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SRE Sempra Energy

Filed: 5 May 21, 3:35pm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549 
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period endedMarch 31, 2021
 or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period fromto

Commission File No.Exact Name of Registrant as Specified in its Charter,
Address of Principal Executive Office and Telephone Number
State of IncorporationI.R.S. Employer Identification No.Former name, former address and former fiscal year, if changed since last report
1-14201SEMPRA ENERGY
sre-20210331_g1.jpg
California33-0732627No change
488 8th Avenue
San Diego, California 92101
(619) 696-2000
1-03779SAN DIEGO GAS & ELECTRIC COMPANY
sre-20210331_g2.jpg
California95-1184800No change
8326 Century Park Court
San Diego, California 92123
(619) 696-2000
1-01402SOUTHERN CALIFORNIA GAS COMPANY
sre-20210331_g3.jpg
California95-1240705No change
555 West Fifth Street
Los Angeles, California 90013
(213) 244-1200
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
SEMPRA ENERGY:
Common Stock, without par valueSRENew York Stock Exchange
6.75% Mandatory Convertible Preferred Stock, Series B,
$100 liquidation preference
SREPRBNew York Stock Exchange
5.75% Junior Subordinated Notes Due 2079, $25 par valueSREANew York Stock Exchange
SAN DIEGO GAS & ELECTRIC COMPANY:
None
SOUTHERN CALIFORNIA GAS COMPANY:
None
1


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Sempra EnergyYesNo
San Diego Gas & Electric CompanyYesNo
Southern California Gas CompanyYesNo
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Sempra EnergyYesNo
San Diego Gas & Electric CompanyYesNo
Southern California Gas CompanyYesNo
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
San Diego Gas & Electric Company:
Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Smaller Reporting Company
Emerging Growth Company
Southern California Gas Company
Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Smaller Reporting Company
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 EnergyYesNo
San Diego Gas & Electric CompanyYesNo
Southern California Gas CompanyYesNo
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Sempra EnergyYesNo
San Diego Gas & Electric CompanyYesNo
Southern California Gas CompanyYesNo
Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date.
Common stock outstanding on April 30, 2021:
Sempra Energy302,760,705 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
2


SEMPRA ENERGY FORM 10-Q
SAN DIEGO GAS & ELECTRIC COMPANY FORM 10-Q
SOUTHERN CALIFORNIA GAS COMPANY FORM 10-Q
TABLE OF CONTENTS
 Page
  
PART I – FINANCIAL INFORMATION 
Item 1.
Item 2.
Item 3.
Item 4.
  
PART II – OTHER INFORMATION 
Item 1.
Item 1A.
Item 6.
  

This combined Form 10-Q is separately filed by Sempra Energy, San Diego Gas & Electric Company and Southern California Gas Company. Information contained herein relating to any one of these individual reporting entities is filed by such entity on its own behalf. Each entity makes statements herein only as to itself and its consolidated subsidiaries and makes no statement whatsoever as to any other entity.
You should read this report in its entirety as it pertains to each respective reporting entity. 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 entity, except for the Notes to Condensed Consolidated Financial Statements. The Notes to Condensed Consolidated Financial Statements for all of the reporting entities are combined. All Items other than Part I – Item 1 are combined for the three reporting entities.
None of the website references in this report are active hyperlinks, and the information contained on, or that can be accessed through, any such website is not, and shall not be deemed to be, part of this report.
3


The following terms and abbreviations appearing in this report have the meanings indicated below.
GLOSSARY
2019 GRC FDfinal decision in the California Utilities’ 2019 General Rate Case
ABCalifornia Assembly Bill
AFUDCallowance for funds used during construction
AMPArrearage Management Payment Plan
Annual ReportAnnual Report on Form 10-K for the year ended December 31, 2020
AOCIaccumulated other comprehensive income (loss)
AROasset retirement obligation
ASCAccounting Standards Codification
ASUAccounting Standards Update
BechtelBechtel Oil, Gas and Chemicals, Inc.
BladeBlade Energy Partners
bpsbasis points
CalGEMCalifornia Geologic Energy Management Division
California UtilitiesSan Diego Gas & Electric Company and Southern California Gas Company, collectively
Cameron LNG JVCameron LNG Holdings, LLC
CCMcost of capital adjustment mechanism
CENACECentro Nacional de Control de Energía (Mexico’s National Energy Control Center)
CFEComisión Federal de Electricidad (Mexico’s Federal Electricity Commission)
CFINCameron LNG FINCO, LLC, a wholly owned and unconsolidated affiliate of Cameron LNG JV
Chilquinta EnergíaChilquinta Energía S.A. and its subsidiaries
CNBVComisión Nacional Bancaria y de Valores (Mexico’s National Banking and Securities Commission)
COVID-19coronavirus disease 2019
CPUCCalifornia Public Utilities Commission
CREComisión Reguladora de Energía (Mexico’s Energy Regulatory Commission)
CRRcongestion revenue right
DOEU.S. Department of Energy
ECA LNGECA LNG Phase 1 and ECA LNG Phase 2
ECA LNG Phase 1ECA LNG Holdings B.V.
ECA LNG Phase 2ECA LNG II Holdings B.V.
ECA Regas FacilityEnergía Costa Azul, S. de R.L. de C.V. LNG 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.)
EPCengineering, procurement and construction
EPSearnings per common share
ERCOTElectric Reliability Council of Texas, Inc., the independent system operator and the regional coordinator of various electricity systems within Texas
ESJEnergía Sierra Juárez, S. de R.L. de C.V.
ETReffective income tax rate
FERCFederal Energy Regulatory Commission
FitchFitch Ratings, Inc.
FTAFree Trade Agreement
GazpromGazprom Marketing & Trading México S. de R.L. de C.V.
GRCGeneral Rate Case
HMRCUnited Kingdom’s Revenue and Customs Department
IEnovaInfraestructura Energética Nova, S.A.B. de C.V.
IMG JVInfraestructura Marina del Golfo
IOUinvestor-owned utility
ISFSIindependent spent fuel storage installation
ISOIndependent System Operator
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
LNGliquefied natural gas
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
4


GLOSSARY (CONTINUED)
Mexican Stock ExchangeBolsa Mexicana de Valores, S.A.B. de C.V., or BMV
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
O&Moperation and maintenance expense
OCIother comprehensive income (loss)
OIIOrder Instituting Investigation
OIROrder Instituting a Rulemaking
OncorOncor Electric Delivery Company LLC
Oncor HoldingsOncor Electric Delivery Holdings Company LLC
OSCOrder to Show Cause
PP&Eproperty, plant and equipment
PPApower purchase agreement
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
S&PS&P Global Ratings
Saavi EnergíaSaavi Energía S. de R.L. de C.V.
SBCalifornia Senate Bill
SDG&ESan Diego Gas & Electric Company
SECU.S. Securities and Exchange Commission
SEDATUSecretaría de Desarrollo Agrario, Territorial y Urbano (Mexico’s 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
SENERSecretaría de Energía de México (Mexico’s Ministry of Energy)
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
series C preferred stockSempra Energy’s 4.875% fixed-rate reset cumulative redeemable perpetual preferred stock, series C
Sharyland HoldingsSharyland Holdings, L.P.
Sharyland UtilitiesSharyland Utilities, L.L.C.
Shell MexicoShell México Gas Natural, S. de R.L. de C.V.
SoCalGasSouthern California Gas Company
SONGSSan Onofre Nuclear Generating Station
Support Agreementsupport agreement, dated July 28, 2020, among Sempra Energy and Sumitomo Mitsui Banking Corporation
TAG JVTAG Norte Holding, S. de R.L. de C.V.
TdMTermoeléctrica de Mexicali
Technip EnergiesTP Oil & Gas Mexico, S. De R.L. De C.V., an affiliate of Technip Energies N.V.
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
TTITexas Transmission Investment LLC
U.S. GAAPgenerally accepted accounting principles 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
5


INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
We make statements in this report that 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. Future results may differ materially from those expressed in any 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.
Forward-looking statements can be identified by words such as “believes,” “expects,” “anticipates,” “plans,” “estimates,” “projects,” “forecasts,” “should,” “could,” “would,” “will,” “confident,” “may,” “can,” “potential,” “possible,” “proposed,” “in process,” “under construction,” “in development,” “target,” “outlook,” “maintain,” “continue,” or similar expressions, or when we discuss our guidance, priorities, strategy, goals, vision, mission, opportunities, projections, intentions or expectations.
Factors, among others, that could cause actual results and events to differ materially from those described in any forward-looking statements include risks and uncertainties relating to:
California wildfires, including the risks that we may be found liable for damages regardless of fault and that we may not be able to recover costs from insurance, the Wildfire Fund or in rates from customers
decisions, investigations, regulations, issuances or revocations of permits and other authorizations, renewals of franchises, and other actions by (i) the CFE, CPUC, DOE, PUCT, and other regulatory and governmental bodies and (ii) states, counties, cities and other jurisdictions in the U.S., Mexico and other countries in which we do business
the success of business development efforts, construction projects and major acquisitions and divestitures, including risks in (i) the ability to make a final investment decision, (ii) completing construction projects or other transactions on schedule and budget, (iii) the ability to realize anticipated benefits from any of these efforts if completed, and (iv) obtaining the consent of partners or other third parties
the resolution of civil and criminal litigation, regulatory inquiries, investigations and proceedings, and arbitrations, including, among others, those related to the Leak
the impact of the COVID-19 pandemic on our capital projects, regulatory approval processes, supply chain, liquidity and execution of operations
actions by credit rating agencies to downgrade our credit ratings or to place those ratings on negative outlook and our ability to borrow on favorable terms and meet our substantial debt service obligations
actions to reduce or eliminate reliance on natural gas, including any deterioration of or increased uncertainty in the political or regulatory environment for local natural gas distribution companies operating in California, and the impact of volatility of oil prices on our businesses and development projects
weather, natural disasters, pandemics, accidents, equipment failures, explosions, acts of terrorism, computer system outages and other events that disrupt our operations, damage our facilities and systems, cause the release of harmful materials, cause fires and subject us to liability for property damage or personal injuries, fines and penalties, some of which may not be covered by insurance, 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 of natural gas from storage facilities, and equipment failures
cybersecurity threats to the energy grid, the storage and pipeline infrastructure, the information and systems used to operate our businesses, and the confidentiality of our proprietary information and the personal information of our customers and employees
expropriation of assets, failure of foreign governments and state-owned entities to honor their contracts, and property disputes
the impact at SDG&E on competitive customer rates and reliability due to the growth in distributed and local power generation, including from departing retail load resulting from customers transferring to Direct Access and Community Choice Aggregation, and the risk of nonrecovery for stranded assets and contractual obligations
Oncor’s ability to eliminate or reduce its quarterly dividends due to regulatory and governance requirements and commitments, including by actions of Oncor’s independent directors or a minority member director
volatility in foreign currency exchange, inflation and interest rates and commodity prices and our ability to effectively hedge these risks
changes in tax and trade policies, laws and regulations, including tariffs and revisions to international trade agreements that may increase our costs, reduce our competitiveness, or impair our ability to resolve trade disputes
other uncertainties, some of which may be difficult to predict and are beyond our control
6


We caution you not to rely unduly on any forward-looking statements. You should review and consider carefully the risks, uncertainties and other factors that affect our business as described herein, in our Annual Report and in other reports that we file with the SEC.
IEnova Exchange Offer
As described in this report, in April 2021, we launched an offer to acquire up to 100% of the publicly held shares of IEnova in exchange for shares of Sempra Energy common stock. The exchange offer has been submitted to shareholders of IEnova for their consideration. In connection with the exchange offer, we have filed a registration statement on Form S-4 (File No. 333-252030) with the SEC that includes a prospectus relating to the offer and sale of the Sempra Energy common stock to be issued in the exchange offer, which has been declared effective by the SEC, and we have filed a prospectus and exchange offer documents with the CNBV and the Mexican Stock Exchange, which has been approved by the CNBV (such registration statement, the prospectus included therein, and prospectus and exchange offer documents are referred to collectively as the Offer Documents). Shareholders are urged to read the Offer Documents carefully and in their entirety, along with any other relevant documents or materials filed or to be filed with the SEC or the CNBV in connection with the exchange offer or incorporated by reference therein, because they contain important information about the exchange offer and the parties thereto. The Offer Documents are available free of charge on the SEC’s website, www.sec.gov, and on the CNBV’s website, www.gob.mx/cnbv. The Offer Documents may also be obtained free of charge by directing a written request to Sempra Energy, Attn: Corporate Secretary, at 488 8th Avenue, San Diego, California 92101. No offering of securities in the U.S. or Mexico will be made except pursuant to the Offer Documents and by means of the prospectuses included therein and the related materials filed with the SEC and the CNBV, and there shall be no offer, solicitation or sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

7


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,
 20212020
 (unaudited)
REVENUES 
Utilities$2,845 $2,665 
Energy-related businesses414 364 
Total revenues3,259 3,029 
EXPENSES AND OTHER INCOME 
Utilities: 
Cost of natural gas(349)(337)
Cost of electric fuel and purchased power(232)(229)
Energy-related businesses cost of sales(109)(59)
Operation and maintenance(1,001)(851)
Aliso Canyon litigation and regulatory matters(100)
Depreciation and amortization(442)(412)
Franchise fees and other taxes(153)(137)
Other income (expense), net35 (254)
Interest income19 27 
Interest expense(259)(280)
Income from continuing operations before income taxes and equity earnings768 397 
Income tax (expense) benefit(158)207 
Equity earnings318 263 
Income from continuing operations, net of income tax928 867 
Income from discontinued operations, net of income tax80 
Net income928 947 
Earnings attributable to noncontrolling interests(33)(151)
Preferred dividends(21)(36)
Earnings attributable to common shares$874 $760 
Basic EPS:
Earnings from continuing operations$2.91 $2.35 
Earnings from discontinued operations$$0.25 
Earnings$2.91 $2.60 
Weighted-average common shares outstanding300,905 292,790 
Diluted EPS:
Earnings from continuing operations$2.87 $2.30 
Earnings from discontinued operations$$0.23 
Earnings$2.87 $2.53 
Weighted-average common shares outstanding308,458 313,925 
See Notes to Condensed Consolidated Financial Statements.
8


SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
 Sempra Energy shareholders’ equity  
 Pretax
amount
Income tax
 (expense) benefit
Net-of-tax
amount
Noncontrolling
interests
(after tax)
Total
 (unaudited)
 Three months ended March 31, 2021 and 2020
2021:     
Net income$1,053 $(158)$895 $33 $928 
Other comprehensive income (loss):     
Foreign currency translation adjustments(5)(5)(1)(6)
Financial instruments121 (29)92 15 107 
Pension and other postretirement benefits17 (3)14 14 
Total other comprehensive income133 (32)101 14 115 
Comprehensive income$1,186 $(190)$996 $47 $1,043 
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 
See Notes to Condensed Consolidated Financial Statements.    

9


SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
March 31,December 31,
 2021
2020(1)
 (unaudited) 
ASSETS  
Current assets:  
Cash and cash equivalents$725 $960 
Restricted cash38 22 
Accounts receivable – trade, net1,595 1,578 
Accounts receivable – other, net393 403 
Due from unconsolidated affiliates26 20 
Income taxes receivable78 113 
Inventories274 308 
Regulatory assets183 190 
Greenhouse gas allowances555 553 
Other current assets333 364 
Total current assets4,200 4,511 
Other assets:  
Restricted cash15 
Due from unconsolidated affiliates674 780 
Regulatory assets2,010 1,822 
Nuclear decommissioning trusts1,014 1,019 
Investment in Oncor Holdings12,553 12,440 
Other investments1,505 1,388 
Goodwill1,602 1,602 
Other intangible assets397 202 
Dedicated assets in support of certain benefit plans494 512 
Insurance receivable for Aliso Canyon costs414 445 
Deferred income taxes132 136 
Greenhouse gas allowances181 101 
Right-of-use assets – operating leases528 543 
Wildfire fund356 363 
Other long-term assets765 753 
Total other assets22,640 22,109 
Property, plant and equipment:  
Property, plant and equipment55,251 53,928 
Less accumulated depreciation and amortization(14,270)(13,925)
Property, plant and equipment, net40,981 40,003 
Total assets$67,821 $66,623 
(1)    Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.
10


SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
March 31,December 31,
 2021
2020(1)
 (unaudited) 
LIABILITIES AND EQUITY  
Current liabilities:  
Short-term debt$1,817 $885 
Accounts payable – trade1,354 1,359 
Accounts payable – other141 154 
Due to unconsolidated affiliates42 45 
Dividends and interest payable595 551 
Accrued compensation and benefits273 446 
Regulatory liabilities437 140 
Current portion of long-term debt and finance leases505 1,540 
Reserve for Aliso Canyon costs152 150 
Greenhouse gas obligations555 553 
Other current liabilities1,004 1,016 
Total current liabilities6,875 6,839 
Long-term debt and finance leases22,023 21,781 
Deferred credits and other liabilities:  
Due to unconsolidated affiliates258 234 
Pension and other postretirement benefit plan obligations, net of plan assets1,069 1,059 
Deferred income taxes3,114 2,871 
Regulatory liabilities3,333 3,372 
Reserve for Aliso Canyon costs285 301 
Asset retirement obligations3,121 3,113 
Greenhouse gas obligations41 
Deferred credits and other2,094 2,119 
Total deferred credits and other liabilities13,315 13,069 
Commitments and contingencies (Note 11)00
Equity:  
Preferred stock (50 million shares authorized):
Mandatory convertible preferred stock, series A
(17.25 million shares outstanding at December 31, 2020)
1,693 
Mandatory convertible preferred stock, series B
(5.75 million shares outstanding)
565 565 
Preferred stock, series C
(0.9 million shares outstanding)
889 889 
Common stock (750 million shares authorized; 303 million and 288 million shares
outstanding at March 31, 2021 and December 31, 2020, respectively; no par value)
8,730 7,053 
Retained earnings14,214 13,673 
Accumulated other comprehensive income (loss)(399)(500)
Total Sempra Energy shareholders’ equity23,999 23,373 
Preferred stock of subsidiary20 20 
Other noncontrolling interests1,589 1,541 
Total equity25,608 24,934 
Total liabilities and equity$67,821 $66,623 
(1)    Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.
11


SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 Three months ended March 31,
 20212020
 (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income$928 $947 
Less: Income from discontinued operations, net of income tax(80)
Income from continuing operations, net of income tax928 867 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization442 412 
Deferred income taxes and investment tax credits97 (243)
Equity earnings(318)(263)
Foreign currency transaction losses, net19 123 
Share-based compensation expense17 22 
Fixed-price contracts and other derivatives130 68 
Other59 56 
Net change in working capital components84 217 
Distributions from investments208 73 
Insurance receivable for Aliso Canyon costs31 (172)
Changes in other noncurrent assets and liabilities, net(195)90 
Net cash provided by continuing operations1,502 1,250 
Net cash provided by discontinued operations68 
Net cash provided by operating activities1,502 1,318 
CASH FLOWS FROM INVESTING ACTIVITIES  
Expenditures for property, plant and equipment(1,181)(1,010)
Expenditures for investments and acquisitions(115)(86)
Proceeds from sale of assets
Purchases of nuclear decommissioning trust assets(288)(552)
Proceeds from sales of nuclear decommissioning trust assets288 552 
Advances to unconsolidated affiliates(8)(30)
Intercompany activities with discontinued operations, net(3)
Other
Net cash used in continuing operations(1,301)(1,116)
Net cash used in discontinued operations(65)
Net cash used in investing activities(1,301)(1,181)
See Notes to Condensed Consolidated Financial Statements.
12


SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in millions)
 Three months ended March 31,
 20212020
 (unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid$(301)$(269)
Preferred dividends paid(36)(36)
Issuances of common stock11 
Repurchases of common stock(37)(57)
Issuances of debt (maturities greater than 90 days)102 1,619 
Payments on debt (maturities greater than 90 days) and finance leases(1,093)(1,433)
Increase in short-term debt, net932 2,127 
Advances from unconsolidated affiliates20 64 
Proceeds from sale of noncontrolling interests
Purchases of noncontrolling interests(16)
Intercompany activities with discontinued operations, net(2)
Other(1)(5)
Net cash (used in) provided by continuing operations(407)2,003 
Net cash provided by discontinued operations111 
Net cash (used in) provided by financing activities(407)2,114 
Effect of exchange rate changes in continuing operations(1)(6)
Effect of exchange rate changes in discontinued operations(8)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(1)(14)
(Decrease) increase in cash, cash equivalents and restricted cash, including
discontinued operations
(207)2,237 
Cash, cash equivalents and restricted cash, including discontinued operations, January 1985 217 
Cash, cash equivalents and restricted cash, including discontinued operations, March 31$778 $2,454 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION  
Interest payments, net of amounts capitalized$225 $263 
Income tax payments, including discontinued operations, net of refunds30 68 
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES  
Accrued capital expenditures499 437 
Increase in finance lease obligations for investment in property, plant and equipment15 20 
Equitization of long-term debt for deficit held by NCI22 
Preferred dividends declared but not paid32 36 
Common dividends issued in stock14 
Common dividends declared but not paid333 306 
See Notes to Condensed Consolidated Financial Statements.
13


SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Dollars in millions)
 Preferred stockCommon
stock
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Sempra
Energy
shareholders'
equity
Non-
controlling
interests
Total
equity
(unaudited)
Three months ended March 31, 2021
Balance at December 31, 2020$3,147 $7,053 $13,673 $(500)$23,373 $1,561 $24,934 
Net income895 895 33 928 
Other comprehensive income101 101 14 115 
Share-based compensation expense17 17 17 
Dividends declared:
Series B preferred stock ($1.69/share)(10)(10)(10)
Series C preferred stock ($12.19/share)(11)(11)(11)
Common stock ($1.10/share)(333)(333)(333)
Conversion of series A preferred stock(1,693)1,693 0 0 
Repurchases of common stock(37)(37)(37)
Noncontrolling interest activities:
Sale4 5 
Balance at March 31, 2021$1,454 $8,730 $14,214 $(399)$23,999 $1,609 $25,608 
 Three months ended March 31, 2020
Balance at December 31, 2019$2,258 $7,480 $11,130 $(939)$19,929 $1,876 $21,805 
Adoption of ASU 2016-13(7)(7)(2)(9)
Adjusted balance at December 31, 20192,258 7,480 11,123 (939)19,922 1,874 21,796 
Net income796 796 151 947 
Other comprehensive loss(251)(251)(32)(283)
Share-based compensation expense22 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 stock25 25 25 
Repurchases of common stock(57)(57)(57)
Noncontrolling interest activities:
Purchases2 (18)(16)
Acquisition1 
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 
See Notes to Condensed Consolidated Financial Statements.
14


SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in millions) 
 Three months ended March 31,
 20212020
 (unaudited)
Operating revenues  
Electric$1,069 $1,050 
Natural gas268 219 
Total operating revenues1,337 1,269 
Operating expenses  
Cost of electric fuel and purchased power241 231 
Cost of natural gas82 60 
Operation and maintenance390 310 
Depreciation and amortization213 201 
Franchise fees and other taxes88 78 
Total operating expenses1,014 880 
Operating income323 389 
Other income, net35 31 
Interest income
Interest expense(102)(101)
Income before income taxes257 320 
Income tax expense(45)(58)
Net Income/Earnings attributable to common shares$212 $262 
See Notes to Condensed Financial Statements.

15


SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
 Pretax
amount
Income tax expenseNet-of-tax
amount
 (unaudited)
 Three months ended March 31, 2021 and 2020
2021:   
Net income/Comprehensive income$257 $(45)$212 
2020:   
Net income/Comprehensive income$320 $(58)$262 
See Notes to Condensed Financial Statements.

16


SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED BALANCE SHEETS
(Dollars in millions)
March 31,December 31,
 2021
2020(1)
 (unaudited) 
ASSETS  
Current assets:  
Cash and cash equivalents$$262 
Accounts receivable – trade, net622 573 
Accounts receivable – other, net87 143 
Inventories122 104 
Prepaid expenses143 153 
Regulatory assets173 174 
Fixed-price contracts and other derivatives54 56 
Greenhouse gas allowances113 113 
Other current assets23 22 
Total current assets1,346 1,600 
Other assets:  
Regulatory assets629 534 
Nuclear decommissioning trusts1,014 1,019 
Greenhouse gas allowances83 83 
Right-of-use assets – operating leases94 102 
Wildfire fund356 363 
Other long-term assets183 189 
Total other assets2,359 2,290 
Property, plant and equipment:  
Property, plant and equipment24,903 24,436 
Less accumulated depreciation and amortization(6,134)(6,015)
Property, plant and equipment, net18,769 18,421 
Total assets$22,474 $22,311 
(1)    Derived from audited financial statements.
See Notes to Condensed Financial Statements.

17


SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
 March 31,December 31,
2021
2020(1)
 (unaudited) 
LIABILITIES AND EQUITY  
Current liabilities:  
Short-term debt$130 $
Accounts payable504 553 
Due to unconsolidated affiliates79 64 
Interest payable72 46 
Accrued compensation and benefits73 135 
Accrued franchise fees40 56 
Regulatory liabilities58 61 
Current portion of long-term debt and finance leases412 611 
Greenhouse gas obligations113 113 
Asset retirement obligations118 117 
Other current liabilities304 255 
Total current liabilities1,903 2,011 
Long-term debt and finance leases6,848 6,866 
Deferred credits and other liabilities:  
Pension obligation, net of plan assets94 92 
Deferred income taxes2,072 2,019 
Deferred investment tax credits13 13 
Regulatory liabilities2,231 2,195 
Asset retirement obligations748 759 
Greenhouse gas obligations
Deferred credits and other616 626 
Total deferred credits and other liabilities5,781 5,704 
Commitments and contingencies (Note 11)00
Shareholder's equity:  
Preferred stock (45 million shares authorized; NaN issued)
Common stock (255 million shares authorized; 117 million shares outstanding;
no par value)
1,660 1,660 
Retained earnings6,292 6,080 
Accumulated other comprehensive income (loss)(10)(10)
Total shareholder’s equity7,942 7,730 
Total liabilities and shareholder's equity$22,474 $22,311 
(1)    Derived from audited financial statements.
See Notes to Condensed Financial Statements.
18


SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 Three months ended March 31,
 20212020
 (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income$212 $262 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization213 201 
Deferred income taxes and investment tax credits27 (8)
Other(10)
Net change in working capital components16 73 
Changes in noncurrent assets and liabilities, net(73)(20)
Net cash provided by operating activities396 498 
CASH FLOWS FROM INVESTING ACTIVITIES  
Expenditures for property, plant and equipment(555)(402)
Purchases of nuclear decommissioning trust assets(288)(552)
Proceeds from sales of nuclear decommissioning trust assets288 552 
Net cash used in investing activities(555)(402)
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(224)(23)
Increase (decrease) in short-term debt, net130 (80)
Net cash (used in) provided by financing activities(94)97 
(Decrease) increase in cash and cash equivalents(253)193 
Cash and cash equivalents, January 1262 10 
Cash and cash equivalents, March 31$$203 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION  
Interest payments, net of amounts capitalized$75 $79 
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES  
Accrued capital expenditures$146 $128 
Increase in finance lease obligations for investment in property, plant and equipment
See Notes to Condensed Financial Statements.
19


SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED STATEMENTS OF CHANGES IN EQUITY
(Dollars in millions)
 Common
stock
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Total
shareholder's
equity
(unaudited)
Three months ended March 31, 2021
Balance at December 31, 2020$1,660 $6,080 $(10)$7,730 
Net income212 212 
Balance at March 31, 2021$1,660 $6,292 $(10)$7,942 
Three months ended March 31, 2020
Balance at December 31, 2019$1,660 $5,456 $(16)$7,100 
Net income262 262 
Common stock dividends declared ($1.72/share)(200)(200)
Balance at March 31, 2020$1,660 $5,518 $(16)$7,162 
See Notes to Condensed Financial Statements.
20


SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in millions)
 Three months ended March 31,
20212020
 (unaudited)
Operating revenues$1,508 $1,395 
Operating expenses 
Cost of natural gas273 278 
Operation and maintenance503 443 
Aliso Canyon litigation and regulatory matters100 
Depreciation and amortization173 159 
Franchise fees and other taxes58 51 
Total operating expenses1,007 1,031 
Operating income501 364 
Other income, net39 30 
Interest income
Interest expense(39)(40)
Income before income taxes501 355 
Income tax expense(94)(52)
Net income/Earnings attributable to common shares$407 $303 
See Notes to Condensed Financial Statements.

21


SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
 Pretax
amount
Income tax expenseNet-of-tax
amount
 (unaudited)
 Three months ended March 31, 2021 and 2020
2021:   
Net income/Comprehensive income$501 $(94)$407 
2020:   
Net income/Comprehensive income$355 $(52)$303 
See Notes to Condensed Financial Statements.


22


SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED BALANCE SHEETS
(Dollars in millions)
 March 31,December 31,
2021
2020(1)
 (unaudited) 
ASSETS  
Current assets:  
Cash and cash equivalents$203 $
Accounts receivable – trade, net772 786 
Accounts receivable – other, net88 64 
Due from unconsolidated affiliates25 22 
Inventories81 153 
Regulatory assets10 16 
Greenhouse gas allowances392 390 
Other current assets40 47 
Total current assets1,611 1,482 
Other assets:  
Regulatory assets1,301 1,208 
Insurance receivable for Aliso Canyon costs414 445 
Greenhouse gas allowances90 
Right-of-use assets – operating leases70 74 
Other long-term assets507 499 
Total other assets2,382 2,235 
Property, plant and equipment:  
Property, plant and equipment21,528 21,180 
Less accumulated depreciation and amortization(6,540)(6,437)
Property, plant and equipment, net14,988 14,743 
Total assets$18,981 $18,460 
(1)    Derived from audited financial statements.
See Notes to Condensed Financial Statements.
23


SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
 March 31,December 31,
2021
2020(1)
 (unaudited) 
LIABILITIES AND SHAREHOLDERS’ EQUITY  
Current liabilities:  
Short-term debt$$113 
Accounts payable – trade487 600 
Accounts payable – other111 122 
Due to unconsolidated affiliates67 31 
Income taxes payable130 24 
Accrued compensation and benefits140 189 
Regulatory liabilities379 79 
Current portion of long-term debt and finance leases10 10 
Reserve for Aliso Canyon costs152 150 
Greenhouse gas obligations392 390 
Asset retirement obligations59 59 
Other current liabilities292 315 
Total current liabilities2,219 2,082 
Long-term debt and finance leases4,769 4,763 
Deferred credits and other liabilities:  
Pension obligation, net of plan assets866 853 
Deferred income taxes1,460 1,406 
Deferred investment tax credits
Regulatory liabilities1,102 1,177 
Reserve for Aliso Canyon costs285 301 
Asset retirement obligations2,324 2,309 
Greenhouse gas obligations29 
Deferred credits and other419 417 
Total deferred credits and other liabilities6,492 6,471 
Commitments and contingencies (Note 11)00
Shareholders’ equity:  
Preferred stock (11 million shares authorized; 1 million shares outstanding)22 22 
Common stock (100 million shares authorized; 91 million shares outstanding; no par value)866 866 
Retained earnings4,644 4,287 
Accumulated other comprehensive income (loss)(31)(31)
Total shareholders’ equity5,501 5,144 
Total liabilities and shareholders’ equity$18,981 $18,460 
(1)    Derived from audited financial statements.
See Notes to Condensed Financial Statements.

24


SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 Three months ended March 31,
 20212020
 (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income$407 $303 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization173 159 
Deferred income taxes and investment tax credits(14)
Other27 
Net change in working capital components299 343 
Insurance receivable for Aliso Canyon costs31 (172)
Changes in other noncurrent assets and liabilities, net(124)114 
Net cash provided by operating activities799 757 
CASH FLOWS FROM INVESTING ACTIVITIES  
Expenditures for property, plant and equipment(459)(388)
Net cash used in investing activities(459)(388)
CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid(25)
Issuances of debt (maturities greater than 90 days)649 
Payments on finance leases(3)(3)
Decrease in short-term debt, net(113)(630)
Debt issuance costs(6)
Net cash (used in) provided by financing activities(141)10 
Increase in cash and cash equivalents199 379 
Cash and cash equivalents, January 110 
Cash and cash equivalents, March 31$203 $389 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION  
Interest payments, net of amounts capitalized$44 $37 
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES  
Accrued capital expenditures$150 $126 
Increase in finance lease obligations for investment in property, plant and equipment16 
Common dividends declared but not paid25 
See Notes to Condensed Financial Statements.

25


SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Dollars in millions)
 Preferred
stock
Common
stock
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Total
shareholders’
equity
(unaudited)
Three months ended March 31, 2021
Balance at December 31, 2020$22 $866 $4,287 $(31)$5,144 
Net income407 407 
Dividends declared:
Preferred stock ($0.38/share)0 
Common stock ($0.55/share)(50)(50)
Balance at March 31, 2021$22 $866 $4,644 $(31)$5,501 
Three months ended March 31, 2020
Balance at December 31, 2019$22 $866 $3,883 $(23)$4,748 
Net income303 303 
Dividends declared:
Preferred stock ($0.38/share)0 
Balance at March 31, 2020$22 $866 $4,186 $(23)$5,051 
See Notes to Condensed Financial Statements.


26


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 holding company, and its consolidated subsidiaries and VIEs. Sempra Energy’s business activities are organized under 5 reportable segments, which we discuss in Note 12. All references in these Notes to our reportable segments are not intended to refer to any legal entity with the same or similar name.
We refer to SDG&E and SoCalGas collectively as the California Utilities. Sempra Global is the holding company for our subsidiaries that are not subject to California or Texas utility regulation.
SDG&E
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.
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,” “our,” “us” and “Sempra Energy Consolidated” are to Sempra Energy and its consolidated entities, collectively, unless otherwise indicated by the context. We have eliminated intercompany accounts and transactions within the consolidated financial statements of each reporting entity.
Throughout these Notes, 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 Financial Statements and related Notes of SDG&E; and
the Condensed Financial Statements and related Notes of SoCalGas.
We have prepared our Condensed Consolidated Financial Statements in conformity with U.S. GAAP and in accordance with the interim-period-reporting requirements of Form 10-Q and applicable rules of the SEC. The financial statements reflect all adjustments that are necessary for a fair presentation of the results for the interim periods. These adjustments are only of a normal, recurring nature. Results of operations for interim periods are not necessarily indicative of results for the entire year or for any other period. We evaluated events and transactions that occurred after March 31, 2021 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.
All December 31, 2020 balance sheet information in the Condensed Consolidated Financial Statements has been derived from our audited 2020 Consolidated Financial Statements in the Annual Report. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the interim-period-reporting provisions of U.S. GAAP and the SEC.
We describe our significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report and the impact of the adoption of new accounting standards on those policies in Note 2 below. We follow the same accounting policies for interim period reporting purposes.
You should read the information in this report in conjunction with the Annual Report.
27


Discontinued Operations
In January 2019, our board of directors approved a plan to sell our South American businesses based on our strategic focus on North America. We determined that these businesses, which previously constituted the Sempra South American Utilities segment, and certain activities associated with these businesses, met the held-for-sale criteria. These businesses are presented as discontinued operations, which we discuss further in Note 5. We completed the sales of our South American businesses in the second quarter of 2020. 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 revenue recognition and the effects of regulation at our utilities in Notes 3 and 4 below and in Notes 1, 3 and 4 of the Notes to Consolidated Financial Statements in the Annual Report.
Our Sempra Texas Utilities segment is comprised of our equity method investments in holding companies that own interests in regulated electric transmission and distribution utilities in Texas.
Our Sempra Mexico segment includes the operating companies of our subsidiary, IEnova, as well as certain holding companies and risk management activity. Certain business activities at IEnova are regulated by the CRE 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 Sempra Energy’s Condensed Consolidated Balance Sheets to the sum of such amounts reported on Sempra Energy’s 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,
 20212020
Cash and cash equivalents$725 $960 
Restricted cash, current38 22 
Restricted cash, noncurrent15 
Total cash, cash equivalents and restricted cash on the Condensed Consolidated Statements of Cash Flows$778 $985 

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 were 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 determine 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 for residential, small business and medium-large commercial and industrial customers (which represent the entire customer population, except for SoCalGas’ noncore customers), waiving late payment fees, and offering flexible payment plans to customers experiencing difficulty paying their electric or gas bills. As we discuss in Note 4, the CPUC authorized each of the California Utilities to track and request recovery of incremental costs, including uncollectible expenses, associated with complying with customer protection measures implemented by the CPUC related to the COVID-19 pandemic.
28


In connection with a separate CPUC decision addressing service disconnections, the California Utilities each established a two-way balancing account to record the uncollectible expenses associated with customers’ inability to pay their electric or gas bills, including as a result of the relief from outstanding utility bill amounts provided under the AMP. We discuss the AMP in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.
The California Utilities have recorded increases in their allowances for expected credit losses primarily related to expected forgiveness of outstanding utility bill amounts, including increases due to the effect of the COVID-19 pandemic, for participating, income-qualified residential customers eligible under the AMP. Our businesses will continue to monitor macroeconomic factors and customer payment patterns when evaluating their allowances for credit losses, which may increase significantly 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. The California Utilities record changes in the allowances for credit losses related to Accounts Receivable – Trade in regulatory accounts.
TRADE AND OTHER ACCOUNTS RECEIVABLE – ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
20212020
Sempra Energy Consolidated:
Allowances for credit losses at January 1$138 $29 
Incremental allowance upon adoption of ASU 2016-13— 
Provisions for expected credit losses43 
Write-offs(5)(4)
Recoveries
Allowances for credit losses at March 31(1)
$176 $33 
SDG&E:
Allowances for credit losses at January 1$69 $14 
Provisions for expected credit losses15 
Write-offs(3)(3)
Recoveries
Allowances for credit losses at March 31(2)
$81 $15 
SoCalGas:
Allowances for credit losses at January 1$68 $15 
Provisions for expected credit losses28 
Write-offs(2)(1)
Allowances for credit losses at March 31(3)
$94 $17 
(1)    At March 31, 2021, includes $146 million in Accounts Receivable – Trade, Net and $30 million in Accounts Receivable – Other, Net.
(2)    At March 31, 2021, includes $66 million in Accounts Receivable – Trade, Net and $15 million in Accounts Receivable – Other, Net.
(3)    At March 31, 2021, includes $79 million in Accounts Receivable – Trade, Net and $15 million in Accounts Receivable – Other, Net.

For amounts due from unconsolidated affiliates, 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.
29


As we discuss below in “Transactions with Affiliates,” Sempra Energy has loans due from unconsolidated affiliates with varying tenors, interest rates and currencies. We provide below the allowances and 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
20212020
Allowances for credit losses at January 1$$
Allowance established upon adoption of ASU 2016-13
Provisions for expected credit losses(2)
Allowances for credit losses at March 31(1)
$$
(1)    At March 31, 2021, $1 million is included in Due from Unconsolidated Affiliates – Noncurrent.

As we discuss in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report, Sempra Energy provided guarantees for the benefit of Cameron LNG JV related to its debt obligations for a maximum aggregate amount of $4.0 billion. In March 2021, Cameron LNG JV reached financial completion of the three-train liquefaction project, which terminated the guarantees. There are no longer any expected credit losses related to these terminated guarantees.

INVENTORIES
The components of inventories are as follows:
INVENTORY BALANCES
(Dollars in millions)
 Natural gasLNGMaterials and suppliesTotal
 March 31, 2021 December 31, 2020March 31, 2021 December 31, 2020March 31, 2021 December 31, 2020March 31, 2021 December 31, 2020
Sempra Energy Consolidated$73 $118 $$$193 $183 $274 $308 
SDG&E122 104 122 104 
SoCalGas23 94 58 59 81 153 

WILDFIRE FUND
In July 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 based on allegations that the legislation violates federal law. That court dismissed the complaint and the plaintiffs have petitioned the U.S. Court of Appeals for the Ninth Circuit to review the dismissal.

CAPITALIZED FINANCING COSTS
Capitalized financing costs include capitalized interest costs and AFUDC related to both debt and equity financing of construction projects. We capitalize interest costs incurred to finance capital projects and interest at equity method investments that have not commenced planned principal operations.
The table below summarizes capitalized interest and AFUDC.
CAPITALIZED FINANCING COSTS
(Dollars in millions)
Three months ended March 31,
 20212020
Sempra Energy Consolidated$59 $48 
SDG&E30 27 
SoCalGas16 11 

30


OTHER INTANGIBLE ASSETS
Other Intangible Assets included on the Sempra Energy Condensed Consolidated Balance Sheets are as follows:
OTHER INTANGIBLE ASSETS
(Dollars in millions)
Amortization period (years)March 31,
2021
December 31,
2020
Renewable energy transmission and consumption permits15 to 19$169 $169 
O&M agreement2366 66 
PPA14198 
Other10 to indefinite15 15 
448 250 
Less accumulated amortization:
Renewable energy transmission and consumption permits(34)(32)
O&M agreement(9)(9)
Other(8)(7)
(51)(48)
$397 $202 

Other Intangible Assets at March 31, 2021 primarily includes:
renewable energy transmission and consumption permits previously granted by the CRE at the Ventika wind power generation facilities, Don Diego Solar and Border Solar;
a favorable O&M agreement acquired in connection with the acquisition of Ductos y Energéticos del Norte, S. de R.L. de C.V.; and
an intangible asset of $198 million, representing the relative fair value of the PPA that was acquired in connection with the acquisition of ESJ in March 2021.
Intangible assets subject to amortization are amortized over their estimated useful lives. Amortization expense for intangible assets was $3 million in the three months ended March 31, 2021 and 2020. We estimate the remaining amortization expense in 2021 to be $20 million, including $11 million recorded against revenues, and amortization expense of $26 million per year for the next four years, including $14 million recorded against revenues.

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 indirectly Sempra Energy, is the primary beneficiary.
SDG&E has agreements under which it purchases power generated by facilities for which it supplies all of the natural gas to fuel the power plant (i.e., tolling agreements). SDG&E’s obligation to absorb natural gas costs may be a significant variable interest. In addition, SDG&E has the power to direct the dispatch of electricity generated by these facilities. Based on our analysis, the ability to direct the dispatch of electricity may have the most significant impact on the economic performance of the entity owning the generating facility because of the associated exposure to the cost of natural gas, which fuels the plants, and the value of electricity produced. To the extent that SDG&E (1) is obligated to purchase and provide fuel to operate the facility, (2) has the power to direct the dispatch, and (3) purchases all of the output from the facility for a substantial portion of the facility’s useful
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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 it considers 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 SDG&E determines that it is the primary beneficiary, SDG&E and Sempra Energy consolidate the entity that owns the facility as a VIE.
In addition to tolling agreements, other variable interests involve various elements of fuel and power costs, and other components of cash flows expected to be paid to or received by our counterparties. In most of these cases, the expectation of variability is not substantial, and SDG&E generally does not have the power to direct activities, including the operation and maintenance activities of the generating facility, that most significantly impact the economic performance of the other VIEs. If our ongoing evaluation of these VIEs were to conclude that SDG&E becomes the primary beneficiary and consolidation by SDG&E becomes necessary, the effects could be significant to the financial position and liquidity of SDG&E and Sempra Energy.
SDG&E determined that none of its PPAs and tolling agreements resulted in SDG&E being the primary beneficiary of a VIE at March 31, 2021 and December 31, 2020. PPAs and tolling agreements that relate to SDG&E’s involvement with VIEs are primarily accounted for as finance leases. The carrying amounts of the assets and liabilities under these contracts are included in PP&E and finance lease liabilities with balances of $1,233 million and $1,237 million at March 31, 2021 and December 31, 2020, respectively. SDG&E recovers costs incurred on PPAs, tolling agreements and other variable interests through CPUC-approved long-term power procurement plans. SDG&E has no residual interest in the respective entities and has not provided or guaranteed any debt or equity support, liquidity arrangements, performance guarantees or other commitments associated with these contracts other than the purchase commitments described in Note 16 of the Notes to Consolidated Financial Statements in the Annual Report. As a result, SDG&E’s potential exposure to loss from its variable interest in these VIEs is not significant.
Sempra Texas Utilities
Our 100% interest in Oncor Holdings is a VIE that owns an 80.25% interest in Oncor. Sempra Energy is not the primary beneficiary of the VIE because of the structural and operational ring-fencing and governance measures in place that prevent us from having the power to direct the significant activities of Oncor Holdings. As a result, we do not consolidate Oncor Holdings and instead account for our ownership interest as an equity method investment. See Note 6 of the Notes to Consolidated Financial Statements in the Annual Report for additional information about our equity method investment in Oncor Holdings and restrictions on our ability to influence its activities. Our maximum exposure to loss, which fluctuates over time, from our interest in Oncor Holdings does not exceed the carrying value of our investment, which was $12,553 million at March 31, 2021 and $12,440 million at December 31, 2020.
Sempra LNG
Cameron LNG JV
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, including LNG production and operation and maintenance activities at the liquefaction facility. 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 $513 million at March 31, 2021 and $433 million at December 31, 2020. Our maximum exposure to loss, which fluctuates over time, includes the carrying value of our investment.
CFIN
As we discuss in Note 6, in July 2020, Sempra Energy entered into a Support Agreement for the benefit of CFIN, which is a VIE. Since we do not have the power to direct the most significant activities of the VIE, we are not the primary beneficiary. The conditional obligations of the Support Agreement represent a variable interest that we measure at fair value on a recurring basis (see Note 9). Sempra Energy’s maximum exposure to loss under the terms of the Support Agreement is $979 million.
ECA LNG Phase 1
ECA LNG Phase 1 is a VIE because its total equity at risk is not sufficient to finance its activities without additional subordinated financial support. We expect that ECA LNG Phase 1 will require future capital contributions or other financial support to finance the construction of the facility. Sempra Energy is the primary beneficiary of the VIE because we have the power to direct the development activities related to the construction of the liquefaction facility, which we consider to be the most significant activities of ECA LNG Phase 1 during the construction phase of its natural gas liquefaction export project. As a result, we consolidate ECA LNG Phase 1. Sempra LNG consolidated $403 million and $207 million of assets at March 31, 2021 and
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December 31, 2020, respectively, consisting primarily of PP&E and cash, attributable to ECA LNG Phase 1 that could be used only to settle obligations of the VIE and that are not available to settle obligations of Sempra Energy, and $234 million and $49 million of liabilities at March 31, 2021 and December 31, 2020, respectively, consisting primarily of long-term debt and accounts payable attributable to ECA LNG Phase 1 for which creditors do not have recourse to the general credit of Sempra Energy. Additionally, as we discuss in Note 7 of the Notes to Consolidated Financial Statements in the Annual Report, Sempra Energy, IEnova and TOTAL SE have provided guarantees for the loan facility supporting construction of the liquefaction facility based on their respective proportionate ownership interest in ECA LNG Phase 1.

PENSION AND OTHER POSTRETIREMENT BENEFITS
Settlement Accounting for Lump Sum Payments
In the three months ended March 31, 2021 and 2020, Sempra Energy recorded settlement charges of $7 million and $5 million, respectively, 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 benefitsOther postretirement benefits
 Three months ended March 31,
 2021202020212020
Service cost$37 $33 $$
Interest cost28 32 
Expected return on assets(43)(42)(15)(13)
Amortization of:    
Prior service cost (credit)(1)(1)
Actuarial loss (gain)11 (2)(3)
Settlement charges
Net periodic benefit cost (credit)43 40 (5)(4)
Regulatory adjustments(29)(28)
Total expense recognized$14 $12 $$

NET PERIODIC BENEFIT COST – SDG&E
(Dollars in millions)
 Pension benefitsOther postretirement benefits
 Three months ended March 31,
 2021202020212020
Service cost$$$$
Interest cost
Expected return on assets(12)(13)(2)(3)
Amortization of:  
Prior service cost
Actuarial loss (gain)(1)
Net periodic benefit cost (credit)(1)
Regulatory adjustments(2)(3)
Total expense recognized$$$$
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NET PERIODIC BENEFIT COST – SOCALGAS
(Dollars in millions)
 Pension benefitsOther postretirement benefits
 Three months ended March 31,
 2021202020212020
Service cost$25 $22 $$
Interest cost20 22 
Expected return on assets(28)(27)(12)(10)
Amortization of:   
Prior service cost (credit)(1)
Actuarial loss (gain)(1)(2)
Net periodic benefit cost (credit)28 25 (5)(3)
Regulatory adjustments(27)(25)
Total expense recognized$$$$

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 $494 million and $512 million at March 31, 2021 and December 31, 2020, respectively.

SEMPRA ENERGY EARNINGS PER COMMON SHARE
Basic EPS is calculated by dividing earnings attributable to common shares (from both continuing and discontinued operations) by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.
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EARNINGS PER COMMON SHARE COMPUTATIONS
(Dollars in millions, except per share amounts; shares in thousands)
 Three months ended March 31,
 20212020
Numerator for continuing operations:  
Income from continuing operations, net of income tax$928 $867 
Earnings attributable to noncontrolling interests(33)(143)
Preferred dividends(21)(36)
Earnings from continuing operations attributable to common shares for basic EPS874 688 
Add back dividends for dilutive mandatory convertible preferred stock(1)
10 36 
Earnings from continuing operations attributable to common shares for diluted EPS$884 $724 
Numerator for discontinued operations:
Income from discontinued operations, net of income tax$$80 
Earnings attributable to noncontrolling interests(8)
Earnings from discontinued operations attributable to common shares$$72 
Numerator for earnings:
Earnings attributable to common shares for basic EPS$874 $760 
Add back dividends for dilutive mandatory convertible preferred stock(1)
10 36 
Earnings attributable to common shares for diluted EPS$884 $796 
Denominator:  
Weighted-average common shares outstanding for basic EPS(2)
300,905 292,790 
Dilutive effect of stock options and RSUs(3)
887 1,304 
Dilutive effect of mandatory convertible preferred stock6,666 19,831 
Weighted-average common shares outstanding for diluted EPS308,458 313,925 
Basic EPS:
Earnings from continuing operations$2.91 $2.35 
Earnings from discontinued operations$$0.25 
Earnings$2.91 $2.60 
Diluted EPS:  
Earnings from continuing operations$2.87 $2.30 
Earnings from discontinued operations$$0.23 
Earnings$2.87 $2.53 
(1)    In the three months ended March 31, 2021 and 2020, due to the dilutive effect of mandatory convertible preferred stock, the numerator used to calculate diluted EPS includes an add-back of dividends declared on our mandatory convertible preferred stock in those quarters.
(2)    Includes 460 and 542 average fully vested RSUs held in our Deferred Compensation Plan for the three months ended March 31, 2021 and 2020, respectively. These fully vested RSUs are included in weighted-average common shares outstanding for basic EPS because there are no conditions under which the corresponding shares will not be issued.
(3)    Due to market fluctuations of both Sempra Energy common stock and the comparative indices used to determine the vesting percentage of our total shareholder return performance-based RSUs, which we discuss in Note 10 of the Notes to Consolidated Financial Statements in the Annual Report, dilutive RSUs may vary widely from period-to-period.

The potentially dilutive impact from stock options and RSUs is calculated under the treasury stock method. Under this method, proceeds based on the exercise price and unearned compensation are assumed to be used to repurchase shares on the open market at the average market price for the period, reducing the number of potential new shares to be issued and sometimes causing an antidilutive effect. The computation of diluted EPS for the three months ended March 31, 2021 and 2020 excludes 428,875 and 254,257 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.
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The potentially dilutive impact from mandatory convertible preferred stock is calculated under the if-converted method until the mandatory conversion date. After the mandatory conversion date, the converted shares are included in weighted-average common shares outstanding for basic EPS. As we discuss below in “Shareholders’ Equity and Noncontrolling Interests,” we converted our series A preferred stock into common stock on January 15, 2021. There were no antidilutive shares to exclude from the computation of diluted EPS in the three months ended March 31, 2021 or 2020.
In January 2021, pursuant to our Sempra Energy share-based compensation plans, the Compensation and Talent Committee of Sempra Energy’s board of directors granted 222,620 nonqualified stock options that vest over a three-year period, 319,027 performance-based RSUs and 132,388 service-based RSUs.
We discuss share-based compensation plans and related awards and the terms and conditions of Sempra Energy’s equity securities further in Notes 10, 13 and 14 of the Notes to Consolidated Financial Statements in the Annual Report.

COMPREHENSIVE INCOME
The following tables present the changes in AOCI by component and amounts reclassified out of AOCI to net income, excluding amounts attributable to NCI.
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1)
(Dollars in millions)
 Foreign
currency
translation
adjustments
Financial
instruments
Pension
and other
postretirement
benefits
Total
accumulated other
comprehensive
income (loss)
 Three months ended March 31, 2021 and 2020
Sempra Energy Consolidated(2):
Balance at December 31, 2020$(64)$(331)$(105)$(500)
OCI before reclassifications(5)73 75 
Amounts reclassified from AOCI19 26 
Net OCI(5)92 14 101 
Balance at March 31, 2021$(69)$(239)$(91)$(399)
   
Balance at December 31, 2019$(607)$(215)$(117)$(939)
OCI before reclassifications(138)(154)16 (276)
Amounts reclassified from AOCI19 25 
Net OCI(138)(135)22 (251)
Balance at March 31, 2020$(745)$(350)$(95)$(1,190)
SDG&E:
Balance at December 31, 2020 and March 31, 2021$(10)$(10)
Balance at December 31, 2019 and March 31, 2020$(16)$(16)
SoCalGas:
Balance at December 31, 2020 and March 31, 2021$(13)$(18)$(31)
Balance at December 31, 2019 and March 31, 2020$(13)$(10)$(23)
(1)    All amounts are net of income tax, if subject to tax, and exclude NCI.
(2)    Includes discontinued operations in 2020.
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RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
Details about accumulated other
comprehensive income (loss) components
Amounts reclassified
from accumulated other
comprehensive income (loss)
 Affected line item on Condensed
Consolidated Statements of Operations
 Three months ended March 31,  
 20212020 
Sempra Energy Consolidated:   
Financial instruments:   
Interest rate instruments$$Interest Expense
Interest rate instruments19 Equity Earnings
Foreign exchange instruments(2)Revenues: Energy-Related Businesses
(2)Other Income (Expense), Net
Interest rate and foreign exchange instruments41 Other Income (Expense), Net
Foreign exchange instruments(2)Equity Earnings
Total before income tax29 39  
 (8)(12)Income Tax (Expense) Benefit
Net of income tax21 27  
 (2)(8)Earnings Attributable to Noncontrolling Interests
 $19 $19  
Pension and other postretirement benefits(1):
   
Amortization of actuarial loss$$Other Income (Expense), Net
Amortization of prior service costOther Income (Expense), Net
Settlement chargesOther Income (Expense), Net
Total before income tax10 
 (3)(2)Income Tax (Expense) Benefit
Net of income tax$$ 
Total reclassifications for the period, net of tax$26 $25  
(1)    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, 2021 and 2020, reclassifications out of AOCI to net income were negligible for SDG&E and SoCalGas.

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SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS
Sempra Energy Series A Preferred Stock
On January 15, 2021, we converted 17,250,000 shares of series A preferred stock into 13,781,025 shares of our common stock based on a conversion rate of 0.7989 shares of our common stock for each issued and outstanding share of series A preferred stock. As a consequence, no shares of series A preferred stock were outstanding after January 15, 2021 and the 17,250,000 shares that were formerly series A preferred stock have returned to the status of authorized and unissued shares of preferred stock.
Other Noncontrolling Interests
Sempra Mexico
In April 2021, we launched an offer to acquire up to 100% of the publicly held shares of IEnova in exchange for shares of our common stock at an exchange ratio of 0.0323 shares of our common stock for each one IEnova ordinary share. We expect to complete this transaction in the second quarter of 2021, subject to customary closing conditions.
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 a terminal for the receipt, storage and delivery of liquid fuels. In March 2021, IEnova entered into an agreement to acquire the remaining 17.5% interest in ICM Ventures Holdings B.V. for $6 million, subject to adjustments. We expect to complete this transaction in the second half of 2021, subject to customary closing conditions.
Sempra LNG
In March 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.
The following table provides information about NCI held by others in subsidiaries or entities consolidated by us and recorded in Other Noncontrolling Interests in Total Equity on Sempra Energy’s Condensed Consolidated Balance Sheets.
OTHER NONCONTROLLING INTERESTS
(Dollars in millions) 
 Percent ownership held by noncontrolling interests Equity held by
noncontrolling interests
 March 31,
2021
December 31,
2020
March 31,
2021
December 31,
2020
Sempra Mexico:    
IEnova29.8 %29.8 %$1,534 $1,487 
ICM Ventures Holdings B.V.17.5 17.5 
Sempra LNG:
ECA LNG Phase 129.0 29.0 48 46 
Parent and other:
PXiSE Energy Solutions, LLC20.0 20.0 
Total Sempra Energy  $1,589 $1,541 

TRANSACTIONS WITH AFFILIATES
We summarize amounts due from and to unconsolidated affiliates at Sempra Energy Consolidated, SDG&E and SoCalGas in the following table.
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AMOUNTS DUE FROM (TO) UNCONSOLIDATED AFFILIATES
(Dollars in millions)
 March 31,
2021
December 31,
2020
Sempra Energy Consolidated:  
Total due from various unconsolidated affiliates – current$26 $20 
Sempra Mexico(1):
ESJ – Note due December 31, 2022, net of negligible allowance for credit losses at December
31, 2020(2)
$$85 
IMG JV – Note due March 15, 2022, net of allowance for credit losses of $1 and $3 at
March 31, 2021 and December 31, 2020, respectively(3)
674 695 
Total due from unconsolidated affiliates – noncurrent$674 $780 
Sempra Mexico – TAG Pipelines Norte, S. de. R.L. de C.V. – Note due December 20, 2021(1)(4)
$(41)$(41)
Various affiliates(1)(4)
Total due to various unconsolidated affiliates – current$(42)$(45)
Sempra Mexico(1)(5):
TAG Pipelines Norte, S. de. R.L. de C.V.:
5.5% Note due January 9, 2024$(69)$(68)
5.5% Note due January 14, 2025(20)
TAG JV – 5.74% Note due December 17, 2029(169)(166)
Total due to unconsolidated affiliates – noncurrent$(258)$(234)
SDG&E:  
Sempra Energy$(44)$(38)
SoCalGas(24)(21)
Various affiliates(11)(5)
Total due to unconsolidated affiliates – current$(79)$(64)
Income taxes due to Sempra Energy(6)
$(18)$
SoCalGas:  
SDG&E$24 $21 
Various affiliates
Total due from unconsolidated affiliates – current$25 $22 
Sempra Energy$(41)$(31)
Pacific Enterprises(25)
Various affiliates(1)
Total due to unconsolidated affiliates – current$(67)$(31)
Income taxes due to Sempra Energy(6)
$(145)$(37)
(1)    Amounts include principal balances plus accumulated interest outstanding.
(2)    U.S. dollar-denominated loan at a variable interest rate based on 1-month LIBOR plus 196 bps (2.11% at December 31, 2020). At December 31, 2020, $1 million of accrued interest receivable is included in Due from Unconsolidated Affiliates – Current. In March 2021, IEnova acquired the 50% equity interest in ESJ that it did not already own and ESJ became a wholly owned, consolidated subsidiary, resulting in the elimination of this note receivable.
(3)    Mexican peso-denominated revolving line of credit for up to 14.2 billion Mexican pesos or approximately $693 million U.S. dollar-equivalent at March 31, 2021, at a variable interest rate based on the 91-day Interbank Equilibrium Interest Rate plus 220 bps (6.45% at March 31, 2021), to finance construction of a natural gas marine pipeline. At both March 31, 2021 and December 31, 2020, $2 million of accrued interest receivable is included in Due from Unconsolidated Affiliates – Current. At March 31, 2021, we classified this revolving line of credit as noncurrent because we expect to extend the maturity date on a long-term basis prior to its stated maturity date.
(4)    U.S. dollar-denominated loan at a variable interest rate based on 6-month LIBOR plus 290 bps (3.11% at March 31, 2021).
(5)     U.S. dollar-denominated loan at a fixed interest rate.
(6)    SDG&E and SoCalGas are included in the consolidated income tax return of Sempra Energy and their respective income tax expense is computed as an amount equal to that which would result from each company having always filed a separate return.

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The following table summarizes income statement information from unconsolidated affiliates.
INCOME STATEMENT IMPACT FROM UNCONSOLIDATED AFFILIATES  
(Dollars in millions)  
 Three months ended March 31,
 20212020
Sempra Energy Consolidated  
Revenues$$12 
Cost of sales11 11 
Interest income15 17 
Interest expense
SDG&E  
Revenues$$
Cost of sales28 17 
SoCalGas
Revenues$25 $18 
Cost of sales
Guarantees
Sempra Energy provided guarantees related to Cameron LNG JV, which were terminated in March 2021, and CFIN, which remains outstanding, as we discuss in Note 6 below and in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

OTHER INCOME (EXPENSE), NET
Other income (expense), net, consists of the following:
OTHER INCOME (EXPENSE), NET  
(Dollars in millions)  
 Three months ended March 31,
 20212020
Sempra Energy Consolidated:  
Allowance for equity funds used during construction$38 $31 
Investment gains (losses)(1)
(37)
Losses on interest rate and foreign exchange instruments, net(30)(153)
Foreign currency transaction losses, net(2)
(19)(123)
Non-service component of net periodic benefit credit29 26 
Interest on regulatory balancing accounts, net
Sundry, net
Total$35 $(254)
SDG&E:  
Allowance for equity funds used during construction$23 $21 
Non-service component of net periodic benefit credit
Interest on regulatory balancing accounts, net
Sundry, net
Total$35 $31 
SoCalGas:  
Allowance for equity funds used during construction$12 $
Non-service component of net periodic benefit credit28 25 
Sundry, net(1)(3)
Total$39 $30 
(1)    Represents investment gains (losses) on dedicated assets in support of our executive retirement and deferred compensation plans. These amounts are 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 $23 million and $149 million in the three months ended March 31, 2021 and 2020, respectively, from translation to U.S. dollars of a Mexican peso-denominated loan to IMG JV, which are offset by corresponding amounts included in Equity Earnings on the Condensed Consolidated Statements of Operations.

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INCOME TAXES
We provide our calculations of ETRs in the following table.
INCOME TAX EXPENSE (BENEFIT) AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
Three months ended March 31,
20212020
Sempra Energy Consolidated:
Income tax expense (benefit) from continuing operations$158 $(207)
Income from continuing operations before income taxes
and equity earnings
$768 $397 
Equity earnings (losses), before income tax(1)
135 (43)
Pretax income$903 $354 
Effective income tax rate18 %(58)%
SDG&E:
Income tax expense$45 $58 
Income before income taxes$257 $320 
Effective income tax rate18 %18 %
SoCalGas:
Income tax expense$94 $52 
Income before income taxes$501 $355 
Effective income tax rate19 %15 %
(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
the equity portion of AFUDC, which is non-taxable
a portion of the cost of removal of utility plant assets
utility self-developed software expenditures
depreciation on a certain portion of utility plant assets
state income taxes
The AFUDC related to equity recorded for regulated construction projects at Sempra Mexico has similar flow-through treatment.
We record income tax (expense) benefit from the transactional effects of foreign currency and inflation. Through the first quarter of 2021, such effects are offset 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.
Discontinued Operations
In January 2019, our board of directors approved a plan to sell our South American businesses. We completed the sales in the second quarter of 2020, as we discuss in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report. Because of our decision to sell our South American businesses, we no longer asserted indefinite reinvestment of basis differences related to these businesses. Accordingly, in the three months ended March 31, 2020, we recorded a $7 million income tax benefit from changes in outside basis differences in our discontinued operations in South America.
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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 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”: ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. In addition to other changes, this standard amends ASC 470-20, “Debt with Conversion and Other Options,” by removing the accounting models for instruments with beneficial conversion and cash conversion features. The standard also amends ASC 260, “Earnings Per Share,” as follows:
requires an entity to apply the if-converted method when calculating diluted EPS for convertible instruments and no longer use the treasury stock method, which was previously allowed for certain convertible instruments;
requires an entity to include the effect of potential share settlement in the diluted EPS calculation when an instrument may be settled in cash or shares, and no longer allows an entity to rebut the presumption of share settlement if it has a history or policy of cash settlement;
requires an entity to include equity-classified convertible preferred stock that contains down-round features whereby, if the down-round feature is triggered, its effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS;
clarifies that the average market price should be used to calculate the diluted EPS denominator when the exercise price or the number of shares that may be issued is variable, except for certain contingently issuable shares; and
clarifies that the weighted-average share count from each quarter should be used when calculating the year-to-date weighted-average share count.
For public entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods therein, with early adoption permitted for fiscal years beginning after December 15, 2020. An entity can use either a full or modified retrospective approach to adopt ASU 2020-06 and must disclose, in the period of adoption, EPS transition information about the effect of the change on affected per-share amounts. We plan to adopt the standard on January 1, 2022 and are currently evaluating the effect of the standard on our ongoing financial reporting.
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.
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The following table disaggregates our revenues from contracts with customers by major service line and market and provides a reconciliation to total revenues by segment. The majority of our revenue is recognized over time.
DISAGGREGATED REVENUES
(Dollars in millions)
SDG&ESoCalGasSempra MexicoSempra LNGConsolidating adjustments and Parent and otherSempra Energy Consolidated
Three months ended March 31, 2021
By major service line:
Utilities$1,216 $1,657 $27 $$(27)$2,873 
Energy-related businesses281 68 (81)268 
Revenues from contracts with customers$1,216 $1,657 $308 $68 $(108)$3,141 
By market:
Gas$273 $1,657 $224 $67 $(103)$2,118 
Electric943 84 (5)1,023 
Revenues from contracts with customers$1,216 $1,657 $308 $68 $(108)$3,141 
Revenues from contracts with customers$1,216 $1,657 $308 $68 $(108)$3,141 
Utilities regulatory revenues121 (149)(28)
Other revenues59 128 (41)146 
Total revenues$1,337 $1,508 $367 $196 $(149)$3,259 
 Three months ended March 31, 2020
By major service line:
Utilities$1,259 $1,544 $20 $$(19)$2,804 
Energy-related businesses198 12 (7)203 
Revenues from contracts with customers$1,259 $1,544 $218 $12 $(26)$3,007 
By market:
Gas$254 $1,544 $147 $11 $(23)$1,933 
Electric1,005 71 (3)1,074 
Revenues from contracts with customers$1,259 $1,544 $218 $12 $(26)$3,007 
Revenues from contracts with customers$1,259 $1,544 $218 $12 $(26)$3,007 
Utilities regulatory revenues10 (149)(139)
Other revenues91 111 (41)161 
Total revenues$1,269 $1,395 $309 $123 $(67)$3,029 
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Remaining Performance Obligations
For contracts greater than one year, at March 31, 2021, 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, 2021.
REMAINING PERFORMANCE OBLIGATIONS(1)
(Dollars in millions)
Sempra Energy ConsolidatedSDG&E
2021 (excluding first three months of 2021)$266 $
2022406 
2023407 
2024348 
2025351 
Thereafter4,391 67 
Total revenues to be recognized$6,169 $86 
(1)    Excludes intercompany transactions.
Contract Liabilities from Revenues from Contracts with Customers
Activities within Sempra Energy’s and SDG&E’s contract liabilities are presented below. There were no contract liabilities at SoCalGas in the three months ended March 31, 2021 or 2020.
CONTRACT LIABILITIES
(Dollars in millions)
20212020
Sempra Energy Consolidated:
Contract liabilities at January 1$(207)$(163)
Revenue from performance obligations satisfied during reporting period25 
Contract liabilities at March 31(1)
$(182)$(162)
SDG&E:
Contract liabilities at January 1$(87)$(91)
Revenue from performance obligations satisfied during reporting period
Contract liabilities at March 31(1)
$(86)$(90)
(1)     At March 31, 2021, includes $28 million and $4 million in Other Current Liabilities and $154 million and $82 million in Deferred Credits and Other on the Sempra Energy and SDG&E Condensed Consolidated Balance Sheets, respectively.
Receivables from Revenues from Contracts with Customers
The table below shows receivable balances associated with revenues from contracts with customers on the Condensed Consolidated Balance Sheets.
RECEIVABLES FROM REVENUES FROM CONTRACTS WITH CUSTOMERS
(Dollars in millions)
March 31, 2021December 31, 2020
Sempra Energy Consolidated:
Accounts receivable – trade, net$1,484 $1,447 
Accounts receivable – other, net12 
Due from unconsolidated affiliates – current(1)
Total$1,495 $1,462 
SDG&E:
Accounts receivable – trade, net$622 $573 
Accounts receivable – other, net
Due from unconsolidated affiliates – current(1)
Total$633 $583 
SoCalGas:
Accounts receivable – trade, net$772 $786 
Accounts receivable – other, net
Total$773 $790 
(1)     Amount is presented net of amounts due to unconsolidated affiliates on the Condensed Consolidated Balance Sheets, when right of offset exists.
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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,
2021
December 31,
2020
 
SDG&E:  
Fixed-price contracts and other derivatives$(49)$(53)
Deferred income taxes recoverable in rates48 22 
Pension and other postretirement benefit plan obligations52 50 
Removal obligations(2,159)(2,121)
Environmental costs56 56 
Sunrise Powerlink fire mitigation123 121 
Regulatory balancing accounts(1)(2)
Commodity – electric108 72 
Gas transportation35 
Safety and reliability64 67 
Public purpose programs(147)(158)
2019 GRC retroactive impacts42 56 
Other balancing accounts285 233 
Other regulatory assets, net(2)
85 72 
Total SDG&E(1,487)(1,548)
SoCalGas:  
Deferred income taxes refundable in rates(15)(82)
Pension and other postretirement benefit plan obligations430 417 
Employee benefit costs37 37 
Removal obligations(674)(685)
Environmental costs35 36 
Regulatory balancing accounts(1)(2)
Commodity – gas, including transportation(190)(56)
Safety and reliability331 335 
Public purpose programs(222)(253)
2019 GRC retroactive impacts152 202 
Other balancing accounts(162)(58)
Other regulatory assets, net(2)
108 75 
Total SoCalGas(170)(32)
Sempra Mexico:
Deferred income taxes recoverable in rates80 80 
Total Sempra Energy Consolidated$(1,577)$(1,500)
(1)    At March 31, 2021 and December 31, 2020, the noncurrent portion of regulatory balancing accounts – net undercollected for SDG&E was $202 million and $139 million, respectively, and for SoCalGas was $261 million and $218 million, respectively.
(2)    Includes regulatory assets earning a return.
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CALIFORNIA UTILITIES
COVID-19 Pandemic Protections
In March 2020, the CPUC required that all energy companies under its jurisdiction, including the California Utilities, take action to implement several emergency customer protection measures to support California customers affected by the COVID-19 pandemic for up to one year. The customer protection measures were mandatory for all residential and small business customers. In February 2021, the CPUC extended the customer protection measures through June 2021 and may extend them further.
In April 2021, the CPUC expanded suspending service disconnections to medium-large commercial and industrial customers through June 2021, thereby including the entire customer population except SoCalGas’ noncore customers. The measures are retroactively effective to December 30, 2020 and may be extended.
Each of the California Utilities has been authorized to track and request recovery of incremental costs associated with complying with customer protection measures implemented by the CPUC related to the COVID-19 pandemic, including costs associated with suspending service disconnections and uncollectible expenses that arise from customers’ failure to pay. The California Utilities expect to pursue recovery of tracked costs in rates in a future CPUC proceeding, which recovery is not assured.
Disconnection OIR
In June 2020, the CPUC issued a decision to adopt certain customer protections to reduce residential customer disconnections and improve reconnection processes, including, among other things, imposing limitations on service disconnections, elimination of deposit requirements and reconnection fees, establishment of the AMP that provides successfully participating, income-qualified residential customers with relief from outstanding utility bill amounts, and increased outreach and marketing efforts. The decision allows each of the California Utilities to establish a two-way balancing account to record the uncollectible expenses associated with residential customers’ inability to pay their electric or gas bills, including as a result of the relief from outstanding utility bill amounts provided under the AMP.
CPUC GRC
The CPUC uses GRC proceedings to set rates designed to allow the California Utilities to recover their reasonable operating costs and to provide the opportunity to realize their authorized rates of return on their investments.
In January 2020, the CPUC issued a final decision implementing a four-year GRC cycle for California IOUs and the California Utilities were directed to file a petition for modification to revise their 2019 GRC to add two additional attrition years, resulting in a transitional five-year GRC period (2019-2023). The California Utilities filed the petition in April 2020 which requested authorization of their post-test year ratemaking mechanism for two additional years.
In March 2021, the CPUC issued a proposed decision approving the California Utilities’ request to continue their authorized post-test year mechanisms for 2022 and 2023 using the fourth quarter 2020 Global Insight utility cost forecast. For SDG&E, the proposed decision authorizes revenue requirement increases of $87 million (3.92%) for 2022 and $86 million (3.70%) for 2023 ($91 million and $104 million, respectively, were requested). The proposed decision includes a reduction of $30 million to account for anticipated benefits from SDG&E’s implementation of a new customer information system in the second quarter of 2021. For SoCalGas, the proposed decision authorizes revenue requirement increases of $142 million (4.53%) for 2022 and $130 million (3.97%) for 2023 ($150 million and $131 million, respectively, were requested).
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 previously recorded regulatory liabilities, inclusive of interest, 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 for these 2016 through 2018 balances, at which time the California Utilities released these regulatory liability balances to revenues and regulatory interest.
We provide additional information concerning the 2019 GRC FD in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.
SDG&E
FERC Rate Matters and Cost of Capital
SDG&E files separately with the FERC for its authorized ROE on FERC-regulated electric transmission operations and assets.
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SDG&E’s 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 on SDG&E��s TO5 filing. The settlement agreement provided for a ROE of 10.60%, consisting of a base ROE of 10.10% plus an additional 50 bps for participation in the California ISO. If the FERC issues an order ruling that California IOUs are no longer eligible for the additional California ISO ROE, SDG&E would refund the additional 50 bps of ROE associated with the California ISO as of the refund effective date (June 1, 2019) in this proceeding. The TO5 term is effective June 1, 2019 and shall remain in effect indefinitely, with parties having the annual right to terminate the agreement beginning in 2022. In the first quarter of 2020, SDG&E recorded retroactive revenues of $12 million related to 2019, and additional FERC revenues of $17 million to conclude a rate base matter, net of certain refunds to be paid to CPUC-jurisdictional customers.
SOCALGAS
OSCs – Energy Efficiency and Advocacy
In October 2019, the CPUC issued an OSC to determine whether SoCalGas should be sanctioned for violation of certain CPUC code sections and orders. The OSC stemmed from a small amount of transitional energy efficiency (EE) codes and standards advocacy activities undertaken by SoCalGas in 2018, following a CPUC decision disallowing SoCalGas’ future engagement in EE statewide codes and standards advocacy. We expect a CPUC decision on this OSC in the second quarter of 2021.
In December 2019, the CPUC issued a second OSC to determine whether SoCalGas is entitled to the EE program’s shareholder incentives for codes and standards advocacy in 2016 and 2017, whether its shareholders should bear the costs of those advocacy activities, and to address whether any other remedies are appropriate. The scope of this OSC was later expanded to include EE program years 2014 and 2015, and SoCalGas’ engagement with local governments on proposed reach codes. On April 21, 2021, the assigned Administrative Law Judge issued a Presiding Officer’s Decision (POD) on the second OSC. The POD finds no violations and assesses no fines or penalties but finds that SoCalGas spent ratepayer funds on activities that were not aligned with the CPUC’s intent for EE codes and standards advocacy. The POD orders customer refunds that SoCalGas does not expect to be material (subject to a CPUC audit), precludes SoCalGas from seeking cost recovery associated with EE codes and standards advocacy programs until lifted by the CPUC, and orders certain nonfinancial remedies. The POD is subject to appeal or request for review within 30 days of date of issuance.
Intervenors in these OSCs have suggested the CPUC order various financial and non-financial penalties. If the CPUC were to assess fines or penalties on SoCalGas associated with these OSCs, they could be material.

NOTE 5. ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS
ACQUISITION
We consolidate assets acquired and liabilities assumed as of the purchase date and include earnings from acquisitions in consolidated earnings after the purchase date.
Sempra Mexico
ESJ
On March 19, 2021, IEnova completed the acquisition of Saavi Energía’s 50% equity interest in ESJ for a purchase price of approximately $65 million (net of $14 million of acquired cash and cash equivalents) plus the assumption of $277 million in debt (including $94 million owed from ESJ to IEnova that eliminates upon consolidation). IEnova previously accounted for its 50% interest in ESJ as an equity method investment. This acquisition increased IEnova’s ownership interest in ESJ from 50% to 100%. We accounted for this asset acquisition using a cost accumulation model whereby the cost of the acquisition and carrying value of our previously held interest in ESJ ($34 million) were allocated to assets acquired ($458 million) and liabilities assumed ($345 million) based on their relative fair values. ESJ owns a fully operating wind power generation facility with a nameplate capacity of 155 MW that is fully contracted by SDG&E under a long-term PPA. IEnova recorded a $198 million intangible asset for the relative fair value of the PPA that will be amortized over a period of 14 years against revenues. ESJ is constructing a
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second wind power generation facility with a nameplate capacity of 108 MW that we expect will be completed in late 2021 or in the first quarter of 2022.

DISCONTINUED OPERATIONS
In January 2019, our board of directors approved a plan to sell our South American businesses. We present these businesses, which previously constituted the Sempra South American Utilities segment, and certain activities associated with those businesses as discontinued operations.
Discontinued operations that were previously in the Sempra South American Utilities segment include our former 100% interest in Chilquinta Energía in Chile, our former 83.6% interest in Luz del Sur in Peru and our former interests in 2 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. As we discuss in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report, we completed the sales of our South American businesses in the second quarter of 2020.
Summarized results from discontinued operations were as follows:
DISCONTINUED OPERATIONS
(Dollars in millions) 
 Three months ended March 31, 2020
Revenues$400 
Cost of sales(253)
Operating expenses(46)
Income before income taxes101 
Income tax expense(21)
Income from discontinued operations, net of income tax80 
Earnings attributable to noncontrolling interests(8)
Earnings from discontinued operations attributable to Sempra Energy$72 

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 on the Condensed Consolidated Statements of Operations. See Note 12 for information on equity earnings and losses, both before and net of income tax, by segment. See Note 1 for information on how equity earnings and losses before income taxes are factored into the calculations of our pretax income or loss and ETR.
We provide additional information concerning our equity method investments in Notes 5 and 6 of the Notes to Consolidated Financial Statements in the Annual Report.
SEMPRA TEXAS UTILITIES
Oncor Holdings
We account for our 100% 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, we do not have the power to direct the significant activities of Oncor Holdings and Oncor. See Note 6 of the Notes to Consolidated Financial Statements in the Annual Report for additional information related to the restrictions on our ability to direct the significant activities of Oncor Holdings and Oncor.
In the three months ended March 31, 2021 and 2020, Sempra Energy contributed $50 million and $70 million, respectively, to Oncor Holdings, and Oncor Holdings distributed $77 million and $73 million, respectively, in dividends to Sempra Energy.
We provide summarized income statement information for Oncor Holdings in the following table.
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SUMMARIZED FINANCIAL INFORMATION – ONCOR HOLDINGS
(Dollars in millions)
 Three months ended March 31,
20212020
Operating revenues$1,139 $1,072 
Operating expenses(829)(801)
Income from operations310 271 
Interest expense(102)(101)
Income tax expense(36)(28)
Net income165 129 
Noncontrolling interest held by TTI(33)(26)
Earnings attributable to Sempra Energy132 103 
SEMPRA MEXICO
ESJ
As we discuss in Note 5, on March 19, 2021, IEnova completed the acquisition of the remaining 50% equity interest in ESJ and ESJ became a wholly owned, consolidated subsidiary. Prior to the acquisition date, IEnova owned 50% of ESJ and accounted for its interest as an equity method investment.
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 Sur de Texas-Tuxpan natural gas marine pipeline, which is fully contracted under a 35-year natural gas transportation service contract with the CFE.
As we discuss in “Transactions with Affiliates” in Note 1, IEnova has provided IMG JV with a Mexican peso-denominated revolving line of credit to finance construction of the natural gas marine pipeline. Due to significant fluctuation of the Mexican peso and the impact of this fluctuation on the Mexican peso-denominated loan in the three months ended March 31, 2021 and 2020, equity earnings from IEnova’s investment in IMG JV included $23 million and $149 million, respectively, of foreign currency gains, which are offset by corresponding amounts included in Other Income (Expense), Net, on the Sempra Energy Condensed Consolidated Statement 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,
 20212020
Operating revenues$122 $122 
Operating expenses(27)(33)
Income from operations95 89 
Other income, net58 364 
Interest expense(29)(43)
Income tax (expense) benefit(31)10 
Net income/Earnings93 420 
SEMPRA LNG
Cameron LNG JV
In the three months ended March 31, 2021, Cameron LNG JV distributed to Sempra LNG dividends of $131 million.
In March 2021, Cameron LNG JV reached financial completion of the three-train liquefaction project and Sempra Energy’s related guarantees for a maximum aggregate amount of $4.0 billion were terminated. We discuss these guarantees in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.
Sempra Energy Support Agreement for CFIN
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In July 2020, CFIN entered into a financing arrangement with Cameron LNG JV’s four project owners and received aggregate proceeds of $1.5 billion from two project owners and from external lenders on behalf of the other two project owners (collectively, the affiliate loans), based on their proportionate ownership interest in Cameron LNG JV. CFIN used the proceeds from the affiliate loans to provide a loan to Cameron LNG JV. The affiliate loans mature in 2039. Principal and interest will be paid from Cameron LNG JV’s project cash flows from its three-train natural gas liquefaction facility. Cameron LNG JV used the proceeds from its loan to return equity to its project owners. Sempra Energy used its $753 million share of the proceeds for working capital and other general corporate purposes, including the repayment of indebtedness.
Sempra Energy’s $753 million proportionate share of the affiliate loans, based on its 50.2% ownership interest in Cameron LNG JV, was funded by external lenders comprised of a syndicate of eight banks (the bank debt) to whom Sempra Energy has provided a guarantee pursuant to a Support Agreement. Under the terms of the Support Agreement, Sempra Energy has severally guaranteed repayment of the bank debt plus accrued and unpaid interest if CFIN fails to pay the external lenders. Additionally, the external lenders may exercise an option to put the bank debt to Sempra Energy on every one-year anniversary of the closing of the affiliate loans, as well as upon the occurrence of certain events, including a failure by CFIN to meet its payment obligations under the bank debt. In addition, some or all of the bank debt will be transferred by each external lender back to Sempra Energy on the five-year anniversary of the affiliate loans, unless the external lenders elect to waive their transfer rights six months prior to the five-year anniversary of the affiliate loans. Sempra Energy also has a right to call the bank debt back from, or to refinance the bank debt with, the external lenders at any time. The Support Agreement will terminate upon full repayment of the bank debt, including repayment following an event in which the bank debt is put to Sempra Energy. In exchange for this guarantee, the external lenders will pay a guarantee fee that is based on the credit rating of Sempra Energy’s long-term senior unsecured non-credit enhanced debt rating, which guarantee fee Sempra LNG will recognize as interest income as earned. Sempra Energy’s maximum exposure to loss is the bank debt plus any accrued and unpaid interest and related fees, subject to a liability cap of 130% of the bank debt, or $979 million. We measure the Support Agreement at fair value, net of related guarantee fees, on a recurring basis (see Note 9). At March 31, 2021, the fair value of the Support Agreement was $3 million, of which $7 million is included in Other Current Assets offset by $4 million included in Deferred Credits and Other on the Sempra Energy Condensed Consolidated Balance Sheet.
RBS SEMPRA COMMODITIES
As we discuss in Note 11, in the first quarter of 2020, we recorded a charge of $100 million in Equity Earnings on Sempra Energy’s Condensed Consolidated Statement of Operations representing our share of estimated losses in excess of the carrying value of our equity method investment in RBS Sempra Commodities. At March 31, 2021, $25 million is included in Other Current Liabilities and $75 million is included in Deferred Credits and Other on Sempra Energy’s Condensed Consolidated Balance Sheet.
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NOTE 7. DEBT AND CREDIT FACILITIES
LINES OF CREDIT
Primary U.S. Committed Lines of Credit
At March 31, 2021, Sempra Energy Consolidated had an aggregate capacity of $6.7 billion in four primary U.S. committed lines of credit, which provide liquidity and support commercial paper. The principal terms of these committed lines of credit, which expire in May 2024, are described below and in Note 7 of the Notes to Consolidated Financial Statements in the Annual Report.
PRIMARY U.S. COMMITTED LINES OF CREDIT
(Dollars in millions)
March 31, 2021
Total facility
Commercial paper outstanding(1)
Available unused credit
Sempra Energy(2)
$1,250 $$1,250 
Sempra Global(3)
3,185 (915)2,270 
SDG&E(3)(4)
1,500 (130)1,370 
SoCalGas(4)
750 750 
Total$6,685 $(1,045)$5,640 
(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. Sempra Energy currently does not have a commercial paper program in place.
(2)    The facility also provides for issuance of $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, 2021.
(3)    Commercial paper outstanding is before reductions of a negligible amount of unamortized discount.
(4)    The facility also provides for issuance of $100 million of letters of credit on behalf of the borrowing utility with the amount of borrowings otherwise available under the facility reduced by the amount of outstanding letters of credit. Subject to obtaining commitments from existing or new lenders and satisfaction of other specified conditions, the borrowing utility has the right to increase the letter of credit commitment up to $250 million. No letters of credit were outstanding at March 31, 2021.

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% at the end of each quarter. At March 31, 2021, each entity was in compliance with this ratio and all other financial covenants under its respective credit facility.
Foreign Committed Lines of Credit
Our foreign operations in Mexico have additional committed lines of credit aggregating $1.8 billion at March 31, 2021. The principal terms of these committed lines of credit are described in Note 7 of the Notes to Consolidated Financial Statements in the Annual Report.
FOREIGN COMMITTED LINES OF CREDIT
(U.S. dollar equivalent in millions)
March 31, 2021
Expiration date of facilityTotal facilityAmounts outstandingAvailable unused credit
February 2024$1,500 $(392)$1,108 
September 2021280 (280)
Total$1,780 $(672)$1,108 

In addition to its committed lines of credit, IEnova has a three-year $20 million uncommitted revolving credit facility with Scotiabank Inverlat S.A. (borrowings may be made in either U.S. dollars or Mexican pesos) and a three-year $100 million uncommitted revolving credit facility with The Bank of Nova Scotia (borrowings may only be made in U.S. dollars). Both credit facilities expire in October 2023. At March 31, 2021, available unused credit on these lines was $20 million.
Letters of Credit
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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, 2021, we had approximately $521 million in standby letters of credit outstanding under these agreements.
WEIGHTED-AVERAGE INTEREST RATES
The weighted-average interest rates on the total short-term debt at March 31, 2021 and December 31, 2020 were as follows:
WEIGHTED-AVERAGE INTEREST RATES
March 31, 2021December 31, 2020
Sempra Energy Consolidated0.51 %0.83 %
SDG&E0.18 
SoCalGas0.14 
LONG-TERM DEBT
Sempra Mexico
As we discuss in Note 5, through its acquisition of ESJ, Sempra Mexico assumed a $177 million (net of $6 million in unamortized debt issuance costs) variable rate loan payable to a syndicate of five lenders that matures in June 2033. To moderate exposure to interest rate and associated cash flow variability, ESJ entered into floating-to-fixed rate swaps for 90% of the principal balance, resulting in a fixed rate of 6.13%. The remaining 10% of the principal balance bears interest at 6-month LIBOR plus a margin of 2.63% with an increase of 25 bps every four years (2.89% at March 31, 2021).
Sempra LNG
In December 2020, ECA LNG Phase 1 entered into a five-year loan agreement with a syndicate of nine banks for an aggregate principal amount of up to $1.6 billion. At March 31, 2021 and December 31, 2020, $119 million and $17 million, respectively, was outstanding, with a weighted-average interest rate of 2.91% and 2.82%, respectively. We discuss the details of this agreement in Note 7 of the Notes to Consolidated Financial Statements in the Annual Report.
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 could cause our asset values to fall or our liabilities to increase. Accordingly, our derivative activity summarized below generally represents an impact that is intended to offset associated revenues, expenses, assets or liabilities that are not included in the tables below.
In certain cases, we apply the normal purchase or sale exception to derivative instruments and have other commodity contracts that are not derivatives. These contracts are not recorded at fair value and are therefore excluded from the disclosures below.
In all other cases, we record derivatives at fair value on the Condensed Consolidated Balance Sheets. We have derivatives that are (1) cash flow hedges, (2) fair value hedges, or (3) undesignated. Depending on the applicability of hedge accounting and, for the California Utilities and other operations subject to regulatory accounting, the requirement to pass impacts through to customers, the impact of derivative instruments may be offset in OCI (cash flow hedges), on the balance sheet (regulatory offsets), or recognized in earnings (fair value hedges and undesignated derivatives not subject to rate recovery). We classify cash flows from the principal settlements of cross-currency swaps that hedge exposure related to Mexican peso-denominated debt as financing activities and settlements of other derivative instruments as operating activities on the Condensed Consolidated Statements of Cash Flows.
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HEDGE ACCOUNTING
We may designate a derivative as a cash flow hedging instrument if it effectively converts anticipated cash flows associated with revenues or expenses to a fixed dollar amount. We may utilize cash flow hedge accounting for derivative commodity instruments, foreign currency instruments and interest rate instruments. Designating cash flow hedges is dependent on the business context in which the instrument is being used, the effectiveness of the instrument in offsetting the risk that the future cash flows of a given revenue or expense item may vary, and other criteria.
ENERGY DERIVATIVES
Our market risk is primarily related to natural gas and electricity price volatility and the specific physical locations where we transact. We use energy derivatives to manage these risks. The use of energy derivatives in our various businesses depends on the particular energy market, and the operating and regulatory environments applicable to the business, as follows:
The California Utilities use natural gas and electricity derivatives, for the benefit of customers, with the objective of managing price risk and basis risks, and stabilizing and lowering natural gas and electricity costs. These derivatives include fixed-price natural gas and electricity positions, options, and basis risk instruments, which are either exchange-traded or over-the-counter financial instruments, or bilateral physical transactions. This activity is governed by risk management and transacting activity plans that have been filed with and approved by the CPUC. Natural gas and electricity derivative activities are recorded as commodity costs that are offset by regulatory account balances and are recovered in rates. Net commodity cost impacts on the Condensed Consolidated Statements of Operations are reflected in Cost of Electric Fuel and Purchased Power or in Cost of Natural Gas.
SDG&E is allocated and may purchase CRRs, which serve to reduce the regional electricity price volatility risk that may result from local transmission capacity constraints. Unrealized gains and losses do not impact earnings, as they are offset by regulatory account balances. Realized gains and losses associated with CRRs, which are recoverable in rates, are recorded in Cost of Electric Fuel and Purchased Power on the Condensed Consolidated Statements of Operations.
Sempra Mexico and Sempra LNG may use natural gas and electricity derivatives, as appropriate, in an effort 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 greenhouse gas allowances.
The following table summarizes net energy derivative volumes.
NET ENERGY DERIVATIVE VOLUMES
(Quantities in millions)
CommodityUnit of measureMarch 31, 2021December 31, 2020
Sempra Energy Consolidated:
Natural gasMMBtu(7)
ElectricityMWh
Congestion revenue rightsMWh41 43 
SDG&E:
Natural gasMMBtu10 16 
ElectricityMWh
Congestion revenue rightsMWh41 43 
SoCalGas:
Natural gasMMBtu

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.
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INTEREST RATE DERIVATIVES
We are exposed to interest rates primarily as a result of our current and expected use of financing. The California Utilities, as well as Sempra Energy and its other subsidiaries and JVs, periodically enter into interest rate derivative agreements intended to moderate our exposure to interest rates and to lower our overall costs of borrowing. In addition, we may utilize interest rate swaps, typically designated as cash flow hedges, to lock in interest rates on outstanding debt or in anticipation of future financings.
The following table presents the net notional amounts of our interest rate derivatives, excluding JVs.
INTEREST RATE DERIVATIVES
(Dollars in millions)
 March 31, 2021December 31, 2020
 Notional debtMaturitiesNotional debtMaturities
Sempra Energy Consolidated:    
Cash flow hedges$729 2021-2034$1,486 2021-2034
FOREIGN CURRENCY DERIVATIVES
We utilize cross-currency swaps to hedge exposure related to Mexican peso-denominated debt at our Mexican subsidiaries and JVs. These cash flow hedges exchange our Mexican peso-denominated principal and interest payments into the U.S. dollar and swap Mexican variable interest rates for U.S. fixed interest rates. From time to time, Sempra Mexico and its JVs may use other foreign currency derivatives to hedge exposures related to cash flows associated with revenues from contracts denominated in Mexican pesos that are indexed to the U.S. dollar.
We are also exposed to exchange rate movements at our Mexican subsidiaries and JVs, which have U.S. dollar-denominated cash balances, receivables, payables and debt (monetary assets and liabilities) that give rise to Mexican currency exchange rate movements for Mexican income tax purposes. They also have deferred income tax assets and liabilities denominated in the Mexican peso, which must be translated to U.S. dollars for financial reporting purposes. In addition, monetary assets and liabilities and certain nonmonetary assets and liabilities are adjusted for Mexican inflation for Mexican income tax purposes. We may utilize foreign currency derivatives as a means to manage the risk of exposure to significant fluctuations in our income tax expense and equity earnings from these impacts; however, we generally do not hedge our deferred income tax assets and liabilities or for inflation.
We also utilized foreign currency derivatives in 2020 to hedge exposure to fluctuations in the Peruvian sol and Chilean peso related to the sales 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, 2021December 31, 2020
 Notional amountMaturitiesNotional amountMaturities
Sempra Energy Consolidated:    
Cross-currency swaps$306 2021-2023$306 2021-2023
Other foreign currency derivatives1,438 2021-20221,764 2021-2022
FINANCIAL STATEMENT PRESENTATION
The Condensed Consolidated Balance Sheets reflect the offsetting of net derivative positions and cash collateral with the same counterparty when a legal right of offset exists. The following tables provide the fair values of derivative instruments on the Condensed Consolidated Balance Sheets, including the amount of cash collateral receivables that were not offset because the cash collateral was in excess of liability positions.
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DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
 March 31, 2021
 
Other current assets(1)
Other long-term assetsOther current liabilitiesDeferred credits and other
Sempra Energy Consolidated:    
Derivatives designated as hedging instruments:    
Interest rate and foreign exchange instruments$$$(22)$(161)
Derivatives not designated as hedging instruments:    
Commodity contracts not subject to rate recovery57 15 (73)(20)
Associated offsetting commodity contracts(53)(15)53 15 
Commodity contracts subject to rate recovery31 92 (29)(26)
Net amounts presented on the balance sheet35 100 (71)(192)
Additional cash collateral for commodity contracts
not subject to rate recovery
24 
Additional cash collateral for commodity contracts
subject to rate recovery
27 
Total(2)
$86 $100 $(71)$(192)
SDG&E:    
Derivatives not designated as hedging instruments:    
Commodity contracts subject to rate recovery$27 $92 $(25)$(25)
Net amounts presented on the balance sheet27 92 (25)(25)
Additional cash collateral for commodity contracts
subject to rate recovery
26 
Total(2)
$53 $92 $(25)$(25)
SoCalGas:    
Derivatives not designated as hedging instruments:    
Commodity contracts subject to rate recovery$$$(4)$(1)
Net amounts presented on the balance sheet(4)(1)
Additional cash collateral for commodity contracts
subject to rate recovery
Total$$$(4)$(1)
(1)    Included in Current Assets: Fixed-Price Contracts and Other Derivatives for SDG&E.
(2)    Normal purchase contracts previously measured at fair value are excluded.
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DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
 December 31, 2020
Other current assets(1)
Other long-term assetsOther current liabilitiesDeferred credits and other
Sempra Energy Consolidated:    
Derivatives designated as hedging instruments:    
Interest rate and foreign exchange instruments$$$(26)$(160)
Derivatives not designated as hedging instruments:    
Foreign exchange instruments24 
Commodity contracts not subject to rate recovery82 17 (95)(16)
Associated offsetting commodity contracts(82)(13)82 13 
Commodity contracts subject to rate recovery35 95 (35)(25)
Associated offsetting commodity contracts(2)
Net amounts presented on the balance sheet57 100 (72)(188)
Additional cash collateral for commodity contracts
not subject to rate recovery
21 
Additional cash collateral for commodity contracts
subject to rate recovery
30 
Total(2)
$108 $100 $(72)$(188)
SDG&E:    
Derivatives not designated as hedging instruments:    
Commodity contracts subject to rate recovery$32 $95 $(28)$(25)
Associated offsetting commodity contracts(1)
Net amounts presented on the balance sheet31 95 (27)(25)
Additional cash collateral for commodity contracts
subject to rate recovery
24 
Total(2)
$55 $95 $(27)$(25)
SoCalGas:    
Derivatives not designated as hedging instruments:    
Commodity contracts subject to rate recovery$$$(7)$
Associated offsetting commodity contracts(1)
Net amounts presented on the balance sheet(6)
Additional cash collateral for commodity contracts
subject to rate recovery
Total$$$(6)$
(1)    Included in Current Assets: Fixed-Price Contracts and Other Derivatives for SDG&E.
(2)    Normal purchase contracts previously measured at fair value are excluded.

The following table includes the effects of derivative instruments designated as cash flow hedges on the Condensed Consolidated Statements of Operations and in OCI and AOCI.
CASH FLOW HEDGE IMPACTS
(Dollars in millions)
Pretax gain (loss)
recognized in OCI
Pretax (loss) gain reclassified
from AOCI into earnings
Three months ended March 31, Three months ended March 31,
 20212020Location20212020
Sempra Energy Consolidated:     
Interest rate instruments$26 $(47)Interest Expense$(2)$(2)
Interest rate instruments83 (185)
Equity Earnings(1)
(19)(2)
Foreign exchange instruments21 
Revenues Energy-
      Related Businesses
(1)
Other Income (Expense), Net
Interest rate and foreign
exchange instruments
(6)(45)Other Income (Expense), Net(6)(41)
Foreign exchange instruments13 
Equity Earnings(1)
(1)
Total$109 $(243) $(29)$(39)
(1)    Equity earnings at Sempra Mexico are recognized after tax.
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For Sempra Energy Consolidated, we expect that losses of $79 million, which are net of income tax benefit, that are currently recorded in AOCI related to cash flow hedges will be reclassified into earnings during the next 12 months as the hedged items affect earnings. SoCalGas expects that $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, 2021 is approximately 14 years for Sempra Energy Consolidated. The maximum remaining term for which we are hedging exposure to the variability of cash flows at our equity method investees is 19 years.
The following table summarizes the effects of derivative instruments not designated as hedging instruments on the Condensed Consolidated Statements of Operations.
UNDESIGNATED DERIVATIVE IMPACTS
(Dollars in millions)
  Pretax (loss) gain on derivatives recognized in earnings
  Three months ended March 31,
 Location20212020
Sempra Energy Consolidated:   
Commodity contracts not subject
to rate recovery
Revenues: Energy-Related
Businesses
$(48)$51 
Commodity contracts subject
to rate recovery
Cost of Natural Gas(3)
Commodity contracts subject
to rate recovery
Cost of Electric Fuel
and Purchased Power
(9)
Foreign exchange instrumentsOther Income (Expense), Net(24)(114)
Total $(68)$(75)
SDG&E:   
Commodity contracts subject
to rate recovery
Cost of Electric Fuel
and Purchased Power
$$(9)
SoCalGas:   
Commodity contracts subject
to rate recovery
Cost of Natural Gas$$(3)
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, 2021 and December 31, 2020 was $20 million and $16 million, respectively. For SoCalGas, the total fair value of this group of derivative instruments in a net liability position at March 31, 2021 and December 31, 2020 was $5 million and $6 million, respectively. At March 31, 2021, if the credit ratings of Sempra Energy or SoCalGas were reduced below investment grade, $20 million and $5 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.
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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, 2021 and December 31, 2020. We classify financial assets and liabilities in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair valued assets and liabilities, and their placement within the fair value hierarchy. We have not changed the valuation techniques or types of inputs we use to measure recurring fair value since December 31, 2020.
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:
Nuclear decommissioning trusts reflect the assets of SDG&E’s NDT, excluding cash balances, accounts receivable and accounts payable. A third-party trustee values the trust assets using prices from a pricing service based on a market approach. We validate these prices by comparison to prices from other independent data sources. Securities are valued using quoted prices listed on nationally recognized securities exchanges or based on closing prices reported in the active market in which the identical security is traded (Level 1). Other securities are valued based on yields that are currently available for comparable securities of issuers with similar credit ratings (Level 2).
For commodity contracts, interest rate 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 – SDG&E.”
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, 2021 and December 31, 2020.
As we discuss in Note 6, in July 2020, Sempra Energy entered into a Support Agreement for the benefit of CFIN. We measure the Support Agreement, which includes a guarantee obligation, a put option and a call option, net of related guarantee fees, at fair value on a recurring basis. We use a discounted cash flow model to value the Support Agreement, net of related guarantee fees. Because some of the inputs that are significant to the valuation are less observable, the Support Agreement is classified as Level 3, as we describe below in “Level 3 Information – Sempra LNG.”
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RECURRING FAIR VALUE MEASURES – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
 Fair value at March 31, 2021
 Level 1Level 2Level 3Total
Assets:    
Nuclear decommissioning trusts:    
Equity securities$358 $$$364 
Debt securities:    
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies
47 20 67 
Municipal bonds324 324 
Other securities265 265 
Total debt securities47 609 656 
Total nuclear decommissioning trusts(1)
405 615 1,020 
Interest rate and foreign exchange instruments
Commodity contracts not subject to rate recovery
Effect of netting and allocation of collateral(2)
24 24 
Commodity contracts subject to rate recovery112 123 
Effect of netting and allocation of collateral(2)
21 27 
Support Agreement, net of related guarantee fees
Total$457 $631 $125 $1,213 
Liabilities:    
Interest rate and foreign exchange instruments$$183 $$183 
Commodity contracts not subject to rate recovery25 25 
Commodity contracts subject to rate recovery50 55 
Support Agreement, net of related guarantee fees
Total$$213 $54 $267 
 Fair value at December 31, 2020
 Level 1Level 2Level 3Total
Assets:    
Nuclear decommissioning trusts:    
Equity securities$358 $$$364 
Debt securities:   
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies
41 24 65 
Municipal bonds326 326 
Other securities270 270 
Total debt securities41 620 661 
Total nuclear decommissioning trusts(1)
399 626 1,025 
Interest rate and foreign exchange instruments25 25 
Commodity contracts not subject to rate recovery
Effect of netting and allocation of collateral(2)
21 21 
Commodity contracts subject to rate recovery121 128 
Effect of netting and allocation of collateral(2)
19 30 
Support Agreement, net of related guarantee fees
Total$445 $661 $134 $1,240 
Liabilities:    
Interest rate and foreign exchange instruments$$186 $$186 
Commodity contracts not subject to rate recovery16 16 
Commodity contracts subject to rate recovery52 58 
Support Agreement, net of related guarantee fees
Total$$208 $56 $264 
(1)    Excludes cash, cash equivalents and receivables (payables), net.
(2)    Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.
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RECURRING FAIR VALUE MEASURES – SDG&E
(Dollars in millions)
 Fair value at March 31, 2021
 Level 1Level 2Level 3Total
Assets:    
Nuclear decommissioning trusts:    
Equity securities$358 $$$364 
Debt securities:    
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies
47 20 67 
Municipal bonds324 324 
Other securities265 265 
Total debt securities47 609 656 
Total nuclear decommissioning trusts(1)
405 615 1,020 
Commodity contracts subject to rate recovery112 119 
Effect of netting and allocation of collateral(2)
20 26 
Total$432 $615 $118 $1,165 
Liabilities:    
Commodity contracts subject to rate recovery$$$50 $50 
Total$$$50 $50 
 Fair value at December 31, 2020
 Level 1Level 2Level 3Total
Assets:    
Nuclear decommissioning trusts:    
Equity securities$358 $$$364 
Debt securities:    
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies
41 24 65 
Municipal bonds326 326 
Other securities270 270 
Total debt securities41 620 661 
Total nuclear decommissioning trusts(1)
399 626 1,025 
Commodity contracts subject to rate recovery121 126 
Effect of netting and allocation of collateral(2)
18 24 
Total$422 $626 $127 $1,175 
Liabilities:    
Commodity contracts subject to rate recovery$$$52 $52 
Total$$$52 $52 
(1)    Excludes cash, cash equivalents and receivables (payables), net.
(2)    Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.

60


RECURRING FAIR VALUE MEASURES – SOCALGAS
(Dollars in millions)
 Fair value at March 31, 2021
 Level 1Level 2Level 3Total
Assets:    
Commodity contracts subject to rate recovery$$$$
Effect of netting and allocation of collateral(1)
Total$$$$
Liabilities:    
Commodity contracts subject to rate recovery$$$$
Total$$$$
 Fair value at December 31, 2020
 Level 1Level 2Level 3Total
Assets:    
Commodity contracts subject to rate recovery$$$$
Effect of netting and allocation of collateral(1)
Total$$$$
Liabilities:    
Commodity contracts subject to rate recovery$$$$
Total$$$$
(1)    Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.
Level 3 Information
SDG&E
The table below sets forth reconciliations of changes in the fair value of CRRs and long-term, fixed-price electricity positions classified as Level 3 in the fair value hierarchy for Sempra Energy Consolidated and SDG&E.
LEVEL 3 RECONCILIATIONS(1)
(Dollars in millions)
Three months ended March 31,
20212020
Balance at January 1$69 $28 
Realized and unrealized losses(2)(5)
Settlements(5)(7)
Balance at March 31$62 $16 
Change in unrealized (losses) gains relating to instruments still held at March 31$(1)$(6)
(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 MWh
2021$(1.81)to$14.11 $(0.12)
2020(3.77)to6.03 (1.58)
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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 INPUTS
Settlement yearPrice per MWhWeighted-average price per MWh
2021$20.60 to$117.00 $46.46 
202016.51 to52.45 35.41 
A significant increase (decrease) in market electricity forward prices would result in a significantly higher (lower) fair value. We summarize long-term, fixed-price electricity position volumes in Note 8.
Realized gains and losses associated with CRRs and long-term, fixed-price electricity positions, which are recoverable in rates, are recorded in Cost of Electric Fuel and Purchased Power on the Condensed Consolidated Statements of Operations. Because unrealized gains and losses are recorded as regulatory assets and liabilities, they do not affect earnings.
Sempra LNG
The table below sets forth a reconciliation of changes in the fair value of Sempra Energy’s Support Agreement for the benefit of CFIN classified as Level 3 in the fair value hierarchy for Sempra Energy Consolidated.
LEVEL 3 RECONCILIATION
(Dollars in millions)
 Three months ended March 31, 2021
Balance at January 1$
Realized and unrealized gains(1)
Settlements(2)
Balance at March 31(2)
$
Change in unrealized gains (losses) relating to instruments still held at March 31$
(1)    Net gains are included in Interest Income and net losses are included in Interest Expense on the Sempra Energy Condensed Consolidated Statement of Operations.
(2)    Includes $7 million in Other Current Assets offset by $4 million in Deferred Credits and Other on the Sempra Energy Condensed Consolidated Balance Sheet.

The fair value of the Support Agreement, net of related guarantee fees, is based on a discounted cash flow model using a probability of default and survival methodology. Our estimate of fair value considers inputs such as third-party default rates, credit ratings, recovery rates, and risk-adjusted discount rates, which may be readily observable, market corroborated or generally unobservable inputs. Because CFIN’s credit rating and related default and survival rates are unobservable inputs that are significant to the valuation, the Support Agreement, net of related guarantee fees, is classified as Level 3. We assigned CFIN an internally developed credit rating of A3 and relied on default rate data published by Moody’s to assign a probability of default. A hypothetical change in the credit rating up or down one notch could result in a significant change in the fair value of the Support Agreement.
Fair Value of Financial Instruments
The fair values of certain of our financial instruments (cash, accounts receivable, 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
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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, 2021
 Carrying
amount
Fair value
 Level 1Level 2Level 3Total
Sempra Energy Consolidated:     
Long-term amounts due from unconsolidated affiliates(1)
$677 $$702 $$702 
Long-term amounts due to unconsolidated affiliates299 292 292 
Total long-term debt(2)
21,456 23,251 23,251 
SDG&E:     
Total long-term debt(3)
$6,036 $$6,659 $$6,659 
SoCalGas:     
Total long-term debt(4)
$4,759 $$5,263 $$5,263 
 December 31, 2020
 Carrying
amount
Fair value
 Level 1Level 2Level 3Total
Sempra Energy Consolidated:     
Long-term amounts due from unconsolidated affiliates(1)
$786 $$817 $$817 
Long-term amounts due to unconsolidated affiliates275 266 266 
Total long-term debt(2)
22,259 25,478 25,478 
SDG&E:     
Total long-term debt(3)
$6,253 $$7,384 $$7,384 
SoCalGas:     
Total long-term debt(4)
$4,759 $$5,655 $$5,655 
(1)    Before allowances for credit losses of $1 million and $3 million at March 31, 2021 and December 31, 2020, respectively. Includes $2 million and $3 million in Due From Unconsolidated Affiliates – Current at March 31, 2021 and December 31, 2020, respectively.
(2)    Before reductions of unamortized discount and debt issuance costs of $264 million and $268 million at March 31, 2021 and December 31, 2020, respectively, and excluding finance lease obligations of $1,336 million and $1,330 million at March 31, 2021 and December 31, 2020, respectively.
(3)    Before reductions of unamortized discount and debt issuance costs of $52 million at both March 31, 2021 and December 31, 2020, and excluding finance lease obligations of $1,276 million at both March 31, 2021 and December 31, 2020.
(4)    Before reductions of unamortized discount and debt issuance costs of $40 million at both March 31, 2021 and December 31, 2020, and excluding finance lease obligations of $60 million and $54 million at March 31, 2021 and December 31, 2020, 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 permanently ceased operations in June 2013, and in which SDG&E has a 20% ownership interest. We discuss SONGS further in Note 15 of the Notes to Consolidated Financial Statements in the Annual Report.
NUCLEAR DECOMMISSIONING AND FUNDING
As a result of Edison’s decision to permanently retire SONGS Units 2 and 3, Edison began the decommissioning phase of the plant. Major decommissioning work began in 2020. We expect the majority of the decommissioning work to take 10 years. Decommissioning of Unit 1, removed from service in 1992, is largely complete. The remaining work for Unit 1 will be completed once Units 2 and 3 are dismantled and the spent fuel is removed from the site. The spent fuel is currently being stored on-site, until the DOE identifies a spent fuel storage facility and puts in place a program for the fuel’s disposal, as we discuss below. SDG&E is responsible for approximately 20% of the total decommissioning cost.
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The Samuel Lawrence Foundation filed a writ petition under the California Coastal Act in LA Superior Court in December 2019 seeking to invalidate the coastal development permit and to obtain injunctive relief to stop decommissioning work. In September 2020, the Samuel Lawrence Foundation filed another writ petition under the California Coastal Act in LA Superior Court seeking to set aside the California Coastal Commission’s July 2020 approval of the inspection and maintenance plan for the SONGS’ canisters and to obtain injunctive relief to stop decommissioning work. Decommissioning work has not been interrupted to date by the writ petitions filed by the Samuel Lawrence Foundation.
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 December 2020, SDG&E received authorization from the CPUC to access NDT funds of up to $89 million for forecasted 2021 costs.
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)
 CostGross
unrealized
gains
Gross
unrealized
losses
Estimated
fair
value
At March 31, 2021:    
Debt securities:    
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies(1)
$67 $$$67 
Municipal bonds(2)
310 15 (1)324 
Other securities(3)
256 10 (1)265 
Total debt securities633 25 (2)656 
Equity securities111 255 (2)364 
Cash and cash equivalents
(Payables) receivables, net(15)(14)
Total$737 $281 $(4)$1,014 
At December 31, 2020:    
Debt securities:    
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies$64 $$$65 
Municipal bonds308 18 326 
Other securities253 17 270 
Total debt securities625 36 661 
Equity securities112 254 (2)364 
Cash and cash equivalents
Payables, net(9)(9)
Total$731 $290 $(2)$1,019 
(1)    Maturity dates are 2022-2051.
(2)    Maturity dates are 2021-2056.
(3)    Maturity dates are 2021-2072.

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The following table shows the proceeds from sales of securities in the NDT and gross realized gains and losses on those sales.
SALES OF SECURITIES IN THE NDT
(Dollars in millions)
 Three months ended March 31,
 20212020
Proceeds from sales$288 $552 
Gross realized gains21 92 
Gross realized losses(2)(5)

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 $566 million at March 31, 2021. 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 2021 dollars is approximately $886 million.
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.
The SONGS co-owners have nuclear property damage insurance of $130 million, which exceeds the minimum federal requirements of $50 million. This insurance coverage is provided through NEIL. The NEIL policies have specific exclusions and limitations that can result in reduced 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 $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, 2021, loss contingency accruals for legal matters, including associated legal fees and regulatory matters related to the Leak, that are probable and estimable were $602 million for Sempra Energy Consolidated, including $458 million for SoCalGas. Amounts for Sempra Energy Consolidated and SoCalGas include $432 million for matters related to the Leak, which we discuss below.
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SoCalGas
Aliso Canyon Natural Gas Storage Facility Gas Leak
From October 23, 2015 through February 11, 2016, SoCalGas experienced a natural gas leak from one of the injection-and-withdrawal wells, SS25, at its Aliso Canyon natural gas storage facility in Los Angeles County. As described below in “Civil Litigation” and “Regulatory Proceedings,” numerous lawsuits, investigations and regulatory proceedings have been initiated in response to the Leak, resulting in significant costs, which together with other Leak-related costs are discussed below in “Cost Estimates, Accounting Impact and Insurance.”
Civil Litigation. As of April 30, 2021, 395 lawsuits, including approximately 36,000 plaintiffs, are pending against SoCalGas and Sempra Energy related to the Leak. All these cases, other than the federal securities class action discussed below, which names only Sempra Energy, are coordinated before a single court in the LA Superior Court for pretrial management.
In November 2017, in the coordinated proceeding, individuals and business entities filed a Third Amended Consolidated Master Case Complaint for Individual Actions, through which their separate lawsuits will be managed for pretrial purposes. The consolidated complaint asserts causes of action for negligence, negligence per se, private and public nuisance (continuing and permanent), trespass, inverse condemnation, strict liability, negligent and intentional infliction of emotional distress, fraudulent concealment, loss of consortium, wrongful death and violations of Proposition 65 against SoCalGas and 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. The initial trial previously scheduled for June 2020 for a small number of randomly selected individual plaintiffs was postponed, with a new trial date yet to be determined by the court.
In January 2017, 2 consolidated class action complaints were filed against SoCalGas and Sempra Energy, 1 on behalf of a putative class of persons and businesses who own or lease real property within a five-mile radius of the well (the Property Class Action), and a second on behalf of a putative class of all persons and entities conducting business within five miles of the facility (the Business Class Action). The Property Class Action asserts claims for strict liability for ultra-hazardous activities, negligence, negligence per se, violation of the California Unfair Competition Law, trespass, permanent and continuing public and private nuisance, and inverse condemnation. The Business Class Action asserts a claim for violation of the California Unfair Competition Law. Both complaints seek compensatory, statutory and punitive damages, injunctive relief and attorneys’ fees.
Five property developers filed complaints in July and October of 2018 against SoCalGas and Sempra Energy alleging causes of action for strict liability, negligence per se, negligence, continuing nuisance, permanent nuisance and violation of the California Unfair Competition Law, as well as claims for negligence against certain directors of SoCalGas. The complaints seek compensatory, statutory and punitive damages, injunctive relief and attorneys’ fees.
In October 2018 and January 2019, complaints were filed on behalf of 51 firefighters stationed near the Aliso Canyon natural gas storage facility who allege they were injured by exposure to chemicals released during the Leak. The complaints against SoCalGas and Sempra Energy assert causes of actions for negligence, negligence per se, private and public nuisance (continuing and permanent), trespass, inverse condemnation, strict liability, negligent and intentional infliction of emotional distress, fraudulent concealment and loss of consortium. The complaints seek compensatory and punitive damages for personal injuries, lost wages and/or lost profits, property damage and diminution in property value, and attorneys’ fees.
NaN shareholder derivative actions were filed alleging breach of fiduciary duties against certain officers and certain directors of Sempra Energy and/or SoCalGas. Three of the actions were joined in an Amended Consolidated Shareholder Derivative Complaint, which was dismissed with prejudice in January 2021. The plaintiffs have filed a notice of appeal. The remaining action was also dismissed but plaintiffs were given leave to amend their complaint.
In addition, a federal securities class action alleging violation of the federal securities laws was filed against Sempra Energy and certain of its officers in July 2017 in the U.S. District Court for the Southern District of California. In March 2018, the court dismissed the action with prejudice. The plaintiffs have appealed the dismissal.
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
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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) of the CPUC 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, the 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 on a subset of issues began in March 2021. The second phase will consider whether SoCalGas should be sanctioned for the Leak and what damages, fines or other penalties or sanctions, if any, should be imposed for any violations, unreasonable or imprudent practices, or failure to sufficiently cooperate with the SED as determined by the CPUC in the first phase. In addition, the second phase will 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, which could result in little or no recovery of such costs by SoCalGas. SoCalGas has engaged in settlement discussions with the SED in connection with this proceeding.
In February 2017, the CPUC opened a proceeding pursuant to the SB 380 OII to determine the feasibility of minimizing or eliminating the use of the Aliso Canyon natural gas storage facility while still maintaining energy and electric reliability for the region, but excluding issues with respect to air quality, public health, causation, culpability or cost responsibility regarding the Leak. The CPUC issued a decision on the interim range of gas inventory levels at the Aliso Canyon natural gas storage facility in November 2020 with a final determination to be made within the SB 380 OII proceeding. The first phase of the proceeding established a framework for the hydraulic, production cost and economic modeling assumptions for the potential reduction in usage or elimination of the Aliso Canyon natural gas storage facility. Phase 2 of the proceeding, which will evaluate the impacts of reducing or eliminating the Aliso Canyon natural gas storage facility using the established framework and models, began in the first quarter of 2019. In December 2019, the CPUC added a third phase of the proceeding and engaged a consultant who is analyzing alternative means for meeting or avoiding the demand for the facility’s services if it were eliminated in either the 2027 or 2035 timeframe.
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, 2021, the Aliso Canyon natural gas storage facility had a net book value of $840 million. Any significant impairment of this asset, or higher operating costs and additional capital expenditures incurred by SoCalGas that may not be recoverable in customer rates, could have a material adverse effect on SoCalGas’ and Sempra Energy’s results of operations, financial condition and cash flows.
Cost Estimates, Accounting Impact and Insurance. SoCalGas has incurred significant costs for temporary relocation of community residents; to control the well and stop the Leak; to mitigate the natural gas released; to purchase natural gas to replace what was lost through the Leak; to defend against and, in certain cases, settle, civil and criminal litigation arising from the Leak; to pay the costs of the government-ordered response to the Leak, including the costs for Blade to conduct the root cause analysis described above; to respond to various government and agency investigations regarding the Leak; and to comply with increased regulation imposed as a result of the Leak. At March 31, 2021, SoCalGas estimates these costs related to the Leak are $1,627 million (the cost estimate), which includes the $1,279 million of costs recovered or probable of recovery from insurance. This cost estimate may increase significantly as more information becomes available. A substantial portion of the cost estimate has been paid, and $437 million is accrued as Reserve for Aliso Canyon Costs as of March 31, 2021 on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets.
In the first quarter of 2020, SoCalGas recorded $277 million in costs, inclusive of estimated legal costs, related to settlement discussions in connection with civil litigation described above in “Civil Litigation.” Of this amount, $177 million was recorded in Insurance Receivable for Aliso Canyon Costs on the SoCalGas and Sempra Energy Condensed Consolidated Balance Sheets and $100 million ($72 million after tax) was recorded in Aliso Canyon Litigation and Regulatory Matters on the SoCalGas and Sempra Energy Condensed Consolidated Statements of Operations. These accruals are included in the cost estimate that we describe above.
Except for the amounts paid or estimated to settle certain actions, as described in “Civil Litigation” and “Regulatory Proceedings” above, the cost estimate does not include litigation, regulatory proceedings 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
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damages, restitution, civil or administrative 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. As of March 31, 2021, we recorded the expected recovery of the cost estimate related to the Leak of $414 million as Insurance Receivable for Aliso Canyon Costs on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets. This amount is exclusive of insurance retentions and $865 million of insurance proceeds we received through March 31, 2021. We intend to pursue the full extent of our insurance coverage for the costs we have incurred. Other than insurance for certain future defense costs we may incur as well as directors’ and officers’ liability, we have exhausted all of our insurance in this matter. We continue to pursue other sources of insurance coverage for costs related to this matter, but we may not be successful in obtaining additional insurance recovery for any of these costs. If we are not able to secure additional insurance recovery, 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.
Sempra Mexico
Energía Costa Azul
IEnova has been engaged in a long-running land dispute relating to property adjacent to its ECA Regas Facility that allegedly overlaps with land owned by the ECA Regas Facility (the facility, however, is not situated on the land that is the subject of this dispute). A claimant to the adjacent property filed complaints in the federal Agrarian Court challenging the refusal of SEDATU in 2006 to issue title to him for the disputed property. In November 2013, the federal Agrarian Court ordered that SEDATU issue the requested title and cause it to be registered. Both SEDATU and IEnova challenged the ruling due to lack of notification of the underlying process. In May 2019, a federal court in Mexico reversed the ruling and ordered a retrial.
Four other cases involving two adjacent areas of real property on which part of the ECA Regas Facility is situated, each brought by a single plaintiff or her descendants, remain pending against the facility. The first disputed area is subject to a claim in the federal Agrarian Court that has been ongoing since 2006, in which the plaintiffs seek to annul the property title for a portion of the land on which the ECA Regas Facility is situated and to obtain possession of a different parcel that allegedly overlaps with the site of the ECA Regas Facility. The second disputed area is one parcel adjacent to the ECA Regas Facility that allegedly overlaps with land on which the ECA Regas Facility is situated, which is subject to a claim in the Agrarian Court and two claims in civil courts. The Agrarian Court proceeding, which seeks an order that SEDATU issue title to the plaintiff, was initiated in 2013 and the parties are awaiting a final decision. The two civil court proceedings, which seek to invalidate the contract by which the ECA Regas Facility purchased the applicable parcel of land on which the ECA Regas Facility is situated on the grounds that the purchase price was allegedly unfair, are progressing at different stages. In the first, initiated in 2013, a lower court ruled in favor of the ECA Regas Facility and the ruling has been appealed by the plaintiff. The same plaintiff filed the second civil case in 2019, which is in its initial stages.
Certain of these land disputes involve land on which portions of the ECA LNG liquefaction facilities are proposed to be situated or on which portions of the ECA Regas Facility that would be necessary for the operation of the proposed ECA LNG liquefaction facilities are situated.
Several administrative challenges are pending before Mexico’s Secretariat of Environment and Natural Resources (the Mexican environmental protection agency) and Federal Tax and Administrative Courts, seeking revocation of the environmental impact authorization issued to the ECA Regas Facility in 2003. These cases generally allege that the conditions and mitigation measures in the environmental impact authorization are inadequate and challenge findings that the activities of the terminal are consistent with regional development guidelines.
In 2018, two related claimants filed separate challenges in the federal district court in Ensenada, Baja California in relation to the environmental and social impact permits issued by each of Agencia de Seguridad, Energía y Ambiente (ASEA) and SENER to ECA LNG authorizing natural gas liquefaction activities at the ECA Regas Facility. In the first case, the court issued a provisional injunction in September 2018. In December 2018, ASEA approved modifications to the environmental permit that facilitate the development of the proposed natural gas liquefaction facility in two phases. In May 2019, the court canceled the provisional injunction. The claimant appealed the court’s decision canceling the injunction, but was not successful. The claimant’s underlying
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challenge to the permits remains pending. In the second case, the initial request for a provisional injunction was denied. That decision was reversed on appeal in January 2020, resulting in the issuance of a new injunction against the same environmental and social impact permits that were already issued by ASEA and SENER. This injunction has uncertain application absent clarification by the court. The reversal and issuance of the injunction in the second case is under further appeal.
In May 2020, the two third-party capacity customers at the ECA Regas Facility, Shell Mexico and Gazprom, asserted that a 2019 update of the general terms and conditions for service at the facility, as approved by the CRE, resulted in a breach of contract by IEnova and a force majeure event. Citing these circumstances, the customers subsequently stopped making payments of amounts due under their respective LNG storage and regasification agreements. IEnova has rejected the customers’ assertions and has drawn (and expects to continue to draw) on the customers’ letters of credit provided as payment security. The parties engaged in discussions under the applicable contractual dispute resolution procedures without coming to a mutually acceptable resolution. In July 2020, Shell Mexico submitted a request for arbitration of the dispute and although Gazprom has joined the proceeding, Gazprom has since replenished the amounts drawn on its letter of credit and has resumed making regular monthly payments under its LNG storage and regasification agreement and as a consequence IEnova is not currently drawing on its letter of credit. IEnova intends to avail itself of its available claims, defenses, rights and remedies in the arbitration proceeding, including seeking dismissal of the customers’ claims. In addition to the arbitration proceeding, Shell Mexico also filed a constitutional challenge to the CRE’s approval of the update to the general terms and conditions. In October 2020, Shell Mexico’s request to stay the CRE’s approval was denied and, subsequently, Shell Mexico filed an appeal of that decision.
One or more unfavorable final decisions on these disputes or challenges could materially and adversely affect our existing natural gas regasification operations and proposed natural gas liquefaction projects at the site of the ECA Regas Facility and have a material adverse effect on Sempra Energy’s cash flows, financial condition, results of operations and prospects.
Guaymas-El Oro Segment of the Sonora Pipeline
IEnova’s Sonora natural gas pipeline consists of two segments, the Sasabe-Puerto Libertad-Guaymas segment, and the Guaymas-El Oro segment. Each segment has its own service agreement with the CFE. In 2015, the Yaqui tribe, with the exception of some members living in the Bácum community, granted its consent and a right-of-way easement agreement for the construction of the Guaymas-El Oro segment of the Sonora natural gas pipeline that crosses its territory. Representatives of the Bácum community filed a legal challenge in Mexican federal court demanding the right to withhold consent for the project, the stoppage of work in the Yaqui territory and damages. In 2016, the judge granted a suspension order that prohibited the construction of such segment through the Bácum community territory. Because the pipeline does not pass through the Bácum community, IEnova did not believe the 2016 suspension order prohibited construction in the remainder of the Yaqui territory. Construction of the Guaymas-El Oro segment was completed, and commercial operations began in May 2017.
Following the start of commercial operations of the Guaymas-El Oro segment, IEnova reported damage to the Guaymas-El Oro segment of the Sonora pipeline in the Yaqui territory that has made that section inoperable since August 2017 and, as a result, IEnova declared a force majeure event. In 2017, an appellate court ruled that the scope of the 2016 suspension order encompassed the wider Yaqui territory, which has prevented IEnova from making repairs to put the pipeline back in service. In July 2019, a federal district court ruled in favor of IEnova and held that the Yaqui tribe was properly consulted and that consent from the Yaqui tribe was properly received. Representatives of the Bácum community appealed this decision, causing the suspension order preventing IEnova from repairing the damage to the Guaymas-El Oro segment of the Sonora pipeline in the Yaqui territory to remain in place until the appeals process is exhausted.
IEnova exercised its rights under the contract, which included seeking force majeure payments for the two-year period such force majeure payments were required to be made, which ended in August 2019.
In July 2019, the CFE filed a request for arbitration generally to nullify certain contract terms that provide for fixed capacity payments in instances of force majeure and made a demand for substantial damages in connection with the force majeure event. In September 2019, the arbitration process ended when IEnova and the CFE reached an agreement to restart natural gas transportation service on the earlier of completion of repair of the damaged pipeline or January 15, 2020, and to modify the tariff structure and extend the term of the contract by 10 years. Subsequently, IEnova and the CFE agreed to extend the service start date to September 14, 2021. 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 September 14, 2021 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.
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. At
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March 31, 2021, the Guaymas-El Oro segment of the Sonora pipeline had a net book value of $442 million. The Sasabe-Puerto Libertad-Guaymas segment of the Sonora pipeline remains in full operation and is not impacted by these developments.
Regulatory Actions by the Mexican Government that Impact Renewable Energy Facilities
In April 2020, CENACE issued an order that it claims would safeguard Mexico’s national power grid from interruptions that may be caused by renewable energy projects. The main provision of the order suspends all legally mandated pre-operative testing that would be needed for new renewable energy projects to commence operations and prevents such projects from connecting to the national power grid until further notice. IEnova’s renewable energy projects affected by the order filed for legal protection through amparo claims (constitutional protection lawsuits) and, in June 2020, received injunctive relief until the claims are resolved by the courts. IEnova has since achieved commercial operations on its solar power generation projects that were impacted by the order. The second phase of ESJ is not impacted by the order because it is not interconnected to the Mexican electric grid.
In May 2020, the CRE approved an update to the transmission rates included in legacy renewable and cogeneration energy contracts, based on the claim that the legacy transmission rates did not reflect fair and proportional costs for providing the applicable services and, therefore, created inequitable competitive conditions. Three of IEnova’s renewable energy facilities (Don Diego Solar, Border Solar and Ventika) are currently holders of contracts with such legacy rates, and any increases in the transmission rates would be passed through directly to their customers. These renewable energy facilities have obtained injunctive relief, but are required to guarantee the difference in tariffs until the claims are resolved by the courts.
In March 2021, the Mexican government published a decree with amendments to Mexico’s Electricity Industry Law that include some public policy changes, including establishing priority of dispatch for CFE plants over privately owned plants. According to the decree, these amendments were to become effective on March 10, 2021, and SENER, the CRE and CENACE were to have 180 calendar days to modify, as necessary, all resolutions, policies, criteria, manuals and other regulations applicable to the power industry to conform with this decree. However, a Mexican court issued a definitive suspension of the amendments on March 19, 2021 and it is expected that Mexico’s Supreme Court will ultimately settle the matter.
In October 2020, the CRE approved a resolution to amend the rules for the inclusion of new offtakers of legacy generation and self-supply permits (the Offtaker Resolution), which became effective immediately. The Offtaker Resolution prohibits self-supply permit holders from adding new offtakers that were not included in the original development or expansion plans, making modifications to the amount of energy allocated to the named offtakers, and including load centers that have entered into a supply arrangement under Mexico’s Electricity Industry Law. Don Diego Solar, Border Solar and Ventika are holders of legacy self-supply permits and are impacted by the Offtaker Resolution. If IEnova is not able to obtain legal protection for these impacted facilities, IEnova expects it will sell Border Solar’s capacity and a portion of Don Diego Solar’s capacity affected by the Offtaker Resolution into the spot market. Currently, prices in the spot market are significantly lower than the fixed prices in the PPAs that were entered into through self-supply permits. IEnova has filed lawsuits against the Offtaker Resolution. Currently, Border Solar and Don Diego Solar are prohibited from delivering electric power to all (with respect to Border Solar) or a portion (with respect to Don Diego Solar) of their respective offtakers pending final resolution of these lawsuits.
IEnova and other companies affected by these new orders and regulations have challenged the orders and regulations by filing amparo claims, some of which have been granted injunctive relief. The court-ordered injunctions provide relief until Mexico’s Federal District Court or Supreme Court ultimately resolves the amparo claims. An unfavorable final decision on these amparo challenges, or the potential for an extended dispute, may impact our ability to operate our wind and solar facilities at existing levels or at all, may result in increased costs for IEnova and its customers, and may adversely affect our ability to develop new projects, any of which may have a material adverse impact on our results of operations and cash flows and our ability to recover the carrying values of our renewable energy investments in Mexico.
On April 23, 2021, the President of Mexico’s initiative to reform the Hydrocarbons Law was approved by Mexico’s Congress, leaving only its promulgation and publication pending. This reform grants SENER and the CRE additional powers to suspend and early terminate permits related to the midstream and downstream sectors. Suspension of permits will be determined by SENER or the CRE when a danger to national security, energy security, or to the national economy is foreseen. Likewise, new grounds for the revocation of permits are in place if the permit holder (i) carries out its activity with illegally imported products (smuggling); (ii) fails, on more than one occasion, to comply with the provisions applicable to quantity, quality and measurement of the products; or (iii) modifies the technical conditions of its infrastructure without authorization. Additionally, in the case of existing permits, authorities will revoke those permits that fail to comply with the minimum storage requirements established by SENER.
Other Litigation
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RBS Sempra Commodities
Sempra Energy holds an equity method investment in RBS Sempra Commodities, a limited liability partnership in the process of being liquidated. RBS, now NatWest Markets plc, our partner in the JV, paid an assessment of £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 J.P. Morgan Chase & Co. and later to Mercuria Energy Group, Ltd. HMRC asserted that RBS was not entitled to reduce its VAT liability by VAT paid on certain carbon credit purchases during 2009 because RBS knew or should have known that certain vendors in the trading chain did not remit their own VAT to HMRC. After paying the assessment, RBS filed a Notice of Appeal of the assessment with the First-Tier Tribunal. Trial on the matter, which could include the assessment of a penalty of up to 100% of the claimed amount, is scheduled to begin in June 2021.
In 2015, liquidators filed a claim in the High Court of Justice against RBS and Mercuria Energy Europe Trading Limited (the Defendants) on behalf of 10 companies (the Liquidating Companies) that engaged in carbon credit trading via chains that included a company that traded directly with RBS SEE. The claim alleges that the Defendants’ participation in the purchase and sale of carbon credits resulted in the Liquidating Companies’ carbon credit trading transactions creating a VAT liability they were unable to pay, and that the Defendants are liable to provide for equitable compensation due to dishonest assistance and for compensation under the U.K. Insolvency Act of 1986. Trial on the matter was held in June and July of 2018. In March 2020, the High Court of Justice rendered its judgment mostly in favor of the Liquidating Companies and awarded damages of approximately £45 million (approximately $62 million in U.S. dollars at March 31, 2021), plus costs and interest. In October 2020, the High Court of Justice assessed costs and interest to be approximately £21 million (approximately $29 million in U.S. dollars at March 31, 2021) as of that date, with interest continuing to accrue. The Defendants appealed the March 2020 judgment, and a hearing in the Court of Appeal was held in March 2021. J.P. Morgan Chase & Co. has notified us that Mercuria Energy Group, Ltd. has sought indemnity for the claim, and J.P. Morgan Chase & Co. has in turn sought indemnity from Sempra Energy and RBS.
Although the final outcome of both the High Court of Justice case and First-Tier Tribunal case remains uncertain, we recorded $100 million in equity losses from our investment in RBS Sempra Commodities in Equity Earnings on the Sempra Energy Condensed Consolidated Statement of Operations in the three months ended March 31, 2020, which represents an estimate of our obligations to settle pending tax matters and related legal costs.
Asbestos Claims Against EFH Subsidiaries
Certain EFH subsidiaries that we acquired as part of the merger of EFH with an indirect subsidiary of Sempra Energy are defendants in personal injury lawsuits brought in state courts throughout the U.S. As of April 30, 2021, 4 such lawsuits are pending, all of which have been served. These cases allege illness or death as a result of exposure to asbestos in power plants designed and/or built by companies whose assets were purchased by predecessor entities to the EFH subsidiaries, and generally assert claims for product defects, negligence, strict liability and wrongful death. They seek compensatory and punitive damages. Additionally, in connection with the EFH bankruptcy proceeding, approximately 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. None of these claims or lawsuits were discharged in the EFH bankruptcy proceeding. The costs to defend or resolve these lawsuits and the amount of damages that may be imposed or incurred could have a material adverse effect on Sempra Energy’s cash flows, financial condition and results of operations.
We are also defendants in ordinary routine litigation incidental to our businesses, including personal injury, employment litigation, product liability, property damage and other claims. Juries have demonstrated an increasing willingness to grant large awards, including punitive damages, in these types of cases.

LEASES
We discuss leases further in Note 16 of the Notes to Consolidated Financial Statements in the Annual Report.
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A lease exists when a contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. We determine if an arrangement is or contains a lease at inception of the contract.
Some of our lease agreements contain nonlease components, which represent activities that transfer a separate good or service to the lessee. As the lessee for both operating and finance leases, we have elected to combine lease and nonlease components as a single lease component for real estate, fleet vehicles, power generating facilities, and pipelines, whereby fixed or in-substance fixed payments allocable to the nonlease component are accounted for as part of the related lease liability and ROU asset. As the lessor, we have elected to combine lease and nonlease components as a single lease component for real estate, power generating facilities and terminals if the timing and pattern of transfer of the lease and nonlease components are the same and the lease component would be classified as an operating lease if accounted for separately.
Lessee Accounting
We have operating and finance leases for real and personal property (including office space, land, fleet vehicles, machinery and equipment, warehouses and other operational facilities) and PPAs with renewable energy and peaker plant facilities.
We provide supplemental noncash information for operating and finance leases below.
SUPPLEMENTAL NONCASH INFORMATION
(Dollars in millions)
Three months ended March 31, 2021
Sempra Energy ConsolidatedSDG&ESoCalGas
Increase in operating lease obligations for ROU assets$$$
Increase in finance lease obligations for investment in PP&E15 
Three months ended March 31, 2020
Sempra Energy ConsolidatedSDG&ESoCalGas
Increase in operating lease obligations for ROU assets$19 $$
Increase in finance lease obligations for investment in PP&E20 16 
Leases that Have Not Yet Commenced
SDG&E has entered into a battery storage tolling agreement that it expects will commence in the third quarter of 2021. SDG&E expects to account for the tolling agreement as an operating lease upon commencement, and expects the future minimum lease payments to be $3 million in 2021, $10 million in each of 2022 through 2025 and $101 million thereafter until expiration in 2036.
Lessor Accounting
Sempra Mexico is a lessor for certain of its natural gas and ethane pipelines, compressor stations, LPG storage facilities and a liquid fuels terminal.
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 in amount from one period to the next.
We provide information below for leases for which we are the lessor.
LESSOR INFORMATION ON THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – SEMPRA ENERGY
(Dollars in millions)
Three months ended March 31,
20212020
Fixed lease payments(1)
$53 $50 
Depreciation expense10 10 
(1)     Included in Revenues: Energy-Related Businesses on the Condensed Consolidated Statements of Operations.

CONTRACTUAL COMMITMENTS
We discuss below significant changes in the first three months of 2021 to contractual commitments discussed in Notes 1 and 16 of the Notes to Consolidated Financial Statements in the Annual Report.
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LNG Purchase Agreement
Sempra LNG has a sale and purchase agreement for the supply of LNG to the ECA Regas Facility. The commitment amount is calculated using a predetermined formula based on estimated forward prices of the index applicable from 2021 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, 2021, we expect the commitment amount to decrease by $67 million in 2021, increase by $37 million in 2022, increase by $35 million in 2023, increase by $29 million in 2024, increase by $23 million in 2025 and increase by $86 million thereafter (through contract termination in 2029) compared to December 31, 2020, reflecting changes in estimated forward prices since December 31, 2020 and actual transactions for the first three months of 2021. These LNG commitment amounts are based on the assumption that all LNG cargoes, less those already confirmed to be diverted, under the agreement are delivered. Actual LNG purchases in the current and prior years have been significantly lower than the maximum amount provided under the agreement due to the customer electing to divert cargoes as allowed by the agreement.
NOTE 12. SEGMENT INFORMATION
We 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 Utilities holds our investment in Oncor Holdings, which owns an 80.25% interest in Oncor, a regulated electric transmission and distribution utility serving customers in the north-central, eastern, western and panhandle regions of Texas; and our indirect, 50% interest in Sharyland Holdings, which owns Sharyland Utilities, a regulated electric transmission utility serving customers near the Texas-Mexico border.
Sempra Mexico develops, owns and operates, or holds interests in, natural gas, electric, LNG, LPG, ethane and liquid fuels infrastructure, and has marketing operations for the purchase of LNG and the purchase and sale of natural gas in Mexico.
Sempra LNG develops, builds, operates and invests in natural gas liquefaction export facilities, including natural gas pipelines and infrastructure, and buys, sells and transports natural gas through its marketing operations, all within North America.
As we discuss in Note 5, the financial information related to our businesses that constituted the Sempra South American Utilities segment is presented as discontinued operations for all periods presented. The information in the tables below excludes amounts from discontinued operations unless otherwise noted. We completed the sales of our discontinued operations in the second quarter of 2020.
We evaluate each segment’s performance based on its contribution to Sempra Energy’s reported earnings and cash flows. The California Utilities operate in essentially separate service territories, under separate regulatory frameworks and rate structures set by the CPUC and the FERC. We describe the accounting policies of all of our segments in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
The cost of common services shared by the business segments is assigned directly or allocated based on various cost factors, depending on the nature of the service provided. Interest income and expense is recorded on intercompany loans. The loan balances and related interest are eliminated in consolidation.
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.
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SEGMENT INFORMATION  
(Dollars in millions)  
 Three months ended March 31,
 20212020
REVENUES  
SDG&E$1,337 $1,269 
SoCalGas1,508 1,395 
Sempra Mexico367 309 
Sempra LNG196 123 
All other
Adjustments and eliminations(1)
Intersegment revenues(1)
(150)(67)
Total$3,259 $3,029 
INTEREST EXPENSE  
SDG&E$102 $101 
SoCalGas39 40 
Sempra Mexico38 32 
Sempra LNG16 
All other83 109 
Intercompany eliminations(6)(18)
Total$259 $280 
INTEREST INCOME  
SDG&E$$
SoCalGas
Sempra Mexico12 18 
Sempra LNG22 
Intercompany eliminations(3)(15)
Total$19 $27 
DEPRECIATION AND AMORTIZATION  
SDG&E$213 $201 
SoCalGas173 159 
Sempra Mexico51 47 
Sempra LNG
All other
Total$442 $412 
INCOME TAX EXPENSE (BENEFIT)  
SDG&E$45 $58 
SoCalGas94 52 
Sempra Mexico(307)
Sempra LNG49 23 
All other(38)(33)
Total$158 $(207)
EQUITY EARNINGS (LOSSES)  
Equity earnings (losses), before income tax:  
Sempra Texas Utilities$$
Sempra LNG134 57 
All other(100)
135 (43)