020 and December 31, 2019, respectively, and excluding finance lease obligations of $1,272 million.$1,268 million and $1,270 million at March 31, 2020 and December 31, 2019, respectively.
(4) 
Before reductions of unamortized discount and debt issuance costs of $32$41 million and $34 million at March 31, 2020 and December 31, 2019, respectively, and excluding finance lease obligations of $5 million.
(5)
Before reductions of unamortized discount and debt issuance costs of $206$33 million and excluding build-to-suit$19 million at March 31, 2020 and capital lease obligations of $1,413 million.
(6)
Before reductions of unamortized discount and debt issuance costs of $49 million and excluding capital lease obligations of $1,272 million.
(7)
Before reductions of unamortized discount and debt issuance costs of $32 million and excluding capital lease obligations of $3 million.December 31, 2019, respectively.

We provide the fair values for the securities held in the NDT related to SONGS in Note 10.
     
NOTE 10. SAN ONOFRE NUCLEAR GENERATING STATION
We provide below updates to ongoing matters related to SONGS, a nuclear generating facility near San Clemente, California that ceased operations in June 2013, and in which SDG&E has a 20-percent20% ownership interest. We discuss SONGS further in Note 15 of the Notes to Consolidated Financial Statements in the Annual Report.
NUCLEAR DECOMMISSIONING AND FUNDING


As a result of Edison’s decision to permanently retire SONGS Units 2 and 3, Edison began the decommissioning phase of the plant. We expect the majority of the decommissioning work to take 10 years after receipt of the required permits. The coastal development permit was issued in October 2019. The Samuel Lawrence Foundation filed a writ petition under the California Coastal Act in LA Superior Court in December 2019 seeking to invalidate the permit and to obtain injunctive relief to stop decommissioning work. Major decommissioning work began in 2020. Decommissioning of Unit 1, removed from service in 1992, is largely complete. The remaining work for Unit 1 will be completed once Units 2 and 3 are dismantled and the spent fuel is removed from the site. The majority of the dismantlement work is expected to take 10 years.site. The spent fuel is currently being stored on-site, until the DOE identifies a spent fuel storage facility and puts in place a program for the fuel’s disposal, as we discuss below. SDG&E is responsible for approximately 20 percent20% of the total contract price.
In accordance with state and federal requirements and regulations, SDG&E has assets held in the NDT to fund its share of decommissioning costs for SONGS Units 1, 2 and 3. The amounts collected in rates for SONGS’ decommissioning are invested in the NDT, which is comprised of externally managed trust funds. Amounts held by the NDT are invested in accordance with


CPUC regulations. SDG&E classifies debt and equity securities held in the NDT as available-for-sale. The NDT assets are presented on the Sempra Energy and SDG&E Condensed Consolidated Balance Sheets at fair value with the offsetting credits recorded in noncurrent Regulatory Liabilities.
Except for the use of funds for the planning of decommissioning activities or NDT administrative costs, CPUC approval is required for SDG&E to access the NDT assets to fund SONGS decommissioning costs for Units 2 and 3. In March 2020, SDG&E has received authorization from the CPUC to access NDT funds of up to $455$109 million for 2013 through 2019 (2019 forecasted) SONGS decommissioningforecasted 2020 costs. This includes up to $93 million authorized by the CPUC in January 2019 to be withdrawn from the NDT for forecasted 2019 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.finalized. SDG&E is awaiting the adoption of, or additional refinement to, the proposed regulations before determining whether the proposed regulations will allow SDG&E to access the NDT funds for reimbursement or payment of the spent fuel management costs incurred in 2017 and subsequent years. Further clarification of the proposed regulations could enable SDG&E to access the NDT to recover spent fuel management costs before Edison reaches final settlement with the DOE regarding the DOE’s reimbursement of these costs. Historically, the DOE’s reimbursements of spent fuel storage costs have not resulted in timely or complete recovery of these costs. We discuss the DOE’s responsibility for spent nuclear fuel below. The IRS held public hearings on the proposed regulations in October 2017. It is unclear when clarification of the proposed regulations might be provided or when the proposed regulations will be finalized.


The following table shows the fair values and gross unrealized gains and losses for the securities held in the NDT. We provide additional fair value disclosures for the NDT in Note 9.
NUCLEAR DECOMMISSIONING TRUSTS(Dollars in millions)
Cost 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair
value
Cost 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair
value
At March 31, 2019:       
At March 31, 2020:       
Debt securities:              
Debt securities issued by the U.S. Treasury and other       
U.S. government corporations and agencies(1)
$48
 $—
 $—
 $48
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies(1)
$68
 $2
 $—
 $70
Municipal bonds(2)
271
 8
 —
 279
320
 12
 (2) 330
Other securities(3)
236
 3
 (1) 238
276
 4
 (11) 269
Total debt securities555
 11
 (1) 565
664
 18
 (13) 669
Equity securities166
 299
 (6) 459
141
 185
 (22) 304
Cash and cash equivalents13
 —
 —
 13
14
 —
 —
 14
Total$734
 $310
 $(7) $1,037
$819
 $203
 $(35) $987
At December 31, 2018:       
At December 31, 2019:       
Debt securities:              
Debt securities issued by the U.S. Treasury and other       
U.S. government corporations and agencies$52
 $1
 $—
 $53
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies$57
 $—
 $—
 $57
Municipal bonds266
 4
 (1) 269
270
 12
 —
 282
Other securities238
 1
 (5) 234
218
 9
 (1) 226
Total debt securities556
 6
 (6) 556
545
 21
 (1) 565
Equity securities168
 253
 (10) 411
176
 339
 (6) 509
Cash and cash equivalents7
 —
 —
 7
8
 —
 —
 8
Total$731
 $259
 $(16) $974
$729
 $360
 $(7) $1,082
(1) 
Maturity dates are 2019-2049.2021-2050.
(2) 
Maturity dates are 2019-2056.2020-2056.
(3) 
Maturity dates are 2019-2064.2020-2072.



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 NDTSALES OF SECURITIES IN THE NDT    
(Dollars in millions)(Dollars in millions)    
Three months ended March 31, Three months ended March 31,
2019 2018 2020 2019
Proceeds from sales$225
 $210
 $552
 $225
Gross realized gains5
 4
 92
 5
Gross realized losses(2) (3) (5) (2)


Net unrealized gains and losses, as well as realized gains and losses that are reinvested in the NDT, are included in noncurrent Regulatory Liabilities on Sempra Energy’s and SDG&E’s Condensed Consolidated Balance Sheets. We determine the cost of securities in the trusts on the basis of specific identification.
ASSET RETIREMENT OBLIGATION AND SPENT NUCLEAR FUEL
The present value of SDG&E’s ARO related to decommissioning costs for the SONGS units was $620$608 million at March 31, 2019.2020. That amount includes the cost to decommission Units 2 and 3, and the remaining cost to complete the decommissioning of Unit 1, which is substantially complete. The ARO for all three units is based on a cost study prepared in 2017 that is pending CPUC approval. The ARO for Units 2 and 3 reflects the acceleration of the start of decommissioning of these units as a result of the early closure of the plant. SDG&E’s share of total decommissioning costs in 20182020 dollars is approximately $810$860 million.
U.S. DEPARTMENT OF ENERGY NUCLEAR FUEL DISPOSAL


Spent nuclear fuel from SONGS is currently stored on-site in an ISFSI licensed by the Nuclear Regulatory Commission or temporarily in spent fuel pools. In October 2015, the California Coastal Commission approved Edison’s application forto expand the proposed expansion of the ISFSI at SONGS.ISFSI. The ISFSI expansion began construction in 2016 and the transfer of the spent nuclear fuel from Units 2 and 3 to the ISFSI began in 2018. Edison suspended this transfer on August 3, 2018 due to an incident that occurred when a spent fuel canister was getting loaded into the ISFSI. The incident did not result in any harm to the public or workers and the canister was subsequently safely loaded into the IFSFI. Edison has not resumed spent fuel transfer operations at SONGS, but has publicly stated that it will resume operations once it is satisfied all corrective actions are in place and proven effective and the NRC has completed its on-site inspection activities. The ISFSI will operate until 2049, when it is assumed that the DOE will have taken custody of all the SONGS spent fuel. The ISFSI would then be decommissioned, and the site restored to its original environmental state. Until then, SONGS owners are responsible for interim storage of spent nuclear fuel at SONGS.
The Nuclear Waste Policy Act of 1982 made the DOE responsible for accepting, transporting, and disposing of spent nuclear fuel. However, it is uncertain when the DOE will begin accepting spent nuclear fuel from SONGS. This delay will lead to increased costs for spent fuel storage. In November 2019, Edison filed a claim for spent fuel management costs in the U.S. Court of Federal Claims for the time period from January 2017 through July 2018. It is unclear when Edison will pursue litigation claims for spent fuel management costs incurred on or after August 1, 2018. SDG&E will continue to support Edison in its pursuit of claims on behalf of the SONGS co-owners against the DOE for its failure to timely accept the spent nuclear fuel. However, it is unclear whether Edison will enter into a new settlement with the DOE or pursue litigation claims for spent fuel management costs incurred on or after January 1, 2017.
NUCLEAR INSURANCE
SDG&E and the other owners of SONGS have insurance to cover claims from nuclear liability incidents arising at SONGS. Currently, this insurance provides $450 million in coverage limits, the maximum amount available, including coverage for acts of terrorism. In addition, the Price-Anderson Act provides an additional $110 million of coverage. If a nuclear liability loss occurs at SONGS and exceeds the $450 million insurance limit, this additional coverage would be available to provide a total of $560 million in coverage limits per incident.
TheAs a result of updated coverage assessments, the SONGS owners including SDG&E, also maintainhave nuclear property damage insurance at $1.5 billion, with a $500of $130 million, property damage sublimit on the ISFSI, which exceeds the minimum federal requirements of $1.06 billion.$50 million. This insurance coverage is provided through NEIL. The NEIL policies have specific exclusions and limitations that can result in reduced or eliminated coverage. Insured members as a group are subject to retrospective premium assessments to cover losses sustained by NEIL under all issued policies. SDG&E could be assessed up to $10.4$3.5 million of retrospective premiums based on overall member claims.


The nuclear property insurance program includes an industry aggregate loss limit for non-certified acts of terrorism (as defined by the Terrorism Risk Insurance Act) of $3.24 billion. This is the maximum amount that will be paid to insured members who suffer losses or damages from these non-certified terrorist acts.
     
NOTE 11. COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS
We accrue losses for a legal proceeding when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. However, the uncertainties inherent in legal proceedings make it difficult to reasonably estimate the costs and effects of resolving these matters. Accordingly, actual costs incurred may differ materially from amounts accrued, may exceed applicable insurance coverage and could materially adversely affect our business, cash flows, results of operations, financial condition and prospects. Unless otherwise indicated, we are unable to estimate reasonably possible losses in excess of any amounts accrued.
At March 31, 2019,2020, loss contingency accruals for legal matters, including associated legal fees, that are probable and estimable were $104$442 million for Sempra Energy Consolidated, including $54$297 million for SoCalGas. Amounts for Sempra Energy Consolidated and SoCalGas include $53$286 million for matters related to the Aliso Canyon natural gas storage facility gas leak, which we discuss below.
SDG&E
2007 Wildfire Litigation and Net Cost Recovery Status
SDG&E has resolved all civil litigation associated with three wildfires that occurred in October 2007.
As a result of a CPUC decision denying SDG&E’s request to recover wildfire costs, SDG&E wrote off the wildfire regulatory asset, resulting in a charge of $351 million ($208 million after-tax) in the third quarter of 2017. SDG&E continues to vigorously pursue recovery of these costs, which were incurred through settling claims brought under the doctrine of inverse condemnation. SDG&E applied to the CPUC for rehearing of its decision on January 2, 2018. On July 12, 2018, the CPUC adopted a decision denying the rehearing requests filed by SDG&E and other parties. On August 3, 2018, SDG&E filed an appeal with the California Court of Appeal seeking to reverse the CPUC’s decision. The filing also asked the court to direct the CPUC to award SDG&E recovery for payments made to settle inverse condemnation claims and limit any reasonableness review to the amounts of those payments. On November 13, 2018, the California Court of Appeal denied SDG&E’s petition. On November 26, 2018, SDG&E filed an appeal with the California Supreme Court seeking to reverse the decisions of the CPUC and the California Court of Appeal. In January 2019, the California Supreme Court denied SDG&E’s petition. On April 30, 2019, SDG&E filed an appeal with the U.S. Supreme Court seeking to reverse the CPUC’s decision.
SoCalGas
Aliso Canyon Natural Gas Storage Facility Gas Leak
OnFrom October 23, 2015 through February 11, 2016, SoCalGas discoveredexperienced a natural gas leak atfrom one of itsthe injection-and-withdrawal wells, SS25, at its Aliso Canyon natural gas storage facility 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. 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. SoCalGas calculated that approximately 4.62 Bcf of natural gas was released from the Aliso Canyon natural gas storage facility as a result of the Leak.
As discussed in “Cost Estimates and Accounting Impact” below, SoCalGas incurred significant costs for temporary relocation, to control the well and to stop the Leak, as well as to purchase natural gas to replace that lost through the Leak. As discussed in “Local Community Mitigation Efforts” below, during the Leak and in the months following the sealing of the well, SoCalGas provided support to nearby residents who wished to temporarily relocate as a result of the Leak. These programs ended in July 2016.
SoCalGas has additionally incurred significant costs to defend against and, in certain cases settle, civil and criminal litigation arising from the Leak; to pay the costs of the government-ordered response to the Leak including the costs for an independent


third party to conduct a root cause analysis to investigate the technical cause of the Leak; to respond to various government and agency investigations regarding the Leak, and to comply with increased regulation imposed as a result of the Leak. As further described below in “Civil and Criminal Litigation,Litigation” and “Regulatory Proceedings,” “Regulatory Proceedings”numerous lawsuits, investigations and “Governmental Investigations and Orders and Additional Regulation,” these activities are ongoing and SoCalGas anticipates that it will incur additional suchregulatory proceedings have been


initiated in response to the Leak, resulting in significant costs, which may also be significant.
Local Community Mitigation Efforts. Pursuant to a directive by the DPH and orders by the LA Superior Court, SoCalGas provided temporary relocation support to residents in the nearby community who requested it. 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 those residents to return home.
In May 2016, the DPH also issued a directive that SoCalGas additionally professionally clean the homes of all residents located within the Porter Ranch Neighborhood Council boundary, or who participated in the relocation program, or whotogether with other Leak-related costs are located within a five-mile radius of the Aliso Canyon natural gas storage facility and experienced symptoms from the Leak (the Directive). SoCalGas disputed the Directive as invalid and unenforceable, and filed a petition for writ of mandate to set aside the Directive. The Directive was settled and SoCalGas’ petition was dismissed pursuant to the Government Plaintiffs Settlement that we discussdiscussed below in “Civil“Cost Estimates, Accounting Impact and Criminal Litigation.Insurance.”
The costs incurred to remediate and stop the Leak and to mitigate local community impacts have been significant and may increase, and we may be subject to potentially significant damages, restitution, and civil, administrative and criminal fines, penalties and other costs. If any of these costs are not covered by insurance (including any costs in excess of applicable policy limits), if there are significant delays in receiving insurance recoveries, or if the insurance recoveries are subject to income taxes while the associated costs are not tax deductible, such amounts could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.
Civil and Criminal Litigation. As of May 2, 2019, 394April 29, 2020, 393 lawsuits, including approximately 48,50036,000 plaintiffs, are pending against SoCalGas related to the Leak, some of which have also named Sempra Energy. All these cases, other than a matter brought by the Los Angeles County District Attorney and the federal securities class action discussed below, are coordinated before a single court in the LA Superior Court for pretrial management (the Coordination Proceeding).management.
Pursuant to the Coordination Proceeding, inIn November 2017, in the coordinated proceeding, individuals and business entities asserting tort and Proposition 65 claims filed a Third Amended Consolidated Master Case Complaint for Individual Actions, through which their separate lawsuits will be managed for pretrial purposes. The consolidated complaint asserts causes of action for negligence, negligence per se, private and public nuisance (continuing and permanent), trespass, inverse condemnation, strict liability, negligent and intentional infliction of emotional distress, fraudulent concealment, loss of consortium, wrongful death and violations of Proposition 65 against SoCalGas, with certain causes of action also naming Sempra Energy. The consolidated complaint seeks compensatory and punitive damages for personal injuries, lost wages and/or lost profits, property damage and diminution in property value, injunctive relief, costs of future medical monitoring, civil penalties (including penalties associated with Proposition 65 claims alleging violation of requirements for warning about certain chemical exposures), and attorneys’ fees. SoCalGas is engaged in settlement discussions in connection with these actions and has recorded a related accrual of $277 million, inclusive of estimated legal costs, in Reserve for Aliso Canyon Costs on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets. The initial trial previously scheduled for June 2020 for a small number of randomly selected individual plaintiffs has been postponed, with a new trial date to be determined by the court.
In January 2017, pursuant to the Coordination Proceeding, two2 consolidated class action complaints were filed against SoCalGas and Sempra Energy, one1 on behalf of a putative class of persons and businesses who own or lease real property within a five-mile radius of the well (the Property Class Action), and a second on behalf of a putative class of all persons and entities conducting business within five miles of the facility (the Business Class Action). Both complaints assertThe Property Class Action asserts claims for strict liability for ultra-hazardous activities, negligence, andnegligence per se, violation of the California Unfair Competition Law. The Property Class Action also asserts claims for negligence per se,Law, 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.violation of the California Unfair Competition Law. Both complaints seek compensatory, statutory and punitive damages, injunctive relief and attorneys’ fees. In December 2017, the California Court of Appeal, Second Appellate District ruled that the purely economic damages alleged in the Business Class Action are not recoverable under the law. In February 2018, the California Supreme Court granted a petition filed by the plaintiffs to review that ruling, and oral argument on the appeal was heard in March 2019.
Complaints byThree property developers were filed complaints in 2017July and October of 2018 against SoCalGas and Sempra Energy alleging causes of action for strict liability, negligence per se, negligence, continuing nuisance, permanent nuisance and violation of the California Unfair Competition Law, as well as claims for negligence against certain directors of SoCalGas. The complaints seek compensatory, statutory and punitive damages, injunctive relief and attorneys’ fees. These claims are also joined in the Coordination Proceeding.
In addition to the lawsuits described above, in October 2018 and January 2019, complaints were filed on behalf of 51 plaintiffs who are firefighters stationed near the Aliso Canyon natural gas storage facility andwho allege they were injured by exposure to chemicals released during the Leak. The complaints against SoCalGas and Sempra Energy assert causes of actions for negligence,


negligence per se, private and public nuisance (continuing and permanent), trespass, inverse condemnation, strict liability, negligent and intentional infliction of emotional distress, fraudulent concealment and loss of consortium. The complaints seek compensatory and punitive damages for personal injuries, lost wages and/or lost profits, property damage and diminution in property value, and attorney’s fees. These claims are also joined in the Coordination Proceeding.
In addition, a federal securities class action alleging violation of the federal securities laws has been filed against Sempra Energy and certain of its officers and certain of its directors in the SDCA. In March 2018, the court dismissed the action with prejudice, and in December 2018 the court denied the plaintiffs’ request for reconsideration of that order. The plaintiffs have filed a notice of appeal of the dismissal.
FiveNaN 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, fourall of which were joined in aan Amended Consolidated Shareholder Derivative Complaint in August 2017.
Three actions by public entities were filed in February 2020. A fifth shareholder derivative action filed in March 2017 was dismissed in November 2019 on the Coordination Proceeding, including complaints bygrounds that the County of Los Angeles, on behalf of itself andplaintiff failed to adequately plead his claims, but the peoplecourt gave leave for him to amend the complaint to cure the defects.
In addition, a federal securities class action alleging violation of the Statefederal securities laws was filed against Sempra Energy and certain of California,its officers in July 2017 in the California Attorney General, acting in an independent capacity and on behalfU.S. District Court for the Southern District of California. In March 2018, the people ofcourt dismissed the State of California andaction with prejudice. The plaintiffs have appealed the CARB, and the Los Angeles City Attorney alleging public nuisance, unfair competition, and violations of California Health and Safety Code provisions regarding discharge of contaminants, among other things, which sought injunctive relief, abatement, civil penalties and damages.
Additionally, the County of Los Angeles filed a petition against DOGGR and its State Oil and Gas Supervisor and the CPUC and its Executive Director, as to which SoCalGas is the real party in interest, alleging that they failed to comply with the provisions of SB 380 in authorizing the resumption of injections of natural gas at the Aliso Canyon natural gas storage facility, and seeking a writ of mandate requiring DOGGR and the State Oil and Gas Supervisor to comply with SB 380 and CEQA, as well as declaratory and injunctive relief against any authorization to inject natural gas and attorneys’ fees.dismissal.
In August 2018, SoCalGas entered intoFebruary 2019, the LA Superior Court approved a settlement agreement withbetween SoCalGas and the Los Angeles City Attorney’s Office, the County of Los Angeles, the California Office of the Attorney General and CARB (collectively, the Government Plaintiffs)of 3 actions filed by these entities under which SoCalGas made payments and agreed to settle the three public entity actions and the Directive for payments andprovide funding for environmental projects totaling $120 million, including $21 million in civil penalties, (the Government Plaintiffs Settlement). Under the settlement agreement,as well as other safety-related commitments.
In September 2016, SoCalGas also agreed to continue its fence-line methane monitoring program, establishsettled a safety committee and hire an independent ombudsman to monitor and report on the safety at the facility. This settlement also fully resolves SoCalGas’ commitment to mitigate the actual natural gas released during the Leak and fulfills the requirements of the Governor’s Order, described below, for SoCalGas to pay for a mitigation program developed by CARB. The Government Plaintiffs Settlement was approved by the LA Superior Courtmisdemeanor criminal complaint filed in February 2019.
Separately, in February 2016 by the Los Angeles County District Attorney’s Office filed a misdemeanor criminal complaint against SoCalGas, seeking penalties and other remedies for alleged failurepleading no contest to a charge that it failed to provide timely notice of the Leak pursuant to California Health and Safety Code section 25510(a), Los Angeles County Code section 12.56.030, and Title 19 California Code of Regulations section 2703(a), 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 $6 million, reimbursements 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 LA Superior Court approved the settlement and entered judgment on the notice charge. Under the settlement, SoCalGas paid a $75,000 fine, $233,500 in penalties, and $246,673 to


reimburse costs incurred by Los Angeles County Fire Department’s Health and Hazardous Materials Division, as well as completed operational commitments estimated to cost approximately $6 million. Certain individuals who objectobjected to the settlement have filed an appealpetitioned the Court of Appeal to vacate the judgment, contending they should be granted restitution.
In July 2019, the Court of Appeal denied the petition in part, but remanded the matter to the trial court to give the petitioners an opportunity to prove damages stemming from only the three-day delay in reporting the Leak. Following the hearing, the trial court denied restitution. The costs of defending against these civil and criminal lawsuits, and any damages, restitution, and civil, administrative and criminal fines, penalties and other costs, if awarded or imposed, as well asalleged victims have asked the costs of mitigating the actual natural gas released, could be significant. If any of these costs are not covered by insurance (including any costs in excess of applicable policy limits), if there are significant delays in receiving insurance recoveries, or if the insurance recoveries are subjecttrial court to income taxes while the associated costs are not tax deductible, such amounts could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.reconsider its order.
Regulatory Proceedings. In January 2016, CalGEM and the CPUC directed an independent analysis of the technical root cause of the Leak to be conducted by Blade. In May 2019, Blade released its report, which concluded that the Leak was caused by a failure of the production casing of the well due to corrosion and that attempts to stop the Leak were not effectively conducted, but did not identify any instances of non-compliance by SoCalGas. Blade concluded that SoCalGas’ compliance activities conducted prior to the Leak did not find indications of a casing integrity issue. Blade opined, however, that there were measures, none of which were required by gas storage regulations at the time, that could have been taken to aid in the early identification of corrosion and that, in Blade’s opinion, would have prevented or mitigated the Leak. The report also identified well safety practices and regulations that have since been adopted by CalGEM and implemented by SoCalGas, which address most of the root cause of the Leak identified during Blade’s investigation.
In June 2019, the CPUC opened an OII to consider penalties against SoCalGas for the Leak, which it later bifurcated into two phases. The first phase will consider whether SoCalGas violated California Public Utilities Code Section 451 or other laws, CPUC orders or decisions, rules or requirements, whether SoCalGas engaged in unreasonable and/or imprudent practices with respect to its operation and maintenance of the Aliso Canyon natural gas storage facility or its related record-keeping practices, whether SoCalGas cooperated sufficiently with the Safety Enforcement Division (SED) and Blade during the pre-formal investigation, and whether any of the mitigation proposed by Blade should be implemented to the extent not already done. In November 2019, SED, based largely on the Blade report, alleged a total of 330 violations, asserting that SoCalGas violated California Public Utilities Code Section 451 and failed to cooperate in the investigation and to keep proper records. Hearings in the first phase of the OII have been postponed until further notice. The second phase will consider whether SoCalGas should be sanctioned for the Leak and what penalties, if any, should be imposed for any violations proven in the first phase, as well as determine the amounts of various costs incurred by SoCalGas and other parties in connection with the Leak and the ratemaking treatment or other disposition of such costs. In a January 2016 emergency proclamation, the Governor ordered the CPUC to ensure that SoCalGas covers costs related to the Leak and its response, while protecting ratepayers. In addition, CalGEM is investigating the Leak.
In February 2017, the CPUC opened a proceeding pursuant to SB 380 to determine the feasibility of minimizing or eliminating the use of the Aliso Canyon natural gas storage facility while still maintaining energy and electric reliability for the region. The CPUC indicated it intends to conduct the proceeding 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 using those analyses and scenarios to evaluate the impacts of reducing or eliminating the use of the Aliso Canyon natural gas storage facility.
The order establishing the scope of the proceeding expressly excludesregion, but excluding issues with respect to air quality, public health, causation, culpability or cost responsibility regarding the Leak. In January 2019, the CPUC concluded Phase 1The first phase of the proceeding by establishingestablished a framework for the hydraulic, production cost and economic modeling assumptions for the potential reduction in usage or elimination of the Aliso Canyon natural gas storage facility. Phase 2 of the proceeding, which will evaluate the impacts of reducing or eliminating the Aliso Canyon natural gas storage facility using the established framework and models, began in the first quarter of 2019. The CPUC has indicated that it expects to issue its report for Phase 2 in 2020.
Governmental Investigations and Orders and Additional Regulation. Various governmental agencies, including DOE, 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. In January 2016, DOGGR andDecember 2019, the CPUC selected Blade Energy Partners to conduct, under their supervision, an independent analysisadded a third phase of the technical root cause ofproceeding to consider alternative means for meeting or avoiding the Leak, to be funded by SoCalGas. The independent root cause analysis is ongoing, and its timing is underdemand for the control of Blade Energy Partners, DOGGR andfacility’s services if it were eliminated in either 2027 or 2045.
If the CPUC. We expect the report will be issued in the second quarter of 2019.
In January 2016, the Governor of the State of California proclaimed a state of emergency in Los Angeles County due to the Leak. The proclamation ordered various actions with respect to the Leak, including: (1) applicable agencies must convene an independent panel of scientific and medical experts to review public health concerns stemming from the Leak and evaluate whether additional measures are needed to protect public health; (2) the CPUC must ensure that SoCalGas covers costs related to the Leak and its response while protecting ratepayers; (3) CARB must develop a program, to be funded by SoCalGas, to fully mitigate the Leak’s emissions of methane; and (4) DOGGR, CPUC, CARB and the CEC must submit to the Governor’s Office a report that assesses the long-term viability ofAliso Canyon natural gas storage facilitiesfacility were to be permanently closed, or if future cash flows from its operation were otherwise insufficient to recover its carrying value, it could result in California.
In March 2016, CARB issued its “Aliso Canyon Methane Leak Climate Impacts Mitigation Program” recommending a program to fully mitigate the emissions from the Leak. In October 2016, CARB issued a report concluding that SoCalGas should mitigate 109,000 metric tons of methane to fully mitigate the GHG impactsan impairment of the Leak. The Government Plaintiffs Settlement described above satisfiesfacility and significantly higher than expected operating costs and/or additional capital expenditures, and natural gas reliability and electric generation could be jeopardized. At March 31, 2020, the mitigation requirementAliso Canyon natural gas storage facility had a net book value of the Governor’s emergency proclamation.$771 million. Any significant impairment of this asset, or higher operating costs and additional capital expenditures incurred by SoCalGas that may not be recoverable in customer rates, could have a material adverse effect on SoCalGas’ and Sempra Energy’s results of operations, financial condition and cash flows.
Cost Estimates, Accounting Impact and Accounting Impact.Insurance. At March 31, 2019, SoCalGas estimates itshas incurred significant costs related to the Leak are $1,071 million (the cost estimate), which includes $1,043 million of costs recovered or probable of recovery from insurance. Approximately 53 percent of the cost estimate is for the temporary relocation program (including cleaning costsof community residents; to control the well and certain labor costs). The remaining portion ofstop the cost estimate includes costs incurredLeak; to mitigate the natural gas released; to purchase natural gas to replace what was lost through the Leak; to defend against and, in certain cases, settle, civil and criminal litigation arising from the Leak; to pay the costs of the government-ordered response to the Leak, including the costs for an independent third partyBlade to conduct athe root cause analysis effortsdescribed above; to controlrespond to various government and agency investigations regarding the well,Leak; and to mitigatecomply with increased regulation imposed as a result of the actual natural gas released,Leak. At March 31, 2020, SoCalGas estimates the costs related to the Leak are $1,408 million (the cost estimate), which includes the $1,277 million of replacing the lost gas, and other costs as well as the estimated costs to settle certain actions. SoCalGas adjusts therecovered or probable of recovery from insurance. This cost estimate may increase significantly as additionalmore information becomes available. A substantial portion of the cost estimate has been


paid, and $60$284 million is accrued as Reserve for Aliso Canyon Costs and $6 million is accrued in Deferred Credits and Other as of March 31, 20192020 on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets.
Except for the amounts paid or estimated to settle certain actions, as described in “Civil and Criminal Litigation” above, the cost estimate does not include all litigation or regulatory costs to the extent it is not possible to predict at this time the outcome of these actions or reasonably estimate the costs to defend or resolve the actions or the amount of damages, restitution, or civil, administrative or criminal fines, sanctions, penalties or other costs or remedies that may be imposed or incurred. The cost estimate also does not include certain other costs incurred by Sempra Energy associated with defending against shareholder derivative lawsuits and other potential costs that we currently do not anticipate incurring or that we cannot reasonably estimate. These costs not included in the cost estimate could be significant and could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.
We have received insurance payments for many of the costs included in the cost estimate, including temporary relocation and associated processing costs, control-of-well expenses, costs of the government-ordered response to the Leak, certain legal costs and lost gas. We intend to pursue the full extent of our insurance coverage for the costs we have incurred. Other than directors’ and officers’ liability insurance, after taking into consideration the additional accrual related to litigation matters described above, we have effectively exhausted all of our insurance in this matter, except as to certain defense costs we may incur in the future, including those related to the shareholder derivative lawsuits described above. We continue to pursue other sources of insurance coverage for costs related to this matter, but we may not be successful in obtaining additional insurance recovery for any of these costs. If we are not able to secure additional insurance recovery for all or a substantial portion of these costs, if any costs we have recorded as an insurance receivable are not collected, if there are delays in receiving insurance recoveries, or if the insurance recoveries are subject to income taxes while the associated costs are not tax deductible, such amounts, which could be significant, could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.
As of March 31, 2019,2020, we recorded the expected recovery of the cost estimate related to the Leak of $477$511 million as Insurance Receivable for Aliso Canyon Costs on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets. This amount is netexclusive of insurance retentions and $566$766 million of insurance proceeds we received through March 31, 2019. The Insurance Receivable for Aliso Canyon Costs and insurance proceeds received to date relate to portions of the cost estimate described above, including temporary relocation and associated processing costs, control-of-well expenses, costs of the government-ordered response for an independent third party to conduct a root cause analysis, the costs to settle certain claims as described above, the estimated costs to perform obligations pursuant to settlement of some of those claims, legal costs and lost gas.2020. If we were to conclude that this receivable or a portion of it is no longer probable of recovery from insurers, some or all of this receivable would be charged against earnings, which could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.
As described in “Civil and Criminal Litigation” above, the actions seek compensatory, statutory and punitive damages, restitution, and civil, administrative and criminal fines, penalties and other costs, which, except for the amounts paid or estimated to settle certain actions as described above, are not included in the cost estimate as it is not possible at this time to predict the outcome of these actions or reasonably estimate the amount of damages, restitution or civil, administrative or criminal fines, penalties or other costs that may be imposed. The recorded amounts above also do not include future legal costs necessary to defend litigation, and other potential costs that we currently do not anticipate incurring or that we cannot reasonably estimate. Furthermore, the cost estimate does not include certain other costs incurred by Sempra Energy associated with defending against shareholder derivative lawsuits.


Insurance. Excluding directors’ and officers’ liability insurance, we have at least four kinds of insurance policies that together we estimate 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 and associated processing costs (including cleaning costs and certain labor costs), costs to address the Leak and stop or reduce emissions, costs of the government-ordered response to the Leak including the costs for an independent third party to conduct a root cause analysis, the value of lost 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 portions of the costs described above, including temporary relocation and associated processing costs, control-of-well expenses, legal costs and lost gas. 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 additional insurance recovery for these costs, 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.
At March 31, 2019, SoCalGas’ estimate of costs related to the Leak of $1,071 million include $1,043 million of costs recovered or probable of recovery from insurance. This estimate may rise significantly as more information becomes available. Costs not included in the $1,071 million cost estimate could be material. If any costs are not covered by insurance (including any costs in excess of applicable policy limits), if there are significant delays in receiving insurance recoveries, or if the insurance recoveries are subject to income taxes while the associated costs are not tax deductible, such amounts 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 capacity of 86 Bcf (representing 63 percent of SoCalGas’ natural gas storage capacity), is the largest SoCalGas storage facility and an important element of SoCalGas’ delivery system. As a result of the Leak, SoCalGas suspended injection of natural gas into the Aliso Canyon natural gas storage facility beginning in October 2015, and following a comprehensive safety review and authorization by DOGGR and the CPUC’s Executive Director, resumed limited injection operations in July 2017.
During the suspension period, SoCalGas advised the California ISO, CEC, CPUC and PHMSA of its concerns that the inability to inject natural gas into the Aliso Canyon natural gas storage facility posed a risk to energy reliability in Southern California. Following the resumption of injection operations, the CPUC has issued a series of directives to SoCalGas specifying the range of working gas to be maintained in the Aliso Canyon natural gas storage facility to help ensure safety and reliability for the region and just and reasonable rates in California, the most recent of which, issued in July 2018, directed SoCalGas to maintain up to 34 Bcf of working gas. Limited withdrawals of natural gas from the facility were made in 2018 and 2019 to augment natural gas supplies during critical demand periods.
If the Aliso Canyon natural gas storage facility were to be permanently closed, or if future cash flows were otherwise insufficient to recover its carrying value, it could result in an impairment of the facility and significantly higher than expected operating costs and/or additional capital expenditures, and natural gas reliability and electric generation could be jeopardized. At March 31, 2019, the Aliso Canyon natural gas storage facility had a net book value of $741 million. Any significant impairment of this asset could have a material adverse effect on SoCalGas’ and Sempra Energy’s results of operations for the period in which it is recorded. Higher operating costs and additional capital expenditures incurred by SoCalGas may not be recoverable in customer rates, and could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.
Sempra Mexico
Property Disputes and Permit Challenges
Energía Costa Azul. Azul
IEnova has been engaged in a long-running land dispute relating to property adjacent to its ECA LNG terminalRegasification facility near Ensenada, Mexico. A claimant to the adjacent property filed complaints in the federal Agrarian Court challenging the refusal of SEDATU in 2006 to issue a title to him for the disputed property. In November 2013, the federal Agrarian Court ordered that SEDATU issue the requested title and cause it to be registered. Both SEDATU and IEnova challenged the ruling, due to lack of notification of the underlying process. Both challenges are pending to be resolved byIn May 2019, a Federal Courtfederal court in Mexico.Mexico reversed the ruling and ordered a retrial. IEnova expects additional proceedings regarding the claims.


Several administrative challenges are pending in Mexico before the Mexican environmental protection agency and the Federal Tax and Administrative Courts seeking revocation of the environmental impact authorization issued to the ECA LNG Regasification facility in 2003. These cases generally allege that the conditions and mitigation measures in the environmental impact authorization are inadequate and challenge findings that the activities of the terminal are consistent with regional development guidelines.
Additionally, in August 2018, a claimant filed a challenge in the federal district court in Ensenada, Baja California in relation to the environmental and social impact permits issued to ECA LNG JV for the potential liquefaction-export project in September 2017 and December 2017, respectively, to allow natural gas liquefaction activities at the ECA LNG terminal.Regasification facility. The court issued a provisional injunction onin September 28, 2018 and maintained that provisional injunction at an April 11, 2019 hearing. The provisional injunction has uncertain application and requires clarification by the court, which is being pursued through additional proceedings that are pending before the court. In December 2018, the relevant Mexican regulators approved modifications to the environmental permit that facilitate the development of the proposed natural gas liquefaction facility at theby ECA LNG terminalJV in two phases. In May 2019, the court canceled the provisional injunction. The claimant appealed the court’s decision but was not successful. The claimant’s underlying challenge to the permits remain pending.
Cases involving two parcels of real property have been filed against ECA.the ECA LNG Regasification facility. In one case, filed in the federal Agrarian Court in 2006, the plaintiffs seek to annul the recorded property title for a parcel on which the ECA LNG terminalRegasification facility is situated and to obtain possession of a different parcel that allegedly sits in the same place. Another civil


complaint filed in the state court was served in April 2012 seeking to invalidate the contract by which the ECA LNG Regasification facility purchased another of the terminal parcels, on the grounds the purchase price was unfair; the plaintiff filed a second complaint in 2013 in the federal Agrarian Court seeking an order that SEDATU issue title to her. In January 2016, the federal Agrarian Court ruled against the plaintiff, and theplaintiff. The plaintiff appealed the ruling.ruling and a partial retrial was ordered. We are awaiting a new decision from the Agrarian Court. In May 2018, the state court dismissed the civil complaint, and the plaintiff has appealed.appealed but was not successful; however, the plaintiff can file a final federal appeal. IEnova expects further proceedings on these two matters.
An unfavorable final decision on these property disputes or permit challenges could materially and adversely affect our existing natural gas gasification operations and our planned natural gas liquefaction projects currently in development at ECA.the ECA LNG Regasification facility and potential ECA LNG JV liquefaction-export project.
Guaymas-El Oro Segment of the Sonora Pipeline.Pipeline
IEnova’s Sonora natural gas pipeline consists of two segments, the Sasabe-Puerto Libertad-Guaymas segment, and the Guaymas-El Oro segment. Each segment has its own service agreement with the CFE. In 2015, the Yaqui tribe, with the exception of some members living in the Bácum community, granted its consent and a right-of-way easement agreement for the construction of the Guaymas-El Oro segment of the Sonora natural gas pipeline that crosses its territory. Representatives of the Bácum community filed a legal challenge in Mexican Federal Courtfederal court demanding the right to withhold consent for the project, the stoppage of work in the Yaqui territory and damages. In 2016, the judge granted a suspension order that prohibited the construction of such segment through the Bácum community territory. Because the pipeline does not pass through the Bácum community, IEnova did not believe the 2016 suspension order prohibited construction in the remainder of the Yaqui territory. Construction of the Guaymas-El Oro segment was completed, and commercial operations began in May 2017.
Following the start of commercial operations of the Guaymas-El Oro segment, an appellate court ruled that the scope of the 2016 suspension order encompassed the wider Yaqui territory. The legal challenge remains pending. IEnova has subsequently reported damage to the Guaymas-El Oro segment of the Sonora pipeline in the Yaqui territory that has made that section inoperable since August 23, 2017 and, as a result, IEnova declared a force majeure event. In 2017, an appellate court ruled that the scope of the 2016 suspension order encompassed the wider Yaqui territory, which has prevented IEnova will continuefrom making repairs to exerciseput the pipeline back in service. In July 2019, a federal district court ruled in favor of IEnova and held that the Yaqui tribe was properly consulted and that consent from the Yaqui tribe was properly received. Representatives of the Bácum community appealed this decision, causing the suspension order preventing IEnova from repairing the damage to the Guaymas-El Oro segment of the Sonora pipeline in the Yaqui territory to remain in place until the appeals process is exhausted.
IEnova exercised its rights under the contract, which includesincluded seeking continued force majeure payments for the two-year period such force majeure payments arewere required to be made, which endsended on August 22, 2019.
In July 2019, the CFE filed a request for arbitration generally to nullify certain contract terms that provide for fixed capacity payments in instances of force majeure and just consideration followingmade a demand for substantial damages in connection with the expirationforce majeure event. In September 2019, the arbitration process ended when IEnova and the CFE reached an agreement to restart natural gas transportation service on the earlier of completion of repair of the two-year perioddamaged pipeline or January 15, 2020, and to modify the tariff structure and extend the term of the contract by 10 years. In January 2020, IEnova and the CFE agreed to extend the January 15, 2020 new service start date to May 15, 2020. Under the revised agreement, the CFE will resume making payments only when the damaged section of the Guaymas-El Oro segment of the Sonora pipeline is repaired. If the pipeline is not repaired by May 15, 2020 and the parties do not agree on a new service start date, IEnova retains the right to terminate the contract and seek to recover its reasonable and documented costs and lost profits. The parties are currently discussing a new service start date in which force majeure payments are made.the event the pipeline is not repaired by May 15, 2020, but there can be no assurance that the parties will have agreed on a new service start date if the pipeline is not repaired by that date.
If IEnova is unable to make such repairs and resume operations in the Guaymas-El Oro segment of the Sonora pipeline within this time frame or if IEnova terminates the contract and is unable to obtain recovery, there may be a material adverse impact on Sempra Energy’s results of operations and cash flows and our ability to recover the carrying value of our investment. The Sasabe-Puerto Libertad-Guaymas segment of the Sonora pipeline remains in full operation.operation and is not impacted by these developments.
Other Litigation
Sempra Energy holds an NCIequity method investment in RBS Sempra Commodities, a limited liability partnership in the process of being liquidated. RBS, now NatWest Markets plc, formerly RBS, our partner in the JV, paid an assessment of £86 million (approximately $138 million in U.S. dollars) in October 2014 to HMRC for denied VAT refund claims filed in connection with the purchase of carbon credit allowances by RBS SEE, a subsidiary of RBS Sempra Commodities. RBS SEE has since been sold to JPJ.P. Morgan Chase & Co. and later to Mercuria Energy Group, Ltd. HMRC asserted that RBS was not entitled to reduce its VAT liability by VAT paid on certain carbon credit purchases during 2009 because RBS knew or should have known that certain vendors in the trading chain


did not remit their own VAT to HMRC. After paying the assessment, RBS filed a Notice of Appeal of the assessment with the First-Tier Tribunal. Trial on the matter, which could include the assessment of a penalty of up to 100% of the claimed amount, has not been scheduled.scheduled between November 2, 2020 and December 11, 2020.
DuringIn 2015, liquidators filed a claim in the High Court of Justice against RBS and Mercuria Energy Europe Trading Limited (the Defendants) on behalf of ten10 companies (the Liquidating Companies) that engaged in carbon credit trading via chains that included a company that traded directly with RBS SEE. The claim alleges that the Defendants’ participation in the purchase and sale of carbon credits resulted in the Liquidating Companies’ carbon credit trading transactions creating a VAT liability they were unable to pay, and that the Defendants are liable to provide for equitable compensation due to dishonest assistance and for compensation under the U.K. Insolvency Act of 1986. Trial on the matter was held in June and July of 2018, at2018. On March 10, 2020, the closeHigh Court of which


Justice rendered its judgment mostly in favor of the Liquidating Companies asserted that the Defendants were liable to the Liquidating Companies in the amountand awarded damages of £71.5approximately £45 million (approximately $93$56 million in U.S. dollars at March 31, 2019) for dishonest assistance2020), plus costs and tointerest, which will be determined after further proceedings.
Although the extent that claim is unsuccessful, to the liquidators in the same amount under the U.K. Insolvency Actfinal outcome of 1986. Ifboth the High Court of Justice finds the Defendants liable, it will determine the amount. JP Morgan has notified us that Mercuria Energy Group, Ltd. has sought indemnity for the claim,case and JP Morgan has in turn sought indemnity from Sempra Energy and RBS.
While the ultimate outcomeFirst-Tier Tribunal case remains uncertain, we continue to evaluate the likelihood of recovery ofrecorded $100 million in equity losses from our investment. Accordingly, in the third quarter of 2018, we fully impaired our remaining $65 million equity method investment in RBS Sempra Commodities.Commodities in Equity Earnings on the Sempra Energy Condensed Consolidated Statement of Operations in the three months ended March 31, 2020, which represents an estimate of our obligations to settle pending tax matters and related legal costs.
Certain EFH subsidiaries that we acquired as part of the Mergermerger of EFH with an indirect subsidiary of Sempra Energy are defendants in personal injury lawsuits brought in state courts throughout the U.S. As of May 2, 2019, 114April 29, 2020, 275 such lawsuits are pending and 1,685with 182 such lawsuits havehaving been filed but not served. These cases allege illness or death as a result of exposure to asbestos in power plants designed and/or built by companies whose assets were purchased by predecessor entities to the EFH subsidiaries, and generally assert claims for product defects, negligence, strict liability and wrongful death. They seek compensatory and punitive damages. Additionally, in connection with the EFH bankruptcy proceeding, approximately 28,000 proofs of claim were filed on behalf of persons who allege exposure to asbestos under similar circumstances and assert the right to file such lawsuits in the future. We anticipate additional lawsuits will be filed. None of these claims or lawsuits were discharged in the EFH bankruptcy proceeding. The costs to defend or resolve these lawsuits and the amount of damages that may be imposed or incurred could have a material adverse effect on Sempra Energy’s cash flows, financial condition and results of operations.
We are also defendants in ordinary routine litigation incidental to our businesses, including personal injury, employment litigation, product liability, property damage and other claims. Juries have demonstrated an increasing willingness to grant large awards, including punitive damages, in these types of cases.cases.
LEASES
We discuss leases further in Note 16 of the Notes to Consolidated Financial Statements in the Annual Report.
A lease exists when a contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. We determine if an arrangement is or contains a lease at inception of the contract.
Some of our lease agreements contain nonlease components, which represent activities that transfer a separate good or service to the lessee. As the lessee for both operating and finance leases, we have elected to combine lease components and nonlease components for all existing classes of underlying assets as a single lease component for real estate, fleet vehicles, power generating facilities, and pipelines, whereby fixed or in-substance fixed payments allocable to the nonlease component are accounted for as part of the related lease liability and ROU asset. As the lessor, we have elected to combine lease and nonlease components as a single lease component for real estate and power generating facilities if the timing and pattern of transfer of the lease components and nonlease components are the same and the lease component would be classified as an operating lease if accounted for separately, we combine the lease components and nonlease components.separately.
Lessee Accounting
We have operating and finance leases for real and personal property (including office space, land, fleet vehicles, machinery and equipment, warehouses and other operational facilities) and PPAs with renewable energy and peaker plant facilities.
Some of our leases include options to extend the lease terms for up to 25 years, while others include options to terminate the leases within one year. Our lease liabilities and ROU assets are based on lease terms that may include such options to extend or terminate the lease when it is reasonably certain that we will exercise that option.
Certain of our contracts are short-term leases, which have a lease term of 12 months or less at lease commencement. We do not recognize a lease liability or ROU asset arising from short-term leases for all existing classes of underlying assets. In such cases, we recognize short-term lease costs on a straight-line basis over the lease term. Our short-term lease costs for the period reasonably reflect our short-term lease commitments.
Certain of our leases contain escalation clauses requiring annual increases in rent ranging from 1 percent to 5 percent or based on the Consumer Price Index. The rentals payable under these leases may increase by a fixed amount each year or by a percentage of a base year. Variable lease payments that are based on an index or rate are included in the initial measurement of our lease liability and ROU asset based on the index or rate at lease commencement and are not remeasured because of changes to the index or rate. Rather, changes to the index or rate are treated as variable lease payments and recognized in the period in which the obligation for those payments is incurred.
Similarly, PPAs for the purchase of renewable energy at SDG&E require lease payments based on a stated rate per MWh produced by the facilities, and we are required to purchase substantially all the output from the facilities. SDG&E is required to pay additional amounts for capacity charges and actual purchases of energy that exceed the minimum energy commitments. Under these contracts, we do not recognize a lease liability or ROU asset for leases for which there are no fixed lease payments. Rather, these variable lease payments are recognized separately as variable lease costs.


As of the lease commencement date, we recognize a lease liabilityWe provide supplemental noncash information for our obligation to make future lease payments, which we initially measure at present value using our incremental borrowing rate at the date of lease commencement, unless the rate implicit in the lease is readily determinable. We determine our incremental borrowing rate based on the rate of interest that we would have to pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. We also record an ROU asset for our right to use the underlying asset, which is initially equal to the lease liability and adjusted for lease payments made at or before lease commencement, lease incentives, and any initial direct costs. Like other long-lived assets, we test ROU assets for recoverability whenever events or changes in circumstances have occurred that may affect the recoverability or the estimated useful lives of the ROU assets.
For our operating leases, our non-regulated entities recognize a single lease cost on a straight-line basis over the lease term in operating expenses. The California Utilities recognize this single lease cost on a basis that is consistent with the recovery of such costs in accordance with U.S. GAAP governing rate-regulated operations.
For our finance leases, the interest expense on the lease liability and amortization of the ROU asset are accounted for separately. Our non-regulated entities use the effective interest rate method to account for the imputed interest on the lease liability and amortize the ROU asset on a straight-line basis over the lease term. The California Utilities recognize amortization of the ROU asset on a basis that is consistent with the recovery of such costs in accordance with U.S. GAAP governing rate-regulated operations.
Our leases do not contain any material residual value guarantees, restrictions or covenants.
Classification of ROU assets and lease liabilities and the weighted-average remaining lease term and discount rate associated with operating and finance leases are summarized in the table below.
LESSEE INFORMATION ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
 March 31, 2019
 Sempra Energy ConsolidatedSDG&ESoCalGas
Right-of-use assets:   
Operating leases:   
Right-of-use assets$612
$135
$110
 


Finance leases:   
Property, plant and equipment1,322
1,315
7
Accumulated depreciation(45)(43)(2)
Property, plant and equipment, net1,277
1,272
5
Total right-of-use assets$1,889
$1,407
$115
    
Lease liabilities:   
Operating leases:   
Other current liabilities$52
$24
$22
Deferred credits and other455
110
88
 507
134
110
Finance leases:   
Current portion of long-term debt and finance leases21
18
3
Long-term debt and finance leases1,256
1,254
2
 1,277
1,272
5
Total lease liabilities$1,784
$1,406
$115
    
Weighted-average remaining lease term (in years):   
Operating leases14
7
6
Finance leases20
20
3
Weighted-average discount rate:   
Operating leases5.87%3.69%3.76%
Finance leases14.91%14.92%3.94%
SUPPLEMENTAL NONCASH INFORMATION
(Dollars in millions)
 Three months ended March 31, 2020
 Sempra Energy Consolidated SDG&E SoCalGas
Increase in operating lease obligations for right-of-use assets$19
 $—
 $—
Increase in finance lease obligations for investment in PP&E20
 4
 16
 Three months ended March 31, 2019
 Sempra Energy Consolidated SDG&E SoCalGas
Increase in operating lease obligations for right-of-use assets$552
 $142
 $117
Increase in finance lease obligations for investment in PP&E7
 4
 3




The components of lease costs were as follows:
LESSEE INFORMATION ON THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(1)
(Dollars in millions)
 Three months ended March 31, 2019
 Sempra Energy ConsolidatedSDG&ESoCalGas
Operating lease costs$24
$8
$7
 


Finance lease costs:   
Amortization of ROU assets5
4
1
Interest on lease liabilities47
47
—
Total finance lease costs52
51
1
    
Short-term lease costs(2)
1
—
—
Variable lease costs(2)
92
90
2
Total lease costs$169
$149
$10
(1)
Includes costs capitalized in PP&E.
(2)
Short-term leases with variable lease costs are recorded and presented as variable lease costs.

Cash paid for amounts included in the measurement of lease liabilities was as follows:
LESSEE INFORMATION ON THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 Three months ended March 31, 2019
 Sempra Energy ConsolidatedSDG&ESoCalGas
Operating activities:   
Cash paid for operating leases$39
$8
$7
Cash paid for finance leases43
43
—
Financing activities:   
Cash paid for finance leases5
4
1
Increase in operating lease obligations for right-of-use assets552
142
117
Increase in finance lease obligations for investment in PP&E7
4
3



The table below presents the maturity analysis of our lease liabilities and reconciliation to the present value of lease liabilities:
LESSEE MATURITY ANALYSIS OF LIABILITIES
(Dollars in millions)
 March 31, 2019
 Sempra Energy Consolidated SDG&E SoCalGas
 Operating leases Finance leases Operating leases Finance leases Operating leases Finance leases
2019 (excluding first three months of 2019)$60
 $146
 $24
 $143
 $20
 $3
202069
 190
 25
 189
 22
 1
202165
 188
 24
 188
 20
 —
202259
 188
 21
 188
 17
 —
202350
 188
 17
 188
 13
 —
Thereafter479
 2,806
 42
 2,805
 31
 1
Total undiscounted lease payments782
 3,706
 153
 3,701
 123
 5
Less: imputed interest(275) (2,429) (19) (2,429) (13) —
Total lease liabilities507
 1,277
 134
 1,272
 110
 5
Less: current lease liabilities(52) (21) (24) (18) (22) (3)
Long-term lease liabilities$455
 $1,256
 $110
 $1,254
 $88
 $2


Leases that Have Not Yet Commenced
SDG&E has PPAs for three battery storage facilities that are currently under construction. When construction is complete and delivery of contracted power commences, which is scheduled to occur in 2019 through 2022, we will account for the PPAs as finance leases. The future minimum lease payments are expected to be $1 million per year in 2020 through 2023 and $18 million thereafter. These PPA’s expire at various dates from 2031 through 2039.
SDG&E and SoCalGas have lease agreements for future acquisitions of fleet vehicles with an aggregate maximum lease limit of $194$167 million. SDG&E and SoCalGas have utilized $52$62 million and $75$80 million, respectively, of these maximum lease limits as of March 31, 2019.
Lease Disclosures Under Previous U.S. GAAP
The table below presents the future minimum lease payments under previous U.S. GAAP:
FUTURE MINIMUM LEASE PAYMENTS
(Dollars in millions)
 December 31, 2018
 Sempra Energy Consolidated SDG&E SoCalGas
 Build-to-suit lease Operating leases Capital leases Operating leases Capital leases Operating leases Capital leases
2019$10
 $77
 $215
 $23
 $212
 $26
 $3
202011
 55
 210
 22
 210
 22
 —
202111
 53
 211
 22
 211
 21
 —
202211
 50
 211
 21
 211
 20
 —
202311
 42
 211
 17
 211
 16
 —
Thereafter217
 253
 3,196
 48
 3,196
 28
 —
Total undiscounted lease payments$271
 $530
 4,254
 $153
 4,251
 $133
 3
Less: estimated executory costs    (480)   (480)   —
Less: imputed interest    (2,483)   (2,483)   —
Total future minimum lease payments    $1,291
   $1,288
   $3

2020.
Lessor Accounting
Sempra Mexico is a lessor for certain of its natural gas and ethane pipelines, compressor stations and LPG storage facilities, and land and office space. These operating leases expire at various dates from 2026 through 2039.


Sempra Mexico expects to continue to derive value from the underlying assets associated with its pipelines following the end of their respective lease terms based on the expected remaining useful life, expected market conditions and our plans to re-market and re-contract the underlying assets.facilities.
Generally, we recognize operating lease income on a straight-line basis over the lease term and evaluate the underlying asset for impairment. Certain of our leases contain rate adjustments or are based on foreign currency exchange rates that may result in lease payments received that vary from one period to the next.
We provide information below for leases for which we are the lessor.
LESSOR INFORMATION – SEMPRA ENERGY 
(Dollars in millions) 
 March 31, 2019
Assets subject to operating leases: 
Assets held for sale$148
  
Property, plant and equipment(1)
$1,026
Accumulated depreciation(151)
Property, plant and equipment, net$875
Maturity analysis of operating lease payments: 
2019 (excluding first three months of 2019)$151
2020200
2021200
2022200
2023200
Thereafter2,619
Total undiscounted cash flows$3,570
LESSOR INFORMATION ON THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – SEMPRA ENERGY
(Dollars in millions)
 Three months ended March 31,
 2020 2019
Fixed lease payments$50
 $50
Variable lease payments—
 4
Total revenues from operating leases(1)
$50
 $54
    
Depreciation expense$10
 $9
(1)  
Included in Machinery and Equipment — Pipelines and Storage withinRevenues: Energy-Related Businesses on the major functional categoriesCondensed Consolidated Statements of PP&E.Operations.

LESSOR INFORMATION ON THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – SEMPRA ENERGY
(Dollars in millions)
 Three months ended March 31,
 2019 2018
Minimum lease payments$50
 $49
Variable lease payments4
 13
Total revenues from operating leases$54
 $62
    
Depreciation expense$9
 $17


OTHER CONTRACTUAL COMMITMENTS
We discuss below significant changes in the first three months of 20192020 to contractual commitments discussed in Notes 1 and 16 of the Notes to Consolidated Financial Statements in the Annual Report.
Natural Gas Contracts
Sempra LNG’s natural gas storage and transportation commitments have increased by $136 million since December 31, 2019, primarily from entering into new storage and transportation contracts in the first three months of 2020. We expect future payments to decrease by $24 million in 2020, and increase by $23 million in 2021, $21 million in 2022, $19 million in 2023, $19 million in 2024 and $78 million thereafter compared to December 31, 2019.
LNG Purchase Agreement
Sempra LNG has a sale and purchase agreement for the supply of LNG to the ECA terminal.LNG Regasification facility. The commitment amount is calculated using a predetermined formula based on estimated forward prices of the index applicable from 20192020 to 2029. Although this agreement specifies a number of cargoes to be delivered, under its terms, the customer may divert certain cargoes,


which would reduce amounts paid under the agreement by Sempra LNG. At March 31, 2019,2020, we expect the commitment amount to decrease by $96 million in 2019 and increase by $19$135 million in 2020, $8$26 million in 2021, $3$35 million in 2022, $2$36 million in 2023, $43 million in 2024 and $52$174 million thereafter (through contract termination in 2029) compared to December 31, 2018,2019, reflecting changes in estimated forward prices since December 31, 20182019 and actual transactions for the first three months of 2019.2020. These LNG commitment amounts are based on the assumption that all LNG cargoes, less those already confirmed to be diverted, under the agreement are delivered. Although this agreement specifies a number of cargoes to be delivered, under its terms, the customer may divert certain cargoes, which would reduce amounts paid under the agreement by


Sempra LNG. Actual LNG purchases in the current and prior years have been significantly lower than the maximum amount provided under the agreement due to the customer electing to divert cargoes as allowed by the agreement.
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. Sempra Mexico’s Ecogas also grants credit to its utility customers and counterparties in Mexico.
Projects and businesses owned or partially owned by Sempra Energy 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 and investment opportunities.
     
NOTE 12. SEGMENT INFORMATION
At March 31, 2019, we had sixWe have 5 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 UtilityUtilities holds our investment in Oncor Holdings, which owns an 80.25-percent80.25% interest in Oncor, a regulated electric transmission and distribution utility serving customers in the north-central, eastern, and western partsand panhandle regions of Texas.Texas; our indirect, 50% interest in Sharyland Holdings, which owns Sharyland Utilities, a regulated electric transmission and distribution utility serving customers near the Texas-Mexico border; and our indirect, 1% interest in TTHC, which owns an indirect 19.75% interest in Oncor. As we discuss in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report, we acquired our investment in Oncor Holdings in March 2018, Sharyland Holdings in May 2019, and TTHC in February 2020.
▪
Sempra Mexico develops, owns and operates, or holds interests in, natural gas, electric, LNG, LPG, ethane and liquid fuels infrastructure, and has marketing operations for the purchase of LNG and the purchase and sale of natural gas in Mexico.
▪
Sempra RenewablesLNG develops projects for the export of LNG, holds an interest in a facility for the export of LNG, owns and operates or holds interests in, wind power generation facilities serving wholesale electricity markets in the U.S. In December 2018, Sempra Renewables completed the sale of all its operating solar assets, solar and battery storage development projects and one wind generation facility. In April 2019, Sempra Renewables completed the sale of its remaining wind assets and investments. Upon completion of this sale, remaining nominal business activities at Sempra Renewables were subsumed into Parent and other and the Sempra Renewables segment ceased to exist.
▪
Sempra LNG (previously known as Sempra LNG & Midstream) develops, owns and operates, or holds interests in, terminals for the import and export of LNG and sale of natural gas, natural gas pipelines, and buys, sells and transports natural gas through its marketing operations, all within the U.S. and Mexico. In February 2019, we completed the sale of our natural gas storage assets at Mississippi Hub and Bay Gas.
In April 2019, Sempra Renewables completed the sale of its remaining wind assets and investments. Upon completion of this sale, remaining nominal business activities at Sempra Renewables were subsumed into Parent and other and the Sempra Renewables segment ceased to exist. The tables below include amounts from Sempra Renewables up until cessation of the segment.
As we discuss in Note 5, the financial information related to our businesses that constituted the Sempra South American Utilities segment has been reclassified toclassified as discontinued operations for all periods presented. The information in the tables below excludes amounts from discontinued operations unless otherwise noted.
We evaluate each segment’s performance based on its contribution to Sempra Energy’s reported earnings and cash flows. The California Utilities operate in essentially separate service territories, under separate regulatory frameworks and rate structures set by the CPUC. 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.
The cost of common services shared by the business segments is assigned directly or allocated based on various cost factors, depending on the nature of the service provided. Interest income and expense is recorded on intercompany loans. The loan balances and related interest are eliminated in consolidation.
The following tables show selected information by segment from our Condensed Consolidated Statements of Operations and Condensed Consolidated Balance Sheets. Amounts labeled as “All other” in the following tables consist primarily of activities of parent organizations and include certain nominal amounts from our South American businesses that did not qualify for treatment as discontinued operations.


SEGMENT INFORMATION      
(Dollars in millions)      
Three months ended March 31,Three months ended March 31,
2019 20182020 2019
REVENUES      
SDG&E$1,145
 $1,055
$1,269
 $1,145
SoCalGas1,361
 1,126
1,395
 1,361
Sempra Mexico383
 308
309
 383
Sempra Renewables7
 25
—
 7
Sempra LNG141
 104
123
 141
All other1
 —
Adjustments and eliminations—
 (1)(1) —
Intersegment revenues(1)
(139) (81)(67) (139)
Total$2,898
 $2,536
$3,029
 $2,898
INTEREST EXPENSE      
SDG&E$103
 $52
$101
 $103
SoCalGas34
 27
40
 34
Sempra Mexico30
 30
32
 30
Sempra Renewables3
 5
—
 3
Sempra LNG4
 8
16
 4
All other109
 112
109
 109
Intercompany eliminations(23) (28)(18) (23)
Total$260
 $206
$280
 $260
INTEREST INCOME      
SDG&E$1
 $1
$1
 $1
SoCalGas1
 —
Sempra Mexico19
 15
18
 19
Sempra Renewables10
 2
—
 10
Sempra LNG14
 13
22
 14
All other1
 16
—
 1
Intercompany eliminations(24) (18)(15) (24)
Total$21
 $29
$27
 $21
DEPRECIATION AND AMORTIZATION      
SDG&E$186
 $166
$201
 $186
SoCalGas147
 135
159
 147
Sempra Mexico44
 43
47
 44
Sempra Renewables—
 13
Sempra LNG2
 11
2
 2
All other4
 4
3
 4
Total$383
 $372
$412
 $383
INCOME TAX EXPENSE (BENEFIT)      
SDG&E$5
 $56
$58
 $5
SoCalGas19
 59
52
 19
Sempra Mexico72
 155
(307) 72
Sempra Renewables(10) (7)—
 (10)
Sempra LNG4
 12
23
 4
All other(48) (33)(33) (48)
Total$42
 $242
$(207) $42
EQUITY EARNINGS (LOSSES)      
Equity earnings before income tax:   
Equity earnings (losses), before income tax:   
Sempra Renewables$3
 $5
$—
 $3
Sempra LNG2
 —
57
 2
All other(100) —
5
 5
(43) 5
Equity earnings (losses) net of income tax:   
Sempra Texas Utility94
 15
Equity earnings, net of income tax:   
Sempra Texas Utilities106
 94
Sempra Mexico2
 (41)200
 2
96
 (26)306
 96
Total$101
 $(21)$263
 $101


SEGMENT INFORMATION (CONTINUED)      
(Dollars in millions)      
Three months ended March 31,Three months ended March 31,
2019
20182020
2019
EARNINGS (LOSSES) ATTRIBUTABLE TO COMMON SHARES      
SDG&E$176
 $170
$262
 $176
SoCalGas264
 225
303
 264
Sempra Texas Utility94
 15
Sempra Texas Utilities105
 94
Sempra Mexico57
 20
191
 57
Sempra Renewables13
 21
—
 13
Sempra LNG5
 (16)75
 5
Discontinued operations(51) 21
72
 (51)
All other(117) (109)(248) (117)
Total$441
 $347
$760
 $441
EXPENDITURES FOR PROPERTY, PLANT & EQUIPMENT      
SDG&E$356
 $475
$402
 $356
SoCalGas324
 403
388
 324
Sempra Mexico85
 59
170
 85
Sempra Renewables—
 31
Sempra LNG18
 6
47
 18
All other—
 5
3
 —
Total$783
 $979
$1,010
 $783
      
March 31, 2019 December 31, 2018
March 31,
2020
 December 31, 2019
ASSETS      
SDG&E$19,558
 $19,225
$20,784
 $20,560
SoCalGas15,904
 15,389
17,610
 17,077
Sempra Texas Utility9,748
 9,652
Sempra Texas Utilities11,741
 11,619
Sempra Mexico9,382
 9,165
10,627
 9,938
Sempra Renewables1,310
 2,549
Sempra LNG3,731
 4,060
3,919
 3,901
Discontinued operations3,845
 3,718
3,930
 3,958
All other1,135
 1,070
1,826
 749
Intersegment receivables(2,995) (4,190)(2,144) (2,137)
Total$61,618
 $60,638
$68,293
 $65,665
EQUITY METHOD AND OTHER INVESTMENTS      
Sempra Texas Utility$9,748
 $9,652
Sempra Texas Utilities$11,735
 $11,619
Sempra Mexico737
 747
914
 741
Sempra Renewables290
 291
Sempra LNG1,255
 1,271
1,184
 1,256
All other8
 11
1
 6
Total$12,038
 $11,972
$13,834
 $13,622
(1) 
Revenues for reportable segments include intersegment revenues of $1 million, $18 million, $29 million and $19 million for the three months ended March 31, 2020 and $1 million, $17 million, $28 million and $93 million for the three months ended March 31, 2019 and $1 million, $17 million, $29 million and $34 million for the three months ended March 31, 2018, for SDG&E, SoCalGas, Sempra Mexico and Sempra LNG, respectively.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with the Condensed Consolidated Financial Statements and the Notes thereto and “Item 1A. Risk Factors” contained in this Form 10-Q,report, and the Consolidated Financial Statements and the Notes thereto, “Item 7. MD&A” and “Item 1A. Risk Factors” contained in the Annual Report.


OVERVIEW
Sempra Energy is a Fortune 500California-based energy-services holding company. Ourcompany whose businesses which consist of six separately managed reportable segments, invest in, develop and operate energy infrastructure, and provide electric and gas services to customers in North America. As we discuss in Note 12 of the Notes to Condensed Consolidated Financial Statements, our businesses consist of five separately managed reportable segments.
On

In January 25, 2019, our board of directors approved a plan to sell our South American businesses, which were previously included in our Sempra South American Utilities segment. Our South American businesses and certain activities associated with those businesses have been reclassified topresented as discontinued operations for all periods presented. Nominal activities that are not classified as discontinued operations have been subsumed into Parent and other. Our discussions below exclude discontinued operations, unless otherwise noted.
In the first quarter of 2019, our Sempra LNG & Midstream segment was renamed “Sempra LNG.” This segment name change had no impact on our historical position, results of operations, cash flow or segment results previously reported.
We provide additional information about discontinued operations in Note 5 of the Notes to Condensed Consolidated Financial Statements and about our reportable segments in Note 12 of the Notes to Condensed Consolidated Financial Statements hereinin this report and in “Item 1. Business” in the Annual Report.
This report includes information for the following separate registrants:
▪Sempra Energy and its consolidated entities
▪SDG&E and its consolidated VIE (until deconsolidation of Otay Mesa VIE in August 2019)
▪SoCalGas
References to “we,” “us,” “our” and “Sempra Energy Consolidated” are to Sempra Energy and its consolidated entities, collectively, unless otherwise indicated by the context. We refer to SDG&E and SoCalGas collectively as the California Utilities, which do not include our Texas utilityutilities or the utility in our Sempra Mexico segment. It also does not include utilities within our South American businesses that have been reclassifiedpresented as discontinued operations. All references in this MD&A to our reportable segments are not intended to refer to any legal entity with the same or similar name.
Throughout this report, we refer to the following as Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements when discussed together or collectively:
▪the Condensed Consolidated Financial Statements and related Notes of Sempra Energy and its subsidiaries and VIEs;
▪the Condensed Consolidated Financial Statements and related Notes of SDG&E and its VIE;VIE (until deconsolidation of Otay Mesa VIE in August 2019); and
▪the Condensed Financial Statements and related Notes of SoCalGas.
     
RESULTS OF OPERATIONS
We discuss the following in Results of Operations:
▪Overall results of our operations of Sempra Energy
▪Segment results
▪Adjusted earnings and adjusted EPS
▪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 ENERGY
OurIn the three months ended March 31, 2020, we reported earnings increased by $94of $760 million (27%)and diluted EPS of $2.53 compared to earnings of $441 million and diluted EPS of $1.59 for the same period in 2019. The change in diluted EPS in the three months ended March 31, 2019 compared to the prior year period, while diluted EPS increased by $0.26 per share (20%) to $1.59 per share. The change in EPS2020 included a decrease of $0.11 attributable$(0.34) due to an increase in the weighted-average common shares outstanding and dilutive common stock equivalents, primarily due to the common stock issuances in the third quarter of 2018.outstanding. Our results and diluted EPS were impacted by variances discussed in “Segment Results” below and by the items included in the table “Sempra Energy Adjusted Earnings and Adjusted EPS,” also below.
SEGMENT RESULTS
The followingThis section presents earnings (losses) by Sempra Energy segment, as well as Parent and other, in the three months ended March 31, 2020 and 2019, and the related discussion of the changes in segment earnings (losses). between these periods. Throughout the MD&A, our reference to earnings represents earnings attributable to common shares. Variance amounts presented are the after-tax earnings impact (based on applicable statutory tax rates), unless otherwise noted, and before NCI, where applicable.


SEMPRA ENERGY EARNINGS (LOSSES) BY SEGMENTSEMPRA ENERGY EARNINGS (LOSSES) BY SEGMENT 
(Dollars in millions)(Dollars in millions) 
Three months ended March 31,Three months ended March 31,
2019 20182020 2019
SDG&E$176
 $170
$262
 $176
SoCalGas264
 225
303
 264
Sempra Texas Utility94
 15
Sempra Texas Utilities105
 94
Sempra Mexico57
 20
191
 57
Sempra Renewables13
 21
—
 13
Sempra LNG5
 (16)75
 5
Parent and other(1)
(117) (109)(248) (117)
Discontinued operations(51) 21
72
 (51)
Earnings attributable to common shares$441
 $347
$760
 $441
(1) 
Includes after-tax interest expense ($79 million and $81 million for the three months ended March 31, 2019 and 2018, respectively), intercompany eliminations recorded in consolidation and certain corporate costs.

Due to the delay in the issuance of the CPUC’s final decision in the California Utilities’ 2019 GRC, the California Utilities recorded revenues in the first quarter of 2019 based on levels authorized for 2018 under the 2016 GRC. The 2019 GRC FD, which was issued by the CPUC in September 2019, was effective retroactively to January 1, 2019. The California Utilities’ CPUC-authorized base revenues for the first quarter of 2020 are based on the revenues authorized for the 2019 test year plus the amount authorized for attrition for 2020. Had the 2019 GRC FD been in effect in the first quarter of 2019, SDG&E’s and SoCalGas’ earnings for the first quarter of 2019 would have been higher by $36 million and $84 million, respectively. These amounts were recorded in earnings in the third quarter of 2019. We provide additional information on the 2019 GRC FD in Note 4 of the Notes to Condensed Consolidated Financial Statements in this report and in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.
SDG&E
The increase in earnings of $6$86 million (4%(49%) in the three months ended March 31, 20192020 was primarily due to:
▪$65 million higher CPUC base operating margin, net of operating expenses, including $36 million lower CPUC base operating margin in 2019 due to the delay in the issuance of the 2019 GRC FD;
▪$38 million higher electric transmission margin, including the following impacts from the March 2020 FERC-approved TO5 settlement proceeding:
◦$18 million to conclude a rate base matter, and
◦$9 million favorable impact from the retroactive application of the final TO5 settlement for 2019. The settlement proceeding increased SDG&E’s authorized ROE from 10.05% to 10.60%, effective June 1, 2019; and
▪
$9 million higher AFUDC equity; offset by
▪$31 million income tax benefit in 2019 from the release of a regulatory liability established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed to be allocated to shareholders in a January 2019 decision; and
▪
$96 million higher earnings from electric transmission operations; offset by
amortization of Wildfire Fund asset.
SoCalGas
The increase in earnings of $39 million (15%) in the three months ended March 31, 2020 was primarily due to:
▪$27109 million higher CPUC base operating margin, net of operating expenses, including $84 million lower CPUC base operating margin in 2019 due to the delay in the issuance of the 2019 GRC decision while absorbingFD;
▪$21 million higher operating costs, including higher wildfire insurance premiums.income tax benefits from flow-through items; and
SoCalGas
The increase in earnings of $39 million (17%) in the three months ended March 31, 2019 was primarily due to:
▪
$8 million penalties in 2019 related to the SoCalGas billing practices OII; offset by
▪$72 million from impacts associated with Aliso Canyon natural gas storage facility litigation; and
▪$35 million income tax benefit in 2019 from the impact of the January 2019 CPUC decision allocating certain excess deferred income tax balances to shareholders; and
▪
$5 million higher regulatory awards; offset by
▪$8 million in penalties related to the SoCalGas billing practices OII that we discuss in Note 4 of the Notes to Condensed Consolidated Financial Statements.shareholders.
Sempra Texas UtilityUtilities
The increase in earnings of $79$11 million for(12%) in the three months ended March 31, 2019 represents2020 was primarily due to higher equity earnings from our investment in Oncor Holdings which we acquired in March 2018.2020, driven mainly by the impact of Oncor’s acquisition of InfraREIT, Inc. in May 2019 and higher revenues due to rate updates to reflect increases in invested transmission capital, partially offset by higher operating costs and lower consumption due to weather.


Sempra Mexico
The increase in earnings of $37$134 million in the three months ended March 31, 20192020 was primarily due to:


▪$45253 million favorable impact from foreign currency and inflation effects net of foreign currency derivatives effects, comprised of:
◦
in 2020, $326 million favorable foreign currency and inflation effects, offset by a $91 million loss from foreign currency derivatives, and
◦in 2019, $25 million unfavorable foreign currency and inflation effects, offset by a $7 million gain from foreign currency derivatives, offset by
◦in 2018, $95 million unfavorable foreign currency and inflation effects, offset by $32 million gain from foreign currency derivatives. We discuss these effects below in “Impact of Foreign Currency and Inflation Rates on Results of Operations;”
▪$11 million higher capitalized financing costs, primarily from higher equity earnings in 2019 from AFUDC at the IMG joint venture;derivatives; and
▪
$108 million improved operating results at TdM mainlyprimarily due to higher power prices and volumes;the start of commercial operations of the Sur de Texas-Tuxpan marine pipeline at IMG JV in the third quarter of 2019; offset by
▪$28144 million earnings attributable to NCI at IEnova in 20192020 compared to $2$28 million lossesearnings in 2018.2019; and
▪$9 million lower earnings at the Guaymas-El Oro segment of the Sonora pipeline primarily from force majeure payments that ended in August 2019.
Sempra Renewables
As we discuss in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report, Sempra Renewables sold its remaining wind assets and investments in April 2019, upon which date the segment ceased to exist.
Sempra LNG
The decreaseincrease in earnings of $8$70 million (38%) in the three months ended March 31, 20192020 was primarily due to:
▪$1643 million lower pretax losses attributed to NCI,higher equity earnings from Cameron LNG JV primarily due to the 2018 impact of the TCJA on NCI allocations computed using the HLBV method;Train 1 and Train 2 commencing commercial operations under their tolling agreements in August 2019 and February 2020, respectively; and
▪
$742 million lowerhigher earnings from assets soldSempra LNG’s marketing operations primarily driven by changes in December 2018;natural gas prices; offset by
▪$7 million lower general and administrative and other costs due to the wind-down of this business; and
▪$4 million lower depreciation as a result of wind assets held for sale.
Sempra LNG
Earnings of $5 million in the three months ended March 31, 2019 compared to losses of $16 million for the same period in 2018 were primarily due to:
▪$155 million higher earnings from our marketing operations primarily driven by changes in natural gas prices; and
▪$9 million unfavorable adjustment in 2018 to TCJA provisional amounts recorded in 2017 related to the remeasurement of deferred income taxes.liquefaction project development costs.
Parent and Other
The increase in losses of $8$131 million (7%) in the three months ended March 31, 20192020 was primarily due to:
▪$17100 million increaseequity losses from our investment in net interest expense;RBS Sempra Commodities to settle pending tax matters and related legal costs, which we discuss in Note 11 of the Notes to Condensed Consolidated Financial Statements; and
▪
$819 million increasenet investment losses in mandatory convertible preferred stock dividends; offset by
▪$152020 compared to $15 million ofnet investment gains in 2019 compared to $4 million of investment losses in 2018 on dedicated assets in support of our executive retirementemployee nonqualified benefit plan and deferred compensation plans, including higher deferred compensation expense associated with these investments; and
▪$3 million higher income tax benefit including $10 million from a reduction in a valuation allowance against certain NOL carryforwards as a result of our decision to sell our South American businesses.obligations.
Discontinued Operations
Discontinued operations that were previously in our Sempra South American Utilities segment include our 100-percent100% interest in Chilquinta Energía in Chile, our 83.6-percent83.6% interest in Luz del Sur in Peru and our interests in two energy-services companies, Tecnored and Tecsur, which provide electric construction and infrastructure services to Chilquinta Energía and Luz del Sur, respectively, as well as third parties. Discontinued operations also include activities, mainly income taxes related to the South American businesses, that were previously included in the holding company of the South American businesses at Parent and other.
LossesEarnings of $51$72 million in the three months ended March 31, 20192020 compared to earningslosses of $21$51 million for the same period in 2018 were2019 was primarily due to:to the following income tax impacts resulting from changes in outside basis differences in our South American businesses:
▪$93 million higher income tax expense primarily due to:
◦$103 million income tax expense in 2019 fromrelated to outside basis differences inexisting as of the January 25, 2019 approval of our plan to sell our South American businesses primarily related to the change in our indefinite reinvestment assertion from our decision on January 25, 2019 to hold those businesses for sale,businesses; and
◦▪
$137 million income tax benefit in 2020 compared to $13 million income tax expense in 2019 related to the increasechanges in outside basis differences from 2019 earnings and foreign currency effects since January 25, 2019, offset by
◦
$16 million income tax expense in 2018 to adjust TCJA provisional amounts recorded in 2017 primarily related to withholding tax on our expected future repatriation of foreign undistributed earnings; offset by


▪$23 million higher earnings from South American operations, including $15 million at Peru due to an increase in rates and lower cost of purchased power and $7 million lower depreciation expense due to assets classified as held for sale.2019.
ADJUSTED EARNINGS AND ADJUSTED EPS
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 analysis 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.
For each period in which a non-GAAP financial measure is used, we provide in the table below a reconciliation of Sempra Energy Adjusted Earnings, Adjusted EPS, and Weighted-Average Common Shares Outstanding – Adjusted to GAAP Earnings, GAAP EPS, and Weighted-Average Common Shares Outstanding – GAAP, which we consider to be the most directly comparable financial measures calculated in accordance with U.S. GAAP.

SEMPRA ENERGY ADJUSTED EARNINGS AND ADJUSTED EPS
(Dollars in millions, except per share amounts; shares in thousands)
 Income tax expense (benefit) Earnings Diluted EPS
 Three months ended March 31, 2019
Sempra Energy GAAP Earnings  $441
 $1.59
Impact of dilutive shares excluded from GAAP EPS(1)
    (0.07)
Excluded items:     
Associated with holding the South American businesses for sale:     
Change in indefinite reinvestment assertion of basis differences in discontinued operations$103
 103
 0.35
Reduction in tax valuation allowance against certain NOL carryforwards(10) (10) (0.04)
Sempra Energy Adjusted Earnings  534
 

Add back series A preferred stock dividends(1)
  26
 0.09
Sempra Energy Adjusted Earnings for Adjusted EPS(1)
  $560
 $1.92
Weighted-average common shares outstanding, diluted – GAAP 
   277,228
Add series A preferred stock shares(1)
    13,951
Weighted-average common shares outstanding, diluted – Adjusted    291,179
 Three months ended March 31, 2018
Sempra Energy GAAP Earnings  $347
 $1.33
Excluded item:     
Impact from the TCJA$25
 25
 0.10
Sempra Energy Adjusted Earnings  $372
 $1.43
Weighted-average common shares outstanding, diluted – GAAP
    259,490
(1)
In the three months ended March 31, 2019, the assumed conversion of the series A preferred stock and the series B preferred stock are antidilutive for GAAP Earnings, however, the series A preferred stock is dilutive for the higher Adjusted Earnings. As such, the series A preferred stock dividends have been added back to the numerator and the dilutive effect of the series A preferred stock shares has been added to the denominator when calculating Adjusted EPS.

SIGNIFICANT CHANGES IN REVENUES, COSTS AND EARNINGS
This section contains a discussion of the differences between periods in the specific line items of the Condensed Consolidated Statements of Operations for Sempra Energy, SDG&E and SoCalGas.
Utilities Revenues
Our utilities revenues include natural gas revenues at our California Utilities and Sempra Mexico’s Ecogas and electric revenues at SDG&E. Intercompany revenues included in the separate revenues of each utility are eliminated in the Sempra Energy Condensed Consolidated Statements of Operations.


SoCalGas and SDG&E currently operate under a regulatory framework that:that permits:
▪permits theThe cost of natural gas purchased for core customers (primarily residential and small commercial and industrial customers) to be passed through to customers in rates substantially as incurred. However, SoCalGas’ GCIM provides SoCalGas the opportunity to share in the savings and/or costs from buying natural gas for its core customers at prices below or above monthly market-based benchmarks. This mechanism permits full recovery of costs incurred when average purchase costs are within a price range around the benchmark price. Any higher costs incurred or savings realized outside this range are shared between the core customers and SoCalGas. We provide further discussion in Note 3 of the Notes to Condensed Consolidated Financial Statements herein and in “Item 1. Business – Ratemaking Mechanisms” in the Annual Report.
▪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 or refunded in subsequent periods through rates.
▪permits theThe California Utilities to recover certain expenses for programs authorized by the CPUC, or “refundable programs.”
Because changes in SoCalGas’ and SDG&E’s cost of natural gas and/or electricity are substantially recovered in rates, changes in these costs are offset in the changes in revenues, and therefore do not impact earnings. In addition to the changes in cost or market prices, natural gas or electric revenues recorded during a period are impacted by customer billing cycles causing a difference between customer billings and recorded or authorized costs. These differences are required to be balanced over time, resulting in over- and undercollected regulatory balancing accounts. We discuss balancing accounts and their effects further in Note 4 of the Notes to Condensed Consolidated Financial Statements hereinin this report and in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.
The California Utilities’ revenues are decoupled from, or not tied to, actual sales volumes. SoCalGas recognizes annual authorized revenue for core natural gas customers using seasonal factors established in the Triennial Cost Allocation Proceeding. Accordingly, a significant portion of SoCalGas’ annual earnings are recognized in the first and fourth quarters of each year. SDG&E’s authorized revenue recognition is also impacted by seasonal factors, resulting in higher earnings in the third quarter when electric loads are typically higher than in the other three quarters of the year. We discuss this decoupling mechanism and its effects further in Note 3 of the Notes to Consolidated Financial Statements in the Annual Report.


The table below summarizes revenues and cost of sales for our consolidated utilities.
UTILITIES REVENUES AND COST OF SALES       
(Dollars in millions)       
 Three months ended March 31,Three months ended March 31,
 2019 20182020 2019
Natural gas revenues:       
SoCalGas $1,361
 $1,126
$1,395
 $1,361
SDG&E 205
 171
219
 205
Sempra Mexico 27
 28
20
 27
Eliminations and adjustments (17) (17)(17) (17)
Total 1,576
 1,308
1,617
 1,576
Electric revenues:       
SDG&E 940
 884
1,050
 940
Eliminations and adjustments (1) (2)(2) (1)
Total 939
 882
1,048
 939
Total utilities revenues $2,515
 $2,190
$2,665
 $2,515
Cost of natural gas:       
SoCalGas $455
 $289
$278
 $455
SDG&E 79
 50
60
 79
Sempra Mexico 5
 13
3
 5
Eliminations and adjustments (8) (4)(4) (8)
Total $531
 $348
$337
 $531
Cost of electric fuel and purchased power:       
SDG&E $258
 $274
$231
 $258
Eliminations and adjustments (2) (3)(2) (2)
Total $256
 $271
$229
 $256



Natural Gas Revenues and Cost of Natural Gas
The table below summarizes the average cost of natural gas sold by the California Utilities and included in Cost of Natural Gas. The average cost of natural gas sold at each utility is impacted by market prices, as well as transportation, tariff and other charges.
CALIFORNIA UTILITIES AVERAGE COST OF NATURAL GASCALIFORNIA UTILITIES AVERAGE COST OF NATURAL GAS   
(Dollars per thousand cubic feet)(Dollars per thousand cubic feet)   
Three months ended March 31,Three months ended March 31,
2019 20182020 2019
SoCalGas$3.85
 $2.92
$2.54
 $3.85
SDG&E4.60
 3.54
3.75
 4.60

In the three months ended March 31, 2019,2020, Sempra Energy’s natural gas revenues increased by $268$41 million (20%(3%) toremaining at $1.6 billion primarily due to:
▪$23534 million increase at SoCalGas, which included:
◦
$166181 million increasehigher CPUC-authorized revenues, including $116 million lower revenues in cost2019 due to the delay in the issuance of natural gas sold, which we discuss below,the 2019 GRC FD, and
◦
$20 million higher revenues from capital projects,
◦$936 million higher recovery of costs associated with CPUC-authorized refundable programs, which revenues are offset in O&M,offset by
◦$7177 million decrease in charges in 2019 associated with tracking the income tax benefit from flow-through items in relation to forecasted amounts in the 2016 GRC FD, and
◦$7 million GCIM award approved by the CPUC in February 2019;cost of natural gas sold, which we discuss below; and
▪$3414 million increase at SDG&E, primarilywhich included:
◦
$29 million higher CPUC-authorized revenues, including $23 million lower revenues in 2019 due to an increasethe delay in the issuance of the 2019 GRC FD, offset by
◦$19 million decrease in the cost of natural gas sold, which we discuss below.


In the three months ended March 31, 2019,2020, our cost of natural gas increaseddecreased by $183$194 million (53%(37%) to $531$337 million primarily due to:
▪
$166177 million increasedecrease at SoCalGas due to $109$143 million from higherlower average natural gas prices and $57$34 million from higherlower volumes driven by weather;weather; and
▪$2919 million increasedecrease at SDG&E due to $18 million from higherlower average natural gas prices and $11 million from higherlower volumes driven by weather.
Electric Revenues and Cost of Electric Fuel and Purchased Power
In the three months ended March 31, 2019,2020, our electric revenues, substantially all of which are at SDG&E, increased by $57$109 million (6%(12%) to $939 million, primarily at SDG&E,$1.0 billion, including:
▪$3567 million increase in transmission operations, including the following impacts related to the March 2020 FERC-approved TO5 settlement proceeding:
◦$26 million to settle a rate base matter, and
◦$12 million favorable impact from the retroactive application of the final TO5 settlement for 2019; and
▪
$55 million higher recovery of costs associated with CPUC-authorized refundable programs, which revenues are offset in O&M; offset by
▪$27 million lower cost of electric fuel and purchased power, which we discuss below; and
▪$23 million higher revenues from transmission operations.below.
Our utility cost of electric fuel and purchased power, substantially all of which is at SDG&E, decreased by $15$27 million (6%(11%) to $256$229 million in the three months ended March 31, 20192020, primarily at SDG&E. The decrease was due to $51 milliona decrease in finance lease costs for PPAs that are now includedresidential demand primarily from an increase in Interest Expense and Depreciation and Amortization Expense as a result of the 2019 adoption of the lease standard, which we discuss in Note 2 of the Notes to Condensed Consolidated Financial Statements, partially offset by $35 million in higher electricity market costs and an additional capacity contract.rooftop solar adoption.


Energy-Related Businesses: Revenues and Cost of Sales
The table below shows revenues and cost of sales for our energy-related businesses.
ENERGY-RELATED BUSINESSES: REVENUES AND COST OF SALES    ENERGY-RELATED BUSINESSES: REVENUES AND COST OF SALES
(Dollars in millions)    (Dollars in millions)
 Three months ended March 31,Three months ended March 31,
 2019 20182020 2019
REVENUES       
Sempra Mexico $356
 $280
$289
 $356
Sempra Renewables 7
 25
—

7
Sempra LNG 141
 104
123
 141
Eliminations and adjustments (121) (63)
Parent and other(1)
(48) (121)
Total revenues $383
 $346
$364
 $383
COST OF SALES(1)(2)
       
Sempra Mexico $121
 $61
$69
 $121
Sempra LNG 103
 70
39
 103
Eliminations and adjustments (116) (62)
Parent and other(1)
(49) (116)
Total cost of sales $108
 $69
$59
 $108
(1)
Includes eliminations of intercompany activity.
(2)  
Excludes depreciation and amortization, which are presented separately on the Sempra Energy Condensed Consolidated Statements of Operations.

In the three months ended March 31, 2019,2020, revenues from our energy-related businesses increaseddecreased by $37$19 million (11% (5%) to $383$364 million primarily due to:
▪$7667 million increasedecrease at Sempra Mexico primarily due to:
◦
$5449 million from the marketing business primarily from higherlower natural gas prices and volumes, including higher volumes due to new regulations that went into effect on March 1, 2018 that require high consumption end users (previously serviced by Ecogas and other natural gas utilities) to procure their natural gas needs from natural gas marketers, including Sempra Mexico’s marketing business, and
◦$2526 million lower revenues at TdM primarily due to higher prices and volumes; and
▪$37 million increase at Sempra LNG primarily due to:
◦$34 million higher natural gas sales to Sempra Mexico due to higherlower natural gas prices and volumes, and
◦
$2210 million lower revenues primarily from natural gas marketing activities from changesforce majeure payments that ended in natural gas prices,August 2019 with respect to the Guaymas-El Oro segment of the Sonora pipeline, offset by
◦
$1214 million increase primarily due to higher volumes at the Ventika wind power generation facilities and from LNG sales to Cameron LNG JVrenewable assets placed in January 2018; offset by
▪$58 million from higher intercompany eliminations associated with sales between Sempra LNG and Sempra Mexico;service in 2019; and
▪$18 million decrease at Sempra RenewablesLNG primarily due to the sale of solar assets in December 2018.to:
In the three months ended March 31, 2019, the cost of sales for our energy-related businesses increased by $39 million to $108 million primarily due to:

▪◦
$6055 million increase atlower natural gas sales to Sempra Mexico mainly associated with higher revenues from the marketing business as a result of higherdue to lower natural gas prices and volumes includingand from fewer LNG cargoes sold, higher volumes due to new regulations that went into effect in 2018. The increase at Sempra Mexico was also due to higher prices and volumes at TdM; andoffset by
▪◦
$3344 million increase at Sempra LNG mainly from natural gas marketing activitiesoperations primarily from higherdue to changes in natural gas prices; offset by
▪$5473 million increase primarily from higherlower intercompany eliminations associated with sales between Sempra LNG and Sempra Mexico.
In the three months ended March 31, 2020, the cost of sales for our energy-related businesses decreased by $49 million (45%) to $59 million primarily due to:
▪$64 million decrease at Sempra LNG mainly from natural gas marketing activities primarily from lower natural gas purchases; and
▪
$52 million decrease at Sempra Mexico mainly associated with lower revenues from the marketing business and TdM as a result of lower natural gas prices and volumes; offset by
▪$67 million increase primarily from lower intercompany eliminations associated with sales between Sempra LNG and Sempra Mexico.
Operation and Maintenance
Our O&M increased by $91$119 million (12%(14%) to $832$951 million in the three months ended March 31, 20192020 primarily due to:
▪$38133 million increase at SDG&E, which included:SoCalGas primarily due to:
◦$16100 million from impacts associated with Aliso Canyon natural gas storage facility litigation, and
◦$36 million higher expenses associated with CPUC-authorized refundable programs for which costs incurred are recovered in revenue (refundable program expenses), and
◦$16 million higher non-refundable operating costs, including wildfire insurance premiums and administrative and support costs;


▪$26 million increase at SoCalGas, which included:
◦$17 million higher non-refundable operating costs due to weather related impacts, and
◦$9 million higher expenses associated with CPUC-authorized refundable programs expenses;revenue; and
▪
$2124 million increaseat SDG&E primarily due to:
◦
$57 million higher expenses associated with CPUC-authorized refundable programs, offset by
◦
$31 million lower non-refundable operating costs, including liability insurance premium costs for 2019 that were not balanced due to the delay in the 2019 GRC FD; offset by
▪$36 million decrease at Parent and other primarily from higher retained operating costs.lower deferred compensation expense.
Other (Expense) Income, Net
As part of our central risk management function, we enter into foreign currency derivatives to hedge Sempra Mexico parent’s exposure to movements in the Mexican peso from its controlling interest in IEnova. The gains/losses associated with these derivatives are included in Other (Expense) Income, Net, as described below, and partially mitigate the transactional effects of foreign currency and inflation included in Income Taxes Tax Benefit (Expense) for Sempra Mexico’s consolidated entities and in earnings fromEquity Earnings for Sempra Mexico’s equity method investments. We also utilize foreign currency derivatives to hedge exposure to fluctuations in the Peruvian sol and Chilean peso related to the sale of our operations in Peru and Chile, respectively. We discuss policies governing our risk management in “Item 7A. Quantitative and Qualitative Disclosure aboutDisclosures About Market Risk” in the Annual Report.
Other income,expense, net, decreased by $70 million (46%) to $82 million in the three months ended March 31, 20192020 was $254 million compared to other income, net, of $82 million in the same period in 2019. The change was primarily due to:
▪$72276 million lower net gainslosses in 20192020 from interest rate and foreign exchange instruments and foreign currency transactions compared to net gains of $20 million for the same period in 2019 primarily due to:
◦$34149 million lowerforeign currency losses in 2020 compared to $10 million foreign currency gains in 2019 on a Mexican peso-denominated loan to IMG JV, which is offset in Equity Earnings, and
◦
$125 million losses in 2020 compared to $10 million gains in 2019 on foreign currency derivatives as a result of fluctuation of the Mexican peso, andoffset by
◦$2911 million lowernet gains in 2020 of foreign currency gains on a Mexican peso-denominated loanderivatives used to hedge exposure to fluctuations in the Peruvian sol and Chilean peso related to the IMG JV, which is offsetsale of our operations in Equity Earnings (Losses);
▪$8 million lower non-service component of net periodic benefit credit in 2019;Peru and Chile; and
▪
$837 million investment losses in penalties related2020 compared to the SoCalGas billing practices OII;$26 million investment gains in 2019 on dedicated assets in support of our executive retirement and deferred compensation plans; offset by
▪$268 million investment gainsin penalties in 2019 comparedrelated to $1 million of investment losses in 2018 on dedicated assets in support of our executive retirement and deferred compensation plans.the SoCalGas billing practices OII.
Interest Expense
Interest expense increased by $54 million (26%) to $260 million in the three months ended March 31, 2019 primarily due to the inclusion of finance lease costs for SDG&E’s PPAs as a result of adoption of the lease standard. Prior to 2019, such costs were included in Cost of Electric Fuel and Purchased Power.


Income Taxes
The table below shows the income tax expense and ETRETRs for Sempra Energy Consolidated, SDG&E and SoCalGas.
INCOME TAX EXPENSE AND EFFECTIVE INCOME TAX RATES
INCOME TAX (BENEFIT) EXPENSE AND EFFECTIVE INCOME TAX RATES   
(Dollars in millions)
Three months ended March 31,Three months ended March 31,
2019 20182020 2019
Sempra Energy Consolidated:      
Income tax expense from continuing operations$42
 $242
Income tax (benefit) expense from continuing operations$(207) $42
      
Income from continuing operations before income taxes   
and equity earnings (losses) of unconsolidated entities$501
 $593
Equity earnings, before income tax(1)
5
 5
Income from continuing operations before income taxes and equity earnings$397
 $501
Equity (losses) earnings, before income tax(1)
(43) 5
Pretax income$506
 $598
$354
 $506
      
Effective income tax rate8% 40%(58)% 8%
SDG&E:      
Income tax expense$5
 $56
$58
 $5
Income before income taxes$182
 $225
$320
 $182
Effective income tax rate3% 25%18 % 3%
SoCalGas:      
Income tax expense$19
 $59
$52
 $19
Income before income taxes$283
 $284
$355
 $283
Effective income tax rate7% 21%15 % 7%
(1) 
We discuss how we recognize equity earnings in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.


Sempra Energy Consolidated
The decrease in incomeIncome tax expensebenefit in the three months ended March 31, 2020 compared to an income tax expense in the same period in 2019 was due to a lower ETR and lower pretax income and a lower ETR.income. The change in ETR was primarily due to:
▪$69308 million lower income tax benefit in 2020 compared to $23 million income tax expense in 2019 from foreign currency and inflation effects primarily as a result of fluctuation of the Mexican peso; and
▪
$19 million income tax benefit in 2020 compared to $8 million income tax expense in 2019 related to share-based compensation; offset by
▪$66 million total income tax benefits in 2019 from the release of regulatory liabilities at SDG&E and SoCalGas established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed be allocated to shareholders in a January 2019 decision; and
▪$10 million income tax benefit in 2019 from a reduction in a valuation allowance against certain NOL carryforwards as a result of our decision to sell our South American businesses; and
▪$9 million income tax expense in 2018 to adjust provisional estimates recorded in 2017 for the effects of tax reform.businesses.
We discuss the impact of foreign currency exchange rates and inflation on income taxes below in “Impact of Foreign Currency and Inflation Rates on Results of Operations.” See Note 1 of the Notes to Condensed Consolidated Financial Statements hereinin this report and Notes 1 and 8 of the Notes to Consolidated Financial Statements in the Annual Report for further details about our accounting for income taxes and items subject to flow-through treatment.
SDG&E
The decreaseincrease in SDG&E’s income tax expense in the three months ended March 31, 20192020 was due to lowera higher ETR and higher pretax income and a lower ETR.income. The change in ETR was primarily due to:
▪$31to $31 million income tax benefit from the release of a regulatory liability established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed be allocated to shareholders in a January 2019 decision; and
higher income tax benefitsbenefit in 2019 from flow-through deductions.the release of a regulatory liability established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed be allocated to shareholders in a January 2019 decision.
SoCalGas
The decreaseincrease in SoCalGas’ income tax expense in the three months ended March 31, 20192020 was due to a lowerhigher ETR offset byand higher pretax income. The change in ETR was primarily due to a $35 million income tax benefit in 2019 from the release of a regulatory liability established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed be allocated to shareholders in a January 2019 decision.


Equity Earnings (Losses)
In the three months ended March 31, 2019,2020, equity earnings were $101increased by $162 million compared to losses of $21$263 million for the same period in 2018 primarily due to:
▪$79171 million higher equity earnings net of income tax, from our investmentat IMG JV, primarily due to foreign currency effects, including $149 million foreign currency gains in Oncor Holdings, which we acquired in March 2018; and
▪$292020 compared to $10 million lower foreign currency losses in 2019 at theon IMG JV on itsJV’s Mexican peso-denominated loans from its JV owners, which is fully offset in Other (Expense) Income, Net.Net, and the start of commercial operations of the Sur de Texas-Tuxpan marine pipeline;
(Earnings) Losses Attributable to Noncontrolling Interests
Earnings attributable to NCI for the three months ended March 31, 2019 were $41 million compared to losses attributable to NCI of $17 million for the same period in 2018. The change was primarily due to:
▪
$3055 million increasehigher equity earnings at Cameron LNG JV primarily due to Train 1 and Train 2 commencing commercial operations under their tolling agreements in earnings attributable to NCI at Sempra Mexico inAugust 2019; and
February 2020, respectively; and
▪
$21 million pretax losses attributedhigher equity earnings at TAG JV primarily due to higher income tax equity investors at Sempra Renewablesbenefits in 20182020;. offset by
▪$100 million equity losses at RBS Sempra Commodities in 2020, which represents an estimate of our obligations to settle pending tax matters and related legal costs at our equity method investment.
Mandatory Convertible Preferred Stock DividendsEarnings Attributable to Noncontrolling Interests
InEarnings attributable to NCI increased by $110 million to $151 million in the three months ended March 31, 2019, mandatory convertible preferred stock dividends increased by $8 million to $36 million2020 primarily due to dividends associated with our series B preferred stock, which were issuedan increase in July 2018.earnings attributable to NCI at Sempra Mexico primarily from foreign currency effects as a result of fluctuation of the Mexico peso.


IMPACT OF FOREIGN CURRENCY AND INFLATION RATES ON RESULTS OF OPERATIONS
Because operations in South America and our natural gas distribution utility in Mexico uses itsuse their local currency as itstheir functional currency, revenues and expenses are translated into U.S. dollars at average exchange rates for the period for consolidation in Sempra Energy Consolidated’s results of operations. We discuss further the impact of foreign currency and inflation rates on results of operations, including impacts on income taxes and related hedging activity, in “Item 7. MD&A – Impact of Foreign Currency and Inflation Rates on Results of Operations” in the Annual Report.
Foreign Currency Translation
Any difference in average exchange rates used for the translation of income statement activity from year to year can cause a variance in Sempra Energy’sEnergy Consolidated’s comparative results of operations. InChanges in foreign currency translation rates between periods resulted in $4 million lower earnings within discontinued operations in the first three months ended March 31, 2019of 2020 compared to the prior-yearsame period the change in our earnings as a result of foreign currency translation was not material.2019.
Foreign Currency Transactional Impacts
Income statement activities at our foreign operations and their JVs are also impacted by transactional gains and losses. Alosses, a summary of these foreign currency transactional gains and losses included in our reported resultswhich is shown in the table below:
TRANSACTIONAL GAINS (LOSSES) FROM FOREIGN CURRENCY AND INFLATION
(Dollars in millions)
 Total reported amounts 
Transactional gains (losses) included
in reported amounts
 Three months ended March 31,
 2019 2018 2019 2018
Other income, net$82
 $152
 $20
 $92
Income tax expense(42) (242) (23) (94)
Equity earnings (losses)101
 (21) (12) (51)
Income from continuing operations560
 330
 (18) (65)
(Loss) income from discontinued operations, net of income tax(42) 28
 —
 1
Earnings attributable to common shares441
 347
 (10) (31)
TRANSACTIONAL (LOSSES) GAINS FROM FOREIGN CURRENCY AND INFLATION
(Dollars in millions)
 Total reported amounts  
Transactional (losses) gains included
in reported amounts
 Three months ended March 31,
 2020 2019  2020 2019
Other (expense) income, net$(254) $82
  $(276) $20
Income tax benefit (expense)207
 (42)  308
 (23)
Equity earnings263
 101
  181
 (12)
Income from continuing operations, net of income tax867
 560
  242
 (18)
Income (loss) from discontinued operations, net of income tax80
 (42)  16
 —
Earnings attributable to common shares760
 441
  150
 (10)


     
CAPITAL RESOURCES AND LIQUIDITY
OVERVIEW
The COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared the COVID-19 outbreak to be a pandemic. President Donald Trump officially declared a national emergency on March 13, 2020. The COVID-19 pandemic is causing a significant impact on the economy and people’s livelihoods, including substantial volatility and erosion of value in financial markets and a historic surge in unemployment claims while individuals adhere to shelter-in-place mandates and practice social distancing, and has resulted in sweeping action by governments and other authorities to help address these effects. The following describes some of these government actions and their current and anticipated impact on our businesses:
▪On March 4, 2020, Governor Gavin Newsom proclaimed a State of Emergency in California as a result of the threat of COVID-19, and on March 19, 2020, the Governor imposed a California-wide shelter-in-place directive via an Executive Order that will remain in place indefinitely. The Governor’s Executive Order requires all individuals living in California to stay home or at their place of residence except as needed to maintain the continuity of 16 critical infrastructure sectors. Our businesses that invest in, develop and operate energy infrastructure and provide electric and gas services to customers in California have been identified as critical infrastructure under the Executive Order.
▪On March 13, 2020, the California Utilities announced that they were voluntarily instituting a suspension of all customer disconnections for nonpayment of customer bills until further notice.
▪On March 17, 2020, the CPUC announced that, retroactive to March 4, 2020, all energy companies under its jurisdiction, including the California Utilities, should take action to implement several emergency customer protection measures to support California customers. The measures apply to all residential and small business customers affected by the COVID-19 pandemic and include suspending service disconnections due to nonpayment, waiving late payment fees, and offering flexible payment plans for all customers experiencing difficulty paying their electric or gas bills. Similarly, on March 26, 2020, the PUCT issued orders that require retail electric providers to offer a deferred payment plan to customers, upon request, and authorized customer assistance programs for certain residential customers of electric service. The continuation of these circumstances could result in a material reduction in payments received from our customers and a material increase in uncollectible accounts that we may not be able to recover in rates, which could have a material adverse effect on the cash flows, financial condition and results of operations for Sempra Energy, SDG&E and SoCalGas.
▪On March 30, 2020, the Mexican government announced a national state of sanitary emergency, suspending all non-essential activities and urging people in Mexico to stay at home until April 30, 2020, which was subsequently extended to May 30, 2020 and may be extended further. Essential business activities that may continue to operate during the health emergency include the conservation, maintenance and repair of critical infrastructure that ensures the production and distribution of electric and gas services.
▪On April 16, 2020, the CPUC approved a resolution authorizing each of the California Utilities to establish a CPPMA to track and request recovery of incremental costs associated with complying with measures implemented by the CPUC related to the COVID-19 pandemic. Although we are tracking these costs, which will include incremental amounts associated with customer nonpayments, CPUC approval is required to collect all or any portion of the balance of the CPPMA, which is not assured. Similarly, the PUCT has provided for the use of a regulatory asset accounting mechanism and a subsequent process through which regulated utility companies may seek future recovery of expenses resulting from the effects of the COVID-19 pandemic, as well as the creation of a COVID-19 Electricity Relief Program fund through which transmission and distribution utilities and retail electric providers may seek to recover a reasonable portion of the cost of providing uninterrupted services to customers facing financial hardship due to the effects of the COVID-19 pandemic. There can be no assurance, however, that our Texas utilities will be able to recover any of the costs they incur from their response to the COVID-19 pandemic through these programs or otherwise.
▪On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted and signed into law in response to the COVID-19 pandemic. The CARES Act contains significant business tax provisions, including a delay of payment of employer payroll taxes and an acceleration of refunds of corporate alternative minimum tax (AMT) credits. Sempra Energy, SDG&E and SoCalGas expect to benefit from deferring payment of the employer’s share of payroll taxes through the end of 2020, with half of such taxes to be paid by the end of 2021 and the other half to be paid by the end of 2022. Sempra Energy has filed a refund claim for its corporate AMT credits and expects to receive approximately $56 million in 2020 rather than in installments through 2021.


In addition, we and other companies, including our partners, are taking steps to try to protect the health and well-being of our employees and other stakeholders. As our businesses continue to operate, our priority is the safety of our employees, customers, partners and the communities we serve. For example, we have activated our business continuity plans and continue to work closely with local, state and federal authorities to provide essential services with minimum interruption to customers and in accordance with applicable shelter-in-place orders. We have implemented precautionary measures across our businesses, including requiring employees to work remotely when possible, restricting non-essential business travel, increasing facility sanitization and communicating proper health and safety protocols to employees. Additionally, SDG&E announced that it is postponing all noncritical planned outages, while continuing with those related to public safety, emergencies and wildfire mitigation, to try to protect employees and maintain service to customers as seamlessly as possible. We also have engaged an infectious disease expert to advise us during this public health crisis. Through the end of the first quarter of 2020, these actions have not required significant outlays of capital and have not had a material impact on our results of operations, but these or other measures that we may implement in the future could have a substantial effect on our liquidity, cash flows, financial position and results of operations if circumstances related to the COVID-19 pandemic worsen or continue for an extended period of time.
The COVID-19 pandemic and its widespread effects may also impact our capital plans, liquidity and asset values. For example:
▪Our capital projects and planned expenditures could experience delays due to the COVID-19 pandemic, either because we decide to postpone certain activities in an effort to preserve cash or other resources or for other reasons related to the pandemic that are beyond our control, including supply chain and contractor performance delays or delays in the issuance of required permits. Any such delay could have a material effect on our capital plans and results of operations. We discuss the potential for these delays in further detail with respect to each of our segments below.
▪The decline and volatility in the financial markets has had a significant impact on certain of the markets that we typically access for working capital and other liquidity requirements. See the discussion in “Liquidity” below for more information.
▪We have significant investments in several trusts to provide for future payments of pensions and other postretirement benefits and nuclear decommissioning. Although all of our trust funds’ investments are diversified and managed in compliance with applicable laws and regulations, the value of the investments in these trusts declined significantly in the second half of the first quarter of 2020 due to a decline in the equity markets and volatility in the fixed income market triggered by the COVID-19 pandemic. These markets continue to be volatile. The decrease in asset values has not affected the funds’ ability to make their required payments; however, this could change if conditions worsen or continue for an extended period. Moreover, if asset values do not recover, our funding requirements for pension and other postretirement benefit plans in 2021 may increase. Other factors may also impact funding requirements for pension and other postretirement benefit plans, including changes to discount rates, assumed rates of return, mortality tables and regulations. Funding requirements for SDG&E’s NDT could be impacted by the value of the assets as well as the timing and amount of SONGS decommissioning costs. At the California Utilities, funding requirements are generally recoverable in rates. We discuss our employee benefit plans and SDG&E’s NDT, including our investment allocation strategies for assets in these trusts, in Notes 9 and 15, respectively, of the Notes to Consolidated Financial Statements in the Annual Report.
▪We perform recovery testing of our recorded asset values when market conditions indicate that such values may not be recoverable. Given the current economic environment, including the significant decline in the price of our common stock, market volatility and potential reduction in customer collections, we considered whether these events or changes in circumstances triggered the need for an interim impairment analysis for our long-lived assets, intangible assets and goodwill. We determined that, given the existing headroom in our prior quantitative tests and assessment of the impact of these conditions on our businesses, there was no triggering event as of March 31, 2020. However, as the effects of the COVID-19 pandemic continue to evolve, we will continue to assess the need to perform an interim impairment test. To the extent the recorded (carrying) value is in excess of the fair value, we would record a noncash impairment charge. A significant impairment charge related to our long-lived assets, intangible assets or goodwill would have a material adverse effect on our results of operations in the period in which it is recorded.
For a further discussion of risks and uncertainties related to the COVID-19 pandemic, see below in “Item 1A. Risk Factors.”
Liquidity
We expect to meet our cash requirements through cash flows from operations, unrestricted cash and cash equivalents, proceeds from recent and planned asset sales, borrowings under our credit facilities, distributions from our equity method investments, issuances of debt, and equity securities, project financing and other equity sales, including partnering in JVs.
Our lines of credit provide liquidity and support commercial paper. As we discuss in Note 7 of the Notes to Condensed Consolidated Financial Statements, at March 31, 2019, Sempra Energy, Sempra Global and the California Utilities each had five-year revolving credit facilities expiring in 2020. The table below shows the amount of available funds, including available unused credit on these three credit facilities. In addition, IEnova has a $1.5 billion line of credit, with approximately $692 million available unused credit at March 31, 2019.


AVAILABLE FUNDS AT MARCH 31, 2019
(Dollars in millions)
 
Sempra Energy
Consolidated
 SDG&E SoCalGas
Unrestricted cash and cash equivalents(1)
$78
 $10
 $3
Available unused credit(2)(3)
3,718
 512
 560
(1)
Amounts at Sempra Energy Consolidated included $58 million held in non-U.S. jurisdictions. We discuss repatriation in Note 1 of the Notes to Condensed Consolidated Financial Statements.
(2)
Available unused credit is the total available on Sempra Energy’s, Sempra Global’s and the California Utilities’ credit facilities that we discuss in Note 7 of the Notes to Condensed Consolidated Financial Statements. Borrowings on the shared line of credit at SDG&E and SoCalGas are limited to $750 million for each utility and a combined total of $1 billion. The available balance at each of the California Utilities assumes no additional borrowings by the other.
(3)
Because the commercial paper programs are supported by these lines, we reflect the amount of commercial paper outstanding as a reduction to the available unused credit.
Sempra Energy Consolidated
We believe that these available funds,cash flow sources, combined with cash flows from operations, proceeds from recent and planned asset sales, distributions from our equity method investments, issuances of debt and equity securities, project financing and other equity sales, including partnering in JVs,available funds, will be adequate to fund our current operations, including to:
▪finance capital expenditures;expenditures
▪meet liquidity requirements;requirements
▪fund dividends;dividends
▪fund new business or asset acquisitions or start-ups;start-ups


▪fund capital contribution requirements;requirements
▪repay maturing long-term debt; anddebt
▪fund expenditures related to the natural gas leak at SoCalGas’ Aliso Canyon natural gas storage facility.facility
Sempra Energy and the California Utilities currently have readyreasonable access to the long-term debt markets and are not currently constrained in any significant way in their ability to borrow money at reasonable rates. However, changing economic conditions,rates from commercial banks, under existing revolving credit facilities or through public offerings registered with the inabilitySEC. There have been, however, substantial disruptions caused by the COVID-19 pandemic in the commercial paper markets during the second half of the first quarter of 2020, which have historically been a primary source of working capital for Sempra Energy and the California legislativeUtilities. In addition, the capital markets in general and regulatory bodiesthe availability of financing from commercial banks also have shown periods of significant distress in the second half of the first quarter of 2020 due to reduce the economic exposureCOVID-19 pandemic, and our ability to access the capital markets or obtain credit from commercial banks outside of our California Utilities to any potential future wildfires,committed revolving credit facilities could become materially constrained, especially if these conditions worsen or continue for an extended period. In addition, our financing activities and actions by credit rating agencies, as well as many other factors, could negatively affect the availability and cost of both short-term and long-term financing. Also, cash flows from operations may be impacted by the timing of commencement and completion, and potentially cost overruns, of large projects. If cash flows from operations were to be significantly reduced or we were unable to borrow under acceptable terms, we would likely first reduce or postpone discretionary capital expenditures (not related to safety) and investments in new businesses. We monitor our ability to finance the needs of our operating, investing and financing activities in a manner consistent with our intention to maintain our investment-grade credit ratings and capital structure.structure.
We used $1.6 billion in cash proceeds received from Sempra Renewables’ December 2018 sale, whichAvailable Funds
Our committed lines of credit provide liquidity and support commercial paper. As we discuss in Note 57 of the Notes to Condensed Consolidated Financial Statements, Sempra Energy, Sempra Global, SDG&E and SoCalGas each have five-year credit agreements expiring in 2024. The table below shows the Annual Report, to temporarily pay down commercial paper, pending the closeamount of Oncor’s agreement to purchase InfraREIT and our agreement to purchase a 50-percent interestavailable funds at March 31, 2020, including available unused credit on these primary U.S. credit facilities. In addition, IEnova has $1.9 billion in Sharyland Holdings, LP, as described below. lines of credit, with approximately $136 million available unused credit at March 31, 2020.
AVAILABLE FUNDS AT MARCH 31, 2020
(Dollars in millions)
 
Sempra Energy
Consolidated
 SDG&E SoCalGas
Unrestricted cash and cash equivalents(1)
$2,247
 $203
 $389
Available unused credit(2)(3)
4,010
 1,300
 750
(1)
Amounts at Sempra Energy Consolidated include $542 million held in non-U.S. jurisdictions. We discuss repatriation in Note 1 of the Notes to Condensed Consolidated Financial Statements.
(2)
Available unused credit is the total available on Sempra Energy’s, Sempra Global’s, SDG&E’s and SoCalGas’ credit facilities that we discuss in Note 7 of the Notes to Condensed Consolidated Financial Statements.
(3)
Because the commercial paper programs are supported by these lines, we reflect the amount of commercial paper outstanding as a reduction to the available unused credit.
Short-Term Borrowings
We use short-term debt primarily to meet liquidity requirements, fund shareholder dividends, and temporarily finance capital expenditures, acquisitions or start-ups. Our corporateCalifornia Utilities use short-term unsecured promissory notes, or commercialdebt primarily to meet working capital needs. Commercial paper, revolving lines of credit and term loans were our primary sources of short-term debt funding in the first three monthsquarter of 2019. Our California Utilities use short-term debt primarily2020. In an effort to meet working capital needs.
At March 31, 2019,protect our liquidity in light of the COVID-19 pandemic, Sempra Energy, hadSempra Global, SDG&E, SoCalGas and IEnova each drew amounts under their respective credit facilities in the first quarter of 2020, a substantial portion of which were repaid through terms loans to unconsolidated affiliates totaling $668 millionobtained in the first quarter of 2020 by Sempra Energy and a loan from an unconsolidated affiliate totaling $38 million, whichSDG&E. As we discuss in Note 17 of the Notes to Condensed Consolidated Financial Statements.Statements, Sempra Energy and SDG&E obtained 364-day term loans with aggregate principal amounts outstanding at March 31, 2020, of $1,525 million and $200 million, respectively. At March 31, 2020, SDG&E classified a total of $400 million of its then outstanding revolving line of credit and term loan as long-term debt based on management’s intent and ability to maintain this level of borrowing on a long-term basis. In April 2020, SDG&E completed a $400 million public offering of first mortgage bonds maturing in 2050 and repaid the amounts borrowed under its revolving line of credit. On April 1, 2020, Sempra Energy borrowed an additional $75 million under its term loan.


Credit Ratings
We have significant investmentsprovide additional information about the credit ratings of Sempra Energy, SDG&E and SoCalGas in several trusts to provide for future payments of pensions“Item 1A. Risk Factors” and other postretirement benefits,“Item 2. MD&A – Capital Resources and nuclear decommissioning. Changes in asset values, which are dependent on the activity in the equity and fixed income markets, have not affected the trust funds’ abilities to make required payments. However, changes in asset values may, along with a number of other factors such as changes to discount rates, assumed rates of return, mortality tables, and regulations, impact funding requirements for pension and other postretirement benefit plans and SDG&E’s NDT. At the California Utilities, funding requirements are generally recoverable in rates. We discuss our employee benefit plans and SDG&E’s NDT, including our investment allocation strategies for assets in these trusts, in Notes 9 and 15, respectively, of the Notes to Consolidated Financial StatementsLiquidity” in the Annual Report.

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

Common Stock Under Forward Sale Agreements
CREDIT RATINGS AT MARCH 31, 2020
Sempra EnergySDG&ESoCalGas
Moody’sBaa1 with a negative outlookBaa1 with a positive outlookA1 with a negative outlook
S&PBBB+ with a negative outlookBBB+ with a stable outlookA with a negative outlook
FitchBBB+ with a stable outlookBBB+ with a stable outlookA with a stable outlook
As we discussOur credit ratings may affect the rates at which borrowings bear interest and the commitment fees on available unused credit. A downgrade of Sempra Energy’s or any of its subsidiaries’ credit ratings or rating outlooks may result in Note 14a requirement for collateral to be posted in the case of certain financing arrangements and may materially and adversely affect the market prices of their equity and debt securities, the rates at which borrowings are made and commercial paper is issued, and the various fees on their outstanding credit facilities. This could make it more costly for Sempra Energy, SDG&E, SoCalGas and Sempra Energy’s other subsidiaries to issue debt securities, to borrow under credit facilities and to raise certain other types of financing.
Sempra Energy has agreed that, if the credit rating of Oncor’s senior secured debt by any of the Notes to Consolidated Financial Statements inthree major rating agencies falls below BBB (or the Annual Report, our forward sale agreements permit us to elect cash settlement or net share settlementequivalent), Oncor will suspend dividends and other distributions (except for all or a portion of our obligations under the forward sale agreements. We expect to settle the forward sale agreements entirelycontractual tax payments), unless otherwise allowed by the physical delivery of shares of our common stock in exchange for cash proceeds. As of May 7, 2019, based on the initial forward sale price of approximately $105.07 per share in January 2018PUCT. Oncor’s senior secured debt was rated A2, A+ and approximately $111.87 per share in July 2018, we expect that the net proceeds from full physical settlement of the remaining forward sale agreements would be approximately $1.8 billion (net of underwriting discounts, but before deducting equity issuance costs,A at Moody’s, S&P and subject to certain adjustments pursuant to the forward sale agreements). If we were to elect cash settlement or net share settlement, the amount of cash proceeds we receive upon settlement could differ, perhaps substantially, or we may not receive any cash proceeds or we may deliver cash (in an amount which could be significant) or shares of our common stock to the forward purchasers. We expect to settle the remaining portion of the forward sale agreements in one or more settlements no later than December 15, 2019, which is the final settlement date under the agreements.
Discontinued OperationsFitch, respectively, at March 31, 2020.
On January 25, 2019, our board of directors approved a planApril 15, 2020, Moody’s placed Sempra Energy on review for downgrade.
Loans to/from Affiliates
At March 31, 2020, Sempra Energy had $615 million in loans to sell our South American businesses. As such, we have reclassified these businesses to held for saleunconsolidated affiliates and presented them as discontinued operations. We expect to complete the sale by the end of 2019$263 million in loans from unconsolidated affiliates.
California Utilities
SDG&E’s and use the proceeds from such sale to focus on capital investment in the U.S. and Mexico to support additional growth opportunities and strengthen our balance sheet by reducing debt.
Our utilities in South AmericaSoCalGas’ operations have historically provided relatively stable earnings and liquidity. We expectTheir future performance will depend primarily on the cash provided by earnings from our focused capital investment will exceed the absence of cash flows from these discontinued operations. However, there can be no assurance that we will derive these anticipated benefits. While we expect to complete the sale of our South American businessesratemaking and regulatory process, environmental regulations, economic conditions, actions by the end of 2019, the planned sale will depend on several factors beyond our control, including, but not limited to, regulatory approvals, market conditions, political and macroeconomic factors, industry trends, consent rights or other rights granted to or held by third partiesCalifornia legislature and the availability of financing to potential buyers on reasonable terms. Further, there can be no assurance thatchanging energy marketplace, as well as the sale, if completed, will resultother matters described in a sales price that we believe adequately values these businesses or additional value to our shareholders, or that we will be able to redeploy the capital that we obtain from such sale in a way that would result in cash flows or earnings exceeding those historically generated by these businesses.
California Utilitiesthis report.
SDG&E and SoCalGas expect that the available unused credit from their credit facilities described above, cash flows from operations, and debt issuances will continue to be adequate to fund their respective current operations and planned capital expenditures. The California Utilities are continuing to monitor the impacts of the COVID-19 pandemic on cash flows and results of operations. As we discuss below in “Item 3. QuantitativeSome of our customers will likely experience diminished ability to pay their electric or gas bills, leading to slower payments and Qualitative Disclosures About Market Risk –higher levels of nonpayment than has been the case historically. Credit Ratings,” the credit ratings of SDG&EThese impacts could be significant and SoCalGas may affect the rates at which borrowings bear interest, collateralcould require modifications to be posted and fees on outstanding credit facilities. our financing plans. The California Utilities manage their capital structure and pay dividends when appropriate and as approved by their respective boards of directors.
SDG&E declared common stock dividends of $250 millionAs we discuss in the year ended December 31, 2018. SDG&E’s declared common stock dividends on an annual historical basis may not be indicative of future declarations, and could be impacted over the next few years in order for SDG&E to maintain its authorized capital structure while managing its capital investment program (approximately $1.6 billion in 2019, which does not include the impactNote 4 of the OMEC LLC put option that we discuss below).
SoCalGas declared common stock dividends of $50 millionNotes to Condensed Consolidated Financial Statements in the year ended December 31, 2018. As a result of its capital investment program, SoCalGas had not previously declared or paid common stock dividends since 2015. SoCalGas expects that its common stock dividends will continue to be impacted by its ability to maintain its authorized capital structure while managing its capital investment program (approximately $1.5 billion in 2019).
As we discussthis report and in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report, changes in balancing accounts for significant costs at SDG&E and SoCalGas, particularly a change between over- and undercollected status, including commodity and transportation balancing accounts, may have a significant impact on cash flows, as theseflows. These changes generally represent the difference between when costs are incurred and when they are ultimately recovered in rates through billings to customers.
SDG&E’s and SoCalGas’ balancing accounts include:
▪Energy Resource Recovery Balancing Account (ERRA) – tracks the difference between amounts billed to customers and the actual cost of electric fuel and purchased power. SDG&E’s ERRA balance was undercollected by $126 million and $50 million at March 31, 2019 and December 31, 2018, respectively. The increase in the ERRA undercollected balance in 2019 was primarily due to seasonalized electric rates. We typically undercollect in the winter months due to lower winter rates and overcollect in the summer months when the higher summer rates take effect. We expect the ERRA undercollected balance to decrease through the end of the year.



▪Core Fixed Cost Account (CFCA) – tracks the difference between amounts billed to customers and the authorized margin and other costs allocated to core customers. SDG&E’s CFCA balance was undercollected by $18 million and $51 million at March 31, 2019 and December 31, 2018, respectively, and SoCalGas’ CFCA balance was undercollected by $63 million and $177 million at March 31, 2019 and December 31, 2018, respectively. The decrease in undercollection was mainly due to cold weather resulting in higher natural gas consumption compared to authorized levels.
SDG&E
As we discussWildfire Fund
In 2019, SDG&E recorded a Wildfire Fund asset for committed shareholder contributions to the Wildfire Fund. We describe the Wildfire Legislation and related accounting treatment in Note 1 of the Notes to Condensed Consolidated Financial Statements in the Annual Report.
SDG&E hasis exposed to the risk that the participating California electric IOUs may incur third-party wildfire claims for which they will seek recovery from the Wildfire Fund. In such a tolling agreementsituation, SDG&E may recognize a reduction of its Wildfire Fund asset and record a charge against earnings in the period when there is a reduction of the available coverage due to purchase power generated at OMEC,recoverable claims from the IOUs. As a 605-MW generating facility. Under the termsresult, if any California electric IOU’s equipment is determined to be a cause of a related agreement, OMEC LLC can requirefire, it could have a material adverse effect on SDG&E’s and Sempra Energy’s financial condition and results of operations up to the carrying value of our Wildfire Fund asset. In addition, the Wildfire Fund could be completely exhausted due to fires in the other California electric IOUs’ service territories, by fires in SDG&E’s service territory or by a combination thereof. In the event that the Wildfire Fund is materially diminished, exhausted or terminated, SDG&E to purchasewill lose the power plant (referred toprotection afforded by the Wildfire Fund, and as the put option) for $280 million, subject to adjustments. On March 28, 2019, OMEC LLC exercised the put option requiringa consequence, a fire in SDG&E to purchase the power plant by October 3, 2019.&E’s service territory could cause a material adverse effect on SDG&E’s and Sempra Energy’s cash flows, results of operations and financial condition.
SoCalGas
Aliso Canyon Natural Gas Storage Facility Gas Leak
We provide informationSoCalGas’ performance will also depend on the natural gas leakresolution of legal, regulatory and other matters concerning the Leak at the Aliso Canyon natural gas storage facility, which we discuss further in Note 11 of the Notes to Condensed Consolidated Financial Statements herein, in “Factors Influencing Future Performance” belowthis report, and in “Item 1A. Risk Factors” in the Annual Report.
Aliso Canyon Natural Gas Storage Facility Gas Leak
From October 23, 2015, through February 11, 2016, SoCalGas experienced a natural gas leak from one of the injection-and-withdrawal wells, SS25, at its Aliso Canyon natural gas storage facility located in Los Angeles County. In February 2016, CalGEM confirmed that the well was permanently sealed.
Cost Estimates, Accounting Impact and Insurance.At March 31, 2020, SoCalGas estimates the costs related to the Leak are $1,408 million (the cost estimate). This cost estimate may increase significantly as more information becomes available. A substantial portion of the cost estimate has been paid, and $284 million is accrued as Reserve for Aliso Canyon Costs and $6 million is accrued in Deferred Credits and Other as of March 31, 2020 on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets.
Except for the amounts paid or estimated to settle certain actions, the cost estimate does not include all litigation or regulatory costs to the extent it is not possible to predict at this time the outcome of these actions or reasonably estimate the costs to defend or resolve the actions or the amount of damages, restitution, or civil, administrative or criminal fines, sanctions, penalties or other costs or remedies that may be imposed or incurred. The cost estimate also does not include certain other costs incurred to remediate and stop the Leak and to mitigate local community impacts are significant and may increase, and the costs ofby Sempra Energy associated with defending against the related civil and criminalshareholder derivative lawsuits and cooperating with related investigations, and any damages, restitution, and civil, administrative and criminal fines,other potential costs and other penalties, if awardedthat we currently do not anticipate incurring or imposed, as well asthat we cannot reasonably estimate. These costs of mitigatingnot included in the actual natural gas released,cost estimate could be significant and could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.
We have received insurance payments for many of the costs included in the cost estimate, including temporary relocation and associated processing costs, control-of-well expenses, costs of the government-ordered response to the Leak, certain legal costs and lost gas. We intend to pursue the full extent of our insurance coverage for the costs we have incurred. Other than directors’ and officers’ liability insurance, after taking into consideration the additional accrual related to litigation matters described in Note 11 of the Notes to Condensed Consolidated Financial Statements, we have effectively exhausted all of our insurance in this matter, except as to certain defense costs we may incur in the future, including those related to the shareholder derivative lawsuits. We continue to pursue other sources of insurance coverage for costs related to this matter, but we may not covered bybe successful in obtaining additional insurance (includingrecovery for any of these costs. If we are not able to secure additional insurance recovery for all or a substantial portion of these costs, if any costs in excess of applicable policy limits),we have recorded as an insurance receivable are not collected, if there were to be significantare delays in receiving insurance recoveries, or if the insurance recoveries are subject to income taxes while the associated costs are not tax deductible, such amounts, which could be significant, could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations. Also, higher operating costs


As of March 31, 2020, we recorded the expected recovery of the cost estimate related to the Leak of $511 million as Insurance Receivable for Aliso Canyon Costs on SoCalGas’ and additional capital expenditures incurred by SoCalGas asSempra Energy’s Condensed Consolidated Balance Sheets. This amount is exclusive of insurance retentions and $766 million of insurance proceeds we received through March 31, 2020. If we were to conclude that this receivable or a resultportion of new laws, orders, rules and regulations arising outit is no longer probable of recovery from insurers, some or all of this incident or our responses theretoreceivable would be charged against earnings, which could be significant and may not be recoverable in customer rates, which may have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.
Natural Gas Storage Operations and Reliability.Natural gas withdrawn from storage is important for service reliability during peak demand periods, including peak electric generation needs in the summer and heating needs in the winter. The Aliso Canyon natural gas storage facility is the largest SoCalGas storage facility and an important element of SoCalGas’ delivery system. As a result of the Leak, SoCalGas suspended injection of natural gas into the Aliso Canyon natural gas storage facility beginning in October 2015 and, following a comprehensive safety review and authorization by CalGEM and the CPUC’s Executive Director, resumed limited injection operations in July 2017.
During the suspension period, SoCalGas advised the California ISO, California Energy Commission, CPUC and Pipeline and Hazardous Materials Safety Administration of its concerns that the inability to inject natural gas into the Aliso Canyon natural gas storage facility posed a risk to energy reliability in Southern California. The CPUC has issued a series of directives to SoCalGas specifying the range of working gas to be maintained in the Aliso Canyon natural gas storage facility as well as protocols for the withdrawal of gas, to help ensure safe and reliable natural gas service, while helping to maintain stable energy prices in Southern California. Limited withdrawals of natural gas from the facility were made in 2018, 2019 and 2020 to augment natural gas supplies during critical demand periods.
In February 2017, the CPUC opened a proceeding pursuant to SB 380 to determine the feasibility of minimizing or eliminating the use of the Aliso Canyon natural gas storage facility. If the Aliso Canyon natural gas storage facility were to be permanently closed, or if future cash flows from its operation were otherwise insufficient to recover its carrying value, it could result in an impairment of the facility and significantly higher than expected operating costs and/or additional capital expenditures, and natural gas reliability and electric generation could be jeopardized. At March 31, 2020, the Aliso Canyon natural gas storage facility had a net book value of $771 million. Any significant impairment of this asset, or higher operating costs and additional capital expenditures incurred by SoCalGas that may not be recoverable in customer rates, could have a material adverse effect on SoCalGas’ and Sempra Energy’s results of operations, financial condition and cash flows.
Sempra Texas UtilityUtilities
Oncor’s business is capital intensive, and it relies on external financing as a significant source of liquidity for its capital requirements. In the past, Oncor has financed a substantial portion of its cash needs from operations and with proceeds from indebtedness. In the event that Oncor fails to meet its capital requirements, we may be required to make additional investments incapital contributions to Oncor, or if Oncor is unable to access sufficient capital to finance its ongoing needs, we may elect to make additional investments incapital contributions to Oncor which could be substantial and which would reduce the cash available to us for other purposes, could increase our indebtedness and could ultimately materially adversely affect our results of operations, financial condition and prospects. In that regard, our commitments to the PUCT prohibit us from making loans to Oncor. As a result, if Oncor requires additional financing and cannot obtain it from other sources, we may be requiredelect to make a capital contribution to Oncor.
On October 18, 2018, Sempra Energy committedOncor’s ability to makepay dividends may be limited by factors such as its credit ratings, regulatory capital requirements, debt-to-equity ratio approved by the PUCT and other restrictions. In addition, Oncor will not pay dividends if a capital contribution to Oncor formajority of Oncor’s independent directors or any minority member director determines it is in the best interests of Oncor to fund its pending acquisitionretain such amounts to meet expected future requirements.


Sempra Mexico
Sempra Mexico is currently building or developing terminals for the receipt, storage, and delivery of interestsliquid fuels in InfraREIT,the new port of Veracruz and vicinity of Mexico City, Puebla, Topolobampo, Manzanillo, and Ensenada. Sempra Mexico is also developing new solar facilities in Juárez, Chihuahua, and Benjamin Hill, Sonora, through which weit will supply renewable energy to several private companies. We expect will closethe projects to commence commercial operations on various dates in mid-2019. We estimate2020 and 2021, but these expected commencement dates could be delayed by worsening or extended disruptions of project construction or development caused by the capital contribution to be $1,025 million, excluding Sempra Energy’s share of approximately $40 million for a management agreement termination fee, as well as other customary transaction costs incurred by InfraREIT that will be borne by Oncor as part of the acquisition.COVID-19 pandemic. See “Item 1A. Risk Factors” below. We expect to fund ourthese capital contribution to Oncorexpenditures and to purchase the 50-percent limited partner interest in Sharyland Holdings, LP by utilizing a portion of the proceeds received from the sales of Sempra Renewables’ assets. The capital contribution is contingent on the satisfaction of customary conditions, including the substantially simultaneous closing of the transactions contemplated by the InfraREIT Merger Agreement. We discuss these transactions in Note 5 of the Notes to Condensed Consolidated Financial Statements herein and below in “Factors Influencing Future Performance.”
Sempra Mexico
We expect to fundinvestments, operations and dividends at IEnova with available funds, including credit facilities, and funds internally generated by the Sempra Mexico businesses, as well as funds from IEnova’s securities issuances, project financing, sales of securities, interim funding from the parent or affiliates, and partnering in JVs.
IEnova paid $71 million Sempra Mexico is continuing to monitor the impacts of dividends to minority shareholders in the year ended December 31, 2018.


IEnova’s shareholders approved the formationCOVID-19 pandemic on cash flows and results of a fund for IEnova to repurchase its own shares for a maximum amount of $250 million. Repurchases shall not exceed IEnova’s total net profits, including retained earnings, as stated in their financial statements. In the three months ended March 31, 2019, IEnova repurchased 1,600,000 shares of its outstanding common stock held by NCI for approximately $6 million, resulting in an increase in Sempra Energy’s ownership interest in IEnova from 66.5 percent at December 31, 2018 to 66.6 percent at March 31, 2019.
Sempra Renewablesoperations.
As we discuss in Note 511 of the Notes to Condensed Consolidated Financial Statements, hereinIEnova received force majeure payments for the Guaymas-El Oro segment of the Sonora pipeline from August 2017 to August 2019. Under an agreement between IEnova and belowthe CFE, the CFE will resume making payments only when the damaged section of the Guaymas-El Oro segment of the Sonora pipeline is repaired. If the pipeline is not repaired by May 15, 2020 and the parties do not agree on a new service start date, IEnova retains the right to terminate the contract and seek to recover its reasonable and documented costs and lost profits. The parties are currently discussing a new service start date in “Factors Influencing Future Performance,”the event the pipeline is not repaired by May 15, 2020, but there can be no assurance that the parties will have agreed on a new service start date if the pipeline is not repaired by that date. If IEnova is unable to make such repairs (which have not commenced) and resume operations in April 2019,the Guaymas-El Oro segment of the Sonora pipeline or if IEnova terminates the contract and is unable to obtain recovery, there may be a material adverse impact on Sempra Renewables sold its remaining wind assetsEnergy’s results of operations and investments for $584 million in cash flows and our ability to recover the carrying value of our investment.
The ability to successfully complete major construction projects is subject to working capitala number of risks and uncertainties. For a discussion of these risks and uncertainties, see “Item 1A. Risk Factors” in the Annual Report.
Sempra LNG
Sempra LNG develops and builds natural gas liquefaction facilities and is pursuing the development of five strategically located LNG projects in North America with a long-term goal of enabling the delivery of natural gas to the largest world markets. We expect Sempra LNG to require funding for the development and expansion of its portfolio of projects, which may be financed through a combination of operating cash flows, funding from the parent, project financing and participating in JVs, including ECA LNG JV with IEnova.
North American natural gas prices, when in decline, negatively affect profitability at Sempra LNG. Also, a reduction in projected global demand for LNG could result in increased competition among those developing projects in an environment of declining LNG demand, such as the Sempra Energy-sponsored LNG export initiatives. Our LNG projects currently under development could be delayed by the worldwide economic slowdown as a result of the COVID-19 pandemic, by the current uncertainty in the global oil and gas markets as a result of the unprecedented decline in oil prices or by a combination of these factors. For a discussion of these risks and other customary adjustments. The proceeds fromrisks involving changing commodity prices, see “Item 1A. Risk Factors” in the sale will be used to pay down debtAnnual Report and redeploy capital to support the strategic growth of Sempra Energy in North America.“Item 1A. Risk Factors” below.
SempraCameron LNG JV Three-Train Liquefaction Project (Phase 1)
Sempra LNG, through its interest in Cameron LNG JV, is constructing a three-train natural gas liquefaction export facility atwith an expected export capability of 12 Mtpa of LNG. Construction on the Cameron LNGthree-train liquefaction project began in the second half of 2014 under an EPC contract with a JV terminal.between CB&I, LLC (as assignee of CB&I Shaw Constructors, Inc.), a wholly owned subsidiary of McDermott International, Inc., and Chiyoda International Corporation, a wholly owned subsidiary of Chiyoda Corporation. The majority of the current three-train liquefaction projectconstruction is project-financed at the JV, with most or all of the remainder of the capital requirements to be provided by the project partners, including Sempra Energy, through equity contributions under the project equity agreements. We expect that our remaining equity requirements to complete the project will be met by a combination of our share of cash generated from eachthe first two liquefaction train as it comes on linetrains that have commenced operations and, if required, additional cash contributions. Sempra Energy signed guarantees 50.2 percentfor 50.2% of Cameron LNG JV’s obligations under the financing agreementsobligations for a maximum amount of up to $3.9$4.0 billion. The guarantees will terminate upon satisfaction of certain conditions, including all three trains achieving commercial operation and meeting certain operational performance tests. We anticipate that the guarantees will be terminated approximately nine months after all three trains achieve commercial operation. We discussfinancial completion by September 30, 2021 (with up to an additional 365-day extension beyond such date permitted in cases of force majeure). However, if Cameron LNG JV fails to satisfy the financial completion criteria, a demand could be made under the guarantee for Sempra Energy’s 50.2% share of Cameron LNG JV’s obligations under the financing arrangements then due and payable, which could have a material adverse impact on Sempra Energy’s liquidity.


Cameron LNG JV achieved commercial operations of Train 1 and Train 2 under its tolling agreements in August 2019 and February 2020, respectively. We expect Train 3 will commence commercial operations in the third quarter of 2020. However, the expected commencement of Train 3’s commercial operations could be delayed by worsening or extended disruptions of project construction and commissioning caused by the COVID-19 pandemic.
Large-scale construction projects such as the design, development and construction of the Cameron LNG JV liquefaction facility involve numerous risks and uncertainties, including among others, the potential for unforeseen engineering challenges, severe weather events, global pandemics, substantial construction delays and increased costs. In addition, once completed, the facility may be subject to design flaws, equipment failures and other operational issues, which could cause the facility to suspend operations or operate at a reduced capacity.
Cameron LNG JV has a lump-sum, turnkey EPC contract, and if the contractor becomes unwilling or unable to perform according to the terms and timetable of the EPC contract, the project could face substantial construction delays and potentially significantly increased costs. In January 2020, McDermott International, Inc. filed for bankruptcy protection under Chapter 11 of the U.S. bankruptcy code. McDermott International, Inc. has stated that it expects all of its projects, including the three-train liquefaction project at Cameron LNG JV, to continue on an uninterrupted basis. However, we cannot be certain the Cameron LNG JV project will not be interrupted. If the contractor defaults under the EPC contract due to the bankruptcy of McDermott International, Inc. or for any other reason, such default could result in Cameron LNG JV’s engagement of a substitute contractor. The inability to complete the project in a timely manner or within our current expectations, cost overruns, and the other risks described above could have a material adverse effect on our business, results of operations, cash flows, financial condition, credit ratings and/or prospects.
For a discussion of our investment in Cameron LNG JV, JV financing, further inSempra Energy guarantees, the risks discussed above and other risks relating to the development of the Cameron LNG JV liquefaction project that could adversely affect our future performance, see Note 6 of the Notes to Consolidated Financial Statements in “Item 1A. Risk Factors” and in “Item 7. MD&A – Factors Influencing Future Performance” in the Annual Report. We also discuss Cameron LNG JV below in “Factors Influencing Future Performance.”
We expect Sempra LNG to require funding for the development and expansion of its remaining portfolio of projects, which may be financed through a combination of operating cash flow, funding from the parent, project financing and partnering in JVs.

CASH FLOWS FROM OPERATING ACTIVITIES
CASH PROVIDED BY OPERATING ACTIVITIES
(Dollars in millions)
 Three months ended
March 31, 2019

2019 change

Three months ended
March 31, 2018
Sempra Energy Consolidated$951
  $(15) (2)%  $966
SDG&E443
  39
 10
  404
SoCalGas376
  (43) (10)  419
Sempra Energy Consolidated
Cash provided by operating activities at Sempra Energy decreased in 2019 primarily due to:
▪
$100 million net decrease in Reserve for Aliso Canyon Costs in 2019 compared to an $18 million net increase in 2018. The $100 million net decrease in 2019 includes $116 million of cash paid, offset by $16 million of additional accruals; and
▪
$3 million decrease in interest payable in 2019 compared to a $91 million increase in 2018; offset by
▪$203 million increase in net overcollected regulatory balancing accounts (including long-term amounts included in regulatory assets) at SoCalGas in 2019 compared to a $94 million increase in 2018;
▪$54 million distribution of earnings received from Oncor in 2019; and
▪$71 million decrease in inventory in 2019 compared to a $25 million decrease in 2018.
Our discontinued operations provided cash from operating activities of $93 million in 2019 compared to $76 million in 2018.


SDG&E
Cash provided by operating activities at SDG&E increased in 2019 primarily due to:
▪$36 million increase in contributions in aid of construction in 2019; and
▪
$16 million lower purchases of GHG allowances in 2019; offset by
▪$34 million increase in income taxes payable in 2019 compared to a $67 million increase in 2018.
SoCalGas
Cash provided by operating activities at SoCalGas decreased in 2019 primarily due to:
▪
$100 million net decrease in Reserve for Aliso Canyon Costs in 2019 compared to an $18 million net increase in 2018. The $100 million net decrease in 2019 includes $116 million of cash paid, offset by $16 million of additional accruals;
▪$77 million lower net income, adjusted for noncash items included in earnings, in 2019 compared to 2018; and
▪
$36 million increase in accounts receivable in 2019 compared to a $6 million decrease in 2018; offset by
▪$203 million increase in net overcollected regulatory balancing accounts (including long-term amounts included in regulatory assets) in 2019 compared to a $94 million increase in 2018; and
▪$84 million increase in income taxes payable in 2019 compared to an $11 million increase in 2018.
CASH FLOWS FROM INVESTING ACTIVITIES
CASH USED IN INVESTING ACTIVITIES
(Dollars in millions)
 Three months ended
March 31, 2019

2019 change

Three months ended
March 31, 2018
Sempra Energy Consolidated$(610)  $(10,092) (94)%  $(10,702)
SDG&E(356)  (119) (25)  (475)
SoCalGas(324)  (76) (19)  (400)
Sempra Energy Consolidated
Cash used in investing activities at Sempra Energy decreased in 2019 primarily due to:
▪$9.55 billion paid, including $9.45 billion of Merger Consideration, for the acquisition of our investment in Oncor Holdings in March 2018, as we discuss in Note 5 of the Notes to Condensed Consolidated Financial Statements;
▪
$327 million net proceeds from the sale of Sempra LNG’s non-utility natural gas storage assets; and
▪$196 million decrease in capital expenditures.
Our discontinued operations used cash in investing activities of $70 million in 2019 compared to $58 million in 2018.
SDG&E
Cash used in investing activities at SDG&E decreased in 2019 due to lower capital expenditures.
SoCalGas
Cash used in investing activities at SoCalGas decreased in 2019 primarily due to lower capital expenditures.


Capital Expenditures
EXPENDITURES FOR PROPERTY, PLANT AND EQUIPMENT
(Dollars in millions)

Three months ended March 31,
 2019 2018
SDG&E:
 
Improvements to electric and natural gas distribution systems, including certain pipeline safety

 

and generation systems$268
 $353
PSEP6
 8
Improvements to electric transmission systems82
 114
SoCalGas:

 

Improvements to natural gas distribution, transmission and storage systems, and for certain   
pipeline safety284
 359
PSEP40
 44
Sempra Mexico:

 

Construction of liquid fuels terminal24
 15
Construction of natural gas pipeline projects and other capital expenditures32
 29
Construction of renewables projects29
 15
Sempra Renewables:
  
Construction costs for wind and solar projects—
 31
Sempra LNG:

  
LNG liquefaction development costs18
 5
Other—
 1
Parent and other—
 5
Total$783
 $979

The amounts and timing of capital expenditures and certain investments are generally subject to approvals by various regulatory and other governmental and environmental bodies, including the CPUC and the FERC. Excluding discontinued operations, in 2019, we expect to make capital expenditures and investments of approximately $5.8 billion, as we discuss in “Item 7. MD&A – Capital Resources and Liquidity” in the Annual Report.
CASH FLOWS FROM FINANCING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
(Dollars in millions)
 Three months ended
March 31, 2019		  2019 change  Three months ended
March 31, 2018
Sempra Energy Consolidated$(381)  $(10,059)  $9,678
SDG&E(75)  (142)  67
SoCalGas(67)  (51)  (16)
Sempra Energy Consolidated
Financing activities at Sempra Energy were a use of cash in 2019 compared to a source of cash in 2018 primarily due to:
▪$5.6 billion lower issuances of debt with maturities greater than 90 days, including:
◦$5 billion for long-term debt issued in 2018 primarily to fund the acquisition of our investment in Oncor Holdings, and
◦
$678 million for commercial paper and other short-term debt ($303 million in 2019 compared to $981 million in 2018);
▪$1.7 billion proceeds, net of $32 million in offering costs, from the issuance of mandatory convertible preferred stock in 2018;
▪$1.3 billion proceeds, net of $24 million in offering costs, from the issuances of common stock in 2018;
▪$683 million higher payments of debt with maturities greater than 90 days, including:
◦
$433 million for long-term debt ($537 million in 2019 compared to $104 million in 2018), and
◦
$250 million for commercial paper and other short-term debt ($300 million in 2019 compared to $50 million in 2018); and


▪$497 million increase in short-term debt in 2019 compared to a $1.1 billion increase in 2018.
Cash used in financing activities at our discontinued operations was $45 million in 2019 compared to $6 million in 2018. The change was primarily due to common dividends paid by Peru.
SDG&E
SDG&E’s financing activities were a use of cash in 2019 compared to a source of cash in 2018 primarily due to a $53 million net decrease in short-term debt in 2019 compared to an $87 million net increase in 2018.
SoCalGas
Cash used in financing activities at SoCalGas increased in 2019 primarily due to a higher net decrease in short-term debt in 2019.
FACTORS INFLUENCING FUTURE PERFORMANCE
We discuss various factors that could influence our future performance below and in “Item 7. MD&A – Factors Influencing Future Performance” in the Annual Report. We describe below significant developments to capital projects and any significant new capital projects in 2019. You should read the information below together with “Item 7. MD&A – Factors Influencing Future Performance” and “Item 1A. Risk Factors” contained in the Annual Report.
SEMPRA ENERGY
Capital Rotation
We regularly review our portfolio of assets with a view toward allocating capital to those businesses that we believe can further improve shareholder value. Following a comprehensive strategic review of our businesses and asset portfolio by our board of directors and management, in June 2018, we announced our intention to sell several energy infrastructure assets, including our entire portfolio of U.S. wind and U.S. solar assets, as well as certain non-utility natural gas storage assets in the southeast U.S. We completed the sales of our U.S. solar assets in December 2018, our non-utility natural gas storage assets in February 2019 and our remaining U.S. wind assets in April 2019. In January 2019, our board of directors approved a plan to sell our South American businesses based on our strategic shift to be geographically focused on North America. Our South American businesses and certain activities associated with those businesses have been presented as discontinued operations. We expect to complete the sale by the end of 2019. We discuss these sales and discontinued operations further in Note 5 of the Notes to Condensed Consolidated Financial Statements herein and in Notes 5 and 6 of the Notes to Consolidated Financial Statements in the Annual Report.

SDG&E
Capital Project Updates
CAPITAL PROJECTS PENDING REGULATORY RESOLUTION – SDG&E
Project description
Estimated capital cost
(in millions)
Status
Electric Vehicle Charging
§January 2018 application, pursuant to SB 350, to make investments to support medium-duty and heavy-duty EVs with an estimated implementation cost of $34 million of O&M.$121
§

Application seeking approval of settlement filed in November 2018. A draft decision is expected in the second quarter of 2019.
Energy Storage Projects
§

February 2018 application, pursuant to AB 2868, to make investments to accelerate the widespread deployment of distributed energy storage systems. SDG&E’s application requests approval of 100 MW of utility-owned energy storage.$161
§


Draft decision received in February 2019 to direct new solicitations. Final decision expected in the second quarter of 2019.
Other SDG&E Matters
See “Item 7. MD&A – Factors Influencing Future Performance” in the Annual Report for a discussion about:
▪Electric Rate Reform – California Assembly Bill 327
▪Potential Impacts of Community Choice Aggregation and Direct Access
▪Renewable Energy Procurement
SOCALGAS
Aliso Canyon Natural Gas Storage Facility Gas Leak
In October 2015, SoCalGas discovered a leak at one of its injection-and-withdrawal wells, SS25, at its Aliso Canyon natural gas storage facility located in Los Angeles County. SoCalGas worked closely with several of the world’s leading experts to stop the Leak. In February 2016, DOGGR confirmed that the well was permanently sealed.
See Note 11 of the Notes to Condensed Consolidated Financial Statements for discussions of the following related to the Leak:
▪Local Community Mitigation Efforts;
▪Civil and Criminal Litigation;
▪Regulatory Proceedings;
▪Governmental Investigations and Orders and Additional Regulation; and
▪Insurance.
The costs incurred to remediate and stop the Leak and to mitigate local community impacts have been significant and may increase, and we may be subject to potential significant damages, restitution, and civil, administrative and criminal fines, penalties and other costs. In addition, the costs of defending against civil and criminal lawsuits, cooperating with investigations, and any damages, restitution, and civil, administrative and criminal fines, penalties and other costs, if awarded or imposed, as well as the costs of mitigating the actual natural gas released, could be significant. To the extent any of these costs are not covered by insurance (including any costs in excess of applicable policy limits), if there were to be significant delays in receiving insurance recoveries, or if the insurance recoveries are subject to income taxes while the associated costs are not tax deductible, such amounts could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.
Cost Estimates and Accounting Impact
At March 31, 2019, SoCalGas estimates its costs related to the Leak are $1,071 million (the cost estimate), which includes $1,043 million of costs recovered or probable of recovery from insurance. Approximately 53 percent of the cost estimate is for the temporary relocation program (including cleaning costs and certain labor costs). The remaining portion of the cost estimate includes costs incurred to defend litigation, the costs of the government-ordered response to the Leak including the costs for an


independent third partyProposed Cameron Liquefaction Expansion (Phase 2)
Cameron LNG JV has received the major permits and FTA and non-FTA approvals necessary to conduct a root cause analysis, efforts to controlexpand the well, to mitigate the actual natural gas released, the cost of replacing the lost gas, and other costs, as well as the estimated costs to settle certain actions. SoCalGas adjusts the cost estimate as additional information becomes available. A substantial portioncurrent configuration of the cost estimate has been paid,Cameron LNG JV liquefaction project beyond Phase 1. The permits obtained for Phase 2 include up to two additional liquefaction trains and $60 million is accrued as Reserve for Aliso Canyon Costs asup to two additional full containment LNG storage tanks (one of March 31, 2019 on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets.which was permitted with the original three-train project).
As of March 31, 2019, we recorded the expected recoveryExpansion of the cost estimate relatedCameron LNG liquefaction facility beyond the first three trains is subject to certain restrictions and conditions under the Leak of $477 million as Insurance Receivable for Aliso Canyon CostsJV project financing agreements, including among others, timing restrictions on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets. This amount is net of insurance retentions and $566 million of insurance proceeds we received through March 31, 2019. The Insurance Receivable for Aliso Canyon Costs and insurance proceeds received to date relate to portionsexpansion of the cost estimate described above, including temporary relocation and associated processing costs, control-of-well expenses, costsproject unless appropriate prior consent is obtained from the project lenders. Under the Cameron LNG JV equity agreements, the expansion of the government-ordered response for an independent third party to conduct a root cause analysis,project requires the costs to settle certain claims as described in “Civil and Criminal Litigation” in Note 11unanimous consent of all the Notes to Condensed Consolidated Financial Statements, the estimated costs to perform obligations pursuant to settlement of some of those claims, legal costs and lost gas. If we were to conclude that this receivable or a portion of it is no longer probable of recovery from insurers, some or all of this receivable would be charged against earnings, which could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.
As described in “Civil and Criminal Litigation” in Note 11 of the Notes to Condensed Consolidated Financial Statements, the actions seek compensatory, statutory and punitive damages, restitution, and civil, administrative and criminal fines, penalties and other costs, which, except for the amounts paid or estimated to settle certain actions, are not included in the cost estimate as it is not possible at this time to predict the outcome of these actions or reasonably estimate the amount of damages, restitution or civil, administrative or criminal fines, penalties or other costs that may be imposed. The recorded amounts above also do not include future legal costs necessary to defend litigation, and other potential costs that we currently do not anticipate incurring or that we cannot reasonably estimate. Furthermore, the cost estimate does not include certain other costs incurred by Sempra Energy associated with defending against shareholder derivative lawsuits.
Natural Gas Storage Operations and Reliability
Natural gas withdrawn from storage is important for service reliability during peak demand periods,partners, including peak electric generation needs in the summer and heating needs in the winter. The Aliso Canyon natural gas storage facility, with a capacity of 86 Bcf (representing 63 percent of SoCalGas’ natural gas storage capacity), is the largest SoCalGas storage facility and an important element of SoCalGas’ delivery system. As a result of the Leak, SoCalGas suspended injection of natural gas into the Aliso Canyon natural gas storage facility beginning in October 2015, and following a comprehensive safety review and authorization by DOGGR and the CPUC’s Executive Director, resumed limited injection operations in July 2017.
During the suspension period, SoCalGas advised the California ISO, CEC, CPUC and PHMSA of its concerns that the inability to inject natural gas into the Aliso Canyon natural gas storage facility posed a risk to energy reliability in Southern California. Following the resumption of injection operations, the CPUC has issued a series of directives to SoCalGas specifying the range of working gas to be maintained in the Aliso Canyon natural gas storage facility to help ensure safety and reliability for the region and just and reasonable rates in California, the most recent of which, issued in July 2018, directed SoCalGas to maintain up to 34 Bcf of working gas. Limited withdrawals of natural gas from the facility were made in 2018 and 2019 to augment natural gas supplies during critical demand periods.
If the Aliso Canyon natural gas storage facility were to be permanently closed, or if future cash flows were otherwise insufficient to recover its carrying value, it could result in an impairment of the facility and significantly higher than expected operating costs and/or additional capital expenditures, and natural gas reliability and electric generation could be jeopardized. At March 31, 2019, the Aliso Canyon natural gas storage facility had a net book value of $741 million. Any significant impairment of this asset could have a material adverse effect on SoCalGas’ and Sempra Energy’s results of operations for the period in which it is recorded. Higher operating costs and additional capital expenditures incurred by SoCalGas may not be recoverable in customer rates, and could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.


CALIFORNIA UTILITIES – JOINT MATTERS
Capital Project Updates
JOINT CAPITAL PROJECTS PENDING REGULATORY RESOLUTION – CALIFORNIA UTILITIES
Project description
Estimated capital cost
(in millions)
Status
Line 1600 Test or Replacement Project
§In September 2018, SDG&E and SoCalGas submitted a plan to the CPUC to address Line 1600 PSEP requirements by replacing 37 miles of Line 1600 predominately in populated areas and testing 13 miles of Line 1600 in rural areas.$671§In January 2019, the CPUC approved the proposed plan to address Line 1600 PSEP requirements. Cost recovery will be addressed in future GRCs.
§Estimated O&M implementation cost of $45 million and cost to retire portions of Line 1600 of $14 million at SDG&E.
Mobile Home Park Utility Upgrade Program
§In April 2018, the CPUC opened an OIR to evaluate the Mobile Home Park Program to convert eligible units to direct utility service and determine if it should be extended beyond the initial three-year pilot to a permanent program, and if extended, to adopt programmatic modifications.
$471 to $508

§A final decision in the OIR is expected by the end of 2019.
§In March 2019, the CPUC issued a resolution approving the extension of the pilot program through the earlier of 2021 or the issuance of a CPUC decision on pending proceedings.
Natural Gas Pipeline Operations Safety Assessments
As we discuss in “Item 7. MD&A – Factors Influencing Future Performance” in the Annual Report, since 2011, the California Utilities have incurred costs related to the implementation of the CPUC’s directives to test or replace natural gas transmission pipelines that do not have sufficient documentation of a pressure test and to address retrofitting pipelines to allow for in-line inspection tools and, where appropriate, automated or remote controlled shut-off valves (referred to as PSEP).
As shown in the table below, SoCalGas and SDG&E have made significant pipeline safety investments under the PSEP program, and SoCalGas expects to continue making significant investments as approved through various regulatory proceedings. SDG&E’s PSEP program was substantially completed in 2017, with the exception of Line 1600, which we discuss in the table above. Both utilities have filed joint applications and plan to file future applications with the CPUC for review of the PSEP project costs as follows:


PIPELINE SAFETY ENHANCEMENT PLAN – REASONABLENESS REVIEW SUMMARY
  
(Dollars in millions)  
 2011 through March 31, 2019
 
Total
 invested(1)
 
CPUC review
completed(2)
 
CPUC review
pending(3)
 
2019 and future applications(4)(5)
Sempra Energy Consolidated:       
Capital$1,725
 $201
 $853
 $671
Operation and maintenance200
 81
 85
 34
Total$1,925
 $282
 $938
 $705
SoCalGas:       
Capital$1,359
 $187
 $731
 $441
Operation and maintenance191
 80
 78
 33
Total$1,550
 $267
 $809
 $474
SDG&E:       
Capital$366
 $14
 $122
 $230
Operation and maintenance9
 1
 7
 1
Total$375
 $15
 $129
 $231
(1)
Excludes certain pressure testing and pipeline replacement costs incurred through March 31, 2019 that were not eligible for recovery based on prior CPUC decisions. Also excludes $42 million incurred for the Line 1600 Test or Replacement Project.
(2)
Excludes $2 million of PSEP-specific insurance costs for which SoCalGas and SDG&E are authorized to request recovery in a future filing.
(3)
Costs for completed projects pursuant to the 2018 Reasonableness Review Application filed in November 2018, with a decision expected in 2020.
(4)
Remaining costs not the subject of prior applications are to be included in subsequent GRCs.
(5)
Authorized to recover 50 percent of the Phase 1 revenue requirement annually, subject to refund.

If either SoCalGas or SDG&E were unable to recover a significant amount of these safety investments from ratepayers, it could have a material adverse effect on the cash flows, results of operations and financial condition of SoCalGas, SDG&E and Sempra Energy.
Senate Bill 901
On September 21, 2018, the Governor of California signed into law SB 901, which includes a number of measures primarily intended to address certain wildfire risks relevant to consumers and utilities and guidelines for the CPUC to determine whether utilities acted reasonably in order to recover costs related to wildfires. Among other things, SB 901 also contains provisions for utility issuance of recovery bonds with respect to certain wildfire costs, subject to CPUC approval, wildfire mitigation plans, and creationthe equity investment obligation of a commission to explore establishment of a fund and options for cost socialization with respect to catastrophic wildfires associated with utility infrastructure. SB 901 does not apply toeach partner. Discussions among all the wildfires in SDG&E’s service territory in 2007.
The CPUC initiatedCameron LNG JV partners have been taking place regarding how an OIR in October 2018 to implement the provisions of SB 901 related to electric utility wildfire mitigation plans. The OIR will provide guidance on the form and content of the initial wildfire mitigation plans, provide a venue for review of the initial plans, and develop and refine the content of and process for review and implementation of wildfire mitigation plans to be filed in future years. The electric utilities filed their proposed wildfire mitigation plans in February 2019, and the CPUC issued a proposed decision in April 2019 that approves the plan filed by SDG&E. The scope of the OIR is limited to only the wildfire mitigation plans required by SB 901 and does not include cost recovery. Pursuant to SB 901, in March 2019, the CPUC authorized each utility to establish a memorandum account to track the costs incurred to implement the plan. The costs recorded to the memorandum account shall be incremental to the utility’s authorized recovery and reviewed as part of the utility’s next GRC proceeding.
In April 2019, Governor Gavin Newsom’s Strike Force issued a report entitled “Wildfires and Climate Change: California’s Energy Future” (the Report), and Governor Newsom called for the California legislature to pass legislation to address the issues in the Report by mid-July 2019. The issues raised in the Report include, among others, three concepts designed to help address the imminent wildfire liability issues facing California’s utilities, including SDG&E: a liquidity-only fund, changing strict liability to a fault-based standard and a wildfire fund.
SB 901 did not change the doctrine of inverse condemnation, which imposes strict liability on a utility whose equipment is determined to be a cause of a fire (meaning that the utilityexpansion may be found liable regardless of fault). In their 2018 ratings actions for SDG&E, whichstructured and we discuss in “Item 7A. Quantitative and Qualitative Disclosures About Market Risk – Credit Ratings” in the Annual Report, each of Moody’s, Fitch Ratings and S&P indicated that the SDG&E rating downgrades reflected the failure of SB 901 to address the longer-term risks associated with inverse condemnation. Without further changes to the law or other reform,


the rating agencies believe that SDG&E is exposed to the potential of material liabilities if a major wildfire were to occur in its service territory and it was determined that its equipment was a cause of the fire.
SEMPRA TEXAS UTILITY
Pending Acquisitions
On October 18, 2018, Oncor entered into the InfraREIT Merger Agreement, whereby Oncor has agreed to acquire a 100 percent interest in InfraREIT and InfraREIT Partners for approximately $1,275 million, plus approximately $40 million for a management agreement termination fee, as well as other customary transaction costs incurred by InfraREIT that would be borne by Oncor as part of the acquisition. In addition, the transaction includes InfraREIT’s outstanding debt, which as of March 31, 2019 was approximately $946 million. Also on October 18, 2018, Oncor entered into the Asset Exchange Agreement, whereby SDTS has agreed to accept and assume certain electricity transmission and distribution-related assets and liabilities of SU in exchange for certain SDTS assets. Immediately prior to completing the exchange, SDTS would become a wholly owned, indirect subsidiary of InfraREIT Partners.
On October 18, 2018, Sempra Energy entered into the Securities Purchase Agreement, whereby Sempra Texas Utilities Holdings I, LLC has agreed to acquire 50 percent of the economic interest in Sharyland Holdings, LP for approximately $98 million, subject to customary closing adjustments. In connection with and prior to the consummation of the Securities Purchase Agreement, Sharyland Holdings, LP would own 100 percent of the membership interests in SU and SU would convert into a limited liability company, expected to be named Sharyland Utilities, LLC. Upon consummation of the Securities Purchase Agreement, Sempra Texas Utilities Holdings I, LLC would indirectly own and account for its 50 percent interest in Sharyland Utilities, LLC as an equity method investment.
Consummation of these transactions is subject to the satisfaction of various closing conditions, including the substantially concurrent consummation of these transactions and PUCT approval. In December 2018, early termination of the 30-day waiting period required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, was granted. In March 2019, we received approval from the FERC and clearance from the Committee on Foreign Investment in the United States. The acquisition of InfraREIT was approved by InfraREIT stockholders on February 7, 2019. We expect that the transactionsdiscussions will close in mid-2019.continue. There can be no assurance that Oncorthe Cameron LNG JV members will unanimously agree on an expansion structure, which, if not accomplished in a timely manner, could materially and adversely impact the development of the expansion project. In light of this, we are unable to predict whether or when Cameron LNG JV might be able to move forward on expansion of the Cameron LNG liquefaction facility beyond the first three trains.
In November 2018, Sempra Energy will deriveand TOTAL S.A. entered into an MOU that provides a framework for cooperation for the anticipated benefits from these acquisitions.
We discuss these transactions further in Note 5development of the Notespotential Cameron LNG JV expansion project and the potential ECA LNG JV liquefaction-export project that we describe below in “ECA LNG JV Liquefaction Export Project.” The MOU contemplates TOTAL S.A. potentially contracting for up to Condensed Consolidated Financial Statements hereinapproximately 9 Mtpa of LNG offtake across these two development projects and aboveprovides TOTAL S.A. the option to acquire an equity interest in “Capital Resourcesthe proposed ECA LNG JV project. In addition, in October 2019, Sempra Energy and Liquidity.”Mitsui & Co., Ltd. entered into an MOU that provides a framework for potential offtake by Mitsui & Co., Ltd. from the potential Cameron LNG JV expansion project and the second phase of the potential ECA LNG JV project, as well as Mitsui & Co., Ltd.’s potential acquisition of an equity interest in the second phase of the potential ECA LNG


SEMPRA MEXICO
Capital Project Updates
CAPITAL PROJECTS – SEMPRA MEXICO
Project description
Our share of
estimated capital cost
(in millions)
Status
Manzanillo Terminal
§Plan to develop, construct and operate a marine terminal for the receipt, storage and delivery of refined products in Manzanillo, Colima.$102 to $165
§

Estimated completion: fourth quarter of 2020.
§

Storage capacity of 1.48 million barrels is fully contracted under long-term, U.S. dollar-denominated agreements with Trafigura Mexico, S.A. de C.V. and a major international integrated oil company. Opportunities for future expansion of storage capacity.
§Owned by TP Terminals, S. de. R.L. de C.V., a JV between IEnova and Trafigura Mexico, S.A. de C.V. IEnova has a 51-percent equity interest in the JV, with an option to increase ownership interest up to 82.5 percent.
La Rumorosa Solar Complex
§Awarded 41-MW photovoltaic solar energy project located in Baja California, Mexico, in an auction conducted by Mexico’s National Center of Electricity Control (Centro Nacional de Control de Energía) in September 2016.$50§Estimated completion: second quarter of 2019
§


Contracted by the CFE under a 15-year renewable energy agreement and a 20-year clean energy certificate agreement, denominated in U.S. dollars.

JV project. In May 2020, Sempra Mexico continuesEnergy and Mitsubishi Corporation entered into an MOU that provides a framework for development of and potential offtake by Mitsubishi Corporation from the potential Cameron LNG JV expansion project. The ultimate participation of and offtake by TOTAL S.A., Mitsui & Co., Ltd. and Mitsubishi Corporation remains subject to monitor CFE project opportunitiesnegotiation and carefully analyze CFE bids in orderfinalization of definitive agreements, among other factors, and TOTAL S.A., Mitsui & Co., Ltd. and Mitsubishi Corporation have no commitment to participate in those that fit its overall growth strategy. There can be no assurance that IEnova will be successful in bidding for new CFEand offtake from the projects.
The ability to successfully complete major construction projectsdevelopment of the potential Cameron LNG expansion project is subject to numerous other risks and uncertainties, including securing binding customer commitments; obtaining a number of riskspermits and uncertainties.regulatory approvals; securing financing; negotiating and completing suitable commercial agreements, including a definitive EPC contract, equity acquisition and governance agreements; reaching a final investment decision; and other factors associated with this potential investment. For a discussion of these risks, and uncertainties, see “Item 1A. Risk Factors” in the Annual Report.
Energí

ECA LNG JV Liquefaction Export Project
Through a Costa Azul LNG Terminal
As we discuss in “Item 7. MD&A – Factors Influencing Future Performance” in the Annual Report,JV agreement, Sempra LNG and IEnova are developing a proposed natural gas liquefaction project at IEnova’s existing regasification terminal at ECA.ECA LNG Regasification facility. The proposed liquefaction facility project, which we expect will be developedis planned for development in two phases (a mid-scale project referred to as ECA LNG JV Phase 1 and a large-scale project referred to as ECA LNG JV Phase 2), is being developed to provide buyers with direct access to west coast LNG supplies. The ECA LNG Regasification facility currently has profitable long-term regasification contracts for 100 percent100% of the regasification facility’s capacity through 2028, making the decisions on whether and how to pursue a newthe ECA LNG JV Phase 2 liquefaction facilityproject dependent in part on whether the investment in a newlarge-scale liquefaction facility would, over the long term, be more beneficial financially than continuing to supply regasification services under our existing contracts. We do not believe that the development of ECA LNG JV Phase 1 will disrupt operations at the ECA LNG Regasification facility.
In March 2019, ECA LNG JV received two authorizations from the DOE to export U.S.-produced natural gas to Mexico and to re-export LNG to non-FTA countries from its ECA LNG JV Phase 1 project, a one-train natural gas liquefaction export facility with a nameplate capacity of 3.25 Mtpa and initial offtake capacity of approximately 2.5 Mtpa, and its ECA LNG JV Phase 2 projectsproject, each of which is in development.
On February 27, 2020, we entered into an EPC contract with TechnipFMC for the engineering, procurement and construction of ECA LNG JV Phase 1. We have no obligation to move forward on the EPC contract, and we may release TechnipFMC to perform portions of the work pursuant to limited notices to proceed. We plan to fully release TechnipFMC to perform all of the work to construct ECA LNG JV Phase 1 only after we reach a final investment decision with respect to the project and after certain other conditions are met. The ultimate participationtotal price of the EPC contract for ECA LNG JV Phase 1 is estimated at approximately $1.5 billion. We estimate that capital expenditures for ECA LNG JV Phase 1 will approximate $1.9 billion, including capitalized interest and project contingency. The actual cost of the EPC contract and the actual amount of these capital expenditures may differ, perhaps substantially, from our estimates.
In November 2018, Sempra LNG and IEnova signed Heads of Agreements with affiliates of TOTAL S.A., Mitsui & Co., Ltd. and Tokyo Gas Co., Ltd. for ECA LNG JV Phase 1 in respect of LNG sales of approximately 2.5 Mtpa in the potentialaggregate. In April 2020, ECA LNG project as contemplated by a HeadsJV executed definitive 20-year LNG sale and purchase agreements with Mitsui & Co., Ltd. and an affiliate of Agreements signed in November 2018TOTAL S.A. for approximately 0.8 Mtpa of LNG and 1.7 Mtpa of LNG, respectively. Each agreement remains subject to finalizationcertain customary conditions of definitive agreements, among other factors. effectiveness, including our final investment decision for the project.
We continue to work towards reaching a final investment decision for ECA LNG JV Phase 1 in the second quarter of 2020. However, this project is contingent on the receipt of an export permit from the Mexican government. The closure of non-essential activities in Mexico in response to the COVID-19 pandemic has added to the uncertainty of the timing of the receipt of this permit and could delay our final investment decision beyond the second quarter of 2020.
The development of both the ECA LNG JV Phase 1 and ECA LNG JV Phase 2 projects is subject to numerous risks and uncertainties, including obtaining binding customer commitments;commitments for Phase 2; the receipt of a number of permits and regulatory approvals; obtaining financing; negotiating and completing suitable commercial agreements, including a definitive EPC contract for Phase 2, equity acquisition and governance agreements, LNG sales agreements and gas supply and transportation agreements; reaching a final investment decision; and other factors associated with this potential investment. In addition, as we discuss in Note 11 of the Notes to Condensed Consolidated Financial Statements, an unfavorable decision on certain property disputes and permit challenges could materially and adversely affect the development of these projects. For a discussion of these risks, see “Item 1A. Risk Factors” in the Annual Report.


SEMPRA RENEWABLES
As we discuss in Note 5 of the Notes to Condensed Consolidated Financial Statements, in April 2019, Sempra Renewables sold its remaining wind assets and investments for $584 million in cash, subject to working capital and other customary adjustments. Upon completion of the sale, remaining nominal business activities at Sempra Renewables were subsumed into Parent and other, and the Sempra Renewables segment ceased to exist.
SEMPRA LNG
Cameron LNG JV Three-Train Liquefaction Project
Construction on the current three-train liquefaction project began in the second half of 2014 under an EPC contract with a JV between CB&I, LLC (as assignee of CB&I Shaw Constructors, Inc.), a wholly owned subsidiary of McDermott International, Inc., and Chiyoda International Corporation, a wholly owned subsidiary of Chiyoda Corporation.
Large-scale construction projects like the design, development and construction of the Cameron LNG JV liquefaction facility involve numerous risks and uncertainties, including among others, the potential for unforeseen engineering challenges, substantial construction delays and increased costs. Cameron LNG JV has a turnkey EPC contract, and if the contractor becomes unwilling or unable to perform according to the terms and timetable of the EPC contract, the project could face substantial construction delays and potentially significantly increased costs. If the contractor’s delays or failures are serious enough to cause the contractor to default under the EPC contract, such default could result in Cameron LNG JV’s engagement of a substitute contractor, which would cause further delays.
Based on a number of factors, we believe it is reasonable to expect that Cameron LNG JV will start generating earnings in mid-2019. These factors include, among others, the EPC contractor’s progress to date, the current commissioning activities, the remaining work to be performed, the project schedules received from the EPC contractor, Cameron LNG JV’s own review of the project schedules, the assumptions underlying such schedules, and the inherent risks in constructing and testing facilities such as the Cameron LNG JV liquefaction facility. For a discussion of the Cameron LNG JV and of these risks and other risks relating to the development of the Cameron LNG JV liquefaction project that could adversely affect our future performance, see Note 6 of the Notes to Consolidated Financial Statements and “Item 1A. Risk Factors” in the Annual Report.
Proposed Additional Cameron Liquefaction Expansion
Cameron LNG JV has received the major permits and FTA and non-FTA approvals necessary to expand the current configuration of the Cameron LNG JV liquefaction project from the current three liquefaction trains under construction. The proposed expansion project includes up to two additional liquefaction trains, capable of increasing LNG production capacity by approximately 9 Mtpa to 10 Mtpa, and up to two additional full containment LNG storage tanks (one of which was permitted with the original three-train project).
Under the Cameron LNG JV financing agreements, expansion of the Cameron LNG JV facilities beyond the first three trains is subject to certain restrictions and conditions, including among others, timing restrictions on expansion of the project unless appropriate prior consent is obtained from lenders. Under the Cameron LNG JV equity agreements, the expansion of the project requires the unanimous consent of all the partners, including with respect to the equity investment obligation of each partner. Discussions among the partners have been taking place regarding how an expansion may be structured. In July 2018, TOTAL S.A. acquired Engie S.A.’s interest in the Cameron LNG JV. In November 2018, Sempra Energy and TOTAL S.A. entered into an MOU that provides a framework for cooperation for the development of the potential Cameron LNG expansion project and the potential ECA liquefaction-export project that we describe above in “Sempra Mexico – Energía Costa Azul LNG Terminal.” The MOU contemplates TOTAL S.A. potentially contracting for up to approximately 9 Mtpa of LNG offtake across these two development projects, though the ultimate participation of TOTAL S.A. remains subject to finalization of definitive agreements, among other factors, and TOTAL S.A. has no commitment to participate in the project. We expect that discussions on the potential expansion will continue among all the Cameron LNG JV members. There can be no assurance that a mutually agreeable expansion structure will be agreed upon unanimously by the Cameron LNG JV members, which if not accomplished in a timely manner, could materially and adversely impact the development of the expansion project. In light of this, we are unable to predict when we and/or Cameron LNG JV might be able to move forward on this expansion project.
The expansion of the Cameron LNG JV facilities beyond the first three trains is subject to a number of risks and uncertainties, including amending the Cameron LNG JV agreement among the partners, obtaining binding customer commitments, completing the required commercial agreements, securing and maintaining all necessary permits, approvals and consents, obtaining financing,


reaching a final investment decision among the Cameron LNG JV partners, and other factors associated with the potential investment. See “Item 1A. Risk Factors” in the Annual Report.
OtherPort Arthur LNG Liquefaction Development
Design, regulatory and commercial activities are ongoing for potential LNG liquefaction developments at our Port Arthur, Texas site and at Sempra Mexico’s ECA facility. For these development projects, we have met with potential customers and determined there is an interest in long-term contracts for LNG supplies beginning in the 2022 to 2025 time frame.
Port ArthurProject
Sempra LNG is developing a proposed natural gas liquefaction project on a greenfield site that it owns in the vicinity of Port Arthur, Texas, located along the Sabine-Neches waterway.
In April 2019, the FERC approved the siting, construction and operation of the Port Arthur liquefaction facility, along with certain natural gas pipelines that could be used to supply feed gas to the liquefaction facility, assuming the project is completed.
Sempra LNG received authorizations from the DOE in August 2015 and May 2019 that collectively permit the LNG to be produced from the proposed Port Arthur LNG project to be exported to all current and future FTA and non-FTA countries.
In June 2018,April 2019, the FERC approved the siting, construction and operation of the proposed Port Arthur LNG liquefaction facility, along with certain natural gas pipelines, including the Louisiana Connector Pipeline, that could be used to supply feed gas to the liquefaction facility, assuming the project is completed.
On February 28, 2020, we selectedentered into an EPC contract with Bechtel Corporation as the EPC contractor for the proposed Port Arthur LNG liquefaction project. The EPC contract contemplates the construction of two liquefaction trains with a nameplate capacity of approximately 13.5 Mtpa, two LNG storage tanks, a marine berth and associated loading facilities and related infrastructure necessary to provide liquefaction services. We have no obligation to move forward on the EPC contract, and we may release Bechtel Corporation is to perform portions of the engineering, execution planningwork pursuant to limited notices to proceed. We plan to fully release Bechtel to perform all of the work to construct the Port Arthur LNG liquefaction project only after we reach a final investment decision with respect to the project and related activities necessaryafter certain other conditions are met, including obtaining project financing. If we issue the full notice to prepare, negotiate and finalize a definitiveproceed by July 15, 2020, the price under the fixed-price EPC contract for the project. The current arrangement with Bechtel Corporationis estimated to be approximately $8.9 billion. This does not commit any partyinclude costs associated with changes to enter into a definitivethe project’s scope or the occurrence of certain events that would entitle Bechtel to relief under the contract, including customary events for similar agreements of this type such as force majeure events, certain changes in law, the discovery of certain differing site conditions, and certain delays to the work that we may cause. If we issue the full notice to proceed after July 15, 2020, the price will be subject to price escalations. If the full notice to proceed is not issued by October 15, 2020, then the EPC contract, or otherwise participate inincluding the project.price, will be subject to renegotiation. Any changes to the EPC contract will require the agreement of both parties, which cannot be assured.
In December 2018, Polish Oil & Gas Company (PGNiG) and Port Arthur LNG entered into a definitive 20-year agreement for the sale and purchase of 2 Mtpa of LNG per year.year from the Port Arthur LNG liquefaction project. Under the agreement, LNG purchases by PGNiG from Port Arthur LNG will be made on a free-on-board basis, with PGNiG responsible for shipping the LNG from the Port Arthur terminalfacility to the final destination. Port Arthur LNG will manage the gas pipeline transportation, liquefaction processing and cargo loading. The agreement is subject to certain conditions precedent, including Port Arthur LNG making a positive final investment decision.decision within certain agreed timelines. The failure of these conditions precedent to be satisfied or waived within the agreed timelines could result in the termination of the agreement.
In May 2019, Aramco Services Company and Sempra LNG signed a Heads of Agreement for the negotiation and finalization of a definitive 20-year LNG sale and purchase agreement for 5 Mtpa of LNG offtake. The Heads of Agreement also includes the negotiation and finalization of a 25% equity investment in the project. In January 2020, Aramco Services Company and Sempra LNG signed an Interim Project Participation Agreement, which sets forth certain mechanisms for the parties to work towards receipt of corporate approvals to enter into and proceed with the transaction, execution of the transaction agreements and the fulfillment or waiver of the conditions precedent contemplated by these agreements, making a final investment decision and other pre-final investment decision activities. The Heads of Agreement and Interim Project Participation Agreement do not obligate the parties to ultimately execute any agreements or participate in the project.
In February 2020, Sempra LNG filed a FERC application for the siting, construction and operation of a second phase at the proposed Port Arthur LNG facility, including the potential addition of two liquefaction trains.
In November 2019, Port Arthur LNG commenced the relocation and upgrade of approximately three miles of highway where the Port Arthur LNG liquefaction project would be located.
We continue to work on completing all necessary milestones so that we are prepared to make a final investment decision for the proposed Port Arthur LNG liquefaction project when appropriate. The impact of the COVID-19 pandemic on the global economy and the current uncertainty in the financial and energy markets has delayed the expected timing of our final investment decision from 2020 to 2021.
Development of the Port Arthur LNG liquefaction project is subject to a number of risks and uncertainties, including obtaining additional customer commitments; completing the required commercial agreements, such as equity acquisitions and governance agreements, LNG sales agreements and gas supply and transportation agreements; completing construction contracts; securing all necessary permits and approvals; obtaining financing and incentives; reaching a final investment decision; and other factors associated with the potential investment. SeeFor a discussion of these risks, see “Item 1A. Risk Factors” in the Annual Report.
Energía Costa Azul
We further


Discontinued Operations
As we discuss Sempra LNG’s participation in potential LNG liquefaction development at Sempra Mexico’s ECA facility above in “Sempra Mexico – Energía Costa Azul LNG Terminal.”
LITIGATION
We describe legal proceedings that could adversely affect our future performance in Note 115 of the Notes to Condensed Consolidated Financial Statements.Statements, in January 2019, our board of directors approved a plan to sell our South American businesses. On April 24, 2020, we completed the sale of our equity interests in our Peruvian businesses for an aggregate base purchase price of $3.59 billion, subject to post-closing adjustments. In October 2019, we entered into an agreement to sell our equity interests in our Chilean businesses for an aggregate base purchase price of $2.23 billion, subject to customary adjustments for working capital and changes in net indebtedness and other adjustments. We expect the sale to close in the second quarter of 2020, subject to satisfaction of conditions to closing.
Our utilities in South America have historically provided relatively stable earnings and liquidity. We intend to use the proceeds from the sales to focus on capital investment in North America to support additional growth opportunities and strengthen our balance sheet by reducing debt. We expect the cash provided by earnings from our capital investment will exceed the absence of cash flows from these discontinued operations. However, there can be no assurance that we will derive these anticipated benefits. Further, there can be no assurance that we will be able to redeploy the capital that we obtain from such sales, if completed, in a way that would result in cash flows or earnings exceeding those historically generated by these businesses.
SOURCES AND USES OF CASH
The following tables include only significant changes in cash flow activities for each of our registrants.
CASH FLOWS FROM OPERATING ACTIVITIES
(Dollars in millions)
Three months ended March 31, Sempra Energy Consolidated SDG&E SoCalGas
2020 $1,318
 $498
 $757
2019 951
 443
 376
Change $367
 $55
 $381
       
Net increase in Reserve for Aliso Canyon Costs primarily due to $276 higher accruals and $98 lower payments $375
   $375
Higher net income, adjusted for noncash items included in earnings 169
 $109
 121
Change in long-term GHG obligations 49
   42
Higher distributions of earnings from Oncor Holdings 19
    
Net increase in Insurance Receivable for Aliso Canyon Costs primarily due to $176 higher accruals offset by $19 insurance proceeds received (156)   (156)
Deferred revenue due to the TCJA at the California Utilities in 2019 (43) (20) (23)
Change in intercompany activities with discontinued operations (31)    
Change in net undercollected regulatory balancing accounts (including long-term amounts in regulatory assets)   (46) 47
Other 10
 12
 (25)
Change in net cash flows from discontinued operations (25)    
  $367
 $55
 $381



CASH FLOWS FROM INVESTING ACTIVITIES
(Dollars in millions)
Three months ended March 31, Sempra Energy Consolidated SDG&E SoCalGas
2020 $(1,181) $(402) $(388)
2019 (610) (356) (324)
Change $(571) $(46) $(64)
       
Net proceeds from the February 2019 sale of Sempra LNG’s non-utility natural gas storage assets $(322)    
Increase in capital expenditures (227) $(46) $(64)
Other (27) 

 

Change in net cash flows from discontinued operations 5
    
  $(571) $(46) $(64)

CASH FLOWS FROM FINANCING ACTIVITIES
(Dollars in millions)
Three months ended March 31, Sempra Energy Consolidated SDG&E SoCalGas
2020 $2,114
 $97
 $10
2019 (381) (75) (67)
Change $2,495
 $172
 $77
       
Increase (decrease) in short-term debt, net $1,630
 $(27) $(564)
Higher issuances of long-term debt 1,048
 400
 649
Higher issuances of commercial paper and other short-term debt with maturities greater than 90 days 267
    
Higher payments on long-term debt and finance leases (503)    
Higher payments for commercial paper and other short-term debt with maturities greater than 90 days (93)    
Higher common dividends paid   (200)  
Other (10) (1) (8)
Change in net cash flows from discontinued operations mainly due to a net increase in short-term debt 156
    
  $2,495
 $172
 $77

Capital Expenditures and Investments and Acquisitions
EXPENDITURES FOR PP&E AND INVESTMENTS AND ACQUISITIONS
(Dollars in millions)

Three months ended March 31,
 2020 2019
SDG&E$402
 $356
SoCalGas388
 324
Sempra Texas Utilities86
 56
Sempra Mexico170
 85
Sempra LNG47
 56
Parent and other3
 —
Total$1,096
 $877



The amounts and timing of capital expenditures and certain investments are generally subject to approvals by various regulatory and other governmental and environmental bodies, including the CPUC, the FERC and the PUCT. Excluding discontinued operations, in 2020, we expect to make capital expenditures and investments of approximately $5.7 billion, a decrease from the $5.9 billion summarized in “Item 7. MD&A – Capital Resources and Liquidity” in the Annual Report. The decrease is primarily attributable to Phase 1 of the ECA LNG JV liquefaction export project at Sempra LNG.
     
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We view certain accounting policies as critical because their application is the most relevant, judgmental, and/or material to our financial position and results of operations, and/or because they require the use of material judgments and estimates. We discuss these accounting policies in “Item 7. MD&A” in the Annual Report.
We describe our significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report. We follow the same accounting policies for interim reporting purposes.


     
NEW ACCOUNTING STANDARDS
We discuss the relevant pronouncements that have recently been issued or become effective and have had or may have an impact on our financial statements and/or disclosures in Note 2 of the Notes to Condensed Consolidated Financial Statements.
     
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We provide disclosure regarding derivative activity in Note 8 of the Notes to Condensed Consolidated Financial Statements. We discuss our market risk and risk policies in detail in “Item 7A. Quantitative and Qualitative Disclosures aboutAbout Market Risk” in the Annual Report.
COMMODITY PRICE RISK
In the first quarter of 2020, there were no significant changes in our exposure to commodity price risk.


INTEREST RATE RISK
The table below shows the nominal amount of our debt:
NOMINAL AMOUNT OF DEBT(1)
NOMINAL AMOUNT OF DEBT(1)
NOMINAL AMOUNT OF DEBT(1)
(Dollars in millions)
March 31, 2019 December 31, 2018March 31, 2020 December 31, 2019
Sempra Energy
Consolidated
 SDG&E SoCalGas 
Sempra Energy
Consolidated
 SDG&E SoCalGas
Sempra Energy
Consolidated
 SDG&E SoCalGas 
Sempra Energy
Consolidated
 SDG&E SoCalGas
Short-term:                      
California Utilities$428
 $238
 $190
 $547
 $291
 $256
$—
 $—
 $—
 $710
 $80
 $630
Other2,097
 —
 —
 1,477
 —
 —
5,744
 —
 —
 2,798
 —
 —
Long-term:                      
California Utilities fixed-rate$8,359
 $4,900
 $3,459
 $8,377
 $4,918
 $3,459
$9,582
 $5,123
 $4,459
 $8,949
 $5,140
 $3,809
California Utilities variable-rate78
 78
 —
 78
 78
 —
400
 400
 —
 —
 —
 —
Other fixed-rate11,145
 —
 —
 10,804
 —
 —
10,485
 —
 —
 11,561
 —
 —
Other variable-rate1,242
 —
 —
 2,091
 —
 —
746
 —
 —
 746
 —
 —
(1) 
After the effects of interest rate swaps. Before the effects of acquisition-related fair value adjustments reductions/increasesand reductions for unamortized discount and reduction for debt issuance costs, and excluding finance lease obligations and build-to-suit lease.obligations.

InterestAn interest rate risk sensitivity analysis measures interest rate risk by calculating the estimated changes in earnings that would result from a hypothetical change in market interest rates. Earnings are affected by changes in interest rates on short-term debt and variable long-term debt. If weighted-average interest rates on short-term debt outstanding at March 31, 20192020 increased or decreased by 10 percent,10%, the change in earnings over the next 12-month period ended March 31, 20202021 would be approximately $8$14 million. If interest rates increased or decreased by 10 percent10% on all variable-rate long-term debt at March 31, 2019,2020, after considering the effects of interest rate swaps, the change in earnings over the next 12-month period ended March 31, 20202021 would be approximately $3$2 million.
CREDIT RATINGS
The credit ratings of Sempra Energy, SDG&E and SoCalGas remained at investment grade levels in the first three months of 2019. At March 31, 2019:
▪Moody’s issuer rating was Baa1 with a negative outlook for Sempra Energy, Baa1 with a negative outlook for SDG&E and A1 with a stable outlook for SoCalGas;
▪S&P’s issuer credit rating was BBB+ with a negative outlook for Sempra Energy, BBB+ with a negative outlook for SDG&E and A with a negative outlook for SoCalGas; and
▪Fitch Ratings’ long-term issuer default rating was BBB+ with a stable outlook for Sempra Energy, BBB+ with a negative outlook for SDG&E and A with a stable outlook for SoCalGas.


Our credit ratings may affect the rates at which borrowings bear interest and the commitment fees on available unused credit. A downgrade of Sempra Energy’s or any of its subsidiaries’ credit ratings or rating outlooks may result in a requirement for collateral to be posted in the case of certain financing arrangements and may materially and adversely affect the market prices of their equity and debt securities, the rates at which borrowings are made and commercial paper is issued, and the various fees on their outstanding credit facilities. This could make it more costly for Sempra Energy, SDG&E, SoCalGas and Sempra Energy’s other subsidiaries to issue debt securities, to borrow under credit facilities and to raise certain other types of financing.
We provide additional information about the credit ratings of Sempra Energy, SDG&E and SoCalGas in “Item 1A. Risk Factors” and “Item 7A. Quantitative and Qualitative Disclosures about Market Risk – Credit Ratings” in the Annual Report.
Sempra Energy has agreed that, if the credit rating of Oncor’s senior secured debt by any of the three major rating agencies falls below BBB (or the equivalent), Oncor will suspend dividends and other distributions (except for contractual tax payments), unless otherwise allowed by the PUCT. Oncor’s senior secured debt is rated A2, A+ and A at Moody’s, S&P and Fitch Ratings, respectively, at March 31, 2019.
FOREIGN CURRENCY AND INFLATION RATE RISK
We discuss our foreign currency and inflation exposure in “Item 2. MD&A – Impact of Foreign Currency and Inflation Rates on Results of Operations” hereinin this report and in “Item 7. MD&A – Impact of Foreign Currency and Inflation Rates on Results of Operations” in the Annual Report. At March 31, 2019,2020, there were no significant changes to our exposure to foreign currency rate risk since December 31, 2018.2019.
     
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Sempra Energy, SDG&E and SoCalGas have designed and maintain disclosure controls and procedures designed to ensure that information required to be disclosed in their respective reports is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to the management of each company, including each respective principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. In designing and evaluating these controls and procedures, the management of each company recognizes that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives; therefore, the management of each company applies judgment in evaluating the cost-benefit relationship of other possible controls and procedures.
Under the supervision and with the participation of management, including the principal executive officers and principal financial officers of Sempra Energy, SDG&E and SoCalGas, each companysuch company’s management evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of March 31, 2019,2020, the end of the period covered by this report. Based on these evaluations, the principal executive officers and principal financial officers of Sempra Energy, SDG&E and SoCalGas concluded that their respective company’s disclosure controls and procedures were effective at the reasonable assurance level.level as of such date.


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

PART II – OTHER INFORMATION



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


     
ITEM 1A. RISK FACTORS
When evaluating our company and its subsidiaries, we urge you toshould consider carefully consider the risksrisk factors and all other information contained in this Quarterly Report on Form 10-Q,report, including the factors discussed above in “Item 2. MD&A” and in this section, and in the riskother documents we file with the SEC, including the factors disclosed in “Item 1A. Risk Factors” in the Annual Report. ThereExcept as set forth below, there have been no material changes from the risk factors as previously disclosed in the Annual Report. Any of the risksrisk factors and other information discussed in this Quarterly Report on Form 10-Qreport or any of the risksrisk factors disclosed in “Item 1A. Risk Factors” in the Annual Report, as well as additional risks and uncertainties not currently known to us or that we currently deem to be immaterial, could materially and adversely affect our businesses, cash flows, results of operations, financial condition, prospects and/or the trading prices of our securities or those of our subsidiaries.
Risks Related to All Sempra Energy Businesses
Our business faces risks related to the COVID-19 pandemic.
The COVID-19 pandemic is currently materially impacting countries, communities, supply chains and markets around the world. The U.S. economy is experiencing a significant slowdown and claims for unemployment are increasing to historic levels. To date, the COVID-19 pandemic has not had a material impact on our results of operations. However, we are conducting business with substantial modifications to employee travel, employee work locations, and virtualization or cancellation of certain business activities, among other modifications. If these or other similar measures were to increase or continue for an extended period, we could experience employee absenteeism, decreased efficiency and productivity by our workforce and other similar impacts that could jeopardize our ability to sustain operations and satisfy compliance requirements. We also have observed other companies, including our current and prospective counterparties, customers and partners, as well as many governments, including our regulators and other governing bodies that affect our businesses, taking precautionary, preemptive and responsive actions to address the effects of the COVID-19 pandemic, and they may take further actions that alter their normal operations. These actions by third parties could impact our operations, results, liquidity and ability to pursue capital projects and strategic initiatives. For example, the CPUC has requested that all energy companies under its jurisdiction take action to implement several emergency customer protection measures to support California customers. The measures apply to all residential and small business customers affected by the COVID-19 pandemic and include suspending service disconnections due to nonpayment, waiving late payment fees, and offering flexible payment plans for all customers experiencing difficulty paying their electric or gas bills. These actions could result in a material reduction in payments received from our customers and a material increase in uncollectible accounts that we may not be able to recover in rates, which could have a material adverse effect on the cash flows, financial condition and results of operations for Sempra Energy, SDG&E and SoCalGas.
In addition, the economic slowdown caused by the COVID-19 pandemic, together with the increase of the supply of oil in world markets, has caused a material and unprecedented decline in oil prices and the demand for energy. These conditions, as well as potential disruptions of construction and development activity if our project counterparties implement or are required to implement stay-at-home or limited workforce measures in response to the pandemic, could result in increased competition among LNG project developers and substantial delays of some of our LNG and other projects currently under development. With respect to Phase 1 of the Cameron LNG JV liquefaction project currently under construction, although the project is considered a critical infrastructure project and is 99.5% complete, the impacts of the COVID-19 pandemic could cause unanticipated delays in completing the project.
Further, the COVID-19 pandemic has adversely affected conditions in the capital markets and may adversely affect our cost of and access to capital, including from the capital markets generally, from commercial paper markets and from commercial banks. Although Sempra Energy, SDG&E and SoCalGas are not currently constrained in any significant way in their ability to borrow money at reasonable rates, these circumstances could change if conditions worsen or continue for an extended period, which could have a material negative effect on our results of operations and on our strategic initiatives and prospects. To date, the COVID-19 pandemic has resulted in a slowdown of our capital spending, which could worsen if conditions deteriorate or fail to improve in the near term and which could have a material adverse effect on Sempra Energy’s, SDG&E’s and SoCalGas’ results of operations and prospects.
We will continue to actively monitor the effects of the COVID-19 pandemic and may take further actions that alter our business operations as may be required by federal, state or local authorities, or that we determine are in the best interests of our employees, customers, partners and suppliers. However, we cannot at this time predict the extent to which the COVID-19 pandemic will further impact our liquidity, financial condition, results of operations and prospects.



     
ITEM 6. EXHIBITS
The following exhibits listed below relate to each registrant as indicated.Unless otherwise indicated, the exhibits that are incorporated by reference herein were filed under File Number 1-14201 (Sempra Energy), File Number 1-40 (Pacific Lighting Corporation), File Number 1-03779 (San Diego Gas & Electric Company) and/or File Number 1-01402 (Southern California Gas Company).


      Incorporated by Reference
Exhibit Number Exhibit Description Filed Herewith FormPeriod EndingExhibitFiling Date
          
EXHIBIT 10 -- MATERIAL CONTRACTS       
          
Sempra Energy/San Diego Gas & Electric Company/Southern California Gas Company     
          
10.1 
Form of Sempra Energy 2013 Long-Term Incentive Plan 2019 Nonqualified Stock Option Award Agreement.
 X     
          
10.2 
Form of Sempra Energy 2013 Long-Term Incentive Plan 2019 Performance-Based Restricted Stock Unit Award - EPS Growth Performance Measure. 
 X     
          
10.3 
Form of Sempra Energy 2013 Long-Term Incentive Plan 2019 Performance-Based Restricted Stock Unit Award - Relative Total Shareholder Return Performance Measure - S&P 500 Index.
 X     
          
10.4 
Form of Sempra Energy 2013 Long-Term Incentive Plan 2019 Performance-Based Restricted Stock Unit Award - Relative Total Shareholder Return Performance Measure - S&P 500 Utilities Index.
 X     
          
10.5 
Form of Sempra Energy 2013 Long-Term Incentive Plan 2019 Special Time-Based Restricted Stock Unit Award - Ratable vesting.
 X     
          
10.6 
Amended and Restated Sempra Energy 2005 Deferred Compensation Plan, now known as Sempra Energy Employee and Director Savings Plan.
   10-K12/31/201810.402/26/2019
          
Sempra Energy/Southern California Gas Company     
          
10.7 
Severance Pay Agreement between Sempra Energy and David J. Barrett, dated January 12, 2019.
   10-K12/31/201810.772/26/2019
          
San Diego Gas & Electric/Southern California Gas Company     
          
10.8* 
Severance Agreement and Mutual Release between San Diego Gas & Electric Company and Southern California Gas Company and P. Kevin Chase dated April 19, 2019.
 X     
          
    Incorporated by Reference
Exhibit Number Exhibit DescriptionFiled or Furnished HerewithFormExhibit or AppendixFiling Date
       
EXHIBIT 3 -- ARTICLES OF INCORPORATION AND BYLAWS    
Sempra Energy   
3.1 
Amended and Restated Articles of Incorporation of Sempra Energy effective May 23, 2008.
 10-K3.102/27/20
       
3.2 
Bylaws of Sempra Energy (as amended through April 14, 2020).
 8-K3.104/14/20
       
3.3 
Certificate of Determination of the 6% Mandatory Convertible Preferred Stock, Series A, of Sempra Energy (including the form of certificate representing the 6% Mandatory Convertible Preferred Stock, Series A), filed the Secretary of State of the State of California and effective January 5, 2018.
 8-K3.101/09/18
       
3.4 
Certificate of Determination of the 6.75% Mandatory Convertible Preferred Stock, Series B, of Sempra Energy (including the form of certificate representing the 6.75% Mandatory Convertible Preferred Stock, Series B) filed with the Secretary of State of the State of California and effective July 11, 2018.
 8-K3.107/13/18
       
San Diego Gas & Electric Company   
3.5 
Amended and Restated Articles of Incorporation of San Diego Gas & Electric Company effective August 15, 2014.
 10-K3.402/26/15
       
3.6 
Bylaws of San Diego Gas & Electric Company (as amended through October 26, 2016).
 10-Q3.111/02/16
       
Southern California Gas Company   
3.7 
Restated Articles of Incorporation of Southern California Gas Company effective October 7, 1996.
 10-K3.0103/28/97
       
3.8 
Bylaws of Southern California Gas Company (as amended through January 30, 2017).
 8-K3.101/31/17
       
EXHIBIT 10 -- MATERIAL CONTRACTS    
       
Sempra Energy   
10.1* 
Engineering, Procurement and Construction Contract, dated as of February 28, 2020, between Port Arthur LNG, LLC, PALNG Common Facilities Company, LLC (but only for the limited purpose set forth therein), and Bechtel Oil, Gas and Chemicals, Inc.
X   
       
Management Contract or Compensatory Plan, Contract or Arrangement   
Sempra Energy/San Diego Gas & Electric/Southern California Gas Company    
10.2 
Severance Agreement and Mutual Release, dated March 30, 2020, between Sempra Energy and George Bilicic. 
X   
       
10.3 
Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Nonqualified Stock Option Award Agreement. 
 10-K10.502/27/20
       
10.4 
Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Time-Based Restricted Stock Unit Award - Three Year Ratable Vest. 
 10-K10.602/27/20
       
10.5 
Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Performance-Based Restricted Stock Unit Award - EPS Growth Performance Measure.
 10-K10.702/27/20
       
10.6 
Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Performance-Based Restricted Stock Unit Award - Relative to Shareholder Return Performance Measure - S&P 500 Index. 
 10-K10.802/27/20
       
10.7 
Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Performance-Based Restricted Stock Unit Award - Relative Total Shareholder Return Performance Measure - S&P 500 Utilities Index. 
 10-K10.902/27/20
       
* Certain sensitive personally identifiable information in this exhibit was omitted by means of redacting a portionPortions of the text and replacing itexhibit have been omitted in accordance with [***].


applicable SEC rules.


Exhibit Number Exhibit Description Filed or Furnished Herewith
     
EXHIBIT 31 -- SECTION 302 CERTIFICATIONS
     
Sempra Energy  
31.1 
Certification of Sempra Energy’s Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
 X
     
31.2 
Certification of Sempra Energy’s Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
 X
     
San Diego Gas & Electric Company  
31.3 
Certification of San Diego Gas & Electric Company’s Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
 X
     
31.4 
Certification of San Diego Gas & Electric Company’s Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
 X
     
Southern California Gas Company  
31.5 
Certification of Southern California Gas Company’s Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
 X
     
31.6 
Certification of Southern California Gas Company’s Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
 X
     
EXHIBIT 32 -- SECTION 906 CERTIFICATIONS  
     
Sempra Energy  
32.1 
Certification of Sempra Energy’s Principal Executive Officer pursuant to 18 U.S.C. Sec. 1350.
 X
     
32.2 
Certification of Sempra Energy’s Principal Financial Officer pursuant to 18 U.S.C. Sec. 1350.
 X
     
San Diego Gas & Electric Company  
32.3 
Certification of San Diego Gas & Electric Company’s Principal Executive Officer pursuant to 18 U.S.C. Sec. 1350.
 X
     
32.4 
Certification of San Diego Gas & Electric Company’s Principal Financial Officer pursuant to 18 U.S.C. Sec. 1350.
 X
     
Southern California Gas Company  
32.5 
Certification of Southern California Gas Company’s Principal Executive Officer pursuant to 18 U.S.C. Sec. 1350.
 X
     
32.6 
Certification of Southern California Gas Company’s Principal Financial Officer pursuant to 18 U.S.C. Sec. 1350.
 X
     
EXHIBIT 101 -- INTERACTIVE DATA FILE  
     
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document. X
     
101.SCH Inline XBRL Taxonomy Extension Schema DocumentDocument. X
     
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase DocumentDocument. X
     
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase DocumentDocument. X
     
101.LAB Inline XBRL Taxonomy Extension Label Linkbase DocumentDocument. X
     
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase DocumentDocument. X
EXHIBIT 104 -- COVER PAGE INTERACTIVE DATA FILE
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).




SIGNATURES
Sempra Energy:
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  
SEMPRA ENERGY,
(Registrant)
   
Date: May 7, 20194, 2020 By: /s/ Peter R. Wall
  
Peter R. Wall
Senior Vice President, Controller and
Chief Accounting Officer (Duly Authorized Officer)
San Diego Gas & Electric Company:
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  
SAN DIEGO GAS & ELECTRIC COMPANY,
(Registrant)
   
Date: May 7, 20194, 2020 By: /s/ Bruce A. Folkmann
  
Bruce A. Folkmann
Senior Vice President, Controller, Chief Financial Officer and Chief Accounting Officer (Duly Authorized Officer)
 
Southern California Gas Company:
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  
SOUTHERN CALIFORNIA GAS COMPANY,
(Registrant)
   
Date: May 7, 20194, 2020 By: /s/ Bruce A. FolkmannMia L. DeMontigny
  
Bruce A. FolkmannMia L. DeMontigny
Vice President, Controller, Chief Financial Officer and Chief Accounting Officer (Duly Authorized Officer)


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