NOTE 8. FAIR VALUE MEASUREMENTS

Fair Value of Financial Instruments

The fair values of certain of our financial instruments (cash, temporary investments, accounts and notes receivable, dividends and accounts payable, short-term debt and customer deposits) approximate their carrying amounts. The following table provides the carrying amounts and fair values of the remaining financial instruments at ~~September 30, 2010~~March 31, 2011 and December 31, ~~2009:~~

FAIR VALUE OF FINANCIAL INSTRUMENTS
(Dollars in millions)

September 30, 2010
December 31, 2009

Carrying
Fair
Carrying
Fair

Amount
Value
Amount
Value
Sempra Energy Consolidated:

Investments in affordable housing partnerships(1)
$
29
$
58
$
34
$
59
Total long-term debt(2)

8,152

9,288

8,004

8,572
Due to unconsolidated affiliate

2

2

2

2
Preferred stock of subsidiaries

179

171

179

156
SDG&E:

Total long-term debt(3)
$
3,308
$
3,594
$
2,652
$
2,808
Contingently redeemable preferred stock

79

82

79 ;

76
PE and SoCalGas:

Total long-term debt(4)
$
1,266
$
1,396
$
1,270
$
1,356

PE:

    Preferred stock
$
80
$
69
$
80
$
61
    Preferred stock of subsidiary

20

20

20

19

SoCalGas:

    Preferred stock
$
22
$
21
$
22
$
20
(1)
We discuss our investments in affordable housing partnerships in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.
(2)
Before reductions for unamortized discount of $21 million at September 30, 2010 and $17 million at December 31, 2009, and excluding capital leases of $214 mill ion at September 30, 2010 and $46 million at December 31, 2009.
(3)
Before reductions for unamortized discount of $10 million at September 30, 2010 and $4 million at December 31, 2009, and excluding capital leases of $197 million at September 30, 2010 and $20 million at Decemb er 31, 2009.
(4)
Before reductions for unamortized discount of $2 million at September 30, 2010 and $2 million at December 31, 2009, and excluding capital leases of $17 million at September 30, 2010 and $26 million at December 31, 2009.

2010:

FAIR VALUE OF FINANCIAL INSTRUMENTS
(Dollars in millions)
		March 31, 2011				December 31, 2010
		Carrying		Fair		Carrying		Fair
		Amount		Value		Amount		Value
Sempra Energy Consolidated:
Investments in affordable housing partnerships(1)		$	26	$	56	$	28	$	58
Total long-term debt(2)			8,868		9,320		8,330		8,883
Due to unconsolidated affiliate(3)			2		2		2		2
Preferred stock of subsidiaries			179		163		179		166
SDG&E:
Total long-term debt(4)		$	3,303	$	3,285	$	3,305	$	3,300
Contingently redeemable preferred stock			79		78		79		78
PE and SoCalGas:
Total long-term debt(5)		$	1,312	$	1,353	$	1,566	$	1,638

PE:
Preferred stock		$	80	$	65	$	80	$	68
Preferred stock of subsidiary			20		20		20		20

SoCalGas:
Preferred stock		$	22	$	21	$	22	$	21
(1)	We discuss our investments in affordable housing partnerships in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.
(2)	Before reductions for unamortized discount of $22 million at March 31, 2011 and December 31, 2010, and excluding capital leases of $217 million at March 31, 2011 and $221 million at December 31, 2010, and commercial paper classified as long-term debt of $200 million at March 31, 2011 and $800 million at December 31, 2010. We discuss our long-term debt in Note 6 above and Note 5 of the Notes to Consolidated Financial Statements in the Annual Report.
(3)	Note payable to Chilquinta Energía S.A. due April 1, 2011 is included in Due to Unconsolidated Affiliates, Current at March 31, 2011 and December 31, 2010.
(4)	Before reductions for unamortized discount of $10 million at March 31, 2011 and $9 million at December 31, 2010, and excluding capital leases of $200 million at March 31, 2011 and $202 million at December 31, 2010.
(5)	Before reductions for unamortized discount of $2 million at March 31, 2011 and $3 million at December 31, 2010, and excluding capital leases of $17 million at March 31, 2011 and $19 million at December 31, 2010.

Sempra Energy based the fair values of investments in affordable housing partnerships on the present value of estimated future cash flows, discounted at rates available for similar investments. All entities based the fair values of long-term debt and preferred stock on their quoted market prices or quoted market prices for similar securities.

Nuclear Decommissioning Trusts

We discuss SDG&E's investments in nuclear decommissioning trust funds in Note 76 of the Notes to Consolidated Financial Statements in the Annual Report. The following table shows the fair values and gross unrealized gains and losses for the securities held in the trust funds:

NUCLEAR DECOMMISSIONING TRUSTS
(Dollars in millions)

Gross

Gross

Estimated

Unrealized

Unrealized

Fair

Cost

Gains

Losses

Value
As of September 30, 2010:

Debt securities

    Debt securities issued by the U.S. Treasury and other

         U.S. government corporations and agencies(1)
$
141
$
24
$
-
$
165
    Municipa l bonds(2)

85

5

(1)

89
    Other securities(3)

22

4

-

26
Total debt securities

248

33

(1)

280
Equity securities

240

201

(2)

439
Cash and cash equivalents

18

-

-

18
Total available-for-sale securities
$
506
$
234
$
(3)
$
737
As of December 31, 2009:

Debt securities

    Debt securities issued by the U.S. Treasury and other

         U.S. government corporations and agencies
$
141
$
12
$
(3)
$
150
    Municipal bonds

85

3

(3)

85
    Other securities

12

1

-

13
Total debt securities

238

16

(6)

248
Equity securities

238

188

(5)

421
Cash and cash equivalents

9

-

-

9
Total available-for-sale securities
$
485
$
204
$
(11)
$
678
(1)
Maturity dates are 2011-2040.
(2)
Maturity dates are 2012-2057.
(3)
Maturity dates are 2011-2049.

NUCLEAR DECOMMISSIONING TRUSTS
(Dollars in millions)
					Gross		Gross		Estimated
					Unrealized		Unrealized		Fair
			Cost		Gains		Losses		Value
As of March 31, 2011:
Debt securities
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies(1)		$	162	$	12	$	(3)	$	171
Municipal bonds(2)			95		2		(3)		94
Other securities(3)			36		3		―		39
Total debt securities			293		17		(6)		304
Equity securities			220		264		(1)		483
Cash and cash equivalents			9		―		―		9
Total		$	522	$	281	$	(7)	$	796
As of December 31, 2010:
Debt securities
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies		$	162	$	14	$	(2)	$	174
Municipal bonds			101		2		(3)		100
Other securities			22		3		―		25
Total debt securities			285		19		(5)		299
Equity securities			219		242		(1)		460
Cash and cash equivalents			10		―		―		10
Total		$	514	$	261	$	(6)	$	769
(1)	Maturity dates are 2011-2040.
(2)	Maturity dates are 2013-2057.
(3)	Maturity dates are 2011-2049.

The following table shows the proceeds from sales of securities in the trusts and gross realized gains and losses on those sales:

SALES OF SECURITIES
(Dollars in millions)

Three months ended September 30,
Nine months ended September 30,

2010
2009
2010
2009
Proceeds from sales
$
97
$
62
$
247
$
150
Gross realized gains

4

-

7

4
Gross realized losses

(2)

(6)

(9)

(30)

SALES OF SECURITIES
(Dollars in millions)
	Three months ended March 31,
	2011		2010
Proceeds from sales	$	42	$	40
Gross realized gains		1		1
Gross realized losses		(1)		(2)

Net unrealized gains (losses) are included in Regulatory Liabilities Arising from Removal Obligations on the Condensed Consolidated Balance Sheets. We determine the cost of securities in the trusts on the basis of specific identification.

Derivative Positions Net of Cash Collateral

Each Condensed Consolidated Balance Sheet reflects the offsetting of net derivative positions with fair value amounts for cash collateral with the same counterparty when management believes a legal right of offset exists.

The following table provides the amount of fair value of cash collateral receivables that were not offset in the Condensed Consolidated Balance Sheets as of ~~September 30, 2010~~March 31, 2011 and December 31, ~~2009:~~

September 30,
December 31,
(Dollars in millions)
2010
2009
Sempra Energy Consolidated
$
24
$
36
SDG&E

21

30
SoCalGas

3

5

2010:

March 31, December 31,
(Dollars in millions) 2011 2010
Sempra Energy Consolidated $ 42 $ 32
SDG&E 31 25
SoCalGas 4 3

Fair Value Hierarchy

We discuss the valuation techniques and inputs we use to measure fair value and the definition of the three levels of the fair value hierarchy in Notes 1 and 2 of the Notes to Consolidated Financial Statements in the Annual Report. We have not changed the valuation techniques or inputs we use to measure fair value during the ~~nine~~three months ended ~~September 30, 2010.~~

March 31, 2011.

The three tables below, by level within the fair value hierarchy, set forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of ~~September 30, 2010~~March 31, 2011 and December 31, ~~2009.~~2010. We also discuss our financial assets and liabilities recorded at fair value on a non-recurring basis. We classify financial assets and liabilities in their entirety based on the lowest level of input that is significant to the fair value measurement. Our ~~asses sment~~assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities, and their placement within the fair value hierarchy levels.

The fair value of commodity derivative assets and liabilities is determined in accordance with our netting policy, as discussed above under "Derivative Positions Net of Cash Collateral."

The determination of fair values, shown in the tables below, incorporates various factors, including but not limited to, the credit standing of the counterparties involved and the impact of credit enhancements (such as cash deposits, letters of credit and priority interests).

We ~~discuss~~provide detail about our financial assets and liabilities that were accounted for at fair value on a recurring basis ~~further~~ in Note 1211 of the Notes to ~~Consolida ted~~Consolidated Financial Statements in the Annual Report.

RECURRING FAIR VALUE MEASURES -- SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)

At fair value as of September 30, 2010

Collateral

Level 1

Level 2

Level 3

netted

Total
Assets:

&n bsp; Nuclear decommissioning trusts(1)

          Equity securities
$
439
$
-
$
-&n bsp;
$
-
$
439
          Debt securities:

              Debt securities issued by the U.S. Treasury and other

                   U.S. government corporations and agencies

132

33

-

-

165
              Municipal bonds

-

89

-

-

89
              Other securities

-

26

-

-

26
          Tota l debt securities

132

148

-

-

280
    Total nuclear decommissioning trusts(1)

571

148

-

-

719
    Interest rate instruments

-& nbsp;

49

-

-

49
    Commodity contracts subject to rate recovery

21

-

12

-

33
    Commodity contracts not subject to rate recovery

5

79

-

(20)

64
    Investments

9

-

-

-

9
Total
$
606
$
276
$
12
$
(20)
$
874
Liabilities:

    Interest rate instruments
$
-
$
117
$
-
$
-
$
117
    Commodity contracts subject to rate recovery

79

10

-

(79)

10
    Commodity contracts not subject to rate recovery

-

69

-

-

69
Total
$
79
$
196
$
-
$
(79)
$
196

At fair value as of December 31, 2009

Collateral

Level 1

Level 2

Level 3

netted

Total
Assets:

    Nuclear decommissioning trusts(1)

& nbsp;

        �� Equity securities
$
421
$
-
$
-
$
-
$
421
          Debt securities:

              Debt securities issued by the U.S. Treasury and other

                   U.S. government corporations and agencies

111

39

-

-

150
              Municipal bonds

-

85

-

-

85
              Other securities

-

13

-

-

13
          Total debt securities

111

137

-

-

248
    Total nuclear decommissioning trusts(1)

532

137

-

-

669
    Interest rate instruments

-

38

-

-

38
    Commodity contracts subject to rate recovery

32

3

10

-

45
    Commodity contracts not subject to rate recovery

7

62

-

(40)

29
    Investments

1

-

-

-

1
Total
$
572
$
240
$
10
$
(40)
$
782
Liabilities:

   ; Interest rate instruments
$
-
$
59
$
-
$
-
$
59
    Commodity contracts subject to rate recovery

9

9

-

(9)

9
    Commodity contracts not subject to rate recovery

-

65

-

-

65
Total
$
9
$
133
$
-
$
(9)
$
133&nbs p;
(1)
Excludes cash balances and cash equivalents.

RECURRING FAIR VALUE MEASURES -- SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
		At fair value as of March 31, 2011
									Collateral
			Level 1		Level 2		Level 3		netted		Total
Assets:
Nuclear decommissioning trusts
Equity securities		$	483	$	―	$	―	$	―	$	483
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies			143		28		―		―		171
Municipal bonds			―		94		―		―		94
Other securities			―		39		―		―		39
Total debt securities			143		161		―		―		304
Total nuclear decommissioning trusts(1)			626		161		―		―		787
Interest rate instruments			―		34		―		―		34
Commodity contracts subject to rate recovery			32		1		3		―		36
Commodity contracts not subject to rate recovery			14		56		―		(9)		61
Investments			14		―		―		―		14
Total		$	686	$	252	$	3	$	(9)	$	932
Liabilities:
Interest rate instruments		$	―	$	83	$	―	$	―	$	83
Commodity contracts subject to rate recovery			44		5		―		(44)		5
Commodity contracts not subject to rate recovery			1		58		―		(1)		58
Total		$	45	$	146	$	―	$	(45)	$	146

		At fair value as of December 31, 2010
									Collateral
			Level 1		Level 2		Level 3		netted		Total
Assets:
Nuclear decommissioning trusts
Equity securities		$	460	$	―	$	―	$	―	$	460
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies			144		30		―		―		174
Municipal bonds			―		100		―		―		100
Other securities			―		25		―		―		25
Total debt securities			144		155		―		―		299
Total nuclear decommissioning trusts(1)			604		155		―		―		759
Interest rate instruments			―		34		―		―		34
Commodity contracts subject to rate recovery			25		1		2		―		28
Commodity contracts not subject to rate recovery			9		66		―		(22)		53
Investments			1		―		―		―		1
Total		$	639	$	256	$	2	$	(22)	$	875
Liabilities:
Interest rate instruments		$	―	$	82	$	―	$	―	$	82
Commodity contracts subject to rate recovery			60		8		―		(60)		8
Commodity contracts not subject to rate recovery			―		67		―		―		67
Total		$	60	$	157	$	―	$	(60)	$	157
(1)	Excludes cash balances and cash equivalents.

RECURRING FAIR VALUE MEASURES -- SDG&E
(Dollars in millions)

At fair value as of September 30, 2010

Collateral

Level 1

Level 2

Level 3

netted

Total
Assets:

    Nuclear decommissioning trusts(1)

          Equity securities
$
439
$
-
$
-
$
-
$
439
          Debt securities:

&n bsp;

              Debt securities issued by the U.S. Treasury and other

                   U.S. government corporations and agencies

132

33

-

-

165
              Municipal bonds

-

89

-

-

89
              Other securities

-

26

-

-

26
          Total debt securities

132

148

-

-

280
    Total nuclear decommissioning trusts(1)

571

148

-

-

719
    Commodity contracts subject to rate recovery

20

-

12

-

32
    Commodity contracts not subject to rate recovery

1

-

-

-

1
Total
$
592
$
148
$
12
$
-
$
752

Liabilities:

    Interest rate instruments
$
-
$
79
$
-
$
-
$
79
    Commodity contracts subject to rate recovery

78

2

-

(78)

2
Total
$
78
$
81
$
-
$
(78)
$
81

At fair value as of December 31, 2009

Collateral

Level 1

Level 2

Level 3

netted

Total
Assets:

    Nuclear decommissioning trusts(1)

          Equity securities
$
421
$
-
$
-
$
-
$
421
          Debt securities:

              Debt securities issued by the U.S. Treasury and other

                   U.S. government corporations and agencies

111

39

-

-

150
              Municipal bonds

-

85

-

-

85
              Other securities

-

13

-

-

13
          Total debt securities

111

137

-

-

248
    Total nuclear decommissioning trusts(1)

532

137

-

-

669
    Commodity contracts subject to rate recovery

29

2

10

-

41
    Commodity contracts not subject to rate recovery

1

-

-

-

1
Total
$
562
$
139
$
10
$
-
$
711

Liabilities:

    Interest rate instruments
$
-
$
43
$
-
$
-
$
43
    Commodity contracts subject to rate recovery

9

-

-

(9)

-
Total
$
9
$
43
$
-
$
(9)
$
43
(1)
Excludes cash balances and cash equivalents.

RECURRING FAIR VALUE MEASURES -- SDG&E
(Dollars in millions)
		At fair value as of March 31, 2011
									Collateral
			Level 1		Level 2		Level 3		netted		Total
Assets:
Nuclear decommissioning trusts
Equity securities		$	483	$	―	$	―	$	―	$	483
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies			143		28		―		―		171
Municipal bonds			―		94		―		―		94
Other securities			―		39		―		―		39
Total debt securities			143		161		―		―		304
Total nuclear decommissioning trusts(1)			626		161		―		―		787
Commodity contracts subject to rate recovery			30		1		3		―		34
Commodity contracts not subject to rate recovery			2		―		―		―		2
Total		$	658	$	162	$	3	$	―	$	823

Liabilities:
Interest rate instruments		$	―	$	53	$	―	$	―	$	53
Commodity contracts subject to rate recovery			44		2		―		(44)		2
Total		$	44	$	55	$	―	$	(44)	$	55

		At fair value as of December 31, 2010
									Collateral
			Level 1		Level 2		Level 3		netted		Total
Assets:
Nuclear decommissioning trusts
Equity securities		$	460	$	―	$	―	$	―	$	460
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies			144		30		―		―		174
Municipal bonds			―		100		―		―		100
Other securities			―		25		―		―		25
Total debt securities			144		155		―		―		299
Total nuclear decommissioning trusts(1)			604		155		―		―		759
Commodity contracts subject to rate recovery			24		―		2		―		26
Commodity contracts not subject to rate recovery			2		―		―		―		2
Total		$	630	$	155	$	2	$	―	$	787

Liabilities:
Interest rate instruments		$	―	$	58	$	―	$	―	$	58
Commodity contracts subject to rate recovery			60		2		―		(60)		2
Total		$	60	$	60	$	―	$	(60)	$	60
(1)	Excludes cash balances and cash equivalents.

RECURRING FAIR VALUE MEASURES -- SOCALGAS
(Dollars in millions)

At fair value as of September 30, 2010

Collateral

Level 1

Level 2

Level 3

netted

Total
Assets:

    Interest rate instruments
$
-
$
3
$
-
$
-
$
3
    Commodity contracts subject to rate recovery

1

-

-

-

1
    Commodity contracts not subject to rate recovery

2

-

& nbsp;-

-

2
Total
$
3
$
3
$
-
$
-
$
6
Liabilities:

    Commodity contracts subject to rate recovery
$
1
$
-
$
-
$
(1)
$
-

At fair value as of December 31, 2009

Collateral

Level 1

Level 2

Level 3

netted

Total
Assets:

    Interest rate instruments
$
-
$
8
$
-
$
-
$
8
    Commodity contracts subject to rate recovery

3

1

-

-

4
    Commodity contracts not subject to rate recovery

3

-

-

-

3
Total
$
6
$
9
$
-
$
-
$
15

RECURRING FAIR VALUE MEASURES -- SOCALGAS
(Dollars in millions)
	At fair value as of March 31, 2011
								Collateral
		Level 1		Level 2		Level 3		netted		Total
Assets:
Commodity contracts subject to rate recovery	$	2	$	―	$	―	$	―	$	2
Commodity contracts not subject to rate recovery		4		―		―		―		4
Total	$	6	$	―	$	―	$	―	$	6
Liabilities:
Commodity contracts subject to rate recovery	$	―	$	1	$	―	$	―	$	1

	At fair value as of December 31, 2010
								Collateral
		Level 1		Level 2		Level 3		netted		Total
Assets:
Interest rate instruments	$	―	$	3	$	―	$	―	$	3
Commodity contracts subject to rate recovery		1		1		―		―		2
Commodity contracts not subject to rate recovery		3		―		―		―		3
Total	$	4	$	4	$	―	$	―	$	8

There were no transfers into or out of Level 1 or Level 2 for Sempra Energy Consolidated, SDG&E or SoCalGas during the periods presented.

Level 3 Information

The following table sets forth reconciliations of changes in the fair value of net trading and other derivatives classified as Level 3 in the fair value hierarchy for Sempra Energy Consolidated and SDG&E:

Three months ended September 30,
(Dollars in millions)
2010
2009
Balance as of July 1
$
7
$
25
    Realized and unrealized losses

(1)

(8)
    Allocated transmission instruments

7

15
    Settlements

(1)

-
Balance as of September 30
$
12
$
32
Change in unrealized gains relating to

    instruments still held at September 30
$
-
$
-

Nine months ended September 30,
(Dollars in millions)
2010
2009
Balance as of January 1
$
10
$
27
    Realized and unrealized losses

(5)

(7)
    Allocated transmission instruments

7

15
    Settlements

-

(3)
Balance as of September 30
$
12
$
32
Change in unrealized gains relating to

    instruments still held at September 30
$
-
$
-

	Three months ended March 31,
(Dollars in millions)	2011		2010
Balance as of January 1	$	2	$	10
Realized and unrealized gains (losses)		6		(2)
Allocated transmission instruments		1		―
Settlements		(6)		1
Balance as of March 31	$	3	$	9
Change in unrealized gains relating to
instruments still held at March 31	$	―	$	―

There were no transfers into or out of Level 3 during the periods presented.

~~Gains and losses (realized and unrealized) for~~

Level 3 recurring items are ~~primarily~~ related to ~~SDG&E's congestion revenue rights~~CRRs. These instruments are recorded at fair value based on the most current annual auction prices published by the California Independent System Operator (ISO). The earnings impact of CRRs are deferred and ~~were~~recorded in regulatory accounts to the extent they are recoverable or refundable through rates. Upon settlement, CRRs are included in Cost of Electric Fuel and Purchased Power on the Condensed Consolidated Statements of Operations for the three months ended March 31, 2011 and ~~nine months ended September 30, 2010 and 2009.~~

2010.

Non-Recurring Fair Value Measures – Sempra Energy Consolidated

We discuss non-recurring fair value measures and the associated accounting impact on our investments in RBS Sempra Commodities and Argentina in Note 4.

~~NOTE 9. SEMPRA UTILITIES' REGULATORY MATTERS~~

~~POWER PROCUREMENT AND RESOURCE PLANNING~~

~~Sunrise Powerlink Electric Transmission Line~~

In December 2008, the CPUC issued a final decision authorizing SDG&E to construct a 500-kilovolt (kV) electric transmission line between the Imperial Valley and the San Die go region (Sunrise Powerlink). This line is designed to provide 1,000 MW of increased import capability into the San Diego area. This CPUC decision approved SDG&E’s request to construct the Sunrise Powerlink along a route that would generally run south of the Anza-Borrego Desert State Park. The decision also approves the environmental impact review conducted jointly by the CPUC and the Bureau of Land Management (BLM) and establishes a total project cost cap of $1.9 billion, including approximately $190 million for environmental mitigation costs. In January 2009, the BLM issued its decision approving the project, route and environmental review.

~~The CPUC decision requires SDG&E to adhere to certain commitments it made during the application process, as follows:~~

§~~not to contract, for any length of term, with conventional coal g enerators to deliver power via the Sunrise Powerlink;~~

§if any currently approved renewable energy contract that is deliverable via the Sunrise Powerlink fails, to replace it with a viable contract with a renewable generator located in the Imperial Valley region; and

§~~voluntarily raise SDG&E's Renewables Portfolio Standard Program goal (discussed below under "Renewable Energy") to 33 percent by 2020.~~

After the issuance by the CPUC of its final decision, the Utility Consumers Action Network (UCAN) and the Center for Biological Diversity/Sierra Club (CBD) applied for rehearing of the final decision. After the CPUC denied t hese rehearing applications, in August 2009, UCAN and the CBD jointly filed a petition with the California Supreme Court challenging the CPUC's decision with regard to implementation of the California Environmental Quality Act (CEQA). UCAN also filed a petition with the California Court of Appeal (Court of Appeal) challenging the decision on other legal grounds, which the Court of Appeal denied in August 2010. The UCAN/CBD appeal will be addressed by the California Supreme Court now that the Court of Appeal has dismissed UCAN's first petition.

In addition, three appeals of the BLM decision were filed with the Interior Board of Land Appeals (IBLA) by individuals, a community organization, and the Viejas Indian tribe. The Viejas Indian tribe withdrew its appeal and the IBLA denied the other two appeals.

Opponents who filed the BLM appeals also filed a lawsuit in Federal District Court for declarato ry and injunctive relief regarding Sunrise Powerlink. The complaint alleges that the BLM failed to properly assess the environmental impacts of the approved Sunrise Powerlink route and the related potential development of renewable resources in east San Diego County and Imperial County. The complaint requests a declaration that the BLM violated federal law in approving Sunrise Powerlink and an injunction against any construction activities. On October 25, 2010, the court granted SDG&E's motion to dismiss the complaint in its entirety for want of standing; the plaintiffs filed an amended complaint on November 5, 2010.

In September 2010, the CPUC and BLM jointly approved the final Project Modification Report, accepting all of the proposed modifications to the approved route and finding that no additional environmental studies are required. In October 2010, the United States Forest Service (USFS) issued a decision rejecting all pending appeals and rea ffirming its July 2010 decision approving the segment of Sunrise Powerlink's route within its jurisdiction. The USFS is expected to issue a special use permit to SDG&E by year-end, which will allow SDG&E to begin construction on USFS land. On October 22, 2010, the CBD and the plaintiffs in the Federal District Court suit against BLM filed an application for rehearing with the CPUC challenging its approval of the Project Modification Report. The CPUC summarily rejected this application for rehearing as contrary to the CPUC's rules. On October 25, 2010, the BLM federal court plaintiffs filed an appeal with the IBLA challenging the BLM's approval of the Project Modification Report. This appeal was accompanied by a motion for a stay of construction of the project, which SDG&E opposed on November 4 ~~2010. SDG&E will also oppose the IBLA appeal.~~

Sunrise Powerlink costs will be recovered in SDG&E's Electric Transmission Formula Rate, where SDG&E must demonstrate to the Federal Energy Regulatory Commission (FERC) that such costs were prudently incurred.

The total amount invested by SDG&E in the Sunrise Powerlink project as of September 30, 2010 was $447 million, which is included in Property, Plant and Equipment on the Condensed Consolidated Balance Sheets of Sempra Energy and SDG&E. SDG&E expects the Sunrise Powerlink to be in commercial operation in the second half of 2012.

~~We provide additional information concerning Sunrise Powerlink in Note 15~~ of the Notes to Consolidated Financial Statements in the Annual Report.

NOTE 9. SEMPRA UTILITIES' REGULATORY MATTERS

POWER PROCUREMENT AND RESOURCE PLANNING

Renewable Energy

~~Certain~~

In 2010, certain California electric retail sellers, including SDG&E, ~~are~~were required to deliver 20 percent of their retail energy sales from renewable energy ~~sources beginning in 2010.~~sources. The rules governing this ~~requirem ent,~~requirement, administered by both the ~~CPUC~~California Public Utilities Commission (CPUC) and the California Energy Commission (CEC), are ~~generally~~ known as the Renewables Portfolio Standard (RPS) Program. In ~~September 2009,~~April 2011, the Governor of California ~~issued an Executive Order~~signed Senate Bill X1 2 (2011 RPS Program) which, ~~set a target for~~when in effect, will supersede the RPS Program and require each California utility to procure 33 percent of ~~their~~its annual electric energy requirements from renewable energy sources by ~~2020. This Executive Order designates the California Air Resources Board (CARB) as the agency responsible for establishing the compliance rules~~2020, with an average of 20 percent required from January 1, 2011 to December 31, 2013; 25 percent by December 31, 2016; and regulations under CARB's Assembly Bill 32 authority to regulate greenhouse gas emissions. In September 2010, CARB adopted a requirement known as the California Renewable Energy Standard (RES), which obligates California utilities to procure 33 percent by December 31, 2020. We expect the 2011 RPS Program to become effective in the second quarter of ~~their annual electric energy requirements from renewable energy sources by 2020. CARB has not yet issued the final version of formal regulations articulating the requirement or detailing how the RES~~2011, and certain implementation details will be ~~implemented.~~

~~In 2008,~~addressed by the ~~CPUC issued a decision defining~~CPUC.

The 2011 RPS Program contains new flexible compliance mechanisms, more restrictive than the prior mechanisms, that can be used to ~~defer compliance~~comply with or meet the 2011 RPS Program mandates in ~~2010~~2011 and beyond. The ~~decision established that~~new mechanisms provide for a CPUC waiver under certain conditions, including: 1) a finding byof inadequate transmission or 2) delays in the ~~CPUC~~start-up of ~~insufficient transmission is a permissible reason to defer compliance with the RPS Program mandates. This decision also confirmed that any~~commercial operations of renewable energy ~~procured in excess of the established targets for prior years, currently and in the future, could be applied~~projects due to ~~any procurement shortfalls in the years 2010 and beyond.~~

permitting or interconnection.

SDG&E continues to procure renewable energy supplies to achieve the 2011 RPS Program ~~goals and the Executive Order/RES~~ requirements. A substantial number of these supply contracts, however, are contingent upon many factors, including:

§~~access to electric transmission inf rastructure (including SDG&E's Sunrise Powerlink transmission line);~~

§	access to electric transmission infrastructure;

§	timely regulatory approval of contracted renewable energy projects;

§	the renewable energy project developers' ability to obtain project financing and permitting; and

§	successful development and implementation of the renewable energy technologies.

For 2010, SDG&E satisfied its RPS procurement requirements through a combination of contracted ~~renewable energy projects;~~

§~~the renewable energy project developers' ability to obtain project financing~~deliveries and ~~permitting; and~~

§~~successful development and implementation~~application of the ~~renewable energy technologies.~~

flexible compliance mechanism, including the application of certain mechanisms that are no longer available under the 2011 RPS Program. For 2011 and beyond, SDG&E believes it will be able to comply with the 2011 RPS Program requirements based on its contracting activity and, if necessary, application of the new flexible compliance mechanisms. SDG&E's failure to comply with the RPS Program ~~requir ements in 2010, or in any subsequent years,~~requirements could subject it to a CPUC-imposed penalty of 5 cents per kilowatt hour of renewable energy ~~under-delivery up to a maximum penalty of $25 million per year. A determination regarding RES compliance is not possible at this time, as program details are not yet known.~~

~~Solar Photovoltaic Program~~

The CPUC issued a decision in September 2010 approving a new solar photovoltaic (PV) program for SDG&E. Under the adopted program, SDG&E may develop up to 100 MW of solar PV in its service area, consisting of up to 26 MW of utility owned generation and up to 74 MW of purchased power from independent producers. Individual project size may range up to 5 MW. Over the 5-year program, SDG&E will be allowed to spend up to $100 million in capital costs for the systems it owns, based on an overall cost cap of $3.50 per watt, including a 10-percent contingency factor. A cost cap of $235 per MWh will apply to purchased power under the program.

~~East County Substation~~

In August 2009, SDG&E filed an application with the CPUC for authorization to proceed with the East County Substation Project, which will include construction of a new 500/230/138-kV substation, rebuilding of the existing Boulevard Substation and construction of a new 138-kV transmission line connecting the two substations. The project, estimated to cost approximately $280 million, would allow interconnections from new renewable-generation sources and enhance the reliability of electric service to a number of communities. The CPUC and BLM have agreed to prepare a joint environmental impact report and environmental impact statement. A CPUC decision on this project is expected in 2011.

under-delivery.

GENERAL RATE CASE (GRC)

The CPUC uses a general rate case proceeding to prospectively set rates sufficient to allow the Sempra Utilities to recover their reasonable cost of operations and to provide the opportunity to realize ~~an acceptable rate~~their authorized rates of return on their ~~investments. The~~investment. In December 2010, the Sempra Utilities filed their ~~Notices of Intent (NOI) for the~~ 2012 General Rate Case ~~(2012 GRC)~~(GRC) applications to establish their authorized 2012 revenue requirements and the ratemaking mechanisms by which those requirements will change on an annual basis over the subsequent three-year (2013-2015) period. The CPUC issued a ruling in ~~August 2010. These NOIs are preliminary~~March 2011 setting the proceeding scope and schedule that projected a final CPUC decision around the month of March 2012 and granted the utilities' requests to establish regulatory accounts to allow recovery of their authorized 2012 revenue requirements retroactive to January 1, 2012.

We provide further detail about the GRC applications ~~that propose revenue requirement increases of $246 million for SDG&E and $282 million for SoCalGas over their respective 2011 authorized revenue. These increases would equate to increases~~ in ~~rates of 7 percent for SDG&E and 7.4 percent for SoCalGas over their 2010 rates. In October 2010, the CPUC staff completed its review~~Note 15 of the ~~NOIs and accepted~~Notes to Consolidated Financial Statements in the proposed filings, enabling both SDG&E and SoCalGas to file their final applications in mid-December 2010. The CPUC is scheduled to issue a decision on each of the final applications in late 2011, with changes in rates to become effective on January 1, 2012.

A number of parties have asked the CPUC to delay the filing of SDG&E's and SoCalGas' next GRC applications for at least a year. To date, the CPUC has denied all such requests and has ordered SDG&E and SoCalGas to follow their original GRC schedules.

Annual Report.

UTILITY INCENTIVE MECHANISMS

The CPUC applies performance-based measures and incentive mechanisms to all California utilities, under which the Sempra Utilities have earnings potential above authorized base margins if they achieve or exceed specific performance and operating goals.

We provide additional information regarding these incentive mechanisms in Note 1615 of the Notes to ~~Consolidat ed~~Consolidated Financial Statements in the Annual Report, and updates below.

Natural Gas Procurement

In ~~January~~June 2010, SoCalGas applied to the CPUC ~~approved~~for approval of a Gas Cost Incentive Mechanism (GCIM) award of $6 million for natural gas procured for our core customers during the 12-month period ending March 31, 2010. SoCalGas expects a CPUC decision in the third quarter of 2011.

In the first quarter of 2010, SoCalGas recorded a GCIM award of $12 million for SoCalGas' procurement activities during the 12-month period ending March 31, ~~2009. In June 2010, SoCalGas applied to~~2009, approved by the CPUC ~~for approval of a GCIM award of $6 million for SoCalGas' procurement activities during the 12-month period ending March 31,~~in January 2010. ~~SoCalGas expects a CPUC decision in 2011.~~

Energy Efficiency

~~In December 2009, the~~

The CPUC awarded $0.3 million and $2.1 million, net of a 35 percent holdback pending a final true-up in 2010, to SDG&E and SoCalGas, respectively, for their performance during the 2006 – 2008 program period. In February 2010, the Sempra Utilities filed a petition with the CPUC to correct errors in the computation of the awards. ~~If adopted, the changes would increase the awards by $0.4 million for SDG&E and $1.3 million for SoCalGas, net of the 35 percent holdback.~~

~~An Administrative Law Judge draft decision and a Commissioner alternate decision were issued in September 2010 regarding the final true-up of the energy efficiency~~established incentive ~~earnings for the 2006 – 2008 program period. The draft decision rules~~mechanisms that ~~no additional incentive payments are warranted for the final true-up of incentive earnings~~. The alternate decision approves additional incentive awards of $6 million for SDG&E and $3.9 million for SoCalGas for the final true-up of the amounts held back for prior years' awards, but makes no determination on the petition to correct errors. A final decision is expected by the end of 2010.

~~COST OF CAPITAL~~

A cost of capital proceeding determines the Sempra Utilities' authorized capital structure and the authorized rate of return that the Sempra Utilities may earn on their electric and natural gas distribution and electric generation assets.

In January 2010, the CPUC approved SDG&E's and the Division of Ratepayer Advocates' (DRA) joint petition to delay SDG&E's next scheduled cost of capital proceeding for two years. With this approval, SDG&E's next cost of capital application is scheduled to be filed in April 2012 for a 2013 test year, consistent with the schedule for cost of capital applications for each of Southern California Edison (Edison) and Pacific Gas and Electric (PG&E).

In addition to establishing the authorized rate of return, a cost of capital proceeding also addresses market-based benchmarks to be monitored to determine whether an adjustment to the established authorized rate of return is required during the interim years between cost of capital proceedings. SDG&E’s cost of capital benchmark is based on the 12-month average monthly A-rated utility bond yield as published by Moody’s for the 12-month period October through September of each fiscal year. If this 12-month average falls outside of the range of 5.02 percent to 7.02 percent, SDG&E’s authorized rate of return would be adjusted, upward or downward, by one-half of the difference between the 12-month average and 6.02 percent (SDG&E’s benchmark interest rate), effective January 1 following the year in which the benchmark range was exceeded.

~~SoCalGas’ cost of capital trigger mechanism identifies two conditions for determining whether a change in the authorized rate of return is required. Both conditions~~ are based on the ~~30-year Treasury Bond Yields – one being~~effectiveness of energy efficiency and demand side management programs. The Sempra Utilities plan to file requests with the ~~most recent 12-month rolling average yield and~~CPUC in June 2011 for any incentive awards for the second being the corresponding 12-month forecasted rolling yield on 30-year Treasury Bonds as published by Global Insights. If both interest rates fall outside a range of 3.88 percent to 6.88 percent, SoCalGas’ authorized rate of return would be adjusted, upward or downward, by one-half of the difference between the historical 12-month rolling average yield and 5.38 percent (SoCalGas' benchmark interest rate), effective January 1 following the2009 program year ~~in which both conditions were exceeded.~~

~~At September 30, 2010, neither SDG&E’s nor SoCalGas’ benchmark ranges have been exceeded.~~

~~ADVANCED METERING INFRASTRUCTURE~~

~~In April 2010, the C PUC issued~~with a decision ~~approving SoCalGas' application~~expected in 2012. The CPUC is also considering modifications to ~~upgrade approximately six million natural gas meters with an advanced metering infrastructure (AMI), subject~~the incentive mechanism that would apply to ~~certain safeguards to better ensure its cost effectiveness for ratepayers. The approved cost of~~ the ~~project is $1.05 billion (including approximately $900 million~~2012 – 2014 program period. We expect a decision on these program modifications in ~~capital investment), with SoCalGas being subject to risk/reward sharing for costs above or below this amount. Installation of the meters is expected to begin in late 2012 and continue through 2017.~~

In May 2010, The Utility Reform Network (TURN) and the Utility Workers Union of America (UWUA) Local 132, parties opposing SoCalGas' AMI application, filed an application for rehearing of the CPUC's decision. The application for rehearing is still pending.

2011.

SDG&E REQUEST FOR AUTHORITY TO INVEST IN WIND FARM

In July 2010, SDG&E filed a request with the CPUC seeking authority to make a tax equity investment in the holding company of a wind farm ~~project in an amount not to exceed $600 million.~~project. In April 2011, SDG&E ~~is seeking to treat the investment as~~filed a ~~rate-based asset for which it would earn its authorized rate of return. A CPUC decision is expected in 2011.~~

~~If approved by~~settlement agreement with the CPUC ~~and~~resolving all issues with the parties in the proceeding. If the CPUC approves the settlement agreement as filed, SDG&E would make an investment, after the wind farm project has met all of the conditions precedent set forth in the definitive documents ~~SDG&E would invest in one or more project holding companies in an amount not to exceed 80% of the project costs (not to exceed an aggregate amount of $600 million)~~and upon the initiation of commercial operation of the ~~project.~~project, which would be included in the utility’s rate base in an amount not to exceed 64.99 percent of the project costs or an aggregate amount of $250 million. SDG&E ~~expects~~would also make an incremental investment, to be excluded from the utility’s rate base, of no less than 10 percent of the project costs. We expect a CPUC decision on the settlement agreement in mid-2011, and the project to be in commercial operation in the second half of 2012.

~~2007 WILDFIRES~~

INSURANCE COST RECOVERY ~~FOR COMPANY FACILITIES~~

In October 2010, the CPUC issued a decision approving a settlement agreement between SDG&E and the DRA, authorizing SDG&E to recover $43 million of capital costs incurred to replace and repair company facilities under CPUC jurisdiction damaged by the October 2007 wildfires. This decision was in response to an application that

SDG&E filed with the CPUC in March 2009 seeking to recover $49.8 million of incremental costs ($43 million of capital costs and $6.8 million of operation and maintenance costs), which application was protested by the DRA.

SDG&E also incurred $30.1 million of incremental costs for the replacement and repair of company facilities under FERC jurisdiction, which are currently being recovered in SDG&E's electric transmission rates.

~~We discuss recovery of 2007 wildfire litigation costs in Note 10.~~

~~INSURANCE COST RECOVERY~~

~~SDG&E filed an application~~a request with the CPUC in August 2009 seeking authorization to recover higher liability insurance premiums (amounts in excess of those authorized to be recovered in the 2008 GRC), which SDG&E began incurring commencing July 1, 2009, and any losses realized due to higher deductibles associated with the new policies. ~~Evidentiary hearings were held~~SDG&E requested a $29 million revenue requirement for the incremental increase in ~~April~~ its general liability and wildfire liability insurance premium costs for the 2009/2010 policy period and proposed a ~~final CPUC decision is expected by~~mechanism for recovery of future liability insurance costs incurred in the ~~end~~2010/2011 policy period and the first six months of ~~2010.~~the 2011/2012 policy period. SDG&E made the filing under the CPUC’s rules allowing utilities to seek recovery of significant cost increases incurred between GRC filings resulting from unforeseen circumstances. SDG&E is requesting a $29 million revenue requirement for the 2009/2010 policy period for the incremental increase in its liability and wildfire insurance premium costs above what is currently authorized in rates and proposes a mechanism for recovery of future liability insurance costs incurred in the 2010/2011 policy period and the first six months of the 2011/2012 policy period. The CPUC's rules allow a utility to seek recovery of incurred costs that meet certain criteria, subject to a $5 million deductible per event. ~~SDG&E has asked that~~In December 2010, the ~~increase in liability insurance costs~~CPUC approved SDG&E’s request for the ~~2009/2010,~~$29 million revenue requirement, which was implemented in rates effective January 1, 2011, and authorized SDG&E to request recovery of any incremental insurance premiums for future policy periods, with a $5 million deductible applied to each policy renewal period. SDG&E filed a request in April 2011 for an incremental revenue requirement of $63 million for the 2010/2011 ~~and~~policy period. We expect a CPUC decision on the request in the second half of 2011. SDG&E also plans to file a request in the third quarter of 2011 for any incremental insurance premiums incurred for the first six months of the 2011/2012 policy periods be deemed a single event subject to one $5 million deductible. In the nine months ended September 30, 2010 and 2009, SDG&E's after-tax earnings were adversely impacted by $20 million and $5 million, respectively, due to the incremental insurance premiums associated with its wildfire coverage.

period.

EXCESS WILDFIRE CLAIMS COST RECOVERY

SDG&E and SoCalGas filed an application, along with other related filings, with the CPUC in August 2009 proposing a new mechanism for the future recovery of all wildfire-related expenses for claims, litigation expenses and ~~insu rance~~insurance premiums that are in excess of amounts authorized by the CPUC for recovery in rates. In connection with these filings, SDG&E is seeking the recovery of costs incurred by SDG&E for the 2007 wildfire losses that are in excess of amounts recovered from its insurance coverage and other potentially responsible third parties, as well as similar costs for future wildfires, if and when incurred. TheThis application ~~for a new mechanism for recovery of costs incurred for future wildfires~~ was made jointly with Southern California Edison (SCE) and ~~PG&E.~~Pacific Gas & Electric (PG&E). In July 2010, the CPUC approved ~~the utilities'~~SDG&E's and SoCalGas' requests for separate regulatory accounts to record the subject expenses while the joint utility application is pending before the CPUC. Several parties protested the original application and, in response, the four utilities jointly submitted an amended application in ~~July~~August 2010. A ~~proceeding schedule has~~February 2011 ruling directing the utilities to show cause why the application should not ~~yet been established.~~

be dismissed was stayed to permit continued settlement discussions between the four utilities and the CPUC and with the other parties to the proceeding.

SDG&E will also seek the recovery of costs incurred by SDG&E for the 2007 wildfire losses that are in excess of amounts recovered from its insurance coverage and other potentially responsible third parties. SDG&E believes that the approval of a new mechanism for cost recovery for future wildfires will provide a framework for discussions on recovery of these costs.

We provide additional information about 2007 wildfire litigation costs and ~~thei r~~their recovery in Note 10.

NATURAL GAS PIPELINE OPERATIONS SAFETY ASSESSMENTS

As a result of recent natural gas pipeline explosions in the U.S., including the September 2010 rupture in San Bruno, California of a natural gas pipeline owned and operated by PG&E (the San Bruno incident), various regulatory agencies, including the CPUC, are evaluating natural gas pipeline safety regulations, practices and procedures.

In February 2011, the CPUC opened a forward-looking proceeding to examine what changes should be made to existing pipeline safety regulations for California natural gas pipelines. The Sempra Utilities are parties to this proceeding. The CPUC also appointed an independent review panel to make recommendations for possible actions by the CPUC in light of the San Bruno incident. Those recommendations may include changes to design, construction, operation and maintenance practices of natural gas facilities in California. The report of the independent review panel is expected in the second quarter of 2011.

In January 2011, the National Transportation Safety Board (NTSB) issued seven safety recommendations in connection with its investigation into the cause of the San Bruno incident. According to the NTSB, these safety recommendations “were issued to address record-keeping problems that could create conditions in which a pipeline is operated at a higher pressure than the pipe was built to withstand.” In response to a request from the CPUC, each of the Sempra Utilities reviewed its pipeline facilities located or operating in populated or high consequence areas, as defined by the NTSB, to identify those segments that have not had the maximum allowable operating pressure (MAOP) established through prior hydrostatic testing. Federal and state regulations allow natural gas pipelines installed prior to July 1, 1970 to establish MAOPs through prior operating history rather than through a strength test, but strength tests are required on natural gas pipelines installed subsequent to June 30, 1970 as an element in establishing MAOPs.

In response to the CPUC’s request, the Sempra Utilities conducted a detailed review of 1,622 miles of pipelines (1,416 miles for SoCalGas and 206 miles for SDG&E) installed in the subject class locations, and on April 15, 2011, the Sempra Utilities submitted a report to the CPUC on the results of their review and the actions they are taking in response to the NTSB recommendations.

The Sempra Utilities’ records review process did not reveal any significant concerns with the currently established MAOP for their pipelines, and the Sempra Utilities intend to continue to operate their pipelines in a safe and prudent manner.

NOTE 10. COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

We ~~record loss reserves~~accrue losses for legal proceedings when it is probable that a loss has been incurred and the amounts of the loss can be reasonably estimated. However, the uncertainties inherent in legal proceedings make it difficult to estimate with reasonable certainty the costs and effects of resolving these matters. Accordingly, actual costs incurred may differ materially from ~~reserved~~ amounts accrued, may exceed ~~applicab le~~applicable insurance coverages and could materially adversely affect our business, cash flows, results of operations, and financial condition.

At ~~September 30, 2010,~~March 31, 2011, Sempra Energy’s ~~reserves~~accrued liabilities for material legal proceedings, on a consolidated basis, were ~~$619~~$764 million, of which ~~$150 million is offset by an insurance receivable for wildfire litigation and $102~~$48 million is for ~~previously~~ resolved matters. ~~At September 30, 2010, these reserves for SDG&E and SoCalGas were $345 million (also offset by the $150 million insurance receivable) and $13 million, respectively.~~ We provide ~~additional information about previously~~detail regarding the resolved matters in Note 1716 of the Notes to Consolidated Financial Statements in the Annual Report.

At March 31, 2011, accrued liabilities for material legal proceedings for SDG&E and SoCalGas were $684 million and $25 million, respectively.

At March 31, 2011, liabilities of $683 million at Sempra Energy and SDG&E related to wildfire litigation may be paid using restricted cash of $312 million received in connection with a wildfire litigation settlement discussed below.

SDG&E

2007 Wildfire Litigation

In October 2007, San Diego County experienced several catastrophic wildfires. Reports issued by the California Department of Forestry and Fire Protection (Cal Fire) concluded that two of these fires (the Witch and Rice fires) were SDG&E "power line caused" and that a third fire (the Guejito fire) occurred when a wire securing a Cox Communications' (Cox) fiber optic cable came into contact with an SDG&E power line "causing an arc and starting the fire." Cal Fire reported that the Rice fire burned approximately 9,500 acres and damaged 206 homes and two commercial properties, and the Witch and Guejito fires merged and eventually burned approximately 198,000 acres, resulting in two fatalities, approximately 40 firefighters injured and approximately 1,141 homes destroyed.

A September 2008 staff report issued by the ~~CPUC's~~ Consumer Protection and Safety Division of the CPUC reached substantially the same conclusions as the Cal Fire reports, but also contended that the power lines involved in the Witch and Rice fires and the lashing wire ~~involv ed~~involved in the Guejito fire were not properly designed, constructed and maintained. In ~~November 2008,~~April 2010, proceedings initiated by the CPUC ~~initiated proceedings~~ to determine if any of its rules were violated ~~and in October 2009,~~were settled with SDG~~&E and the Consumer Protection and Safety Division entered into a settlement agreement, approved by the CPUC in April 2010, that resolves these proceedings by SDG&E's~~&E’s payment of $14.75 million.

Numerous parties have sued SDG&E and Sempra Energy in San Diego County Superior Court seeking recovery of unspecified amounts of damages, including punitive damages, from the three fires. These include owners and insurers of properties that were destroyed or damaged in the fires and public entities seeking recovery of firefighting, emergency response, and environmental costs. They assert various bases for recovery, including inverse condemnation based upon a California Court of Appeal decision finding that another California investor-owned utility was subject to strict liability, without regard to foreseeability or negligence, for property damages resulting from a wildfire ignited by power lines.

In October 2010, the ~~court~~Court of ~~appeal~~Appeal affirmed the trial court's ruling that these claims must be pursued in individual lawsuits, ~~(rather~~rather than as class actions on behalf of all persons who incurred wildfire ~~damages).~~ damages. In February 2011, the California Supreme Court denied a petition for review of the affirmance. The trial court has scheduled a Witch fire and Guejito fire trial to begin in February 2012.

SDG&E ~~has~~ filed cross-complaints against Cox ~~Communications~~ seeking indemnification for any liability that SDG&E ~~may~~might incur ~~that relates to~~in connection with the Guejito fire, two SDG&E contractors seeking indemnification in connection with the Witch fire, and one SDG&E contractor seeking indemnification in connection with the Rice fire. ~~The court has scheduled a Guejito fire trial~~

In December 2010, SDG&E and Cox reached an agreement settling SDG&E's claims against Cox and Cox’s insurers in the wildfire litigation (Cox Settlement). Among other things, the settlement agreement provides that SDG&E will receive approximately $444 million, which it will use for ~~two individual plaintiffs~~wildfire related expenditures, and SDG&E will defend and indemnify Cox against all compensatory damage claims and related costs arising out of the wildfires.

At December 31, 2010, the $300 million Settlement Receivable Related to ~~begin~~Wildfire Litigation on the Condensed Consolidated Balance Sheets of Sempra Energy and SDG&E represented cash to be received in accordance with the terms of the Cox Settlement in several payments through March ~~2011.~~

2011 and which was received. Restricted cash of $312 million at March 31, 2011 on the Condensed Consolidated Balance Sheets of Sempra Energy and SDG&E represents amounts received from Cox not yet applied to wildfire related expenditures.

SDG&E has settled substantially all of the 19,000 claims of homeowner insurers relating to the three fires, including claims for payment by the insurers to their policyholders for approximately 1,000 of the 1,300 houses, mobile homes, and apartment units identified in public records as having been destroyed.fires. Under the settlement agreements, SDG&E has paid or will pay 57.5 percent of the approximately $1.6 billion paid or reserved for payment by the insurers to their policyholders and received an assignment of the insurers’ claims against ~~Cox Communications and~~ other parties potentially responsible for the fires.

The wildfire litigation also includes claims of non-insurer plaintiffs for damage to uninsured and underinsured structures, business interruption, evacuation expenses, agricultural damage, emotional harm, personal injuries and other losses. SDG&E has settled the claims of approximately ~~450~~1,190 of these plaintiffs. OfApproximately 1,000 of the approximately ~~2,500~~2,000 remaining individual and business plaintiffs ~~approximately 1,200~~ have ~~thus far~~ submitted settlement demands orand damage ~~information. Individual and business claims total~~estimates totaling approximately ~~$825~~$800 million and government entity claims total approximately ~~$150~~$140 million. SDG&E expects to receive additional settlement demands and damage estimates as settlement negotiations continue.

SDG&E has established reserves for the wildfire litigation as we discuss below.

SDG&E's ~~settlements~~settlement of claims and defense costs have exceeded its $1.1 billion of liability insurance coverage. ~~SDG&E has established reserves for its estimated cost of resolving the remaining claims for damages of approximately 1,300 plaintiffs.~~ It expects that its wildfire reserves and amounts paid to resolve wildfire claims will continue to increase as it obtains additional ~~information and~~information; it is presently unable to reasonably estimate the amount or timing of recoveries from other potentially responsible ~~parties.~~

parties, other than Cox.

SDG&E has concluded, however, that it is probable that it will be permitted to recover from its utility customers substantially all reasonably incurred costs of resolving wildfire claims in excess of its liability insurance coverage and any amounts recovered from other ~~potent ially~~potentially responsible parties. Accordingly, although such recovery ~~from utility customers~~ will require future regulatory actions, as ~~we discuss in Note 9,~~of December 31, 2010 and March 31, 2011, SDG&E ~~has~~ recorded a regulatory asset in an amount substantially equal to the aggregate amount it has paid or reserved for payment for the resolution of wildfire claims and related costs in excess of its liability insurance ~~coverage.~~coverage and amounts received or to be received from Cox. SDG&E will increase ~~the amount of~~ the regulatory asset as additional amounts are paid or reserves are recorded and reduce it by any amounts recovered from other potentially responsible parties.

As ~~of September 30, 2010, the amount~~a consequence of the ~~regulatory asset was $311 million.~~

~~Consequently,~~expected recovery of wildfire costs from utility customers, Sempra Energy and SDG&E expect no significant earnings impact from the resolution of the remaining wildfire claims. However, SDG&E’s cash flow ~~will~~may be adversely affected bydue to the timing differences between the resolution of claims and the recoveries from other potentially responsible parties and utility ~~cus tomers,~~customers, which may extend over a number of years. Also, recovery from customers will require future regulatory actions, and a failure to obtain recovery, or any negative assessment of the likelihood of recovery, would likely have a material adverse effect on Sempra Energy's and SDG&E's cash flows and results of operations.

SDG&E will continue to gather information to evaluate and assess the remaining wildfire claims and the likelihood, amount and timing of related recoveries from other potentially responsible parties and utility customers and will make appropriate adjustments to wildfire reserves and the related regulatory asset as additional information becomes available.

In 2010 and 2011, as liabilities for wildfire litigation have become reasonably estimable in the form of settlement demands, damage estimates, and other damage information, SDG&E has recorded related reserves as a liability. The impact of this liability at December 31, 2010 and March 31, 2011 is offset by (1) current receivables for amounts to be received from Cox (December 31, 2010), (2) $312 million of restricted cash received from Cox (March 31, 2011) and (3) the recognition of a regulatory asset, as discussed above, for reserves in excess of the insurance coverage and the Cox settlement. The impact of the reserves on SDG&E's and Sempra Energy's after-tax earnings for the three months ended March 31, 2011 and 2010, was $1 million and $3 million, respectively. At March 31, 2011, wildfire litigation reserves were $683 million ($489 million in current and $194 million in long-term).

Sunrise Powerlink Electric Transmission Line

SDG&E commenced construction on the Sunrise Powerlink in the fall of 2010. The Sunrise Powerlink is a new 117-mile, 500-kilovolt (kV) electric transmission line that is being built between the Imperial Valley and the San Diego region, along a route that generally runs south of the Anza-Borrego Desert State Park. The current project plan provides for the transmission line to be completed and in-service in the second half of 2012.

The Sunrise Powerlink project was originally approved by the CPUC in December 2008, including approval of the environmental impact review conducted jointly with the Bureau of Land Management (BLM). The CPUC has subsequently denied or dismissed all requests for rehearing of its approval of the project.

In February 2011, the California Supreme Court denied a petition filed jointly by the Utility Consumers' Action Network (UCAN) and the Center for Biological Diversity/Sierra Club (CBD). The petition challenged the CPUC's decision with regard to implementation of the California Environmental Quality Act (CEQA). In addition, in August 2010 the California Court of Appeal denied a petition previously filed by UCAN with the Court of Appeal challenging the CPUC decision on other legal grounds.

In January 2009, the BLM issued its decision approving the portions of the project, route and environmental review within its jurisdiction. The Interior Board of Land Appeals (IBLA) subsequently denied or dismissed all administrative appeals that were filed challenging the BLM’s approval of the project.

The CPUC and BLM jointly approved the final Project Modification Report for Sunrise Powerlink in September 2010, accepting all of the proposed modifications to the approved route and finding that no additional environmental review was required. In December 2010, the IBLA dismissed an appeal challenging the BLM’s approval of the Project Modification Report. On March 3, 2011, opponents of the Sunrise Powerlink filed a petition for writ of review or mandamus with the California Supreme Court challenging the CPUC’s acceptance of the Project Modification Report. The California Supreme Court denied the petition on April 13, 2011.

In February 2010, parties opposed to the project filed a lawsuit in Federal District Court in San Diego seeking declaratory and injunctive relief and alleging that the BLM failed to properly assess the environmental impacts of the approved Sunrise Powerlink route and the related potential development of renewable resources in east San Diego County and Imperial County. The plaintiffs have filed a motion for a preliminary injunction regarding construction on BLM land and the plaintiffs, the federal government and SDG&E have each filed separate motions for summary judgment with the Court.

In July 2010, the United States Forest Service (USFS) issued its decision approving the portions of the project, route and environmental review within its jurisdiction. The USFS has subsequently denied all administrative appeals challenging its approval of the project.

In January 2011, project opponents filed a lawsuit in Federal District Court in San Diego alleging that the federal approvals for construction of the project on USFS land and BLM land violated the National Environmental Policy Act and other federal environmental laws. The lawsuit asks the Court for injunctive relief preventing the USFS and the BLM from approving any ongoing or future construction activities.

On February 7, 2011, opponents of the Sunrise Powerlink filed a lawsuit in California Superior Court in Sacramento, California against the State Water Resources Control Board and SDG&E alleging that the water quality certification issued by the Board under the Federal Clean Water Act violated CEQA. The complaint seeks to have the certification set aside and requests an injunction be issued.

We provide additional information concerning Sunrise Powerlink in Note 14 of the Notes to Consolidated Financial Statements in the Annual Report.

SoCalGas

SoCalGas, along with Monsanto Co., Solutia, Inc., Pharmacia Corp., and Pfizer, Inc., are defendants in two Los Angeles County Superior Court lawsuits filed in April 2011 seeking recovery of unspecified amounts of damages, including punitive damages, as a result of plaintiffs' exposure to PCBs (polychlorinated biphenyls). The lawsuits allege plaintiffs were exposed to PCBs not only through the food chain and other various sources but from PCB-contaminated natural gas pipelines owned and operated by SoCalGas. This contamination allegedly caused plaintiffs to develop cancer and other serious illnesses. Plaintiffs assert various bases for recovery, including negligence and products liability.

Sempra Pipelines & Storage

Liberty Gas Storage, LLC (Liberty) received a demand for arbitration from Williams Midstream Natural Gas Liquids, Inc. in February 2011 related to a sublease agreement. Williams alleges that Liberty was negligent in its attempt to convert certain salt caverns to natural gas storage and seeks damages of $56.7 million. Liberty filed a counterclaim alleging breach of contract in the inducement and seeks damages of more than $215 million. We discuss other matters related to these caverns in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

Sempra LNG

Sempra LNG has been engaged in a long-running land dispute relating to property adjacent to its Energía Costa Azul liquefied natural gas (LNG) receipt terminal near Ensenada, Mexico. The adjacent property is not required by environmental or other regulatory permits for the operation of the terminal. A claimant to the adjacent property has nonetheless asserted that his health and safety are endangered by the operation of the facility. In June 2010, a Mexican federal appeals court revoked a district court order, issued at the behest of the claimant, directing Mexican regulatory authorities to provisionally suspend authorizations for the operation of the LNG terminal. In February 2011, based on a complaint by the claimant, the new Ensenada Mayor attempted to temporarily close the terminal based on claims of irregularities in municipal permits issued six years earlier. This attempt was promptly countermanded by Mexican federal and Baja California state authorities. No terminal permits or operations were affected as a result of these proceedings or events and the terminal has continued to operate normally. ~~The~~

Sempra LNG expects additional Mexican ~~district~~ court ~~is expected to conduct additional~~ proceedings and governmental actions regarding the claimant’s assertions ~~and~~as to whether the terminal’s permits should be modified or ~~revoked.~~

revoked in any manner.

The property claimant has also filed a lawsuit against Sempra Energy in ~~U.S. district court~~Federal District Court in San Diego seeking compensatory and punitive damages and earnings from the Energía Costa Azul LNG terminal based on his allegations that he was wrongfully evicted from the adjacent property and that he has been harmed by other allegedly improper actions.

Other Litigation

In August 2007, the U.S. Court of Appeals for the Ninth Circuit issued a decision reversing and remanding certain Federal Energy ~~Crisis Litigation Settlement~~

Sempra Energy, RBS Sempra Commodities and Sempra Generation have reached a comprehensive settlement to resolve substantially all of their remaining energy crisis litigation for a total payment of $410 million. Described in more detail below, the matters resolved by the settlement include the multiple actions brought by the California Department of Water Resources (DWR) and other parties with respect to the validity, pricing and operation of Sempra Generation’s contract with the DWR and the FERC refu nd and manipulation proceedings against RBS Sempra Commodities. Two settlement agreements were submitted in October 2010 to the FERC for its approval. We anticipate that the FERC will act on the settlements in the first quarter of 2011.

We expect the settlement of $410 million to be funded largely from previously recorded reserves and receivables at RBS Sempra Commodities. Sempra Energy has also recorded an additional pretax charge of $159 million in the first quarter of 2010Regulatory Commission (FERC) orders declining to provide ~~for the remainder of the settlement, including $139 million at Sempra Generation and $20 million at Sempra Commodities.~~

~~DWR Contract~~

Among other relief from existing and potential disputes, under the terms of the settlement reached on the DWR contract, all claims, appeals and proceedings related to the DWR contract will be dismissed. These matters include the 2002 challenge bro ught by the California Energy Oversight Board (CEOB) and the CPUC at the FERC asserting that the DWR contract with Sempra Generation contained unjust and unreasonable rates; the DWR’s appeal in response to the denial of its 2002 claims for misrepresentation and breach of contract in San Diego Superior Court; and the 2008 arbitration proceedings in which the DWR asserted that Sempra Generation had breached the parties' agreement in various operational respects, and violated the order issued by an earlier arbitration panel relating to the amount refunded to the DWR and the manner in which Sempra Generation operates.

~~FERC Refund Proceedings~~

The settlement involving RBS Sempra Commodities includes, among other things, resolution of the following matters: the FERC's investigation of prices charged by various electric suppliers to buyers in the California Power Exchange (PX) and Independent System Operator (ISO) m arkets; a complaint involvingrefunds regarding short-term bilateral sales up to one month in the Pacific Northwest ~~(the~~for the December 2000 to June 2001 time period. The FERC has not yet acted on the court’s order. In December 2010, the FERC approved a comprehensive settlement resolves the sales between the DWR and Sempra Commodities); the California Attorney General's complaint that electricity sellers had failed to comply with the FERC's quarterly reporting requirements; and the California Attorney General's complaint seeking to collect for alleged overcharges related to all short-term bilateral transactions between sellers and the DWR from January 18, 2001 through June 20, 2001.

~~FERC Manipulation Investigation~~

The settlement involving RBS Sempra Commodities also includes resolution of the FERC's separate investigation into whether there was manipulation of short-term energy markets in the western United States that would constitute violations of applicable tariffs and warrant disgorgement of associated profits.

previously reached by Sempra Energy and RBS Sempra Commodities ~~have recorded reserves for~~with the ~~full amount~~State of California. The settlement resolves all issues with regard to sales between the ~~settlement~~California Department of Water Resources (DWR) and Sempra Commodities (see Note 11) in the Pacific Northwest, but potential claims may exist regarding sales between Sempra Commodities and other ~~litigation.~~ buyers in the Pacific Northwest.

Pursuant to the agreements related to the formation of RBS Sempra Commodities, we have indemnified RBS should the liability from the final resolution of these matters be greater than the reserves related to Sempra Commodities. Pursuant to our agreement with the Noble Group, ~~as we discuss in Note 4,~~ we have also indemnified Noble Americas Gas & Power Corp. and its affiliates for all losses incurred by such parties resulting from these proceedings as related to Sempra Commodities.

~~Other Litigation~~

Sempra Energy and several subsidiaries, along with three oil and natural gas companies, the City of Beverly Hills, and the Beverly Hills Unified School District, are defendants in a toxic tort lawsuit filed in Los Angeles County Superior Court by ~~approxima tely~~approximately 1,000 plaintiffs. This lawsuit claims that various emissions resulted in cancer or fear of cancer. We have submitted the case to our insurers, who have reserved their rights with respect to coverage. In November 2006, the court granted the defendants' summary judgment motions based on lack of medical causation for the 12 initial plaintiffs scheduled to go to trial first. The court also granted summary judgment excluding punitive damages. The court has stayed the case as to the remaining plaintiffs pending the appeal of the rulings. A mediation occurred in June 2010, after which the plaintiffs’ counsel agreed to recommend a settlement of the lawsuits as to Sempra Energy and its subsidiaries for an amount that is not significant. Any such settlement will require approval by each of the plaintiffs. If approval is obtained, finalization of the settlement is expected to occur within six months.

We are also defendants in ordinary routine ~~lit igation~~litigation incidental to our businesses, including personal injury, product liability, property damage and other claims. California juries have demonstrated an increasing willingness to grant large awards, including punitive damages, in these cases.

~~Wildfire Reserves and Insurance Receivables~~

In 2009 and 2010, as liabilities for wildfire litigation have become reasonably estimable, SDG&E has recorded related reserves as a current liability. The impact of this liability is offset by a current receivable resulting from SDG&E’s liability insurance and, for reserves in excess of the insurance coverage, the recognition of a regulatory asset, as discussed above. There was no effect on SDG&E's or Sempra Energy's 2009 earnings from the recording of the reserves. The impact on their 2010 earnings was $7 million and $17 million in the three months and nine months ended September 30, 2010, respect ively. At September 30, 2010, wildfire litigation reserves were $344 million and the receivable from SDG&E's insurers was $150 million.

NUCLEAR INSURANCE

SDG&E and the other owners of San Onofre Nuclear Generating Station (SONGS) have insurance to cover claims from nuclear liability incidents arising at SONGS. This insurance provides $375 million in coverage limits, the maximum amount available, including coverage for acts of terrorism. In addition, the Price-Anderson Act provides for up to $12.2 billion of secondary financial protection (SFP). If a nuclear liability loss occurring at any U.S. licensed/commercial reactor exceeds the $375 million insurance limit, all nuclear reactor owners could be required to contribute to the SFP. SDG&E's contribution would be up to $47 million. This amount is subject to an annual ~~maximu m~~maximum of $7 million, unless a default occurs by any other SONGS owner. If the SFP is insufficient to cover the liability loss, SDG&E could be subject to an additional assessment.

The SONGS owners, including SDG&E, also have $2.75 billion of nuclear property, decontamination, and debris removal insurance. In addition, the SONGS owners have up to $490 million insurance coverage for outage expenses and replacement power costs due to accidental property damage. This coverage is limited to $3.5 million per week for the first 52 weeks, then $2.8 million per week for up to 110 additional weeks. There is a 12-week waiting period deductible. These insurance coverages are provided through a mutual insurance company. Insured members are subject to retrospective premium assessments. SDG&E could be assessed up to $8.5 million.

The nuclear property insurance program includes an industry aggregate loss limit for ~~non-cert ified~~non-certified acts of terrorism (as defined by the Terrorism Risk Insurance Act). The industry aggregate loss limit for property claims arising from non-certified acts of terrorism is $3.24 billion. This is the maximum amount that will be paid to insured members who suffer losses or damages from these non-certified terrorist acts.

CONTRACTUAL COMMITMENTS

Sempra Energy Consolidated

In the first ~~nine months~~quarter of ~~2010,~~2011, significant increases in commitments at Sempra Energy were

§~~the issuance of $250 million of 5.35-percent first mortgage bonds and $500 million of 4.50-percent first mortgage bonds maturing in 2040 at SDG&E;~~

§~~$453 million for purchased-power contracts at SDG&E;~~

§~~$223 million for costs associated with nuclear fuel fabrication at SONGS;~~

§~~$133 million at SDG&E for engineering, material procurement and construction costs associated with the Sunrise Powerlink project;~~

§~~$54 million at SDG&E for electric distribution systems, advanced metering infrastructure, and electric generation plant and equipment;~~

§~~$52 million for construction and infrastructure improvemen ts for gas transmission and distribution operations at SoCalGas; and~~

§~~$315 million at Sempra Pipelines & Storage and Sempra LNG for natural gas contracts.~~

~~The~~

§	the issuance of $500 million of 2.0-percent notes and $300 million of floating rate notes, both maturing in 2014, at Sempra Energy;

§	$62 million for purchased-power contracts at SDG&E;

§	$23 million for costs related to the replacement of the steam generators and other construction projects at SONGS;

§	$45 million for electric distribution systems, advanced metering infrastructure and electric generation plant and equipment at SDG&E;

§	$321 million at SDG&E for engineering, material procurement and construction costs associated with the Sunrise Powerlink project; and

§	$42 million for construction and infrastructure improvements for natural gas transmission and distribution operations and advanced metering at SoCalGas; offset by

§	$51 million in reductions at Sempra Generation for natural gas contracts.

We expect future payments for the contractual commitments listed above ~~are expected~~ to be ~~$280 million for 2010, $187~~$341 million for 2011, ~~$151~~$85 million for 2012, ~~$135~~$31 million for 2013, ~~$112~~$778 million for 2014, $2 million for 2015 and ~~$2.2 billion~~$57 million thereafter. These amounts include expected interest payments on the ~~first mortgage bonds~~notes using the stated interest ~~rates.~~

~~Reserves~~rate for the fixed-rate notes and forward rates in effect at March 31, 2011 for the floating rate notes.

We discuss reserves for Sempra Energy and SDG&E related to wildfire litigation ~~are discussed~~ above in “SDG&E – 2007 Wildfire Litigation.” ~~Reserves for Sempra Energy related to the FERC and DWR contract settlement litigation are discussed above in “Energy Crisis Litigation Settlement.”~~

~~Changes~~

We discuss changes to SoCalGas’ natural gas purchase and pipeline capacity commitments ~~and Sempra LNG’s natural gas purchase and transportation commitments are discussed~~ below.

At ~~December~~March 31, ~~2009,~~2011, Sempra LNG ~~had LNG~~has various purchase agreements with ~~Tangguh PSC Contractors~~major international companies for the supply of LNG to its Energía Costa Azul and ~~Ras Laffan Liquefied Natural Gas Company.~~Cameron receipt terminals. We discuss these agreements further in Note 1716 of the Notes to Consolidated Financial Statements in the Annual Report.

In April 2010, Sempra LNG entered into an LNG supply option agreement with Gazprom Global LNG Limited (GGLNG), a subsidiary of OAO Gazprom. The multi-year agreement, which commenced in June 2010, allows GGLNG to deliver and sell up to two LNG cargoes per month to Sempra LNG at its Cameron receipt terminal. GGLNG pays Sempra LNG a fee for the right to deliver and sell the LNG cargoes using a predetermined pricing formula based on a market index.

Sempra LNG’s commitments under all LNG purchase agreements, reflecting the ~~additional recent~~termination effective September 2011 of an LNG supply option agreement ~~with GGLNG,~~by one of the suppliers, changes in forward prices since December 31, ~~2009,~~2010, and actual transactions for the first ~~nine~~three months of ~~2010,~~2011, are expected to decrease by ~~$1.4 billion in 2010 and $2~~$336 million in 2011, ~~to increase by $121~~$366 million in 2012, and ~~to decrease by $81~~$145 million in 2013, ~~$254~~and to increase by $50 million in 2014, $83 million in 2015 and ~~$4.4~~$2.3 billion thereafter compared to December 31, ~~2009.~~

2010.

The LNG commitment amounts above are based on Sempra LNG’s commitment to accept the maximum possible delivery of cargoes under the agreements. Actual LNG purchases for the ~~nine~~three months ended ~~September 30, 2010~~March 31, 2011 have been significantly lower than the maximum amounts possible.

Sempra LNG has a natural gas transportation agreement to provide service from the U.S./Mexico border to Southern California and Arizona. At September 30, 2010, Sempra LNG’s remaining commitment on this contract, which runs through August 2022, is $226 million.

SDG&E

In the first ~~nine months~~quarter of ~~2010,~~2011, significant increases to contractual commitments at SDG&E were ~~the issuance of $250 million of 5.35-percent first mortgage bonds maturing in 2040, the issuance of $500 million of 4.50-percent first mortgage bonds maturing in 2040, $453~~$62 million for purchased-power contracts, ~~$223~~$23 million for costs ~~associated with nuclear fuel fabrication~~related to the replacement of the steam generators and other construction projects at SONGS, ~~$133~~$45 million for electric distribution systems, advanced metering infrastructure and electric generation plant and equipment and $321 million for engineering, material procurement and construction costs associated with the Sunrise Powerlink ~~project and $54 million for electric distribution systems, advanced metering infrastructure, and electric generation plant and equipment.~~

The future payments for these contractual com mitments are expected to be $180 million for 2010, $143 million for 2011, $120 million for 2012, $107 million for 2013, $93 million for 2014 and $2 billion thereafter. These amounts include expected interest payments on the first mortgage bonds using the stated interest rates.

~~SoCalGas~~

In the first nine months of 2010, significant increases to contractual commitments at SoCalGas were $52 million for construction and infrastructure improvements for gas transmission and distribution operations. project.

The future payments for these contractual commitments are expected to be ~~$39~~$331 million for ~~2010 and $13~~2011, $56 million for ~~2011.~~

2012, $3 million for 2013, $2 million for 2014, $2 million for 2015 and $57 million thereafter.

SoCalGas

In the first quarter of 2011, significant increases to contractual commitments at SoCalGas were $42 million for construction and infrastructure improvements for natural gas transmission and distribution operations and advanced metering at SoCalGas. The future payments for these contractual commitments are expected to be $25 million for 2011, $12 million for 2012 and $5 million for 2013.

SoCalGas’ natural gas purchase and pipeline capacity commitments have decreased by ~~$682~~$97 million since December 31, ~~2009.~~2010. The decrease, primarily due to a reduction of ~~$1.1 billion~~$237 million based on ~~lower natural gas forward p rices and~~ actual transactions for the first ~~nine months~~quarter of ~~2010,~~2011, is offset by new natural gas purchase and pipeline capacity contracts of ~~$415~~$140 million. Net future payments are therefore expected to decrease by ~~$903~~$114 million for ~~2010~~2011 and to increase by ~~$124 million for 2011, $52~~$16 million for 2012 ~~$29~~and $1 million for ~~2013, $14 million for~~ 2014 ~~and $2 million thereafter~~ compared to December 31, ~~2009.~~

2010.

~~CAPITAL LEASES~~

SDG&E has two power purchase agreements with peaker plant facilities that went into commercial operation in June 2010 and are accounted for as capital leases. As of September 30, 2010, capital lease obligations for these leases, each with a 25-year term, were $181 million.

~~At September 30, 2010, the future minimum lease payments and present value of the net minimum lease payments under these capital leases for both Sempra Energy Consolidated and SDG&E were as follows:~~

(Dollars in millions)

2010
$
6

2011

24

2012

24

2013

24

2014

24

Thereafter

489

Total minimum lease payments(1)

591

Less: estimated executory costs

(97)

Less: interest(2)

(313)

Present value of net minimum lease payments(3)
$
181
(1)
This amount will be recorded over the lives of the leases as Cost of Electric Fuel and Purchased Power on Sempra Energy's and SDG&E's Condensed Consolidated Statements of Operations. This expense will receive ratemaking treatment consistent with purchased-power costs.
(2)
Amount necessary to reduce net minimum lease payments to present value at the inception of the leases.
(3)
Includes $7 million in Current Portion of Long-term Debt and $174 million in Long-term Debt on Sempra Energy's and SDG&E's Condensed Consolidated Balance Sheets at September 30, 2010.

NOTE 11. SEGMENT INFORMATION

We have ~~six~~five separately managed reportable segments, as follows:

1.	SDG&E provides electric service to San Diego and southern Orange counties and natural gas service to San Diego County.

2.	SoCalGas is a natural gas distribution utility, serving customers throughout most of Southern California and part of central California.

Sempra Generation develops, owns and operates, or holds interests in, electric power plants and energy projects in Arizona, California, Colorado, Nevada, Indiana, Hawaii and Mexico to serve wholesale electricity markets in the United States and Mexico. Sempra Generation also includes the operating results of Sempra Rockies Marketing, which holds firm service capacity on the Rockies Express Pipeline.

Sempra Pipelines & Storage ~~&nbs p;~~ ~~SDG&E~~ ~~provides electric service to San Diego and southern Orange counties and natural gas service to San Diego County.~~

2.~~SoCalGas~~ ~~is a natural gas distribution utility, serving customers throughout most of Southern California and part of central California.~~

3.~~Sempra Commodities~~ ~~holds our investment in RBS Semp ra Commodities, a joint venture with RBS. The partnership was formed from~~our commodities-marketing businesses previously reported in this segment. The partnership's commodity trading businesses serve customers in natural gas and electricity, and prior to July 1, 2010, also in petroleum and petroleum products, and base metals. Sempra Commodities also includes the operating results of Sempra Rockies Marketing, which holds firm service capacity on the Rockies Express Pipeline.

In February 2010, Sempra Energy, RBS and the partnership entered into an agreement to sell certain businesses within the partnership, which agreement was consummated on July 1, 2010. In September and October of 2010, the partnership entered into two additional agreements for transactions which will complete the divestiture of the last of the joint venture’s principal assets. ~~One of these transactions was compl eted on November 1, 2010, and the second transaction is expected to be completed by year-end.~~ ~~We discuss these transactions and other matters concerning the partnership in Note 4 above and in Notes 4 and 20 of the Notes to Consolidated Financial Statements in the Annual Report.~~

4.~~Sempra Generation~~ develops, owns and operates, or holds interests in, electric power plants and energy projects in Arizona, California, Colorado, Nevada, Indiana, Hawaii and Mexico to serve wholesale electricity markets in the United States and Mexico.

5.~~Sempra Pipelines & Storage~~ develops, owns and operates, or holds interests in, natural gas and propane pipelines and natural gas storage facilities in the United States and Mexico, and companies that provide natural gas or electricity services in Argentina, Chile, Mexico and Peru. We are currently pursuing the sale of our interests in the Argentine utilities, which we discuss further ~~in Note 4 above and~~ in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report. Sempra Pipelines & Storage also operates a natural gas distribution utility in Alabama.

In April 2011, Sempra Pipelines & Storage ~~also operates a natural gas distribution utility~~increased its interests in ~~Alabama.~~

6.~~Sempra LNG~~ ~~develops , owns~~Chile and ~~operates receipt terminals for importing LNG~~Peru, as we discuss in ~~the U.S. and Mexico, and has supply and marketing agreements to purchase LNG and sell natural gas.~~

Note 12.

5.	Sempra LNG develops, owns and operates receipt terminals for importing LNG into the U.S. and Mexico, and has supply and marketing agreements to purchase and sell LNG and natural gas.

We evaluate each segment's performance based on its contribution to Sempra Energy's reported earnings. The Sempra Utilities operate in essentially separate service territories, under separate regulatory frameworks and rate structures set by the CPUC. The Sempra Utilities' operations are based on rates set by the CPUC and the FERC. We describe the accounting policies of our segments in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

Prior to 2011, our Sempra Commodities segment contained our investment in RBS Sempra Commodities LLP (RBS Sempra Commodities), which held commodities-marketing businesses previously owned by us. Our investment in the ~~first~~partnership is reported on the equity method. We and RBS, our partner in the joint venture, sold substantially all of the partnership’s businesses and assets in four separate transactions completed in July, November and December of 2010 and February of 2011. We discuss these transactions and other matters concerning the partnership in Note 4 above and in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.

The activity in the partnership no longer meets the quantitative thresholds that require Sempra Commodities to be reported as a reportable segment under applicable generally accepted accounting principles, and we do not consider the remaining wind-down activities of the partnership to be of continuing significance. As a result, effective January 1, 2011, we are reporting the former Sempra Commodities segment in "All other" in the following tables and have restated prior year information to be consistent with this treatment.

Also, in the fourth quarter of 2010, we changed the composition of our reporting segments to include Sempra ~~LNG became a reportable~~Rockies Marketing, which was previously included in the Sempra Commodities segment, in the Sempra Generation segment. We have revised segment disclosures for ~~2009~~2010 to reflect this.

The following ~~ta bles~~tables show selected information by segment from our Condensed Consolidated Statements of Operations and Condensed Consolidated Balance Sheets.

Amounts labeled as ~~"all~~"All other" in the following tables consist primarily of parent ~~organizations.~~organizations and the former commodities-marketing businesses.

SEGMENT INFORMATION
(Dollars in millions)
	Three months ended March 31,
	2011				2010
REVENUES
SDG&E	$	840	35	%	$	742	29	%
SoCalGas		1,056	43			1,182	47
Sempra Generation		269	11			318	13
Sempra Pipelines & Storage		109	4			110	4
Sempra LNG		186	8			205	8
Adjustments and eliminations		―	―			3	―
Intersegment revenues(1)		(26)	(1)			(26)	(1)
Total	$	2,434	100	%	$	2,534	100	%
INTEREST EXPENSE
SDG&E	$	36			$	31
SoCalGas		17				17
Sempra Generation		2				4
Sempra Pipelines & Storage		8				9
Sempra LNG		11				12
All other		67				88
Intercompany eliminations		(33)				(52)
Total	$	108			$	109
INTEREST INCOME
Sempra Generation	$	5			$	2
Sempra Pipelines & Storage		2				4
Sempra LNG		1				―
All other		28				50
Intercompany eliminations		(33)				(52)
Total	$	3			$	4
DEPRECIATION AND AMORTIZATION
SDG&E	$	103	44	%	$	92	44	%
SoCalGas		81	35			75	36
Sempra Generation		19	8			15	7
Sempra Pipelines & Storage		13	6			11	5
Sempra LNG		13	6			12	6
All other		2	1			5	2
Total	$	231	100	%	$	210	100	%
INCOME TAX EXPENSE (BENEFIT)
SDG&E	$	49			$	31
SoCalGas		37				56
Sempra Generation		22				(38)
Sempra Pipelines & Storage		7				6
Sempra LNG		11				12
All other		(17)				(9)
Total	$	109			$	58

SEGMENT INFORMATION (Continued)
(Dollars in millions)
		Three months ended March 31,
		2011				2010
EQUITY EARNINGS
Earnings recorded before tax:
Sempra Generation		$	1			$	―
Sempra Pipelines & Storage			9				10
All other			(9)				5
Total		$	1			$	15
Earnings recorded net of tax:
Sempra Pipelines & Storage		$	31			$	19
EARNINGS (LOSSES)
SDG&E(2)		$	89	35	%	$	83	78	%
SoCalGas(2)			68	26			65	61
Sempra Generation			44	17			(51)	(48)
Sempra Pipelines & Storage			54	21			38	36
Sempra LNG			33	13			32	30
All other			(30)	(12)			(61)	(57)
Total		$	258	100	%	$	106	100	%
EXPENDITURES FOR PROPERTY PLANT & EQUIPMENT
SDG&E		$	348	57	%	$	290	65	%
SoCalGas			168	28			114	26
Sempra Generation			52	9			4	1
Sempra Pipelines & Storage			36	6			36	8
Sempra LNG			3	―			2	―
Total		$	607	100	%	$	446	100	%
		March 31, 2011				December 31, 2010
ASSETS
SDG&E		$	12,390	40	%	$	12,077	40	%
SoCalGas			7,908	26			7,986	26
Sempra Generation			1,905	6			2,401	8
Sempra Pipelines & Storage			5,722	19			5,175	17
Sempra LNG			2,403	8			2,379	8
All other			1,399	4			1,691	6
Intersegment receivables			(1,031)	(3)			(1,426)	(5)
Total		$	30,696	100	%	$	30,283	100	%
INVESTMENTS IN EQUITY METHOD INVESTEES
Sempra Generation		$	185			$	185
Sempra Pipelines & Storage			1,775				1,777
All other			794				803
Total		$	2,754			$	2,765
(1)	Revenues for reportable segments in 2011 include intersegment revenues of $2 million, $13 million and $11 million for SDG&E, SoCalGas and Sempra Pipelines & Storage, respectively. Revenues for reportable segments in 2010 include intersegment revenues of $1 million, $11 million and $14 million for SDG&E, SoCalGas and Sempra Pipelines & Storage, respectively.
(2)	After preferred dividends.

NOTE 12. SUBSEQUENT EVENT

SEGMENT INFORMATION

(Dollars in millions)

Three months ended September 30,
Nine months ended September 30,

2010
2009
2010
2009
REVENUES

SDG&E
$
811
38
%
$
773
42
%
$
2,245
34
%
$
2,136
38
%
SoCalGas

776
37

662
36

2,792
42

2,276
40

Sempra Commodities

24
1

24
1

73
1

50
1

Sempra Generation

269
13

250
13

&nb sp;806
12

792
14

Sempra Pipelines & Storage

77
3

98
5

262
4

328
6

Sempra LNG

183
9

68
4

554
8

125
2

Adjustments and eliminations

2
-

(2)
-

3
-
&nb sp;

(2)
-

Intersegment revenues

(26)
(1)

(20)
(1)

(77)
(1)

(55)
(1)

      Total
$
2,116
100
%
$
1,853
100
%
$
6,658
100
%
$
5,650
100
%
INTEREST EXPENSE

&nbs p;

SDG&E
$
37

$
29

$
99

$
75

SoCalGas

17

16

50

51

Sempra Commodities

2

1

3

7

Sempra Generation

4

3

11

11

Sempra Pipelines & Storage

10

9

25

&n bsp;

23

Sempra LNG

13

8

37

12

All other

73

70

239

190

Intercompany eliminations

(45)

(40)

(141)

(112)

      Total
$
111

$
96

$
323

$
257

INTEREST INCOME

SDG&E
$
-

$
1

$
-

$
1

SoCalGas

1

;1

1

3

Sempra Commodities

6

-
&n bsp;

6

-

Sempra Generation

6

4

11

10

Sempra Pipelines & Storage

4

5

12

13

Sempra LNG

1

-

1

-

All other

32

34

123

101

Intercompany eliminations

(45)

(40)

(141)

(112)

      Total
$
5

$
&nbs p;5

$
13

$
16

DEPRECIATION AND AMORTIZATION

SDG&E
$
96
44
%
$
81
41
%
$
283
44
%
$
239
42
%
SoCalGas

78
36

73
37

230
36

220
39

Sempra Generation

16
7

14
7

47
7

43
7

Sempra Pipelines & Storage

11
5

13
7

32
5

32
6

Sempra LNG

13
6

10
5

38
6

23
4

All other

4
2

5
3

13
2

11
2

      Total
$
218
100
%
$
196
100
%
$
643
100
%
$
568
100
%
INCOME TAX EXPENSE (BENEFIT)

SDG&E
$
56

$
53

$
131

$
141

SoCalGas

42

42

132

115

Sempra Commodities

(147)

30

(167)

104

Sempra Generation

18

30

(19)

76

Sempra Pipelines & Storage

23

(9)

36

(26)

Sempra LNG

3

(10)

19

(32 )

All other

(27)

(8)

(47)

(51)

      Total
$
(32)

$
128

$
85

$
327

SEGMENT INFORMATION (Continued)

(Dollars in millions)

Three months ended September 30,
Nine months ended September 30,

2010
2009
2010
2009
EQUITY EARNINGS (LOSSES)

Earnings (losses) recorded before tax:

   Sempra Commodities
$
(281)

$
105

$
(290)

$
384

   Sempra Generation

(1)

4

(2)

(2)

   Sempra Pipelines & Storage

10

18

32

39

   All other

(1)

(4)

(6)

&nbs p;

(10)

       Total
$
(273)

$
123

$
(266)

$
411

Earnings (losses) recorded net of tax:

   Sempra Pipelines & Storage
$
(4)

$
20

$
42

$
59

EARNINGS (LOSSES)

   SDG&E(1)
$
106
81
%
$
108
34
%
$
264
58
%
$
277
33
%
   SoCalGas(1)

78
59

74
23

212
46

198
24

   Sempra Commodities

(134)
(102)

75
24

(139)
(30)

274
33

   Sempra Generation

56
43

43
14

51
11

119
14

   Sempra Pipelines & Storage

43
33

54
17

120
26

64
8

   Sempra LNG

5
4

-
-

50
11

(19)
(2)

   All other

(23)
(18)

(37)
(12)

(99)
(22)

(82)
(10)

       Total
$
131
100
%
$
317
100
%
$
459
100
%
$
831
100
%

Nine months ended September 30,

2010
2009
EXPENDITURES FOR PROPERTY PLANT & EQUIPMENT

   SDG&E

$
822
61
%
$
633
46
%
   SoCalGas

337
25

336
24

   Sempra Generation

32
2

21
2

   Sempra Pipelines & Storage

151
11

149
11

   Sempra LNG

9
1

230
17

   All other

&nb sp;

3
-

2
-

       Total

$
1,354
100
%
$
1,371
100
%

September 30, 2010
December 31, 2009
ASSETS

   SDG&E

$
11,496
40
%
$
10,229
36
%
   SoCalGas

7,350
25

7,287
25

   Sempra Commodities

1,963
7

2,255
8

   Sempra Generation

2,383
8

2,048
7

   Sempra Pipelines & Storage

5,108
18

4,485
16

   Sempra LNG

2,329
8

2,277
8

   All other

492
2

596
2

   Intersegment receivables

&nbs p;

(2,172)
(8)

(665)
(2)

       Total

$
28,949
100
%
$
28,512
100
%
INVESTMENTS IN EQUITY METHOD INVESTEES

   Sempra Commodities

$
825

$
2,172

   Sempra Generation

256

434

   Sempra Pipelines & Storage

1,746

1,429

   All other

18

21

       Total

$
2,845

$
4,056

(1)
After preferred dividends.

��

In January 2011, Sempra Pipelines & Storage agreed to acquire from AEI its interests in Chilquinta Energía S.A. (Chilquinta Energía) in Chile and Luz del Sur S.A. (Luz del Sur) in Peru. At March 31, 2011, Sempra Pipelines & Storage and AEI each owned 50 percent of Chilquinta Energía and approximately 38 percent of Luz del Sur. We completed the transaction on April 6, 2011, and Sempra Pipelines & Storage now owns 100 percent of Chilquinta Energía and approximately 76 percent of Luz del Sur, with the remaining shares of Luz del Sur held by institutional investors and the general public. The purchase price was $875 million (plus working capital adjustments of $13 million), which resulted from valuing the assets in Chile at $490 million and the assets in Peru at $385 million. As part of our acquisition of AEI’s interest in Luz del Sur, we are required to launch a tender offer to the minority shareholders of Luz del Sur to purchase their shares at a price as determined by an independent appraiser. As part of the transaction, Sempra Pipelines & Storage also acquired AEI’s interests in two energy-services companies, Tecnored S.A. and Tecsur S.A. We provide additional information about Sempra Pipelines & Storage’s investments in Chilquinta Energía and Luz Del Sur in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.

Due to the limited time since the date of the acquisition, the initial accounting for this business combination is incomplete as of the date of this filing, including updated appraisal information for the acquisition. As such, it is impracticable for us to make certain business combination disclosures at this time, including:

§	the acquisition date fair value of the equity interest we held prior to the acquisition and any estimation of any gain or loss associated with the remeasurement of these equity interests; and

§	amounts to be recognized at the acquisition date for the major classes of assets acquired and liabilities assumed, including pre-acquisition contingencies, goodwill and other intangibles.

We will provide this information in our second quarter 2011 Form 10-Q.

Excluding the impact of purchase accounting to be determined, the incremental revenues and earnings for Sempra Energy had the acquisition occurred on January 1, 2010 were $343 million and $23 million, respectively, for the three months ended March 31, 2011, and $277 million and $19 million, respectively, for the three months ended March 31, 2010.

We expect the acquisition to be accretive to our EPS in 2011 and beyond, based on historically strong operating performance of the companies within sound regulatory environments and stable and growing countries.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with the financial statements contained in this Form 10-Q, "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in our ~~2009~~2010 Annual Report on Form 10-K (Annual Report), and "Risk Factors" contained in our Annual ~~Report and Part II of this Form 10-Q.~~

Report.

OVERVIEW

Sempra Energy is a Fortune 500 energy services holding company whose business units develop energy infrastructure, operate utilities and provide ~~electric, natural gas and other energy~~related products and services to their customers. Our operations are divided principally between the Sempra Utilities and Sempra Global. The Sempra Utilities consist of two California regulated public utility companies, 1)(1) San Diego Gas & Electric Company (SDG&E) and 2)(2) Southern ~~Californi a~~California Gas Company (SoCalGas). Sempra Global consists of other businesses engaged in providing energy products and services.

This report includes information for the following separate registrants:

§~~Sempra Energy and its consolidated entities~~

§~~SDG&E~~

§~~Pacific Enterprises (PE), the holding company for SoCalGas~~

§~~SoCalGas~~

§	Sempra Energy and its consolidated entities

SDG&E

§	Pacific Enterprises (PE), the holding company for SoCalGas

SoCalGas

References in this report to "we," "our" and "Sempra Energy Consolidated" are to Sempra Energy and its consolidated entities, collectively, unless otherwise indicated by ~~the~~its context.

PE's operations consist solely of those of SoCalGas and additional items (e.g., cash, intercompany accounts and equity) attributable to serving as a holding company for SoCalGas.

Below are ~~the~~summary descriptions of our operating business ~~units.~~

units, which are also our reportable segments.

SEMPRA ENERGY BUSINESS UNITS

The Sempra Utilities consist of SDG&E and SoCalGas.

SEMPRA UTILITIES
	~~Market~~ MARKET	~~service~~ ~~territory~~ SERVICE TERRITORY
SAN DIEGO GAS & ELECTRIC COMPANY (SDG&E) A regulated public utility; infrastructure supports electric generation, transmission and distribution, and natural gas distribution	§Provides electricity to 3.5 million consumers (1.4 million meters) §Provides natural gas to 3.2 million consumers ~~(845,000~~(850,000 meters)	Serves the county of San Diego, CACalifornia and an adjacent portion of southern Orange County covering 4,100 square miles
SOUTHERN CALIFORNIA GAS COMPANY (SOCALGAS) A regulated public utility; infrastructure supports natural gas distribution, transmission and storage	§Residential, commercial, industrial, utility electric generation and wholesale customers §Covers a population of ~~20.7~~20.9 million (5.8 million meters)	Southern California and portions of ~~Central~~central California (excluding San Diego County, the city of Long Beach and the desert area of San Bernardino County) ~~coveri ng~~covering 20,000 square miles

Sempra Global is a holding company for most of our subsidiaries that are not subject to California utility regulation. Sempra Global's principal business units, which provide energy-related products and services, are

§~~Sempra Commodities~~

§~~Sempra Generation~~

§~~Sempra Pipelines & Storage~~

§~~Sempra LNG~~

§	Sempra Generation

§	Sempra Pipelines & Storage

§	Sempra LNG

SEMPRA GLOBAL
	~~Market~~ MARKET	~~Geographic Region~~ GEOGRAPHIC REGION
~~SEMPRA COMMODITIES~~ ~~Holds an interest in RBS Sempra Commodities LLP, a commodities-marketing business joint venture with The Royal Bank of Scotland (RBS)~~	§~~Natural gas; natural gas liquids~~ §~~Power~~ ~~Prior to July 1, 2010:~~ §~~Petroleum and petroleum products~~ §~~Coal~~ §~~Emissions~~ §~~Ethanol~~ §~~Base metals~~	§~~North America~~ ~~Prior to July 1, 2010:~~ §~~Global~~
SEMPRA GENERATION Develops, owns and operates, or holds interests in, electric power plants and energy projects	§Wholesale electricity	§U.S.A. §Mexico
SEMPRA PIPELINES & STORAGE Develops, owns and operates, or holds interests in, natural gas and propane pipelines, ~~and~~ natural gas storage facilities, and natural gas and electric service providers	§Natural gas §Electricity	§U.S.A. §Mexico §Argentina §Chile §Peru
SEMPRA LNG Develops, owns and operates receipt terminals for importation of liquefied natural gas (LNG) and sale of natural gas	§Liquefied natural gas §Natural gas	§U.S.A. §Mexico §Global

~~In February 2010, we, RBS and~~

Prior to 2011, our ~~joint-venture partnership,~~Sempra Commodities segment contained our investment in RBS Sempra Commodities LLP (RBS Sempra Commodities), ~~entered into an agreement to sell certain~~which held commodities-marketing businesses ~~within~~previously owned by us. Our investment in the partnership is reported on the equity method. We and The Royal Bank of Scotland (RBS), our partner in the joint venture, ~~which agreement was consummated on~~sold substantially all of the partnership’s businesses and assets in four separate transactions completed in July, ~~1, 2010. In September~~November and ~~October~~December of 2010 ~~the partnership entered into two additional agreements which will complete the divestiture~~and February of ~~the last of the joint venture’s principal assets. One of these transactions was completed on November 1, 2010, and the second transaction is expected to be completed by year-end.~~2011. We discuss these transactions and other matters concerning the partnership in Note 4 of the Notes to Condensed ~~Consoli dated~~Consolidated Financial Statements herein and in ~~Notes~~Note 4 ~~and 20~~ of the Notes to Consolidated Financial Statements in the Annual Report.

The activity in the partnership no longer meets the quantitative thresholds that require Sempra Commodities to be reported as a reportable segment under applicable generally accepted accounting principles, and we do not consider the remaining wind-down activities of the partnership to be of continuing significance. As a result, effective January 1, 2011, we are reporting the former Sempra Commodities segment in Parent and Other, and have restated prior year information to be consistent with this treatment. Also, in the fourth quarter of 2010, we changed the composition of our reporting segments to include Sempra Rockies Marketing, which was previously included in the Sempra Commodities segment, in the Sempra Generation segment.

RESULTS OF OPERATIONS

We discuss the following in Results of Operations:

§~~Overall results of our operations and factors affecting those results~~

§~~Our business unit results~~

§~~Significant changes in revenues, costs and earnings between periods~~

§	Overall results of our operations and factors affecting those results

§	Our business unit results

§	Significant changes in revenues, costs and earnings between periods

In the three months ended ~~September 30, 2010,~~March 31, 2011, our earnings ~~decreased~~increased by ~~$186~~$152 million ~~(59%~~(143%) to ~~$131~~$258 million primarily due to a $139 million after-tax write-down of our investment in RBS Sempra Commodities in the Sempra Commodities segment and lower earnings from the joint venture, as we discuss in Note 4 of the Notes to Condensed Consolidated Financial Statements herein. to:

§	litigation expense recorded in 2010 of $96 million related to an agreement to settle certain energy crisis litigation;

§	improved operating results at Sempra Generation and Sempra Pipelines & Storage; and

§	lower losses at Parent and Other.

Diluted earnings per share for the three-month period ~~decreased~~increased by ~~$0.74 (58%~~$0.65 (155%) per share to ~~$0.53~~$1.07 per share, ~~primarily from the write-down and lower earnings at Sempra Commodities.~~

~~In the nine months ended September 30, 2010, our earnings decreased by $372 million (45%) to $459 million primarily~~ due to ~~lower joint-venture~~higher earnings ($0.61 per share) and the investment write-down at Sempra Commodi ties and lower earnings at Sempra Generation, partially offset by improved results at Sempra LNG and Sempra Pipelines & Storage. In the first quarter of 2010, Sempra Generation and Sempra Commodities recorded after-tax litigation expense of $84 million and $12 million, respectively, related to the agreement to settle certain energy crisis litigation, as we discuss in Note 10 of the Notes to Condensed Consolidated Financial Statements herein. Diluted earnings per share for the nine months decreased by $1.53 (45%) per share to $1.84 per share, primarily from the write-down at Sempra Commodities and net lower earnings.

~~Earnings~~a decrease in the ~~nine-month period~~number of ~~2009 were negatively impacted by an after-tax asset write-off~~shares primarily as a result of ~~$64 million related to assets at Sempra Pipelines & Storage’s Liberty Gas Storage (Liberty) project.~~

our share repurchase program initiated in 2010 ($0.04 per share).

The following table shows our earnings (losses) by business unit, which we discuss below in "Business Unit Results."

SEMPRA ENERGY EARNINGS (LOSSES) BY BUSINESS UNIT
(Dollars in millions)

Three months ended September 30,

2010
2009
Sempra Utilities:

    SDG&E(1)
$
106
81
%
$
108
34
%
    SoCalGas(1)

78
59

74
23

Sempra Global:

    Sempra Commodities

(134)
(102)

75
24

    Sempra Generation

56
43

43
14

    Sempra Pipelines & Storage

43
33

54
17

    Sempra LNG

5
4

-
-

Parent and other(2)

(23)
(18)

(37)
(12)

Earnings
$
131
100
%
$
317
100
%

Nine months ended September 30,

2010
2009
Sempra Utilities:

;

&nb sp;   SDG&E(1)
$
264
58
%
$
277
33
%
    SoCalGas(1)

212
46

198
24

Sempra Global:

    Sempra Commodities

(139)
(30)

274
33

    Sempra Generation

51
11

119
14

    Sempra Pipelines & Storage

120
26

64
8

    Sempra LNG

50
11

(19)
(2)

Parent and other(2)

(99)
(22)

(82)
(10)

Earnings
$
459
100
%
$
831
100
%
(1)
After preferred dividends.
(2)
Includes after-tax interest expense ($35 million and $33 million for the three months ended September 30, 2010 and 2009, respectively, and $110 million and $100 million for the nine months ended September 30, 2010 and 2009, respectively), intercompany eliminations recorded in consolidation and certain corporate costs.

SEMPRA ENERGY EARNINGS (LOSSES) BY BUSINESS UNIT
(Dollars in millions)
Three months ended March 31,
2011 2010
Sempra Utilities:
    SDG&E(1) $ 89 35 % $ 83 78 %
    SoCalGas(1) 68 26 65 61
Sempra Global:
    Sempra Generation 44 17 (51) (48)
    Sempra Pipelines & Storage 54 21 38 36
    Sempra LNG 33 13 32 30
Parent and other(2) (30) (12) (61) (57)
Earnings $ 258 100 % $ 106 100 %
(1) After preferred dividends.
(2) Includes after-tax interest expense ($34 million and $38 million for the three months ended March 31, 2011 and 2010, respectively), results from our former Sempra Commodities segment (losses of $5 million and $7 million for the three months ended March 31, 2011 and 2010, respectively), intercompany eliminations recorded in consolidation and certain corporate costs.

BUSINESS UNIT RESULTS

The following section is a discussion of earnings (losses) by business unit, as it appears in the table above.

EARNINGS BY BUSINESS UNIT -- SEMPRA UTILITIES

(Dollars in millions)

[graph1.gif]

SDG&E

SDG&E business unit earnings were

§~~$106~~

§	$89 million in the first three months of 2011 ($90 million before preferred dividends)

§	$83 million in the first three months of 2010 ($84 million before preferred dividends)

The increase of $6 million ~~in the three months ended September 30, 2010 ($108 million before preferred dividends)~~

§~~$108 million in the three months ended September 30, 2009 ($110 million before preferred dividends)~~

§~~$264 million in the nine months ended September 30, 2010 ($268 million before preferred dividends)~~

§~~$277 million in the nine months ended September 30, 2009 ($281 million before preferre d dividends)~~

~~The decrease of $2 million (2%~~(7%) ~~in the three months ended September 30, 2010~~ was due to:

§~~$9 million from the resolution of regulatory matters that favorably impacted 2009 earnings;~~

§~~$6 million increase in litigation reserves in 2010; and~~

§~~$5 million higher liability insurance premiums for wildfire coverage;~~ ~~offset by~~

§$12 million higher authorized margin for operations regulated by the California Public Utilities Commission (CPUC) and lower operation and maintenance expenses (excluding insurance premiums for wildfire coverage); and

§~~$4 million higher electric transmission margin.~~

~~The decrease of $13 million (5%) in the nine months ended September 30, 2010 was due to:~~

§~~$16 million higher liability insurance premiums for wildfire coverage;~~

§~~$11 million lower favorable impact from the resolution of prior years’ income tax issues;~~

§~~$11 million net unfavorable impact from an increase in litigation reserves in 2010 compared to the favorable resolution of litigation in 2009; and~~

§~~$3 million due to the write-down of deferred tax assets as a result of the change to U.S. tax law regarding the Medicare Part D subsidy;~~ ~~offset by~~

§~~$12 million higher authorized margin for CPUC-regulated operations in excess of higher operation and maintenance expenses (excluding insurance premiums for wildfire coverage);~~

§~~$9 million higher electric transmission margin; and~~

§$6 million lower income taxes as a result of higher software development costs and incremental depreciation expense deductions for tax purposes which, for ratemaking purposes, are not treated as deferred taxes.

§	$5 million higher authorized margin for California Public Utilities Commission (CPUC)-regulated operations and lower operation and maintenance expenses (excluding insurance premiums for wildfire coverage and litigation-related expenses);

§	$3 million due to the write-down of deferred tax assets as a result of a change in U.S. tax law regarding the Medicare Part D subsidy in 2010;

§	$2 million lower litigation reserves; and

§	$2 million higher electric transmission margin; offset by

§	$5 million higher liability insurance premiums for wildfire coverage.

SoCalGas

SoCalGas business unit earnings were

§~~$78 million in the three months ended September 30, 2010 (both before and after preferred dividends)~~

§~~$74 million in the three months ended September 30, 2009 (both before and after preferred dividends)~~

§~~$212 million in the nine months ended September 30, 2010 ($213 million before preferred dividends)~~

§~~$198 million in the nine months ended September 30, 2009 ($199 million before preferred dividends)~~

§	$68 million in the first three months of 2011 (both before and after preferred dividends)

§	$65 million in the first three months of 2010 (both before and after preferred dividends)

The increase of $4$3 million (5%) ~~in the three months ended September 30, 2010~~ was primarily due ~~to higher authorized margin for CPUC-regulated operations in excess of higher operation and maintenance expenses.~~

~~The increase of $14 million (7%) in the nine months ended September 30, 2010 was due~~ to:

§~~$12 million higher authorized margin for CPUC-regulated operations in excess of hig her operation and maintenance expenses;~~

§~~$5 million net favorable earnings impact primarily due to the effect of self-developed software costs on the effective income tax rate; and~~

§~~$3 million higher regulatory awards;~~ ~~offset by~~

§~~$13 million due to the write-off of deferred tax assets as a result of the change in U.S. tax law regarding the Medicare Part D subsidy.~~

§	$13 million due to the write-down of deferred tax assets as a result of the change in U.S. tax law regarding the Medicare Part D subsidy in 2010; offset by

§	$7 million lower regulatory awards.

EARNINGS (LOSSES) BY BUSINESS UNIT – SEMPRA GLOBAL

(Dollars in millions)

[graph2.gif]

Sempra ~~Commodities~~

Generation

Sempra ~~Commodities~~Generation recorded business unit earnings (losses) of:

§~~$(134) million in the three months ended September 30, 2010~~

§~~$75 million in the three months ended September 30, 2009~~

§~~$(139) million in the nine months ended September 30, 2010~~

§~~$274 million in the nine months ended September 30, 2009~~

~~The change in earnings for the three months ended September 30, 2010 was due to:~~

§~~a $139 million write-down of our investment in the RBS Sempra Commodities joint venture (as we discuss in Note 4 of the Notes to Condensed Consolidated Financial Statements herein);~~

§~~equity earnings from RBS Sempra Commodities of $18 million in 2010 compared to $75 million in 2009; and~~

§~~$11 million state income tax expense related to our exit from the RBS Sempra Commodities business.~~

~~The change in earnings for the nine months ended September 30, 2010 was due to:~~

§~~the $139 million write-down of our investment in the RBS Sempra Commodities joint venture;~~

§~~equity earnings from RBS Sempra Commodities of $24 million in 2010 compared to $278 million in 2009;~~

§$12 million litigation expense related to an agreement to settle energy crisis litigation associated with the DWR contract, as we discuss in Note 10 of the Notes to Condensed Consolidated Financial Statements herein; and

§~~$11 million state income tax expense related to our exit from the RBS Sempra Commodities business.~~

The equity earnings from the joint venture were adversely impacted by the sale on July 1, 2010 of the global metals and oil businesses and the European natural gas and power business; lower volatility in the U.S. natural gas and power business; and the disruptions caused by the process to sell the partnership’s businesses.

~~Sempra Generation~~

~~Sempra Generation recorded business unit earnings of:~~

§~~$56 million in the three months ended September 30, 2010~~

§~~$43 million in the three months ended September 30, 2009~~

§~~$51 million in the nine months ended September 30, 2010~~

§~~$119 million in the nine months ended September 30, 2009~~

§	$44 million in the first three months of 2011

§	$(51) million in the first three months of 2010

The increase in earnings of ~~$13~~$95 million ~~(30%) in the three months ended September 30, 2010~~ was due to:

§~~$12 million renewable energy tax credits primarily due to additional investments in the Copper Mountain Solar project; and~~

§~~$6 million mark-to-market gains on forward contracts with RBS Sempra Commodities and other counterparties in 2010 compared to $2 million mark-to-market losses in 2009;~~ ~~offset by~~

§~~$9 million lower earnings from operations, primarily due to less favorable market pricing in 2010.~~

~~The decrease in earnings of $68 million (57%) in the nine months ended September 30, 2010 was primarily due to:~~

§$86 million in litigation expense related to an agreement to settle energy crisis litigation associated with the DWR contract, as we discuss in Note 10 of the Notes to Condensed Consolidated Financial Statements herein;and

§$26 million lower earnings from operations, primarily from increased scheduled plant maintenance and associated down time in 2010, less favorable market pricing, and expenses and associated down time from earthquake damage to our Mexicali power plant in the second quarter of 2010; ~~offset by~~

§~~$37 million renewable energy tax credits in 2010.~~

§	$83 million decreased litigation expense primarily related to a 2010 agreement to settle energy crisis litigation, as we discuss in Note 16 of the Notes to Consolidated Financial Statements in the Annual Report; and

§	$11 million lower operation and maintenance costs primarily as a result of 2010 scheduled plant maintenance.

Sempra Pipelines & Storage

Sempra Pipelines & Storage recorded business unit earnings of:

§~~$43~~

§	$54 million in the first three months of 2011

§	$38 million in the first three months of 2010

The increase of $16 million ~~in the three months ended September 30, 2010~~

§~~$54 million in the three months ended September 30, 2009~~

§~~$120 million in the nine months ended September 30, 2010~~

§~~$64 million in the nine months ended September 30, 2009~~

~~The decrease of $11 million (20%~~(42%) ~~in the three months ended September 30, 2010~~ was due to:

§~~a $24 million write-down of our investment in Argentina; and~~

§~~$15 million from the favorable resolution of prior years’ income tax issues in 2009;~~ ~~offset by~~

§~~$48 million in proceeds received from a legal settlement in 2010, less a related income tax effect of $17 million.~~

~~The improvement in earnings of $56 million (88%) in the nine months ended September 30, 2010 was primarily due to:~~

§~~$64 million lower earnings in 2009 from a write-off of assets at Liberty; and~~

§~~$48 million in proceeds received from a legal settlement in 2010, less a related income tax effect of $17 million;~~ ~~offset by~~

§~~a $24 million write-down of our investment in Argentina; and~~

§~~$15 million from the favorable resolution of prior years’ income tax issues in 2009.~~

~~We discuss the investment write-down and legal settlement in Note 4 of the Notes to Condensed Consolidated Statements herein.~~

§	$8 million higher earnings related to a Mexican pipeline acquisition in April 2010;

§	$6 million higher operating results from its investments in Chile and Peru; and

§	$2 million higher earnings primarily related to natural gas storage placed into service in the second half of 2010.

Sempra LNG

Sempra LNG recorded earnings ~~(losses)~~ of:

§$5

§	$33 million in the first three months of 2011

§	$32 million in the first three months of 2010

Earnings for the first quarter of 2011 were consistent with the first quarter of the prior year. Both years included $11 million ~~in the three months ended September 30, 2010~~

§~~$0 million in the three months ended September 30, 2009~~

§~~$50 million in the nine months ended September 30, 2010~~

§~~$(19) million in the nine months ended September 30, 2009~~

~~The improvement in~~of earnings related to contractual counterparty obligations for non-delivery of $5 million and $69 million in the three months and nine months ended September 30, 2010, respectively, was primarily from higher earnings from the start-up in 2009 of marketing operations, the Cameron receipt terminal and the nitrogen-injection facility at the Energía Costa Azul receipt terminal.

cargoes.

Parent and Other

Losses for Parent and Other were

§~~$23 million in the three months ended September 30, 2010~~

§~~$37 million in the three months ended September 30, 2009~~

§~~$99 million in the nine months ended September 30, 2010~~

§~~$82 million in the nine months ended September 30, 2009~~

§	$30 million in the first three months of 2011

§	$61 million in the first three months of 2010

The decrease in losses of ~~$14~~$31 million ~~(38%~~(51%) ~~in the three months ended September 30, 2010 was primarily due to lower income tax expense.~~

~~The increase in losses of $17 million (21%) in the nine months ended September 30, 2010 was primarily due to higher net interest expense.~~

included:

§	$19 million lower income tax expense;

§	$12 million energy crisis litigation expense recorded in 2010 related to our former commodities-marketing businesses; and

§	$5 million Mexican peso exchange gain; offset by

§	$5 million equity losses from our former commodities-marketing businesses in 2011 compared to $8 million equity earnings in 2010.

CHANGES IN REVENUES, COSTS AND EARNINGS

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

Sempra Utilities Revenues

Sempra Utilities revenues are comprised of natural gas revenues at SDG&E and SoCalGas, and electric revenues at SDG&E. Intercompany revenues included in the separate revenues of each utility are eliminated in the Sempra Energy Condensed Consolidated Statements of Operations.

The current regulatory framework permits the cost of natural gas purchased for core customers (primarily residential and small commercial and industrial customers) to be passed on to customers substantially as incurred. However, SoCalGas' Gas Cost Incentive Mechanism ~~(GCIM)~~ provides SoCalGas the opportunity to share in the savings and/or costs from buying natural gas for its core customers at prices below or above monthly market-based ~~monthly~~ benchmarks. This mechanism permits full recovery of costs incurred when average purchase costs are within a price range around ~~a monthly~~the benchmark price. Any higher costs incurred or savings realized outside ~~thi s~~this range are shared between the core customers and SoCalGas. We provide further discussion in Note 9 of the Notes to Condensed Consolidated Financial Statements herein.

The regulatory framework also permits SDG&E to recover the actual cost incurred to generate or procure electricity based on annual estimates of the cost of electricity supplied to customers. The differences in cost between estimates and actual are recovered in the next year through rates.

Sempra Utilities: Natural Gas Revenues and Cost of Natural Gas

The tables below show natural gas revenues for Sempra Energy, SDG&E and SoCalGas for the ~~nine-month~~three-month periods ended ~~September 30.~~March 31, 2011 and 2010. The Sempra Energy Consolidated amounts reflect SDG&E and SoCalGas revenues, net of intercompany transactions. Because the cost of natural gas is recovered in rates, changes in the cost are ~~reflecte d~~reflected in the changes in revenues. In addition to the change in market prices, ~~the average cost of~~ natural gas revenues recorded during a period isare impacted by the difference between customer billings and recorded or CPUC-authorized costs. These differences are required to be balanced over time, resulting in over- and undercollected regulatory balancing accounts.

We discuss balancing accounts and their effects further in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

SEMPRA ENERGY CONSOLIDATED
NATURAL GAS SALES AND TRANSPORTATION
(Volumes in billion cubic feet, dollars in millions)

Natural Gas Sales
Transportation
Total
Customer class
Volumes
Revenue
Volumes
Revenue
Volumes
Revenue
2010:

    Residential
195
$
1,943
1
$
2
196
$
1,945
    Commercial and industrial
86

657
203

177
289

834
    Electric generation plants
-

-
153

36
153

36
    Wholesale
-

-
17

3
17

3

281
$
2,600
374
$
218
655

2,818
    Other revenues

70
    Balancing accounts(1)

246
        Total

$
3,134
2009:

    Residential
187
$
1,624
1
$
2
188
$
1,626
    Commercial and industrial
85

553
205

163
290

716
    Electric generation plants
-

-
203

51
203

51
    Wholesale
-

-
12

3
12

3

272
$
2,177
421
$
219
693

2,396
    Other revenues

75
    Balancing accounts(1)

133
        Total

$
2,604
(1) We discuss balancing accounts and their effects in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

SEMPRA ENERGY CONSOLIDATED — SEMPRA UTILITIES:
NATURAL GAS SALES AND TRANSPORTATION
(Volumes in billion cubic feet, dollars in millions)
	Natural Gas Sales			Transportation			Total
Customer class	Volumes	Revenue		Volumes	Revenue		Volumes	Revenue
2011:
Residential	104	$	958	1	$	1	105	$	959
Commercial and industrial	34		257	68		65	102		322
Electric generation plants	―		―	45		13	45		13
Wholesale	―		―	9		2	9		2
	138	$	1,215	123	$	81	261		1,296
Other revenues									23
Balancing accounts									(101)
Total								$	1,218
2010:
Residential	97	$	980	1	$	1	98	$	981
Commercial and industrial	35		289	68		62	103		351
Electric generation plants	―		―	41		11	41		11
Wholesale	―		―	7		1	7		1
	132	$	1,269	117	$	75	249		1,344
Other revenues									25
Balancing accounts									(19)
Total								$	1,350

During the three months ended ~~September 30, 2010,~~March 31, 2011, our natural gas revenues ~~increased~~decreased by ~~$127~~$132 million ~~(17%~~(10%) to $858 million, and the cost of natural gas increased by $77 million (37%) to $285 million. During the nine months ended September 30, 2010, our natural gas revenues increased by $530 million (20%) to $3.1$1.2 billion, and the cost of natural gas ~~increased~~decreased by ~~$405~~$149 million ~~(41%~~(20%) to ~~$1.4 billion. The primary factor contributing~~$609 million, due primarily to ~~the increased~~lower natural gas ~~revenues and cost of natural gas~~prices in ~~both the third-quarter and year-to-date periods was higher natural gas pr ices in 2010.~~2011. We discuss the ~~increase~~changes in the cost of natural gas individually for SDG&E and SoCalGas below.

SDG&E
NATURAL GAS SALES AND TRANSPORTATION
(Volumes in billion cubic feet, dollars in millions)

Natural Gas Sales
Transportation
Total
Customer class
Volumes
Revenue
Volumes
Revenue
Volumes
Revenue
2010:

    Residential
23
$
260
-
$
-
23
$
260
    Commercial and industrial
11

82
6

9
17

91
    Electric generation plants
-

-
21

5
21

5

34
$
342
27
$
14
61

356
    Other revenues

27
    Balancing accounts

(8)
        Total(1)

$
375
2009:

    Residential
23
$
230
-
$
-
23
$
230
    Commercial and industrial
11

76
5

7
16

83
    Electric generation plants
-

-
45

13
45

13

34
$
306
50
$
20
84

326
    Other revenues

25
    Balancing accounts

2
        Total(1)

$
353
(1) Includes sales to affiliates of $1 million in each of 2010 and 2009.

SDG&E
NATURAL GAS SALES AND TRANSPORTATION
(Volumes in billion cubic feet, dollars in millions)
	Natural Gas Sales			Transportation			Total
Customer class	Volumes	Revenue		Volumes	Revenue		Volumes	Revenue
2011:
Residential	12	$	133	―	$	―	12	$	133
Commercial and industrial	5		33	2		3	7		36
Electric generation plants	―		―	5		2	5		2
	17	$	166	7	$	5	24		171
Other revenues									10
Balancing accounts									(6)
Total								$	175
2010:
Residential	12	$	135	―	$	―	12	$	135
Commercial and industrial	4		36	2		3	6		39
Electric generation plants	―		―	6		2	6		2
	16	$	171	8	$	5	24		176
Other revenues									9
Balancing accounts									(6)
Total								$	179

During the three months ended ~~September 30, 2010,~~March 31, 2011, SDG&E's natural gas revenues ~~increased~~decreased by ~~$15~~$4 million ~~(19%~~(2%) to ~~$93~~$175 million, ~~and~~while the cost of natural gas ~~increased~~decreased by $7$6 million ~~(23%~~(7%) to ~~$37 million. During~~$83 million compared with the ~~nine months ended September 30, 2010, SDG&E's natural gas revenues increased by $22 million (6%) to $375 million, and the cost of natural gas increased by $16 million (10%) to $170 million.~~corresponding period in 2010. The average cost of natural gas for the three months ended ~~September 30, 2010~~March 31, 2011 was ~~$4.86~~$4.83 per thousand cubic feet (Mcf) compared to ~~$4.27~~$5.50 per Mcf for the corresponding period in ~~2009,~~2010, a ~~14-percent increase of $0.59~~12-percent decrease or $0.67 per Mcf, resulting in lower revenues and cost of $12 million. The decrease due to the lower average cost of natural gas delivered was partially offset by higher demand for natural gas, which resulted in higher revenues and cost of ~~$5 million. For the nine months ended September 30 , 2010, SDG&E’s average cost of natural gas was $4.98 per Mcf compared to $4.52 per Mcf for the corresponding period~~$6 million in ~~2009, a 10-percent increase of $0.46 per Mcf, resulting in higher revenues and cost of $16 million.~~

2011.

SOCALGAS
NATURAL GAS SALES AND TRANSPORTATION
(Volumes in billion cubic feet, dollars in millions)

Natural Gas Sales
Transportation
Total
Customer class
Volumes
Revenue
Volumes
Revenue
Volumes
Revenue
2010:

& nbsp;

    Residential
172
$
1,683
1
$
2
173
$
1,685
    Commercial and industrial
75

575
197

169
272

744
    Electric generation plants
-

-
132

31
132

31
    Wholesale
-

-
108

11
108

11

247
$
2,258
438
$
213
685

2,471
    Other revenues

67
    Balancing accounts

254
        Total(1)

$
2,792
2009:

    Residential
164
$
1,394
1
$
2
165
$
1,396
    Commercial and industrial
74

477
200

157
274

634
    Electric generation plants
-

-
158

38
158

38
    Wholesale
-

-
99

10
99

10

238
$
1,871
458
$
207
696

2,078
    Other revenues

67
    Balancing accounts

131
        Total(1)

$
2,276
(1) Includes sales to affiliates of $32 million i n 2010 and $24 million in 2009.

SOCALGAS
NATURAL GAS SALES AND TRANSPORTATION
(Volumes in billion cubic feet, dollars in millions)
	Natural Gas Sales			Transportation			Total
Customer class	Volumes	Revenue		Volumes	Revenue		Volumes	Revenue
2011:
Residential	92	$	825	1	$	1	93	$	826
Commercial and industrial	29		224	66		62	95		286
Electric generation plants	―		―	40		11	40		11
Wholesale	―		―	43		6	43		6
	121	$	1,049	150	$	80	271		1,129
Other revenues									22
Balancing accounts									(95)
Total(1)								$	1,056
2010:
Residential	85	$	845	1	$	1	86	$	846
Commercial and industrial	31		253	66		59	97		312
Electric generation plants	―		―	35		9	35		9
Wholesale	―		―	44		4	44		4
	116	$	1,098	146	$	73	262		1,171
Other revenues									24
Balancing accounts									(13)
Total(1)								$	1,182
(1) Includes sales to affiliates of $13 million in 2011 and $11 million in 2010.

During the three months ended ~~September 30, 2010,~~March 31, 2011, SoCalGas' natural gas revenues ~~increased~~decreased by ~~$114~~$126 million ~~(17%~~(11%) to ~~$776 million, and the cost of natural gas increased by $72 million (40%) to $252 million. The increase in revenues was primarily due to:~~

§~~the increase in cost of natural gas, which was caused primarily by higher natural gas prices, as we discuss below;~~

§~~$25 million higher CPUC-authorized cost recovery, for which revenues are fully offset in operation and maintenance expenses; and~~

§~~$13 million higher authorized base margin in accordance with the CPUC's 2008 General Rate Case (GRC) decision.~~

~~During the nine months ended September 30, 2010, SoCalGas’ revenues increased by $516 million (23%) to $2.8~~$1.1 billion, and the cost of natural gas ~~increased~~decreased by ~~$395~~$143 million ~~(47%~~(21%) to ~~$1.2 billion.~~$531 million. The ~~increase~~decrease in revenues was primarily due to:

§~~the increase in cost of natural gas, which was caused primarily by higher natural gas prices, as we discuss below;~~

§~~$60 million higher CPUC-authorized cost recovery, for which revenues are fully offset in operation and maintenance expenses; and~~

§~~$39 million higher authorized base margin in accordance with the CPUC's 2008 GRC decision.~~

~~SoCalGas'~~

§	the decrease in cost of natural gas, which was caused primarily by lower natural gas prices, as we discuss below; and

§	$12 million lower regulatory awards; offset by

§	$19 million higher recovery of CPUC-authorized costs, which revenues are fully offset in operation and maintenance expenses; and

§	$13 million higher authorized base margin.

The average cost of natural gas for the three months ended ~~September 30, 2010~~March 31, 2011 was ~~$4.40~~$4.36 per Mcf compared to ~~$3.36~~$5.81 per Mcf for the corresponding period in ~~2009,~~2010, a ~~31-percent increase of $1.04~~25-percent decrease or $1.45 per Mcf, resulting in lower revenues and cost of $176 million. The decrease due to the lower average cost of natural gas delivered was partially offset by higher demand for natural gas, which resulted in higher revenues and cost of ~~$59 million. For the nine months ended September 30, 2010, SoCalGas' average cost of natural gas was $5.04 per Mcf compared to $3.57 per Mcf for the corresponding period~~$33 million in ~~2009, a 41-percent increase of $1.47 per Mcf, resulting in higher revenues and cost of $362 million.~~

2011.

Sempra Energy and SDG&E: Electric Revenues and Cost of Electric Fuel and Purchased Power

The table below shows electric revenues for Sempra Energy and SDG~~&E.~~&E for the three-month periods ended March 31, 2011 and 2010. Sempra Energy Consolidated amounts are ~~shown after eliminating~~net of intercompany transactions. Because the cost of electricity is substantially recovered in rates, changes in the cost are reflected in the changes in revenues.

ELECTRIC DISTRIBUTION AND TRANSMISSION
(Volumes in millions of kilowatt-hours, dollars in millions)
	2011			2010
Customer class	Volumes	Revenue		Volumes	Revenue
Sempra Energy Consolidated:
Residential	1,959	$	314	1,913	$	276
Commercial	1,669		231	1,595		200
Industrial	490		57	524		56
Direct access	786		36	720		25
Street and highway lighting	27		4	23		3
	4,931		642	4,775		560
Other revenues			25			29
Balancing accounts			(4)			(27)
Total		$	663		$	562
SDG&E:
Residential	1,959	$	314	1,913	$	276
Commercial	1,669		231	1,595		200
Industrial	493		58	527		56
Direct access	786		36	720		25
Street and highway lighting	27		4	23		3
	4,934		643	4,778		560
Other revenues			26			30
Balancing accounts			(4)			(27)
Total(1)		$	665		$	563
(1) Includes sales to affiliates of $2 million in 2011 and $1 million in 2010.

During the three months ended ~~September 30, 2010,~~March 31, 2011, electric revenues increased by ~~$24~~$101 million ~~(3%~~(18%) to ~~$717~~$663 million at Sempra Energy and by ~~$23~~$102 million ~~(3%~~(18%) to ~~$718~~$665 million at SDG~~&E. The increase in revenues was~~&E, primarily due to:

§$16 million increase due to tolling payments and natural gas supply costs in 2010 associated with the power generated by Otay Mesa VIE in excess of purchased power costs in 2009 for the equivalent amount of power;

§~~$15 million higher authorized transmission and electric generation margins;~~

§~~$9 million higher authorized base margin on electric distribution; and~~

§~~$6 million increase in the cost of electric fuel and purchased power excluding Otay Mesa VIE;~~ ~~offset by~~

§~~$16 million lower recoverable expenses that are fully offset in operation and maintenance expenses; and~~

§~~$9 million resolution of regulat ory matters in 2009 that favorably impacted earnings.~~

~~During the nine months ended September 30, 2010, electric revenues increased by $87 million (5%) at both Sempra Energy and SDG&E to $1.9 billion. The increase in revenues was primarily due to:~~

§$22 million increase due to tolling payments and natural gas supply costs in 2010 associated with the power generated by Otay Mesa VIE in excess of purchased power costs in 2009 for the equivalent amount of power;

§~~$38 million higher authorized transmission and electric generation margins;~~

§~~$22 million higher authorized base margin on el ectric distribution; and~~

§~~$12 million increase in the cost of electric fuel and purchased power excluding Otay Mesa VIE;~~ ~~offset by~~

§~~$9 million resolution of regulatory matters in 2009 that favorably impacted earnings.~~

The cost of electric fuel and purchased power at both Sempra Energy and SDG&E decreased in the three months ended September 30, 2010 primarily due to an $11 million decrease in the cost of power purchased from third-party generators as a result of the start up of new power generation at Otay Mesa VIE, which commenced commercial operations in the fourth quarter of 2009, offset by a $6 million increase in other fuel and purchased power costs. Associated with this decrease, SDG&E’s o perating costs increased by $11 million from Otay Mesa VIE’s operations.

§	$42 million higher recoverable expenses that are fully offset in operation and maintenance expenses;

§	$32 million increase in the cost of electric fuel and purchased power excluding Otay Mesa VIE;

§	$15 million higher authorized base margin on electric generation and distribution; and

§	$5 million higher authorized transmission margin; offset by

§	$11 million decrease due to tolling payments and natural gas supply costs in 2011 associated with the power generated by Otay Mesa.

At both Sempra Energy and SDG&E, the cost of electric fuel and purchased power ~~decreased~~increased by ~~$28~~$23 million ~~(6%~~(16%) to ~~$480~~$171 million ~~for~~in the ~~nine~~three months ended ~~September 30, 2010~~March 31, 2011 primarily due to a ~~$40~~$32 million increase in fuel and purchased-power costs (excluding Otay Mesa VIE), offset by a $9 million decrease in the cost of power purchased from ~~third-party generators as a result of the start up of new power generation at~~ Otay Mesa VIE, which commenced commercial operations in the fourth quarter of 2009, offset by a $12 million increase in other fuel and purchased power costs. Associated with this decrease, SDG&E’s operating costs increased by $31 million from Otay Mesa VIE’s operations.

ELECTRIC DISTRIBUTION AND TRANSMISSION
(Volumes in millions of kilowatt-hours, dollars in millions)

2010
2009
Customer class
Volumes
Revenue
Volumes
Revenue
Sempra Energy Consolidated:

Residential
5,406
$
756
5,671
$
831
Commercial
5,017

651
5,302

725
Industrial
1,598

167
1,716

194
Direct access
2,365

90
2,290

80
Street and highway lighting
76

9
79

10

14,462

1,673
15,058

1,840
Other revenues

77

102
Balancing accounts

115

(164)
Tot al

$
1,865

$
1,778
SDG&E:

Residential
5,406
$
756
5,671
$
831
Commercial
5,017

651
5,302

725
Industrial
1,612

169
1,724

195
Direct access
2,365

90
2,290

80
Street and highway lighting
76

9
79

10

14,476

1,675
15,066

1,841
Other revenues

80

106
Balancing accounts

115

(164)
Total(1)

$
1,870

$
1,783
(1) Includes sales to affiliates of $5 million in each of 2010 and 2009.

VIE.

We do not include in the Condensed Consolidated Statements of Operations the commodity costs (and the revenues to recover those costs) associated with long-term contracts that are allocated to SDG&E by the California Department of Water Resources (DWR). However, we do include the associated volumes and distribution ~~re venues~~revenues in the table above. We provide further discussion of these contracts in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

Sempra Global and Parent Revenues and Cost of Sales

During the three months ended ~~September 30, 2010,~~March 31, 2011, our Sempra Global and Parent revenues ~~increased~~decreased by ~~$112~~$69 million ~~(26%~~(11%) to ~~$541~~$553 million. ~~During the nine months ended September 30, 2010, our Sempra Global and Parent revenues increased by $391 million (31%) to $1.7 billion.~~ The ~~increases in both the three months and nine months ended September 30, 2010 were due to higher revenues at Sempra LNG,~~decrease was primarily due to increased marketing operations and the start up of operations at its Cameron LNG receipt terminal and the nitrogen-injection facility at the Energía Costa Azul receipt terminal, partially offset by lower revenues at Sempra Pipelines & Storage due to the expiration of the Comis ión Federal de Electricidad (CFE) natural gas supply contract in 2009. At the expiration of the contract, Sempra LNG began supplying the CFE under a separate contract ending December 2022.

Into:

§	$49 million lower revenues at Sempra Generation due to decreased power sales; and

§	$19 million lower revenues at Sempra LNG primarily due to decreased natural gas sales and lower natural gas prices in 2011.

During the three months ended ~~September 30, 2010,~~March 31, 2011, our cost of natural gas, electric fuel and purchased power ~~increased by $72 million (33%)~~decreased to ~~$292 million. During the nine months ended September 30, 2010, our cost of natural gas, electric fuel and purchased power increased by $212 million (31%) to $887~~$263 million. The ~~increases in both periods were~~$75 million (22%) decrease included $51 million at Sempra Generation and $13 million at Sempra LNG, primarily associated with ~~the higher revenues at Sempra LNG, offset partially by~~their lower ~~costs at Sempra Pipelines & Storage resulting primarily from the expiration of the CFE contract.~~

revenues.

Litigation Expense

Sempra Energy Consolidated

In the three months ended March 31, 2010, we recorded ~~$184 million in~~ litigation expense ~~in the nine months ended September 30, 2010,~~of $168 million, which included ~~$163~~$159 million related to the agreement to settle certain energy crisis litigation. ~~We discuss this settlement agreement in Note 10 of the Notes to Condensed Consolidated Financial Statements herein.~~

Other Operation and Maintenance

Sempra Energy Consolidated

For the three months ended ~~September 30, 2010,~~March 31, 2011, our other operation and maintenance expenses increased by ~~$22~~$56 million ~~(4%~~(10%) to ~~$590 million, primarily due to an~~$632 million. The increase ~~at SoCalGas. For the nine months ended September 30, 2010, our other operation and maintenance expenses increased by $109 million (7%) to $1.8 billion, primarily due to~~included higher ~~operation an d maintenance expenses at both SDG&E and SoCalGas.~~

~~We discuss the changes in~~ operation and maintenance expenses at SDG&E (discussed below) of $45 million (which excludes the $4 million of lower litigation expense separately reported as Litigation Expense on the Sempra Energy Condensed Consolidated Statements of Operations), and $26 million at SoCalGas, ~~below.~~

including $19 million higher recoverable expenses.

Operation and Maintenance

SDG&E

For the three months ended September 30, 2010, SDG&E's operation and maintenance expenses decreased by $1 million to $235 million, primarily due to $12 million lower expenses recoverable in revenues as incurred, offset by $10 million higher litigation expense in 2010.

~~For the nine months ended September 30, 2010,~~March 31, 2011, SDG&E's operation and maintenance expenses increased by ~~$55~~$41 million ~~(8%~~(18%) to ~~$704 million. The increase was due to:~~

§$21 million higher other operational and maintenance costs (including $22 million of higher liability insurance premiums for wildfire coverage and $12 million at Otay Mesa VIE due to commencement of plant operation in October 2009, offset by $13 million lower other operational and maintenance costs);

§~~$18 million net unfavorable impact from an increase in litigation reserves in 2010 compared to the favorable resolution of litigation in 2009; and~~

§~~$15 million higher expenses recoverable in revenues as incurred.~~

~~SoCalGas~~

For the three months ended September 30, 2010, SoCalGas' operation and maintenance expenses increased by $33 million (13%) to $285 million. The increase was d ue primarily to $25 million higher expenses recoverable in revenues as incurred.

For the nine months ended September 30, 2010, SoCalGas’ operation and maintenance expenses increased by $72 million (9%) to $840 million due primarily to $60 million higher expenses recoverable in revenues as incurred.

~~Write-off of Long-lived Assets~~

In the second quarter of 2009, we recorded a $132 million write-off related to certain assets at one of Sempra Pipelines & Storage’s Liberty natural gas storage projects. Sempra Energy's after-tax share of this write-off was $64 million. We discuss the write-off of the assets in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

~~Equity Earnings (Losses) Before Income Taxes~~

~~Sempra Energy Consolidated~~

For the three months ended September 30, 2010, equity losses from our investment in RBS Sempra Commodities were $281 million compared to equity earnings of $105 million in the corresponding period of 2009. For the nine months ended September 30, 2010, equity losses from our investment in RBS Sempra Commodities were $290 million compared to equity earnings of $384 million in the corresponding period of 2009. Equity earnings were adversely impacted by several factors, as we discuss above in “Business Unit Results – Sempra Commodities.” Results for both periods in 2010 include a $305 million pretax write-down of our investment in RBS Sempra Commodities. We discuss the write-down further in Note 4 of the Notes to Condensed Consolidated Financial Statements herein.

~~We provide additional information about the determination and allocation of this investment' s earnings in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.~~

~~Other Income (Expense), Net~~

~~Sempra Energy Consolidated~~

~~In the three months ended September 30, 2010, other income, net, increased by $42 million (175%) to $66 million primarily due to:~~

§~~proceeds of $48 million from a legal settlement at Sempra Pipelines & Storage;~~ ~~offset by~~

§~~$17 million in losses on interest rate instruments in 2010 at Otay Mesa VIE compared to $11 m illion in 2009; and~~

§~~a $10 million decrease in gains from investment activity related to our executive retirement and deferred compensation plans in 2010.~~

~~For the nine months ended September 30, 2010, other income, net, decreased by $15 million (15%) to $82 million primarily due to:~~

§~~$51 million in losses on interest rate instruments in 2010 at Otay Mesa VIE compared to $19 million in gains in 2009; and~~

§~~a $25 million decrease in gains from investment activity related to our executive retirement and deferred compensation plans in 2010;~~ ~~offset by~~

§~~proceeds of $48 million from a legal settlement at Sempra Pipelines & Storage;~~

§~~$12 million increase in allowance for equity funds used during construction; and~~

§~~a $10 million gain recognized on an interest rate instrument at Parent and Other.~~

~~SDG&E~~

The changes in SDG&E’s other income (expense), net, in the three months and nine months ended September 30, 2010, were primarily due to the losses and gains from interest rate instruments at Otay Mesa VIE, as we discuss above.

~~Interest Expense~~

~~Sempra Energy Consolidated~~

~~For the three months ended September 30, 2010, our interest expense increased by $15 million (16%) to $111 million. The increase included:~~

§~~$17 million higher interest expense, primarily from long-term debt issued in 2009 and 2010 at Parent and Other and SDG&E;~~ ~~offset by~~

§~~$5 million lower interest expense from maturities of debt at Parent and Other.~~

~~During the nine months ended September 30, 2010, our interest expense increased by $66 million (26%) to $323~~$273 million. The increase was primarily due to:

§~~$70~~

§	$43 million higher recoverable expenses; and

§	$8 million of higher liability insurance premiums for wildfire coverage; offset by

§	$4 million lower litigation reserves.

Other Income, Net

Sempra Energy Consolidated

In the three months ended March 31, 2011, other income, net, increased by $35 million ~~higher interest expense,~~to $43 million primarily ~~from long-term debt issued in 2009 and 2010 at Parent and Other and SDG&E; and~~

§~~$26 million lower capitalized interest, primarily at Sempra LNG~~ due ~~to completion of construction projects;~~ ~~offset by~~

§~~$22 million lower interest expense from maturities of debt at Parent and Other; and~~

§$14 million lower short-term debt interest expense, primarily from lower average commercial paper borrowings and interest rates, and reduced interest expense related to energy crisis litigation reserves at Parent and Other.

to:

§	$10 million of gains on interest rate and foreign exchange instruments in the first three months of 2011 compared to $9 million losses, all related to Otay Mesa VIE, in the first three months of 2010;

§	$6 million higher allowance for equity funds used during construction attributable to SDG&E; and

§	$5 million higher investment gains on dedicated assets in support of our executive retirement and deferred compensation plans.

Income Taxes

The table below shows the income tax expense ~~(benefit)~~ and effective income tax rates for Sempra Energy, SDG&E, PE and SoCalGas.

INCOME TAX EXPENSE (BENEFIT) AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)

Three months ended Septe mber 30,

2010

2009

Income Tax Expense

Effective Income

Income Tax

Effective Income

(Benefit)

Tax Rate

Expense

Tax Rate

Sempra Energy Consolidated
$
(32)

(32)
%
$
128

31
%
SDG&E

56

35

53

37

PE

42

35

41

36

SoCalGas

42

35

42

36

Nine months ended September 30,

2010

2009

Income Tax

Effective Income

Income Tax

Effective Income

Expense

Tax Rate

Expense

Tax Rate

Sempra Energy Consolidated
$
85

18
%
$
327

30
%
SDG&E

131

36

141

33

PE

132

38

117

38

SoCalGas

132

38

115

37

INCOME TAX EXPENSE AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
Three months ended March 31,
2011 2010
Income Tax Effective Income Income Tax Effective Income
Expense Tax Rate Expense Tax Rate
Sempra Energy Consolidated $ 109 32 % $ 58 42 %
SDG&E 49 34 31 29
PE 37 35 57 47
SoCalGas 37 35 56 46

Sempra Energy Consolidated

The ~~change~~increase in income tax expense in the three months ended ~~September 30, 2010~~March 31, 2011 was ~~due to lower pretax income and a lower effective income tax rate primarily resulting from:~~

§~~higher planned investment tax credits;~~

§~~higher exclusions from taxable income of the equity portion of AFUDC; and~~

§higher pretax income (including a $175 million gain related to our share of the RBS Sempra Commodities sale to J.P. Morgan Ventures Energy Corporation on July 1, 2010) in countries with lower statutory rates; ~~offset by~~

§~~$11 million state income tax expense related to our exit from the RBS Sempra Commodities business;~~

§~~lower favorable impact from the resolution of prior years' income tax issues;~~

§~~an increase in the amount by which book depreciation exceeds normalized tax depreciation, which is not treated as a deferred tax asset for ratemaking purposes; and~~

§~~$5 million tax expense in 2010 compared to $3 million tax benefit in 2009 due to Mexican currency translation and inflatio n adjustments.~~

In the nine months ended September 30, 2010, Sempra Energy's income tax expense decreased due to lower pretax income and a lower effective income tax rate. The lower effective income tax rate was primarily due to:

§~~higher planned investment tax credits;~~

§~~higher deductions for self-developed software costs;~~

§~~higher exclusions from taxable income of the equity portion of AFUDC;~~ ~~offset by~~

§~~$11 million state income tax expense related to our exit from the RBS Sempra Commodities business;~~

§~~lower favorable impact from the resolution of prior years' income tax issues;~~

§a $16 million write-down of the deferred tax assets related to other postretirement benefits, as a result of a change in U.S. tax law that eliminates a future deduction, starting in 2013, for retiree healthcare funded by the Medicare Part D subs idy;

§~~an increase in the amount by which book depreciation exceeds normalized tax depreciation, which is not treated as a deferred tax asset for ratemaking purposes; and~~

§~~$4 million higher tax expense in 2010 due to Mexican currency translation and inflation adjustments.~~

~~SDG&E~~

~~The increase in SDG&E's income tax expense in the three months ended September 30, 2010 was primarily~~ due to higher pretax income, offset by a lower effective income tax ~~rate. The lower effective income tax~~ rate ~~was~~ primarily ~~due to:~~

§~~the impact of Otay Mesa VIE;~~

§~~a decrease in the amount by which book depreciation exceeds normalized tax depreciation, which is not treated as a deferred tax asset for ratemaking purposes;~~

§~~higher exclusions from taxable income of the equity portion of AFUDC; and~~

§~~higher favorable impact from the resolution of prior years' income tax issues;~~ ~~offset by~~

§~~lower deductions for self-developed software costs;~~

§ ~~lower deductions for other postretirement benefits; and~~

§~~lower utility repair allowance.~~

~~In the nine months ended September 30, 2010,~~resulting from:

§	a $16 million write-down in 2010 of the deferred tax assets related to other postretirement benefits, as a result of a change in U.S. tax law that eliminates a future deduction, starting in 2013, for retiree healthcare funded by the Medicare Part D subsidy;

§	lower tax expense in 2011 due to Mexican currency translation and inflation adjustments;

§	higher planned investment tax credits;

§	higher exclusions from taxable income of the equity portion of allowance for funds used during construction (AFUDC); and

§	higher deductions for self-developed software costs; offset by

§	lower favorable adjustments related to prior years' income tax issues; and

§	an increase in the amount by which book depreciation for the Sempra Utilities exceeds normalized tax depreciation, which is not treated as a deferred tax asset for ratemaking purposes.

SDG&E

SDG&E's income tax expense ~~decreased~~increased in the three months ended March 31, 2011 primarily ~~from lower~~due to higher pretax income ~~partially offset by~~and a higher effective income tax rate primarily resulting ~~primarily~~ from:

§~~the impact of Otay Mesa VIE;~~

§~~a $3 million write-down of the deferred tax assets related to other postretirement benefits as a result of a change in U.S. tax law, as we discuss above;~~

§~~an increase in the amount by which book depreciation exceeds normalized tax depreciation, which is not treated as a deferred tax asset~~

§	lower favorable adjustments related to prior years’ income tax issues; offset by

§	a $3 million write-down in 2010 of the deferred tax assets related to other postretirement benefits as a result of a change in U.S. tax law, as we discuss above;

§	the impact of Otay Mesa VIE, as we discuss below; and

§	higher exclusions from taxable income of the equity portion of AFUDC.

Results for ~~ratemaking purposes;~~

§~~lower deductions for other postretirement benefits;~~Sempra Energy Consolidated and

§~~lower utility repair allowance;~~ ~~offset by~~

§~~higher exclusions from taxable income of the equity portion of AFUDC; and~~

§~~higher favorable impact from the resolution of prior years' income tax issues.~~

SDG~~&E's results~~&E include Otay Mesa VIE, which is consolidated, and therefore, ~~SDG&E's~~their effective income tax ~~rate is~~rates are impacted by the VIE’s stand-alone effective income tax rate.

PE and SoCalGas

~~The decrease in PE’s and SoCalGas’ effective income tax rates in the three months ended September 30, 2010 was primarily due to:~~

§~~higher deductions for self-developed software costs;~~ ~~offset by~~

§~~lower deductions for other postretirement benefits; and~~

§~~an increase in the amount by which book depreciation exceeds no rmalized tax depreciation, which is not treated as a deferred tax asset for ratemaking purposes.~~

~~In the nine months ended September 30, 2010, income~~

Income tax expense ~~increased~~decreased at PE and SoCalGas primarily due to ~~higher~~lower pretax ~~income.~~ income, as well as lower effective income tax rates primarily due to:

§	a $13 million write-down in 2010 of the deferred tax assets related to other postretirement benefits as a result of a change in U.S. tax law, as we discuss above; and

§	higher deductions for self-developed software costs; offset by

§	an increase in the amount by which book depreciation exceeds normalized tax depreciation, which is not treated as a deferred tax asset for ratemaking purposes.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

In December 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Act) was signed into law. The 2010 Tax Act included the extension of bonus depreciation for U.S. federal income tax purposes for years 2010 through 2012 and an increase in the rate of bonus depreciation from 50 percent to 100 percent. This increased rate only applies to certain investments made after September 8, 2010 through December 31, 2012.

Additionally, the 2010 Tax Act extended for years 2010 and 2011 the U.S. federal income tax law known as the look-through rule. This rule allows, under certain situations, for certain non-operating activity (e.g., dividend income, royalty income, interest income, rental income, etc.) of a greater than 50-percent owned non-U.S. subsidiary, to not be taxed under U.S. federal income tax law. If this rule is not extended beyond 2011, Sempra Energy’s effective income tax rate ~~at SoCalGas increased slightly primarily due to:~~

§~~a $13 million write-down of the deferred tax assets related to other postretirement benefits as a result of a change in U.S. tax law, as we discuss above;~~

§~~lower deductions for other postretirement benefits; and~~

§ancould potentially increase in subsequent years.

We provide further discussion regarding the ~~amount by which book depreciation exceeds no rmalized tax depreciation, which is not treated as a deferred tax asset for ratemaking purposes;~~ ~~offset by~~

§~~higher deductions for self-developed software costs;~~2010 Tax Act in "Management's Discussion and

§~~higher exclusions from taxable income~~ Analysis of Financial Condition and Results of Operations" in the ~~equity portion of AFUDC.~~

~~Although it did not change year-over-year, these fluctuations are also reflected in PE’s effective income tax rate.~~

Annual Report.

Equity Earnings, ~~(Losses),~~ Net of Income Tax

Equity ~~losses,~~earnings, net of income tax, consisting of earnings from Sempra Pipelines & Storage’s equity method investments, were $4$31 million ~~i n~~in the three months ended ~~September 30, 2010~~March 31, 2011 compared to ~~equity earnings of $20~~$19 million for the corresponding period in ~~2009. Equity earnings, net of income tax, decreased by $17 million (29%) to $42 million in the nine months ended September 30,~~ 2010. The ~~change~~increase in ~~both the three months and nine months~~2011 was primarily due ~~to a $24 million write-down of Sempra Pipelines & Storage’s investment in Argentina.~~

to:

§	$7 million in earnings related to the joint-venture interest acquired from El Paso Corporation in April 2010; and

§	$5 million higher earnings from investments in Chile and Peru.

(Earnings) Losses ~~(Earnings)~~ Attributable to Noncontrolling Interests

Sempra Energy Consolidated

Losses attributable to noncontrolling interests decreased by $11 million (65%) in the three months ended September 30, 2010. The decrease was primarily due to a $13 million decrease in losses attributable to noncontrolling interests at and SDG&E ~~which we discuss below.~~

~~Losses attributable to noncontrol ling interests increased by $12 million (55%) in the nine months ended September 30, 2010. The change was primarily due to:~~

§~~$43 million increase in losses attributable to noncontrolling interests at SDG&E, which we discuss below;~~ ~~offset by~~

§~~$33 million associated with the write-off of assets at Liberty in 2009.~~

~~SDG&E~~

~~Losses~~

Earnings attributable to noncontrolling interests, all related to Otay Mesa VIE, were $5$4 million in the ~~three months ended September 30, 2010~~first quarter of 2011 compared to ~~$18~~losses of $8 million in the ~~corresponding period~~first quarter of ~~2009. The change was~~2010, primarily due ~~to:~~

§~~a $20~~to $9 million ~~increase in operating income;~~ ~~offset by~~

§~~a $6 million increase in~~of losses on interest rate instruments in 2010.

Losses attributable to noncontrolling interests, all related to Otay Mesa VIE, were $34 million in the nine months ended September 30, 2010 compared to earnings of $9 million in the corresponding period of 2009. The change was primarily due to:

§~~$51 million in losses on interest rate instruments in 2010 compared to $19 million in gains in 2009;~~ ~~offset by~~

§~~a $36 million increase in operating income.~~

Earnings

We discuss variations in Sempra Energy's earnings (losses) by business unit above in "Business Unit Results."

CAPITAL RESOURCES AND LIQUIDITY

We expect our cash flows from operations to fund a substantial portion of our capital expenditures and dividends. In addition, we may meet our cash requirements through the issuance of short-term and long-term debt and the expected distributions from RBS Sempra Commodities related to proceeds from the transactions to sell ~~the~~certain businesses within ~~RBS Sempra Commodities,~~the joint venture, as we discuss below.

Our committed lines of credit provide liquidity and support commercial paper. As we discuss in Note 6 of the Notes to Condensed Consolidated Financial Statements herein, ~~in October 2010,~~ Sempra Energy, Sempra Global and the Sempra Utilities ~~entered into agreements for new~~each have four-year revolving credit facilities, ~~to replace the previous principal credit agreements that were scheduled to expire~~expiring in ~~2011. The new agreements have a longer term (four years) and, in light of our exit from the commodities joint venture, a lower total credit commitment by $500 million at Sempra Global.~~2014. At Sempra Energy and Sempra Global, the ~~new~~ agreements are syndicated broadly among 23 different lenders and at the Sempra Utilities, among 22 different lenders. No single lender has greater than a 7-percent share in any ~~agreement.~~

facility.

The table below shows the amount of available funds at ~~September 30, 2010:~~

AVAILABLE FUNDS AT SEPTEMBER 30, 2010
(Dollars in millions)

Sempra Energy

Consolidated
SDG&E
PE/SoCalGas
Unrestricted cash and cash equivalents
$
547
$
332
$
72
Available unused credit(1)

3,419

338

538
(1)
Borrowings on the shared line of credit at SDG&E and SoCalGas are limited to $600 million for each utility and $800 million in total. SDG&E's available funds reflect letters of credit outstanding of $25 million and variable-rate demand notes outstanding of $237 million supported by the line. SoCalGas' availability reflects the impact of SDG&E's use of the combined credit available on the line.

March 31, 2011:

AVAILABLE FUNDS AT MARCH 31, 2011
(Dollars in millions)
Sempra Energy
Consolidated SDG&E PE/SoCalGas
Unrestricted cash and cash equivalents $ 1,219 $ 272 $ 33
Available unused credit(1) 2,771 363 563
(1) Borrowings on the shared line of credit at SDG&E and SoCalGas are limited to $600 million for each utility and $800 million in total. SDG&E's available funds reflect variable-rate demand notes outstanding of $237 million supported by the line. SoCalGas' availability reflects the impact of SDG&E's use of the combined credit available on the line.

Sempra Energy Consolidated

We believe thatthese available funds and cash flows from operations, distributions from equity method investments andsecurity issuances, combined with current cash balances, will be adequate to:

§~~finance capital expenditur es~~

§~~meet liquidity requirements~~

§	finance capital expenditures

§	meet liquidity requirements

§	fund shareholder dividends

§	fund new business acquisitions or start-ups

In March 2011, Sempra Energy publicly offered and ~~common stock repurchases~~

§~~fund new business acquisitions or start-ups~~

~~As we discuss in Note 4 of the Notes to Condensed Consolidated Financial Statements herein, in July 2010, RBS Sempra Commodities~~ sold its global metals and oil businesses, as well as the European natural gas and power business. Our share of the proceeds from this transaction approximated $1 billion, including a $134 million distribution of 2009 partnership earnings related to the businesses sold. In September 2010, Noble Group Ltd. agreed to acquire the U.S. retail commodity marketing business of RBS Sempra Commodities for $318 million in cash, plus assumption of all debt, which agreement was consummated on November 1, 2010. In October 2010, the joint venture entered into an agreement to sell most of its remaining assets to J.P. Morgan Ventures Energy Corporation (J.P. Morgan Ventures), a unit of J.P. Morgan Chase & Co. (JP Morgan), for approximately $220 million. This transaction is expected to close by year-end.

We expect our share of the proceeds from the sales of all of the partnership’s businesses and related cash distributions to total $1.8 billion to $1.9 billion. This includes approximately $1.3 billion expected from the announced transactions, plus $500 million to $600 million consisting primarily of cash and accounts receivable, as well as net margin that is expected to be collected as customers are transferred to JP Morgan. The transfer of all accounts to JP Morgan will be done as soo n as possible, but is expected to continue into 2011. We are using $500 million of ~~the proceeds to repurchase shares~~2-percent notes and $300 million of ~~our common stock under a Collared Accelerated Share Acquisition Program, which began~~floating rate notes, both maturing in ~~September 2010. We discuss the share repurchase program further in Note 5 of the Notes to Condensed Consolidated Financial Statements herein.~~

2014. SDG&E ~~has~~and SoCalGas issued long-term debt in 2010 in the aggregate principal amounts of $750 million and ~~both Sempra Energy and SDG&E issued long-term debt in 2009.~~$300 million, respectively. Changing economic conditions could affect the availability and cost of both short-term and long-term financing. If cash flows from operations were to be significantly reduced or we were to be unable to borrow under acceptable terms, we would reduce or postpone discretionary capital expenditures and investments in new businesses. If these measures were necessary, they would primarily impact our Sempra Global businesses, as credit availability for the Sempra Utilities has not been significantly impacted by the credit crisis. Discretionary expenditures at Sempra Global include projects that we have not yet made firm commitments to build, primarily renewable generation facilities. We continuously monitor our ability to finance the needs of our operating, investing and financing activities in a manner consistent with our intention to maintain strong, ~~investment-quality ratings.~~

investment-grade credit ratings and capital structure.

In three separate transactions during 2010 and one in early 2011, we and RBS sold substantially all of the businesses and assets of our joint-venture partnership that comprised our commodities-marketing businesses. As we conclude the transactions to divest the businesses, we expect to recover our remaining $779 million investment in the partnership throughout 2011, including $329 million received in April 2011. We are providing transitional back-up guarantees, some of which may continue for a prolonged period of time. RBS or JP Morgan, one of the buyers in the sales transactions, have fully indemnified us for any claims or losses in connection with the related transactions.

We provide additional information about RBS Sempra Commodities and the sales transactions and guarantees in Notes 4 and 6 of the Notes to Condensed Consolidated Financial Statements herein and in Notes 3, 4, 5 and 16 of the Notes to Consolidated Financial Statements in the Annual Report.

We have significant investments in several trusts to provide for future payments of pensions and other postretirement benefits, and nuclear decommissioning. The value of the trust funds’ investments declined in 2008 and the first quarter of 2009 due to a decrease in the equity market and volatility in the fixed income market. Values increased from favorable market activity later in 2009 and in 2010. However, these markets continue to be volatile. The changes in asset values have not affected the trust funds’ abilities to make required payments, but may impact funding ~~requirem ents~~requirements for pension and other postretirement benefit plans. At the Sempra Utilities, funding requirements are generally recoverable in rates.

We discuss our principal credit agreements more fully in Note 6 of the Notes to Condensed Consolidated Financial Statements herein and in Note 65 of the Notes to Consolidated Financial Statements in the Annual Report.

Sempra Utilities

~~The Sempra Utilities expect~~

SoCalGas expects that cash flows from operations and debt issuances will continue to be adequate to meet ~~operating and~~its capital expenditure requirements. ~~Due~~In March 2011, Sempra Energy made a $200 million capital contribution to ~~the extended review period associated with the Sunrise Powerlink project~~SDG&E, and ~~the resultant delay~~SDG&E expects its cash flows from operations and debt issuances will be adequate to meet its future capital expenditure requirements.

SoCalGas declared and paid a $50 million common dividend to PE in ~~initiating construction activities,~~2011 and a $100 million common dividend in 2010. PE paid corresponding dividends to Sempra Energy in both years. In 2009, SDG&E declared and paid a $150 million common dividend to Sempra ~~Energy in the first quarter of 2009.~~ Energy.

However, the level of future common dividends from SDG&E and ~~SoCa lGas~~SoCalGas may be reduced or eliminated during periods of increased capital expenditures. The level of future common dividends from PE is dependent upon common dividends paid by SoCalGas. Sempra Energy may from time to time make additional equity contributions to SDG&E orand SoCalGas to support the Sempra ~~Utilities'~~Utilities’ capital expenditure programs.

As we discuss in Note 10 of the Notes to Condensed Consolidated Financial Statements herein, SDG&E’s and therefore Sempra Energy’s cash flows are likely to be adversely impacted by cash flows related to the 2007 wildfire litigation.

~~Sempra Commodities~~

We discuss above the completed and pending transactions and anticipated cash flows related to the dissolution of the RBS Sempra Commodities joint venture, which generally comprises the Sempra Commodities business unit. The impact of the sale transactions on cash flow will depend on many factors, including the final proceeds received from the transactions, potential changes to the partnership agreement, and any sales of residual assets. Our partner in the joint venture, RBS, is obligated to provide the joint venture with all working-capital requirements and credit support. However, we are providing transitional back-up guarantees, some of which may continue for a prolonged period of time. RBS or JP Morgan have fully indemnified us for any claims or losses in connection with these arrangements.

We account for our investment in the partnership under the equity method. RBS Sempra Commodities intends to distribute all of its net income on an annual basis, although the distributions are within the discretion of the board of directors of the partnership. In limited cases, the partnership may retain earnings allocable to the partners to replenish capital depleted through losses. In the first nine months of 2010, we received cash distributions from the partnership of $1 billion, which includes our share of proceeds from the transaction with J.P. Morgan Ventures. In the first nine months of 2009, we received cash distributions from the partnership of $407 million. Based on the joint venture’s results through the third quarter of 2010, we currently do not expect distributions for 2010 results to be material.

We provide additional information about RBS Sempra Commodities and the sales transactions in Notes 4 and 6 of the Notes to Condensed Consolidated Financial Statements herein and in Notes 3, 4, 6 and 20 of the Notes to Consolidated Financial Statements in the Annual Report.

Sempra Generation

We expect Sempra Generation to require funds for the development of electric generation facilities, primarily renewable energy projects. Projects at Sempra Generation may be financed through a combination of operating cash flow, project financing, funds from the parent, external borrowings, partnering in joint ventures and ~~external borrowings.~~the sale of its El Dorado natural gas power plant to SDG&E on October 1, 2011. Cash flows from operations at Sempra Generation are expected to decrease upon the expiration of ~~their~~its contract with the DWR in ~~late~~September 2011, due to less favorable pricing on replacement ~~contracts.~~contracts, and the sale of El Dorado. Also, Sempra Generation may not be able to replace all of the lost revenue. ~~We expect the litigation settlement recorded in the first quarter~~

Some of ~~2010 related to the DWR litigation to be funded from operations.~~

Sempra Generation's long-term power sale contracts ~~may~~ contain collateral requirements, although the DWR ~~contract does~~contracts do not contain such requirements. The collateral arrangements require Sempra Generation and/or the counterparty to post cash, guarantees or letters of credit to the other party for exposure in excess of established thresholds. Sempra Generation may be required ~~t o~~to provide collateral when market price movements adversely affect the counterparty's cost of replacement energy supplies if Sempra Generation fails to deliver the contracted amounts. Sempra Generation had no outstanding collateral requirements under such contracts at ~~September 30, 2010.~~

March 31, 2011.

Sempra Pipelines & Storage

Sempra Pipelines & Storage is expected to require funding from the parent or from external sources to fund projects and investments, including ~~the~~ development and expansion of its natural gas storage projects.

~~Also, on~~

In April ~~30, 2010,~~2011, Sempra Pipelines & Storage ~~completed an acquisition resulting~~acquired AEI’s interests in ~~the purchase~~Chilquinta Energía S.A. (Chilquinta Energía) and Luz del Sur S.A. (Luz del Sur) for $875 million plus working capital adjustments of ~~the Mexican pipeline~~$13 million. This transaction was funded with excess funds from foreign operations, proceeds from divestitures and ~~natural gas infrastructure assets of El Paso Corporation for $307 million ($292 million, net of cash acquired).~~ short-term debt.

We ~~discuss the acquisition further~~provide additional information about Sempra Pipelines & Storage’s investments in Chilquinta Energía and Luz del Sur in Note ~~3 o f~~12 of the Notes to Condensed Consolidated Financial Statements ~~herein.~~

~~Sempra LNG~~

~~Sempra LNG required funding from 2004 through 2009 for its development~~herein and in Notes 4 and 19 of the ~~Energía Costa Azul and Cameron LNG receipt terminals. As both of these facilities are now~~Notes to Consolidated Financial Statements in ~~service,~~ the Annual Report.

Sempra LNG ~~is expected~~

We expect Sempra LNG to provide operating cash flow for further development within Sempra ~~Global.~~

Global from the operations of its two LNG receipt terminals, Energía Costa Azul and Cameron.

CASH FLOWS FROM OPERATING ACTIVITIES

CASH PROVIDED BY OPERATING ACTIVITIES
(Dollars in millions)

2010
2010 Change
2009
Sempra Energy Consolidated
$
1,602
$
(282)
(15)
%
$
1,884
SDG&E

416

(203)
(33)

619
PE

562

17
3

545
SoCalGas

569

20
4

549

CASH PROVIDED BY OPERATING ACTIVITIES
(Dollars in millions)
2011 2011 Change 2010
Sempra Energy Consolidated $ 805 $ (83) (9) % $ 888
SDG&E 501 226 82 275
PE 380 (112) (23) 492
SoCalGas 371 (130) (26) 501

Sempra Energy Consolidated

Cash provided by operating activities at Sempra Energy decreased in ~~2010~~2011 primarily due to:

§	a $161 million decrease in accounts receivable in 2010, primarily at SoCalGas; and

§	$37 million of income tax payments in 2011 compared to $73 million of income tax refunds in 2010; offset by

§	$185 million higher net income, adjusted for noncash items, in 2011 compared to 2010.

Other working capital changes in 2011 compared to ~~$209~~2010 reflect $300 million ~~lower distributions~~of funds received from ~~RBS Sempra Commodities.~~

a wildfire litigation settlement, offset by a $229 million reduction in accrued liabilities for the payment in 2011 of wildfire settlement claims ($99 million) and the settlement paid related to energy crisis litigation ($130 million), as well as the accrual of the latter in the first quarter of 2010.

SDG&E

Cash provided by operating activities at SDG&E ~~decreased~~increased in ~~2010~~2011 primarily due to $117 million of settlement payments in 2010, net of cash received from liability insurance, compared to $36 million of cash received from liability insurance in 2 009, net of settlement payments, related to the 2007 wildfire litigation.

to:

§	$300 million of funds received from a wildfire litigation settlement, which is offset by an increase in restricted cash in cash flows from investing activities; and

§	$79 million higher net income, adjusted for noncash items, in 2011 compared to 2010; offset by

§	$99 million in settlement payments of accrued liabilities for the 2007 wildfires from our restricted funds in 2011, compared to $9 million net receipts from our liability insurance carriers in 2010 related to the 2007 wildfire litigation.

PE and SoCalGas

Cash provided by operating activities at PE and SoCalGas ~~increased~~decreased in ~~2010~~2011 primarily due to:

§~~$60 million higher net income, net of noncash adjustments, at SoCalGas; and~~

§~~a $71 million accounts payable decrease in 2010 compared to a $185 million decrease in 2009, primarily due to higher natural gas prices in 2010 compared to 2009~~; ~~offset by~~

§~~a $66 million decrease in regulatory balancing accounts in 2010 compared to a $52 million increase in 2009~~. ~~Over- and undercollected regulatory balancing accounts reflect the difference between billings and recorded or CPUC-authorized costs. These differences are required to be balanced over time; and~~

§~~a $272 million accounts receivable decrease in 2010 compared to a $306 million decrease in 2009, primarily due to higher natural gas volumes and cost of natural gas in 2010 compared to 2009~~.

§	an $89 million decrease in accounts receivable in 2010, primarily due to lower volumes and cost of natural gas billed; and

§	a $75 million decrease in accounts payable in 2011, primarily due to lower volumes and prices of natural gas purchased; offset by

§	$40 million higher net income, adjusted for noncash items, in 2011 compared to 2010.

The table below shows the contributions to pension and other postretirement benefit plans for the ~~nine~~three months ended ~~September 30, 2010.~~

Other

Pension
Postretirement
(Dollars in millions)
Benefits
Benefits
Sempra Energy Consolida ted
$
91
$
39
SDG&E

35

12
PE/SoCalGas

37

26

March 31, 2011.

			Other
	Pension		Postretirement
(Dollars in millions)	Benefits		Benefits
Sempra Energy Consolidated	$	11	$	19
SDG&E		―		4
PE/SoCalGas		1		14

CASH FLOWS FROM INVESTING ACTIVITIES

CASH USED IN INVESTING ACTIVITIES
(Dollars in millions)

2010
2010 Change
2009
Sempra Energy Consolidated
$
(633)
$
(1,337)
(68)
%
$
(1,970)
SDG&E

(813)

233
40

(580)
PE

(435)

106
32

(329)
SoCalGas

(445)

109
32

(336)

~~SempraEnergy~~

CASH USED IN INVESTING ACTIVITIES
(Dollars in millions)
2011 2011 Change 2010
Sempra Energy Consolidated $ (756) $ 260 52 % $ (496)
SDG&E (552) 252 84 (300)
PE (463) 203 78 (260)
SoCalGas (455) 185 69 (270)

Sempra Energy Consolidated

Cash used in investing activities at Sempra Energy ~~decreased~~increased in ~~2010~~2011 primarily due to:

§$849 million of distributions from RBS Sempra Commodities LLP at Sempra Commodities in 2010 related to the sale of businesses within the joint venture, as we discuss in Note 4 of the Notes to Condensed Consolidated Financial Statements herein;

§~~$180 million of distributions from Fowler Ridge II Wind Farm (Fowler Ridge) at Sempra Generation in 2010;~~

§~~a $182 million investment in Fowler Ridge b y Sempra Generation in 2009; and~~

§~~$462 million lower contributions to Rockies Express. The $65 million contribution in the first quarter of 2010 was the last required for the construction phase of the project;~~ ~~offset by~~

§~~$176 million proceeds from remarketing of industrial development bonds in 2009; and~~

§~~Sempra Pipelines & Storage’s $292 million acquisition (net of cash acquired) resulting in the purchase of Mexican pipeline and natural gas infrastructure assets.~~

§	a $300 million increase in restricted cash due to funds received from a wildfire litigation settlement; and

§	a $161 million increase in capital expenditures; offset by

§	$99 million in payments for claims related to wildfire litigation using restricted funds received from a wildfire litigation settlement; and

§	lower contributions to Rockies Express. The $65 million contribution in the first quarter of 2010 was the last required for the construction phase of the project.

SDG&E

~~The increase in cash~~

Cash used in investing activities at SDG&E increased in ~~2010 was~~2011 primarily due to:

§~~a $189 million net increase in capital expenditures (a $265 million increase at SDG&E, offset by a decrease of $76 million at Otay Mesa VIE);~~

§~~net proceeds of $24 million related to industrial development bonds in 2009; and~~

§~~$20 million lower decrease in loans to affiliates.~~

§	a $300 million increase in restricted cash due to funds received from a wildfire litigation settlement; and

§	a $58 million increase in capital expenditures; offset by

§	$99 million in payments for claims related to wildfire litigation using restricted funds received from a wildfire litigation settlement.

PE and SoCalGas

Cash used in investing activities at PE and SoCalGas increased in ~~2010~~2011 primarily due to ~~a $108 millio n~~$131 million higher increase in advances from SoCalGas to Sempra ~~Energy in 2010.~~

Energy.

FUTURE CONSTRUCTION EXPENDITURES AND INVESTMENTS

The amounts and timing of capital expenditures are generally subject to approvals by the CPUC, the Federal Energy Regulatory Commission (FERC) and other regulatory bodies. However, in ~~2010,~~2011, we expect to make capital expenditures and investments of $3approximately $3.8 billion, ~~including:~~

§~~$1.9 billion at the~~net of transferring Sempra ~~Utilities (excluding Otay Mesa VIE) for capital projects and plant improvements ($1.4 billion at~~Generation’s El Dorado facility to SDG~~&E and $500 million at SoCalGas)~~

§~~$1.1 billion at our other subsidiaries for the development of natural gas stor age facilities and pipelines, and renewable generation projects~~

&E. These expenditures include:

§	$2.6 billion at the Sempra Utilities for capital projects and plant improvements ($1.9 billion at SDG&E and $720 million at SoCalGas)

§	$1.4 billion at our other subsidiaries for the acquisition of AEI’s interests in Chile and Peru, development of natural gas storage facilities and pipelines, and renewable generation projects

The Sempra Utilities expect the $2.6 billion of capital expenditures to include:

§~~$780 million for additions to SDG&E’s natural gas and electric distribution systems, advanced metering infrastructure, and electric generation plant and equipment~~

§~~$500 million at SoCalGas for improvements to distribution and transmission systems, and for advanced metering infrastructure~~

§~~$400 million at SDG&E for the Sunrise Powerlink transmission line~~

~~&# 167;$190 million for improvements to SDG&E’s electric transmission infrastructure~~

§	$780 million for additions to SDG&E’s natural gas and electric distribution systems, advanced metering infrastructure, and electric generation plant and equipment

§	$680 million at SDG&E for the Sunrise Powerlink transmission line

§	$220 million for improvements to SDG&E’s electric transmission infrastructure

§	$200 million for the transfer of Sempra Generation’s El Dorado facility to SDG&E

§	$720 million at SoCalGas for improvements to distribution and transmission systems, and for advanced metering infrastructure

The Sempra Utilities expect to finance these expenditures and investments with cash flows from operations, cash on hand, debt issuances and ~~debt issuances.~~

at SDG&E, capital contributed by Sempra Energy.

The expected capital expenditures of ~~$1.1~~$1.4 billion at our other subsidiaries ~~include:~~

§~~approximately $150 million to $250 million for Copper Mountain Solar (a 48-megawatt (MW) solar generation facility under construction by Sempra Generation in Boulder City, Nevada);~~

§~~approximately $230 million for investments in Cedar Creek II Wind Farm, a 250-MW project in northern Colorado;~~

§~~approximately $250 million to $300 million for~~ include

Sempra Pipelines & ~~Storage’s contribution to Rockies Express and the development of natural gas storage projects at Bay Gas and Mississippi Hub; and~~

§~~$307~~Storage

§	approximately $875 million to acquire AEI’s interests in Chile and Peru

§	approximately $100 million to $150 million for capital projects in South America in the second half of 2011

§	approximately $100 million to $150 million for development of natural gas storage projects at Bay Gas and Mississippi Hub

Sempra Pipelines & Storage’s acquisition resulting in the purchase of Mexican pipeline and natural gas infrastructure assets which closed in April 2010 and that we discuss in Note 3 of the Notes to Condensed Consolidated Financial Statements herein.

Generation

§	approximately $100 million for investment in the first phase (150 megawatts (MW)) of Mesquite Solar, a solar project at our Mesquite Power plant near Arlington, Arizona

Our level of capital expenditures and investments in the next few years may vary substantially and will depend on the cost and availability of financing, regulatory approvals and business opportunities providing desirable rates of return. We intend to finance our capital expenditures in a manner that will maintain our strong investment-grade ratings and capital structure.

CASH FLOWS FROM FINANCING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES
(Dollars in millions)

2010
2010 Change
2009
Sempra Energy Consolidated
$
(532)
$
(1,043)
204
%
$
511
SDG&E

716

483
207

233
PE

(104)

(100)
(2,500)

(4)
SoCalGas

(101)

(100)
(10,000)

(1)

CASH FLOWS FROM FINANCING ACTIVITIES
(Dollars in millions)
2011 2011 Change 2010
Sempra Energy Consolidated $ 258 $ 538 192 % $ (280)
SDG&E 196 170 654 26
PE (301) (200) (198) (101)
SoCalGas (300) (200) (200) (100)

Sempra Energy Consolidated

Cash provided by financing activities at Sempra Energy ~~financing acti vities used cash~~increased in ~~2010 compared to providing cash in 2009,~~2011 primarily due to:

§~~$502 million repurchases of common stock in 2010;~~

§~~$410 million lower issuances of debt; and~~

§~~$402 million higher debt payments;~~ ~~offset by~~

§~~$94 million for the purchase of the remaining 40-percent ownership interest in Mississippi Hub in 2009; and~~

§~~$184 million increase in short-term debt in 2010 co mpared to a $52 million decrease in 2009.~~

§	$791 million higher issuances of long-term debt; and

§	$247 million lower debt payments; offset by

§	a $192 million decrease in short-term debt in 2011 compared to a $294 million increase in 2010.

SDG&E

Cash provided by financing activities at SDG&E increased in 2011 primarily due ~~to:~~

§~~$150~~to a $200 million ~~common dividends paid to~~capital contribution from Sempra Energy in ~~2009; and~~

2011; offset by §~~$358~~a $27 million ~~higher issuances of long-term debt.~~increase in short-term debt in 2010.

PE and SoCalGas

Cash used in financing activities at PE and SoCalGas increased in ~~2010 increased~~2011 primarily due ~~to $100 million common dividends paid to Sempra Energy and PE, respectively.~~

to:

§	a $250 million long-term debt payment at SoCalGas in 2011; and

§	$50 million in common dividends paid in 2011; offset by

§	$100 million in common dividends paid in 2010.

COMMITMENTS

We discuss significant changes to contractual commitments at Sempra Energy, SDG&E, PE and SoCalGas in Note 10 of the Notes to Condensed Consolidated Financial Statements herein.

CREDIT RATINGS

The credit ratings of Sempra Energy and its principal subsidiaries remained at investment grade levels during the first quarter of 2011.

We provide additional information about our credit ratings at Sempra Energy, SDG&E, PE and SoCalGas in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report.

FACTORS INFLUENCING FUTURE PERFORMANCE

SEMPRA ENERGY OVERVIEW

The Sempra Utilities' operations generally provide relatively stable earnings and liquidity. However, for the next few years, SDG&E and SoCalGas intend to limit their common stock dividends to reinvest their earnings in significant capital projects.

Long-term contracts at Sempra Global's ~~long-term contracts also~~businesses generally provide relatively stable earnings and liquidity, but are subject to variability due to fluctuations in commodity prices. Also, Sempra Generation's contract with the DWR, which provides a significant portion of Sempra Generation's revenues, ends in ~~late~~September 2011, and Sempra Generation will sell its El Dorado natural gas generation plant to SDG&E on October 1, 2011. ~~Because it is unable to forecast with certainty future~~Based on current market prices for electricity, ~~prices and the cost of natural gas,~~ contracts it enters into to replace the DWR contract, if obtained, or merchant (daily) sales ~~may~~will provide substantially lower earnings. Sempra Generation is also undertaking and investing in several projects for the construction of renewable generation facilities, with planned in-service dates ranging from ~~late 2010~~mid-2011 to ~~2012.~~

2013.

On April 6, 2011, Sempra Pipelines & Storage increased its investment in two utilities in South America. We expect the acquisition to be accretive to our earnings per share. We discuss the acquisition in Note 12 of the Notes to Condensed Consolidated Financial Statements herein. Sempra Pipelines & Storage is also expected to provide earnings from construction ~~programs~~projects when completed and other investments, but will require substantial funding for these investments.

At Sempra LNG, until there are firm LNG supply or capacity services contracts from third parties that would subscribe to 100 percent of the capacity of Sempra LNG's Cameron receipt terminal, Sempra LNG will seek to purchase ~~and market~~ short-term LNG supplies and sell short-term capacity, which may result in greater variability in revenues and earnings.

The Sempra Utilities' performance will depend primarily on the ratemaking and regulatory process, environmental regulations, economic conditions, actions by the California legislature to address the state budget crisis and the changing energy marketplace. Their performance will also depend on the successful completion of capital projects that we discuss in various sections of this report. As the 2008 General Rate Case provides for fixed annual increases through 2011 rather than adjustments based on inflation indices as in the past, performance will depend on the Sempra Utilit ies' ability to manage costs, including bad debts. Starting inIn the third quarter of 2009, SDG&E's liability insurance premiums increased significantly, by approximately $40 million (pretax) annually, due to the increased costs of wildfire liability coverage as compared to the previous policy year. ~~Starting in~~In the third quarter of 2010, SDG&E ~~has~~ secured additional insurance coverage of approximately $560 million, providing SDG&E with ~~respect to any future wildfire liabilities. SDG&E's~~ maximum loss recovery due to a wildfire incident from insurance carriers ~~is now~~of approximately $960 million, with the remainder of Sempra Energy's business units' maximum coverage for a wildfire incident remaining at $400 million, the same as in the previous policy year. ~~Starting~~As a result of the increase in SDG&E's wildfire liability insurance coverage in the third quarter of 2010, SDG&E's insurance premiums ~~increase~~increased by approximately $30 million (pretax) annually for the increased coverage.

In regard to the 2007 wildfire litigation, SDG~~&E has exceeded its~~&E's settlement of claims and the estimate of outstanding claims and legal fees is approximately $1.9 billion, which is in excess of the $1.1 billion of liability ~~in surance~~insurance coverage ~~in settling wildfire claims.~~and the $444 million of proceeds received as a result of the settlement with Cox Communications. However, itSDG&E has concluded that it is probable that it will be permitted to recover from its utility customers substantially all reasonably incurred costs of resolving wildfire claims in excess of its liability insurance coverage and ~~any~~ amounts recovered from other potentially responsible parties. Consequently, Sempra Energy and SDG&E expect no significant earnings impact from the resolution of the remaining wildfire claims. However, SDG&E’s cash flow ~~will~~may be adversely affected by timing differences between the resolution of claims and recoveries from other potentially responsible parties and utility customers, which may extend over a number of years. In addition, recovery from customers will require future regulatory actions, and a failure to obtain recovery, or any negative assessment of the likelihood of recovery, would likely have a material adverse effect on Sempra Energy's and SDG&E's cash flows and results of operations.

herein and in Notes 14, 15 and 16 of the Notes to Consolidated Financial Statements in the Annual Report.

SDG&E has a 20-percent ownership interest in San Onofre Nuclear Generating Station (SONGS), a 2,150-MW nuclear generating facility near San Clemente, California. SONGS is operated by Southern California Edison (SCE) and is subject to the jurisdiction of the Nuclear Regulatory Commission (NRC). SCE is currently addressing a number of regulatory and performance issues at SONGS, and the NRC has required SCE to take actions to provide greater assurance of compliance by SONGS personnel. SCE continues to implement plans and address the identified issues, however a number of these issues remain outstanding. To the extent that these issues persist, the likelihood of further required action by SCE persists, which may result in increased SONGS operating costs and/or adversely impacted operations. Currently, SDG&E is allowed to fully offset its share of SONGS operating costs in revenue. If further action is required, it may result in an increase in SDG&E’s Operation and Maintenance Expense, with any increase being fully offset in Operating Revenues – Electric or, if electric generation is adversely impacted, require SDG&E to procure additional electricity supply from other sources.

In light of the aftermath and the significant safety events at the Fukushima Daiichi nuclear plant in Japan resulting from the recent earthquake and tsunami, the NRC plans to perform additional operation and safety reviews of nuclear facilities in the United States. The lessons learned from the events in Japan and the results of the NRC reviews may impact future operations and capital requirements at nuclear facilities in the United States, including the operations and capital requirements at SONGS. We provide more information about SONGS in Note 10 of the Notes ~~7, 15~~to Condensed Consolidated Financial Statements herein and 17in Notes 6, 14 and 16 of the Notes to Consolidated Financial Statements in the Annual ~~Report,~~Report.

Pending the outcome of the various regulatory agency evaluations of natural gas pipeline safety regulations, practices and procedures, Sempra Energy, including the Sempra Utilities, may incur incremental expense and capital investment associated with its natural gas pipeline operations and investments. If incremental expense and capital investment is required by either SDG&E or SoCalGas, we would expect to file a request with the CPUC to recover any incremental expenses incurred from our customers in rates and to request any capital investment required above what is approved and authorized in our 2012 GRC application as incremental rate base. We provide more information in “Natural Gas Pipeline Operations Safety Assessments” in Note 9 of the Notes to Condensed Consolidated Financial Statements herein.

Both SDG&E and SoCalGas have filed their 2012 GRC applications with the CPUC to establish their authorized revenue requirements for the 2012 Test Year and the ratemaking mechanisms to update the authorized revenue on an annual basis over the subsequent three-year (2013-2015) period. Since these applications were filed, Congress passed the 2010 Tax Act which, among other things, included provisions for companies to elect bonus depreciation on certain investments made after September 8, 2010 through December 31, 2012 for federal income tax purposes. The use of bonus depreciation, while reducing cash tax obligations in the near term, results in incremental deferred tax liabilities which reduce both SDG&E's and SoCalGas' rate base upon which authorized revenue requirements are determined. In March 2011, the Internal Revenue Service issued technical guidance on the application of the bonus depreciation provisions of the 2010 Tax Act. SDG&E and SoCalGas are currently analyzing how this guidance will impact the federal income tax depreciation deductions the companies expect to claim for 2011, as well as quantifying the incremental deferred federal income tax liabilities generated. After applying the incremental deferred tax liabilities to each company’s rate base, assuming all other factors in the 2012 GRC application remain the same, it will result in revenue requirements that are less than what the companies have requested in their 2012 GRC applications.

The scoping memo issued by the CPUC in March 2011 set a final decision on the GRC to be issued around the month of March 2012, with retroactive application to allow recovery of SDG&E's and SoCalGas' authorized 2012 revenue requirements to January 1, 2012. If the CPUC's final decision grants a significantly lower authorized revenue requirement, it could result in an adverse effect to the Sempra Utilities' cash flows and results of operations starting in 2012. We provide more information about the GRC in Note 9 of the Notes to Condensed Consolidated Financial Statements herein and in ~~Items 1 and 1A~~Note 15 of ~~our 2009~~the Notes to Consolidated Financial Statements in the Annual ~~Report on Form 10-K.~~

~~Both~~ Report.

SDG&E's ~~an d SoCalGas'~~next CPUC cost of capital ~~decisions include provisions that can result~~proceeding is scheduled to be filed in ~~adjustments, upwards or downwards,~~April 2012 for a 2013 test year. SoCalGas has also requested to ~~their return on capital in periods between~~file its next CPUC cost of capital ~~filings. As~~proceeding on the same schedule as SDG&E. A cost of capital proceeding determines the authorized capital structure, authorized rate of return and authorized rate for recovery of debt service costs on SDG&E's electric distribution and generation assets and on both companies' natural gas transmission and distribution assets. SDG&E's and SoCalGas' current CPUC authorized return on equity (ROE) is 11.10 percent and 10.82 percent, respectively, with authorized common equity capital structures of 49.00 percent and 48.00 percent, respectively. If the proceedings result in either a ~~result~~reduction in the authorized ROE or in the authorized common equity capital structure, it would have an adverse effect on the respective company's cash flows and results of operations starting in 2013. Also, to the ~~worldwide recession, interest rates have remained~~extent that either company's authorized rate for recovery of debt service costs is higher than their actual rate of debt service costs at ~~relatively low levels for an extended period~~the time of ~~time. If~~ the cost of capital ~~benchmark interest rates,~~proceeding, the authorized rate for ~~either company, recorded~~recovery of debt service costs will be reduced to the actual rate of debt service costs, which would adversely affect the respective company's cash flows and results of operations starting in 2013. We provide more information about the cost of capital proceedings in Note 15 of the Notes to Consolidated Financial Statements in the ~~third quarter~~Annual Report.

The current FERC formulaic rate methodology for SDG&E's electric transmission assets will be up for review in 2013, with the new rates effective in September 2013. This proceeding will assess the rate-making methodology to be employed for SDG&E's FERC-regulated operations, including a determination of ~~2010 were to continue at the same levels through the second quarter~~SDG&E's FERC-authorized ROE and recovery of ~~2011, one~~operations and maintenance expenses. If this proceeding results in a reduction from SDG&E's current authorized ROE of 11.35 percent or ~~both companies’ authorized return on capital could be adjusted downward effective January 1, 2012. It is estimated that if such a downward adjustment were to occur, it would result~~ in an adverse ~~impact to~~determination for the recovery of operations and maintenance expenses, it would adversely affect SDG&E's cash flows and results of operations.

We discuss additional potential and expected impacts of the 2010 Tax Act on our income tax expense, earnings and cash flows in ~~2012~~"Results of ~~$15 million at SDG&E~~Operations – Changes in Revenues, Costs and ~~$23 million at SoCalGas. Both SDG&E~~Earnings – Income Taxes" above.

In three separate transactions in 2010 and ~~SoCalGas are planning to file a cost~~one in early 2011, we and RBS sold substantially all of ~~capital application with~~ the ~~CPUC in April 2012. Once approved by the CPUC, the applications would establish return on capital~~businesses and ~~cost~~assets of ~~debt recovery for both SDG&E and SoCalGas starting in J anuary 2013.~~

~~In 2008, we completed the formation of a partnership, RBS Sempra Commodities, to own and operate~~ our commodities-marketing businesses, which generally comprised our Sempra Commodities segment. In November 2009, RBS announced its intention to divest its interest in the joint venture following a directive from the European Commission to dispose of certain assets. In February 2010, Sempra Energy, RBS and the partnership entered into an agreement to sell certain businesses within the partnership, which agreement was consummated on July 1, 2010. In September 2010, the parties announced an agreement to sell the U.S. retail commodity marketing business of RBS Sempra Commodities, which closed on November 1, 2010. In October 2010, the joint venture entered into an agreement to sell most of its remaining assets to J.P. Morgan Ventures. This transaction is expected to close by year-end. Our joint venture partner, RBS, continues to be obligated to provid e the partnership with all working-capital requirements and credit support.

partnership. We expect our share of the remaining proceeds from the sales of all of the joint venture's businesses and related cash distributions to ~~total $1.8 billion to $1.9 billion. These distributions are net~~approximate $779 million, of ~~expected transition costs and are not expected to fully recover the goodwill included~~which $329 million was received in the carrying value of our investment in the joint venture. Accordingly, in the third quarter of 2010, we recorded an after-tax charge of $139 million to reduce our investment in RBS Sempra Commodities.

Future earnings and distributions from the partnership will depend on the profitability achieved in the partnership's remaining businesses through their final disposition dates and the continued ability of RBS to provide capital and credit support for the partnership. Results of the joint venture in the first three quarters of 2010 were adversely impac ted by the sale on July 1, 2010, of the global metals and oil businesses and the European natural gas and power business; lower volatility in the U.S. natural gas and power business; and the disruptions caused by the process to sell the partnership's businesses.April 2011. We provide additional information in Notes 4 and 6 of the Notes to Condensed Consolidated Financial Statements ~~herein and in Notes 3, 4, 6 and 20 of the Notes to Consolidated Financial Statements in the Annual Report.~~

herein.

We may be further impacted by depressed and rapidly changing economic conditions. Moreover, the dollar has fluctuated significantly compared to some foreign currencies, especially in Mexico and South America where we have significant operations. North American natural gas prices, which affect profitability at Sempra Generation and Sempra LNG, are currently significantly below Asian and European prices. These factors could, if they remain unchanged, adversely affect profitability.

We discuss additional matters that could affect our future performance in Notes 9 and 10 of the Notes to Condensed Consolidated Financial Statements herein and in Notes 14, 15 ~~through 17~~and 16 of the Notes to Consolidated Financial Statements in the Annual Report.

FINANCIAL DERIVATIVES REFORMS

In July 2010, federal legislation to reform financial markets was enacted that significantly alters how over-the-counter (OTC) derivatives are regulated, which may impact all of our businesses. The law increased regulatory oversight of OTC energy derivatives, including (1) requiring standardized OTC derivatives to be traded on registered exchanges regulated by the U.S. Commodity Futures Trading Commission (CFTC), (2) imposing new and potentially higher capital and margin requirements and (3) authorizing the establishment of overall ~~vol ume~~volume and position limits. The law gives the CFTC authority to exempt end users of energy commodities which could reduce, but not eliminate, the applicability of these measures to us and other end users. These requirements could cause our OTC transactions to be more costly and have an adverse effect on our liquidity due to additional capital requirements. In addition, as these reforms aim to standardize OTC products, they could limit the effectiveness of our hedging programs, because we would have less ability to tailor OTC derivatives to match the precise risk we are seeking to ~~protect.~~

mitigate.

LITIGATION

We describe legal proceedings which could adversely affect our future performance in Note 10 of the Notes to Condensed Consolidated Financial Statements herein.

SEMPRA UTILITIES – INDUSTRY DEVELOPMENTS AND CAPITAL PROJECTS

We describe capital projects, electric and natural gas regulation and rates, and other pending proceedings and investigations that affect our business in Note 9 of the Notes to Condensed Consolidated Financial Statements herein and in Notes 1514 and 1615 of the Notes to Consolidated Financial Statements in the Annual Report.

SEMPRA GLOBAL INVESTMENTS

As we discuss in "Cash Flows From Investing Activities," our investments will significantly impact our future performance. In addition to the discussion below, we provide information about these investments in "Capital Resources and Liquidity" herein and “Capital Resources and Liquidity” and “Factors Influencing Future Performance” in the Annual Report.

Sempra Generation

~~Copper Mountain Solar~~

Pacific Gas and Electric has contracted for 48 MW of solar power from Copper Mountain Solar, a new plant under development in Boulder City, Nevada by Sempra Generation on land adjacent to the 10-MW El Dorado Energy Solar plant. Construction has begun and we expect it to be completed in late 2010.

Mesquite Solar

Mesquite Solar is a photovoltaic generation facility under development by Sempra Generation in Maricopa County, Arizona. When fully developed, the project will be capable of producing approximately 400 MW to ~~600~~700 MW of solar power. Mesquite Solar will connect to the 500-kilovolt Hassayampa switchyard via our existing Mesquite Power natural gas generation plant.

Construction of the first phase (Mesquite ~~Sola r I)~~Solar 1) of 150 MW is expected to begin in June 2011 and be completed in early 2013. ~~In October 2010, Sempra Generation announced that~~ PG&E ~~has contracted, subject to CPUC approval, for 150 MW of solar power at Mesquite Solar I for 20 years.~~

~~Cedar Creek II Wind Farm~~

In October 2010, Sempra Generation invested $209 million for a 50 percent-ownership interest in Cedar Creek II Wind Farm LLC, a joint venture with BP Wind Energy for the development of a 250-MW wind farm in northern Colorado expected to be operational in mid-2011. Public Service Company of Colorado, an Xcel Energy company, has contracted for all of the solar power at Mesquite Solar 1 for 20 years, which contract was approved by the CPUC in April 2011.

Auwahi Wind

In April 2011, Sempra Generation entered into a 20-year contract with Maui Electric Company to provide 21 MW of wind energy from the ~~facility~~Auwahi Wind project in the southeastern region of Maui. The contract is subject to approval by the Hawaii Public Utilities Commission. We expect construction on the project to begin in early 2012, and the project to be fully operational in late 2012.

Energía Sierra Juárez

In April 2011, San Diego Gas & Electric entered into a 20-year contract for ~~25 years.~~

renewable power supplied from the 156-MW first phase of Sempra Generation’s Energía Sierra Juárez wind project in Baja California, Mexico. The contract is subject to approval by the CPUC and FERC. We expect construction on the project to begin in 2012, and the project to be fully operational in 2013.

Sempra Generation intends to develop the project within the framework of a joint venture, and is working on a joint development agreement for the sale of a 50-percent partnership interest in the current phase of the project to BP Wind Energy.

Sempra Pipelines & Storage

Natural Gas Storage Projects

Currently, Sempra Pipelines & Storage has 23 billion cubic feet (Bcf) of operational working natural gas storage ~~capacity, including approximately 12 Bcf which recently became operational at its Mississippi Hub and Bay Gas natural gas storage facilities.~~capacity. We plan to develop as much as 75 Bcf of total storage capacity by 2015.

Sempra Pipelines & Storage’s natural gas storage facilities and projects include

Bay Gas Storage Company, a facility located 40 miles north of Mobile, Alabama, that provides underground storage and delivery of natural gas. Sempra Pipelines & Storage owns 91 percent of the project. It is the easternmost salt dome storage facility on the Gulf Coast, with direct service to the Florida market and markets across the Southeast, Mid-Atlantic and Northeast regions.

Mississippi Hub storage facility, located 45 miles southeast of Jackson, Mississippi, an underground salt dome natural gas storage project with access to shale basins of East Texas and Louisiana, traditional gulf supplies and LNG, with multiple interconnections to serve the Southeast and Northeast regions.

§	Liberty Gas Storage Expansion, a salt cavern development project in Cameron Parish, Louisiana. Sempra Pipelines & Storage owns 75 percent of the project and ProLiance Transportation LLC owns the remaining 25 percent. The project’s location provides access to several LNG facilities in the area.

South American Utilities

We discuss the increase in Sempra Pipelines & ~~Storage owns 91 percent of the project. It is the easternmost salt dome storage facility on the gulf coast, with direct service to the Florida market~~Storage’s investments in Chile and ~~markets across the Southeast, Mid-Atlantic and Northeast regions.~~

§~~Mississippi Hub storage facility, located~~Peru in Simpson County, Mississippi, an underground salt dome natural gas storage project with access to shale basins of East Texas and Louisiana, traditional gulf supplies and LNG, with multiple interconnections to serve the Southeast and Northeast regions.

§Liberty Gas Storage Expansion, a salt cavern facility in Cameron Parish, Louisiana. Sempra Pipelines & Storage owns 75 percent of the project and ProLiance Transportation LLC owns the remaining 25 percent. The project’s location provides access to several LNG facilities in the area.

~~Acquisition of Mexican Pipeline and Natural Gas Infrastructure~~

On April 30, 2010, Sempra Pipelines & Storage completed the acquisition resulting in a purchase of the Mexican pipeline an d natural gas infrastructure assets of El Paso Corporation for $307 million ($292 million, net of cash acquired).

~~We discuss the acquisition more fully~~2011 in Note 312 of the Notes to Condensed Consolidated Financial Statements herein.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We view certain accounting policies as critical because their application is the most relevant, judgmental and/or material to our financial position and results of operations, and/or because they require the use of material judgments and estimates. We ~~discus s~~discuss these accounting policies in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report.

We describe our significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

~~NEW ACCOUNTING STANDARDS~~

We discuss the relevant pronouncements that have recently become effective and have had or may have an impact on our financial statements in Note 2 of the Notes to Condensed Consolidated Financial Statements herein.

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 herein. We discuss our market risk and risk policies in detail in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report.

INTEREST RATE RISK

The table below shows the nominal amount and the one-year VaR for long-term debt, excluding commercial paper classified as long-term debt and capital lease obligations, at ~~September 30, 2010~~March 31, 2011 and December 31, ~~2009:~~

Sempra Energy

Consolidated
SDG&E
PE/SoCalGas

Nominal
One-Year
Nominal
One-Year
Nominal
One-Year
(Dollars in millions)
Debt
VaR(1)
Debt
VaR(1)
Debt
VaR(1)
At September 30, 2010:

    Utility fixed-rate
$
3,817
$
701
$
& nbsp;2,704
$
585
$
1,113
$
116
    Utility variable-rate

754

44

604

44

150

-
    Non-util ity, fixed-rate and variable-rate

3,578

481

-

-

-

-
At December 31, 2009:

    Utility fixed-rate
$
3,067
$
369
$
1,954
$
273
$
1,113
$
97&nb sp;
    Utility variable-rate

848

43

698

43

150

-
    Non-utility, fixed-rate and variable-rate

4,075

392

-

-

-

-
(1) After the effects of interest rate swaps.

2010:

	Sempra Energy
	Consolidated				SDG&E				PE/SoCalGas
	Nominal		One-Year		Nominal		One-Year		Nominal		One-Year
(Dollars in millions)	Debt		VaR(1)		Debt		VaR(1)		Debt		VaR(1)
At March 31, 2011:
Utility fixed-rate	$	4,017	$	478	$	2,705	$	358	$	1,312	$	120
Utility variable-rate		598		34		598		34		―		―
Non-utility, fixed-rate and variable-rate		4,255		304		―		―		―		―
At December 31, 2010:
Utility fixed-rate	$	4,117	$	787	$	2,704	$	587	$	1,413	$	200
Utility variable-rate		751		59		601		59		150		―
Non-utility, fixed-rate and variable-rate		3,459		509		―		―		―		―
(1) After the effects of interest rate swaps.

At ~~September 30, 2010,~~March 31, 2011, the net notional amount of ~~intere st~~interest rate swap transactions ranged from ~~$215~~$15 million to ~~$355~~$305 million at Sempra Energy (ranges relate to amortizing notional amounts). We provide additional information about interest rate swap transactions in Note 7 of the Notes to Condensed Consolidated Financial Statements herein.

FOREIGN CURRENCY RATE RISK

We discuss our foreign currency rate risk in detail in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report. At ~~September 30, 2010,~~March 31, 2011, there were no significant changes to our exposure to foreign currency rate risk since December 31, ~~2009.~~

2010.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Sempra Energy, SDG&E, PE and SoCalGas have designed and maintain disclosure controls and procedures to ensure that information required to be disclosed in their respective reports is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and is accumulated and communicated to the management of each company, including each respective Chief Executive Officer and Chief Financial Officer, to allow timely decisions ~~regardi ng~~regarding required disclosure. In designing and evaluating these controls and procedures, the management of each company recognizes that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives; therefore, the management of each company applies judgment in evaluating the cost-benefit relationship of other possible controls and procedures.

Under the supervision and with the participation of management, including the Chief Executive Officers and Chief Financial Officers of Sempra Energy, SDG&E, PE and SoCalGas, each company evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of ~~September 30, 2010,~~March 31, 2011, the end of the period covered by this report. Based on these evaluations, the Chief Executive Officers and Chief Financial Officers of Sempra Energy, SDG&E, PE and SoCalGas concluded that their respective company's ~~dis closure~~disclosure controls and procedures were effective at the reasonable assurance level.

INTERNAL CONTROL OVER FINANCIAL REPORTING

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

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not party to, and our property is not the subject of, any material pending legal proceedings (other than ordinary routine litigation incidental to our businesses) except for the matters 1) described in Notes 9 and 10 of the Notes to Condensed Consolidated Financial Statements herein and Notes 14, 15 and 16 of the Notes to Consolidated Financial Statements in the Annual Report, or 2) referred to in "Management's Discussion and Analysis of Financial Condition and Results of Operations" herein and in the Annual Report.

ITEM 1A. RISK FACTORS

There have not been any material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2009, except for the following additional risk that was disclosed in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010:~~

2010.

~~RECOVERY OF 2007 WILDFIRE LITIGATION COSTS~~

As we discuss in Note 10 of the Notes to Condensed Consolidated Financial Statements herein, SDG&E is subject to numerous lawsuits arising out of the San Diego County wildfires in 2007. It expects that substantially all reasonably incurred costs of resolving 2007 wildfire claims that exceed its liability insurance coverage and any amounts recovered from other potentially responsible parties will be recovered from utility customers. However, recovery from cu stomers will require future regulatory actions, and a failure to obtain recovery, or any negative assessment of the likelihood of recovery, would likely have a material adverse effect on Sempra Energy’s and SDG&E’s cash flows and results of operations.

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

~~Purchases of Equity Securities by the Issuer and Affiliated Purchasers~~

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

On September 21, 2010, we entered into a Collared Accelerated Share Acquisition Program with JPMorgan Chase Bank, National Association under which we prepaid $500 million to repurchase shares of our common stock, as we discuss in ~~our Current~~Note 13 of the Notes to Consolidated Financial Statements in the Annual Report ~~on Form 8-K dated September 21, 2010~~ and in Note 5 of the Notes to Condensed Consolidated Financial Statements herein.

The following table sets forth information concerning purchases made by us, from the program authorized above, of our common stock during the ~~third~~first quarter of ~~2010:~~

Maximum

Total Number of
Dollar Value of

Total

Shares Purchased as
Shares that May

Number
Average
Part of Publicly
Yet Be Purchased

of Shares
Price Paid
Announced Plans
Under the Plans

Purchased (1)
Per Share (1)
or Programs (1)
or Programs

September 2010
5,670,006

5,670,006

5,670,006

5,670,006
$500 million remaining (2)
(1)
All shares were purchased under the Collared Accelerated Share Acquisition Program entered into on September 21, 2010. The weighted average cost to us of shares purchased under the program will not be determinable until the completion of the program, which is expected to extend into the first quarter of 2011. Additional information regarding the program is provided in Note 5 of the Notes to Condensed Consolidated Financial Statements herein.
(2)
Our board of directors has authorized the repurchase of shares of our common stock provided that the amounts expended for such purposes do not exceed the greater of $2 billion or amounts expended to purchase no more than 40 million shares. We prepaid $500 million under a Collared Accelerated Share Acquisition Program with JPMorgan Chase Bank, National Association on September 21, 2010 and expended an additional $1 billion pursuant to a share repurchase program completed in 2008. Therefore, approximately $500 million remains authorized by the board for the purchase of additional shares. We also may, from time to time, purchase shares of our common stock from restricted stock plan participants who elect to sell a sufficient number of vesting restricted shares to meet minimum statutory tax withholding requirements.
2011:

						Maximum
					Total Number of	Dollar Value of
		Total			Shares Purchased as	Shares that May
		Number	Average		Part of Publicly	Yet Be Purchased
		of Shares	Price Paid		Announced Plans	Under the Plans
		Purchased (1)	Per Share (1)		or Programs (1)	or Programs

March 2011		1,496,435	$	52.22	1,496,435
		1,496,435			1,496,435	$500 million remaining (2)
(1)	Our publicly announced Collared Accelerated Share Acquisition Program, which began in September 2010, was completed in March 2011. A total of 9,574,435 shares were purchased at a weighted average price of $52.22 per share under this program, including 1,496,435 shares received in March 2011. Additional information regarding the program is provided in Note 5 of the Notes to Condensed Consolidated Financial Statements herein.
(2)	Our board of directors has authorized the repurchase of shares of our common stock provided that the amounts expended for such purposes do not exceed the greater of $2 billion or amounts expended to purchase no more than 40 million shares. We prepaid $500 million under a Collared Accelerated Share Acquisition Program with JPMorgan Chase Bank, National Association in September 2010 and expended an additional $1 billion pursuant to a share repurchase program completed in 2008. Therefore, approximately $500 million remains authorized by the board for the purchase of additional shares. We also may, from time to time, purchase shares of our common stock from restricted stock plan participants who elect to sell a sufficient number of vesting restricted shares to meet minimum statutory tax withholding requirements.

ITEM 6. EXHIBITS

The exhibits filed under Forms 8-K that are incorporated herein by reference were filed under Commission File Number 1-14201 (Sempra Energy).

The following exhibits relate to each registrant as indicated.

EXHIBIT 10 -- MATERIAL CONTRACTS
*Sempra Energy*
10.1	~~Master Confirmation for Share Purchase~~Letter Agreement, dated as of ~~September 21, 2010, between~~April 15, 2011, by and among The Royal Bank of Scotland plc, Sempra Energy, Sempra Commodities, Inc. and ~~JPMorgan Chase Bank, National Association.~~ Sempra Energy Holdings VII B.V. (Sempra Energy Form 8-K/A filed on April 15, 2011, Exhibit 10.1).

10.2	Form of Sempra Energy 2008 Long Term Incentive Plan, 2011 Performance-Based Restricted Stock Unit Award.
Sempra Energy / Pacific Enterprises
10.3	Fourth Amendment to Indemnity Agreement, dated as of April 15, 2011, by and among The Royal Bank of Scotland plc, Sempra Energy, Pacific Enterprises and Enova Corporation (Sempra Energy Form 8-K filed on April 15, 2011, Exhibit 10.2).
Sempra Energy / San Diego Gas & Electric Company
10.4	Amended and Restated Operating Order between San Diego Gas & Electric Company and the California Department of Water Resources effective March 10, 2011.

10.5	Amended and Restated Servicing Order between San Diego Gas & Electric Company and the California Department of Water Resources effective March 10, 2011.
EXHIBIT 12 – STATEMENTS RE: COMPUTATION OF RATIOS
*Sempra Energy*
12.1	Sempra Energy Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.
*San Diego Gas & Electric Company*
12.2	San Diego Gas & Electric Company Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.
*Pacific Enterprises*
12.3	Pacific Enterprises Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.
*Southern California Gas Company*
12.4	Southern California Gas Company Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.
EXHIBIT 31 -- SECTION 302 CERTIFICATIONS
*Sempra Energy*
31.1	Statement of Sempra Energy's Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

31.2	Statement of Sempra Energy's Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
*San Diego Gas & Electric Company*
31.3	Statement of San Diego Gas & Electric Company's Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

31.4	Statement of San Diego Gas & ~~Elec tric~~Electric Company's Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
*Pacific Enterprises*
31.5	Statement of Pacific ~~Ente rprise's~~Enterprises’ Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

31.6	Statement of Pacific ~~Enterprise's~~Enterprises’ Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
*Southern California Gas Company*
31.7	Statement of Southern California Gas Company's Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

31.8	Statement of Southern California Gas Company's Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
EXHIBIT 32 -- SECTION 906 CERTIFICATIONS
*Sempra Energy*
32.1	Statement of Sempra Energy's Chief Executive Officer pursuant to 18 U.S.C. Sec. 1350.

32.2	Statement of Sempra Energy's Chief Financial Officer pursuant to 18 U.S.C. Sec. 1350.
*San Diego Gas & Electric Company*
32.3	Statement of San Diego Gas & Electric Company's Chief Executive Officer pursuant to 18 U.S.C. Sec. 1350.

32.4	Statement of San Diego Gas & Electric Company's Chief Financial Officer pursuant to 18 U.S.C. Sec. 1350.
*Pacific Enterprises*
32.5	Statement of Pacific Enterprise's Chief Executive Officer pursuant to 18 U.S.C. Sec. 1350.

32.6	Statement of Pacific Enterprise's Chief Financial Officer pursuant to 18 U.S.C. Sec. 1350.
*Southern California Gas Company*
32.7	Statement of Southern California Gas Company's Chief Executive Officer pursuant to 18 U.S.C. Sec. 1350.

32.8	Statement of Southern California Gas Company's Chief Financial Officer pursuant to 18 U.S.C. Sec. 1350.
EXHIBIT 101 -- INTERACTIVE DATA FILE

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	XBRL Taxonomy Extension Label Linkbase Document

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES
Sempra Energy:

Pursuant to the requirements of Section 13 or 15(d) 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: ~~November~~May 9, ~~2010~~ 2011	By: /s/ Joseph A. Householder
	Joseph A. Householder Senior Vice President, Controller and Chief Accounting Officer

San Diego Gas & Electric Company:

Pursuant to the requirements of Section 13 or 15(d) 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~~May 9, ~~2010~~ 2011	By: /s/ Robert M. Schlax
	Robert M. Schlax Vice President, Controller, Chief Financial Officer and Chief Accounting Officer

Pacific Enterprises:

Pursuant to the requirements of Section 13 or 15(d) 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.

	PACIFIC ENTERPRISES, (Registrant)

Date: ~~November~~May 9, ~~2010~~ 2011	By: /s/ ~~Robe rt M. Schlax~~
	Robert M. Schlax
	Robert M. Schlax Vice President, Controller, Chief Financial Officer and Chief Accounting Officer

Southern California Gas Company:

Pursuant to the requirements of Section 13 or 15(d) 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 ~~authori zed.~~ authorized.

	SOUTHERN CALIFORNIA GAS COMPANY, (Registrant)

Date: ~~November~~May 9, ~~2010~~ 2011	By: /s/ Robert M. Schlax
	Robert M. Schlax Vice President, Controller, Chief Financial Officer and Chief Accounting Officer

SEMPRA ENERGY FORM 10-Q SAN DIEGO GAS & ELECTRIC COMPANY FORM 10-Q PACIFIC ENTERPRISES FORM 10-Q SOUTHERN CALIFORNIA GAS COMPANY FORM 10-Q TABLE OF CONTENTS
		Page
Information Regarding Forward-Looking Statements		4

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	73 62
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	99 83
Item 4.	Controls and Procedures	~~100~~ 84

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	~~101~~ 85
Item 1A.	Risk Factors	~~101~~ 85
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	~~102~~ 85
Item 6.	Exhibits	~~103~~ 86
	~~&nb sp;~~
Signatures		~~105~~ 89

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
	Three months ended				Nine months ended
	September 30,				September 30,
	2010		2009		2010		2009
	(unaudited)
REVENUES
Sempra Utilities	$	1,575	$	1,424	$	4,999	$	4,382
Sempra Global and parent		541		429		1,659		1,268
Total revenues		2,116		1,853		6,658		5,650
EXPENSES AND OTHER INCOME
Sempra Utilities:
Cost of natural gas		(285)		(208)		(1,402)		(997)
Cost of electric fuel and purchased power		(203)		(208)		(480)		(508)
Sempra Global and parent:
Cost of natural gas, electric fuel and purchased power		(292)		(220)		(887)		(675)
Other cost of sales		(23)		(19)		(68)		(52)
Litigation expense		(17)		(3)		(184)		-
Other operation and maintenance		(590)		(568)		(1,782)		(1,673)
Depreciation and amortization		(218)		(196)		(643)		(568)
Franchise fe es and other taxes		(76)		(77)		(243)		(228)
Write-off of long-lived assets		-		-		-		(132)
Equity earnings (losses):
RBS Sempra Commodities LLP		(281)		105		(290)		384
Other		8		18		24		27
Other income, net		66		24	;	82		97
Interest income		5		5		13		16
Interest expense		(111)		(96)		(323)		(257)
Income before income taxes and equity earnings
of certain unconsolidated subsidiaries		99		410		475		1,084
Income tax benefit (expense)		32		(128)		(85)		(327)
Equity earnings (losses), net of income tax		(4)		20		42		59
Net income		127		302		432		816
Losses attributable to noncontrolling interests		6		17		34		22
Preferred dividends of subsidiaries		(2)		(2)		(7)		(7)
Earnings	$	131	$	317	$	459	$	83 1

Basic earnings per common share	$	0.53	$	1.30	$	1.86	$	3.42
Weighted-average number of shares outstanding, basic (thousands)		246,668		243,925		246,513		242,806

Diluted earnings per common share	$	0.53	$	1.27	$	1.84	$	3.37
Weighted-average number of shares outstanding, diluted (thousands)		249,811		248,461		249,773		246,875
Dividends declared per share of common stock	$	0.3 9	$	0.39	$	1.17	$	1.17
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2010		2009
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	547	$	110
Restricted cash		4		35
Trade accounts receivable		632		971
Other accounts and notes receivable		144		159
Due from unconsolidated affiliate		30		41
Income taxes receivable		312		221
Def erred income taxes		-		10
Inventories		296		197
Regulatory assets		97		54
Fixed-price contracts and other derivatives		84		77
Insurance receivable related to wildfire litigation (Note 10)		150		273
Other		199		147
Total current assets		2,495		2,295

Investments and other assets:
Restricted cash		27		-
Regulatory assets arising from fixed-price contracts and other derivatives		241		241
Regulatory assets arising from pension and other postretirement
benefit obligations		950		959
Other regulatory assets		973		603
Nuclear decommissioning trusts		737		678
Investment in RBS Sempra Commodities LLP		825		2,172
Other investments		2,317		2,151
Goodwill and other intangible assets		542		524
Sundry		621		608
Total investments and other assets		7,233		7,936

Property, plant and equipment:
Property, plant and equi pment		26,286		25,034
Less accumulated depreciation and amortization		(7,065)		(6,753)
Property, plant and equipment, net ($523 at September 30, 2010 related to VIE)		19,221		18,281
Total assets	$	28,949	$	28,512
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)

	Three months ended March 31,
	2011		2010
	(unaudited)
REVENUES
Sempra Utilities	$	1,881	$	1,912
Sempra Global and parent		553		622
Total revenues		2,434		2,534
EXPENSES AND OTHER INCOME
Sempra Utilities:
Cost of natural gas		(609)		(758)
Cost of electric fuel and purchased power		(171)		(148)
Sempra Global and parent:
Cost of natural gas, electric fuel and purchased power		(263)		(338)
Other cost of sales		(23)		(25)
Litigation expense		(7)		(168)
Other operation and maintenance		(632)		(576)
Depreciation and amortization		(231)		(210)
Franchise fees and other taxes		(95)		(90)
Equity earnings, before income tax		1		15
Other income, net		43		8
Interest income		3		4
Interest expense		(108)		(109)
Income before income taxes and equity earnings
of certain unconsolidated subsidiaries		342		139
Income tax expense		(109)		(58)
Equity earnings, net of income tax		31		19
Net income		264		100
(Earnings) losses attributable to noncontrolling interests		(4)		8
Preferred dividends of subsidiaries		(2)		(2)
Earnings	$	258	$	106

Basic earnings per common share	$	1.07	$	0.43
Weighted-average number of shares outstanding, basic (thousands)		240,128		246,083

Diluted earnings per common share	$	1.07	$	0.42
Weighted-average number of shares outstanding, diluted (thousands)		241,903		250,373
Dividends declared per share of common stock	$	0.48	$	0.39
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2010		2009
&n bsp;	(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	574	$	618
Accounts payable - trade		572		522
Accounts payable - other		130		&n bsp;171
Due to unconsolidated affiliates		12		29
Deferred income taxes		16		-
Dividends and interest payable		232		190
Accrued compensation and benefits		247		264
Regulatory balancing accounts, net		242		382
Current portion of long-term debt		313		573
Fixed-price contracts and other derivatives		107		95
Customer deposits		133		145
Reserve for wildfire litigation (Note 10)		344		270
Other		855		629
Total current liabilities		3,77 7		3,888
Long-term debt ($357 at September 30, 2010 related to VIE)		8,032		7,460

Deferred credits and other liabilities:
Due to unconsolidated affiliate		-		2
Customer advances for construction		147		146
Pension and other postretirement benefit obligations, net of plan assets		1,225		1,252
Deferred income taxes		1,516		1,318
Deferred investment tax credits		52		54
Regulatory liabilities arising from removal obligations		2,635		2,557
Asset retirement obligations		1,327		1,277
Other regulatory liabilities		144		181
Fixed-price contracts and other derivatives		336		312
Deferred credits and other		672		735
Total deferred credits and other liabilities		8,054		7,834
Contingently redeemable preferred stock of subsidiary		79		79

Commitments and contingencies (Note 10)

Equity:
Preferred stock (50 million shares authorized; none issued)		-		-
Common stock (750 million shares authorized; 242 million and 247 million shares
outstanding at September 30, 2010 and December 31, 2009, respectively; no par
value)		2,012		2,418
Retained earnings		7,143		6,971
Deferred compensation		(9)		(13)
Accumulated other comprehensive income (loss)		(344)		(369)
Total Sempra Energy shareholders' equity		8,802		9,007
Preferred stock of subsidiaries		100		100
Other noncontrolling interests		105	&nb sp;	144
Total equity		9,007		9,251
Total liabilities and equity	$	28,949	$	28,512
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
	Nine months ended Se ptember 30,
	2010		2009
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	432	$	816
Adjustments to reconcile net income to net cash provided
; by operating activities:
Depreciation and amortization		643		568
Deferred income taxes and investment tax credits		133		181
Equity losses (earnings)		224		(470)
Write-off of long-lived assets		-		132
Fixed-price contracts and other derivatives		19		(27)
Other		(24)		42
Net change in other working capital components		(77)		220
Distributions from RBS Sempra Commodities LLP		198		407
Changes in other assets		76		81
Changes in other liabilities		(22)		(66)
Net cash provided by operating activities		1,602		1,884

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment		(1,354)		(1,371)
Proceeds from sale of assets		-		179
Expenditures for investments and acquisition of businesses, net of cash acquired		(385)		(762)
Distributions from RBS Sempra Commodities LLP		849		-
Distributions from other investments		2 59		16
Purchases of nuclear decommissioning and other trust assets		(261)		(167)
Proceeds from sales by nuclear decommissioning and other trusts		261		155
Other		(2)		(20)
Net cash used in investing activities		(633)		(1,970)

CASH FLOWS FROM FIN ANCING ACTIVITIES
Common dividends paid		(269)		(255)
Preferred dividends paid by subsidiaries		(7)		(7)
Issuances of common stock		29		52
& nbsp; Repurchases of common stock		(502)		-
Increase (decrease) in short-term debt, net		184		(52)
Issuances of debt (maturities greater than 90 days)		771		1,181
Payments on debt (maturities greater than 90 days)		(727)		(325)
Purchase of noncontrolling interest		-		(94)
Other		(11)		11
Net cash (used in) provided by financing activities		(532)		511

Increase in cash and cash equivalents		437		425
Cash and cash equivalents, January 1		110		331
Cash and cash equivalents, September 30	$	547	$	756
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
		March 31,		December 31,
		2011		2010(1)
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	1,219	$	912
Restricted cash			318		131
Trade accounts receivable			922		891
Other accounts and notes receivable			136		141
Due from unconsolidated affiliates			17		34
Income taxes receivable			261		248
Deferred income taxes			36		75
Inventories			176		258
Regulatory assets			73		90
Fixed-price contracts and other derivatives			97		81
Settlement receivable related to wildfire litigation			―		300
Other			171		192
Total current assets			3,426		3,353

Investments and other assets:
Restricted cash			―		27
Regulatory assets arising from pension and other postretirement
benefit obligations			885		869
Regulatory assets arising from wildfire litigation costs			348		364
Other regulatory assets			932		934
Nuclear decommissioning trusts			796		769
Investment in RBS Sempra Commodities LLP			779		787
Other investments			2,163		2,164
Goodwill and other intangible assets			537		540
Sundry			630		600
Total investments and other assets			7,070		7,054

Property, plant and equipment:
Property, plant and equipment			27,556		27,087
Less accumulated depreciation and amortization			(7,356)		(7,211)
Property, plant and equipment, net ($510 and $516 at March 31, 2011 and December 31, 2010, respectively, related to VIE)			20,200		19,876
Total assets		$	30,696	$	30,283
(1)	Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended				Nine months ended
	September 30,				September 30,
	2010		2009		2010		2009
	(unaudited)
Operating revenues
Electric	$	718	$	695	$	&nb sp;1,870	$	1,783
Natural gas		93		78		375		353
Total operating revenues		811		773		2,245		2,136
Operating expenses
Cost of electric fuel and purchased power		203		208		480		508
Cost of natural gas		37		30		170		154
Operation and maintenance		235		236		704		649
Depreciation and amortization		96		81		283		239
Franchise fees and other taxes		42		46		126		126
Total operating expenses		613		601		1,763		1,676
Operating income		198		172		482		460
Other income (expense), net		(2)		1		(18)		45
Interest income		-		1		-		1
Interest expense		(37)		(29)		(99)		(75)
Income before income taxes		159		145		365		431
Income tax expense		(56)		(53)		(131)		(141)
Net income		103		92		234		290
Losses (earnings) attributable to noncontrolling interests		5		18		34		(9)
Earnings		108		110		268		281
Preferred dividend requirements		(2)		(2)		(4)	;	(4)
Earnings attributable to common shares	$	106	$	108	$	264	$	277
See Notes to Condensed Consolidated Financial Statements.

PACIFIC ENTERPRISES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended				Nine months ended
	September 30,				September 30,
	2010		2009		2010		2009
	(unaudited)

Operating revenues	$	776	$	662	$	2,792	$	2,276
Operating expenses
Cost of natural gas		252		180		1,244		849
Operation and maintenance		283		249		838		766
Depreciation		78		73		230		220
Franchise fees and other taxes		27		25		92		81
Total operating expenses		640		527		2,404		1,916
Operating income		136		135		388		360
Other income (expense), net		2		(4)		8		1
Interest income		-		-	&n bsp;	1		3
Interest expense		(17)		(17)		(50)		(52)
Income before income taxes		121		114		347		312
Income tax expense		(42)		(41)		(132)		(117)
Net income		79		73		215		195
Preferred dividends of subsidiary		-		-		(1)		(1)
Earnings		79		73		214		194
Preferred dividend requirements		(1)		(1)		(3)		(3)
Earnings attributable to common shares	$	78	$	72	$	211	$	191
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Three months ended March 31,
	2011		2010
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	264	$	100
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization		231		210
Deferred income taxes and investment tax credits		88		61
Equity earnings		(32)		(34)
Fixed-price contracts and other derivatives		(9)		―
Other		(13)		7
Net change in other working capital components		286		534
Changes in other assets		(5)		18
Changes in other liabilities		(5)		(8)
Net cash provided by operating activities		805		888

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment		(607)		(446)
Expenditures for investments		(4)		(74)
Distributions from investments		21		24
Purchases of nuclear decommissioning and other trust assets		(45)		(44)
Proceeds from sales by nuclear decommissioning and other trusts		46		46
Decrease in restricted cash		160		14
Increase in restricted cash		(320)		(23)
Other		(7)		7
Net cash used in investing activities		(756)		(496)

CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid		(94)		(86)
Preferred dividends paid by subsidiaries		(2)		(2)
Issuances of common stock		15		14
Repurchases of common stock		(18)		(2)
Issuances of debt (maturities greater than 90 days)		803		12
Payments on debt (maturities greater than 90 days)		(260)		(507)
(Decrease) increase in short-term debt, net		(192)		294
Other		6		(3)
Net cash provided by (used in) financing activities		258		(280)

Increase in cash and cash equivalents		307		112
Cash and cash equivalents, January 1		912		110
Cash and cash equivalents, March 31	$	1,219	$	222
See Notes to Condensed Consolidated Financial Statements.

SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended				Nine months ended
	September 30,				September 30,
	2010		2009		2010		2009
	(unaudited)

Operating revenues	$	776	$	662	$	2,792	$	2,276
Operating expenses
Cost of natural gas		252		180		1,244		849
Operation and maintenance		285		252		840		768
Depreciation		78		73		230		220
Franchise fees and other taxes		27		25		92		81
Total operating expenses		642		530		2,406		1,918
Operating income		134		132		386		&n bsp;358
Other income (expense), net		2		(1)		8		4
Interest income		1		1		1		3
Interest expense		(17)		(16)		(50)		(51)
Income before income taxes		120		116		345		314
Income tax expense		(42)		(42)		(132)		(115)
Net income		78		74		213		199
Preferred dividend requirements		-		-		(1)		(1)
Earnings attributable to common shares	$	78	$	74	$	212	$	198
See Notes to Condensed Consolidated Financial Statements.

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)

	Three months ended March 31,
	2011		2010
	(unaudited)
Operating revenues
Electric	$	665	$	563
Natural gas		175		179
Total operating revenues		840		742
Operating expenses
Cost of electric fuel and purchased power		171		148
Cost of natural gas		83		89
Operation and maintenance		273		232
Depreciation and amortization		103		92
Franchise fees and other taxes		47		43
Total operating expenses		677		604
Operating income		163		138
Other income, net		16		―
Interest expense		(36)		(31)
Income before income taxes		143		107
Income tax expense		(49)		(31)
Net income		94		76
(Earnings) losses attributable to noncontrolling interests		(4)		8
Earnings		90		84
Preferred dividend requirements		(1)		(1)
Earnings attributable to common shares	$	89	$	83
See Notes to Condensed Consolidated Financial Statements.

PACIFIC ENTERPRISES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)

	Three months ended March 31,
	2011		2010
	(unaudited)

Operating revenues	$	1,056	$	1,182
Operating expenses
Cost of natural gas		531		674
Operation and maintenance		288		261
Depreciation		81		75
Franchise fees and other taxes		37		37
Total operating expenses		937		1,047
Operating income		119		135
Other income, net		3		4
Interest expense		(17)		(17)
Income before income taxes		105		122
Income tax expense		(37)		(57)
Net income/Earnings		68		65
Preferred dividend requirements		(1)		(1)
Earnings attributable to common shares	$	67	$	64
See Notes to Condensed Consolidated Financial Statements.

SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)

	Three months ended March 31,
	2011		2010
	(unaudited)

Operating revenues	$	1,056	$	1,182
Operating expenses
Cost of natural gas		531		674
Operation and maintenance		288		262
Depreciation		81		75
Franchise fees and other taxes		37		37
Total operating expenses		937		1,048
Operating income		119		134
Other income, net		3		4
Interest expense		(17)		(17)
Income before income taxes		105		121
Income tax expense		(37)		(56)
Net income/Earnings attributable to common shares	$	68	$	65
See Notes to Condensed Consolidated Financial Statements.

~~(Dollars in millions)~~
~~Cash consideration (fair value of total consideration)~~		$	~~307~~
~~Recognized amounts of identifiable assets acquired and liabilities assumed:~~
	~~Cash~~		15
	~~Accounts receivable~~		4
	~~Investment in equity method investee~~		~~256~~
	~~Property, plant & equipment~~		25
	~~Other liabilities~~		~~(11)~~
~~Total identifiable net assets~~			~~289~~
~~Goodwill(1)~~		$	18

~~Acquisition-related costs (included in Other Operation and Maintenance expense in~~
	~~the Condensed Consolidated Statements of Operations for the nine months~~
	~~ended September 30, 2010)~~	$	1
~~(1)~~	The goodwill, which represents the residual of the consideration paid over the identifiable net assets, is assigned to the Sempra Pipelines & Storage segment and is attributed to the strategic value of the transaction. None of the goodwill recorded is deductible in Mexico for income tax purposes.

	Three months ended September 30,				Nine months ended September 30,
(Dollars in millions)	2010		2009		2010		2009
Gross revenues and fee income	$	72	$	291	$	466	$	1,167
Gros s profit		74		268		446		1,096
Income (loss) from continuing operations		(7)		115		(20)		504
Partnership net income (loss)		(7)		115		(20)		504

NET PERIODIC BENEFIT COST -- SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
	Pension Benefits				Other Postretirement Benefits
	Three months ended September 30,				Three months ended September 30,
	2010		2009		2010		2009
Service cost	$	20	$	17	$	5	$	7
Interest cost		41		42		14		14
Expected return on assets		(36)		(34)		(12)		(11)
Amortization of:
Prior service cost		1		1		-		-
Actuarial loss		8		6		2		1
Regulatory adjustment		5		(14)		1		1
Total net periodic benefit cost	$	39	$	18	$	10	$	12
	Nine months ended September 30,				Nine months ended September 30,
	2010		2009		2010		2009
Service cost	$	62	$	56	$	20	$	21
Interest cost		125		127		43		43
Expected return on assets		(108)		(104)		(35)		(35)
Amortization of:
Prior service cost (credit)		3		3		(1)		(1)
Ac tuarial loss		23		18		6		3
Regulatory adjustment		(14)		(53)		5		5
Total net periodic benefit cost	$	91	$	47	$	38	$	36

NET PERIODIC BENEFIT COST -- SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
	Pension Benefits				Other Postretirement Benefits
	Three months ended March 31,				Three months ended March 31,
	2011		2010		2011		2010
Service cost	$	22	$	22	$	7	$	7
Interest cost		43		43		17		15
Expected return on assets		(37)		(36)		(12)		(12)
Amortization of:
Prior service cost		1		1		―		―
Actuarial loss		9		8		4		2
Regulatory adjustment		(29)		(29)		2		2
Total net periodic benefit cost	$	9	$	9	$	18	$	14

NET PERIODIC BENE FIT COST -- SDG&E
(Dollars in millions)
	Pension Benefits				Other Postretirement Benefits
	Three months ended September 30,				Three months ended September 30,
	2010&nb sp;		2009		2010		2009
Service cost	$	7	$	5	$	2	$	2
Interest cost		12		12		2		3
Expected return on assets		(11)		(8)		(2)		(1)
Amortization of:
Prior service cost		-		-		1		1
Actuarial loss		3		4		-		- ;
Regulatory adjustment		3		(2)		-		-
Total net periodic benefit cost	$	14	$	11	$	3	$	5
	Nine months ended September 30,				Nine months ended September 30,
	2010		2009		2010		2009
Service cost	$	21	$	17	$	5	$	5
Interest cost		36		36		7		7
Expected return on assets		(32)		(24)		(5)		(3)
Amortization of:
Prior service cost		1		1		3		3
Actuarial loss		9		12		-		-
Regulatory adjustment		(2)		(16)		1		1
Total net periodic benefit cost	$	33	$	26	$	11	$	13

NET PERIODIC BENEFIT COST -- SOCALGAS
(Dollars in millions)
	Pension Benefits				Other Postretirement Benefits
	Three months ended September 30,				Th ree months ended September 30,
	2010		2009		2010		2009
Service cost	$	11	$	9	$	3	$	6
Interest cost		25		25		11		11
Expected return on assets		(23)		(24)		(9)		(10)
Amortization of:
Prior service cost (credit)		1	&n bsp;	1		(1)		(1)
Actuarial loss		2		-		2		1
Regulatory adjustment		2		(10)		1		1
Total net periodic benefit cost	$	18	$	1	$	7	$	8
	Nine months ended September 30,				Nine months ended September 30,
	2010		2009		2010		2009
Service cost	$	34	$	31	$	13	$	15
Interest cost		74		74		34		34
Expected return on assets		(68)		(70)		(29)		(31)
Amortization of:
Prior service cost (credit)		2		2		(3)		(3)
Actuarial loss		7		-		6		3
Regulatory adjustment		(12)		(35)		4		4
Total net periodic benefit cost	$	37	$	2	$	25	$	22

NET PERIODIC BENEFIT COST -- SDG&E
(Dollars in millions)
	Pension Benefits				Other Postretirement Benefits
	Three months ended March 31,				Three months ended March 31,
	2011		2010		2011		2010
Service cost	$	7	$	7	$	2	$	2
Interest cost		13		12		2		2
Expected return on assets		(12)		(10)		(2)		(2)
Amortization of:
Prior service cost		1		1		1		1
Actuarial loss		2		3		―		―
Regulatory adjustment		(9)		(12)		1		1
Total net periodic benefit cost	$	2	$	1	$	4	$	4

NET PERIODIC BENEFIT COST -- SOCALGAS
(Dollars in millions)
	Pension Benefits				Other Postretirement Benefits
	Three months ended March 31,				Three months ended March 31,
	2011		2010		2011		2010
Service cost	$	12	$	12	$	5	$	5
Interest cost		25		25		13		12
Expected return on assets		(22)		(23)		(10)		(10)
Amortization of:
Prior service cost (credit)		1		1		(1)		(1)
Actuarial loss		4		3		5		2
Regulatory adjustment		(20)		(17)		1		1
Total net periodic benefit cost	$	―	$	1	$	13	$	9

EARNINGS PER SHARE COMPUTATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Three months ended September 30,				Nine months ended September 30,
	2010		2009		2010		2009
Numerator:
Earnings	$	131	$	317	$	459	$	831

Denominator:				&n bsp;
Weighted-average common shares
outstanding for basic EPS		246,668		243,925		246,513		242,806
Dilutive effect of stock options, res tricted
& nbsp; stock awards and restricted stock units		3,143		4,536		3,260		4,069
Weighted-average common shares
outstanding for diluted EPS		249,811		248,461		249,773		246,875

Earnings per share:
Basic	$	0.53	$	1.30	$	1.86	$	3.42
Diluted	$	0.53	$	1.27	$	1.84	$	3.37

EARNINGS PER SHARE COMPUTATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Three months ended March 31,
	2011		2010
Numerator:
Earnings/Income attributable to common shareholders	$	258	$	106

Denominator:
Weighted-average common shares outstanding for basic EPS		240,128		246,083
Dilutive effect of stock options, restricted stock awards and restricted stock units		1,775		4,290
Weighted-average common shares outstanding for diluted EPS		241,903		250,373

Earnings per share:
Basic	$	1.07	$	0.43
Diluted	$	1.07	$	0.42

CAPITALIZED FINANCING COSTS
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2010		2009		2010		2009
Sempra Energy Consolidated:
AFUDC related to debt	$	6	$	4	$	16	$	11
AFUDC related to equity		13		10		40		28
Other capitalized financing costs		9		15		27		62
Total Sempra Energy Consolidated	$	28	$	29	$	83	$	101
SDG&E:
AFUDC related to debt	$	5	$	3	$	12	$	7
AFUDC related to equity		11		8		30		21
Other capitalized financing costs		-		&nbs p;2		-		4
Total SDG&E	$	16	$	13	$	42&n bsp;	$	32
SoCalGas:
AFUDC related to debt	$	1	$	1	$	4	$	4
AFUDC related to equity		2		2		10		7
Other capitalized financing costs		-		1		-		1
Total SoCalGas	$	3	$	4	$	14	$	12

CAPITALIZED FINANCING COSTS
(Dollars in millions)
	Three months ended March 31,
	2011		2010
Sempra Energy Consolidated:
AFUDC related to debt	$	8	$	5
AFUDC related to equity		19		13
Other capitalized financing costs		6		7
Total Sempra Energy Consolidated	$	33	$	25
SDG&E:
AFUDC related to debt	$	6	$	3
AFUDC related to equity		15		9
Total SDG&E	$	21	$	12
SoCalGas:
AFUDC related to debt	$	2	$	2
AFUDC related to equity		4		4
Total SoCalGas	$	6	$	6

COMPREHENSIVE INCOME
(Dollars in millions)
		Three months ended September 30,
		2010						2009
		Share-		Non-				Share-		Non-
		holders'		controlling		Total		holders'		controlling		Total
		Equity(1)		Interests		Equity		Equity(1)		Interests		Equity
Sempra Energy Consolidated:
	Net income (loss)(2)	$	133	$	(6)	$	127	$	319	$	(17)	$	302
	Foreign currency translation
	adjustments		53		-		53		(11)		-		(11)
	Financial instruments		(3)		1		(2)		(5)		-		(5)
	Available-for-sale securities		4		-		4		8		-		8
	Net actuarial gain		1		-		1		2		-		2
	Comprehensive income (loss)	$	188	$	(5)	$	183	$	313	$	(17)	$	296
SDG&E:
	Net income (loss)	$	108	$	(5)	$	103	$	110	$	(18)	$	92
	Financial instruments		-		1		1		-		-		-& nbsp;
	Comprehensive income (loss)	$	108	$	(4)	$	104	$	110	$	(18)	$	92
PE:
	Net income(2)	$	79	$	-	$	79	$	73	$	-	$	73
	Financial instruments		1		-		1		-		-		-
	Comprehensive income	$	80	$	-	$	80	$	73	$	-	$	73
SoCalGas:
	Net income	$	78	$	-	$	78	$	74	$	-	$	74
	Financial instruments		1		-		1		-		-		-
	Comprehensive income	$	79	$	-	$	79	$	74	$	-	$	74

COMPREHENSIVE INCOME (Continued)
(Dollars in millions)
		Nine months ended September 30,
		2010						2009
		Share-		Non-				Share-		Non-
		holders'		controlling		Total		holders'		controlling		Total
		Equity(1)		Interests		Equity		Equity(1)		Interests		Equity
Sempra Energy Consolidated:
	Net income (loss)(2)	$	466	$	(34)	$	432	$	838	$	(22)	$	816
	Foreign currency translation
	adjustments		32		-		32		69		-		69
	Financial instruments		(12)		5		(7)		18		(3)		15
	Available-for-sale securities		1		-		1		21		-		21
	Net actuarial gain		4		-		4		4		-		4
	Comprehensive income (loss)	$	491	$	(29)	$	462	$	950	$	(25)	$	925
SDG&E:
	Net income (loss)	$	268	$	(34)	$	234	$	281	$	9	$	290
	Financial instruments		-		5		5		2		(3)		(1)
	Net actuarial gain		1		-		1		1		-		1
	Comprehensive income (loss)	$	269	$	(29)	$	240	$	284	$	6	$	290
PE:
	Net income(2)	$	215	$	-	$	215	$	195	$	-	$	195
	Financial instruments		2		-		2		2		-		2
	Comprehensive income	$	217	$	-	$	217	$	197	$	-	$	197
SoCalGas:
	Net income	$	213	$	-	$	213	$	199	$	-	$	199
	Financial instruments		2		-		2		2		-		2
	Comprehensive income	$	215	$	-	$	215	$	201	$	-	$	201
(1)	Shareholders' equity of Sempra Energy Consolidated, SDG&E, PE or SoCalGas as indicated in left margin.
(2)	Before preferred dividends of subsidiaries.

INCOME TAX EXPENSE (BENEFIT) ASSOCIATED WITH OTHER COMPREHENSIVE INCOME
(Dollars in millions)
		Three months ended September 30,
		2010						2009
		Share-		Non-				Share-		Non-
		holders'		controlling		Total		holders'		controlling		Total
		Equity(1)		Interests		Equity		Equity( 1)		Interests		Equity
Sempra Energy Consolidated:
	Financial instruments	$	(1)	$	-	$	(1)	$	(2)	$	-	$	(2)
	Available-for-sale securities		-		-		-		6		-		6
	Net actuarial gain		1		-		1		-		-		-
SDG&E:
	Financial instruments	$	-	$	-	$	-	$	-	$	-	$	-
PE:
	Financial instruments	$	1	$	-	$	1	$	-	$	-	$	-
SoCalGas:
	Financial instruments	$	1	$	-	$	1	$	-	$	-	$	-

		Nine months ended September 30,
		2010						2009
		Share-		Non-				Share-		Non-
		holders'		controlling		Total		holders'		controlling		Total
		Equity(1)		Interests		Equity		Equity(1)		Interests		Equity
Sempra Energy Consolidated:
	Financial instruments	$	(7)	$	-	$	(7)	$	12	$	-	$	12
	Available-for-sale securities		(1)		-		(1)		10		-		10
	Net actuarial gain		3		-		3		2		-		2
SDG&E:
	Financial instruments	$	-	$	-	$	-	$	1	$	-	$	1
PE:
	Financial instruments	$	2	$	-	$	2	$	1	$	-	$	1
SoCalGas:
	Financial instruments	$	2	$	-	$	;2	$	1	$	-	$	1
(1)	Shareholders' equity of Sempra Energy Consolidated, SDG&E, PE or SoCalGas as indicated in left margin.

SHAREHOLDERS' EQUITY AND NONCONTROLLING INTERESTS
(Dollars in millions)
		Sempra
		Energy		Non-
		Shareholders'		controlling		Total
		Equity		Interests		Equity
Balance at December 31, 2009	$	9,007	$	244	$	9,251
Comprehensive income (loss)		491		(29)		462
Share-based compensation expense		31		-		31
Common stock dividends decl ared		(287)		-		(287)
Preferred dividends of subsidiaries		(7)		-		(7)
Issuance of common stock		53		-		53
Tax benefit related to share-based compensation		3		-		3
Repurchase of common stock		(502)		-		(502)
Common stock released from ESOP		13		-		13
Distributions to noncontrolling interests		-		(10)		(10)
Balance at September 30, 2010	$	8,802	$	205	$	9,007
Balance at December 31, 2008	$	7,969	$	340	$	&n bsp;8,309
Comprehensive income (loss)		950		(25)		925
Purchase of noncontrolling interest in subsidiary		(10)		(84)		(94)
Share-based compensation expense		&nbs p;28		-		28
Common stock dividends declared		(287)		-		(287)
Preferred dividends of subsidiaries		(7)		-		(7)
Issuance of common stock		81		-		81
Tax benefit related to share-based compensation		10		-		10
Common stock released from ESOP		11		-		11
Equity contributed by noncontrolling interests		-		7		7
Balance at September 30, 2009	$	8,745	$	238	$	8,983

SHAREHOLDERS' EQUITY AND NONCONTROLLING INTERESTS
(Dollars in millions)
		Sempra
		Energy		Non-
		Shareholders'		controlling		Total
		Equity		Interests		Equity
Balance at December 31, 2010	$	9,027	$	211	$	9,238
Comprehensive income		258		5		263
Share-based compensation expense		11		―		11
Common stock dividends declared		(115)		―		(115)
Preferred dividends of subsidiaries		(2)		―		(2)
Issuance of common stock		15		―		15
Tax benefit related to share-based compensation		2		―		2
Repurchase of common stock		(17)		―		(17)
Common stock released from ESOP		7		―		7
Equity contributed by noncontrolling interests		―		1		1
Balance at March 31, 2011	$	9,186	$	217	$	9,403
Balance at December 31, 2009	$	9,007	$	244	$	9,251
Comprehensive income (loss)		105		(6)		99
Share-based compensation expense		13		―		13
Common stock dividends declared		(96)		―		(96)
Preferred dividends of subsidiaries		(2)		―		(2)
Issuance of common stock		27		―		27
Tax benefit related to share-based compensation		1		―		1
Repurchase of common stock		(2)		―		(2)
Common stock released from ESOP		7		―		7
Distributions to noncontrolling interests		―		(3)		(3)
Balance at March 31, 2010	$	9,060	$	235	$	9,295

SHAREHOLDER'S EQUITY AND NONCONTROLLING INTEREST
(Dollars in millions)
		SDG&E		Non-
		Shareholder's		controlling		Total
		Equity		Interest		Equity
Balance at December 31, 2010	$	3,108	$	113	$	3,221
Comprehensive income		90		5		95
Preferred stock dividends declared		(1)		―		(1)
Capital contribution		200		―		200
Equity contributed by noncontrolling interest		―		1		1
Balance at March 31, 2011	$	3,397	$	119	$	3,516
Balance at December 31, 2009	$	2,739	$	146	$	2,885
Comprehensive income (loss)		84		(6)		78
Preferred stock dividends declared		(1)		―		(1)
Distributions to noncontrolling interest		―		(2)		(2)
Balance at March 31, 2010	$	2,822	$	138	$	2,960

AMOUNTS DUE TO AND FROM AFFILIATES AT SDG&E, PE AND SOCALGAS
(Dollars in millions)
		September 30,		December 31,
		2010		2009
SDG&E
Current:
Due from Sempra Energy		$	-	$	2
Due from SoCalGas			3		3
Due from various affiliates			1		3
		$	4	$	8

Due to Sempra Energy		$	21	$	-

Income taxes due from Sempra Energy(1)		$	(92)	$	(37 )

Noncurrent:
Promissory note due from Sempra Energy, variable rate based on
short-term commercial paper rates (0.13% at December 31, 2009)		$	-	$	2

Pacific Enterprises
Current:
Due from Sempra Energy		$	113	$	7
Due from various affiliates			5		5
		$	118	$	12

Due to affiliate		$	84	$	84
Due to SDG&E			3		3
		$	87	$	87

Income taxes due to (from) Sempra Energy(1)		$	1	$	(2)

Noncurrent:
Promissory note due from Sempra Energy, variable rate based on
short-term commercial paper rates (0.17% at September 30, 2010)		$	504	$	513

SoCalGas
Current:
Due from Sempra Energy		$	118	$	6

Due to SDG&E		$	3	$	3

Income taxes due to (from) Sempra Energy(1)		$	5	$	(2)
(1)	SDG&E, PE and SoCalGas are included in the consolidated income tax return of Sempra Energy and are allocated income tax expense from Sempra Energy in an amount equal to that which would result from the companies' having always filed a separate return.

AMOUNTS DUE TO AND FROM AFFILIATES AT SDG&E, PE AND SOCALGAS
(Dollars in millions)
		March 31,		December 31,
		2011		2010
SDG&E
Current:
Due from SoCalGas		$	―	$	11
Due from various affiliates			1		1
		$	1	$	12

Due to Sempra Energy		$	23	$	16
Due to SoCalGas			21		―
		$	44	$	16

Income taxes due from Sempra Energy(1)		$	36	$	25

PE
Current:
Due from Sempra Energy		$	357	$	60
Due from SDG&E			21		―
Due from various affiliates			5		8
		$	383	$	68

Due to affiliate		$	85	$	85
Due to SDG&E			―		11
		$	85	$	96

Income taxes due from Sempra Energy(1)		$	1	$	6

Noncurrent:
Promissory note due from Sempra Energy, variable rate based on
short-term commercial paper rates (0.19% at March 31, 2011)		$	505	$	502

SoCalGas
Current:
Due from Sempra Energy		$	357	$	60
Due from SDG&E			21		―
Due from various affiliates			―		3
		$	378	$	63

Due to SDG&E		$	―	$	11

Income taxes due to Sempra Energy(1)		$	(4)	$	(3)
(1)	SDG&E, PE and SoCalGas are included in the consolidated income tax return of Sempra Energy and are allocated income tax expense from Sempra Energy in an amount equal to that which would result from the companies' having always filed a separate return.

REVENUES FROM UNCONSOLIDATED AFFILIATES AT THE SEMPRA UTILITIES
(Dollars in millions)
	Three months ended				Nine months ended
	September 30,				September 30,
	2010		2009		2010		2009
SDG&E	$	1	$	2	$	6	$	6
SoCalGas		11		9		32		24