Sempra 2020 10-K Annual Report

FORM 10-K

Commission File No.			Exact Name of Registrants as Specified in their Charters, Address and Telephone Number												State of Incorporation			I.R.S. Employer Identification Nos.
1-14201			SEMPRA ENERGY												California			33-0732627
			488 8th Avenue
			San Diego, California 92101
			(619) 696-2000
1-03779			SAN DIEGO GAS & ELECTRIC COMPANY												California			95-1184800
			8326 Century Park Court
			San Diego, California 92123
			(619) 696-2000
1-01402			SOUTHERN CALIFORNIA GAS COMPANY												California			95-1240705
			555 West Fifth Street
			Los Angeles, California 90013
			(213) 244-1200

This combined Form 10-K 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 II – Items 6 and 8 are provided for each reporting entity, except for the Notes to Consolidated Financial Statements in Part II – Item 8. The Notes to Consolidated Financial Statements for all of the reporting entities are combined. All Items other than Part II – Items 6 and 8 are combined for the three reporting entities.

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

References in this report to “we,” “our,” “us,” “our company” and “Sempra Energy Consolidated” are to Sempra Energy and its consolidated entities, collectively, unless otherwise indicated by the context. We refer to SDG&E and SoCalGas collectively as the California Utilities, which do not include the utilities in our Sempra Texas Utilities or Sempra Mexico segments or the utilities in our former South American businesses included in discontinued operations. All references in this report to our reportable segments are not intended to refer to any legal entity with the same or similar name.

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

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

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

▪the Financial Statements and related Notes of SoCalGas.

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

▪moves to reduce or eliminate reliance on natural gas 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 (including costs in excess of applicable policy limits), may be disputed by insurers or may otherwise not be recoverable through regulatory mechanisms or may impact our ability to obtain satisfactory levels of affordable insurance

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

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

▪expropriation of assets, 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 DA and CCA, 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 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

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 and in other reports that we file with the SEC.

SUMMARY OF RISK FACTORS

There are a number of risks that you should understand before making an investment decision in our securities or the securities of our subsidiaries. This summary is not intended to be complete and should only be read together with the information set forth in “Risk Factors” in this report. If any of these risks occur, Sempra Energy’s and its subsidiaries’ businesses, cash flows, financial condition, results of operations and/or prospects could be materially and adversely affected, and the trading prices of Sempra Energy’s securities and those of its subsidiaries could substantially decline. These risks include, among others, the following:

Risks Related to Sempra Energy

▪Sempra Energy’s cash flows, ability to pay dividends and ability to meet its debt obligations largely depend on the performance of its subsidiaries and entities that are accounted for as equity method investments, such as Oncor Holdings and Cameron LNG JV.

▪The economic interest, voting rights and market value of our outstanding common and preferred stock may be adversely affected by any additional equity securities we may issue and, with respect to our common stock, by our outstanding preferred stock.

Risks Related to All Sempra Energy Businesses

▪Severe weather conditions, natural disasters, pandemics, accidents, equipment failures, explosions or acts of terrorism could materially adversely affect us.

▪The substantial debt service obligations of Sempra Energy, SDG&E and SoCalGas could have a material adverse effect on us, and with respect to Sempra Energy, could require additional equity securities issuances.

▪The availability and cost of debt or equity financing could be adversely affected by conditions in the financial markets and economic conditions generally, as well as other factors, and any such negative effects could materially adversely affect us.

▪Certain credit rating agencies may downgrade our credit ratings or place those ratings on negative outlook.

▪Our businesses are subject to complex governmental regulations and tax and accounting requirements and may be materially adversely affected by these regulations or requirements or any changes to them.

▪Our businesses require numerous permits, licenses, franchises, and other approvals and agreements from various federal, state, local and foreign governmental agencies, and the failure to obtain or maintain any of them could materially adversely affect us.

Risks Related to the California Utilities

▪Wildfires in California pose a significant risk to the California Utilities (particularly SDG&E) and Sempra Energy.

▪The electricity industry is undergoing significant change, including increased deployment of distributed energy resources, technological advancements, and political and regulatory developments.

▪Natural gas and natural gas storage have increasingly been the subject of political and public scrutiny, including a desire by some to substantially reduce or eliminate reliance on natural gas as an energy source.

▪The California Utilities are subject to extensive regulation by state, federal and local legislative and regulatory authorities, which may materially adversely affect us.

▪SoCalGas has incurred and may continue to incur significant costs, expenses and other liabilities related to the Leak, a substantial portion of which may not be recoverable through insurance.

Risks Related to Our Interest in Oncor

▪Certain ring-fencing measures, governance mechanisms and commitments limit our ability to influence the management and policies of Oncor.

▪Changes in the electric utility industry, including changes in regulation of ERCOT, could materially adversely affect Oncor, which could materially adversely affect us.

Risks Related to Our Businesses Other Than the California Utilities and Our Interest in Oncor

▪Project development activities may not be successful and projects under construction may not commence operation as scheduled, be completed within budget or operate at expected levels, which could have a material adverse effect on us.

▪Our businesses depend on the performance of counterparties, including with respect to long-term supply, sales and capacity agreements, and any failure by these parties to perform could result in substantial expenses and business disruptions and exposure to commodity price risk and volatility, any of which could materially adversely affect us.

▪Our international businesses and operations expose us to legal, tax, economic, geopolitical, management oversight, foreign currency and inflation risks and challenges.

Risks Related to Our Proposed IEnova Exchange Offer and Our Proposed Transaction Related to Sempra Infrastructure Partners

▪Our ability to complete our proposed IEnova exchange offer is subject to various conditions and other risks and uncertainties that could cause the transaction to be abandoned, delayed or restructured, which could materially adversely affect us.

▪We expect to issue shares of our common stock in the proposed exchange offer, which would dilute the voting interests and could dilute the economic interests of our current shareholders and may adversely affect the market value of our common stock and preferred stock.

▪The proposed exchange offer, if completed, would subject us to additional regulation and liability in Mexico.

▪Our proposed transaction related to Sempra Infrastructure Partners is subject to a number of risks and uncertainties.

PART I.

OVERVIEW

We are a California-based holding company with energy infrastructure investments in North America. Our businesses invest in, develop and operate energy infrastructure, and provide electric and gas services to customers through regulated public utilities.

Sempra Energy was formed in 1998 through a business combination of Enova and PE, the holding companies of our regulated public utilities in California: SDG&E, which began operations in 1881, and SoCalGas, which began operations in 1867. We have since expanded our regulated public utility presence into Texas through our 80.25% interest in Oncor and 50% interest in Sharyland Utilities.

We have had a strong and growing presence in Mexico through IEnova. IEnova has a diverse portfolio of energy infrastructure projects and assets serving Mexico’s growing energy needs. Our energy infrastructure footprint includes our 50.2% interest in Cameron LNG JV, which is a natural gas liquefaction export facility operating in Louisiana, and construction and development of LNG projects and assets on the Gulf Coast and Pacific Coast of North America.

In 2018, we announced a multi-phase portfolio optimization initiative designed to sharpen our strategic focus on North America. We have since executed on that initiative by completing the sales of our renewables businesses and our non-utility natural gas storage assets in the U.S., and by completing the sales of our businesses in South America. We present the South American businesses as discontinued operations throughout this report.

Business Strategy

Our mission is to be North America’s premier energy infrastructure company. We are primarily focused on transmission and distribution investments among other areas that we believe are capable of producing stable cash flows and improved earnings visibility, with the goal of delivering safe and reliable energy to our customers and increasing shareholder value.

DESCRIPTION OF BUSINESS BY SEGMENT

Our business activities are organized under the following reportable segments:

▪SDG&E

▪SoCalGas

▪Sempra Texas Utilities

▪Sempra Mexico

▪Sempra LNG

SDG&E

SDG&E is a regulated public utility that provides electric services to a population of, at December 31, 2020, approximately 3.7 million and natural gas services to approximately 3.4 million of that population, covering a 4,100 square mile service territory in Southern California that encompasses San Diego County and an adjacent portion of Orange County.

SDG&E’s assets at December 31, 2020 covered the following territory:

Electric Utility Operations

Electric Transmission and Distribution System. Service to SDG&E’s customers is supported by its electric transmission and distribution system, which includes substations and overhead and underground lines. These electric facilities are primarily in the San Diego, Imperial and Orange counties of California, and in Arizona and Nevada and consisted of 2,129 miles of transmission lines, 23,926 miles of distribution lines and 183 substations at December 31, 2020. Periodically, various areas of the service territory require expansion to accommodate customer growth and maintain reliability and safety.

SDG&E’s 500-kV Southwest Powerlink transmission line, which is shared with Arizona Public Service Company and Imperial Irrigation District, extends from Palo Verde, Arizona to San Diego, California. SDG&E’s share of the line is 1,162 MW, although it can be less under certain system conditions. SDG&E’s Sunrise Powerlink is a 500-kV transmission line constructed and operated by SDG&E with import capability of 1,000 MW of power.

Mexico’s Baja California transmission system is connected to SDG&E’s system via two 230-kV interconnections with combined capacity of up to 600 MW in the north-to-south direction and 800 MW in the south-to-north direction, although it can be less under certain system conditions.

Edison’s transmission system is connected to SDG&E’s system via five 230-kV transmission lines.

Electric Resources. To meet customer demand, SDG&E supplies power from its own electric generation facilities and procures power on a long-term basis from other suppliers for resale through CPUC-approved purchased-power contracts or through purchases on a spot basis. SDG&E does not earn any return on commodity sales volumes. SDG&E’s supply at December 31, 2020 was as follows:

(1) Excludes approximately 107.5 MW of battery storage owned and approximately 174 MW of battery storage contracted.

(2) SDG&E owns and operates four natural gas-fired power plants, three of which are in California and one of which is in Nevada.

Charges under contracts with suppliers are based on the amount of energy received or are tolls based on available capacity. Tolling contracts are purchased-power contracts under which SDG&E provides natural gas for generation to the energy supplier.

SDG&E procures natural gas under short-term contracts for its owned generation facilities and for certain tolling contracts associated with purchased-power arrangements. Purchases are from various southwestern U.S. suppliers and are primarily priced based on published monthly bid-week indices.

SDG&E is a participant in the Western Systems Power Pool, which includes an electric-power and transmission-rate agreement that allows access to power trading with more than 300 member utilities, power agencies, energy brokers and power marketers located throughout the U.S. and Canada. Participants can make power transactions on standardized terms, including market-based rates, preapproved by the FERC. Participation in the Western Systems Power Pool is intended to assist members in managing power delivery and price risk.

Customers and Demand. SDG&E provides electric services through the generation, transmission and distribution of electricity to the following customer classes:

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When evaluating our company and its subsidiaries and any investment in our or their securities, you should consider carefully the following risk factors and all other information contained in this report and in the other documents we file with the SEC, including in documents we file subsequent to this report. These risk factors could materially adversely affect our actual results and cause such results to differ materially from those expressed in any forward-looking statements made by us or on our behalf. We may also be materially harmed by risks and uncertainties not currently known to us or that we currently deem to be immaterial. If any of these risks occurs, our businesses, cash flows, results of operations, financial condition and/or prospects could be materially adversely affected, and the trading prices of our securities and those of our subsidiaries could substantially decline. These risk factors should be read in conjunction with the other information concerning our company set forth in or attached as an exhibit to this report, including, among other things, the information set forth in the Consolidated Financial Statements and in “Part II – Item 7. MD&A.”

Risks Related to Sempra Energy

Operational and Structural Risks

Sempra Energy’s cash flows, ability to pay dividends and ability to meet its debt obligations largely depend on the performance of its subsidiaries and entities that are accounted for as equity method investments, such as Oncor Holdings and Cameron LNG JV.

We are a holding company and substantially all our assets are owned by our subsidiaries or entities we do not control, which include equity method investments such as Oncor Holdings and Cameron LNG JV. Our ability to pay dividends and to meet our debt and other obligations largely depends on cash flows from our subsidiaries and equity method investments. Cash flows from our subsidiaries and equity method investments depend on their ability to successfully execute their business strategies and generate cash flows in excess of their own expenditures, common and preferred dividends (if any), and debt and other obligations. In addition, the entities accounted for as equity method investments, which we do not control, and our subsidiaries are all separate and distinct legal entities that are not obligated to pay dividends or make loans or distributions to us and could be precluded from paying any such dividends or making any such loans or distributions under certain circumstances, including, among other things, as a result of legislation, regulation, court order or contractual restrictions or in times of financial distress. The inability to access capital from our subsidiaries and entities accounted for as equity method investments could have a material adverse effect on our cash flows, financial condition and/or prospects.

Sempra Energy’s rights to the assets of its subsidiaries and equity method investments are structurally subordinated to the claims of that entity’s creditors, including trade creditors. In addition, to the extent Sempra Energy is a creditor of any such entity, its rights as a creditor would be effectively subordinated to any security interest in the assets of that entity and any indebtedness of the entity senior to that held by Sempra Energy.

Sempra Energy has substantial investments in and obligations arising from businesses that it does not control or manage or in which it shares control.

We have and make investments in entities that we do not control or manage or in which we share control, which include Sempra Energy’s direct or indirect interest in Oncor, Cameron LNG JV and RBS Sempra Commodities; SDG&E’s interest in SONGS; and IEnova’s indirect interest in the Sur de Texas-Tuxpan natural gas marine pipeline in Mexico, among others. In some cases, we engage in other arrangements with or for these entities that could expose us to risks in addition to our investment. For example, Sempra Energy has provided guarantees in support of financing agreements related to Cameron LNG JV, Sempra Energy is subject to certain indemnities with respect to RBS Sempra Commodities, and Sempra Mexico has provided loans to JVs in which it has investments. We discuss the guarantees in Note 6, indemnities in Note 16, and affiliate loans in Note 1 of the Notes to Consolidated Financial Statements.

Where we share control with other equity owners, any disagreements among the owners of these businesses with respect to material issues, including strategy, financial, operational or transactional matters, could have a material adverse effect on the ability of that business to move forward with key initiatives or projects or take other actions, and could also negatively affect the long-term relationships among the business owners and the ability of the entity to function efficiently and effectively. Any such circumstance could materially adversely affect our business, financial condition, cash flows, result of operations and/or prospects.

With respect to ventures and other businesses over which we do not exercise control, we could be responsible for significant liabilities or losses related to these businesses, such as our investment in RBS Sempra Commodities where we recorded $100 million in equity losses representing our estimated obligations to settle outstanding tax matters and related legal costs, and where we could be subject to further losses upon final resolution of these matters. In addition to other risks inherent in these businesses, if their management were to fail to perform adequately, the other investors in the businesses were unable or otherwise failed to perform their obligations to provide capital and credit support for these businesses, business decisions were made with which we do not agree or other factors were to result in liabilities or losses at these entities, it could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects. We discuss our investments further in Notes 5, 6 and 16 of the Notes to Consolidated Financial Statements.

Our business could be negatively affected as a result of actions of activist shareholders.

Activist shareholders may, from time to time, engage in proxy solicitations, advance shareholder proposals, or otherwise attempt to effect changes and assert influence on our board of directors and management. In taking these steps, activist shareholders could seek to acquire significant amounts of our capital stock, which could threaten our ability to use some or all our NOL carryforwards if any such attempt were to result in our corporation undergoing an “ownership change” under applicable tax rules. Responding to activist shareholders would require us to incur significant legal and advisory fees, proxy solicitation expenses (in

the case of a proxy contest) and administrative and associated costs and require significant time and attention by our board of directors and management, diverting their attention from the pursuit of our business strategy.

Any perceived uncertainties as to our future direction and control, our ability to execute on our strategy, or the composition of our board of directors or senior management team arising from a proxy contest or increased ownership or other interest in our company from activist shareholders could lead to the perception of a change in the direction of our business or instability, which could be exploited by our competitors and/or other activist shareholders, result in the loss of business opportunities, and make it more difficult to pursue our strategic initiatives or attract and retain qualified personnel and business partners, any of which could have a material adverse effect on our business, operating results and/or prospects. Further, any such actions could cause significant fluctuations in the trading prices of our common stock, preferred stock and debt securities based on temporary or speculative market percep

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None.

We own or lease land, warehouses, offices, operating and maintenance centers, shops, service facilities and equipment necessary to conduct our businesses. Each of our operating segments currently has adequate space and, if we needed more space, we believe it is readily available. We discuss properties related to our electric, natural gas and energy infrastructure operations in “Part I – Item 1. Business” and Note 1 of the Notes to Consolidated Financial Statements.

We are not party to, and our property is not the subject of, any material pending legal proceedings (other than ordinary routine litigation incidental to our businesses) except for the matters described in Notes 15 and 16 of the Notes to Consolidated Financial Statements, “Part I – Item 1A. Risk Factors” and “Part II – Item 7. MD&A – Capital Resources and Liquidity.”

Not applicable.

PART II.

MARKET INFORMATION

Sempra Energy Common Stock

Our common stock is traded on the NYSE under the ticker symbol SRE. At February 22, 2021, there were approximately 23,345 record holders of our common stock.

SoCalGas and SDG&E Common Stock

Information concerning dividend declarations for SoCalGas and SDG&E is included in their Statements of Changes in Shareholders’ Equity and Statements of Changes in Equity, respectively, set forth in the consolidated financial statements.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

On July 6, 2020, our board of directors authorized the repurchase of shares of our common stock at any time and from time to time in an aggregate amount not to exceed the lesser of $2 billion or amounts spent to purchase no more than 25 million shares. This repurchase authorization was publicly announced on August 5, 2020 and has no expiration date. No shares have been repurchased under this authorization.

We may also, from time to time, purchase shares of our common stock to which participants would otherwise be entitled from LTIP participants who elect to sell a sufficient number of shares in connection with the vesting of RSUs and stock options in order to satisfy minimum statutory tax withholding requirements.

FIVE-YEAR SUMMARIES

The following tables present selected financial data of Sempra Energy, SDG&E and SoCalGas for the five years ended December 31, 2020. The data is derived from the audited consolidated financial statements of each company. You should read this information in conjunction with “Part II – Item 7. MD&A” and the consolidated financial statements and notes contained in this annual report on Form 10-K.

(1) Includes long-term debt due within one year and current portion of finance lease obligations. Excludes discontinued operations.

(2) Excludes discontinued operations.

In 2020, SoCalGas recorded charges of $307 million ($233 million after tax) in Aliso Canyon Litigation and Regulatory Matters on the SoCalGas and Sempra Energy Consolidated Statements of Operations related to settlement discussions in connection with civil litigation and regulatory matters. We discuss these matters in Note 16 of the Notes to Consolidated Financial Statements.

In 2020, we completed the sale of our equity interests in our Peruvian businesses for cash proceeds of $3,549 million, net of transaction costs and as adjusted for post-closing adjustments, and recorded a pretax gain of $2,271 million ($1,499 million after tax) in discontinued operations. Also in 2020, we completed the sale of our equity interests in our Chilean businesses for cash proceeds of $2,216 million, net of transaction costs and as adjusted for post-closing adjustments, and recorded a pretax gain of $628 million ($248 million after tax) in discontinued operations. We discuss discontinued operations in Note 5 of the Notes to Consolidated Financial Statements.

In 2020, we recorded a charge of $100 million in Equity Earnings on Sempra Energy’s Consolidated Statement of Operations for losses from our investment in RBS Sempra Commodities. We discuss the charge further in Note 16 of the Notes to Consolidated Financial Statements.

In 2020, Sempra Energy completed a registered public offering of our series C preferred stock. This offering provided net proceeds of $889 million. We used the net proceeds for working capital and other general corporate purposes, including the repayment of indebtedness.

In 2020, Sempra Energy entered into and completed an ASR program under which we paid $500 million to repurchase 4,089,375 shares of our common stock at an average price of $122.27 per share.

In 2019, Sempra Renewables completed the sale of its remaining U.S. wind assets and investments and recognized a pretax gain on sale of $61 million ($45 million after tax and NCI). In 2018, Sempra Renewables completed the sale of its U.S. operating solar assets, solar and battery storage development projects, as well as an interest in one wind facility, and recognized a pretax gain on sale of $513 million ($367 million after tax). We discuss the sales and related gains in Note 5 of the Notes to Consolidated Financial Statements.

In 2018, we recorded impairment charges of $1.1 billion ($629 million after tax and NCI) at Sempra LNG, $200 million ($145 million after tax) at Sempra Renewables and $65 million at Parent and other. We discuss the impairments in Notes 5, 6 and 12 of the Notes to Consolidated Financial Statements.

In 2018, Sempra Energy completed registered public offerings of our common stock (including shares offered pursuant to forward sale agreements), series A preferred stock, series B preferred stock and long-term debt. These offerings, including settlement of the forward sale agreements, provided total net proceeds of approximately $4.5 billion in equity and $4.9 billion in debt. A portion of these proceeds were used to partially fund the acquisition of an indirect, 100*%* interest in Oncor Holdings, which we account for as an equity method investment. We discuss the acquisition and equity method investment further in Notes 5 and 6 of the Notes to Consolidated Financial Statements.

In 2017, Sempra Energy’s income tax expense included $870 million related to the impact of the TCJA.

In 2017, we recorded a charge of $208 million (after tax) for the write-off of SDG&E’s wildfire regulatory asset.

In 2017 and 2016, Sempra Mexico recognized impairment charges of $47 million (after NCI) and $90 million (after tax and NCI), respectively, related to assets held for sale at TdM.

In 2016, we recorded a $350 million (after tax and NCI) noncash gain associated with the remeasurement of Sempra Mexico’s equity interest in IEnova Pipelines.

In 2016, IEnova completed a private offering in the U.S. and outside of Mexico and a concurrent public offering in Mexico of common stock.

We discuss litigation and other contingencies in Note 16 of the Notes to Consolidated Financial Statements.

(1) Includes long-term debt due within one year and current portion of finance lease obligations.

OVERVIEW

In 2018, we set out to simplify Sempra Energy’s business model and sharpen our focus on our mission to be North America’s premier energy infrastructure company. Our 2020 operational and financial results reflect our focus on executing this strategy:

▪We completed the sales of our South American businesses

▪We achieved full commercial operations at Cameron LNG JV Phase 1

▪We reached a final investment decision for ECA LNG Phase 1

▪We executed well on our planned capital expenditures

Our South American businesses and certain activities associated with those businesses are presented as discontinued operations for all periods presented. Nominal activities that are not classified as discontinued operations have been subsumed into Parent and other. Our discussions below exclude discontinued operations, unless otherwise noted.

RESULTS OF OPERATIONS

We discuss the following in Results of Operations:

▪Overall results of operations of Sempra Energy Consolidated;

▪Segment results;

▪Significant changes in revenues, costs and earnings; and

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

OVERALL RESULTS OF OPERATIONS OF SEMPRA ENERGY CONSOLIDATED

In 2020 compared to 2019, our earnings increased by $1,709 million to $3,764 million and our diluted EPS increased by $5.59 to $12.88. In 2019 compared to 2018, our earnings increased by $1,131 million to $2,055 million and our diluted EPS increased by $3.87 to $7.29. The change in diluted EPS for 2020 and 2019 included decreases of $(0.46) and $(0.33), respectively, attributable to an increase in weighted-average common shares outstanding. Our earnings and diluted EPS were impacted by variances discussed in “Segment Results” below.

SEGMENT RESULTS

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

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

SDG&E

The increase in earnings of $57 million (7%) in 2020 compared to 2019 was primarily due to:

▪$62 million due to the release of a regulatory liability in 2020 related to 2016-2018 forecasting differences that are not subject to tracking in the income tax expense memorandum account, which we discuss in Note 4 of the Notes to Consolidated Financial Statements;

▪$52 million higher electric transmission margin, including an increase in authorized ROE and the following impacts from the March 2020 FERC-approved TO5 settlement:

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

◦$9 million favorable impact from the retroactive application of the final TO5 settlement for 2019;

▪$23 million higher AFUDC equity; and

▪$16 million higher income tax benefits from flow-through items; offset by

▪$44 million expected to be refunded to customers and a fine related to the Energy Efficiency Program inquiry, which we discuss in Note 4 of the Notes to Consolidated Financial Statements;

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

▪$13 million higher amortization and accretion of the Wildfire Fund asset and liability, respectively; and

▪$12 million higher net interest expense.

The increase in earnings of $98 million (15%) in 2019 compared to 2018 was primarily due to:

▪$71 million higher CPUC base operating margin authorized for 2019, net of operating expenses;

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

▪$11 million higher margin from electric transmission operations, net of a FERC formulaic rate adjustment benefit in 2018; offset by

▪$10 million amortization of the Wildfire Fund asset.

SoCalGas

The decrease in earnings of $137 million (21%) in 2020 compared to 2019 was primarily due to:

▪$233 million from impacts associated with Aliso Canyon natural gas storage facility litigation and regulatory matters;

▪$38 million income tax benefit in 2019 from the impact of the January 2019 CPUC decision allocating certain excess deferred income tax balances to shareholders; and

▪$12 million higher net interest expense; offset by

▪$64 million due to the release of a regulatory liability in 2020 related to 2016-2018 income tax expense forecasting differences;

▪$29 million higher CPUC base operating margin authorized for 2020, net of operating expenses;

▪$21 million impairment of non-utility native gas assets in 2019;

▪$10 million higher income tax benefits from flow-through items; and

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

The increase in earnings of $241 million in 2019 compared to 2018 was primarily due to:

▪$216 million higher CPUC base operating margin authorized for 2019, net of operating expenses;

▪$38 million income tax benefit from the impact of the January 2019 CPUC decision allocating certain excess deferred income tax balances to shareholders;

▪$22 million from impacts associated with Aliso Canyon natural gas storage facility litigation in 2018; and

▪$14 million higher income tax benefits from flow-through items; offset by

▪$21 million impairment of non-utility native gas assets in 2019;

▪$18 million higher net interest expense; and

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

Sempra Texas Utilities

The increase in earnings of $51 million (10%) in 2020 compared to 2019 was primarily due to higher equity earnings from Oncor Holdings driven by:

▪increased revenues from rate updates to reflect increases in invested capital and customer growth;

▪the impact of Oncor’s acquisition of InfraREIT in May 2019; and

▪higher AFUDC equity; offset by

▪unfavorable weather and increased operating costs and expenses attributable to invested capital.

The increase in earnings of $157 million (42%) in 2019 compared to 2018 primarily represented higher equity earnings from Oncor Holdings, which we acquired in March 2018, driven by the impact of Oncor’s acquisition of InfraREIT in May 2019 and higher revenues due to rate updates to refl

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Market risk is the risk of erosion of our cash flows, earnings, asset values or equity due to adverse changes in commodity market prices, interest rates and foreign currency and inflation rates.

RISK POLICIES

Sempra Energy has policies governing its market risk management and trading activities. Sempra Energy and the California Utilities maintain separate risk management committees, organizations and processes for the California Utilities and for all non-CPUC regulated affiliates to provide oversight of these activities. The committees consist of senior officers who establish policy, oversee energy risk management activities, and monitor the results of trading and other activities to help ensure compliance with our stated energy risk management and trading policies. These activities include, but are not limited to, monitoring of market positions that create credit, liquidity and market risk. The respective oversight organizations and committees are independent from energy procurement departments.

Along with other tools, we use VaR and liquidity metrics to measure our exposure to market risk associated with commodity portfolios. VaR is an estimate of the potential loss on a position or portfolio of positions over a specified holding period, based on normal market conditions and within a given statistical confidence interval. We use a variance-covariance VaR model at a 95% confidence level. A liquidity metric is intended to monitor the amount of financial resources needed for meeting potential margin calls as forward market prices move. VaR and liquidity risk metrics are independently verified by the respective risk management oversight organizations.

The California Utilities use power and natural gas derivatives to manage electric and natural gas price risk associated with servicing load requirements. The use of power and natural gas derivatives is subject to certain limitations imposed by company policy and is in compliance with risk management and trading activity plans that have been filed with and approved by the CPUC. We discuss revenue recognition in Note 3 and additional market-risk information regarding derivative instruments in Note 11 of the Notes to Consolidated Financial Statements.

We have exposure to changes in commodity prices, interest rates and foreign currency and inflation rates. The following discussion of these primary market-risk exposures as of December 31, 2020 includes a discussion of how these exposures are managed.

COMMODITY PRICE RISK

Market risk related to physical commodities is created by volatility in the prices and basis of certain commodities. Our various subsidiaries are exposed, in varying degrees, to commodity price risk, primarily to prices in the natural gas and electricity markets. Our policy is to manage this risk within a framework that considers the specific markets and operating and regulatory environments of each subsidiary.

Sempra Mexico and Sempra LNG are generally exposed to commodity price risk indirectly through their LNG, natural gas pipelines and storage, and power-generating assets. These segments may utilize commodity transactions in an effort to optimize these assets. These transactions are typically priced based on market indices, but may also include fixed price purchases and sales of commodities. Any residual exposure is monitored as described above. A hypothetical 10% unfavorable change in commodity prices would not have resulted in a material change in the fair value of our commodity-based derivatives for these segments at December 31, 2020 or 2019. The impact of a change in energy commodity prices on our commodity-based derivative instruments at a point in time is not necessarily representative of the results that will be realized when the contracts are ultimately settled and does not typically include the generally offsetting impact of our underlying asset positions.

The California Utilities’ market-risk exposure is limited due to CPUC-authorized rate recovery of the costs of commodity purchases, interstate and intrastate transportation, and storage activity. However, SoCalGas may, at times, be exposed to market risk as a result of incentive mechanisms that reward or penalize the utility for commodity costs below or above certain benchmarks for SoCalGas’ GCIM. If commodity prices were to rise too rapidly, it is likely that volumes would decline. This decline would increase the per-unit fixed costs, which could lead to further volume declines. The California Utilities manage their risk within the parameters of their market risk management framework. As of and for the year ended December 31, 2020, the total VaR of the California Utilities’ natural gas and electric positions was not material, and SDG&E’s power procurement activities were in compliance with the procurement plans filed with and approved by the CPUC.

INTEREST RATE RISK

We are exposed to fluctuations in interest rates primarily as a result of our having issued short- and long-term debt. Subject to regulatory constraints, we periodically enter into interest rate swap agreements to moderate our exposure to interest rate changes and to lower our overall cost of borrowing.

The table below shows the nominal amount of our debt:

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

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

We provide further information about debt and interest rate swap transactions in Notes 7 and 11, respectively, of the Notes to Consolidated Financial Statements.

We also are subject to the effect of interest rate fluctuations on the assets of our pension plans, other postretirement benefit plans, and SDG&E’s NDT. However, we expect the effects of these fluctuations, as they relate to the California Utilities, to be recovered in future rates.

FOREIGN CURRENCY AND INFLATION RATE RISK

We discuss our foreign currency and inflation exposures in “Part II – Item 7. MD&A – Impact of Foreign Currency and Inflation Rates on Results of Operations.”

The hypothetical effect for every 10% appreciation in the U.S. dollar against the Mexican peso, in which we have operations and investments, are as follows:

(1) After the effects of foreign currency derivatives.

(2) Amount represents the impact to earnings for a change in the average exchange rate throughout the reporting period.

(3) Amount primarily represents the effects of currency exchange rate movement from December 31, 2020 on monetary assets and liabilities and translation of non-U.S. deferred income tax balances at our Mexican subsidiaries.

(4) Amount represents the effects of currency exchange rate movement from December 31, 2020 that would be recorded to OCI at the end of the reporting period.

Monetary assets and liabilities at our Mexican subsidiaries and JVs that are denominated in U.S. dollars may fluctuate significantly throughout the year. These monetary assets and liabilities and certain nonmonetary assets and liabilities are adjusted for Mexican inflation for Mexican income tax purposes. Based on a net monetary liability position of $4.4 billion, including those related to our investments in JVs, at December 31, 2020, the hypothetical effect of a 10% increase in the Mexican inflation rate is

approximately $90 million lower earnings as a result of higher income tax expense for our consolidated subsidiaries, as well as lower equity earnings for our JVs.

We completed the sales of our South American businesses in 2020 and are no longer exposed to changes in foreign currency and inflation rates in Peru and Chile.

Our consolidated financial statements are listed on the Index to Consolidated Financial Statements set forth on page F-1 of this annual report on Form 10-K.

None.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Sempra Energy, SDG&E, SoCalGas

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

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

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Sempra Energy, SDG&E, SoCalGas

The respective management of Sempra Energy, SDG&E and SoCalGas is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f).

Under the supervision and with the participation of the principal executive officers and principal financial officers of Sempra Energy, SDG&E and SoCalGas, each such company’s management evaluated the effectiveness of its internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on these evaluations, each company’s management concluded that its internal control over financial reporting was effective as of December 31, 2020. Deloitte & Touche LLP audited the effectiveness of each company’s internal control over financial reporting as of December 31, 2020, as stated in their reports, which are included in this annual report on Form 10-K.

There have been no changes in any such company’s internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, such company’s internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Sempra Energy:

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Sempra Energy and subsidiaries (“Sempra Energy”) as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, Sempra Energy maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements as of and for the year ended December 31, 2020 of Sempra Energy and our report dated February 25, 2021 expressed an unqualified opinion on those financial statements.

Basis for Opinion

Sempra Energy’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on Sempra Energy’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Sempra Energy in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

San Diego, California

February 25, 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholder and Board of Directors of San Diego Gas & Electric Company:

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of San Diego Gas & Electric Company (“SDG&E”) as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, SDG&E maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements as of and for the year ended December 31, 2020 of SDG&E and our report dated February 25, 2021 expressed an unqualified opinion on those financial statements.

Basis for Opinion

SDG&E’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on SDG&E’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to SDG&E in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

San Diego, California

February 25, 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Southern California Gas Company:

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Southern California Gas Company (“SoCalGas”) as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, SoCalGas maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the financial statements as of and for the year ended December 31, 2020 of SoCalGas and our report dated February 25, 2021 expressed an unqualified opinion on those financial statements.

Basis for Opinion

SoCalGas’ management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on SoCalGas’ internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to SoCalGas in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

San Diego, California

February 25, 2021

None.

PART III.

Because SDG&E meets the conditions of General Instructions I(1)(a) and (b) of Form 10-K and is therefore filing this report with a reduced disclosure format as permitted by General Instruction I(2), the information required by Part III – Items 10, 11, 12 and 13 below is not required for SDG&E. We have, however, provided the information required by Part III – Item 10 with respect to SDG&E’s executive officers in “Part I – Item 1. Business – Other Matters – Information About Our Executive Officers.”

We provide the information required by Part III – Item 10 with respect to executive officers for Sempra Energy (other than information required by Item 405 of SEC Regulation S-K) and SoCalGas in “Part I – Item 1. Business – Other Matters – Information About Our Executive Officers.” For Sempra Energy, all other information required by Part III – Item 10 is incorporated by reference from “Corporate Governance,” “Share Ownership” and “Proposal 1: Election of Directors” in the proxy statement to be filed for its May 2021 annual meeting of shareholders. For SoCalGas, all other information required by Part III – Item 10 is incorporated by reference from its information statement to be filed for its June 2021 annual meeting of shareholders. In all cases, only the specific information that is expressly required by this item is incorporated herein by reference.

The information required by Part III – Item 11 is incorporated by reference from “Corporate Governance” and “Executive Compensation,” including “Compensation Discussion and Analysis,” “Compensation and Talent Committee Report” and “Compensation Tables” in the proxy statement to be filed for the May 2021 annual meeting of shareholders for Sempra Energy and from the information statement to be filed for the June 2021 annual meeting of shareholders for SoCalGas. In all cases, only the specific information that is expressly required by this item is incorporated herein by reference.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

Sempra Energy has LTIPs that permit the grant of a wide variety of equity and equity-based incentive awards to directors, officers and key employees. At December 31, 2020, outstanding awards consisted of stock options and RSUs held by 460 employees.

The following table sets forth information regarding our equity compensation plans at December 31, 2020.

(1) The 2013 LTIP consists of 243,177 options to purchase shares of our common stock, all of which were granted at an exercise price equal to 100% of the grant date fair market value of the shares subject to the option, 658,574 performance-based RSUs and 186,213 service-based RSUs. The 2019 LTIP consists of 122,218 options to purchase shares of our common stock, all of which were granted at an exercise price equal to 100% of the grant date fair market value of the shares subject to the option, 235,387 performance-based RSUs and 157,364 service-based RSUs. Each performance-based RSU granted under the 2013 LTIP and the 2019 LTIP represents the right to receive from zero to 2.0 shares of our common stock if applicable performance conditions are satisfied. For purposes of this table, the number of shares of common stock shown to be subject to each performance-based RSU is 1.0 share, which assumes performance conditions are satisfied at the target level.

(2) Represents the weighted-average exercise price of the 243,177 and 122,218 outstanding options to purchase shares of our common stock under the 2013 LTIP and the 2019 LTIP, respectively.

(3) The number of shares available for future issuance is increased by the number of shares to which each participant would otherwise be entitled that are withheld or surrendered to satisfy the exercise price or to satisfy tax withholding obligations relating to any plan awards, and is also increased by the number of shares subject to awards that expire or are forfeited, canceled or otherwise terminated without the issuance of shares. No new awards may be granted under the 2013 LTIP.

We provide additional discussion of share-based compensation in Note 10 of the Notes to Consolidated Financial Statements.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The security ownership information required by Part III – Item 12 is incorporated by reference from “Share Ownership” in the proxy statement to be filed for the May 2021 annual meeting of shareholders for Sempra Energy and from the information statement to be filed for the June 2021 annual meeting of shareholders for SoCalGas. In all cases, only the specific information that is expressly required by this item is incorporated herein by reference.

The information required by Part III – Item 13 is incorporated by reference from “Corporate Governance” in the proxy statement to be filed for the May 2021 annual meeting of shareholders for Sempra Energy and from the information statement to be filed for the June 2021 annual meeting of shareholders for SoCalGas. In all cases, only the specific information that is expressly required by this item is incorporated herein by reference.

Information regarding principal accountant fees and services is presented below for Sempra Energy, SDG&E and SoCalGas. The following table shows the fees paid to Deloitte & Touche LLP, the independent registered public accounting firm for Sempra Energy, SDG&E and SoCalGas, for services provided for 2020 and 2019.