Sempra 10-Q 2023-09-30

Filed 2023-11-03. 8 sections, 511K 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		September 30, 2023
		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	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
	8330 Century Park Court
	San Diego, California 92123
	(619) 696-2000

1-01402	SOUTHERN CALIFORNIA GAS COMPANY	California	95-1240705	No change
	555 West 5th 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:
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	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	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:
☒ 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	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	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 October 31, 2023:


Sempra			629,328,058 shares
San Diego Gas & Electric Company			Wholly owned by Enova Corporation, which is wholly owned by Sempra
Southern California Gas Company			Wholly owned by Pacific Enterprises, which is wholly owned by Sempra

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

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	112
Item 1A.	Risk Factors	112
Item 5.	Other Information	113
Item 6.	Exhibits	114

Signatures		117

This combined Form 10-Q is separately filed by 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 such reporting 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, which are combined for all of the reporting entities. 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 or incorporated by reference in this report or any other document that we file with or furnish to the SEC.

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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, 2022
AOCI			accumulated other comprehensive income (loss)
ARO			asset retirement obligation
ASEA			Agencia de Seguridad, Energía y Ambiente (Mexico’s National Agency for Industrial Safety and Environmental Protection)
ASR			accelerated share repurchase
Bcf			billion cubic feet
Bechtel			Bechtel Energy Inc. (formerly known as Bechtel Oil, Gas and Chemicals, Inc.)
bps			basis points
Cameron LNG JV			Cameron LNG Holdings, LLC
Cameron LNG Phase 1 facility			Cameron LNG JV liquefaction facility
Cameron LNG Phase 2 project			Cameron LNG JV liquefaction expansion project
CCA			Community Choice Aggregation
CCM			cost of capital adjustment mechanism
CFE			Comisión Federal de Electricidad (Mexico’s Federal Electricity Commission)
CFIN			Cameron LNG FINCO, LLC, a wholly owned and unconsolidated affiliate of Cameron LNG JV
ConocoPhillips			ConocoPhillips Company
COVID-19			coronavirus disease 2019
CPUC			California Public Utilities Commission
CRE			Comisión Reguladora de Energía (Mexico’s Energy Regulatory Commission)
CRR			congestion revenue right
DOE			U.S. Department of Energy
ECA LNG			ECA LNG Phase 1 and ECA LNG Phase 2, collectively
ECA LNG Phase 1			ECA LNG Holdings B.V.
ECA LNG Phase 2			ECA LNG II Holdings B.V.
ECA Regas Facility			Energía Costa Azul, S. de R.L. de C.V. LNG regasification facility
Ecogas			Ecogas México, S. de R.L. de C.V.
Edison			Southern California Edison Company, a subsidiary of Edison International
EFH			Energy Future Holdings Corp. (renamed Sempra Texas Holdings Corp.)
EPC			engineering, procurement and construction
EPS			earnings per common share
ETR			effective income tax rate
Exchange Act			Securities Exchange Act of 1934, as amended
FEED			front-end engineering design
FERC			Federal Energy Regulatory Commission
Fitch			Fitch Ratings, Inc.
FTA			Free Trade Agreement
GCIM			Gas Cost Incentive Mechanism
GHG			greenhouse gas
GRC			General Rate Case
HOA			Heads of Agreement
IEnova			Infraestructura Energética Nova, S.A.P.I. de C.V.
IMG			Infraestructura Marina del Golfo
INEOS			INEOS Energy Trading LTD., a subsidiary of INEOS Ltd.
IOU			investor-owned utility
IRA			Inflation Reduction Act of 2022
IRS			U.S. Internal Revenue Service

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GLOSSARY (CONTINUED)

ISO			Independent System Operator
JV			joint venture
KKR Denali			KKR Denali Holdco LLC, an affiliate of Kohlberg Kravis Roberts & Co. L.P.
KKR Pinnacle			KKR Pinnacle Investor L.P. (as successor-in-interest to KKR Pinnacle Aggregator L.P.), an affiliate of Kohlberg Kravis Roberts & Co. L.P.
LA Superior Court			Los Angeles County Superior Court
Leak			the leak at the SoCalGas Aliso Canyon natural gas storage facility injection-and-withdrawal well, SS25, discovered by SoCalGas on October 23, 2015
LNG			liquefied natural gas
MD&A			Management’s Discussion and Analysis of Financial Condition and Results of Operations
MMBtu			million British thermal units (of natural gas)
Moody’s			Moody’s Investors Service, Inc.
MOU			Memorandum of Understanding
Mtpa			million tonnes per annum
MWh			megawatt hour
NCI			noncontrolling interest(s)
NDT			nuclear decommissioning trusts
O&M			operation and maintenance expense
OCI			other comprehensive income (loss)
OEIS			Office of Energy Infrastructure Safety
OII			Order Instituting Investigation
Oncor			Oncor Electric Delivery Company LLC
Oncor Holdings			Oncor Electric Delivery Holdings Company LLC
ORLEN			Polski Koncern Naftowy Orlen S.A. (formerly Polish Oil & Gas Company)
OSC			Order to Show Cause
PA LNG Phase 1 project			initial phase of the Port Arthur LNG liquefaction project
PA LNG Phase 2 project			second phase of the Port Arthur LNG liquefaction project
PBOP			postretirement benefits other than pension
Port Arthur LNG			Port Arthur LNG, LLC, an indirect subsidiary of SI Partners that owns the PA LNG Phase 1 project
PP&E			property, plant and equipment
PPA			power purchase agreement
PUCT			Public Utility Commission of Texas
RBS			The Royal Bank of Scotland plc
RBS SEE			RBS Sempra Energy Europe
RBS Sempra Commodities			RBS Sempra Commodities LLP
ROE			return on equity
RSU			restricted stock unit
S&P			S&P Global Ratings, a division of S&P Global Inc.
SB			California Senate Bill
SDG&E			San Diego Gas & Electric Company
SDSRA			Senior Debt Service Reserve Account
SEC			U.S. Securities and Exchange Commission
SED			Safety and Enforcement Division of the CPUC
SEDATU			Secretaría de Desarrollo Agrario, Territorial y Urbano (Mexico’s agency in charge of agriculture, land and urban development)
Sempra California			San Diego Gas & Electric Company and Southern California Gas Company, collectively
SENER			Secretaría de Energía de México (Mexico’s Ministry of Energy)
series C preferred stock			Sempra’s 4.875% fixed-rate reset cumulative redeemable perpetual preferred stock, series C
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
SOFR			Secured Overnight Financing Rate
SONGS			San Onofre Nuclear Generating Station

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GLOSSARY (CONTINUED)

SPA			sale and purchase agreement
Support Agreement			support agreement, dated July 28, 2020 and amended on June 29, 2021, among Sempra and Sumitomo Mitsui Banking Corporation
TAG			TAG Norte Holding, S. de R.L. de C.V.
TdM			Termoeléctrica de Mexicali
Technip Energies			TP Oil & Gas Mexico, S. De R.L. De C.V., an affiliate of Technip Energies N.V.
TO5			Electric Transmission Owner Formula Rate, effective June 1, 2019
U.S. GAAP			generally accepted accounting principles in the United States of America
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. 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.

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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on assumptions about the future, involve risks and uncertainties, and are not guarantees. Future results may differ materially from those expressed or implied in any forward-looking statement. 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 otherwise.

Forward-looking statements can be identified by words such as “believe,” “expect,” “intend,” “anticipate,” “contemplate,” “plan,” “estimate,” “project,” “forecast,” “should,” “could,” “would,” “will,” “confident,” “may,” “can,” “potential,” “possible,” “proposed,” “in process,” “construct,” “develop,” “opportunity,” “initiative,” “target,” “outlook,” “optimistic,” “poised,” “maintain,” “continue,” “progress,” “advance,” “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 expressed or implied in any forward-looking statement include:

▪California wildfires, including potential liability for damages regardless of fault and any inability to recover all or a substantial portion of costs from insurance, the Wildfire Fund, rates from customers or a combination thereof

▪decisions, investigations, inquiries, regulations, denials or revocations of permits, consents, approvals or other authorizations, renewals of franchises, and other actions by the (i) CPUC, CRE, DOE, FERC, PUCT, IRS and other governmental and regulatory bodies and (ii) U.S., Mexico and states, counties, cities and other jurisdictions therein and in other countries where we do business

▪the success of business development efforts, construction projects, acquisitions, divestitures, and other significant transactions, including risks in (i) being able to make a final investment decision, (ii) completing construction projects or other transactions on schedule and budget, (iii) realizing anticipated benefits from any of these efforts if completed, and (iv) obtaining third-party consents and approvals

▪macroeconomic trends or other factors that could change our capital expenditure plans and their potential impact on rate base or other growth

▪litigation, arbitrations, property disputes and other proceedings, and changes to laws and regulations, including those related to tax and trade policy and the energy industry in Mexico

▪cybersecurity threats, including by state and state-sponsored actors, of ransomware or other attacks on our systems or the systems of third parties with which we conduct business, including the energy grid or other energy infrastructure, all of which continue to become more pronounced

▪the availability, uses, sufficiency, and cost of capital resources and our ability to borrow money or otherwise raise capital on favorable terms and meet our obligations, including due to (i) actions by credit rating agencies to downgrade our credit ratings or place those ratings on negative outlook, (ii) instability in the capital markets, or (iii) rising interest rates and inflation

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

▪the impact on affordability of SDG&E’s and SoCalGas’ customer rates and their cost of capital and on SDG&E’s, SoCalGas’ and Sempra Infrastructure’s ability to pass through higher costs to customers due to (i) volatility in inflation, interest rates and commodity prices, (ii) with respect to SDG&E’s and SoCalGas’ businesses, the cost of the clean energy transition in California, and (iii) with respect to Sempra Infrastructure’s business, volatility in foreign currency exchange rates

▪the impact of climate and sustainability policies, laws, rules, regulations, disclosures and trends, including actions to reduce or eliminate reliance on natural gas, increased uncertainty in the political or regulatory environment for California natural gas distribution companies, the risk of nonrecovery for stranded assets, and our ability to incorporate new technologies

▪weather, natural disasters, pandemics, accidents, equipment failures, explosions, terrorism, information system outages or other events that disrupt our operations, damage our facilities or systems, cause the release of harmful materials or fires or subject us to liability for damages, fines and penalties, some of which may not be recoverable through regulatory mechanisms or insurance or may impact our ability to obtain satisfactory levels of affordable insurance

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

▪Oncor’s ability to reduce or eliminate its quarterly dividends due to regulatory and governance requirements and commitments, including by actions of Oncor’s independent directors or a minority member director

▪other uncertainties, some of which are difficult to predict and beyond our control

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We caution you not to rely unduly on any forward-looking statements. You should review and carefully consider 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.

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PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS


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

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

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

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

See Notes to Condensed Consolidated Financial Statements.

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


2022:
Net income	$	517	$	(21)	$	496	$	65	$	561
Other comprehensive income (loss):
Foreign currency translation adjustments	—		—		—		(1)		(1)
Financial instruments	60		(15)		45		21		66
Pension and other postretirement benefits	2		—

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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.

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

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We are currently considering a resegmentation in which our SDG&E and SoCalGas segments would be combined into one segment, Sempra California, resulting in three reportable segments. We intend to complete our analysis in the fourth quarter of 2023 and, assuming a positive determination is made, we would implement the resegmentation in our annual report on Form 10-K for the period ending December 31, 2023.

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

Sempra’s overall results of operations for the three months (Q3) and nine months (YTD) ended September 30, 2023 and 2022 were as follows:


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

178 179 180

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 foreign currency and inflation effects and NCI, where applicable.


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

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

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SDG&E

The increase in earnings of $3 million (1%) in the three months ended September 30, 2023 compared to the same period in 2022 was primarily due to:

▪$11 million higher electric transmission margin;

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

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

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

▪$6 million higher net interest expense.

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

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

▪$16 million higher net regulatory interest income;

▪$12 million higher electric transmission margin; and

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

▪$20 million higher net interest expense; and

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

SoCalGas

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

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

▪$11 million higher income tax benefits primarily from flow-through items; and

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

▪$15 million higher net interest expense.

The increase in earnings of $192 million in the nine months ended September 30, 2023 compared to the same period in 2022 was primarily due to:

▪$199 million charge in 2022 relating to litigation and regulatory matters pertaining to the Leak;

▪$28 million higher income tax benefits primarily from flow-through items, which includes $25 million related to income tax benefits in 2023 for previously unrecognized income tax benefits pertaining to gas repairs expenditures;

▪$15 million higher net regulatory interest income;

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

▪$10 million in penalties in 2022 related to energy efficiency and advocacy OSCs; offset by

▪$52 million higher net interest expense; and

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

Sempra Texas Utilities

The increase in earnings of $49 million (19%) in the three months ended September 30, 2023 compared to the same period in 2022 was primarily due to higher equity earnings from Oncor Holdings driven by:

▪higher revenues attributable to:

◦higher customer consumption primarily attributable to weather,

◦updates to transmission billing factors,

◦new base rates implemented in May 2023,

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

◦customer growth; offset by

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

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▪higher O&M.

The decrease in earnings of $56 million (9%) in the nine months ended September 30, 2023 compared to the same period in 2022 was prima

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We provide disclosure regarding derivative activity in Note 7 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 exposed to commodity price risk indirectly through its LNG, natural gas pipelines and storage, and power-generating assets. In the first nine months of 2023, a hypothetical 10% change in commodity prices would have resulted in

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a change in the fair value of our commodity-based natural gas and electricity derivatives of $16 million at September 30, 2023 compared to $24 million at December 31, 2022.

The one-day value at risk for SDG&E’s and SoCalGas’ commodity positions were $2 million and $14 million, respectively, at September 30, 2023 compared to $25 million and $2 million, respectively, at December 31, 2022.

INTEREST RATE RISK

The table below shows the nominal amount of our debt:


NOMINAL AMOUNT OF DEBT(1)
(Dollars in millions)
	September 30, 2023						December 31, 2022
	Sempra		SDG&E		SoCalGas		Sempra		SDG&E		SoCalGas
Short-term:
Sempra California	$	421	$	—	$	421	$	1,105	$	205	$	900
Other	1,558		—		—		2,247		—		—
Long-term:
Sempra California fixed-rate	$	15,109	$	8,350	$	6,759	$	13,159	$	7,400	$	5,759
Sempra California variable-rate	400		400		—		700		400		300
Other fixed-rate	11,322		—		—		10,079		—		—
Other variable-rate	826		—		—		575		—		—

(1) After the effects of interest rate swaps. Before 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 attributable to common shares (but disregarding capitalized interest and impacts on equity earnings from debt at our equity method investees) that would result from a hypothetical change in market interest rates. Earnings attributable to common shares 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 September 30, 2023 increased or decreased by 10%, the change in earnings attributable to common shares over the 12-month period ending September 30, 2024 would be approximately $7 million. If interest rates increased or decreased by 10% on all variable-rate long-term debt at September 30, 2023, after considering the effects of interest rate swaps, the change in earnings attributable to common shares over the 12-month period ending September 30, 2024 would be approximately $4 million.

FOREIGN CURRENCY EXCHANGE RATE RISK AND INFLATION EXPOSURE

We discuss our foreign currency exchange rate risk and inflation exposure 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 September 30, 2023, there were no significant changes to our exposure to foreign currency exchange rate risk since December 31, 2022.

In 2022 and 2023 to date, SDG&E and SoCalGas have experienced inflationary pressures from increases in various costs, including the cost of natural gas, electric fuel and purchased power, labor, materials and supplies, as well as availability of labor and materials. Sempra Texas Utilities has experienced increased costs of labor and materials and does not have specific regulatory mechanisms that allow for recovery of higher costs due to inflation; rather, recovery is limited to rate updates through capital trackers and base rate reviews, which may result in partial non-recovery due to the regulatory lag. If such costs continue to be subject to significant inflationary pressures and we are not able to fully recover such higher costs in rates or there is a delay in recovery, these increased costs may have a significant effect on Sempra’s, SDG&E’s and SoCalGas’ results of operations, financial condition, cash flows and/or prospects.

Sempra Infrastructure has experienced inflationary pressures from increases in various costs, including the cost of labor, materials and supplies. Sempra Infrastructure generally secures long-term contracts that are U.S. dollar-denominated or referenced and are periodically adjusted for market factors, including inflation, and Sempra Infrastructure generally enters into lump-sum contracts for its large construction projects in which much of the risk during construction is absorbed or hedged by the EPC contractor. If additional costs become subject to significant inflationary pressures, we may not be able to fully recover such higher costs through contractual adjustments for inflation, which may have a significant effect on Sempra’s results of operations, financial condition, cash flows and/or prospects.

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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 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, 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 September 30, 2023, 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 9 and 10 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.

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Item 5. OTHER INFORMATION

(a)None.

(b)None.

(c)During the most recent fiscal quarter, no Sempra, SDG&E or SoCalGas director or officer, as defined in Rule 16a-1(f) under the Exchange Act, adopted or terminated a Rule 10b5-1 trading arrangement, as defined in Item 408(a) of SEC Regulation S-K, or a non-Rule 10b5-1 trading arrangement, as defined in Item 408(c) of SEC Regulation S-K.

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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), 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
3.1	Amended and Restated Articles of Incorporation of Sempra effective May 23, 2008.		10-K	3.1	02/27/20

3.2	Certificate of Determination of Preferences of the 6% Mandatory Convertible Preferred Stock, Series A, of Sempra (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

3.3	Certificate of Determination of Preferences of the 6.75% Mandatory Convertible Preferred Stock, Series B, of Sempra (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

3.4	Certificate of Determination of Preferences of 4.875% Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock, Series C, of Sempra (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

3.5	Certificate of Amendment of Amended and Restated Articles of Incorporation of Sempra dated May 12, 2023.		8-K	3.1	05/16/23

3.6	Bylaws of Sempra (as amended through May 12, 2023).		8-K	3.2	05/16/23

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

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

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

3.10	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 / San Diego Gas & Electric Company
4.1	Seventy-Fifth Supplemental Indenture, dated as of August 11, 2023.		8-K	4.1	08/11/23

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

EXHIBIT 10 -- MATERIAL CONTRACTS

Sempra
10.1	Amended and Restated Sempra 2019 Long-Term Incentive Plan.	X

10.2	Amended and Restated Sempra Employee and Director Savings Plan, formerly known as the Sempra 2005 Deferred Compensation Plan.	X


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

EXHIBIT 31 -- SECTION 302 CERTIFICATIONS

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

32.2	Certification of Sempra’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

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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).

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SIGNATURES


Sempra:
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, (Registrant)

Date: November 3, 2023						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: November 3, 2023						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: November 3, 2023						By: /s/ Mia L. DeMontigny
						Mia L. DeMontigny
						Senior Vice President, Chief Financial Officer and Chief Accounting Officer (Duly Authorized Officer)