Sempra 10-Q 2022-03-31

Filed 2022-05-05. 7 sections, 476K characters. Original on sec.gov · Markdown · JSON

Cover and table of contents



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 ended		March 31, 2022
		or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from			to


Commission File No.	Exact Name of Registrant as Specified in its Charter, Address of Principal Executive Office and Telephone Number	State of Incorporation	I.R.S. Employer Identification No.	Former name, former address and former fiscal year, if changed since last report
1-14201	SEMPRA ENERGY	California	33-0732627	No change
	488 8th Avenue
	San Diego, California 92101
	(619) 696-2000

1-03779	SAN DIEGO GAS & ELECTRIC COMPANY	California	95-1184800	No change
	8326 Century Park Court
	San Diego, California 92123
	(619) 696-2000

1-01402	SOUTHERN CALIFORNIA GAS COMPANY	California	95-1240705	No 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 Class	Trading Symbol	Name of Each Exchange on Which Registered
SEMPRA ENERGY:
Common Stock, without par value	SRE	New York Stock Exchange

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

SAN DIEGO GAS & ELECTRIC COMPANY:
None

SOUTHERN CALIFORNIA GAS COMPANY:
None



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

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



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

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

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


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

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

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

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

Common stock outstanding on April 29, 2022:


Sempra Energy			314,304,730 shares
San Diego Gas & Electric Company			Wholly owned by Enova Corporation, which is wholly owned by Sempra Energy
Southern California Gas Company			Wholly owned by Pacific Enterprises, which is wholly owned by Sempra Energy


TABLE OF CONTENTS

		Page
Glossary		4
Information Regarding Forward-Looking Statements		7

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	9
	Notes to Condensed Consolidated Financial Statements
	Note 1. General Information and Other Financial Data	28
	Note 2. New Accounting Standards	43
	Note 3. Revenues	44
	Note 4. Regulatory Matters	46
	Note 5. Acquisitions and Divestitures	49
	Note 6. Investments in Unconsolidated Entities	49
	Note 7. Debt and Credit Facilities	51
	Note 8. Derivative Financial Instruments	54
	Note 9. Fair Value Measurements	59
	Note 10. San Onofre Nuclear Generating Station	65
	Note 11. Commitments and Contingencies	67
	Note 12. Segment Information	76
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	79
	Overview	79
	Results of Operations	80
	Capital Resources and Liquidity	87
	Critical Accounting Estimates	99
	New Accounting Standards	99
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	100
Item 4.	Controls and Procedures	101

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	101
Item 1A.	Risk Factors	101
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	102
Item 6.	Exhibits	103

Signatures		107

This combined Form 10-Q is separately filed by Sempra Energy doing business as Sempra, 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 entities 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. A separate Part I – Item 1 is 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.

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


GLOSSARY

AB			California Assembly Bill
ADIA			Black Silverback ZC 2022 LP (assignee of Black River B 2017 Inc.), a wholly owned affiliate of Abu Dhabi Investment Authority
AFUDC			allowance for funds used during construction
Annual Report			Annual Report on Form 10-K for the year ended December 31, 2021
AOCI			accumulated other comprehensive income (loss)
ARO			asset retirement obligation
ASC			Accounting Standards Codification
ASEA			Agencia de Seguridad, Energía y Ambiente (Mexico’s National Agency for Industrial Safety and Environmental Protection)
ASR			accelerated share repurchase
ASU			Accounting Standards Update
Bcf			billion cubic feet
Bechtel			Bechtel Oil, Gas and Chemicals, Inc.
Blade			Blade Energy Partners
bps			basis points
CalGEM			California Geologic Energy Management Division
Cameron LNG JV			Cameron LNG Holdings, LLC
CCM			cost of capital adjustment mechanism
CENACE			Centro Nacional de Control de Energía (Mexico’s National Center for Energy Control)
CFE			Comisión Federal de Electricidad (Mexico’s Federal Electricity Commission)
CFIN			Cameron LNG FINCO, LLC, a wholly owned and unconsolidated affiliate of Cameron LNG JV
COVID-19			coronavirus disease 2019
CPUC			California Public Utilities Commission
CRE			Comisión Reguladora de Energía (Mexico’s Energy Regulatory Commission)
CRR			congestion revenue right
DOE			U.S. Department of Energy
ECA LNG			ECA LNG Phase 1 and ECA LNG Phase 2, collectively
ECA LNG Phase 1			ECA LNG Holdings B.V.
ECA LNG Phase 2			ECA LNG II Holdings B.V.
ECA Regas Facility			Energía Costa Azul, S. de R.L. de C.V. LNG regasification facility
Ecogas			Ecogas México, S. de R.L. de C.V.
Edison			Southern California Edison Company, a subsidiary of Edison International
EFH			Energy Future Holdings Corp. (renamed Sempra Texas Holdings Corp.)
EPC			engineering, procurement and construction
EPS			earnings (losses) per common share
ESJ			Energía Sierra Juárez, S. de R.L. de C.V.
ETR			effective income tax rate
FERC			Federal Energy Regulatory Commission
Fitch			Fitch Ratings
FTA			Free Trade Agreement
Gazprom			Gazprom Marketing & Trading México S. de R.L. de C.V.
GRC			General Rate Case
HOA			Heads of Agreement
IEnova			Infraestructura Energética Nova, S.A.P.I. de C.V.
IMG			Infraestructura Marina del Golfo
IOU			investor-owned utility
ISO			Independent System Operator
JV			joint venture
KKR			KKR Pinnacle Investor L.P. (as successor-in-interest to KKR Pinnacle Aggregator L.P.), an affiliate of Kohlberg Kravis Roberts & Co. L.P.
LA Superior Court			Los Angeles County Superior Court


GLOSSARY (CONTINUED)

Leak			the leak at the SoCalGas Aliso Canyon natural gas storage facility injection-and-withdrawal well, SS25, discovered by SoCalGas on October 23, 2015
LNG			liquefied natural gas
MD&A			Management’s Discussion and Analysis of Financial Condition and Results of Operations
Mexican Stock Exchange			Bolsa Mexicana de Valores, S.A.B. de C.V., or BMV
MMBtu			million British thermal units (of natural gas)
Moody’s			Moody’s Investors Service
MOU			Memorandum of Understanding
Mtpa			million tonnes per annum
MW			megawatt
MWh			megawatt hour
NCI			noncontrolling interest(s)
NDT			nuclear decommissioning trusts
O&M			operation and maintenance expense
OCI			other comprehensive income (loss)
OII			Order Instituting Investigation
Oncor			Oncor Electric Delivery Company LLC
Oncor Holdings			Oncor Electric Delivery Holdings Company LLC
OSC			Order to Show Cause
PG&E			Pacific Gas and Electric Company
PP&E			property, plant and equipment
PPA			power purchase agreement
PUCT			Public Utility Commission of Texas
RBS			The Royal Bank of Scotland plc
RBS SEE			RBS Sempra Energy Europe
RBS Sempra Commodities			RBS Sempra Commodities LLP
REC			renewable energy certificate
ROE			return on equity
ROU			right-of-use
RSU			restricted stock unit
S&P			S&P Global Ratings, a division of S&P Global Inc.
Saavi Energía			Saavi Energía S. de R.L. de C.V.
SB			California Senate Bill
SDG&E			San Diego Gas & Electric Company
SDSRA			Senior Debt Service Reserve Account
SEC			U.S. Securities and Exchange Commission
SED			Safety and Enforcement Division of the CPUC
SEDATU			Secretaría de Desarrollo Agrario, Territorial y Urbano (Mexico’s agency in charge of agriculture, land and urban development)
Sempra			Sempra Energy doing business as Sempra, together with its consolidated entities unless otherwise stated or indicated by the context
Sempra California			San Diego Gas & Electric Company and Southern California Gas Company, collectively
SENER			Secretaría de Energía de México (Mexico’s Ministry of Energy)
series A preferred stock			6% mandatory convertible preferred stock, series A
series B preferred stock			6.75% mandatory convertible preferred stock, series B
series C preferred stock			4.875% fixed-rate reset cumulative redeemable perpetual preferred stock, series C
Shell Mexico			Shell México Gas Natural, S. de R.L. de C.V.
SI Partners			Sempra Infrastructure Partners, LP, the holding company for most of Sempra’s subsidiaries not subject to California or Texas utility regulation
SoCalGas			Southern California Gas Company
SONGS			San Onofre Nuclear Generating Station
Support Agreement			support agreement, dated July 28, 2020 and amended on June 29, 2021, among Sempra and Sumitomo Mitsui Banking Corporation
TAG			TAG Norte Holding, S. de R.L. de C.V.
TdM			Termoeléctrica de Mexicali


GLOSSARY (CONTINUED)

Technip Energies			TP Oil & Gas Mexico, S. De R.L. De C.V., an affiliate of Technip Energies N.V.
U.S. GAAP			generally accepted accounting principles in the United States of America
VAT			value-added tax
Ventika			Ventika, S.A.P.I. de C.V. and Ventika II, S.A.P.I. de C.V., collectively
VIE			variable interest entity
Wildfire Fund			the fund established pursuant to AB 1054
Wildfire Legislation			AB 1054 and AB 111

References in this report to “we,” “our,” “us,” “our company” and “Sempra” are to Sempra and its consolidated entities, collectively, unless otherwise stated or indicated by the context. We sometimes refer to SDG&E and SoCalGas collectively as Sempra California, which does not include the utilities in our Sempra Texas Utilities or Sempra Infrastructure segments. 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 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;
the Condensed Financial Statements and related Notes of SDG&E; and
the Condensed 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,” “intends,” “anticipates,” “plans,” “estimates,” “projects,” “forecasts,” “should,” “could,” “would,” “will,” “confident,” “may,” “can,” “potential,” “possible,” “proposed,” “in process,” “under construction,” “in development,” “opportunity,” “target,” “outlook,” “maintain,” “continue,” “goal,” “aim,” “commit,” 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 all or a substantial portion of costs from insurance, the Wildfire Fund, in rates from customers or a combination thereof

▪decisions, investigations, regulations, issuances or revocations of permits and other authorizations, renewals of franchises, and other actions by (i) the CPUC, CRE, DOE, FERC, 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 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 or approval of partners or other third parties, including governmental entities and regulatory bodies

▪the resolution of civil and criminal litigation, regulatory inquiries, investigations and proceedings, arbitrations, and property disputes, including those related to the Leak

▪changes to laws, including changes to certain of Mexico’s laws and rules that impact energy supplier permitting, energy contract rates, the electricity industry generally and the ability to import, export, transport and store hydrocarbons

▪cybersecurity threats, including by state and state-sponsored actors, to the energy grid, storage and pipeline infrastructure, information and systems used to operate our businesses, and confidentiality of our proprietary information and personal information of our customers and employees, including ransomware attacks on our systems and the systems of third-party vendors and other parties with which we conduct business, all of which have become more pronounced due to recent geopolitical events and other uncertainties, such as the war in Ukraine

▪failure of foreign governments and state-owned entities to honor their contracts and commitments

▪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 debt service obligations

▪the impact of energy and climate policies, legislation, rulemaking and disclosures, as well as related goals set and actions taken by companies in our industry, including actions to reduce or eliminate reliance on natural gas generally and any deterioration of or increased uncertainty in the political or regulatory environment for California natural gas distribution companies and the risk of nonrecovery for stranded assets

▪the pace of the development and adoption of new technologies in the energy sector, including those designed to support governmental and private party energy and climate goals, and our ability to timely and economically incorporate them into our business

▪weather, natural disasters, pandemics, accidents, equipment failures, explosions, acts of terrorism, information system outages or other events that disrupt our operations, damage our facilities and systems, cause the release of harmful materials, cause fires or 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 or limitations on the withdrawal of natural gas from storage facilities

▪the impact of the COVID-19 pandemic, including potential vaccination mandates, on capital projects, regulatory approvals and the execution of our operations

▪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 Community Choice Aggregation and Direct Access, 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, including inflationary pressures in the U.S., and our ability to effectively hedge these risks and with respect to inflation and interest rates, the impact on SDG&E’s and SoCalGas’ cost of capital and the affordability of customer rates

▪changes in tax and trade policies, laws and regulations, including tariffs, revisions to international trade agreements and sanctions, such as those that have been imposed and that may be imposed in the future in connection with the war in Ukraine, which may increase our costs, reduce our competitiveness, impact our ability to do business with certain current or potential counterparties, 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 businesses as described herein, in our Annual Report and in other reports we file with the SEC.

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS


SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Three months ended March 31,
		2022		2021
		(unaudited)
REVENUES
Utilities:
Natural gas		$	2,320	$	1,777
Electric		1,117		1,068
Energy-related businesses		383		414
Total revenues		3,820		3,259

EXPENSES AND OTHER INCOME
Utilities:
Cost of natural gas		(802)		(349)
Cost of electric fuel and purchased power		(205)		(232)
Energy-related businesses cost of sales		(135)		(109)
Operation and maintenance		(1,086)		(1,001)
Aliso Canyon litigation and regulatory matters		(92)		—
Depreciation and amortization		(493)		(442)
Franchise fees and other taxes		(162)		(153)


Other income, net		38		35
Interest income		25		19
Interest expense		(243)		(259)
Income before income taxes and equity earnings		665		768
Income tax expense		(334)		(158)
Equity earnings		326		318
Net income		657		928
Earnings attributable to noncontrolling interests		(34)		(33)
Preferred dividends		(11)		(21)
Earnings attributable to common shares		$	612	$	874

Basic EPS:
Earnings		$	1.93	$	2.91
Weighted-average common shares outstanding		316,353		300,905

Diluted EPS:
Earnings		$	1.93	$	2.87
Weighted-average common shares outstanding		317,434		308,458

See Notes to Condensed Consolidated Financial Statements.


SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
	Sempra Energy shareholders’ equity
	Pretax amount		Income tax (expense) benefit		Net-of-tax amount		Noncontrolling interests (after tax)		Total
	(unaudited)






















	Three months ended March 31, 2022 and 2021
2022:
Net income	$	957	$	(334)	$	623	$	34	$	657
Other comprehensive income (loss):
Foreign currency translation adjustments	3		—		3		1		4
Financial instruments	102		(24)		78		20		98
Pension and other postretirement benefits

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

This combined MD&A for Sempra, SDG&E and SoCalGas should be read in conjunction with the Condensed Consolidated Financial Statements and the Notes thereto in this report, and the Consolidated Financial Statements and the Notes thereto, “Part I – Item 1A. Risk Factors” and “Part II – Item 7. MD&A” in the Annual Report.

OVERVIEW

Sempra is 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. In the fourth quarter of 2021, we formed Sempra Infrastructure, which resulted in a change to our reportable segments. Historical segment disclosures have been restated to conform with the current presentation of our four reportable segments, which we discuss in Note 12 of the Notes to Condensed Consolidated Financial Statements in this report and in “Part I – Item 1. Business” in the Annual Report.

RESULTS OF OPERATIONS

We discuss the following in Results of Operations:

▪Overall results of operations of Sempra;

▪Segment results;

▪Significant changes in revenues, costs and earnings; and

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

OVERALL RESULTS OF OPERATIONS OF SEMPRA


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

Our earnings and diluted EPS were impacted by variances discussed below in “Segment Results.”

SEGMENT RESULTS

This section presents earnings (losses) by Sempra segment, as well as Parent and other, 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.


SEMPRA EARNINGS (LOSSES) BY SEGMENT
(Dollars in millions)
	Three months ended March 31,
		2022		2021
SDG&E		$	234	$	212
SoCalGas		334		407
Sempra Texas Utilities		162		135
Sempra Infrastructure		95		202
Parent and other(1)		(213)		(82)
Earnings attributable to common shares		$	612	$	874

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

SDG&E

The increase in earnings of $22 million (10%) in the three months ended March 31, 2022 compared to the same period in 2021 was primarily due to higher CPUC base operating margin, net of operating expenses.

SoCalGas

The decrease in earnings of $73 million (18%) in the three months ended March 31, 2022 compared to the same period in 2021 was primarily due to:

▪$66 million charge relating to civil litigation pertaining to the Leak; and

▪$10 million in penalties related to the energy efficiency and advocacy OSCs, which we discuss in Note 4 of the Notes to Condensed Consolidated Financial Statements.

Sempra Texas Utilities

The increase in earnings of $27 million (20%) in the three months ended March 31, 2022 compared to the same period in 2021 was primarily due to higher equity earnings from Oncor Holdings driven by increased revenues from rate updates to reflect increases in invested capital, higher customer consumption and customer growth, offset by increased operating costs and expenses attributable to invested capital.

Sempra Infrastructure

Because Ecogas, our natural gas distribution utility in Mexico, uses the local currency as its functional currency, its revenues and expenses are translated into U.S. dollars at average exchange rates for the period for consolidation in Sempra’s results of operations. Prior year amounts used in the variances discussed below are as adjusted for the difference in foreign currency translation rates between years. We discuss these and other foreign currency effects below in “Impact of Foreign Currency and Inflation Rates on Results of Operations.”

The decrease in earnings of $107 million in the three months ended March 31, 2022 compared to the same period in 2021 was primarily due to:

▪$107 million unfavorable impact from foreign currency and inflation effects, net of foreign currency derivative effects, comprised of a $95 million unfavorable impact in 2022 compared to a $12 million favorable impact in 2021; and

▪$84 million lower earnings from asset and supply optimization primarily driven by changes in natural gas prices and lower volumes; offset by

▪$34 million income tax benefit in 2022 primarily from remeasurement of certain deferred income taxes;

▪$13 million higher earnings primarily due to the start of commercial operations of the Veracruz and Mexico City terminals in March and July of 2021, respectively;

▪$13 million higher earnings due to higher transportation revenues primarily driven by higher rates; and

▪$5 million favorable U.S. tax impact from converting SI Partners from a corporation to a partnership in October 2021.

Parent and Other

The increase in losses of $131 million in the three months ended March 31, 2022 compared to the same period in 2021 was primarily due to:

▪$120 million deferred income tax expense associated with the change in our indefinite reinvestment assertion related to our foreign subsidiaries, which we discuss in Note 1 of the Notes to Condensed Consolidated Financial Statements; and

▪$17 million net investment losses in 2022 compared to $2 million net investment gains in 2021 on dedicated assets in support of our employee nonqualified benefit plan and deferred compensation obligations; offset by

▪$10 million lower net interest expense; and

▪$10 million lower preferred dividends due to the mandatory conversion of all series B preferred stock in July 2021.

SIGNIFICANT CHANGES IN REVENUES, COSTS AND EARNINGS

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

Utilities Revenues and Cost of Sales

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

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

▪The cost of natural gas purchased for core customers (primarily residential and small commercial and industrial customers) to

be passed through to customers in rates substantia

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

COMMODITY PRICE RISK

Sempra Infrastructure is generally exposed to commodity price risk indirectly through its LNG, natural gas pipelines and storage, and power-generating assets. In the first three months of 2022, a hypothetical 10% unfavorable change in commodity prices would have resulted in a change in the fair value of our commodity-based natural gas and electricity derivatives of $10 million at March 31, 2022 compared to $3 million at December 31, 2021.

The one-day value at risk for SDG&E and SoCalGas’ commodity positions were $2 million and negligible, respectively, at March 31, 2022 compared to $5 million and $1 million, respectively, at December 31, 2021.

INTEREST RATE RISK

The table below shows the nominal amount of our debt:


NOMINAL AMOUNT OF DEBT(1)
(Dollars in millions)
	March 31, 2022						December 31, 2021
	Sempra		SDG&E		SoCalGas		Sempra		SDG&E		SoCalGas
Short-term:
Sempra California	$	—	$	—	$	—	$	1,161	$	776	$	385
Other	2,183		—		—		2,310		—		—
Long-term:
Sempra California fixed-rate	$	12,559	$	7,400	$	5,159	$	10,876	$	6,417	$	4,459
Sempra California variable-rate	500		200		300		300		—		300
Other fixed-rate	10,235		—		—		8,591		—		—
Other variable-rate	392		—		—		341		—		—

(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 March 31, 2022 increased or decreased by 10%, the change in earnings over the 12-month period ending March 31, 2023 would be approximately $2 million. If interest rates increased or decreased by 10% on all variable-rate long-term debt at March 31, 2022, after considering the effects of interest rate swaps, the change in earnings over the 12-month period ending March 31, 2023 would be approximately $1 million.

FOREIGN CURRENCY AND INFLATION RATE RISK

We discuss our foreign currency and inflation exposures in “Part I – Item 2. MD&A – Impact of Foreign Currency and Inflation Rates on Results of Operations” in this report and in “Part II – Item 7. MD&A – Impact of Foreign Currency and Inflation Rates on Results of Operations” in the Annual Report. At March 31, 2022, there were no significant changes to our exposure to foreign currency rate risk since December 31, 2021.

Item 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Sempra, 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 Securities Exchange Act of 1934, as amended, 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, SDG&E and SoCalGas, each such company’s management evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of March 31, 2022, the end of the period covered by this report. Based on these evaluations, the principal executive officers and principal financial officers of Sempra, 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.

INTERNAL CONTROL OVER FINANCIAL REPORTING

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

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

Item 1A. RISK FACTORS

When evaluating our company and its subsidiaries and any investment in our or their securities, you should consider carefully the risk factors and all other information contained in this report and in the other documents we file with the SEC (including those filed subsequent to this report), including the factors discussed in “Part I – Item 2. MD&A” in this report and “Part I – Item 1A. Risk Factors” and “Part II – Item 7. MD&A” in the Annual Report. Any of the risks and other information discussed in this report or any of the risk factors discussed in “Part I – Item 1A. Risk Factors” or “Part II – Item 7. MD&A” in the Annual Report, as well as additional risks and uncertainties not currently known to us or that we currently deem to be immaterial, could materially adversely affect our results of operations, financial condition, cash flows, prospects and/or the trading prices of our securities or those of our subsidiaries.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

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. As of May 5, 2022, a maximum of $1.25 billion and no more than 19,632,529 shares may yet be purchased under this repurchase authorization.

The following table sets forth information about our common stock repurchase activity for the three months ended March 31, 2022:


PURCHASES OF EQUITY SECURITIES
(Dollars in millions, except per share amounts)
	Total number of shares purchased(1)	Average price paid per share(1)		Total number of shares purchased as part of publicly announced plans or programs(1)	Maximum dollar value of shares that may yet be purchased under the plans or programs
January 1, 2022 - January 31, 2022	1,177,856	$	135.80	1,177,856	$	1,540
February 1, 2022 - February 28, 2022	294,900	$	135.80	294,900	$	1,500
Total	1,472,756	$	135.80	1,472,756	$	1,500

(1) On January 11, 2022, we entered into an ASR program under which we prepaid $200 to repurchase shares of our common stock in a share forward transaction. The total number of shares purchased was determined by dividing the $200 purchase price by the arithmetic average of the volume-weighted average trading prices of shares of our common stock during the valuation period of January 12, 2022 through February 11, 2022, minus a fixed discount. The ASR program was completed on February 11, 2022.

In addition, on April 6, 2022, we entered into an ASR program under which we prepaid $250 million to repurchase shares of our common stock in a share forward transaction. A total of 1,471,957 shares were purchased under this program at an average price of $169.84 per share. The total number of shares purchased was determined by dividing the $250 million purchase price by the arithmetic average of the volume-weighted average trading prices of shares of our common stock during the valuation period of April 7, 2022 through April 25, 2022, minus a fixed discount. The ASR program was completed on April 25, 2022.

We may also, from time to time, purchase shares of our common stock to which participants would otherwise be entitled from long-term incentive plan 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.

Item 6. EXHIBITS

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


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

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

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

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

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

3.5	Certificate of Determination of Preferences of 4.875% Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock, Series C, of Sempra Energy (including the form of certificate representing the 4.875% Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock, Series C), filed with the Secretary of State of the State of California and effective June 11, 2020.		8-K	3.1	06/15/20

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

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

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

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

EXHIBIT 4 -- INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
Certain instruments defining the rights of holders of long-term debt instruments are not required to be filed or incorporated by reference herein pursuant to Item 601(b)(4)(iii)(A) of SEC Regulation S-K. Each registrant agrees to furnish a copy of such instruments to the SEC upon request.

Sempra Energy
4.1	Officers’ Certificate of the Company, including the form of 3.300% Note due 2025 and the form of 3.700% Note due 2029.		8-K	4.1	03/24/22

Sempra Energy / San Diego Gas & Electric Company

4.2	Seventy-Second Supplemental Indenture, dated as of March 11, 2022.		8-K	4.1	03/11/22

4.3	Seventy-Third Supplemental Indenture, dated as of March 11, 2022.		8-K	4.2	03/11/22

Sempra Energy / Southern California Gas Company
4.4	Officers’ Certificate of Southern California Gas Company, including the form of its 2.950% Note due 2027.		8-K	4.1	03/14/22

4.5	Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of March 29 , 2022.	X


EXHIBIT INDEX (CONTINUED)
Exhibit Number	Exhibit Description	Filed or Furnished Herewith

EXHIBIT 31 -- SECTION 302 CERTIFICATIONS

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

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

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

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

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

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

EXHIBIT 32 -- SECTION 906 CERTIFICATIONS

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

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

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

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

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

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


EXHIBIT INDEX (CONTINUED)
Exhibit Number	Exhibit Description	Filed or Furnished Herewith

EXHIBIT 101 -- INTERACTIVE DATA FILE

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

101.SCH	Inline XBRL Taxonomy Extension Schema Document.	X

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

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

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

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

EXHIBIT 104 -- COVER PAGE INTERACTIVE DATA FILE

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

SIGNATURES


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

Date: May 5, 2022						By: /s/ Peter R. Wall
						Peter R. Wall
						Senior Vice President, Controller and Chief Accounting Officer (Duly Authorized Officer)


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

Date: May 5, 2022						By: /s/ Valerie A. Bille
						Valerie A. Bille
						Vice President, Controller and Chief Accounting Officer (Duly Authorized Officer)


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

Date: May 5, 2022						By: /s/ Mia L. DeMontigny
						Mia L. DeMontigny
						Chief Financial Officer, Controller and Chief Accounting Officer (Duly Authorized Officer)