0001032208 us-gaap:OperatingSegmentsMember sre:RenewablesServiceLIneMember sre:SempraMexicoMember 2019-01-01 2019-09-30 0001032208 us-gaap:OperatingSegmentsMember sre:SDGESegmentMember 2019-01-01 2019-09-300001032208us-gaap:DiscontinuedOperationsHeldforsaleMembersre:SempraSouthAmericanUtilitiesMember2019-01-012019-09-30

UNITED STATES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549 
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 20192020
or
☐or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period fromto

Commission File No.Exact Name of RegistrantsRegistrant as Specified in their Charters,its Charter, Address of Principal Executive Office and Telephone NumberState of IncorporationI.R.S. Employer Identification Nos.No.Former name, former address and former fiscal year, if changed since last report
1-14201SEMPRA ENERGYCalifornia33-0732627
sre-20200930_g1.jpg
California33-0732627No change
488 8th Avenue
San Diego,California92101
(619)696-2000
1-03779SAN DIEGO GAS & ELECTRIC COMPANYCalifornia95-1184800
sre-20200930_g2.jpg
California95-1184800No change
8326 Century Park Court
San Diego,California92123
(619)696-2000
1-01402SOUTHERN CALIFORNIA GAS COMPANYCalifornia95-1240705
sre-20200930_g3.jpg
California95-1240705No change
555 West Fifth Street
Los Angeles,California90013
(213)244-1200
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
SEMPRA ENERGY:
Sempra Energy Common Stock, without par valueSRENew York Stock Exchange
Sempra Energy 6% Mandatory Convertible Preferred Stock, Series A,
$100 liquidation preference		SREPRANew York Stock Exchange
Sempra Energy 6.75% Mandatory Convertible Preferred Stock, Series B,
$100 liquidation preference		SREPRBNew York Stock Exchange
Sempra Energy 5.75% Junior Subordinated Notes Due 2079, $25 par valueSREANew York Stock Exchange
SAN DIEGO GAS & ELECTRIC COMPANY:
None
SOUTHERN CALIFORNIA GAS COMPANY:
None
1

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
SEMPRA ENERGY:
Sempra Energy Common Stock, without par valueSRENYSE
Sempra Energy 6% Mandatory Convertible Preferred Stock, Series A, $100 liquidation preferenceSREPRANYSE
Sempra Energy 6.75% Mandatory Convertible Preferred Stock, Series B, $100 liquidation preferenceSREPRBNYSE
Sempra Energy 5.75% Junior Subordinated Notes Due 2079, $25 par valueSREANYSE
SAN DIEGO GAS & ELECTRIC COMPANY:
None
SOUTHERN CALIFORNIA GAS COMPANY:
None

Indicate by check mark whether the registrantsregistrant (1) havehas filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants wereregistrant was required to file such reports), and (2) havehas been subject to such filing requirements for the past 90 days.
Sempra EnergyYes☒No☐
San Diego Gas & Electric CompanyYes☒No☐
Southern California Gas CompanyYes☒No☐
Indicate by check mark whether the registrants haveregistrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants wereregistrant was required to submit such files).
Sempra EnergyYes☒No☐
San Diego Gas & Electric CompanyYes☒No☐
Southern California Gas CompanyYes☒No☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Sempra Energy:
☒Large Accelerated Filer☐Accelerated Filer☐Non-accelerated Filer☐Smaller Reporting Company☐Emerging Growth Company
San Diego Gas & Electric Company:
☐Large Accelerated Filer☐Accelerated Filer☒Non-accelerated Filer☐Smaller Reporting Company☐Emerging Growth Company
Southern California Gas Company:
☐Large Accelerated Filer☐Accelerated Filer☒Non-accelerated Filer☐Smaller Reporting Company☐Emerging Growth Company
Sempra Energy:
☒ Large Accelerated Filer
☐ Accelerated Filer
☐ Non-accelerated Filer
☐Smaller Reporting Company
☐Emerging Growth Company
San Diego Gas & Electric Company:
☐ Large Accelerated Filer
☐ Accelerated Filer
☒ Non-accelerated Filer
☐Smaller Reporting Company
☐Emerging Growth Company
Southern California Gas Company
☐ Large Accelerated Filer
☐ Accelerated Filer
☒ Non-accelerated Filer
☐Smaller Reporting Company
☐Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Sempra EnergyYes☐No☐
San Diego Gas & Electric CompanyYes☐No☐
Southern California Gas CompanyYes☐No☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Sempra EnergyYes☐No☒
San Diego Gas & Electric CompanyYes☐No☒
Southern California Gas CompanyYes☐No☒
Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date.
Common stock outstanding on October 28, 2019:November 2, 2020:
Sempra Energy281,895,936
288,470,244 shares
San Diego Gas & Electric CompanyWholly owned by Enova Corporation, which is wholly owned by Sempra Energy
Southern California Gas CompanyWholly owned by Pacific Enterprises, which is wholly owned by Sempra Energy

2


SEMPRA ENERGY FORM 10-Q
SAN DIEGO GAS & ELECTRIC COMPANY FORM 10-Q
SOUTHERN CALIFORNIA GAS COMPANY FORM 10-Q
TABLE OF CONTENTS
Page
4
7
PART I – FINANCIAL INFORMATION
Item 1.
9
Notes to Condensed Consolidated Financial Statements
Note 1. General Information and Other Financial Data
29
Note 2. New Accounting Standards
53
Note 3. Revenues
54
Note 4. Regulatory Matters
58
Note 5. Acquisitions, Divestitures and Discontinued Operations
61
Note 6. Investments in Unconsolidated Entities
63
Note 7. Debt and Credit Facilities
65
Note 8. Derivative Financial Instruments
67
Note 9. Fair Value Measurements
73
Note 10. San Onofre Nuclear Generating Station
80
Note 11. Commitments and Contingencies
82
Note 12. Segment Information
91
Item 2.
9893
Overview
94
Results of Operations
94
Capital Resources and Liquidity
107
Critical Accounting Policies and Estimates
121
New Accounting Standards
122
Item 3.
131122
Item 4.
133123
PART II – OTHER INFORMATION
Item 1.
133123
Item 1A.
133123
Item 6.2.
134125
Item 6.
126
135129

This combined Form 10-Qreport is separately filed by Sempra Energy, San Diego Gas & Electric Company and Southern California Gas Company. Information contained herein relating to any one of these individual companyreporting entities is filed by such companyentity on its own behalf. Each companyentity makes representationsstatements herein only as to itself and its consolidated subsidiaries and makes no other representationstatement whatsoever as to any other company.entity.
You should read this report in its entirety as it pertains to each respective reporting company.entity. No one section of the report deals with all aspects of the subject matter. Separate Part I – Item 1 sections are provided for each reporting company,entity, except for the Notes to Condensed Consolidated Financial Statements. The Notes to Condensed Consolidated Financial Statements for all of the reporting companiesentities are combined. All Items other than Part I – Item 1 are combined for the three reporting companies.entities.
3

The following terms and abbreviations appearing in the text of this report have the meanings indicated below.
GLOSSARY
GLOSSARY
2016 GRC FDfinal decision in the California Utilities’ 2016 General Rate Case
2019 GRC FDfinal decision in the California Utilities’ 2019 General Rate Case
ABCalifornia Assembly Bill
AEPAmerican Electric Power Company, Inc.
AFUDCallowance for funds used during construction
AMPArrearage Management Payment Plan
Annual ReportAnnual Report on Form 10-K for the year ended December 31, 20182019
AOCIaccumulated other comprehensive income (loss)
AROasset retirement obligation
ASCAccounting Standards Codification
Asset Exchange AgreementASRagreement and plan of merger among Oncor, SDTS and SUaccelerated share repurchase
ASUAccounting Standards Update
Bay GasBay Gas Storage Company, Ltd.
BcfBechtelbillion cubic feetBechtel Oil, Gas and Chemicals, Inc.
BladeBlade Energy Partners
BPbpsBritish Petroleum or its subsidiariesbasis points
bpsCalGEMbasis pointsCalifornia Geologic Energy Management Division (formerly known as Division of Oil, Gas, and Geothermal Resources or DOGGR)
California UtilitiesSan Diego Gas & Electric Company and Southern California Gas Company, collectively
Cameron LNG JVCameron LNG Holdings, LLC
CARBCalifornia Air Resources Board
CECCCMCalifornia Energy Commissioncost of capital adjustment mechanism
CFECENACECentro Nacional de Control de Energía (Mexico’s National Energy Control Center)
CFEComisión Federal de Electricidad (Federal(Mexico’s Federal Electricity Commission of Mexico)Commission)
CFINCameron LNG FINCO, LLC, a wholly owned and unconsolidated affiliate of Cameron LNG JV
Chilquinta EnergíaChilquinta Energía S.A. and its subsidiaries
CPUCCOFECEComisión Federal de Competencia Económica (Mexico’s Competition Commission)
COVID-19coronavirus disease 2019
CPPMACOVID-19 Pandemic Protections Memorandum Account
CPUCCalifornia Public Utilities Commission
CRRCREComisión Reguladora de Energía (Mexico’s Energy Regulatory Commission)
CRRcongestion revenue right
DOEU.S. Department of Energy
DOGGRECA LNG JVCalifornia Department of Conservation’s Division of Oil, Gas, and Geothermal ResourcesECA LNG Holdings B.V.
DPHECA LNG RegasificationLos Angeles County Department of Public Health
DWRCalifornia Department of Water Resources
ECAEnergía Costa Azul, S. de R.L. de C.V. regasification
EcogasEcogas México, S. de R.L. de C.V.
EdisonSouthern California Edison Company, a subsidiary of Edison International
EFHEnergy Future Holdings Corp. (renamed Sempra Texas Holdings Corp.)
EFIHEletransEnergy Future Intermediate Holding Company LLC (renamed Sempra Texas Intermediate Holding Company LLC)
EletransEletrans S.A., Eletrans II S.A. and Eletrans III S.A., collectively
EPAEPCU.S. Environmental Protection Agency
EPCengineering, procurement and construction
EPSearnings per common share
ETRESJEnergía Sierra Juárez, S. de R.L. de C.V.
ETReffective income tax rate
FERCFederal Energy Regulatory Commission
FitchFitch Ratings
FTAFree Trade Agreement
GCIMGazpromGas Cost Incentive MechanismGazprom Marketing & Trading México S. de R.L. de C.V.
GHGGRCgreenhouse gas
GRCGeneral Rate Case
HLBVHMRChypothetical liquidation at book value
HMRCUnited Kingdom’s Revenue and Customs Department
IEnovaInfraestructura Energética Nova, S.A.B. de C.V.
IMG JVInfraestructura Marina del Golfo
InfraREITInfraREIT, Inc. (merged into a wholly owned subsidiary of Oncor)
InfraREIT Merger AgreementIOUagreement and plan of merger among Oncor, 1912 Merger Sub LLC (a wholly owned subsidiary of Oncor), Oncor T&D Partners, LP (a wholly owned indirect subsidiary of Oncor), InfraREIT and InfraREIT Partnersinvestor-owned utility
InfraREIT PartnersIRSInfraREIT Partners, LP (renamed Oncor NTU Partnership LP)
IOUinvestor-owned utility
IRSInternal Revenue Service
ISFSIindependent spent fuel storage installation
ISOIndependent System Operator
JP MorganJVJ.P. Morgan Chase & Co.joint venture
JVjoint venture

GLOSSARY (CONTINUED)
LA Superior CourtLos Angeles County Superior Court
Leakthe leak at the SoCalGas Aliso Canyon natural gas storage facility injection-and-withdrawal well, SS25, discovered by SoCalGas on October 23, 2015
4

LNGGLOSSARY (CONTINUED)
LIBORLondon Interbank Offered Rate
LNGliquefied natural gas
LPGliquid petroleum gas
Luz del SurLuz del Sur S.A.A. and its subsidiaries
MD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations
Mergerthe merger of EFH with an indirect subsidiary of Sempra Energy, with EFH continuing as the surviving company and as an indirect, wholly owned subsidiary of Sempra Energy
Merger AgreementAgreement and Plan of Merger dated August 21, 2017, as supplemented by a Waiver Agreement dated October 3, 2017 and an amendment dated February 15, 2018, between Sempra Energy, EFH, EFIH and an indirect subsidiary of Sempra Energy
Merger ConsiderationPursuant to the Merger Agreement, Sempra Energy paid consideration of $9.45 billion in cash
Mississippi HubMississippi Hub, LLC
MMBtumillion British thermal units (of natural gas)
Moody’sMoody’s Investors Service
MOUMemorandum of Understanding
Mtpamillion tonnes per annum
MWMWhmegawatt hour
MWhNCImegawatt hournoncontrolling interest(s)
NCINDTnoncontrolling interest(s)
NDTnuclear decommissioning trusts
NEILNuclear Electric Insurance Limited
NOLnet operating loss
NRCOCINuclear Regulatory Commission
OCIother comprehensive income (loss)
OIIOrder Instituting Investigation
OIRO&MOrder Instituting a Rulemaking
O&Moperation and maintenance expense
OMECOncorOtay Mesa Energy Center
OMEC LLCOtay Mesa Energy Center LLC
OMIOncor Management Investment LLC
OncorOncor Electric Delivery Company LLC
Oncor HoldingsOncor Electric Delivery Holdings Company LLC
Otay Mesa VIEOMECOtay Mesa Energy Center LLC VIE
PG&EPacific Gas &and Electric Company
PHMSAPPAPipeline and Hazardous Materials Safety Administration
PPApower purchase agreement
PP&Eproperty, plant and equipment
PSEPPUCTPipeline Safety Enhancement Plan
PUCTPublic Utility Commission of Texas
RBSThe Royal Bank of Scotland plc
RBS SEERBS Sempra Energy Europe
RBS Sempra CommoditiesRBS Sempra Commodities LLP
ROEreturn on equity
ROUright-of-use
RSUrestricted stock unit
SBS&PStandard & Poor’s
SBCalifornia Senate Bill
SDG&ESan Diego Gas & Electric Company
SDTSSECSharyland Distribution & Transmission Services, L.L.C. (a subsidiary of InfraREIT Partners, renamed Oncor Electric Delivery Company NTU LLC)
SECU.S. Securities and Exchange Commission
Securities Purchase Agreement

Securities Purchase Agreementsecurities purchase agreement among SU,Sharyland Utilities, LP, SU Investment Partners, L.P., Sempra Texas
Utilities Holdings I, LLC (a wholly owned subsidiary of Sempra Energy) and Sempra Energy
SEDATUSecretaría de Desarrollo Agrario, Territorial y Urbano (Mexican agency in charge of agriculture, land and urban development)
Sempra Globalholding company for most of Sempra Energy’s subsidiaries not subject to California or Texas utility regulation
SENERSecretaría de Energía de México (Mexico’s Ministry of Energy)
series A preferred stockSempra Energy’s 6% mandatory convertible preferred stock, series A
series B preferred stockSempra Energy’s 6.75% mandatory convertible preferred stock, series B
series C preferred stockSempra Energy’s 4.875% fixed-rate reset cumulative redeemable perpetual preferred stock, series C
Sharyland HoldingsSharyland Holdings, L.P.
SoCalGasShell MexicoShell México Gas Natural, S. de R.L. de C.V.
SoCalGasSouthern California Gas Company
SONGSSan Onofre Nuclear Generating Station
STIHSempra Texas Intermediate Holding Company LLC
Support Agreementsupport agreement, dated July 28, 2020, between Sempra Energy and Sumitomo Mitsui Banking Corporation
TAG JVTAG Norte Holding, S. de R.L. de C.V.
TdMTermoeléctrica de Mexicali
TechnipFMCTP Oil & Gas Mexico, S. De R.L. De C.V., an affiliate of TechnipFMC plc
TecnoredTecnored S.A.
TecsurTecsur S.A.
TO4Electric Transmission Owner Formula Rate, effective through May 31, 2019
TO5Electric Transmission Owner Formula Rate, effective June 1, 2019
TTHCTexas Transmission Holdings Corporation
TTITexas Transmission Investment LLC

5

GLOSSARY (CONTINUED)
GLOSSARY (CONTINUED)
SONGSSan Onofre Nuclear Generating Station
S&PStandard & Poor’s
SUSharyland Utilities, L.L.C. (formerly known as Sharyland Utilities, L.P.)
TAGTAG Pipelines Norte, S. de R.L. de C.V.
TC EnergyTC Energy Corporation (formerly known as TransCanada Corporation)
TCJATax Cuts and Jobs Act of 2017
TdMTermoeléctrica de Mexicali
TecnoredTecnored S.A.
TecsurTecsur S.A.
TO5Electric Transmission Owner Formula Rate, new application
TTITexas Transmission Investment LLC
U.S. GAAPaccounting principles generally accepted in the United States of America
VATvalue-added tax
VIEVentikaVentika, S.A.P.I. de C.V. and Ventika II, S.A.P.I. de C.V., collectively
VIEvariable interest entity
Wildfire Fundthe fund established pursuant to AB 1054
Wildfire LegislationAB 1054 and AB 111

6



INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
We make statements in this report that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on assumptions with respect to the future, involve risks and uncertainties, and are not guarantees of performance.guarantees. Future results may differ materially from those expressed in the forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the filing date of this report. We assume no obligation to update or revise any forward-looking statement as a result of new information, future events or other factors.
In this report, when we useforward-looking statements can be identified by words such as “believes,” “expects,” “anticipates,” “plans,” “estimates,” “projects,” “forecasts,” “contemplates,” “assumes,” “depends,” “should,” “could,” “would,” “will,” “confident,” “may,” “can,” “potential,” “possible,” “proposed,” “target,” “pursue,” “outlook,” “maintain,” or similar expressions, or when we discuss our guidance, strategy, plans, goals, vision, mission, opportunities, projections initiatives, objectives or intentions, we are making forward-looking statements.intentions.
Factors, among others, that could cause our actual results and future actions to differ materially from those described in any forward-looking statements include risks and uncertainties relating to:
▪the greater degree and prevalence of wildfires in California in recent years and the risk that we may be found liable for damages regardless of fault, such as where inverse condemnation applies, and the risk that we may not be able to recover any such costs from insurance, the California wildfire fund or in rates from customers in California or otherwise;
▪actions and the timing of actions, including decisions, investigations, new regulations and issuances of permits and other authorizations and renewal of franchises by the CFE, CPUC, DOE, DOGGR, DPH, EPA, FERC, PHMSA, PUCT, states, cities and counties, and other regulatory and governmental bodies in the U.S. and other countries in which we operate;
▪the success of business development efforts, construction projects, and major acquisitions, divestitures and internal structural changes, including risks in (i) obtaining or maintaining authorizations; (ii) completing construction projects on schedule and budget; (iii) obtaining the consent of partners; (iv) counterparties’ financial ability or otherwise to fulfill contractual commitments; (v) winning competitively bid infrastructure projects; (vi) the ability to complete contemplated acquisitions and/or divestitures and the disruptions caused by such efforts; and (vii) the ability to realize anticipated benefits from any of these efforts once completed;
▪the resolution of civil and criminal litigation, regulatory investigations and proceedings, and arbitrations;
▪actions by credit rating agencies to downgrade our credit ratings or those of our subsidiaries or to place those ratings on negative outlook and our ability to borrow at favorable interest rates;
▪deviations from regulatory precedent or practice that result in a reallocation of benefits or burdens among shareholders and ratepayers; denial of approvals of proposed settlements; delays in, or denial of, regulatory agency authorizations to recover costs in rates from customers or regulatory agency approval for projects required to enhance safety and reliability; and moves to reduce or eliminate reliance on natural gas;
▪weather conditions, natural disasters, accidents, equipment failures, computer system outages, explosions, terrorist attacks and other events that disrupt our operations, damage our facilities and systems, cause the release of harmful materials, cause fires and subject us to third-party liability for property damage or personal injuries, fines and penalties, some of which may not be covered by insurance (including costs in excess of applicable policy limits), may be disputed by insurers or may otherwise not be recoverable through regulatory mechanisms or may impact our ability to obtain satisfactory levels of affordable insurance;
▪the availability of electric power and natural gas and natural gas storage capacity, including disruptions caused by failures in the transmission grid, limitations on the withdrawal or injection of natural gas from or into storage facilities, and equipment failures;
▪risks posed by actions of third parties who control the operations of our investments;
▪cybersecurity threats to the energy grid, storage and pipeline infrastructure, the information and systems used to operate our businesses, and the confidentiality of our proprietary information and the personal information of our customers and employees;
▪expropriation of assets, the failure to honor the terms of contracts by foreign governments and state-owned entities such as the CFE, and other property disputes;
▪the impact at SDG&E on competitive customer rates and reliability of electric transmission and distribution systems due to the growth in distributed and local power generation and from possible departing retail load resulting from customers transferring to Direct Access and Community Choice Aggregation or other forms of distributed and local power generation and the potential risk of nonrecovery for stranded assets and contractual obligations;

▪California wildfires, including the risk that we may be found liable for damages regardless of fault and the risk that we may not be able to recover any such costs from insurance, the Wildfire Fund or in rates from customers;
▪Oncor’s ability to eliminate or reduce its quarterly dividends due to regulatory capital requirements and other regulatory and governance commitments, including the determination by a majority of Oncor’s independent directors or a minority member director to retain such amounts to meet future requirements;
▪changes in capital markets, energy markets and economic conditions, including the availability of credit; and volatility in foreign currency exchange, interest and inflation rates and commodity prices and our ability to effectively hedge the risk of such volatility;
▪changes in foreign and domestic trade policies and laws, including border tariffs and revisions to or replacement of international trade agreements, such as the North American Free Trade Agreement, that may increase our costs or impair our ability to resolve trade disputes;
▪actions of activist shareholders, which could disrupt our operations by, among other things, requiring significant time by management and our board of directors;
▪the impact of federal or state tax reform and our ability to mitigate adverse impacts; and
▪other uncertainties, some of which may be difficult to predict and are beyond our control.
▪decisions, investigations, regulations, issuances of permits and other authorizations, renewals of franchises, and other actions by (i) the CFE, CPUC, DOE, PUCT, and other regulatory and governmental bodies and (ii) states, counties, cities and other jurisdictions in the U.S., Mexico and other countries in which we operate or do business;
▪the success of business development efforts, construction projects and major acquisitions and divestitures, including risks in (i) the ability to make a final investment decision, (ii) completing construction projects on schedule and budget, (iii) the ability to realize anticipated benefits from any of these efforts once completed, and (iv) obtaining the consent of partners;
▪the impact of the COVID-19 pandemic on our (i) ability to commence and complete capital and other projects and obtain regulatory approvals, (ii) supply chain and current and prospective counterparties, contractors, customers, employees and partners, (iii) liquidity, resulting from bill payment challenges experienced by our customers, including in connection with a CPUC-ordered suspension of service disconnections, decreased stability and accessibility of the capital markets and other factors, and (iv) ability to sustain operations and satisfy compliance requirements due to social distancing measures or if employee absenteeism were to increase significantly;
▪the resolution of civil and criminal litigation, regulatory inquiries, investigations and proceedings, and arbitrations;
▪actions by credit rating agencies to downgrade our credit ratings or to place those ratings on negative outlook and our ability to borrow at favorable interest rates;
▪moves to reduce or eliminate reliance on natural gas and the impact of the extreme volatility of oil prices on our businesses and development projects;
▪weather, natural disasters, accidents, equipment failures, computer system outages and other events that disrupt our operations, damage our facilities and systems, cause the release of harmful materials, cause fires and subject us to liability for property damage or personal injuries, fines and penalties, some of which may not be covered by insurance (including costs in excess of applicable policy limits), may be disputed by insurers or may otherwise not be recoverable through regulatory mechanisms or may impact our ability to obtain satisfactory levels of affordable insurance;
▪the availability of electric power and natural gas and natural gas storage capacity, including disruptions caused by failures in the transmission grid, limitations on the withdrawal of natural gas from storage facilities, and equipment failures;
▪cybersecurity threats to the energy grid, storage and pipeline infrastructure, the information and systems used to operate our businesses, and the confidentiality of our proprietary information and the personal information of our customers and employees;
▪expropriation of assets, the failure of foreign governments and state-owned entities to honor the terms of contracts, and property disputes;
▪the impact at SDG&E on competitive customer rates and reliability due to the growth in distributed and local power generation, including from departing retail load resulting from customers transferring to Direct Access, Community Choice Aggregation or other forms of distributed or local power generation, and the risk of nonrecovery for stranded assets and contractual obligations;
▪Oncor’s ability to eliminate or reduce its quarterly dividends due to regulatory and governance requirements and commitments, including by actions of Oncor’s independent directors or a minority member director;
▪volatility in foreign currency exchange, interest and inflation rates and commodity prices and our ability to effectively hedge the risk of such volatility;
▪changes in tax and trade policies, laws and regulations, including tariffs and revisions to or replacement of international trade agreements, such as the United States-Mexico-Canada Agreement, that may increase our costs or impair our ability to resolve trade disputes; and
7

▪other uncertainties, some of which may be difficult to predict and are beyond our control.
We caution you not to rely unduly on any forward-looking statements. You should review and consider carefully the risks, uncertainties and other factors that affect our business as described herein, in our most recent Annual Report and in other reports that we file with the SEC.
8

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SEMPRA ENERGY    
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts; shares in thousands)    
 Three months ended
September 30,		Nine months ended
September 30,
 2020201920202019
 (unaudited)
REVENUES    
Utilities$2,301 $2,398 $7,199 $6,808 
Energy-related businesses343 360 1,000 1,078 
Total revenues2,644 2,758 8,199 7,886 
EXPENSES AND OTHER INCOME    
Utilities:    
Cost of natural gas(114)(122)(582)(789)
Cost of electric fuel and purchased power(429)(410)(918)(929)
Energy-related businesses cost of sales(90)(94)(200)(265)
Operation and maintenance(1,044)(845)(2,893)(2,515)
Depreciation and amortization(418)(402)(1,242)(1,174)
Franchise fees and other taxes(139)(127)(397)(369)
Impairment losses(1)(43)(1)(43)
(Loss) gain on sale of assets0 (3)0 63 
Other income (expense), net29 (7)(163)103 
Interest income27 22 76 64 
Interest expense(264)(279)(818)(797)
Income from continuing operations before income taxes and equity earnings201 448 1,061 1,235 
Income tax expense(99)(61)(60)(150)
Equity earnings326 266 822 485 
Income from continuing operations, net of income tax428 653 1,823 1,570 
(Loss) income from discontinued operations, net of income tax(7)256 1,850 292 
Net income421 909 3,673 1,862 
Earnings attributable to noncontrolling interests(22)(60)(201)(146)
Preferred dividends(48)(36)(121)(107)
Preferred dividends of subsidiary0 0 (1)(1)
Earnings attributable to common shares$351 $813 $3,350 $1,608 
Basic EPS:
Earnings from continuing operations$1.23 $2.04 $5.17 $4.86 
(Losses) earnings from discontinued operations$(0.02)$0.89 $6.31 $0.97 
Earnings$1.21 $2.93 $11.48 $5.83 
Weighted-average common shares outstanding289,490 277,360 291,771 275,684 
Diluted EPS:
Earnings from continuing operations$1.23 $2.00 $5.15 $4.79 
(Losses) earnings from discontinued operations$(0.02)$0.84 $6.28 $0.95 
Earnings$1.21 $2.84 $11.43 $5.74 
Weighted-average common shares outstanding290,582 295,789 292,935 279,809 
See Notes to Condensed Consolidated Financial Statements.
SEMPRA ENERGY       
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts; shares in thousands)       
 Three months ended September 30, 
Nine months ended
September 30,
 2019 2018 2019 2018
 (unaudited)
REVENUES       
Utilities$2,398
 $2,102
 $6,808
 $6,112
Energy-related businesses360
 463
 1,078
 1,164
Total revenues2,758
 2,565
 7,886
 7,276
        
EXPENSES AND OTHER INCOME       
Utilities:       
Cost of natural gas(122) (255) (789) (782)
Cost of electric fuel and purchased power(410) (446) (929) (1,037)
Energy-related businesses cost of sales(94) (119) (265) (258)
Operation and maintenance(845) (792) (2,515) (2,275)
Depreciation and amortization(402) (366) (1,174) (1,115)
Franchise fees and other taxes(127) (131) (369) (352)
Impairment losses(43) (4) (43) (1,304)
(Loss) gain on sale of assets(3) —
 63
 —
Other (expense) income, net(7) 96
 103
 192
Interest income22
 19
 64
 66
Interest expense(279) (222) (797) (656)
Income (loss) from continuing operations before income taxes
     and equity earnings
448
 345
 1,235
 (245)
Income tax (expense) benefit(61) (139) (150) 221
Equity earnings266
 74
 485
 49
Income from continuing operations, net of income tax653
 280
 1,570
 25
Income from discontinued operations, net of income tax256
 54
 292
 137
Net income909
 334
 1,862
 162
Earnings attributable to noncontrolling interests(60) (24) (146) (12)
Mandatory convertible preferred stock dividends(36) (36) (107) (89)
Preferred dividends of subsidiary—
 —
 (1) (1)
Earnings attributable to common shares$813
 $274
 $1,608
 $60
        
Basic earnings (losses) per common share:       
Earnings (losses) from continuing operations attributable to common shares$2.04
 $0.83
 $4.86
 $(0.21)
Earnings from discontinued operations attributable to common shares$0.89
 $0.17
 $0.97
 $0.44
Earnings attributable to common shares$2.93
 $1.00
 $5.83
 $0.23
Weighted-average common shares outstanding277,360
 273,944
 275,684
 265,963
        
Diluted earnings (losses) per common share:       
Earnings (losses) from continuing operations attributable to common shares$2.00
 $0.82
 $4.79
 $(0.21)
Earnings from discontinued operations attributable to common shares$0.84
 $0.17
 $0.95
 $0.44
Earnings attributable to common shares$2.84
 $0.99
 $5.74
 $0.23
Weighted-average common shares outstanding295,789
 275,907
 279,809
 265,963
9

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
 Sempra Energy shareholders’ equity  
 Pretax
amount		Income tax
(expense) benefit		Net-of-tax
amount		Noncontrolling
interests
(after-tax)		Total
 (unaudited)
 Three months ended September 30, 2020 and 2019
2020:     
Net income$489 $(90)$399 $22 $421 
Other comprehensive income (loss):     
Foreign currency translation adjustments9 0 9 (1)8 
Financial instruments36 (16)20 5 25 
Pension and other postretirement benefits6 (1)5 0 5 
Total other comprehensive income51 (17)34 4 38 
Comprehensive income$540 $(107)$433 $26 $459 
2019:     
Net income$762 $87 $849 $60 $909 
Other comprehensive income (loss):    
Foreign currency translation adjustments(91)0 (91)(8)(99)
Financial instruments(55)18 (37)(4)(41)
Pension and other postretirement benefits(3)1 (2)0 (2)
Total other comprehensive loss(149)19 (130)(12)(142)
Comprehensive income$613 $106 $719 $48 $767 
 Nine months ended September 30, 2020 and 2019
2020:     
Net income$4,718 $(1,246)$3,472 $201 $3,673 
Other comprehensive income (loss):     
Foreign currency translation adjustments533 0 533 (16)517 
Financial instruments(167)41 (126)(9)(135)
Pension and other postretirement benefits27 (3)24 0 24 
Total other comprehensive income (loss)393 38 431 (25)406 
Comprehensive income5,111 (1,208)3,903 176 4,079 
Preferred dividends of subsidiary(1)0 (1)0 (1)
Comprehensive income, after preferred
dividends of subsidiary
$5,110 $(1,208)$3,902 $176 $4,078 
2019:    
Net income$1,898 $(182)$1,716 $146 $1,862 
Other comprehensive income (loss):     
Foreign currency translation adjustments(45)0 (45)(2)(47)
Financial instruments(213)70 (143)(16)(159)
Pension and other postretirement benefits22 (6)16 0 16 
Total other comprehensive loss(236)64 (172)(18)(190)
Comprehensive income1,662 (118)1,544 128 1,672 
Preferred dividends of subsidiary(1)0 (1)0 (1)
Comprehensive income, after preferred
dividends of subsidiary
$1,661 $(118)$1,543 $128 $1,671 
See Notes to Condensed Consolidated Financial Statements.    

10

SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
September 30,December 31,
 2020
2019(1)
 (unaudited) 
ASSETS  
Current assets:  
Cash and cash equivalents$3,515 $108 
Restricted cash28 31 
Accounts receivable – trade, net1,067 1,261 
Accounts receivable – other, net418 455 
Due from unconsolidated affiliates46 32 
Income taxes receivable152 112 
Inventories309 277 
Regulatory assets386 222 
Greenhouse gas allowances66 72 
Assets held for sale in discontinued operations0 445 
Other current assets407 324 
Total current assets6,394 3,339 
Other assets:  
Restricted cash3 3 
Due from unconsolidated affiliates617 742 
Regulatory assets1,740 1,930 
Nuclear decommissioning trusts1,057 1,082 
Investment in Oncor Holdings11,962 11,519 
Other investments1,455 2,103 
Goodwill1,602 1,602 
Other intangible assets205 213 
Dedicated assets in support of certain benefit plans469 488 
Insurance receivable for Aliso Canyon costs504 339 
Deferred income taxes199 155 
Greenhouse gas allowances598 470 
Right-of-use assets – operating leases563 591 
Wildfire fund371 392 
Assets held for sale in discontinued operations0 3,513 
Other long-term assets699 732 
Total other assets22,044 25,874 
Property, plant and equipment:  
Property, plant and equipment52,429 49,329 
Less accumulated depreciation and amortization(13,645)(12,877)
Property, plant and equipment, net38,784 36,452 
Total assets$67,222 $65,665 
(1)Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
 Sempra Energy shareholders’ equity    
 Pretax
amount		 Income tax
benefit (expense)		 Net-of-tax
amount		 
Noncontrolling
interests
(after-tax)
 Total
 (unaudited)
 Three months ended September 30, 2019 and 2018
2019:         
Net income$762
 $87
 $849
 $60
 $909
Other comprehensive income (loss):         
Foreign currency translation adjustments(91) —
 (91) (8) (99)
Financial instruments(55) 18
 (37) (4) (41)
Pension and other postretirement benefits(3) 1
 (2) —
 (2)
Total other comprehensive loss(149) 19
 (130) (12) (142)
Comprehensive income$613
 $106
 $719
 $48
 $767
2018:         
Net income$477
 $(167) $310
 $24
 $334
Other comprehensive income (loss):         
Foreign currency translation adjustments(16) —
 (16) (2) (18)
Financial instruments22
 (7) 15
 4
 19
Pension and other postretirement benefits(14) 4
 (10) —
 (10)
Total other comprehensive (loss) income(8) (3) (11) 2
 (9)
Comprehensive income$469
 $(170) $299
 $26
 $325
11

SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
September 30,December 31,
 2020
2019(1)
 (unaudited) 
LIABILITIES AND EQUITY  
Current liabilities:  
Short-term debt$772 $3,505 
Accounts payable – trade1,129 1,234 
Accounts payable – other163 179 
Due to unconsolidated affiliates6 5 
Dividends and interest payable563 515 
Accrued compensation and benefits412 476 
Regulatory liabilities373 319 
Current portion of long-term debt and finance leases2,890 1,526 
Reserve for Aliso Canyon costs268 9 
Greenhouse gas obligations66 72 
Liabilities held for sale in discontinued operations0 444 
Other current liabilities993 866 
Total current liabilities7,635 9,150 
Long-term debt and finance leases21,770 20,785 
Deferred credits and other liabilities:  
Due to unconsolidated affiliates271 195 
Pension and other postretirement benefit plan obligations, net of plan assets999 1,067 
Deferred income taxes2,696 2,577 
Deferred investment tax credits22 21 
Regulatory liabilities3,410 3,741 
Asset retirement obligations2,961 2,923 
Greenhouse gas obligations456 301 
Liabilities held for sale in discontinued operations0 1,052 
Deferred credits and other2,146 2,048 
Total deferred credits and other liabilities12,961 13,925 
Commitments and contingencies (Note 11)
Equity:  
Preferred stock (50 million shares authorized):
Mandatory convertible preferred stock, series A
(17.25 million shares outstanding)
1,693 1,693 
Mandatory convertible preferred stock, series B
(5.75 million shares outstanding)
565 565 
Preferred stock, series C
(0.9 million shares outstanding)
889 0 
Common stock (750 million shares authorized; 288 million and 292 million shares
outstanding at September 30, 2020 and December 31, 2019, respectively; no par value)
7,034 7,480 
Retained earnings13,560 11,130 
Accumulated other comprehensive income (loss)(513)(939)
Total Sempra Energy shareholders’ equity23,228 19,929 
Preferred stock of subsidiary20 20 
Other noncontrolling interests1,608 1,856 
Total equity24,856 21,805 
Total liabilities and equity$67,222 $65,665 
 Nine months ended September 30, 2019 and 2018
2019:         
Net income$1,898
 $(182) $1,716
 $146
 $1,862
Other comprehensive income (loss):         
Foreign currency translation adjustments(45) —
 (45) (2) (47)
Financial instruments(213) 70
 (143) (16) (159)
Pension and other postretirement benefits22
 (6) 16
 —
 16
Total other comprehensive loss(236) 64
 (172) (18) (190)
Comprehensive income1,662
 (118) 1,544
 128
 1,672
Preferred dividends of subsidiary(1) —
 (1) —
 (1)
Comprehensive income, after preferred         
dividends of subsidiary$1,661
 $(118) $1,543
 $128
 $1,671
2018:         
Net income$23
 $127
 $150
 $12
 $162
Other comprehensive income (loss):         
Foreign currency translation adjustments(78) —
 (78) (5) (83)
Financial instruments145
 (45) 100
 20
 120
Pension and other postretirement benefits(8) 3
 (5) —
 (5)
Total other comprehensive income59
 (42) 17
 15
 32
Comprehensive income82
 85
 167
 27
 194
Preferred dividends of subsidiary(1) —
 (1) —
 (1)
Comprehensive income, after preferred         
dividends of subsidiary$81
 $85
 $166
 $27
 $193

(1)    Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.

12

SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
 September 30,
2019		 
December 31,
2018(1)
 (unaudited)  
ASSETS   
Current assets:   
Cash and cash equivalents$106
 $102
Restricted cash28
 35
Accounts receivable – trade, net976
 1,215
Accounts receivable – other, net455
 320
Dividends receivable from discontinued operations422
 —
Due from unconsolidated affiliates40
 37
Income taxes receivable98
 60
Inventories270
 258
Regulatory assets183
 138
Greenhouse gas allowances59
 59
Assets held for sale—
 713
Assets held for sale in discontinued operations720
 459
Other309
 249
Total current assets3,666
 3,645
    
Other assets:   
Restricted cash3
 21
Due from unconsolidated affiliates712
 644
Regulatory assets1,942
 1,589
Nuclear decommissioning trusts1,049
 974
Investment in Oncor Holdings11,145
 9,652
Other investments2,076
 2,320
Goodwill1,602
 1,602
Other intangible assets216
 224
Dedicated assets in support of certain benefit plans439
 416
Insurance receivable for Aliso Canyon costs354
 461
Deferred income taxes157
 141
Greenhouse gas allowances483
 289
Right-of-use assets – operating leases595
 —
Wildfire fund381
 —
Assets held for sale in discontinued operations3,395
 3,259
Sundry850
 962
Total other assets25,399
 22,554
    
Property, plant and equipment:   
Property, plant and equipment48,139
 46,615
Less accumulated depreciation and amortization(12,619) (12,176)
Property, plant and equipment, net ($295 at December 31, 2018
    related to Otay Mesa VIE)
35,520
 34,439
Total assets$64,585
 $60,638

(1)
Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)   
 September 30,
2019		 
December 31,
2018(1)
 (unaudited)  
LIABILITIES AND EQUITY   
Current liabilities:   
Short-term debt$3,588
 $2,024
Accounts payable – trade959
 1,160
Accounts payable – other170
 138
Due to unconsolidated affiliates12
 10
Dividends and interest payable517
 480
Accrued compensation and benefits362
 440
Regulatory liabilities445
 105
Current portion of long-term debt and finance leases ($28 at December 31, 2018
    related to Otay Mesa VIE)
1,623
 1,644
Reserve for Aliso Canyon costs45
 160
Greenhouse gas obligations59
 59
Liabilities held for sale in discontinued operations804
 368
Other914
 935
Total current liabilities9,498
 7,523
    
Long-term debt and finance leases ($190 at December 31, 2018
    related to Otay Mesa VIE)
20,995
 20,903
    
Deferred credits and other liabilities:   
Due to unconsolidated affiliates39
 37
Pension and other postretirement benefit plan obligations, net of plan assets1,120
 1,143
Deferred income taxes2,360
 2,321
Deferred investment tax credits22
 24
Regulatory liabilities3,823
 4,016
Asset retirement obligations2,824
 2,786
Greenhouse gas obligations281
 131
Liabilities held for sale in discontinued operations1,023
 1,013
Deferred credits and other2,049
 1,493
Total deferred credits and other liabilities13,541
 12,964
    
Commitments and contingencies (Note 11)


 


    
Equity:   
Preferred stock (50 million shares authorized):   
6% mandatory convertible preferred stock, series A
(17.25 million shares issued and outstanding)
1,693
 1,693
6.75% mandatory convertible preferred stock, series B
(5.75 million shares issued and outstanding)
565
 565
Common stock (750 million shares authorized; 282 million and 274 million shares
     outstanding at September 30, 2019 and December 31, 2018, respectively; no par value)
6,374
 5,540
Retained earnings10,966
 10,104
Accumulated other comprehensive income (loss)(978) (764)
Total Sempra Energy shareholders’ equity18,620
 17,138
Preferred stock of subsidiary20
 20
Other noncontrolling interests1,911
 2,090
Total equity20,551
 19,248
Total liabilities and equity$64,585
 $60,638
(1)
Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 Nine months ended September 30,
 2019 2018
 (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$1,862

$162
Less: Income from discontinued operations, net of income tax(292) (137)
Income from continuing operations, net of income tax1,570
 25
Adjustments to reconcile net income to net cash provided by operating activities: 
 
Depreciation and amortization1,174

1,115
Deferred income taxes and investment tax credits12

(328)
Impairment losses43

1,304
Gain on sale of assets(63) —
Equity earnings(485)
(49)
Share-based compensation expense56

50
Fixed-price contracts and other derivatives(12)
(44)
Other16

36
Intercompany activities with discontinued operations, net184
 72
Net change in other working capital components(200)
491
Insurance receivable for Aliso Canyon costs107
 (56)
Wildfire fund, current and noncurrent(323) —
Changes in other noncurrent assets and liabilities, net(250) (177)
Net cash provided by continuing operations1,829

2,439
Net cash provided by discontinued operations289

220
Net cash provided by operating activities2,118

2,659
    
CASH FLOWS FROM INVESTING ACTIVITIES   
Expenditures for property, plant and equipment(2,590) (2,654)
Expenditures for investments and acquisition(1,449) (9,921)
Proceeds from sale of assets899
 1
Decrease in cash from deconsolidation of Otay Mesa VIE(8) —
Purchases of nuclear decommissioning trust assets(728) (703)
Proceeds from sales of nuclear decommissioning trust assets728
 703
Advances to unconsolidated affiliates(16) (81)
Repayments of advances to unconsolidated affiliates12
 4
Intercompany activities with discontinued operations, net(257) (18)
Other33
 38
Net cash used in continuing operations(3,376) (12,631)
Net cash used in discontinued operations(63) (161)
Net cash used in investing activities(3,439) (12,792)
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in millions)
 Nine months ended September 30,
 2019 2018
 (unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES   
Common dividends paid(734) (645)
Preferred dividends paid(107) (53)
Issuances of mandatory convertible preferred stock, net—
 2,259
Issuances of common stock, net757
 2,261
Repurchases of common stock(23) (20)
Issuances of debt (maturities greater than 90 days)3,269
 8,458
Payments on debt (maturities greater than 90 days) and finance leases(2,500) (2,836)
Increase in short-term debt, net888
 715
Proceeds from sale of noncontrolling interests, net5
 90
Purchases of noncontrolling interests(30) —
Contributions from (distributions to) noncontrolling interests, net171
 (88)
Intercompany activities with discontinued operations, net(128) 70
Other(42) (112)
Net cash provided by continuing operations1,526
 10,099
Net cash provided by (used in) discontinued operations49
 (34)
Net cash provided by financing activities1,575
 10,065
    
Effect of exchange rate changes in continuing operations—
 —
Effect of exchange rate changes in discontinued operations(3) (8)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(3) (8)
    
Increase (decrease) in cash, cash equivalents and restricted cash, including discontinued
operations		251
 (76)
Cash, cash equivalents and restricted cash, including discontinued operations, January 1246
 364
Cash, cash equivalents and restricted cash, including discontinued operations, September 30$497
 $288
    
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION   
Interest payments, net of amounts capitalized$766
 $555
Income tax payments, net of refunds289
 69
    
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES   
Acquisition:   
Assets acquired$—
 $9,670
Liabilities assumed—
 (104)
Cash paid$—
 $9,566
    
Accrued interest receivable from unconsolidated affiliate$55
 $45
Accrued capital expenditures390
 396
Increase in finance lease obligations for investment in property, plant and equipment27
 7
Preferred dividends declared but not paid36
 36
Common dividends receivable from discontinued operations422
 —
Common dividends issued in stock41
 41
Common dividends declared but not paid272
 244
SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 Nine months ended September 30,
 20202019
 (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income$3,673 $1,862 
Less: Income from discontinued operations, net of income tax(1,850)(292)
Income from continuing operations, net of income tax1,823 1,570 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization1,242 1,174 
Deferred income taxes and investment tax credits(12)12 
Impairment losses1 43 
Gain on sale of assets0 (63)
Equity earnings(822)(485)
Foreign currency transaction losses, net95 2 
Share-based compensation expense57 56 
Other131 2 
Intercompany activities with discontinued operations, net0 184 
Net change in other working capital components(137)(200)
Distributions from investments429 163 
Insurance receivable for Aliso Canyon costs(165)107 
Wildfire fund, current and noncurrent0 (323)
Changes in other noncurrent assets and liabilities, net38 (413)
Net cash provided by continuing operations2,680 1,829 
Net cash (used in) provided by discontinued operations(1,051)289 
Net cash provided by operating activities1,629 2,118 
CASH FLOWS FROM INVESTING ACTIVITIES  
Expenditures for property, plant and equipment(3,313)(2,590)
Expenditures for investments and acquisitions(229)(1,449)
Proceeds from sale of assets22 899 
Distributions from investments761 9 
Purchases of nuclear decommissioning trust assets(1,091)(728)
Proceeds from sales of nuclear decommissioning trust assets1,091 728 
Advances to unconsolidated affiliates(32)(16)
Repayments of advances to unconsolidated affiliates7 12 
Intercompany activities with discontinued operations, net0 (257)
Other13 16 
Net cash used in continuing operations(2,771)(3,376)
Net cash provided by (used in) discontinued operations5,186 (63)
Net cash provided by (used in) investing activities2,415 (3,439)
See Notes to Condensed Consolidated Financial Statements.
13


SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Dollars in millions)
 Preferred stock Common
stock		 Retained
earnings		 Accumulated
other
comprehensive
income (loss)		 Sempra
Energy
shareholders'
equity		 Non-
controlling
interests		 Total
equity
 (unaudited)
 Three months ended September 30, 2019
Balance at June 30, 2019$2,258
 $5,605
 $10,425
 $(848) $17,440
 $1,994
 $19,434
              
Net income    849
   849
 60
 909
Other comprehensive loss      (130) (130) (12) (142)
              
Share-based compensation expense  17
     17
   17
Dividends declared:             
Series A preferred stock ($1.50/share)    (26)   (26)   (26)
Series B preferred stock ($1.68/share)    (10)   (10)   (10)
Common stock ($0.96/share)    (272)   (272)   (272)
Issuances of common stock  751
     751
   751
Repurchases of common stock  (5)     (5)   (5)
Noncontrolling interest activities:             
Contributions          175
 175
Distributions  2
     2
 (7) (5)
Purchases        

 (2) (2)
Sale  4
     4
 1
 5
Acquisition          3
 3
Deconsolidation        

 (281) (281)
Balance at September 30, 2019$2,258
 $6,374
 $10,966
 $(978) $18,620
 $1,931
 $20,551
              
 Three months ended September 30, 2018
Balance at June 30, 2018$1,693
 $5,279
 $9,455
 $(601) $15,826
 $2,538
 $18,364
              
Net income    310
   310
 24
 334
Other comprehensive (loss) income      (11) (11) 2
 (9)
              
Share-based compensation expense  17
     17
   17
Dividends declared:             
Series A preferred stock ($1.50/share)    (26)   (26)   (26)
Series B preferred stock ($1.73/share)    (10)   (10)   (10)
Common stock ($0.90/share)    (244)   (244)   (244)
Issuance of series B preferred stock566
       566
   566
Issuances of common stock  185
     185
   185
Noncontrolling interest activities:             
Contributions          2
 2
Distributions          (86) (86)
Sales, net of offering costs  4
     4
 1
 5
Acquisition          13
 13
Balance at September 30, 2018$2,259
 $5,485

$9,485

$(612) $16,617

$2,494

$19,111
See Notes to Condensed Consolidated Financial Statements.


SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
(Dollars in millions)
 Preferred stock Common
stock		 Retained
earnings		 Accumulated
other
comprehensive
income (loss)		 Sempra
Energy
shareholders'
equity		 Non-
controlling
interests		 Total
equity
 (unaudited)
 Nine months ended September 30, 2019
Balance at December 31, 2018$2,258
 $5,540
 $10,104
 $(764) $17,138
 $2,110
 $19,248
Cumulative-effect adjustments from             
change in accounting principles    57
 (42) 15
   15
         

   

Net income    1,716
   1,716
 146
 1,862
Other comprehensive loss      (172) (172) (18) (190)
              
Share-based compensation expense  56
     56
   56
Dividends declared:        

   

Series A preferred stock ($4.50/share)    (78)   (78)   (78)
Series B preferred stock ($5.06/share)    (29)   (29)   (29)
Common stock ($2.90/share)    (803)   (803)   (803)
Preferred dividends of subsidiary    (1)   (1)   (1)
Issuances of common stock  798
     798
   798
Repurchases of common stock  (23)     (23)   (23)
Noncontrolling interest activities:        

   

Contributions        

 175
 175
Distributions  2
     2
 (19) (17)
Purchases  (3)     (3) (27) (30)
Sale  4
     4
 1
 5
Acquisition          3
 3
Deconsolidations        

 (440) (440)
Balance at September 30, 2019$2,258
 $6,374
 $10,966
 $(978) $18,620
 $1,931
 $20,551
              
 Nine months ended September 30, 2018
Balance at December 31, 2017$—
 $3,149
 $10,147
 $(626) $12,670
 $2,470
 $15,140
Cumulative-effect adjustments from             
change in accounting principles    2
 (3) (1)   (1)
              
Net income    150
   150
 12
 162
Other comprehensive income      17
 17
 15
 32
              
Share-based compensation expense  50
     50
   50
Dividends declared:             
Series A preferred stock ($4.60/share)    (79)   (79)   (79)
Series B preferred stock ($1.73/share)    (10)   (10)   (10)
Common stock ($2.69/share)    (724)   (724)   (724)
Preferred dividends of subsidiary    (1)   (1)   (1)
Issuance of series A preferred stock1,693
       1,693
   1,693
Issuance of series B preferred stock566
       566
   566
Issuances of common stock  2,302
     2,302
   2,302
Repurchases of common stock  (20)     (20)   (20)
Noncontrolling interest activities:             
Contributions          3
 3
Distributions          (104) (104)
Purchases          (1) (1)
Sales, net of offering costs  4
     4
 86
 90
Acquisition          13
 13
Balance at September 30, 2018$2,259
 $5,485
 $9,485
 $(612) $16,617
 $2,494
 $19,111
See Notes to Condensed Consolidated Financial Statements.


SAN DIEGO GAS & ELECTRIC COMPANY    
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Dollars in millions)  
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
 (unaudited)
Operating revenues       
Electric$1,271
 $1,192
 $3,184
 $3,014
Natural gas156
 107
 482
 391
Total operating revenues1,427
 1,299
 3,666
 3,405
Operating expenses       
Cost of electric fuel and purchased power411
 448
 934
 1,045
Cost of natural gas23
 30
 136
 110
Operation and maintenance295
 262
 857
 761
Depreciation and amortization196
 174
 571
 509
Franchise fees and other taxes79
 85
 220
 217
Total operating expenses1,004
 999
 2,718
 2,642
Operating income423
 300
 948
 763
Other income, net19
 24
 60
 77
Interest income1
 1
 3
 3
Interest expense(106) (56) (311) (161)
Income before income taxes337
 269
 700
 682
Income tax expense(71) (53) (111) (151)
Net income266
 216
 589
 531
Earnings attributable to noncontrolling interest(3) (11) (7) (10)
Earnings attributable to common shares$263
 $205
 $582
 $521
SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in millions)
 Nine months ended September 30,
 20202019
 (unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid(872)(734)
Preferred dividends paid(107)(107)
Issuances of preferred stock890 0 
Issuances of common stock10 757 
Repurchases of common stock(565)(23)
Issuances of debt (maturities greater than 90 days)5,934 3,269 
Payments on debt (maturities greater than 90 days) and finance leases(4,387)(2,500)
(Decrease) increase in short-term debt, net(1,871)888 
Advances from unconsolidated affiliates64 0 
Purchases of noncontrolling interests(178)(30)
Contributions from noncontrolling interests, net of distributions0 171 
Intercompany activities with discontinued operations, net0 (128)
Other(29)(37)
Net cash (used in) provided by continuing operations(1,111)1,526 
Net cash provided by discontinued operations401 49 
Net cash (used in) provided by financing activities(710)1,575 
Effect of exchange rate changes in continuing operations(2)0 
Effect of exchange rate changes in discontinued operations(3)(3)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(5)(3)
Increase in cash, cash equivalents and restricted cash, including discontinued operations3,329 251 
Cash, cash equivalents and restricted cash, including discontinued operations, January 1217 246 
Cash, cash equivalents and restricted cash, including discontinued operations, September 30$3,546 $497 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION  
Interest payments, net of amounts capitalized$781 $766 
Income tax payments, including discontinued operations, net of refunds1,376 372 
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES  
Accrued interest receivable from unconsolidated affiliate$0 $55 
Accrued capital expenditures460 390 
Increase in finance lease obligations for investment in property, plant and equipment72 27 
Equitization of long-term debt for deficit held by NCI22 0 
Contribution to Cameron LNG JV50 0 
Distribution from Cameron LNG JV50 0 
Preferred dividends declared but not paid50 36 
Common dividends receivable from discontinued operation0 422 
Common dividends issued in stock23 41 
Common dividends declared but not paid301 272 
See Notes to Condensed Consolidated Financial Statements.

14

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Dollars in millions)
 Preferred stockCommon
stock		Retained
earnings		Accumulated
other
comprehensive
income (loss)		Sempra
Energy
shareholders'
equity		Non-
controlling
interests		Total
equity
(unaudited)
Three months ended September 30, 2020
Balance at June 30, 2020$3,147 $7,490 $13,511 $(542)$23,606 $1,780 $25,386 
Net income399 399 22 421 
Other comprehensive income34 34 4 38 
Share-based compensation expense19 19 19 
Dividends declared:
Series A preferred stock ($1.50/share)(26)(26)(26)
Series B preferred stock ($1.68/share)(10)(10)(10)
Series C preferred stock ($14.08/share)(12)(12)(12)
Common stock ($1.05/share)(302)(302)(302)
Repurchases of common stock(501)(501)(501)
Noncontrolling interest activities:
Purchases26 (5)21 (178)(157)
Balance at September 30, 2020$3,147 $7,034 $13,560 $(513)$23,228 $1,628 $24,856 
 Three months ended September 30, 2019
Balance at June 30, 2019$2,258 $5,605 $10,425 $(848)$17,440 $1,994 $19,434 
Net income849 849 60 909 
Other comprehensive loss(130)(130)(12)(142)
Share-based compensation expense17 17 17 
Dividends declared:
Series A preferred stock ($1.50/share)(26)(26)(26)
Series B preferred stock ($1.68/share)(10)(10)(10)
Common stock ($0.96/share)(272)(272)(272)
Issuances of common stock751 751 751 
Repurchases of common stock(5)(5)(5)
Noncontrolling interest activities:
Contributions175 175 
Distributions2 2 (7)(5)
Purchases(2)(2)
Sale4 4 1 5 
Acquisition3 3 
Deconsolidation(281)(281)
Balance at September 30, 2019$2,258 $6,374 $10,966 $(978)$18,620 $1,931 $20,551 
See Notes to Condensed Consolidated Financial Statements.

15
SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
 SDG&E shareholder’s equity    
 
Pretax
amount
 Income tax (expense) benefit 
Net-of-tax
amount
 
Noncontrolling
interest
(after-tax)
 Total
 (unaudited)
 Three months ended September 30, 2019 and 2018
2019:         
Net income$334
 $(71) $263
 $3
 $266
Other comprehensive income (loss):         
Financial instruments—
 —
 —
 1
 1
Total other comprehensive income—
 —
 —
 1
 1
Comprehensive income$334
 $(71) $263
 $4
 $267
2018:         
Net income$258
 $(53) $205
 $11
 $216
Other comprehensive income (loss):         
Financial instruments—
 —
 —
 2
 2
Pension and other postretirement benefits(8) 2
 (6) —
 (6)
Total other comprehensive (loss) income(8) 2
 (6) 2
 (4)
Comprehensive income$250
 $(51) $199
 $13
 $212
          
 Nine months ended September 30, 2019 and 2018
2019:         
Net income$693
 $(111) $582
 $7
 $589
Other comprehensive income (loss):         
Financial instruments—
 —
 —
 2
 2
Pension and other postretirement benefits1
 —
 1
 —
 1
Total other comprehensive income1
 —
 1
 2
 3
Comprehensive income$694
 $(111) $583
 $9
 $592
2018:         
Net income$672
 $(151) $521
 $10
 $531
Other comprehensive income (loss):         
Financial instruments—
 —
 —
 7
 7
Pension and other postretirement benefits(8) 2
 (6) —
 (6)
Total other comprehensive (loss) income(8) 2
 (6) 7
 1
Comprehensive income$664
 $(149) $515
 $17
 $532

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
(Dollars in millions)
 Preferred stockCommon
stock		Retained
earnings		Accumulated
other
comprehensive
income (loss)		Sempra
Energy
shareholders'
equity		Non-
controlling
interests		Total
equity
(unaudited)
Nine months ended September 30, 2020
Balance at December 31, 2019$2,258 $7,480 $11,130 $(939)$19,929 $1,876 $21,805 
Adoption of ASU 2016-13(7)(7)(2)(9)
Adjusted balance at December 31, 20192,258 7,480 11,123 (939)19,922 1,874 21,796 
Net income3,472 3,472 201 3,673 
Other comprehensive income (loss)431 431 (25)406 
Share-based compensation expense57 57 57 
Dividends declared:
Series A preferred stock ($4.50/share)(78)(78)(78)
Series B preferred stock ($5.06/share)(29)(29)(29)
Series C preferred stock ($15.71/share)(14)(14)(14)
Common stock ($3.14/share)(913)(913)(913)
Preferred dividends of subsidiary(1)(1)(1)
Issuance of series C preferred stock889 889 889 
Issuances of common stock33 33 33 
Repurchases of common stock(565)(565)(565)
Noncontrolling interest activities:
Distributions(1)(1)
Purchases29 (5)24 (208)(184)
Acquisition1 1 
Equitization of long-term debt for
deficit held by NCI
22 22 
Deconsolidation(236)(236)
Balance at September 30, 2020$3,147 $7,034 $13,560 $(513)$23,228 $1,628 $24,856 
 Nine months ended September 30, 2019
Balance at December 31, 2018$2,258 $5,540 $10,104 $(764)$17,138 $2,110 $19,248 
Adoption of ASU 2016-0217 17 17 
Adoption of ASU 2018-0240 (42)(2)(2)
Adjusted balance at December 31, 20182,258 5,540 10,161 (806)17,153 2,110 19,263 
Net income1,716 1,716 146 1,862 
Other comprehensive loss(172)(172)(18)(190)
Share-based compensation expense56 56 56 
Dividends declared:
Series A preferred stock ($4.50/share)(78)(78)(78)
Series B preferred stock ($5.06/share)(29)(29)(29)
Common stock ($2.90/share)(803)(803)(803)
Preferred dividends of subsidiary(1)(1)(1)
Issuances of common stock798 798 798 
Repurchases of common stock(23)(23)(23)
Noncontrolling interest activities:
Contributions175 175 
Distributions2 2 (19)(17)
Purchases(3)(3)(27)(30)
Sale4 4 1 5 
Acquisition3 3 
Deconsolidations(440)(440)
Balance at September 30, 2019$2,258 $6,374 $10,966 $(978)$18,620 $1,931 $20,551 
See Notes to Condensed Consolidated Financial Statements.
16

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions) 
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
 (unaudited)
Operating revenues    
Electric$1,338 $1,271 $3,478 $3,184 
Natural gas134 156 498 482 
Total operating revenues1,472 1,427 3,976 3,666 
Operating expenses    
Cost of electric fuel and purchased power430 411 921 934 
Cost of natural gas27 23 118 136 
Operation and maintenance414 295 1,050 857 
Depreciation and amortization200 196 598 571 
Franchise fees and other taxes86 79 237 220 
Total operating expenses1,157 1,004 2,924 2,718 
Operating income315 423 1,052 948 
Other (expense) income, net(2)19 47 60 
Interest income1 1 2 3 
Interest expense(103)(106)(307)(311)
Income before income taxes211 337 794 700 
Income tax expense(33)(71)(161)(111)
Net income178 266 633 589 
Earnings attributable to noncontrolling interest0 (3)0 (7)
Earnings attributable to common shares$178 $263 $633 $582 
See Notes to Condensed Consolidated Financial Statements.


17
SAN DIEGO GAS & ELECTRIC COMPANY   
CONDENSED CONSOLIDATED BALANCE SHEETS   
(Dollars in millions)   
 September 30,
2019		 
December 31,
2018(1)
 (unaudited)  
ASSETS   
Current assets:   
Cash and cash equivalents$24
 $8
Restricted cash—
 11
Accounts receivable – trade, net446
 368
Accounts receivable – other, net106
 106
Due from unconsolidated affiliates1
 —
Inventories92
 102
Prepaid expenses160
 74
Regulatory assets171
 123
Fixed-price contracts and other derivatives26
 82
Greenhouse gas allowances15
 15
Other25
 5
Total current assets1,066
 894
    
Other assets:   
Restricted cash—
 18
Regulatory assets519
 454
Nuclear decommissioning trusts1,049
 974
Greenhouse gas allowances194
 155
Right-of-use assets – operating leases126
 —
Wildfire fund381
 —
Sundry390
 420
Total other assets2,659
 2,021
    
Property, plant and equipment:   
Property, plant and equipment22,038
 21,662
Less accumulated depreciation and amortization(5,427) (5,352)
Property, plant and equipment, net ($295 at December 31, 2018 related to VIE)16,611
 16,310
Total assets$20,336
 $19,225
(1)
Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.


SAN DIEGO GAS & ELECTRIC COMPANY   
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)   
(Dollars in millions)   
 September 30,
2019		 
December 31,
2018(1)
 (unaudited)  
LIABILITIES AND EQUITY   
Current liabilities:   
Short-term debt$—
 $291
Accounts payable444
 439
Due to unconsolidated affiliates26
 61
Accrued compensation and benefits103
 117
Accrued franchise fees46
 64
Regulatory liabilities118
 53
Current portion of long-term debt and finance leases ($28 at December 31, 2018
related to VIE)		55
 81
Customer deposits72
 70
Greenhouse gas obligations15
 15
Asset retirement obligations98
 96
Other268
 141
Total current liabilities1,245
 1,428
    
Long-term debt and finance leases ($190 at December 31, 2018 related to VIE)6,307
 6,138
    
Deferred credits and other liabilities:   
Pension and other postretirement benefit plan obligations, net of plan assets213
 212
Deferred income taxes1,715
 1,616
Deferred investment tax credits15
 16
Regulatory liabilities2,400
 2,404
Asset retirement obligations770
 778
Greenhouse gas obligations65
 30
Deferred credits and other686
 488
Total deferred credits and other liabilities5,864
 5,544
    
Commitments and contingencies (Note 11)

 

    
Equity:   
Preferred stock (45 million shares authorized; none issued)—
 —
Common stock (255 million shares authorized; 117 million shares outstanding;
no par value)		1,660
 1,338
Retained earnings5,271
 4,687
Accumulated other comprehensive income (loss)(11) (10)
Total SDG&E shareholder’s equity6,920
 6,015
Noncontrolling interest—
 100
Total equity6,920
 6,115
Total liabilities and equity$20,336
 $19,225
(1)
Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.


SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 Nine months ended September 30,
 2019 2018
 (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$589
 $531
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization571
 509
Deferred income taxes and investment tax credits(20) 88
Other7
 (31)
Net change in other working capital components(60) 150
Wildfire fund, current and noncurrent(323) —
Changes in other noncurrent assets and liabilities, net(10) (16)
Net cash provided by operating activities754
 1,231
    
CASH FLOWS FROM INVESTING ACTIVITIES   
Expenditures for property, plant and equipment(1,071) (1,194)
Decrease in cash from deconsolidation of Otay Mesa VIE(8) —
Purchases of nuclear decommissioning trust assets(728) (703)
Proceeds from sales of nuclear decommissioning trust assets728
 703
Increase in loans to affiliate, net(25) —
Other7
 —
Net cash used in investing activities(1,097) (1,194)
    
CASH FLOWS FROM FINANCING ACTIVITIES   
Equity contribution from Sempra Energy322
 —
Issuances of debt (maturities greater than 90 days)400
 398
Payments on debt (maturities greater than 90 days) and finance leases(269) (204)
Decrease in short-term debt, net(291) (205)
Contributions from (distributions to) noncontrolling interest, net172
 (8)
Debt issuance costs(4) (3)
Net cash provided by (used in) financing activities330
 (22)
    
(Decrease) increase in cash, cash equivalents and restricted cash(13) 15
Cash, cash equivalents and restricted cash, January 137
 29
Cash, cash equivalents and restricted cash, September 30$24
 $44
    
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION   
Interest payments, net of amounts capitalized$285
 $139
Income tax payments, net of refunds131
 79
    
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES 
  
Accrued capital expenditures$117
 $113
Increase in finance lease obligations for investment in property, plant and equipment12
 —
Common dividends declared but not paid—
 250
SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
 SDG&E shareholder’s equity  
 Pretax
amount		Income tax expenseNet-of-tax
amount		Noncontrolling
interest
(after-tax)		Total
 (unaudited)
 Three months ended September 30, 2020 and 2019
2020:     
Net income/Comprehensive income$211 $(33)$178 $0 $178 
2019:     
Net income$334 $(71)$263 $3 $266 
Other comprehensive income (loss):     
Financial instruments0 0 0 1 1 
Total other comprehensive income0 0 0 1 1 
Comprehensive income$334 $(71)$263 $4 $267 
 Nine months ended September 30, 2020 and 2019
2020:     
Net income$794 $(161)$633 $0 $633 
Other comprehensive income (loss):     
Pension and other postretirement benefits5 (1)4 0 4 
Total other comprehensive income5 (1)4 0 4 
Comprehensive income$799 $(162)$637 $0 $637 
2019:     
Net income$693 $(111)$582 $7 $589 
Other comprehensive income (loss):     
Financial instruments0 0 0 2 2 
Pension and other postretirement benefits1 0 1 0 1 
Total other comprehensive income1 0 1 2 3 
Comprehensive income$694 $(111)$583 $9 $592 
See Notes to Condensed Consolidated Financial Statements.


18


SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Dollars in millions)
 Common
stock		 Retained
earnings		 Accumulated
other
comprehensive
income (loss)		 SDG&E
shareholder's
equity		 Noncontrolling
interest		 Total
equity
 (unaudited)
 Three months ended September 30, 2019
Balance at June 30, 2019$1,338
 $5,008
 $(11) $6,335
 $103
 $6,438
            
Net income  263
   263
 3
 266
Other comprehensive income      

 1
 1
            
Equity contribution322
     322
   322
Noncontrolling interest activities:           
Contributions      

 175
 175
Distributions      

 (1) (1)
Decrease from deconsolidation        (281) (281)
Balance at September 30, 2019$1,660
 $5,271
 $(11) $6,920
 $—
 $6,920
            
 Three months ended September 30, 2018
Balance at June 30, 2018$1,338
 $4,584
 $(8) $5,914
 $29
 $5,943
            
Net income  205
   205
 11
 216
Other comprehensive (loss) income    (6) (6) 2
 (4)
            
Common stock dividends declared ($2.14/share)  (250)   (250)   (250)
Noncontrolling interest activities:           
Contributions        1
 1
Distributions 
  
  
   (6) (6)
Balance at September 30, 2018$1,338
 $4,539
 $(14) $5,863
 $37
 $5,900
            
 Nine months ended September 30, 2019
Balance at December 31, 2018$1,338
 $4,687
 $(10) $6,015
 $100
 $6,115
Cumulative-effect adjustment from           
change in accounting principle  2
 (2) —
   —
            
Net income  582
   582
 7
 589
Other comprehensive income    1
 1
 2
 3
            
Equity contribution322
     322
   322
Noncontrolling interest activities:           
Contributions 
  
  
   175
 175
Distributions        (3) (3)
Decrease from deconsolidation        (281) (281)
Balance at September 30, 2019$1,660
 $5,271
 $(11) $6,920
 $—
 $6,920
            
 Nine months ended September 30, 2018
Balance at December 31, 2017$1,338
 $4,268
 $(8) $5,598
 $28
 $5,626
            
Net income  521
   521
 10
 531
Other comprehensive (loss) income    (6) (6) 7
 1
            
Common stock dividends declared ($2.14/share)  (250)   (250)   (250)
Noncontrolling interest activities:           
Contributions 
  
  
   2
 2
Distributions        (10) (10)
Balance at September 30, 2018$1,338
 $4,539
 $(14) $5,863
 $37
 $5,900
SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
September 30,December 31,
 2020
2019(1)
 (unaudited) 
ASSETS  
Current assets:  
Cash and cash equivalents$733 $10 
Accounts receivable – trade, net462 398 
Accounts receivable – other, net150 119 
Due from unconsolidated affiliates3 0 
Income taxes receivable, net23 128 
Inventories105 94 
Prepaid expenses202 120 
Regulatory assets367 209 
Fixed-price contracts and other derivatives35 43 
Greenhouse gas allowances13 13 
Other current assets21 24 
Total current assets2,114 1,158 
Other assets:  
Regulatory assets470 440 
Nuclear decommissioning trusts1,057 1,082 
Greenhouse gas allowances191 189 
Right-of-use assets – operating leases109 130 
Wildfire fund371 392 
Other long-term assets186 202 
Total other assets2,384 2,435 
Property, plant and equipment:  
Property, plant and equipment23,813 22,504 
Less accumulated depreciation and amortization(5,890)(5,537)
Property, plant and equipment, net17,923 16,967 
Total assets$22,421 $20,560 
(1)    Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.

19

SOUTHERN CALIFORNIA GAS COMPANY    
CONDENSED STATEMENTS OF OPERATIONS    
(Dollars in millions)    
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
 (unaudited)
        
Operating revenues$975
 $802
 $3,142
 $2,700
Operating expenses       
Cost of natural gas101
 224
 660
 663
Operation and maintenance427
 394
 1,291
 1,160
Depreciation and amortization154
 141
 449
 414
Franchise fees and other taxes43
 38
 132
 111
Impairment losses37
 —
 37
 —
Total operating expenses762
 797
 2,569
 2,348
Operating income213
 5
 573
 352
Other income, net1
 3
 18
 49
Interest income—
 —
 1
 1
Interest expense(36) (29) (104) (82)
Income (loss) before income taxes178
 (21) 488
 320
Income tax (expense) benefit(35) 7
 (50) (75)
Net income (loss)143
 (14) 438
 245
Preferred dividends—
 —
 (1) (1)
Earnings (losses) attributable to common shares$143
 $(14) $437
 $244
SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
 September 30,December 31,
2020
2019(1)
 (unaudited) 
LIABILITIES AND EQUITY  
Current liabilities:  
Short-term debt$0 $80 
Accounts payable569 496 
Due to unconsolidated affiliates61 53 
Interest payable70 43 
Accrued compensation and benefits123 138 
Accrued franchise fees46 53 
Regulatory liabilities69 76 
Current portion of long-term debt and finance leases861 56 
Customer deposits65 74 
Greenhouse gas obligations13 13 
Asset retirement obligations117 95 
Other current liabilities232 133 
Total current liabilities2,226 1,310 
Long-term debt and finance leases6,863 6,306 
Deferred credits and other liabilities:  
Pension obligation, net of plan assets119 153 
Deferred income taxes1,976 1,848 
Deferred investment tax credits14 14 
Regulatory liabilities2,210 2,319 
Asset retirement obligations739 771 
Greenhouse gas obligations96 62 
Deferred credits and other641 677 
Total deferred credits and other liabilities5,795 5,844 
Commitments and contingencies (Note 11)
Shareholder's equity:  
Preferred stock (45 million shares authorized; NaN issued)0 0 
Common stock (255 million shares authorized; 117 million shares outstanding;
no par value)
1,660 1,660 
Retained earnings5,889 5,456 
Accumulated other comprehensive income (loss)(12)(16)
Total shareholder’s equity7,537 7,100 
Total liabilities and shareholder's equity$22,421 $20,560 
(1)    Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.
20

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 Nine months ended September 30,
 20202019
 (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income$633 $589 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization598 571 
Deferred income taxes and investment tax credits36 (20)
Other13 7 
Net change in other working capital components(184)(60)
Wildfire fund, current and noncurrent0 (323)
Changes in other noncurrent assets and liabilities, net(113)(10)
Net cash provided by operating activities983 754 
CASH FLOWS FROM INVESTING ACTIVITIES  
Expenditures for property, plant and equipment(1,323)(1,071)
Decrease in cash from deconsolidation of Otay Mesa VIE0 (8)
Purchases of nuclear decommissioning trust assets(1,091)(728)
Proceeds from sales of nuclear decommissioning trust assets1,091 728 
Increase in loans to affiliate, net0 (25)
Other8 7 
Net cash used in investing activities(1,315)(1,097)
CASH FLOWS FROM FINANCING ACTIVITIES  
Common dividends paid(200)0 
Equity contribution from Sempra Energy0 322 
Issuances of debt (maturities greater than 90 days)1,598 400 
Payments on debt (maturities greater than 90 days) and finance leases(252)(269)
Decrease in short-term debt, net(80)(291)
Contributions from noncontrolling interest, net0 172 
Debt issuance costs(11)(4)
Net cash provided by financing activities1,055 330 
Increase (decrease) in cash, cash equivalents and restricted cash723 (13)
Cash, cash equivalents and restricted cash, January 110 37 
Cash and cash equivalents, September 30$733 $24 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION  
Interest payments, net of amounts capitalized$276 $285 
Income tax payments, net of refunds20 131 
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES  
Accrued capital expenditures$184 $117 
Increase in finance lease obligations for investment in property, plant and equipment26 12 
See Notes to Condensed Consolidated Financial Statements.
21

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Dollars in millions)
 Common
stock		Retained
earnings		Accumulated
other
comprehensive
income (loss)		SDG&E
shareholder's
equity		Noncontrolling
interest		Total
equity
(unaudited)
Three months ended September 30, 2020
Balance at June 30, 2020$1,660 $5,711 $(12)$7,359 $0 $7,359 
Net income178 178 0 178 
Balance at September 30, 2020$1,660 $5,889 $(12)$7,537 $0 $7,537 
Three months ended September 30, 2019
Balance at June 30, 2019$1,338 $5,008 $(11)$6,335 $103 $6,438 
Net income263 263 3 266 
Other comprehensive income1 1 
Equity contribution from Sempra Energy322 322 322 
Noncontrolling interest activities:
Contributions175 175 
Distributions   (1)(1)
Deconsolidation(281)(281)
Balance at September 30, 2019$1,660 $5,271 $(11)$6,920 $0 $6,920 
 Nine months ended September 30, 2020
Balance at December 31, 2019$1,660 $5,456 $(16)$7,100 $0 $7,100 
Net income633 633 0 633 
Other comprehensive income4 4 0 4 
Common stock dividends declared ($1.72/share)(200)(200)(200)
Balance at September 30, 2020$1,660 $5,889 $(12)$7,537 $0 $7,537 
Nine months ended September 30, 2019
Balance at December 31, 2018$1,338 $4,687 $(10)$6,015 $100 $6,115 
Adoption of ASU 2018-022 (2)— 0 
Adjusted balance at December 31, 20181,338 4,689 (12)6,015 100 6,115 
Net income582 582 7 589 
Other comprehensive income1 1 2 3 
Equity contribution from Sempra Energy322 322 322 
Noncontrolling interest activities:
Contributions   175 175 
Distributions(3)(3)
Deconsolidation(281)(281)
Balance at September 30, 2019$1,660 $5,271 $(11)$6,920 $0 $6,920 
See Notes to Condensed Consolidated Financial Statements.
22

SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in millions)
 Three months ended September 30,Nine months ended September 30,
2020201920202019
 (unaudited)
Operating revenues$842 $975 $3,247 $3,142 
Operating expenses 
Cost of natural gas92 101 476 660 
Operation and maintenance521 427 1,526 1,291 
Depreciation and amortization165 154 486 449 
Franchise fees and other taxes48 43 142 132 
Impairment losses0 37 0 37 
Total operating expenses826 762 2,630 2,569 
Operating income16 213 617 573 
Other (expense) income, net(7)1 21 18 
Interest income0 0 2 1 
Interest expense(39)(36)(119)(104)
(Loss) income before income taxes(30)178 521 488 
Income tax benefit (expense)6 (35)(95)(50)
Net (loss) income(24)143 426 438 
Preferred dividends0 0 (1)(1)
(Losses) earnings attributable to common shares$(24)$143 $425 $437 
See Notes to Condensed Financial Statements.


23
SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
 Pretax
amount		 Income tax (expense) benefit Net-of-tax
amount
 (unaudited)
 Three months ended September 30, 2019 and 2018
2019:     
Net income$178
 $(35) $143
Other comprehensive income (loss):     
Financial instruments1
 —
 1
Total other comprehensive income1
 —
 1
Comprehensive income$179
 $(35) $144
2018:     
Net loss/Comprehensive loss$(21) $7
 $(14)
      
 Nine months ended September 30, 2019 and 2018
2019:     
Net income$488
 $(50) $438
Other comprehensive income (loss):     
Financial instruments1
 —
 1
Pension and other postretirement benefits6
 (2) 4
Total other comprehensive income7
 (2) 5
Comprehensive income$495
 $(52) $443
2018:     
Net income$320
 $(75) $245
Other comprehensive income (loss):     
Pension and other postretirement benefits1
 —
 1
Total other comprehensive income1
 —
 1
Comprehensive income$321
 $(75) $246

SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
 Pretax
amount		Income tax benefit (expense)Net-of-tax
amount
 (unaudited)
 Three months ended September 30, 2020 and 2019
2020:   
Net loss/Comprehensive loss$(30)$6 $(24)
2019:   
Net income$178 $(35)$143 
Other comprehensive income (loss):
Financial instruments1 0 1 
Total other comprehensive income1 0 1 
Comprehensive income$179 $(35)$144 
 Nine months ended September 30, 2020 and 2019
2020:   
Net income$521 $(95)$426 
Other comprehensive income (loss):
Pension and other postretirement benefits1 0 1 
Total other comprehensive income1 0 1 
Comprehensive income$522 $(95)$427 
2019:   
Net income$488 $(50)$438 
Other comprehensive income (loss):
Financial instruments1 0 1 
Pension and other postretirement benefits6 (2)4 
Total other comprehensive income7 (2)5 
Comprehensive income$495 $(52)$443 
See Notes to Condensed Financial Statements.



SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED BALANCE SHEETS
(Dollars in millions)
 September 30,
2019		 
December 31,
2018(1)
 (unaudited)  
ASSETS   
Current assets:   
Cash and cash equivalents$5
 $18
Accounts receivable – trade, net356
 634
Accounts receivable – other, net67
 97
Due from unconsolidated affiliates—
 7
Inventories134
 134
Regulatory assets7
 12
Greenhouse gas allowances37
 37
Other39
 31
Total current assets645
 970
    
Other assets:   
Regulatory assets1,341
 1,051
Insurance receivable for Aliso Canyon costs354
 461
Greenhouse gas allowances261
 116
Right-of-use assets – operating leases99
 —
Sundry360
 352
Total other assets2,415
 1,980
    
Property, plant and equipment:   
Property, plant and equipment18,904
 18,138
Less accumulated depreciation and amortization(5,941) (5,699)
Property, plant and equipment, net12,963
 12,439
Total assets$16,023
 $15,389

(1)

Derived from audited financial statements.
See Notes to Condensed Financial Statements.

24
SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
 September 30,
2019		 
December 31,
2018(1)
 (unaudited)  
LIABILITIES AND SHAREHOLDERS’ EQUITY   
Current liabilities:   
Short-term debt$108
 $256
Accounts payable – trade320
 556
Accounts payable – other111
 93
Due to unconsolidated affiliates187
 34
Accrued compensation and benefits146
 159
Regulatory liabilities327
 52
Current portion of long-term debt and finance leases5
 3
Customer deposits70
 101
Reserve for Aliso Canyon costs45
 160
Greenhouse gas obligations37
 37
Asset retirement obligations89
 90
Other223
 217
Total current liabilities1,668
 1,758
    
Long-term debt and finance leases3,784
 3,427
    
Deferred credits and other liabilities:   
Pension obligation, net of plan assets747
 760
Deferred income taxes1,225
 1,177
Deferred investment tax credits7
 8
Regulatory liabilities1,423
 1,612
Asset retirement obligations2,015
 1,973
Greenhouse gas obligations184
 86
Deferred credits and other422
 330
Total deferred credits and other liabilities6,023
 5,946
    
Commitments and contingencies (Note 11)

 

    
Shareholders’ equity:   
Preferred stock (11 million shares authorized; 1 million shares outstanding)22
 22
Common stock (100 million shares authorized; 91 million shares outstanding;   
no par value)866
 866
Retained earnings3,679
 3,390
Accumulated other comprehensive income (loss)(19) (20)
Total shareholders’ equity4,548
 4,258
Total liabilities and shareholders’ equity$16,023
 $15,389
(1)
Derived from audited financial statements.
See Notes to Condensed Financial Statements.



SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED BALANCE SHEETS
(Dollars in millions)
 September 30,December 31,
2020
2019(1)
 (unaudited) 
ASSETS  
Current assets:  
Cash and cash equivalents$304 $10 
Accounts receivable – trade, net422 710 
Accounts receivable – other, net82 87 
Due from unconsolidated affiliates1 11 
Income taxes receivable, net31 161 
Inventories160 136 
Regulatory assets18 7 
Greenhouse gas allowances53 52 
Other current assets51 44 
Total current assets1,122 1,218 
Other assets:  
Regulatory assets1,187 1,407 
Insurance receivable for Aliso Canyon costs504 339 
Greenhouse gas allowances361 248 
Right-of-use assets – operating leases82 94 
Other long-term assets460 447 
Total other assets2,594 2,535 
Property, plant and equipment:  
Property, plant and equipment20,558 19,362 
Less accumulated depreciation and amortization(6,331)(6,038)
Property, plant and equipment, net14,227 13,324 
Total assets$17,943 $17,077 
SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 Nine months ended September 30,
 2019 2018
 (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$438
 $245
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization449
 414
Deferred income taxes and investment tax credits(79) 70
Impairment losses37
 —
Other(5) (4)
Net change in other working capital components194
 391
Insurance receivable for Aliso Canyon costs107
 (56)
Changes in other noncurrent assets and liabilities, net(328) (178)
Net cash provided by operating activities813
 882
    
CASH FLOWS FROM INVESTING ACTIVITIES   
Expenditures for property, plant and equipment(1,019) (1,127)
Increase in loans to affiliate, net—
 (88)
Other1
 6
Net cash used in investing activities(1,018) (1,209)
    
CASH FLOWS FROM FINANCING ACTIVITIES   
Preferred dividends paid(1) (1)
Issuances of debt (maturities greater than 90 days)349
 949
Payments on debt (maturities greater than 90 days) and finance leases(4) (500)
Decrease in short-term debt, net(148) (116)
Debt issuance costs(4) (9)
Net cash provided by financing activities192
 323
    
Decrease in cash and cash equivalents(13) (4)
Cash and cash equivalents, January 118
 8
Cash and cash equivalents, September 30$5
 $4
    
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION   
Interest payments, net of amounts capitalized$92
 $71
Income tax payments (refunds), net115
 (1)
    
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES   
Accrued capital expenditures$167
 $178
Increase in finance lease obligations for investment in property, plant and equipment15
 7
Common dividends declared but not paid150
 50
(1)    Derived from audited financial statements.
See Notes to Condensed Financial Statements.

25


SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
 September 30,December 31,
2020
2019(1)
 (unaudited) 
LIABILITIES AND SHAREHOLDERS’ EQUITY  
Current liabilities:  
Short-term debt$0 $630 
Accounts payable – trade359 545 
Accounts payable – other117 110 
Due to unconsolidated affiliates101 47 
Accrued compensation and benefits174 182 
Regulatory liabilities304 243 
Current portion of long-term debt and finance leases11 6 
Customer deposits58 71 
Reserve for Aliso Canyon costs268 9 
Greenhouse gas obligations53 52 
Asset retirement obligations63 65 
Other current liabilities254 222 
Total current liabilities1,762 2,182 
Long-term debt and finance leases4,764 3,788 
Deferred credits and other liabilities:  
Pension obligation, net of plan assets757 785 
Deferred income taxes1,443 1,403 
Deferred investment tax credits8 7 
Regulatory liabilities1,200 1,422 
Asset retirement obligations2,181 2,112 
Greenhouse gas obligations316 208 
Deferred credits and other438 422 
Total deferred credits and other liabilities6,343 6,359 
Commitments and contingencies (Note 11)
Shareholders’ equity:  
Preferred stock (11 million shares authorized; 1 million shares outstanding)22 22 
Common stock (100 million shares authorized; 91 million shares outstanding; no par value)866 866 
Retained earnings4,208 3,883 
Accumulated other comprehensive income (loss)(22)(23)
Total shareholders’ equity5,074 4,748 
Total liabilities and shareholders’ equity$17,943 $17,077 
SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Dollars in millions)
 Preferred
stock		 Common
stock		 Retained
earnings		 Accumulated
other
comprehensive
income (loss)		 Total
shareholders’
equity
 (unaudited)
 Three months ended September 30, 2019
Balance at June 30, 2019$22
 $866
 $3,686
 $(20) $4,554
          
Net income    143
 

 143
Other comprehensive income      1
 1
          
Dividends declared:         
Preferred stock ($0.38/share)    —
 

 —
Common stock ($1.64/share)    (150)   (150)
Balance at September 30, 2019$22
 $866
 $3,679
 $(19) $4,548
          
 Three months ended September 30, 2018
Balance at June 30, 2018$22
 $866
 $3,298
 $(20) $4,166
          
Net loss    (14) 

 (14)
          
Dividends declared:         
Preferred stock ($0.38/share)    —
   —
Common stock ($0.55/share)    (50)   (50)
Balance at September 30, 2018$22
 $866
 $3,234
 $(20) $4,102
          
 Nine months ended September 30, 2019
Balance at December 31, 2018$22
 $866
 $3,390
 $(20) $4,258
Cumulative-effect adjustment from         
change in accounting principle    2
 (4) (2)
          
Net income    438
 

 438
Other comprehensive income      5
 5
          
Dividends declared:         
Preferred stock ($1.13/share)    (1) 

 (1)
Common stock ($1.64/share)    (150)   (150)
Balance at September 30, 2019$22
 $866
 $3,679
 $(19) $4,548
          
 Nine months ended September 30, 2018
Balance at December 31, 2017$22
 $866
 $3,040
 $(21) $3,907
          
Net income    245
   245
Other comprehensive income      1
 1
          
Dividends declared:         
Preferred stock ($1.13/share)    (1) 

 (1)
Common stock ($0.55/share)    (50)   (50)
Balance at September 30, 2018$22
 $866
 $3,234
 $(20) $4,102
(1)Derived from audited financial statements.
See Notes to Condensed Financial Statements.



26

SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 Nine months ended September 30,
 20202019
 (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income$426 $438 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization486 449 
Deferred income taxes and investment tax credits(38)(79)
Impairment losses0 37 
Other42 (5)
Net change in working capital components513 194 
Insurance receivable for Aliso Canyon costs(165)107 
Changes in other noncurrent assets and liabilities, net124 (328)
Net cash provided by operating activities1,388 813 
CASH FLOWS FROM INVESTING ACTIVITIES  
Expenditures for property, plant and equipment(1,345)(1,019)
Other0 1 
Net cash used in investing activities(1,345)(1,018)
CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid(50)0 
Preferred dividends paid(1)(1)
Issuances of debt (maturities greater than 90 days)949 349 
Decrease in short-term debt, net(630)(148)
Payments on finance leases(9)(4)
Debt issuance costs(8)(4)
Net cash provided by financing activities251 192 
Increase (decrease) in cash and cash equivalents294 (13)
Cash and cash equivalents, January 110 18 
Cash and cash equivalents, September 30$304 $5 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION  
Interest payments, net of amounts capitalized$114 $92 
Income tax payments, net of refunds1 115 
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES  
Accrued capital expenditures$146 $167 
Increase in finance lease obligations for investment in property, plant and equipment46 15 
Common dividends declared but not paid50 150 
See Notes to Condensed Financial Statements.

27

SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Dollars in millions)
 Preferred
stock		Common
stock		Retained
earnings		Accumulated
other
comprehensive
income (loss)		Total
shareholders’
equity
(unaudited)
Three months ended September 30, 2020
Balance at June 30, 2020$22 $866 $4,282 $(22)$5,148 
Net loss(24)(24)
Dividends declared:
Preferred stock ($0.38/share)0 0 
Common stock ($0.55/share)(50)(50)
Balance at September 30, 2020$22 $866 $4,208 $(22)$5,074 
Three months ended September 30, 2019
Balance at June 30, 2019$22 $866 $3,686 $(20)$4,554 
Net income143 143 
Other comprehensive income1 1 
Dividends declared:
Preferred stock ($0.38/share)0 0 
Common stock ($1.64/share)(150)(150)
Balance at September 30, 2019$22 $866 $3,679 $(19)$4,548 
 Nine months ended September 30, 2020
Balance at December 31, 2019$22 $866 $3,883 $(23)$4,748 
Net income426 426 
Other comprehensive income1 1 
Dividends declared:
Preferred stock ($1.13/share)(1)(1)
Common stock ($1.10/share)(100)(100)
Balance at September 30, 2020$22 $866 $4,208 $(22)$5,074 
Nine months ended September 30, 2019
Balance at December 31, 2018$22 $866 $3,390 $(20)$4,258 
Adoption of ASU 2018-022 (4)(2)
Adjusted balance at December 31, 201822 866 3,392 (24)4,256 
Net income438 438 
Other comprehensive income5 5 
Dividends declared:
Preferred stock ($1.13/share)(1)(1)
Common stock ($1.64/share)(150)(150)
Balance at September 30, 2019$22 $866 $3,679 $(19)$4,548 
See Notes to Condensed Financial Statements.


28

SEMPRA ENERGY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. GENERAL INFORMATION AND OTHER FINANCIAL DATA
PRINCIPLES OF CONSOLIDATION
Sempra Energy
Sempra Energy’s Condensed Consolidated Financial Statements include the accounts of Sempra Energy, a California-based energy-services holding company, and its consolidated subsidiaries and VIEs. Sempra Global is the holding company for most of our subsidiaries that are not subject to California or Texas utility regulation. Sempra Energy’s businesses were managed within 6 separate reportable segments until April 2019 and 5 separate reportable segments thereafter, which we discuss in Note 12. In the first quarter of 2019, our Sempra LNG & Midstream segment was renamed “Sempra LNG.” This segment name change had no impact on our historical position, results of operations, cash flow or segment level results previously reported. All references in these Notes to our reportable segments are not intended to refer to any legal entity with the same or similar name.
SDG&E
SDG&E’s Condensed Consolidated Financial Statements include its accounts and the accounts of a VIE of which SDG&E was the primary beneficiary until August 23, 2019, at which time SDG&E deconsolidated the VIE, as we discuss below in “Variable Interest Entities.”VIE. SDG&E’s common stock is wholly owned by Enova Corporation, which is a wholly owned subsidiary of Sempra Energy.
SoCalGas
SoCalGas’ common stock is wholly owned by Pacific Enterprises, which is a wholly owned subsidiary of Sempra Energy.
In this report, we refer to SDG&E and SoCalGas collectively as the California Utilities.
BASIS OF PRESENTATION
This is a combined report of Sempra Energy, SDG&E and SoCalGas. We provide separate information for SDG&E and SoCalGas as required. References in this report to “we,” “us,” “our” and “Sempra Energy Consolidated” are to Sempra Energy and its consolidated entities, unless otherwise indicated by the context. We have eliminated intercompany accounts and transactions within the consolidated financial statements of each reporting entity.
Throughout this report, we refer to the following as Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements when discussed together or collectively:
▪the Condensed Consolidated Financial Statements and related Notes of Sempra Energy and its subsidiaries and VIEs;
▪the Condensed Consolidated Financial Statements and related Notes of SDG&E and its VIE (until deconsolidation of the VIE on August 23, 2019); and
▪the Condensed Financial Statements and related Notes of SoCalGas.
▪the Condensed Consolidated Financial Statements and related Notes of Sempra Energy and its subsidiaries and VIEs;
▪the Condensed Consolidated Financial Statements and related Notes of SDG&E and its VIE (until deconsolidation of Otay Mesa VIE in August 2019); and
▪the Condensed Financial Statements and related Notes of SoCalGas.
We have prepared the Condensed Consolidated Financial Statements in conformity with U.S. GAAP and in accordance with the interim-period-reporting requirements of Form 10-Q.10-Q and applicable rules of the SEC. Results of operations for interim periods are not necessarily indicative of results for the entire year.year or for any other period. We evaluated events and transactions that occurred after September 30, 20192020 through the date the financial statements were issued and, in the opinion of management, the accompanying statements reflect all adjustments necessary for a fair presentation. These adjustments are only of a normal, recurring nature.
All December 31, 20182019 balance sheet information in the Condensed Consolidated Financial Statements has been derived from our audited 20182019 Consolidated Financial Statements in the Annual Report, which for Sempra Energy has been retrospectively adjusted for discontinued operations, as we discuss below.Report. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the interim-period-reporting provisions of U.S. GAAP and the SEC.

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We describe our significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report and the impact of the adoption of new accounting standards on those policies in Note 2 below. We follow the same accounting policies for interim period reporting purposes.
You should read the information in this Quarterly Reportreport in conjunction with the Annual Report.
Discontinued Operations
OnIn January 25, 2019, our board of directors approved a plan to sell our South American businesses based on our strategic focus on North America. We determined that these businesses, which previously constituted the Sempra South American Utilities segment, and certain activities associated with these businesses, met the held-for-sale criteria. These businesses are presented as discontinued operations, which we discuss further in Note 5, as the planned sales represent a strategic shift that will have a major effect on our operations and financial results. Throughout this report,We completed the financial information for all periods presented has been adjusted to reflectsales in the presentationsecond quarter of these businesses as discontinued operations, which we discuss further in Note 5.2020. Our discussions in the Notes below relate only to our continuing operations unless otherwise noted.
Regulated Operations
The California Utilities and Sempra Mexico’s natural gas distribution utility, Ecogas, prepare their financial statements in accordance with the provisions of U.S. GAAP governing rate-regulated operations. We discuss revenue recognition and the effects of regulation and revenue recognition at our utilities in Notes 13 and 4 below and in Notes 1, 3 and 4 of the Notes to Consolidated Financial Statements in the Annual Report.
Our Sempra Texas Utilities segment is comprised of our equity method investments in holding companies that own interests in regulated electric transmission and distribution utilities in Texas and prepare their financial statements in accordance with the provisions of U.S. GAAP governing rate-regulated operations.Texas.
Our Sempra Mexico segment includes the operating companies of our subsidiary, IEnova.IEnova, as well as certain holding companies and risk management activity. Certain business activities at IEnova are regulated by the Comisión Reguladora de Energía (Energy Regulatory Commission of Mexico)CRE and meet the regulatory accounting requirements of U.S. GAAP. Pipeline projects under construction at IEnova that meet the regulatory accounting requirements of U.S. GAAP record the impact of AFUDC related to equity. We discuss AFUDC below and in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

CASH, CASH EQUIVALENTS AND RESTRICTED CASH
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on theSempra Energy’s Condensed Consolidated Balance Sheets to the sum of such amounts reported on theSempra Energy’s Condensed Consolidated Statements of Cash Flows. We provide information about the nature of restricted cash in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(Dollars in millions)
September 30,December 31,
 20202019
Sempra Energy Consolidated:
Cash and cash equivalents$3,515 $108 
Restricted cash, current28 31 
Restricted cash, noncurrent3 3 
Cash, cash equivalents and restricted cash in discontinued operations0 75 
Total cash, cash equivalents and restricted cash on the Condensed Consolidated Statements of Cash Flows$3,546 $217 
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(Dollars in millions)
 September 30,December 31,
 20192018
Sempra Energy Consolidated:  
Cash and cash equivalents$106
$102
Restricted cash, current28
35
Restricted cash, noncurrent3
21
Cash, cash equivalents and restricted cash in discontinued operations360
88
Total cash, cash equivalents and restricted cash on the Condensed Consolidated Statements of Cash Flows$497
$246
SDG&E: 
 
Cash and cash equivalents$24
$8
Restricted cash, current—
11
Restricted cash, noncurrent—
18
Total cash, cash equivalents and restricted cash on the Condensed Consolidated Statements of Cash Flows$24
$37

In the Sempra Energy Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2020, the ending cash, cash equivalents and restricted cash balance in discontinued operations of $4.6 billion is considered to be cash, cash equivalents and restricted cash for continuing operations following the sales of the South American businesses.


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CREDIT LOSSES
We are exposed to credit losses from financial assets measured at amortized cost, including trade and other accounts receivable and amounts due from unconsolidated affiliates. We are also exposed to credit losses from off-balance sheet arrangements through our guarantees of Cameron LNG JV’s debt.
We regularly monitor and evaluate credit losses and record allowances for expected credit losses, if necessary, for trade and other accounts receivable using a combination of factors, including past-due status based on contractual terms, trends in write-offs, the age of the receivable, historical and industry trends, counterparty creditworthiness, economic conditions and specific events, such as bankruptcies. We write off financial assets measured at amortized cost in the period in which we determine they are not recoverable. We record recoveries of amounts previously written off when it is known that they will be recovered.
In connection with the COVID-19 pandemic, the California Utilities have implemented certain measures to assist customers, including suspending service disconnections due to nonpayment for residential and small business customers, waiving late payment fees for business customers, and offering flexible payment plans for customers experiencing difficulty paying their electric or gas bills. As we discuss in Note 4, the CPUC authorized each of the California Utilities to establish a CPPMA to track and request recovery of incremental costs, including uncollectible expenses, associated with complying with residential and small business customer protection measures implemented by the CPUC related to the COVID-19 pandemic.
In June 2020, the CPUC issued a decision in a separate proceeding addressing service disconnections that, among other things, allows each of the California Utilities to establish a two-way balancing account to record the uncollectible expenses associated with residential customers’ inability to pay their electric or gas bills. This decision also directs the California Utilities to establish an AMP that provides successfully participating, income-qualified residential customers with relief from outstanding utility bill amounts. Refer to Note 4 for further discussion.
The California Utilities have recorded increases in their allowances for expected credit losses as of September 30, 2020 primarily related to expected forgiveness of outstanding utility bill amounts for residential customers eligible under the AMP. Our businesses will continue to monitor macroeconomic factors and customer payment patterns when evaluating their allowances for credit losses in future reporting periods, which may increase significantly due to the effects of the COVID-19 pandemic or other factors.
We provide below allowances and changes in allowances for credit losses for trade and other accounts receivable, excluding allowances related to amounts due from unconsolidated affiliates and off-balance sheet arrangements, which we discuss separately below the table.
TRADE AND OTHER ACCOUNTS RECEIVABLE – ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
Sempra
Energy
Consolidated(1)
SDG&E(2)
SoCalGas(3)
Allowances for credit losses at December 31, 2019$29 $14 $15 
Incremental allowance upon adoption of ASU 2016-131 0 — 
Provisions for expected credit losses84 44 40 
Write-offs(11)(6)(5)
Allowances for credit losses at September 30, 2020$103 $52 $50 
(1)Balance at September 30, 2020 includes $75 million and $28 million in Accounts Receivable – Trade, Net and Accounts Receivable – Other, Net, respectively.
(2)    Balance at September 30, 2020 includes $37 million and $15 million in Accounts Receivable – Trade, Net and Accounts Receivable – Other, Net, respectively.
(3)    Balance at September 30, 2020 includes $37 million and $13 million in Accounts Receivable – Trade, Net and Accounts Receivable – Other, Net, respectively.

For amounts due from unconsolidated affiliates and off-balance sheet arrangements, on a quarterly basis, we evaluate credit losses and record allowances for expected credit losses, if necessary, based on credit quality indicators such as external credit ratings, published default rate studies, the maturity date of the instrument and past delinquencies. However, we do not record allowances for expected credit losses related to accrued interest receivable on loans due from unconsolidated affiliates because we write off such amounts, if any, through a reversal of interest income in the period we determine such amounts are uncollectible. In the absence of external credit ratings, we may utilize an internally developed credit rating based on our analysis of a counterparty’s financial statements to determine our expected credit losses.
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As we discuss below in “Transactions with Affiliates,” we have loans due from unconsolidated affiliates with varying tenors, interest rates and currencies. We provide below the changes in allowances for credit losses for loans and other amounts due from unconsolidated affiliates.
AMOUNTS DUE FROM UNCONSOLIDATED AFFILIATES – ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
Sempra
Energy
Consolidated(1)
Allowances for credit losses at December 31, 2019$0 
Allowance established upon adoption of ASU 2016-136 
Reduction to expected credit losses(3)
Allowances for credit losses at September 30, 2020$3 
(1)    Balance at September 30, 2020 includes negligible amounts and $3 million in Due from Unconsolidated Affiliates – Current and Due from Unconsolidated Affiliates – Noncurrent, respectively.

As we discuss in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report, Sempra Energy has provided guarantees for a maximum aggregate amount of $4.0 billion associated with Cameron LNG JV’s debt obligations. We established a liability for credit losses of $6 million for this off-balance sheet arrangement upon adoption of ASU 2016-13 on January 1, 2020 and we subsequently reduced this liability by $3 million in the nine months ended September 30, 2020 through a reduction to credit loss expense, which is included in O&M on the Sempra Energy Condensed Consolidated Statement of Operations. At September 30, 2020, expected credit losses of $3 million are included in Other Current Liabilities on the Sempra Energy Condensed Consolidated Balance Sheet.
CONCENTRATION OF CREDIT RISK
Credit risk is the risk of loss that would be incurred as a result of nonperformance by our counterparties on their contractual obligations. We have policies governing the management of credit risk that are administered by the respective credit departments at each of our segments and overseen by their separate risk management committees.
This oversight includes calculating current and potential credit risk on a regular basis and monitoring actual balances in comparison to approved limits. We establish credit limits based on risk and return considerations under terms customarily available in the industry. We avoid concentration of counterparties whenever possible, and we believe our credit policies significantly reduce overall credit risk. These policies include an evaluation of:
▪prospective counterparties’ financial condition (including credit ratings)
▪collateral requirements
▪the use of standardized agreements that allow for the netting of positive and negative exposures associated with a single counterparty
▪downgrade triggers
We believe that we have provided adequate reserves for counterparty nonperformance in our allowances for credit losses.
In the nine months ended September 30, 2020, four customers each represented 10% or more of Sempra Mexico’s revenues (including intercompany transactions with affiliates consolidated by Sempra Energy). Additionally, for the same period, certain of our unconsolidated equity method investees (Oncor Holdings, Cameron LNG JV and IMG JV) had customers that each represented 10% or more of their respective revenues.
When our development projects become operational, we rely significantly on the ability of suppliers to perform under long-term agreements and on our ability to enforce contract terms in the event of nonperformance. Also, the factors that we consider in evaluating a development project include negotiating customer and supplier agreements and, therefore, we rely on these agreements for future performance. We also may condition our decision to go forward on development projects on first obtaining these customer and supplier agreements.


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INVENTORIES
The following table presents the components of inventories by segment.are as follows:
INVENTORY BALANCES
(Dollars in millions)
 Natural gasLNGMaterials and suppliesTotal
 September 30, 2020 December 31, 2019September 30, 2020 December 31, 2019September 30, 2020 December 31, 2019September 30, 2020 December 31, 2019
Sempra Energy Consolidated$127 $110 $2 $9 $180 $158 $309 $277 
SDG&E0 1 0 0 105 93 105 94 
SoCalGas104 90 0 0 56 46 160 136 
INVENTORY BALANCES
(Dollars in millions)
 Natural gas  LNG  Materials and supplies  Total
 
September
30, 2019
 December 31, 2018  
September
30, 2019
 December 31, 2018  
September
 30, 2019
 December 31, 2018  
September
30, 2019
 December 31, 2018
SDG&E$1
 $—
  $—
 $—
  $91
 $102
  $92
 $102
SoCalGas87
 92
  —
 —
  47
 42
  134
 134
Sempra Mexico—
 —
  6
 4
  16
 15
  22
 19
Sempra LNG22
 3
  —
 —
  —
 —
  22
 3
Sempra Energy Consolidated$110
 $95
  $6
 $4
  $154
 $159
  $270
 $258


WILDFIRE FUND
On July 12, 2019, AB 1054 and AB 111 (together, the Wildfire Legislation) wereLegislation was signed into law. The Wildfire Legislation addresseslaw to address certain issues related to catastrophic wildfires in the State of California and their impact on electric IOUs. Investor-owned gas distribution utilities such as SoCalGas are not covered by this legislation. The issues addressed include wildfire mitigation, cost recovery standards and requirements, a wildfire fund, a cap on liability, and the establishment of a wildfire safety board.
The Wildfire Legislation requires SDG&E to install at least $215 million of fire risk mitigation capital improvements, which will be the first $215 million of capital included in its wildfire mitigation plan, and recover its securitized financing costs without a ROE.
The Wildfire Legislation establishes a revised legal standard for the recovery of wildfire costs (Revised Prudent Manager Standard) and establishes a fund (the Wildfire Fund) to provide liquidity to SDG&E, PG&E and Edison (each a California electric IOU) to pay IOU wildfire-related claims in the event that the governmental agency responsible for determining causation determines the applicable IOU’s equipment caused the ignition of a wildfire, the primary insurance coverage is exceeded and certain other conditions are satisfied. The primary purpose of the Wildfire Fund is to pool resources provided by shareholders and ratepayers of the IOUs and make those resources available to reimburse the IOUs for third-party wildfire claims incurred after July 12, 2019, the effective date ofWe discuss the Wildfire Legislation subject to certain limitations.
An IOU may seek payment from the Wildfire Fund for settled or adjudicated third-party damage claims arising from certain wildfires that exceed,further in aggregate in a calendar year, the greater of $1 billion or the IOU’s required amount of insurance coverage as recommended by the Wildfire Fund’s administrator. Wildfire claims approved by the Wildfire Fund’s administrator will be paid by the Wildfire Fund to the IOU to the extent funds are available. These utilized funds will be subject to review by the CPUC, which will make a determination as to the degree an IOU’s conduct related to an ignition of a wildfire was prudent or imprudent. The Revised Prudent Manager Standard requires that the CPUC apply clear standards when reviewing wildfire liability losses paid when determining the reasonableness of an IOU’s conduct related to an ignition. Under this standard, the conduct under review related to the ignition may include factors within and beyond the IOU’s control, including humidity, temperature and winds. Costs and expenses may be allocated for cost recovery in full or in part. Also, under this standard, an IOU’s conduct will be deemed reasonable if a valid annual safety certification is in place at the timeNote 1 of the ignition, unless a serious doubt is raised, in which case the burden shiftsNotes to the utility to dispel that doubt. The IOUs will receive an annual safety certification from the CPUC if they meet various requirements.


If an IOU has maintained a valid annual safety certification, to the extent it is found to be imprudent, claims will be reimbursable by the IOU to the Wildfire Fund up to a cap based on the IOU’s rate base. The aggregate requirement to reimburse the Wildfire Fund over a trailing three calendar year period is capped at 20 percent of the equity portion of an IOU’s electric transmission and distribution rate baseConsolidated Financial Statements in the year of the prudency determination. SDG&E received its annual safety certification from the CPUC on July 26, 2019, which is valid for 12 months. Based on 2018 rate base, the initial liability cap for SDG&E is approximately $825 million, which will be adjusted annually. The liability cap will apply on a rolling three-year basis so long as future annual safety certifications are received and the Wildfire Fund has not been terminated, which could occur if funds are exhausted. Amounts in excess of the liability cap and amounts that are determined to be prudently incurred do not need to be reimbursed by an IOU to the Wildfire Fund. The Wildfire Fund does not have a specified term and coverage will continue until the assets of the Wildfire Fund are exhausted and the Wildfire Fund is terminated, in which case, the remaining funds will be transferred to California’s general fund to be used for fire risk mitigation programs.
The Wildfire Fund could initially be funded up to $10.5 billion by a loan from the State of California Surplus Money Investment Fund, $2 billion of which was loaned to the Wildfire Fund in August 2019. Such lending will subsequently be financed through an anticipated DWR bond, securitized through a dedicated surcharge on ratepayers’ bills attributable to the DWR. In October 2019, the CPUC adopted a decision authorizing a non-bypassable charge to be collected by the IOUs to support the anticipated DWR bond issuance authorized by AB 1054. The CPUC decision also determined that ratepayers of non-participating electrical corporations shall not pay the non-bypassable charge. PG&E has agreed to participate in the Wildfire Fund, subject to bankruptcy court approval. Accordingly, if PG&E is unable to participate in the Wildfire Fund, its customers will not pay the non-bypassable charge, resulting in significantly lower Wildfire Fund contributions from ratepayers than the anticipated $10.5 billion.
The Wildfire Fund could also be funded by up to $7.5 billion in initial shareholder contributions from the IOUs (SDG&E’s share is $322.5 million, PG&E’s share is $4.8 billion and Edison’s share is $2.4 billion). The IOUs could also be required to make annual shareholder contributions to the Wildfire Fund with an aggregate value of $3 billion over a 10-year period (SDG&E’s share is $129 million, PG&E’s share is $1.9 billion and Edison’s share is $945 million). If PG&E is unable to participate in the Wildfire Fund, SDG&E’s and Edison’s aggregate shareholder contributions to the Wildfire Fund will not change and are expected to total approximately $3.8 billion. When estimating the period of benefit of the Wildfire Fund asset that we discuss below, we assume PG&E will participate in the Wildfire Fund. The contributions are not subject to rate recovery.
SDG&E paid its initial shareholder contribution of $322.5 million to the Wildfire Fund in September 2019. SDG&E funded this contribution with proceeds from an equity contribution from Sempra Energy. Sempra Energy funded the equity contribution to SDG&E with proceeds from settling forward sale agreements through physical delivery of shares of Sempra Energy common stock in exchange for cash, which we discuss in “Shareholders’ Equity and Noncontrolling Interests – Sempra Energy Common Stock Offerings” in Note 1. Edison paid its initial shareholder contribution in September 2019.Annual Report.
In a complaint filed in U.S. District Court for the Northern District of California in July 2019, plaintiffs seek to invalidate AB 1054, which established the Wildfire Fund, based on allegations that the legislation violates federal law. That court dismissed the complaint and the plaintiffs have petitioned the U.S. Court of Appeals for the Ninth Circuit to review the dismissal.
In June 2020, the CPUC approved SDG&E’s 2020 wildfire mitigation plan, which will be effective until the CPUC approves a new plan. In addition, on September 14, 2020, SDG&E received its 2020 safety certification from the Wildfire Safety Division of the CPUC. The California Attorney Generalcertificate is valid for 12 months from the issue date.
In July 2020, PG&E received bankruptcy court approval to participate in the Wildfire Fund and has movedmade its required contributions to dismiss the complaint.Wildfire Fund. As a result of PG&E’s participation, the Wildfire Fund will be funded up to $21 billion.
Wildfire Fund Asset and Obligation
In the third quarter of 2019, SDG&E recorded both a Wildfire Fund asset and a related obligation of $451.5 million for its commitment to make shareholder contributions totaling $451.5 million,to the Wildfire Fund, measured at present value as of July 25, 2019 (the date by which both Edison and SDG&E opted to contribute to the Wildfire Fund). SDG&E is amortizing the Wildfire Fund asset to O&M on a straight-line basis over a 10-yearthe estimated period of benefit, as adjusted for utilization by the participating IOUs. The estimated period of benefit of the Wildfire Fund asset is based on several assumptions, including, but not limited to:
historical wildfire experience15 years. SDG&E expects to make annual shareholder contributions of each IOU in$12.9 million through December 31, 2028. SDG&E accretes the State of California, including frequency and severity of the wildfires;
thepresent value of property potentially damaged by wildfires;
the effectiveness of wildfire risk mitigation efforts by each IOU;
liability cap of each IOU;
IOU prudency determination levels;
FERC jurisdictional allocation levels; and
insurance coverage levels.
The use of different assumptions, or changes to the assumptions used, could have a significant impact on the estimated period of benefit of the Wildfire Fund asset.obligation until the liability is settled.


We willSDG&E periodically reevaluateevaluates the estimated period of benefit of the Wildfire Fund asset based on actual experience and changes in the above assumptions. SDG&E may recognize a reduction of its Wildfire Fund asset and record a charge against earnings in the period when there is a reduction of the available coverage due to recoverable claims from any of the participating IOUs. The reduction to the Wildfire Fund asset may be proportionate to the Wildfire Fund’s consumption (i.e., recoveries for outstanding wildfire claims that are recoverable from the Wildfire Fund, net of anticipated or actual reimbursement to the Wildfire Fund by the responsible IOU, would decrease the Wildfire Fund asset and remaining available coverage). Incoverage. Although California has experienced some of the three months ended September 30, 2019, there were no such knownlargest wildfires in its history in 2020 (measured by acres burned), including fires in each participating IOU’s service territory, SDG&E is not aware of any claims from the IOUsmade by any participating IOU requiring an incrementala reduction of the Wildfire Fund asset.
At September 30, 2019,
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The following table summarizes the current portionlocation of balances related to the Wildfire Fund asset was $43 million in Other Current Assets on Sempra Energy’s Condensed Consolidated Balance Sheet and in Prepaid Expenses on SDG&E’s Condensed Consolidated Balance Sheet, and the noncurrent portion of $381 million was in Wildfire Fund on Sempra Energy’s and SDG&E’s Condensed Consolidated Balance Sheets.
Wildfire Fund Obligation
SDG&E recorded a Wildfire Fund obligation for its commitment to make shareholder contributions totaling $451.5 million, measured at present value as of July 25, 2019 (the date by which both EdisonSheets and SDG&E opted to contribute to the Wildfire Fund). SDG&E paid its initial shareholder contribution of $322.5 million to the Wildfire Fund in September 2019. At September 30, 2019, SDG&E expects to make annual shareholder contributions of $12.9 million in each of the next 10 years by January 1 of each year, beginning July 25, 2019. SDG&E accretes the present value of the Wildfire Fund obligation to O&M until the liability is settled.
At September 30, 2019, the Wildfire Fund obligation was $12.9 million in Other Current Liabilities and $97 million in Deferred Credits and Other on Sempra Energy’s and SDG&E’s Condensed Consolidated Balance Sheets.Statements of Operations.
WILDFIRE FUND
(Dollars in millions)
LocationSeptember 30,
2020		December 31,
2019
Wildfire Fund asset:
Current
Other Current Assets(1)
$29 $29 
NoncurrentWildfire Fund371 392 
Wildfire Fund obligation:
CurrentOther Current Liabilities$13 $13 
NoncurrentDeferred Credits and Other87 86 
Three months ended September 30,Nine months ended September 30,
2020201920202019
Amortization of Wildfire Fund assetOperation and Maintenance$7 $8 $21 $8 
Accretion of Wildfire Fund obligationOperation and Maintenance0 0 1 0 
(1)    Included in Prepaid Expenses for SDG&E.

CAPITALIZED FINANCING COSTS
Capitalized financing costs include capitalized interest costs and AFUDC related to both debt and equity financing of construction projects. We capitalize interest costs incurred to finance capital projects and interest onat equity method investments that have not commenced planned principal operations.
The table below summarizes capitalized interest and AFUDC.
CAPITALIZED FINANCING COSTSCAPITALIZED FINANCING COSTS    CAPITALIZED FINANCING COSTS
(Dollars in millions)(Dollars in millions)    (Dollars in millions)
Three months ended September 30, Nine months ended September 30,Three months ended September 30,Nine months ended September 30,
2019 2018 2019 2018 2020201920202019
Sempra Energy Consolidated$46
 $47
 $144
 $150
Sempra Energy Consolidated$51 $46 $149 $144 
SDG&E19
 20
 56
 67
SDG&E26 19��79 56 
SoCalGas13
 10
 35
 39
SoCalGas14 13 39 35 

VARIABLE INTEREST ENTITIES
We consolidate a VIE if we are the primary beneficiary of the VIE. Our determination of whether we are the primary beneficiary is based on qualitative and quantitative analyses, which assess:
▪the purpose and design of the VIE;
▪the nature of the VIE’s risks and the risks we absorb;
▪the power to direct activities that most significantly impact the economic performance of the VIE; and
▪the obligation to absorb losses or the right to receive benefits that could be significant to the VIE.
▪the purpose and design of the VIE;
▪the nature of the VIE’s risks and the risks we absorb;
▪the power to direct activities that most significantly impact the economic performance of the VIE; and
▪the obligation to absorb losses or the right to receive benefits that could be significant to the VIE.
We will continue to evaluate our VIEs for any changes that may impact our determination of whether an entity is a VIE and if we are the primary beneficiary.
SDG&E
SDG&E’s power procurement is subject to reliability requirements that may require SDG&E to enter into various PPAs that include variable interests. SDG&E evaluates the respective entities to determine if variable interests exist and, based on the qualitative and quantitative analyses described above, if SDG&E, and thereby Sempra Energy, is the primary beneficiary.


Tolling Agreements
SDG&E has agreements under which it purchases power generated by facilities for which it supplies all of the natural gas to fuel the power plant (i.e., tolling agreements). SDG&E’s obligation to absorb natural gas costs may be a significant variable interest. In addition, SDG&E has the power to direct the dispatch of electricity generated by these facilities. Based on our analysis, the ability to direct the dispatch of electricity may have the most significant impact on the economic performance of the entity owning the generating facility because of the associated exposure to the cost of natural gas, which fuels the plants, and the value of electricity produced. To the extent that SDG&E (1) is obligated to purchase and provide fuel to operate the facility, (2) has the power to direct the dispatch, and (3) purchases all of the output from the facility for a substantial portion of the facility’s useful
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life, SDG&E may be the primary beneficiary of the entity owning the generating facility. SDG&E determines if it is the primary beneficiary in these cases based on a qualitative approach in which we considerit considers the operational characteristics of the facility, including its expected power generation output relative to its capacity to generate and the financial structure of the entity, among other factors. If we determineSDG&E determines that SDG&Eit is the primary beneficiary, SDG&E and Sempra Energy consolidate the entity that owns the facility as a VIE.
Otay Mesa VIE
Through October 3, 2019, SDG&E had a tolling agreement to purchase power generated at OMEC, a 605-MW generating facility owned by OMEC LLC, which is a VIE that we refer to as Otay Mesa VIE. Under the terms of a related agreement, OMEC LLC could have required SDG&E to purchase the power plant (referred to as the put option) on or before October 3, 2019 for $280 million, subject to adjustments, or upon earlier termination of the PPA. SDG&E determined that it was the primary beneficiary of Otay Mesa VIE, and therefore, SDG&E and Sempra Energy consolidated Otay Mesa VIE.
In October 2018, SDG&E and OMEC LLC signed a resource adequacy capacity agreement for a term that would commence at the expiration of the current tolling agreement in October 2019 and end in August 2024. The capacity agreement was approved by OMEC LLC’s lenders and the CPUC in December 2018 and February 2019, respectively. However, given certain then pending requests for rehearing of the CPUC’s decision approving the capacity agreement, on March 28, 2019, OMEC LLC exercised the put option requiring SDG&E to purchase the power plant. On August 6, 2019, the CPUC denied the rehearing requests, and on August 23, 2019, SDG&E and OMEC LLC executed an amended resource adequacy capacity agreement that irrevocably rescinded exercise of the put option. Consequently, SDG&E and Sempra Energy deconsolidated Otay Mesa VIE on August 23, 2019. NaN gain or loss was recognized upon deconsolidation.
Prior to deconsolidation, on August 14, 2019, OMEC LLC paid in full its variable-rate loan that was scheduled to mature in August 2024, which we describe in Note 7.
The following table summarizes the deconsolidation:
DECONSOLIDATION OF OTAY MESA VIE 
(Dollars in millions) 
  August 23, 2019
Cash and cash equivalents$8
Accounts receivable, net11
Inventories4
Total current assets23
Property, plant and equipment, net272
Other noncurrent assets27
Total assets$322
  
Accounts payable$10
Other2
Total current liabilities12
  
Asset retirement obligations2
Deferred credits and other27
Total deferred credits and other liabilities29
  
Noncontrolling interest281
Total liabilities and equity$322



Otay Mesa VIE’s equity of $100 million at December 31, 2018 is included on the Condensed Consolidated Balance Sheets in Other Noncontrolling Interests for Sempra Energy and in Noncontrolling Interest for SDG&E.
The Condensed Consolidated Statements of Operations of Sempra Energy and SDG&E include the following amounts associated with Otay Mesa VIE until its deconsolidation on August 23, 2019. The amounts are net of eliminations of transactions between SDG&E and Otay Mesa VIE. The captions in the table below correspond to SDG&E’s Condensed Consolidated Statements of Operations.
AMOUNTS ASSOCIATED WITH OTAY MESA VIE    
(Dollars in millions)    
 Three months ended September 30, Nine months ended September 30,
 
2019(1)
 2018 
2019(1)
 2018
Operating expenses       
Cost of electric fuel and purchased power$(17) $(28) $(52) $(60)
Operation and maintenance2
 3
 10
 11
Depreciation and amortization8
 8
 23
 23
Total operating expenses(7) (17) (19) (26)
Operating income7
 17
 19
 26
Interest expense(4) (6) (12) (16)
Income before income taxes/Net income3
 11
 7
 10
Earnings attributable to noncontrolling interest(3) (11) (7) (10)
Earnings attributable to common shares$—
 $—
 $—
 $—

(1)
Amounts for 2019 include activity until deconsolidation on August 23, 2019.

SDG&E determined that none of its contracts resulted in SDG&E being the primary beneficiary of a VIE at September 30, 2019. In addition to the tolling agreements, described above, other variable interests involve various elements of fuel and power costs, and other components of cash flows expected to be paid to or received by our counterparties. In most of these cases, the expectation of variability is not substantial, and SDG&E generally does not have the power to direct activities, including the operation and maintenance activities of the generating facility, that most significantly impact the economic performance of the other VIEs. If our ongoing evaluation of these VIEs were to conclude that SDG&E becomes the primary beneficiary and consolidation by SDG&E becomes necessary, the effects could be significant to the financial position and liquidity of SDG&E and Sempra Energy. We provide additional information about PPAs
SDG&E determined that none of its contracts resulted in SDG&E being the primary beneficiary of a VIE at September 30, 2020 and December 31, 2019. The carrying amounts of the assets and liabilities that relate to SDG&E’s involvement with power plant facilities that are VIEs of whichwhere SDG&E is not the primary beneficiary are included in PP&E and finance lease liabilities with balances of $1,242 million and $1,255 million at September 30, 2020 and December 31, 2019, respectively. SDG&E recovers costs incurred on PPAs, tolling agreements and other variable interests through CPUC-approved long-term power procurement plans. SDG&E has no residual interest in the respective entities and has not provided or guaranteed any debt or equity support, liquidity arrangements, performance guarantees or other commitments associated with these contracts other than the purchase commitments described in Note 16 of the Notes to Consolidated Financial Statements in the Annual Report.
We provide additional information regarding Otay Mesa VIE As a result, SDG&E’s potential exposure to loss from its variable interest in Note 11 below and in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.these VIEs is not significant.
Sempra Texas Utilities
On March 9, 2018, we completed the acquisition of an indirect, 100-percentOur 100% interest in Oncor Holdings is a VIE that owns an 80.25-percent80.25% interest in Oncor. Sempra Energy is not the primary beneficiary of the VIE because of the structural and operational ring-fencing and governance measures in place that prevent us from having the power to direct the significant activities of Oncor Holdings. As a result, we do not consolidate Oncor Holdings and instead account for our ownership interest as an equity method investment. See Note 6 for additional information about our equity method investment in Oncor Holdings and restrictions on our ability to influence its activities. Our maximum exposure to loss, which fluctuates over time, from our interest in Oncor Holdings does not exceed the carrying value of our investment, which was $11,145$11,962 million at September 30, 20192020 and $9,652$11,519 million at December 31, 2018.2019.
Sempra RenewablesMexico
Sempra Mexico’s businesses also enter into arrangements that could include variable interests. We evaluate these arrangements and applicable entities based on the qualitative and quantitative analyses described above. Certain of Sempra Renewables’ wind and solar power generation projects were held by limited liabilitythese entities are service or project companies whose members were Sempra Renewables andthat are VIEs because the total equity at risk is not sufficient for the entities to finance their activities without additional subordinated financial institutions. The financial institutions were noncontrolling tax equity investors to which earnings, tax attributes and cash flows were allocated in accordance with the respective limited liability company agreements. These entities were VIEs and Sempra Energy was the primary beneficiary, generally due to Sempra Energy’s power as the operator of the renewable energy projects to direct the activities that most significantly impacted the economic performance of these VIEs. Assupport. If we are the primary beneficiary of these tax equity limited liability companies, we consolidatedconsolidate them. We sold the solar entities in December 2018 and the wind entities in April 2019.


Sempra Energy’s Condensed Consolidated Balance Sheet includes equity of $158 million atAt December 31, 20182019, Sempra Mexico consolidated a VIE with assets totaling approximately $126 million, which consisted primarily of Other Noncontrolling Interests associated with these entities. Sempra Energy’s Condensed Consolidated Statements of Operations include the following amounts associated with the tax equity limited liability companies, net of eliminations of transactions between Sempra EnergyPP&E and these entities.
AMOUNTS ASSOCIATED WITH TAX EQUITY ARRANGEMENTS(1)
  
(Dollars in millions)     
  Three months ended September 30, Nine months ended
September 30,
  2018 2019 2018
REVENUES     
Energy-related businesses$28
 $8
 $77
EXPENSES     
Operation and maintenance(5) (2) (13)
Depreciation and amortization(13) (4) (36)
Income before income taxes10
 2
 28
Income tax expense(4) —
 (16)
Net income6
 2
 12
Losses (earnings) attributable to noncontrolling interests(2)
9
 (1) 50
Earnings attributable to common shares$15
 $1
 $62
(1)
Amounts for 2019 include activity until deconsolidation of the wind entities in April 2019. Amounts for 2018 include activity until deconsolidation of the solar entities in December 2018.
(2)
Net income or loss attributable to NCI is computed using the HLBV method and is not based on ownership percentages.

We provide additional information regarding the tax equity limited liability companies in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.other long-term assets.
Sempra LNG
Cameron LNG JV is a VIE principally due to contractual provisions that transfer certain risks to customers. Sempra Energy is not the primary beneficiary of the VIE because we do not have the power to direct the most significant activities of Cameron LNG JV, and therefore, we account for our investment in Cameron LNG JV under the equity method. The carrying value of our investment, including amounts recognized in AOCI related to interest-rate cash flow hedges at Cameron LNG JV, was $1,216$433 million at September 30, 20192020 and $1,271$1,256 million at December 31, 2018.2019. Our maximum exposure to loss, which fluctuates over time, includes the carrying value of our investment and the guarantees that we discuss in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.
Other Variable Interest Entities
As we discuss in Note 6, in July 2020, Sempra Energy entered into a Support Agreement for the benefit of CFIN that is a VIE. Since we do not have the power to direct the most significant activities of the VIE, we are not the primary beneficiary. The conditional obligations of the Support Agreement represent a variable interest that we measure at fair value on a recurring basis (see Note 9). Sempra Energy’s other businesses also enter into arrangements that could include variable interests. We evaluate these arrangements and applicable entities based on the qualitative and quantitative analyses described above. Certain of these entities are service or project companies that are VIEs because the total equity at risk is not sufficient for the entities to finance their activities without additional subordinated financial support. As the primary beneficiary of these companies, we consolidate them. The assets of these VIEs totaled approximately $779 million at September 30, 2019 and $286 million at December 31, 2018 and consisted primarily of PP&E and other long-term assets. Sempra Energy’smaximum exposure to loss under the terms of the Support Agreement is equal to the carrying value of these assets. In all other cases, we have determined that these arrangements are not variable interests in a VIE and therefore are not subject to the U.S. GAAP requirements concerning the consolidation or disclosures of VIEs.$979 million.


35

PENSION AND OTHER POSTRETIREMENT BENEFITS
Settlement Accounting for Lump Sum Payments
Sempra Energy recorded settlement charges of $13 million and $22 million in the three months and nine months ended September 30, 2020, respectively, in net periodic benefit cost for lump sum payments from its nonqualified pension plan that were in excess of the plan’s service cost plus interest cost.
In the nine months ended September 30, 2019, Sempra Energy recorded settlement charges of $22 million in net periodic benefit cost for lump sum payments from its non-qualifiednonqualified pension plan that were in excess of the plan’s service cost plus interest cost.


Sale of Qualified Pension Plan Annuity Contracts
In March 2018, an insurance company purchased certain annuities for current annuitants in the SDG&E and SoCalGas qualified pension plans and assumed the obligation for payment of these annuities. At SDG&E in the first quarter of 2018 and at SoCalGas in the second quarter of 2018, the liability transferred for these annuities, plus the total year-to-date lump-sum payments, exceeded the settlement threshold, which triggered settlement accounting. This resulted in a reduction of the recorded pension liability and pension plan assets of $300 million at Sempra Energy Consolidated, including $108 million at SDG&E and $192 million at SoCalGas. This also resulted in settlement charges in net periodic benefit cost of $3 million and $42 million at Sempra Energy Consolidated, including $1 million and $17 million at SDG&E and $2 million and $25 million at SoCalGas in the three months and nine months ended September 30, 2018, respectively. The settlement charges were recorded as regulatory assets on the Condensed Consolidated Balance Sheets.
Net Periodic Benefit Cost
The following three tables provide the components of net periodic benefit cost.
NET PERIODIC BENEFIT COST – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
 Pension benefitsOther postretirement benefits
 Three months ended September 30,
 2020201920202019
Service cost$31 $27 $5 $4 
Interest cost32 34 8 9 
Expected return on assets(41)(36)(14)(17)
Amortization of:  
Prior service cost (credit)3 3 (1)0 
Actuarial loss (gain)9 8 (2)(3)
Settlement charges13 4 0 0 
Net periodic benefit cost (credit)47 40 (4)(7)
Regulatory adjustments37 3 4 8 
Total expense recognized$84 $43 $0 $1 
 Nine months ended September 30,
 2020201920202019
Service cost$97 $82 $14 $12 
Interest cost97 104 24 27 
Expected return on assets(126)(108)(41)(52)
Amortization of:    
Prior service cost (credit)9 9 (2)0 
Actuarial loss (gain)26 29 (7)(8)
Settlement charges22 26 0 0 
Net periodic benefit cost (credit)125 142 (12)(21)
Regulatory adjustments31 (30)12 22 
Total expense recognized$156 $112 $0 $1 

36

NET PERIODIC BENEFIT COST – SEMPRA ENERGY CONSOLIDATED
NET PERIODIC BENEFIT COST – SDG&ENET PERIODIC BENEFIT COST – SDG&E
(Dollars in millions)(Dollars in millions)(Dollars in millions)
Pension benefits Other postretirement benefits Pension benefitsOther postretirement benefits
Three months ended September 30, Three months ended September 30,
2019 2018 2019 2018 2020201920202019
Service cost$27
 $29
 $4
 $4
Service cost$7 $7 $1 $1 
Interest cost34
 35
 9
 9
Interest cost7 9 2 1 
Expected return on assets(36) (35) (17) (18)Expected return on assets(12)(9)(3)(3)
Amortization of:       Amortization of:  
Prior service cost3
 3
 —
 —
Prior service cost1 0 0 1 
Actuarial loss (gain)8
 6
 (3) (2)Actuarial loss (gain)1 2 (1)0 
Settlement charges4
 9
 —
 —
Special termination benefits—
 —
 —
 5
Net periodic benefit cost (credit)40
 47
 (7) (2)Net periodic benefit cost (credit)4 9 (1)0 
Regulatory adjustments3
 (11) 8
 2
Regulatory adjustments22 (1)1 0 
Total expense recognized$43
 $36
 $1
 $—
Total expense recognized$26 $8 $0 $0 
       
Nine months ended September 30, Nine months ended September 30,
2019 2018 2019 2018 2020201920202019
Service cost$82
 $95
 $12
 $15
Service cost$23 $22 $3 $3 
Interest cost104
 104
 27
 27
Interest cost22 26 5 5 
Expected return on assets(108) (117) (52) (53)Expected return on assets(37)(29)(8)(9)
Amortization of:       Amortization of:  
Prior service cost9
 8
 —
 —
Prior service cost2 2 0 2 
Actuarial loss (gain)29
 25
 (8) (4)Actuarial loss (gain)3 9 (2)(1)
Settlement charges26
 48
 —
 —
Special termination benefits—
 —
 —
 5
Net periodic benefit cost (credit)142
 163
 (21) (10)Net periodic benefit cost (credit)13 30 (2)0 
Regulatory adjustments(30) (91) 22
 11
Regulatory adjustments28 (13)2 0 
Total expense recognized$112
 $72
 $1
 $1
Total expense recognized$41 $17 $0 $0 



NET PERIODIC BENEFIT COST – SOCALGAS
(Dollars in millions)
 Pension benefitsOther postretirement benefits
 Three months ended September 30,
 2020201920202019
Service cost$20 $17 $3 $3 
Interest cost22 23 7 6 
Expected return on assets(27)(24)(11)(14)
Amortization of:  
Prior service cost (credit)2 2 (1)(1)
Actuarial loss (gain)6 3 (1)(2)
Net periodic benefit cost (credit)23 21 (3)(8)
Regulatory adjustments15 4 3 8 
Total expense recognized$38 $25 $0 $0 
 Nine months ended September 30,
 2020201920202019
Service cost$64 $51 $10 $9 
Interest cost66 68 19 20 
Expected return on assets(81)(71)(32)(43)
Amortization of:   
Prior service cost (credit)6 6 (2)(2)
Actuarial loss (gain)19 14 (5)(6)
Net periodic benefit cost (credit)74 68 (10)(22)
Regulatory adjustments3 (17)10 22 
Total expense recognized$77 $51 $0 $0 
37
NET PERIODIC BENEFIT COST – SDG&E
(Dollars in millions)
 Pension benefits Other postretirement benefits
 Three months ended September 30,
 2019 2018 2019 2018
Service cost$7
 $7
 $1
 $1
Interest cost9
 9
 1
 2
Expected return on assets(9) (10) (3) (3)
Amortization of:       
Prior service cost—
 —
 1
 —
Actuarial loss (gain)2
 —
 —
 (1)
Settlement charges—
 1
 —
 —
Special termination benefits—
 —
 —
 3
Net periodic benefit cost9
 7
 —
 2
Regulatory adjustments(1) (7) —
 (2)
Total expense recognized$8
 $—
 $—
 $—
        
 Nine months ended September 30,
 2019 2018 2019 2018
Service cost$22
 $23
 $3
 $3
Interest cost26
 26
 5
 5
Expected return on assets(29) (35) (9) (10)
Amortization of:
   
  
Prior service cost2
 1
 2
 2
Actuarial loss (gain)9
 3
 (1) (2)
Settlement charges—
 17
 —
 —
Special termination benefits—
 —
 —
 3
Net periodic benefit cost30
 35
 —
 1
Regulatory adjustments(13) (34) —
 (1)
Total expense recognized$17
 $1
 $—
 $—


NET PERIODIC BENEFIT COST – SOCALGAS
(Dollars in millions)
 Pension benefits Other postretirement benefits
 Three months ended September 30,
 2019 2018 2019 2018
Service cost$17
 $19
 $3
 $3
Interest cost23
 23
 6
 6
Expected return on assets(24) (22) (14) (13)
Amortization of:       
Prior service cost (credit)2
 2
 (1) (1)
Actuarial loss (gain)3
 3
 (2) (1)
Settlement charges—
 2
 —
 —
Special termination benefits—
 —
 —
 2
Net periodic benefit cost (credit)21
 27
 (8) (4)
Regulatory adjustments4
 (4) 8
 4
Total expense recognized$25
 $23
 $—
 $—
        
 Nine months ended September 30,
 2019 2018 2019 2018
Service cost$51
 $62
 $9
 $11
Interest cost68
 68
 20
 20
Expected return on assets(71) (73) (43) (41)
Amortization of:    
  
Prior service cost (credit)6
 6
 (2) (2)
Actuarial loss (gain)14
 15
 (6) (2)
Settlement charges—
 25
 —
 —
Special termination benefits—
 —
 —
 2
Net periodic benefit cost (credit)68
 103
 (22) (12)
Regulatory adjustments(17) (57) 22
 12
Total expense recognized$51
 $46
 $—
 $—

Benefit Plan Contributions
The following table shows our year-to-date contributions to pension and other postretirement benefit plans and the amounts we expect to contribute in 2019.2020.
BENEFIT PLAN CONTRIBUTIONS
(Dollars in millions)
 Sempra Energy
Consolidated		SDG&ESoCalGas
Contributions through September 30, 2020:   
Pension plans$202 $39 $76 
Other postretirement benefit plans6 1 1 
Total expected contributions in 2020:  
Pension plans$298 $54 $155 
Other postretirement benefit plans8 1 1 
BENEFIT PLAN CONTRIBUTIONS
(Dollars in millions)
  
Sempra Energy
Consolidated
 SDG&E SoCalGas
Contributions through September 30, 2019:      
Pension plans $130
 $17
 $51
Other postretirement benefit plans 6
 —
 1
Total expected contributions in 2019:      
Pension plans $280
 $53
 $152
Other postretirement benefit plans 8
 1
 1

RABBI TRUST
In support of its Supplemental Executive Retirement, Cash Balance Restoration and Deferred Compensation Plans, Sempra Energy maintains dedicated assets, including a Rabbi Trust and investments in life insurance contracts, which totaled $439$469 million and $416$488 million at September 30, 20192020 and December 31, 2018,2019, respectively.



SEMPRA ENERGY EARNINGS PER COMMON SHARE
Basic EPS is calculated by dividing earnings attributable to common shares (from both continuing and discontinued operations) by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.
38

EARNINGS (LOSSES) PER COMMON SHARE COMPUTATIONS       
(Dollars in millions, except per share amounts; shares in thousands)       
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
Numerator for continuing operations:       
Income from continuing operations, net of income tax$653
 $280
 $1,570
 $25
(Earnings) losses attributable to noncontrolling interests(52) (16) (121) 10
Mandatory convertible preferred stock dividends(36) (36) (107) (89)
Preferred dividends of subsidiary—
 —
 (1) (1)
Earnings (losses) from continuing operations attributable to common shares for basic EPS565
 228
 1,341
 (55)
Add back dividends for dilutive mandatory convertible preferred stock(1)
26
 —
 —
 —
Earnings (losses) from continuing operations attributable to common shares for diluted EPS$591
 $228
 $1,341
 $(55)
        
Numerator for discontinued operations:       
Income from discontinued operations, net of income tax$256
 $54
 $292
 $137
Earnings attributable to noncontrolling interests(8) (8) (25) (22)
Earnings from discontinued operations attributable to common shares$248
 $46
 $267
 $115
        
Numerator for earnings:       
Earnings attributable to common shares for basic EPS$813
 $274
 $1,608
 $60
Add back dividends for dilutive mandatory convertible preferred stock(1)
26
 —
 —
 —
Earnings attributable to common shares for diluted EPS$839
 $274
 $1,608
 $60
        
Denominator:       
Weighted-average common shares outstanding for basic EPS(2)
277,360
 273,944
 275,684
 265,963
Dilutive effect of stock options and RSUs(3)(4)
1,636
 854
 1,381
 —
Dilutive effect of common shares sold forward(3)
3,555
 1,109
 2,744
 —
Dilutive effect of mandatory convertible preferred stock13,238
 —
 —
 —
Weighted-average common shares outstanding for diluted EPS295,789
 275,907
 279,809
 265,963
        
Basic EPS:       
Earnings (losses) from continuing operations attributable to common shares$2.04
 $0.83
 $4.86
 $(0.21)
Earnings from discontinued operations attributable to common shares$0.89
 $0.17
 $0.97
 $0.44
Earnings attributable to common shares$2.93
 $1.00
 $5.83
 $0.23
        
Diluted EPS:       
Earnings (losses) from continuing operations attributable to common shares$2.00
 $0.82
 $4.79
 $(0.21)
Earnings from discontinued operations attributable to common shares$0.84
 $0.17
 $0.95
 $0.44
Earnings attributable to common shares$2.84
 $0.99
 $5.74
 $0.23
(1)
In the three months ended September 30, 2019, due to the dilutive effect of the series A preferred stock, the numerator used to calculate diluted EPS includes an add-back of series A preferred stock dividends declared in that quarter.
(2)
Includes 618 and 645 average fully vested RSUs held in our Deferred Compensation Plan for the three months ended September 30, 2019 and 2018, respectively, and 615 and 638 of such RSUs for the nine months ended September 30, 2019 and 2018, respectively. These fully vested RSUs are included in weighted-average common shares outstanding for basic EPS because there are no conditions under which the corresponding shares will not be issued.
(3)
In the nine months ended September 30, 2018, the total weighted-average potentially dilutive stock options and RSUs of 736 and common stock shares sold forward of 945 were not included in the computation of diluted EPS since to do so would have decreased the losses from continuing operations attributable to common shares.
(4)
Due to market fluctuations of both Sempra Energy common stock and the comparative indices used to determine the vesting percentage of our total shareholder return performance-based RSUs, which we discuss in Note 10 of the Notes to Consolidated Financial Statements in the Annual Report, dilutive RSUs may vary widely from period-to-period.



EARNINGS PER COMMON SHARE COMPUTATIONS
(Dollars in millions, except per share amounts; shares in thousands)
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
Numerator for continuing operations:    
Income from continuing operations, net of income tax$428 $653 $1,823 $1,570 
Earnings attributable to noncontrolling interests(22)(52)(191)(121)
Preferred dividends(48)(36)(121)(107)
Preferred dividends of subsidiary0 0 (1)(1)
Earnings from continuing operations attributable to common shares for basic EPS358 565 1,510 1,341 
Add back dividends for dilutive mandatory convertible preferred stock(1)
0 26 0 0 
Earnings from continuing operations attributable to common shares for diluted EPS$358 $591 $1,510 $1,341 
Numerator for discontinued operations:
(Loss) income from discontinued operations, net of income tax$(7)$256 $1,850 $292 
Earnings attributable to noncontrolling interests0 (8)(10)(25)
(Losses) earnings from discontinued operations attributable to common shares$(7)$248 $1,840 $267 
Numerator for earnings:
Earnings attributable to common shares for basic EPS$351 $813 $3,350 $1,608 
Add back dividends for dilutive mandatory convertible preferred stock(1)
0 26 0 0 
Earnings attributable to common shares for diluted EPS$351 $839 $3,350 $1,608 
Denominator:    
Weighted-average common shares outstanding for basic EPS(2)
289,490 277,360 291,771 275,684 
Dilutive effect of stock options and RSUs(3)
1,092 1,636 1,164 1,381 
Dilutive effect of common shares sold forward0 3,555 0 2,744 
Dilutive effect of mandatory convertible preferred stock0 13,238 0 0 
Weighted-average common shares outstanding for diluted EPS290,582 295,789 292,935 279,809 
Basic EPS:
Earnings from continuing operations$1.23 $2.04 $5.17 $4.86 
(Losses) earnings from discontinued operations$(0.02)$0.89 $6.31 $0.97 
Earnings$1.21 $2.93 $11.48 $5.83 
Diluted EPS:    
Earnings from continuing operations$1.23 $2.00 $5.15 $4.79 
(Losses) earnings from discontinued operations$(0.02)$0.84 $6.28 $0.95 
Earnings$1.21 $2.84 $11.43 $5.74 
(1)    In the three months ended September 30, 2019, due to the dilutive effect of our series A preferred stock, the numerator used to calculate diluted EPS includes an add-back of dividends declared on our series A preferred stock.
(2)    Includes 535 and 618 average fully vested RSUs held in our Deferred Compensation Plan for the three months ended September 30, 2020 and 2019, respectively, and 536 and 615 of such RSUs for the nine months ended September 30, 2020 and 2019, respectively. These fully vested RSUs are included in weighted-average common shares outstanding for basic EPS because there are no conditions under which the corresponding shares will not be issued.
(3)    Due to market fluctuations of both Sempra Energy common stock and the comparative indices used to determine the vesting percentage of our total shareholder return performance-based RSUs, which we discuss in Note 10 of the Notes to Consolidated Financial Statements in the Annual Report, dilutive RSUs may vary widely from period-to-period.

39


The potentially dilutive impact from stock options and RSUs is calculated under the treasury stock method. Under this method, proceeds based on the exercise price and unearned compensation are assumed to be used to repurchase shares on the open market at the average market price for the period, reducing the number of potential new shares to be issued and sometimes causing an antidilutive effect. The computation of diluted EPS for the three months and nine months ended September 30, 20192020 excludes 142,100 and 2018 excludes 0 and 508204,426 potentially dilutive shares, respectively, because to include them would be antidilutive for the period. The computation of diluted EPS for the three months and nine months ended September 30, 2019 excludes 0 and 2018 excludes 107,042, and 1,552respectively, of such potentially dilutive shares, respectively.shares. However, these shares could potentially dilute basic EPS in the future.
The potentially dilutive impact from the forward sale of our common stock pursuant to the forward sale agreements that we entered into in 2018 and fully settled by the end of 2019 is reflected in our diluted EPS calculation using the treasury stock method. We anticipate there will be a dilutive effect on our EPS when the average market price ofmethod until settlement. After settlement, those shares of ourare included in weighted-average common stock is above the applicable adjusted forward sale price, subject to increase or decrease based on the overnight bank funding rate, less a spread, and subject to decrease by amounts related to expected dividends on shares of our common stock during the term of the forward sale agreements. The computation of diluted EPSoutstanding for both the three months and nine months ended September 30, 2019 excludes 0 potentially dilutive shares because to include them would be antidilutive for those periods. The computation of diluted EPS for the three months and nine months ended September 30, 2018 excludes 0 and 2,857,143 potentially dilutive shares, respectively, because to include them would be antidilutive for the period. Additionally, if we decide to physically settle or net share settle the forward sale agreements, delivery of our shares to the forward purchasers on any such physical settlement or net share settlement of the forward sale agreements would result in dilution to ourbasic EPS.
The potentially dilutive impact from mandatory convertible preferred stock that we issued in 2018 is calculated under the if-converted method. The computation of diluted EPS for the three months and nine months ended September 30, 2020 excludes 19,292,641 potentially dilutive shares and for the three months and nine months ended September 30, 2019 excludes 4,219,350 and 17,457,000 potentially dilutive shares, respectively, because to include them would be antidilutive for those periods. The computation of dilutiveHowever, these shares could potentially dilute basic EPS forin the three months and nine months ended September 30, 2018 excludes 19,152,109 and 15,863,530 such potentially dilutive shares, respectively.future.
Pursuant to our Sempra Energy share-based compensation plans, the compensation committee of Sempra Energy’s Boardboard of Directorsdirectors granted 261,075 non-qualified154,860 nonqualified stock options that are exercisablevest over a three-year period, 389,825265,236 performance-based RSUs and 260,594163,475 service-based RSUs in the nine months ended September 30, 2019,2020, primarily in January.
We discuss share-based compensation plans and related awards and the terms and conditions of Sempra Energy’s equity securities further in NoteNotes 10, 13 and 14 of the Notes to Consolidated Financial Statements in the Annual Report.



40

COMPREHENSIVE INCOME
The following tables present the changes in AOCI by component and amounts reclassified out of AOCI to net income, excluding amounts attributable to NCI.
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1)
(Dollars in millions)
 Foreign
currency
translation
adjustments		Financial
instruments		Pension
and other
postretirement
benefits		Total
accumulated other
comprehensive
income (loss)
 Three months ended September 30, 2020 and 2019
Sempra Energy Consolidated(2):
Balance as of June 30, 2020$(83)$(361)$(98)$(542)
OCI before reclassifications6 14 (7)13 
Amounts reclassified from AOCI0 4 12 16 
Net OCI(3)
6 18 5 29 
Balance as of September 30, 2020$(77)$(343)$(93)$(513)
   
Balance as of June 30, 2019$(518)$(213)$(117)$(848)
OCI before reclassifications(91)(41)(7)(139)
Amounts reclassified from AOCI0 4 5 9 
Net OCI(91)(37)(2)(130)
Balance as of September 30, 2019$(609)$(250)$(119)$(978)
SDG&E:
Balance as of June 30, 2020 and September 30, 2020$(12)$(12)
Balance as of June 30, 2019 and September 30, 2019$(11)$(11)
SoCalGas:
Balance as of June 30, 2020 and September 30, 2020$(13)$(9)$(22)
Balance as of June 30, 2019$(14)$(6)$(20)
Amounts reclassified from AOCI1 0 1 
Net OCI1 0 1 
Balance as of September 30, 2019$(13)$(6)$(19)
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1)
(Dollars in millions)
 
Foreign
currency
translation
adjustments
 
Financial
instruments
 
Pension
and other
postretirement
benefits
 
Total
accumulated other
comprehensive
income (loss)
 Three months ended September 30, 2019 and 2018
Sempra Energy Consolidated(2):
       
Balance as of June 30, 2019$(518) $(213) $(117) $(848)
OCI before reclassifications(91) (41) (7) (139)
Amounts reclassified from AOCI—
 4
 5
 9
Net OCI(91) (37) (2) (130)
Balance as of September 30, 2019$(609) $(250) $(119) $(978)
        
Balance as of June 30, 2018$(482) $(40) $(79) $(601)
OCI before reclassifications(16) 19
 (18) (15)
Amounts reclassified from AOCI—
 (4) 8
 4
Net OCI(16) 15
 (10) (11)
Balance as of September 30, 2018$(498) $(25) $(89) $(612)
SDG&E:       
Balance as of June 30, 2019 and September 30, 2019    $(11) $(11)
        
Balance as of June 30, 2018    $(8) $(8)
OCI before reclassifications    (6) (6)
Net OCI    (6) (6)
Balance as of September 30, 2018    $(14) $(14)
SoCalGas:       
Balance as of June 30, 2019  $(14) $(6) $(20)
Amounts reclassified from AOCI  1
 —
 1
Net OCI  1
 —
 1
Balance as of September 30, 2019  $(13) $(6) $(19)
        
Balance as of June 30, 2018 and September 30, 2018  $(13) $(7) $(20)
(1)(1)    All amounts are net of income tax, if subject to tax, and exclude NCI.
All amounts are net of income tax, if subject to tax, and exclude NCI.
(2)
Includes discontinued operations.


(2)    Includes discontinued operations in 2019.
(3)    Total AOCI includes $5 million associated with purchases of NCI, which we discuss below in “Other Noncontrolling Interests – Sempra Mexico,” and which does not impact the Condensed Consolidated Statement of Comprehensive Income (Loss).
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1) (CONTINUED)
(Dollars in millions)
 
Foreign
currency
translation
adjustments
 
Financial
instruments
 
Pension
and other
postretirement
benefits
 
Total
accumulated other
comprehensive
income (loss)
 Nine months ended September 30, 2019 and 2018
Sempra Energy Consolidated(2):
       
Balance as of December 31, 2018$(564) $(82) $(118) $(764)
Cumulative-effect adjustment from change in accounting principle—
 (25) (17) (42)
OCI before reclassifications(3)
(45) (153) (13) (211)
Amounts reclassified from AOCI(3)
—
 10
 29
 39
Net OCI(45) (143) 16
 (172)
Balance as of September 30, 2019$(609) $(250) $(119) $(978)
        
Balance as of December 31, 2017$(420) $(122) $(84) $(626)
Cumulative-effect adjustment from change in accounting principle—
 (3) —
 (3)
OCI before reclassifications(78) 104
 (17) 9
Amounts reclassified from AOCI—
 (4) 12
 8
Net OCI(78) 100
 (5) 17
Balance as of September 30, 2018$(498) $(25) $(89) $(612)
SDG&E:       
Balance as of December 31, 2018    $(10) $(10)
Cumulative-effect adjustment from change in accounting principle    (2) (2)
Amounts reclassified from AOCI    1
 1
Net OCI    1
 1
Balance as of September 30, 2019    $(11) $(11)
        
Balance as of December 31, 2017    $(8) $(8)
OCI before reclassifications    (6) (6)
Net OCI    (6) (6)
Balance as of September 30, 2018    $(14) $(14)
SoCalGas:       
Balance as of December 31, 2018  $(12) $(8) $(20)
Cumulative-effect adjustment from change in accounting principle  (2) (2) (4)
Amounts reclassified from AOCI(3)
  1
 4
 5
Net OCI  1
 4
 5
Balance as of September 30, 2019  $(13) $(6) $(19)
        
Balance as of December 31, 2017  $(13) $(8) $(21)
Amounts reclassified from AOCI  —
 1
 1
Net OCI  —
 1
 1
Balance as of September 30, 2018  $(13) $(7) $(20)
41

(1)
All amounts are net of income tax, if subject to tax, and exclude NCI.
(2)
Includes discontinued operations.
(3)
Pension and Other Postretirement Benefits and Total AOCI include a $4 million transfer of liabilities from SoCalGas to Sempra Energy related to the nonqualified pension plan.


CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1) (CONTINUED)
(Dollars in millions)
 Foreign
currency
translation
adjustments		Financial
instruments		Pension
and other
postretirement
benefits		Total
accumulated other
comprehensive
income (loss)
 Nine months ended September 30, 2020 and 2019
Sempra Energy Consolidated(2):
Balance as of December 31, 2019$(607)$(215)$(117)$(939)
OCI before reclassifications(3)
(115)(153)(5)(273)
Amounts reclassified from AOCI(3)
645 25 29 699 
Net OCI(4)
530 (128)24 426 
Balance as of September 30, 2020$(77)$(343)$(93)$(513)
   
Balance as of December 31, 2018$(564)$(82)$(118)$(764)
Adoption of ASU 2018-020 (25)(17)(42)
OCI before reclassifications(3)
(45)(153)(13)(211)
Amounts reclassified from AOCI(3)
0 10 29 39 
Net OCI(45)(143)16 (172)
Balance as of September 30, 2019$(609)$(250)$(119)$(978)
SDG&E:
Balance as of December 31, 2019$(16)$(16)
Amounts reclassified from AOCI(3)
4 4 
Net OCI4 4 
Balance as of September 30, 2020$(12)$(12)
Balance as of December 31, 2018$(10)$(10)
Adoption of ASU 2018-02(2)(2)
Amounts reclassified from AOCI1 1 
Net OCI1 1 
Balance as of September 30, 2019$(11)$(11)
SoCalGas:
Balance as of December 31, 2019$(13)$(10)$(23)
Amounts reclassified from AOCI0 1 1 
Net OCI0 1 1 
Balance as of September 30, 2020$(13)$(9)$(22)
Balance as of December 31, 2018$(12)$(8)$(20)
Adoption of ASU 2018-02(2)(2)(4)
Amounts reclassified from AOCI(3)
1 4 5 
Net OCI1 4 5 
Balance as of September 30, 2019$(13)$(6)$(19)
(1)    All amounts are net of income tax, if subject to tax, and exclude NCI.
(2)    Includes discontinued operations.
(3)    Pension and Other Postretirement Benefits and Total AOCI include $3 million in transfers of liabilities from SDG&E to Sempra Energy in 2020 and $4 million in transfers of liabilities from SoCalGas to Sempra Energy in 2019 related to the nonqualified pension plans.
(4)    Total AOCI includes $5 million associated with purchases of NCI, which we discuss below in “Other Noncontrolling Interests – Sempra Mexico,” and which does not impact the Condensed Consolidated Statement of Comprehensive Income (Loss).
RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
Details about accumulated other comprehensive income (loss) componentsAmounts reclassified
from accumulated other
comprehensive income (loss)		 Affected line item on Condensed
Consolidated Statements of Operations
 Three months ended September 30,  
 2019 2018  
Sempra Energy Consolidated:     
Financial instruments:     
Interest rate and foreign exchange instruments(1)
$1
 $—
 Interest Expense
 5
 (11) Other (Expense) Income, Net
Interest rate and foreign exchange instruments2
 3
 Equity Earnings
Total before income tax8
 (8)  
 (2) 4
 Income Tax (Expense) Benefit
Net of income tax6
 (4)  
 (2) —
 Earnings Attributable to Noncontrolling Interests
 $4
 $(4)  
Pension and other postretirement benefits:     
Amortization of actuarial loss(2)
$3
 $9
 Other (Expense) Income, Net
Amortization of prior service cost(2)
1
 1
 Other (Expense) Income, Net
Settlement charges(2)
4
 —
 Other (Expense) Income, Net
Total before income tax8
 10
  
 (3) (2) Income Tax (Expense) Benefit
Net of income tax$5
 $8
  
      
Total reclassifications for the period, net of tax$9
 $4
  
SDG&E:     
Financial instruments:     
Interest rate instruments(1)
$1
 $2
 Interest Expense
 (1) (2) Earnings Attributable to Noncontrolling Interest
Total reclassifications for the period, net of tax$—
 $—
  
SoCalGas: 
  
  
Financial instruments:     
Interest rate instruments$1
 $—
 Interest Expense
Total reclassifications for the period, net of tax$1
 $—
  
42

(1)
Amounts include Otay Mesa VIE.All of SDG&E’s interest rate derivative activity relates to Otay Mesa VIE.
(2)
Amounts are included in the computation of net periodic benefit cost (see “Pension and Other Postretirement Benefits” above).


RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
Details about accumulated other
comprehensive income (loss) components		Amounts reclassified
from accumulated other
comprehensive income (loss)		 Affected line item on Condensed
Consolidated Statements of Operations
 Three months ended September 30,  
 20202019 
Sempra Energy Consolidated:   
Financial instruments:   
Interest rate and foreign exchange instruments(1)
$3 $1 Interest Expense
(4)5 Other Income (Expense), Net
Interest rate and foreign exchange instruments5 2 Equity Earnings
Total before income tax4 8  
 0 (2)Income Tax Expense
Net of income tax4 6  
 0 (2)Earnings Attributable to Noncontrolling Interests
 $4 $4  
Pension and other postretirement benefits(2):
   
Amortization of actuarial loss$3 $3 Other Income (Expense), Net
Amortization of prior service cost1 1 Other Income (Expense), Net
Settlement charges13 4 Other Income (Expense), Net
Total before income tax17 8 
 (5)(3)Income Tax Expense
Net of income tax$12 $5  
Total reclassifications for the period, net of tax$16 $9  
SDG&E:   
Financial instruments:   
Interest rate instruments(1)
$0 $1 Interest Expense
 0 (1)Earnings Attributable to Noncontrolling Interest
Total reclassifications for the period, net of tax$0 $0  
SoCalGas:   
Financial instruments:
Interest rate instruments$0 $1 Interest Expense
Total reclassifications for the period, net of tax$0 $1 

(1)    Amounts in 2019 include Otay Mesa VIE. All of SDG&E’s interest rate derivative activity relates to Otay Mesa VIE.
(2)    Amounts are included in the computation of net periodic benefit cost (see “Pension and Other Postretirement Benefits” above).
RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (CONTINUED)
(Dollars in millions)
Details about accumulated other
comprehensive income (loss) components		Amounts reclassified
from accumulated other
comprehensive income (loss)		 Affected line item on Condensed
Consolidated Statements of Operations
 Nine months ended September 30,  
 2019 2018  
Sempra Energy Consolidated:     
Financial instruments:     
Interest rate and foreign exchange instruments(1)
$2
 $(1) Interest Expense
 —
 (11) Other (Expense) Income, Net
Interest rate instruments10
 —
 (Loss) Gain on Sale of Assets
Interest rate and foreign exchange instruments3
 8
 Equity Earnings
Foreign exchange instruments1
 (1) Revenues: Energy-Related Businesses
Total before income tax16
 (5)  
 (3) 3
 Income Tax (Expense) Benefit
Net of income tax13
 (2)  
 (3) (2) Earnings Attributable to Noncontrolling Interests
 $10
 $(4)  
Pension and other postretirement benefits:     
Amortization of actuarial loss(2)
$7
 $15
 Other (Expense) Income, Net
Amortization of prior service cost(2)
2
 1
 Other (Expense) Income, Net
Settlement charges(2)
26
 —
 Other (Expense) Income, Net
Total before income tax35
 16
  
 (10) (4) Income Tax (Expense) Benefit
Net of income tax$25
 $12
  
      
Total reclassifications for the period, net of tax$35
 $8
  
SDG&E:     
Financial instruments:     
Interest rate instruments(1)
$3
 $6
 Interest Expense
 (3) (6) Earnings Attributable to Noncontrolling Interest
 $—
 $—
  
Pension and other postretirement benefits:     
Amortization of prior service cost(2)
$1
 $—
 Other Income, Net
      
Total reclassifications for the period, net of tax$1
 $—
  
SoCalGas: 
  
  
Financial instruments:     
Interest rate instruments$1
 $—
 Interest Expense
Pension and other postretirement benefits: 
  
  
Amortization of actuarial loss(2)
$—
 $1
 Other Income, Net
      
Total reclassifications for the period, net of tax$1
 $1
  
43

(1)
RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (CONTINUED)
(Dollars in millions)
Details about accumulated other
comprehensive income (loss) components		Amounts reclassified
from accumulated other
comprehensive income (loss)		Affected line item on Condensed
Consolidated Statements of Operations
Nine months ended September 30,
20202019
Sempra Energy Consolidated:
Foreign currency translation adjustments$645 $0 
(Loss) Income from Discontinued Operations,
Net of Income Tax
Financial instruments:
Interest rate and foreign exchange instruments(1)
$7 $2 Interest Expense
33 0 Other Income (Expense), Net
Interest rate instruments0 10 (Loss) Gain on Sale of Assets
Interest rate and foreign exchange instruments6 3 Equity Earnings
Foreign exchange instruments(2)1 Revenues: Energy-Related Businesses
(1)0 Other Income (Expense), Net
Total before income tax43 16 
(12)(3)Income Tax Expense
Net of income tax31 13 
(6)(3)Earnings Attributable to Noncontrolling Interests
$25 $10 
Pension and other postretirement benefits(2):
  
Amortization of actuarial loss$6 $7 Other Income (Expense), Net
Amortization of actuarial loss6 0 
(Loss) Income from Discontinued Operations,
Net of Income Tax
Amortization of prior service cost3 2 Other Income (Expense), Net
Settlement charges22 26 Other Income (Expense), Net
Total before income tax37 35 
(2)0 
(Loss) Income from Discontinued Operations,
Net of Income Tax
(9)(10)Income Tax Expense
Net of income tax$26 $25 
Total reclassifications for the period, net of tax$696 $35 
SDG&E:  
Financial instruments:  
Interest rate instruments(1)
$0 $3 Interest Expense
0 (3)Earnings Attributable to Noncontrolling Interest
$0 $0 
Pension and other postretirement benefits(2):
Amortization of prior service cost$1 $1 Other Income, Net
Total reclassifications for the period, net of tax$1 $1  
SoCalGas:   
Financial instruments:
Interest rate instruments$0 $1 Interest Expense
Pension and other postretirement benefits(2):
   
Amortization of prior service cost$1 $0 Other Income, Net
Total reclassifications for the period, net of tax$1 $1 
(1)    Amounts in 2019 include Otay Mesa VIE. All of SDG&E’s interest rate derivative activity relates to Otay Mesa VIE.
(2)    Amounts are included in the computation of net periodic benefit cost (see “Pension and Other Postretirement Benefits” above).

44

Amounts include Otay Mesa VIE.All of SDG&E’s interest rate derivative activity relates to Otay Mesa VIE.
(2)
Amounts are included in the computation of net periodic benefit cost (see “Pension and Other Postretirement Benefits” above).

SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS
Sempra Energy Mandatory ConvertibleSeries A Preferred Stock Offerings
In January 2018, we issued 17,250,000 sharesThe terms of our series A preferred stock require a notice to holders when the aggregate adjustment to the conversion rates at which shares of series A preferred stock are convertible into shares of Sempra Energy common stock is more than 1%. On July 6, 2020, we notified the holders of the series A preferred stock of such an adjustment. These adjustments, which resulted from the incremental impact of our second quarter dividend declared on our common stock and which became effective as of June 25, 2020, the ex-dividend date for such dividend, include adjustments to the minimum and maximum conversion rates and the related initial and threshold appreciation prices as shown in the following table:
CONVERSION RATES
Applicable market value per share of
our common stock		Conversion rate (number of shares of our common stock to be received upon
conversion of each share of series A preferred stock)
Greater than $129.668 (which is the adjusted threshold appreciation price)0.7712 shares (equal to $100.00 divided by the adjusted threshold appreciation price)
Equal to or less than $129.668 but greater than or equal to $105.8425Between 0.7712 and 0.9448 shares, determined by dividing $100.00 by the applicable market value of our common stock
Less than $105.8425 (which is the adjusted initial price)0.9448 shares (equal to $100.00 divided by the adjusted initial price)
Sempra Energy Series C Preferred Stock
On June 19, 2020, we issued 900,000 shares of our 4.875% fixed-rate reset cumulative redeemable perpetual preferred stock, series C (series C preferred stock) in a registered public offering resulting inat a price to the public of $1,000 per share and received net proceeds of approximately $1.69 billion. In July 2018, we issued 5,750,000$889 million after deducting the underwriting discount and equity issuance costs of $11 million. We used the net proceeds for working capital and other general corporate purposes, including the repayment of indebtedness.
Liquidation Preference
Each share of series C preferred stock has a liquidation preference of $1,000 plus any accumulated and unpaid dividends (whether or not declared) on such share.
Redemption at the Option of Sempra Energy
The shares of series C preferred stock are perpetual and have no maturity date. However, we may, at our option, redeem the series BC preferred stock in whole or in part, from time to time, on any day during the period from and including the July 15 immediately preceding October 15, 2025 and October 15 of every fifth year after 2025 through and including such October 15 at a registered public offering resultingredemption price in net proceedscash equal to $1,000 per share. Additionally, in the event that a credit rating agency then publishing a rating for us makes certain amendments, clarifications or changes to the criteria it uses to assign equity credit to securities such as the series C preferred stock (Ratings Event), we may redeem the series C preferred stock, in whole but not in part, at any time within 120 days after the conclusion of approximately any review or appeal process instituted by us following the occurrence of the Ratings Event or, if no such review or appeal process is available or sought, the occurrence of such Ratings Event, at a redemption price in cash equal to $1,020 per share (102% of the liquidation preference per share).
Dividends
Dividends on the series C preferred stock, when, as and if declared by our board of directors or an authorized committee thereof, are payable in cash, on a cumulative basis, semi-annually in arrears beginning on October 15, 2020. Dividends on the series C preferred stock will be cumulative:
▪$565 millionwhether or not we have earnings;
▪. Each sharewhether or not the payment of such dividends is then permitted under California law;
▪whether or not such dividends are authorized or declared; and
▪whether or not any agreements to which we are a party prohibit the current payment of dividends, including any agreement relating to our indebtedness.

45

We accrue dividends on the series C preferred stock on a monthly basis. The dividend rate from and including June 19, 2020 to, but excluding, October 15, 2025 is 4.875% per annum of the $1,000 liquidation preference per share. The dividend rate will reset on October 15, 2025 and on October 15 of every fifth year after 2025 and, for each five-year period following such reset dates, will be a per annum rate equal to the Five-year U.S. Treasury Rate as of the second business day prior to such reset date, plus a spread of 4.550%, of the $1,000 liquidation preference per share.
Voting Rights
The holders of series C preferred stock do not have any voting rights, except with respect to any authorization, creation or increase in the authorized amount of any class or series of capital stock ranking senior to the series C preferred stock, certain amendments to the terms of the series C preferred stock, in certain other limited circumstances and as otherwise specifically required by California law. In addition, whenever dividends on any shares of series C preferred stock have not been declared and paid or have been declared but not paid for three or more dividend periods, whether or not consecutive, the authorized number of directors on our board of directors will automatically be increased by two and the holders of the series C preferred stock, voting together as a single class with holders of any and all other outstanding series of preferred stock of equal rank having similar voting rights, will be entitled to elect two directors to fill such two newly created directorships. This voting right will terminate when all accumulated and unpaid dividends on the series C preferred stock have been paid in full and, upon such termination and the termination of the same voting rights of all other holders of outstanding series of preferred stock that have such voting rights, the term of office of each director elected pursuant to such rights will terminate and the authorized number of directors will automatically decrease by two, subject to the revesting of such rights in the event of each subsequent nonpayment.
Ranking
The series C preferred stock ranks, with respect to dividend rights and distribution rights upon our liquidation, winding-up or dissolution:
▪senior to our common stock and each other class or series of our capital stock established in the future, unless the terms of such capital stock expressly provide otherwise;
▪on parity with our outstanding series A preferred stock and series B preferred stock has a liquidation valueand each class or series of $100.00. We discuss the preferredour capital stock offerings in Note 13 of the Notes to Consolidated Financial Statementsestablished in the Annual Report.future if the terms of such capital stock provide that it ranks on parity with the series C preferred stock;

•junior to each class or series of our capital stock established in the future, if the terms of such capital stock provide that it ranks senior to the series C preferred stock;

▪junior to our existing and future indebtedness and other liabilities; and
•structurally subordinated to all existing and future indebtedness and other liabilities of our subsidiaries and capital stock of our subsidiaries held by third parties.
Settlement of Sempra Energy Common Stock OfferingsForward Sale Agreements
In January 2018,the third quarter of 2019, we completedreceived $728 million (net of underwriting discounts of $13 million) from the offeringsettlement of 26,869,1587,156,185 shares of our common stock no par value, inat a registered public offering at $107.00 per share (approximately $105.07 per share after deducting underwriting discounts), pursuant to forward sale agreements. Through September 30, 2019, we received net proceeds totaling approximately $2.8 billionprice of $101.74 related to fully settle these shares, as follows:
▪$367 million (net of underwriting discounts and equity issuance costs of $8 million) to cover overallotment shares of 3,504,672 in the first quarter of 2018;
▪$900 million (net of underwriting discounts of $16 million) from the settlement of 8,556,630 shares in the first quarter of 2018;
▪$800 million (net of underwriting discounts of $14 million) from the settlement of 7,651,671 shares in the second quarter of 2018; and
▪$728 million (net of underwriting discounts of $13 million) from the settlement of 7,156,185 shares in the third quarter of 2019.
In Julyour January 2018 we completed the offering of 11,212,500 shares of our common stock, no par value, in a registered public offering at $113.75 per share (approximately $111.87 per share after deducting underwriting discounts), pursuant to forward sale agreements. We received net proceeds of approximately $164 million (net of underwriting discounts and equity issuance costs of $3 million) from the sale of 1,462,500 shares in the third quarter of 2018 to cover overallotments.
As of November 1, 2019, a total of 9,750,000 shares of Sempra Energy common stock are subject to future settlement under the July 2018 forward sale agreements, which may be settled on one or more dates specified by us occurring no later than December 15, 2019, the final settlement date under the agreements. Although we expect to settle the forward sale agreements entirely by the physical delivery of shares of our common stock in exchange for cash proceeds, we may, subject to certain conditions, elect cash settlement or net share settlement for all or a portion of our obligations under the forward sale agreements. The forward sale agreements are also subject to acceleration by the forward purchasers upon the occurrence of certain events.
offering. We provide additional information regarding the common stock offeringsoffering in Note 14 of the Notes to Consolidated Financial Statements in the Annual Report.

46

Sempra Energy Common Stock Repurchases
On September 11, 2007, our board of directors authorized the repurchase of shares of our common stock, provided that the amounts spent for such purpose do not exceed the greater of $2 billion or amounts spent to purchase no more than 40 million shares. On July 1, 2020, we entered into an ASR program under which we prepaid $500 million to repurchase shares of our common stock in a share forward transaction. The total number of shares purchased was determined by dividing the $500 million purchase price by the arithmetic average of the volume-weighted average trading prices of shares of our common stock during the valuation period of July 2, 2020 through August 4, 2020, minus a fixed discount. The program was completed on August 4, 2020 with an aggregate of 4,089,375 shares of Sempra Energy common stock repurchased at an average price of $122.27 per share. Following the completion of the ASR program, the aggregate dollar amount authorized by the September 11, 2007 share repurchase authorization was exhausted.
On July 6, 2020, our board of directors authorized the repurchase of shares of our common stock at any time and from time to time in an aggregate amount not to exceed the lesser of $2 billion or amounts spent to purchase no more than 25 million shares. No shares have been repurchased under this authorization.
SoCalGas Preferred Stock
The preferred stock at SoCalGas is presented at Sempra Energy as a noncontrolling interest.NCI. Sempra Energy records charges against income related to NCI for preferred stock dividends declared by SoCalGas. We provide additional information regarding preferred stock in Note 13 of the Notes to Consolidated Financial Statements in the Annual Report.
Other Noncontrolling Interests
Ownership interests that are held by owners other than Sempra Energy and SDG&E in subsidiaries or entities consolidated by them are accounted for and reported as NCI.
SDG&E
As we discuss in “Variable Interest Entities” above,Note 1 of the Notes to Consolidated Financial Statements in the Annual Report, on August 23, 2019, SDG&E and Sempra Energy deconsolidated Otay Mesa VIE after SDG&E determined that it iswas no longer the primary beneficiary of the VIE.
Sempra Mexico
In the nine months ended September 30, 2020, IEnova repurchased 57,547,381 shares of its outstanding common stock held by NCI for $167 million, resulting in an increase in Sempra Energy’s ownership interest in IEnova from 66.6% at December 31, 2019 to 69.2% at September 30, 2020. Since October 1, 2020, IEnova repurchased a total of 19,575,399 shares for $64 million.
In the nine months ended September 30, 2019, IEnova repurchased 2,620,000 shares of its outstanding common stock held by NCI for approximately $10 million resulting in an increase in Sempra Energy’s ownership interest in IEnova from 66.5 percent66.5% at December 31, 2018 to 66.6 percent66.6% at September 30, 2019.
In the first quarter of 2020, IEnova purchased additional shares in ICM Ventures Holdings B.V. for $9 million, increasing its ownership from 53.7% to 82.5%. ICM Ventures Holdings B.V. owns certain permits and land where IEnova is building terminals for the receipt, storage and delivery of liquid fuels.
Sempra Renewables
As we discuss in Note 5,, in April 2019, Sempra Renewables sold its remaining wind assets and investments, which included its wind tax equity arrangements. The remaining ownership interest in PXiSE Energy Solutions, LLC was subsumed into Parent and other.
Sempra LNG
OnIn March 2020, Sempra LNG purchased for $7 million the 24.6% minority interest in Liberty Gas Storage LLC, which owns 100% of LA Storage, LLC, increasing Sempra LNG’s ownership in Liberty Gas Storage LLC to 100%. Prior to the purchase, the minority partner converted $22 million in notes payable due from Sempra LNG to equity. As a result of the purchase, we recorded an increase in Sempra Energy’s shareholders’ equity of $2 million for the difference between the carrying value and fair value related to the change in ownership.
In February 7, 2019, Sempra LNG purchased for $20 million the 9.1-percent9.1% minority interest in Bay Gas immediately prior to the sale of 100 percent100% of Bay Gas, which we discuss in Note 5.


Gas.
Sempra LNG and IEnova are jointly developing a proposed natural gas liquefaction project at the site of IEnova’s existing regasification terminal at ECA.ECA LNG Regasification terminal. Sempra LNG consolidates the proposed ECA LNG JV liquefaction project. Thus, Sempra Energy’s NCI in IEnova’s 50-percent50% interest in the proposed project is reported at Sempra LNG.
47

Discontinued Operations
As we discuss in Note 5, we completed the sales of our equity interests in our Peruvian and Chilean businesses in the second quarter of 2020. The minority interests in Luz del Sur and Tecsur were deconsolidated upon sale of our Peruvian businesses in April 2020, and the minority interests in the Chilquinta Energía subsidiaries were deconsolidated upon sale of our Chilean businesses in June 2020.
The following table provides information on noncontrolling ownership interestsabout NCI held by others (not including preferred shareholders)in subsidiaries or entities consolidated by us and recorded in Other Noncontrolling Interests in Total Equity on Sempra Energy’s Condensed Consolidated Balance Sheets.
OTHER NONCONTROLLING INTERESTS
(Dollars in millions) 
 Percent ownership held by noncontrolling interests Equity (deficit) held by
noncontrolling interests
 September 30,
2020		December 31,
2019		September 30,
2020		December 31,
2019
Sempra Mexico:    
IEnova30.8 %33.4 %$1,586 $1,608 
IEnova subsidiaries(1)
17.5 10.0 – 46.37 15 
Sempra LNG:
Liberty Gas Storage LLC0 24.6 0 (13)
ECA LNG JV15.4 16.7 15 12 
Parent and other:
PXiSE Energy Solutions, LLC20.0 20.0 0 1 
Discontinued Operations:   
Chilquinta Energía subsidiaries(1)
0 19.7 – 43.40 23 
Luz del Sur0 16.4 0 205 
Tecsur0 9.8 0 5 
Total Sempra Energy  $1,608 $1,856 
OTHER NONCONTROLLING INTERESTS
(Dollars in millions)  
 Percent ownership held by noncontrolling interests 
 Equity (deficit) held by
noncontrolling interests
 September 30,
2019		 December 31,
2018		 September 30,
2019		 December 31,
2018
SDG&E:       
Otay Mesa VIE—%100%$—
 $100
Sempra Mexico:       
IEnova33.4 33.5 1,676
 1,592
IEnova subsidiaries(1)
10.0 – 46.3 10.0 – 49.0 16
 13
Sempra Renewables:       
Tax equity arrangements – wind(2)
—  NA —
 158
PXiSE Energy Solutions, LLC(3)
— 11.1 —
 1
Sempra LNG:       
Bay Gas— 9.1 —
 18
Liberty Gas Storage, LLC24.6 24.6 (13) (12)
ECA LNG proposed liquefaction project16.7 — 3
 —
Parent and other:       
PXiSE Energy Solutions, LLC(3)
20.0 — 1
 —
Discontinued Operations:       
Chilquinta Energía subsidiaries(1)
19.7 – 43.4 19.7 – 43.4 23
 23
Luz del Sur16.4 16.4 200
 193
Tecsur9.8 9.8 5
 4
Total Sempra Energy    $1,911
 $2,090
(1)(1)    IEnova and Chilquinta Energía have subsidiaries with NCI held by others. Percentage range reflects the highest and lowest ownership percentages among these subsidiaries.
IEnova and Chilquinta Energía have subsidiaries with NCI held by others. Percentage range reflects the highest and lowest ownership percentages among these subsidiaries.
(2)
Net income or loss attributable to NCI is computed using the HLBV method and is not based on ownership percentages.
(3)
In April 2019, PXiSE Energy Solutions, LLC was subsumed into Parent and other.


TRANSACTIONS WITH AFFILIATES
We summarize amounts due from and to unconsolidated affiliates at Sempra Energy Consolidated, SDG&E and SoCalGas in the following table.
48

AMOUNTS DUE FROM (TO) UNCONSOLIDATED AFFILIATES
(Dollars in millions)
 September 30,
2019		 December 31,
2018
Sempra Energy Consolidated:   
Total due from various unconsolidated affiliates – current$40
 $37
    
Sempra Mexico(1):
   
IMG – Note due March 15, 2022(2)
$712
 $641
Energía Sierra Juárez – Note(3)
—
 3
Total due from unconsolidated affiliates – noncurrent$712
 $644
    
Total due to various unconsolidated affiliates – current$(12) $(10)
    
Sempra Mexico(1):
   
Total due to unconsolidated affiliates – noncurrent – TAG – Note due December 20, 2021(4)
$(39) $(37)
SDG&E:   
Total due from unconsolidated affiliates – current – SoCalGas$1
 $—
    
Sempra Energy(1)(5)
$(14) $(43)
SoCalGas—
 (6)
Various affiliates(12) (12)
Total due to unconsolidated affiliates – current$(26) $(61)
    
Income taxes due from Sempra Energy(6)
$5
 $5
SoCalGas:   
SDG&E$—
 $6
Various affiliates—
 1
Total due from unconsolidated affiliates – current$—
 $7
    
Sempra Energy$(35) $(34)
Pacific Enterprises(150) —
SDG&E(1) —
Various affiliates(1) —
Total due to unconsolidated affiliates – current$(187) $(34)
    
Income taxes due to Sempra Energy(6)
$(19) $(4)
(1)
Amounts include principal balances plus accumulated interest outstanding.
(2)
Mexican peso-denominated revolving line of credit for up to 14.2 billion Mexican pesos or approximately $718 million U.S. dollar-equivalent, at a variable interest rate based on the 91-day Interbank Equilibrium Interest Rate plus 220 bps (10.13 percent at September 30, 2019), to finance construction of the natural gas marine pipeline.
(3)
U.S. dollar-denominated loan, at a variable interest rate based on the 30-day LIBOR plus 637.5 bps (8.89 percent at December 31, 2018).
(4)
U.S. dollar-denominated loan, at a variable interest rate based on the 6-month LIBOR plus 290 bps (4.96 percent at September 30, 2019).
(5)
At September 30, 2019, net payable includes outstanding advances to Sempra Energy of $25 million at an interest rate of 2.03 percent.
(6)
SDG&E and SoCalGas are included in the consolidated income tax return of Sempra Energy and their respective income tax expense is computed as an amount equal to that which would result from each company having always filed a separate return.



AMOUNTS DUE FROM (TO) UNCONSOLIDATED AFFILIATES
(Dollars in millions)
 September 30,
2020		December 31,
2019
Sempra Energy Consolidated:  
Total due from various unconsolidated affiliates – current, net of negligible allowance for credit
losses at September 30, 2020(1)(2)
$46 $32 
Total due from unconsolidated affiliates – noncurrent – Sempra Mexico – IMG JV – Note due
March 15, 2022, net of allowance for credit losses of $3 at September 30, 2020(2)(3)
$617 $742 
Total due to various unconsolidated affiliates – current$(6)$(5)
Sempra Mexico(2):
TAG Pipelines Norte, S. de. R.L. de C.V.:
Note due December 20, 2021(4)
$(41)$(39)
5.5% Note due January 9, 2024(5)
(67)0 
TAG JV – 5.74% Note due December 17, 2029(5)
(163)(156)
Total due to unconsolidated affiliates – noncurrent$(271)$(195)
SDG&E:  
SoCalGas$2 $0 
Various affiliates1 0 
Total due from unconsolidated affiliates – current$3 $0 
Sempra Energy$(56)$(37)
SoCalGas0 (10)
Various affiliates(5)(6)
Total due to unconsolidated affiliates – current$(61)$(53)
Income taxes due from Sempra Energy(6)
$25 $130 
SoCalGas:  
SDG&E$0 $10 
Various affiliates1 1 
Total due from unconsolidated affiliates – current$1 $11 
Sempra Energy$(49)$(45)
SDG&E(2)0 
Pacific Enterprises(50)0 
Various affiliates0 (2)
Total due to unconsolidated affiliates – current$(101)$(47)
Income taxes due from Sempra Energy(6)
$20 $152 
(1)    Amount at September 30, 2020 includes $25 million of outstanding principal and a negligible amount of accrued interest receivable from a U.S. dollar-denominated loan from IEnova to ESJ at a variable interest rate based on 1-month LIBOR plus 196 bps (2.12% at September 30, 2020) with a maturity date of December 31, 2020. Pursuant to the agreement, if ESJ is unable to meet certain conditions for an expansion project by December 31, 2020, IEnova and ESJ have the option to convert the loan to a 10-year note.
(2)    Amounts include principal balances plus accumulated interest outstanding.
(3)    Mexican peso-denominated revolving line of credit for up to 14.2 billion Mexican pesos or approximately $641 million U.S. dollar-equivalent, at a variable interest rate based on the 91-day Interbank Equilibrium Interest Rate plus 220 bps (6.75% at September 30, 2020), to finance construction of a natural gas marine pipeline. At September 30, 2020, $2 million of accrued interest receivable is included in Due from Unconsolidated Affiliates – Current.
(4)    U.S. dollar-denominated loan at a variable interest rate based on 6-month LIBOR plus 290 bps (3.16% at September 30, 2020).
(5)     U.S. dollar-denominated loan at a fixed interest rate.
(6)    SDG&E and SoCalGas are included in the consolidated income tax return of Sempra Energy and their respective income tax expense is computed as an amount equal to that which would result from each company having always filed a separate return.

49

The following table summarizes revenues and cost of sales from unconsolidated affiliates.
REVENUES AND COST OF SALES FROM UNCONSOLIDATED AFFILIATES    
(Dollars in millions)    
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
Revenues:       
Sempra Energy Consolidated$13
 $17
 $40
 $49
SDG&E2
 1
 5
 4
SoCalGas16
 15
 50
 47
Cost of Sales:       
Sempra Energy Consolidated$12
 $9
 $40
 $36
SDG&E16
 21
 56
 56
SoCalGas2
 —
 6
 —

REVENUES AND COST OF SALES FROM UNCONSOLIDATED AFFILIATES  
(Dollars in millions)  
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
Revenues:    
Sempra Energy Consolidated$9 $13 $31 $40 
SDG&E1 2 4 5 
SoCalGas23 16 61 50 
Cost of Sales:    
Sempra Energy Consolidated$9 $12 $35 $40 
SDG&E17 16 56 56 
SoCalGas2 2 2 6 
Guarantees
Sempra Energy has provided guarantees related to the financing of the Cameron LNG JV, project, as we discuss in Note 6 below and in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.


50

OTHER INCOME (EXPENSE) INCOME,, NET
Other Income (Expense) Income,, Net, on the Condensed Consolidated Statements of Operations consistedconsists of the following:
OTHER INCOME (EXPENSE), NET   
(Dollars in millions)   
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
Sempra Energy Consolidated:    
Allowance for equity funds used during construction$34 $25 $96 $69 
Investment gains(1)
16 9 9 46 
Gains (losses) on interest rate and foreign exchange instruments, net19 (17)(129)7 
Foreign currency transaction gains (losses), net(2)
15 (13)(95)(2)
Non-service component of net periodic benefit cost(48)(13)(45)(19)
Fine related to Energy Efficiency Program inquiry(6)0 (6)0 
Penalties related to billing practices OII0 0 0 (8)
Interest on regulatory balancing accounts, net0 4 13 9 
Sundry, net(1)(2)(6)1 
Total$29 $(7)$(163)$103 
SDG&E:    
Allowance for equity funds used during construction$21 $15 $61 $42 
Non-service component of net periodic benefit (cost) credit(18)— (15)8 
Fine related to Energy Efficiency Program inquiry(6)0 (6)0 
Interest on regulatory balancing accounts, net0 4 8 10 
Sundry, net1 0 (1)0 
Total$(2)$19 $47 $60 
SoCalGas:   
Allowance for equity funds used during construction$11 $9 $29 $25 
Non-service component of net periodic benefit (cost) credit(15)(5)(3)9 
Penalties related to billing practices OII0 0 0 (8)
Interest on regulatory balancing accounts, net0 0 5 (1)
Sundry, net(3)(3)(10)(7)
Total$(7)$1 $21 $18 
(1)    Represents investment gains on dedicated assets in support of our executive retirement and deferred compensation plans. These amounts are partially offset by corresponding changes in compensation expense related to the plans, recorded in O&M on the Condensed Consolidated Statements of Operations.
(2)    Includes gains of $15 million and losses of $120 million in the three months and nine months ended September 30, 2020, respectively, and losses of $17 million and a negligible amount in the three months and nine months ended September 30, 2019, respectively, from translation to U.S. dollars of a Mexican peso-denominated loan to IMG JV, which are offset by corresponding amounts included in Equity Earnings on the Condensed Consolidated Statements of Operations.

OTHER (EXPENSE) INCOME, NET      
(Dollars in millions)      
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
Sempra Energy Consolidated:       
Allowance for equity funds used during construction$25
 $23
 $69
 $79
Investment gains(1)
9
 8
 46
 13
(Losses) gains on interest rate and foreign exchange instruments, net(17) 39
 7
 46
Foreign currency transaction (losses) gains, net(2)
(13) 28
 (2) 16
Non-service component of net periodic benefit (cost) credit(13) (3) (19) 37
Penalties related to billing practices OII—
 —
 (8) —
Interest on regulatory balancing accounts, net4
 1
 9
 2
Sundry, net(2) —
 1
 (1)
Total$(7) $96
 $103
 $192
SDG&E:       
Allowance for equity funds used during construction$15
 $15
 $42
 $49
Non-service component of net periodic benefit credit—
 8
 8
 25
Interest on regulatory balancing accounts, net4
 2
 10
 4
Sundry, net—
 (1) —
 (1)
Total$19
 $24
 $60
 $77
SoCalGas:       
Allowance for equity funds used during construction$9
 $8
 $25
 $30
Non-service component of net periodic benefit (cost) credit(5) (1) 9
 27
Penalties related to billing practices OII—
 —
 (8) —
Interest on regulatory balancing accounts, net—
 (1) (1) (2)
Sundry, net(3) (3) (7) (6)
Total$1
 $3
 $18
 $49
(1)
Represents investment gains on dedicated assets in support of our executive retirement and deferred compensation plans. These amounts are partially offset by corresponding changes in compensation expense related to the plans, recorded in O&M on the Condensed Consolidated Statements of Operations.
(2)
Includes losses of $17 million and a negligible amount in the three months and nine months ended September 30, 2019, respectively, and gains of $33 million and $25 million in the three months and nine months ended September 30, 2018, respectively, from translation to U.S. dollars of a Mexican peso-denominated loan to the IMG JV, which are offset by corresponding amounts included in Equity Earnings on the Condensed Consolidated Statements of Operations.


51

INCOME TAXES
We provide our calculations of ETRs in the following table.
INCOME TAX EXPENSE (BENEFIT) AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
Three months ended September 30,Nine months ended September 30,
2020201920202019
Sempra Energy Consolidated:
Income tax expense from continuing operations$99 $61 $60 $150 
Income from continuing operations before income taxes
and equity earnings
$201 $448 $1,061 $1,235 
Equity earnings, before income tax(1)
117 17 158 24 
Pretax income$318 $465 $1,219 $1,259 
Effective income tax rate31 %13 %5 %12 %
SDG&E:
Income tax expense$33 $71 $161 $111 
Income before income taxes$211 $337 $794 $700 
Effective income tax rate16 %21 %20 %16 %
SoCalGas:
Income tax (benefit) expense$(6)$35 $95 $50 
(Loss) income before income taxes$(30)$178 $521 $488 
Effective income tax rate20 %20 %18 %10 %
INCOME TAX EXPENSE (BENEFIT) AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
Sempra Energy Consolidated:       
Income tax expense (benefit) from continuing operations$61
 $139
 $150
 $(221)
        
Income (loss) from continuing operations before income taxes       
 and equity earnings$448
 $345
 $1,235
 $(245)
Equity earnings (losses), before income tax(1)
17
 (52) 24
 (236)
Pretax income (loss)$465
 $293
 $1,259
 $(481)
        
Effective income tax rate13% 47% 12% 46%
SDG&E:       
Income tax expense$71
 $53
 $111
 $151
Income before income taxes$337
 $269
 $700
 $682
Effective income tax rate21% 20% 16% 22%
SoCalGas:       
Income tax expense (benefit)$35
 $(7) $50
 $75
Income (loss) before income taxes$178
 $(21) $488
 $320
Effective income tax rate20% 33% 10% 23%
(1)    We discuss how we recognize equity earnings in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

(1)
We discuss how we recognize equity earnings in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

Sempra Energy, SDG&E and SoCalGas record income taxes for interim periods utilizing a forecasted ETR anticipated for the full year. Unusual and infrequent items and items that cannot be reliably estimated are recorded in the interim period in which they occur, which can result in variability in the ETR.
For SDG&E and SoCalGas, the CPUC requires flow-through rate-making treatment for the current income tax benefit or expense arising from certain property-related and other temporary differences between the treatment for financial reporting and income tax, which will reverse over time. Under the regulatory accounting treatment required for these flow-through temporary differences, deferred income tax assets and liabilities are not recorded to deferred income tax expense, but rather to a regulatory asset or liability, which impacts the ETR. As a result, changes in the relative size of these items compared to pretax income, from period to period, can cause variations in the ETR. The following items are subject to flow-through treatment:
▪repairs expenditures related to a certain portion of utility plant fixed assets;
▪the equity portion of AFUDC, which is non-taxable;
▪a portion of the cost of removal of utility plant assets;
▪utility self-developed software expenditures;
▪depreciation on a certain portion of utility plant assets; and
▪state income taxes.
▪repairs expenditures related to a certain portion of utility plant fixed assets
▪the equity portion of AFUDC, which is non-taxable
▪a portion of the cost of removal of utility plant assets
▪utility self-developed software expenditures
▪depreciation on a certain portion of utility plant assets
▪state income taxes
The AFUDC related to equity recorded for regulated construction projects at Sempra Mexico has similar flow-through treatment.
We record income tax (expense) benefit from the transactional effects of foreign currency and inflation. Such effects are partially mitigatedoffset by net gains (losses) from foreign currency derivatives that are hedging Sempra Mexico parent’s exposure to movements in the Mexico peso from its controlling interest in IEnova.
In the nine months ended September 30, 2019, SDG&E and SoCalGas recorded income tax benefits of $31 million and $38 million, respectively, from the release of a regulatory liability established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed be allocated to shareholders in a January 2019 decision.

52

Discontinued Operations
OnIn January 25, 2019, our board of directors approved a plan to sell our South American businesses and we completed the sales in the second quarter of 2020, as we discuss in Note 5. Prior to this decision, our repatriation estimate excluded post-2017 earnings and other basis differences related to our South American businesses. Because of our decision to sell our South American businesses, we no longer assert indefinite reinvestment of these basis differences and have recorded the following in discontinued operationsdifferences. Accordingly, in the nine months ended September 30, 2019:we recorded the following income tax impacts from changes in outside basis differences in our discontinued operations in South America:
▪$89 million income tax benefit primarily related to outside basis differences existing as of the January 25, 2019 approval of our plan to sell our South American businesses. The amount is comprised of $103 million of income tax expense recorded in the first quarter of 2019, which was then reduced by $192 million in the third quarter of 2019 as a result of a change in the anticipated structure of the sale; and
▪$32 million income tax expense related to the increase in outside basis differences from 2019 earnings since January 25, 2019.
▪$89 million income tax benefit in 2019 primarily related to outside basis differences existing as of the January 25, 2019 approval of our plan to sell our South American businesses. The amount is comprised of $103 million of income tax expense recorded in the first quarter of 2019, which was then reduced by $192 million in the third quarter of 2019 as a result of a change in the anticipated structure of the sale; and
▪$7 million income tax benefit in 2020 compared to $32 million income tax expense in 2019 related to changes in outside basis differences from earnings and foreign currency effects since January 25, 2019.
We have not changed our indefinite reinvestment assertion or repatriation plan for our continuing international operations.operations during 2020.
NOTE 2. NEW ACCOUNTING STANDARDS
We describe below recent accounting pronouncements that have had or may have a significant effect on our financial condition, results of operations, cash flows or disclosures.
ASU 2016-02, “Leases,” ASU 2018-01, “Land Easement Practical Expedient for Transition to Topic 842,” ASU 2018-10, “Codification Improvements to Topic 842, Leases,” ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” ASU 2018-20, “Narrow-Scope Improvements for Lessors” and ASU 2019-01, “Leases (Topic 842): Codification Improvements” (collectively referred to as the “lease standard”): In 2016, the Financial Accounting Standards Board began issuing the first in a series of ASUs intended to increase transparency and comparability among organizations with leasing activities. The most significant provision of the lease standard is the requirement that lessees recognize operating lease ROU assets and lease liabilities on the balance sheet.
We adopted the lease standard on January 1, 2019, using the optional transition method to apply the new guidance prospectively as of January 1, 2019, rather than as of the earliest period presented. We elected the package of practical expedients that permits us to not reassess (a) whether a contract is or contains a lease, (b) lease classification or (c) determination of initial direct costs, which allows us to carry forward accounting conclusions under previous U.S. GAAP on contracts that commenced prior to adoption of the lease standard. We also elected the land easement practical expedient, which allows us to continue to account for pre-existing land easements under our accounting policy that existed before adoption of the lease standard. We did not elect the practical expedient to use hindsight in making judgments when determining the lease term.
The adoption of the lease standard did not change our previously reported financial statements. However, in accordance with the lease standard, on a prospective basis, a significant portion of finance lease costs for PPAs that have historically been presented in Cost of Electric Fuel and Purchased Power are now presented in Depreciation and Amortization Expense and Interest Expense on Sempra Energy’s and SDG&E’s statements of operations. Additionally, the adoption of the lease standard had a material impact on our balance sheets at January 1, 2019 due to the initial recognition of ROU assets and lease liabilities for operating leases. Our finance leases were already included on our balance sheets prior to adoption of the lease standard, consistent with previous U.S. GAAP for capital leases.


The following table shows the initial increases (decreases) on our balance sheets at January 1, 2019 from adoption of the lease standard.
IMPACT FROM ADOPTION OF THE LEASE STANDARD
(Dollars in millions)
 Sempra Energy Consolidated SDG&E SoCalGas
Assets held for sale$13
 $—
 $—
Sundry(71) —
 —
Property, plant and equipment, net(147) —
 —
Right-of-use assets – operating leases603
 130
 116
Deferred income tax assets(3) —
 —
Other current liabilities80
 20
 23
Long-term debt(138) —
 —
Deferred credits and other436
 110
 93
Retained earnings17
 —
 —


As a result of the adoption of the lease standard, we derecognized our corporate headquarters building lease in accordance with the transition provisions for build-to-suit arrangements. On a prospective basis, we will account for the corporate headquarters building lease as an operating lease. The initial impact is included in the above table.
We include additional disclosures about our leases in Note 11.
ASU 2016-13, “Measurement of Credit Losses on Financial Instruments”: ASU 2016-13, as amended by subsequently issued ASUs, changes how entities will measure credit losses for most financial assets and certain other instruments. The standard introduces an “expected credit loss” impairment model that requires immediate recognition of estimated credit losses expected to occur over the remaining life of most financial assets measured at amortized cost, including trade and other receivables, loan receivables and commitments and financial guarantees. ASU 2016-13 also requires use of an allowance to record estimated credit losses on available-for-sale debt securities and expands disclosure requirements regarding an entity’s assumptions, models and methods for estimating the credit losses.
For public entities, ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods therein, with early adoption permitted for fiscal years beginning after December 15, 2018. The amendments are to be applied We adopted the standard on January 1, 2020 using a modified retrospective approach through a cumulative-effect adjustment to retained earnings atearnings. The adoption primarily impacted the beginning of the first reporting period in the year of adoption.
We are currently evaluating the effect of the standard on our ongoing financial reporting. On a prospective basis, the new standard will primarily apply to ourexpected credit losses associated with accounts receivable balances, amounts due from unconsolidated affiliates and off-balance sheet financial guarantees. We will adoptThere was an insignificant impact to SDG&E’s or SoCalGas’ balance sheets from adoption. The following table shows the standardinitial (decreases) increases on Sempra Energy’s balance sheet at January 1, 2020.2020 from adoption of ASU 2016-13.
IMPACT FROM ADOPTION OF ASU 2016-13
(Dollars in millions)
Sempra Energy
Accounts receivable – trade, net$(1)
Due from unconsolidated affiliates – noncurrent(6)
Deferred income tax assets4 
Other current liabilities4 
Deferred credits and other2 
Retained earnings(7)
Other noncontrolling interests(2)

ASU 2017-04, “Simplifying the Test for Goodwill Impairment”: ASU 2017-04 removes the second step of the goodwill impairment test, which requires a hypothetical purchase price allocation. An entity will be required to apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill. We adopted ASU 2017-04 on January 1, 2020 and will apply the standard on a prospective basis to our goodwill impairment tests.
ASU 2019-12, “Simplifying the Accounting for Income Taxes”: ASU 2019-12 simplifies certain areas of accounting for income taxes. In addition to other changes, this standard amends ASC 740, “Income Taxes,” as follows:
▪removes the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items, including discontinued operations or other comprehensive income;
53

▪simplifies the recognition of deferred taxes related to basis differences as a result of ownership changes in investments;
▪specifies an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements; and
▪requires an entity to reflect the effect of an enacted change in tax laws or rates in the annual ETR computation in the interim period that includes the enactment date.
For public entities, ASU 2017-042019-12 is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019,2020, including interim periods therein, with early adoption permitted. The transition method related to the amendments are to be appliedmade by ASU 2019-12 varies based on a prospective basis.the nature of the change. We will adopt the standard on January 1, 2021 and do not expect it will have a material impact on our financial statements.
ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting”: ASU 2020-04 provides optional expedients and exceptions for applying U.S. GAAP to contract modifications that replace LIBOR or another reference rate affected by reference rate reform and to hedging relationships that reference LIBOR or another reference rate that is affected or expected to be affected by reference rate reform. ASU 2020-04 is effective March 12, 2020 and can be applied through December 31, 2022, with certain exceptions for hedging relationships that continue to exist after this date, and may be applied from January 1, 2020. For contract modifications, the standard allows entities to account for modifications as an event that does not require reassessment or remeasurement (i.e., as a continuation of the existing contract). The standard also allows entities to amend their formal designation and documentation of hedging relationships affected or expected to be affected by reference rate reform, without having to de-designate the hedging relationship. Entities may elect the optional expedients and exceptions on an individual hedging relationship basis and independently from one another. We elected the optional expedients for contract modifications. We elected the cash flow hedging expedients to disregard the potential discontinuation of a reference rate when assessing whether a hedged forecasted interest payment is probable and to disregard certain mismatches between the designated hedging instrument and the hedged item when assessing the hedge effectiveness. We are applying these expedients prospectively from January 1, 2020. Application of these expedients preserves the presentation of derivatives consistent with the past presentation.
ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”: ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. In addition to other changes, this standard amends ASC 470-20, “Debt with Conversion and Other Options,” by removing the accounting models for instruments with beneficial conversion features and cash conversion features. The standard also amends ASC 260, “Earnings Per Share,” as follows:
▪ASU 2018-02 contains amendments that allow a reclassification from AOCI to retained earnings for stranded tax effects resulting from the TCJA. Under ASU 2018-02,requires an entity to apply the if-converted method when calculating diluted EPS for convertible instruments and no longer use the treasury stock method, which was previously allowed for certain convertible instruments;
▪requires an entity to include the effect of potential share settlement in the diluted EPS calculation when an instrument may be settled in cash or shares, and no longer allows an entity to rebut the presumption of share settlement if it has a history or policy of cash settlement;
▪requires an entity to include equity-classified convertible preferred stock that contains down-round features whereby, if the down-round feature is requiredtriggered, its effect is treated as a dividend and as a reduction of income available to providecommon shareholders in basic EPS;
▪clarifies that the average market price should be used to calculate the diluted EPS denominator when the exercise price or the number of shares that may be issued is variable, except for certain disclosures regarding stranded tax effects,contingently issuable shares; and
▪clarifies that the weighted-average share count from each quarter should be used when calculating the year-to-date weighted-average share count.
For public entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including its accounting policy relatedinterim periods therein, with early adoption permitted for fiscal years beginning after December 15, 2020. An entity can use either a full or modified retrospective approach to releasing the income tax effects from AOCI. The amendmentsadopt ASU 2020-06 and must disclose, in this update can be applied either as of the beginning of the period of adoption, or retrospectively as of the date of enactment of the TCJA and to each period in whichEPS transition information about the effect of the TCJA is recognized. change on affected per-share amounts. We adopted ASU 2018-02 on January 1, 2019 and reclassifiedare currently evaluating the income tax effectseffect of the TCJA from AOCI to retained earnings.standard on our ongoing financial reporting and have not yet selected the year in which we will adopt the standard.


The impact from adoption of ASU 2018-02 on January 1, 2019 was as follows:
▪
Sempra Energy: increase of $40 million to beginning Retained Earnings, $2 million to noncurrent Regulatory Liabilities and $42 million to Accumulated Other Comprehensive Loss;
▪SDG&E: increase of $2 million to beginning Retained Earnings and Accumulated Other Comprehensive Loss; and
▪SoCalGas: increase of $2 million to beginning Retained Earnings, $2 million to noncurrent Regulatory Liabilities and $4 million to Accumulated Other Comprehensive Loss.
NOTE 3. REVENUES
We discuss revenue recognition for revenues from contracts with customers and from sources other than contracts with customers in Note 3 of the Notes to Consolidated Financial Statements in the Annual Report.
54

In connection with the COVID-19 pandemic, the California Utilities and the CPUC have implemented certain measures to assist customers, including suspending service disconnections due to nonpayment for residential and small business customers, waiving late payment fees for business customers, and offering flexible payment plans for customers experiencing difficulty paying their electric or gas bills. Additional measures could be mandated or voluntarily implemented in the future. Under the regulatory compact applicable to the California Utilities, including decoupling of rates, recovery of uncollectible expenses, and other recovery mechanisms potentially available, which we discuss in Note 4, the California Utilities have continued to recognize revenues under ASC 606, “Revenue from Contracts with Customers,” in the three months and nine months ended September 30, 2020.
The following table disaggregates our revenues from contracts with customers by major service line and market and provides a reconciliation to total revenues by segment. The majority of our revenue is recognized over time.
DISAGGREGATED REVENUESDISAGGREGATED REVENUESDISAGGREGATED REVENUES
(Dollars in millions)(Dollars in millions)(Dollars in millions)
Three months ended September 30, 2019SDG&ESoCalGasSempra MexicoSempra LNGConsolidating adjustments and Parent and OtherSempra Energy Consolidated
SDG&E SoCalGas Sempra Mexico Sempra Renewables Sempra LNG Consolidating adjustments, Parent & Other Sempra Energy ConsolidatedThree months ended September 30, 2020
By major service line:             By major service line:
Utilities$1,370
 $765
 $14
 $—
 $—
 $(18) $2,131
Utilities$1,301 $813 $12 $0 $(25)$2,101 
Midstream—
 —
 158
 —
 48
 (39) 167
Renewables—
 —
 32
 —
 —
 2
 34
Other—
 —
 52
 —
 2
 (3) 51
Energy-related businessesEnergy-related businesses0 0 244 35 (32)247 
Revenues from contracts with customers$1,370
 $765
 $256
 $—
 $50
 $(58) $2,383
Revenues from contracts with customers$1,301 $813 $256 $35 $(57)$2,348 
             
By market:             By market:
Gas$100
 $765
 $171
 $—
 $48
 $(55) $1,029
Gas$126 $813 $159 $33 $(54)$1,077 
Electric1,270
 —
 85
 —
 2
 (3) 1,354
Electric1,175 0 97 2 (3)1,271 
Revenues from contracts with customers$1,370
 $765
 $256
 $—
 $50
 $(58) $2,383
Revenues from contracts with customers$1,301 $813 $256 $35 $(57)$2,348 
             
Revenues from contracts with customers$1,370
 $765
 $256
 $—
 $50
 $(58) $2,383
Revenues from contracts with customers$1,301 $813 $256 $35 $(57)$2,348 
Utilities regulatory revenues57
 210
 —
 —
 —
 —
 267
Utilities regulatory revenues171 29 0 0 0 200 
Other revenues—
 —
 101
 —
 50
 (43) 108
Other revenues0 0 95 28 (27)96 
Total revenues$1,427
 $975
 $357
 $—
 $100
 $(101) $2,758
Total revenues$1,472 $842 $351 $63 $(84)$2,644 
Nine months ended September 30, 2019
Nine months ended September 30, 2020
By major service line:             By major service line:
Utilities$3,604
 $3,170
 $56
 $—
 $—
 $(56) $6,774
Utilities$3,610 $3,261 $42 $0 $(66)$6,847 
Midstream—
 —
 472
 —
 134
 (109) 497
Renewables—
 —
 82
 5
 —
 1
 88
Other—
 —
 147
 —
 5
 (5) 147
Energy-related businessesEnergy-related businesses0 0 616 56 (40)632 
Revenues from contracts with customers$3,604
 $3,170
 $757
 $5
 $139
 $(169) $7,506
Revenues from contracts with customers$3,610 $3,261 $658 $56 $(106)$7,479 
             
By market:             By market:
Gas$441
 $3,170
 $527
 $—
 $134
 $(160) $4,112
Gas$518 $3,261 $439 $51 $(98)$4,171 
Electric3,163
 —
 230
 5
 5
 (9) 3,394
Electric3,092 0 219 5 (8)3,308 
Revenues from contracts with customers$3,604

$3,170

$757

$5

$139

$(169)
$7,506
Revenues from contracts with customers$3,610 $3,261 $658 $56 $(106)$7,479 
             
Revenues from contracts with customers$3,604
 $3,170
 $757
 $5
 $139
 $(169) $7,506
Revenues from contracts with customers$3,610 $3,261 $658 $56 $(106)$7,479 
Utilities regulatory revenues62
 (28) —
 —
 —
 —
 34
Utilities regulatory revenues366 (14)0 0 0 352 
Other revenues—
 —
 301
 5
 188
 (148) 346
Other revenues0 0 277 199 (108)368 
Total revenues$3,666
 $3,142
 $1,058
 $10
 $327
 $(317) $7,886
Total revenues$3,976 $3,247 $935 $255 $(214)$8,199 
55



DISAGGREGATED REVENUES (CONTINUED)
(Dollars in millions)
SDG&ESoCalGasSempra MexicoSempra RenewablesSempra LNGConsolidating adjustments and Parent and otherSempra Energy Consolidated
Three months ended September 30, 2019
By major service line:
Utilities$1,370 $765 $14 $0 $0 $(18)$2,131 
Energy-related businesses0 0 242 0 50 (40)252 
Revenues from contracts with customers$1,370 $765 $256 $0 $50 $(58)$2,383 
By market:
Gas$100 $765 $171 $0 $48 $(55)$1,029 
Electric1,270 0 85 0 2 (3)1,354 
Revenues from contracts with customers$1,370 $765 $256 $0 $50 $(58)$2,383 
Revenues from contracts with customers$1,370 $765 $256 $0 $50 $(58)$2,383 
Utilities regulatory revenues57 210 0 0 0 0 267 
Other revenues0 0 101 0 50 (43)108 
Total revenues$1,427 $975 $357 $0 $100 $(101)$2,758 
 Nine months ended September 30, 2019
By major service line:
Utilities$3,604 $3,170 $56 $0 $0 $(56)$6,774 
Energy-related businesses0 0 701 5 139 (113)732 
Revenues from contracts with customers$3,604 $3,170 $757 $5 $139 $(169)$7,506 
By market:
Gas$441 $3,170 $527 $0 $134 $(160)$4,112 
Electric3,163 0 230 5 5 (9)3,394 
Revenues from contracts with customers$3,604 $3,170 $757 $5 $139 $(169)$7,506 
Revenues from contracts with customers$3,604 $3,170 $757 $5 $139 $(169)$7,506 
Utilities regulatory revenues62 (28)0 0 0 0 34 
Other revenues0 0 301 5 188 (148)346 
Total revenues$3,666 $3,142 $1,058 $10 $327 $(317)$7,886 
DISAGGREGATED REVENUES (CONTINUED)
(Dollars in millions)
 Three months ended September 30, 2018
 SDG&E SoCalGas Sempra Mexico Sempra Renewables Sempra LNG Consolidating adjustments Sempra Energy Consolidated
By major service line:             
Utilities$1,577
 $719
 $17
 $—
 $—
 $(16) $2,297
Midstream—
 —
 194
 —
 82
 (71) 205
Renewables—
 —
 32
 14
 1
 (1) 46
Other—
 —
 71
 —
 1
 (2) 70
Revenues from contracts with customers$1,577
 $719
 $314
 $14
 $84
 $(90) $2,618
              
By market:             
Gas$91
 $719
 $214
 $—
 $82
 $(86) $1,020
Electric1,486
 —
 100
 14
 2
 (4) 1,598
Revenues from contracts with customers$1,577
 $719
 $314
 $14
 $84
 $(90) $2,618
              
Revenues from contracts with customers$1,577
 $719
 $314
 $14
 $84
 $(90) $2,618
Utilities regulatory revenues(278) 83
 —
 —
 —
 —
 (195)
Other revenues—
 —
 96
 24
 63
 (41) 142
   Total revenues$1,299
 $802
 $410
 $38
 $147
 $(131) $2,565
 Nine months ended September 30, 2018
By major service line:             
Utilities$3,707
 $2,529
 $58
 $—
 $—
 $(51) $6,243
Midstream—
 —
 484
 —
 171
 (105) 550
Renewables—
 —
 85
 37
 2
 (1) 123
Other—
 —
 142
 —
 5
 (5) 142
Revenues from contracts with customers$3,707
 $2,529
 $769
 $37
 $178
 $(162) $7,058
              
By market:             
Gas$372
 $2,529
 $545
 $—
 $171
 $(153) $3,464
Electric3,335
 —
 224
 37
 7
 (9) 3,594
Revenues from contracts with customers$3,707
 $2,529
 $769
 $37
 $178
 $(162) $7,058
              
Revenues from contracts with customers$3,707
 $2,529
 $769
 $37
 $178
 $(162) $7,058
Utilities regulatory revenues(302) 171
 —
 —
 —
 —
 (131)
Other revenues—
 —
 259
 66
 152
 (128) 349
   Total revenues$3,405
 $2,700
 $1,028
 $103
 $330
 $(290) $7,276
56

Remaining Performance Obligations
For contracts greater than one year, at September 30, 2019,2020, we expect to recognize revenue related to the fixed fee component of the consideration as shown below. SoCalGas did not have any such remaining performance obligations at September 30, 2019.2020.
REMAINING PERFORMANCE OBLIGATIONS(1)
(Dollars in millions)
Sempra Energy ConsolidatedSDG&E
2020 (excluding first nine months of 2020)$88 $1 
2021388 4 
2022406 4 
2023407 4 
2024348 4 
Thereafter4,712 71 
Total revenues to be recognized$6,349 $88 
REMAINING PERFORMANCE OBLIGATIONS(1)
  
(Dollars in millions)  
 Sempra Energy ConsolidatedSDG&E
2019 (excluding first nine months of 2019)$87
$1
2020409
4
2021401
4
2022405
4
2023401
4
Thereafter4,986
75
Total revenues to be recognized$6,689
$92
(1)(1)
Excludes intercompany transactions.


Contract Balances from Revenues from Contracts with Customers
Activities within Sempra Energy’s and SDG&E’s contract liabilities are presented below. There were no contract liabilities at SDG&ESoCalGas in the nine months ended September 30, 2018 or SoCalGas2020 and 2019.
CONTRACT LIABILITIES
(Dollars in millions)
Sempra Energy ConsolidatedSDG&E
Balance at January 1, 2020$(163)$(91)
Revenue from performance obligations satisfied during reporting period3 3 
Balance at September 30, 2020(1)
$(160)$(88)
Balance at January 1, 2019$(70)$0 
Revenue from performance obligations satisfied during reporting period1 0 
Payments received in advance(95)(92)
Balance at September 30, 2019$(164)$(92)
(1)Includes $4 million and $4 million in Other Current Liabilities and $156 million and $84 million in Deferred Credits and Other on the nine months ended September 30, 2019Sempra Energy and 2018.SDG&E Condensed Consolidated Balance Sheets, respectively.
CONTRACT LIABILITIES  
(Dollars in millions)  
 Sempra Energy ConsolidatedSDG&E
Balance at January 1, 2019$(70)$—
Revenue from performance obligations satisfied during reporting period1
—
Payments received in advance(95)(92)
Balance at September 30, 2019(1)
$(164)$(92)
   
Balance at January 1, 2018$—
 
Adoption of ASC 606 adjustment(61) 
Revenue from performance obligations satisfied during reporting period6
 
Payments received in advance(9) 
Balance at September 30, 2018$(64) 
(1)
Includes $3 million and $3 million in Other Current Liabilities and $161 million and $89 million in Deferred Credits and Other on the Sempra Energy and SDG&E Condensed Consolidated Balance Sheets, respectively.
Receivables from Revenues from Contracts with Customers
The table below shows receivable balances associated with revenues from contracts with customers on ourthe Condensed Consolidated Balance Sheets.
RECEIVABLES FROM REVENUES FROM CONTRACTS WITH CUSTOMERS
(Dollars in millions)
September 30, 2020December 31, 2019
Sempra Energy Consolidated:
Accounts receivable – trade, net$962 $1,163 
Accounts receivable – other, net13 16 
Due from unconsolidated affiliates – current(1)
3 5 
Total$978 $1,184 
SDG&E:
Accounts receivable – trade, net$462 $398 
Accounts receivable – other, net9 5 
Due from unconsolidated affiliates – current(1)
3 2 
Total$474 $405 
SoCalGas:
Accounts receivable – trade, net$422 $710 
Accounts receivable – other, net4 11 
Total$426 $721 
(1)Amount is presented net of amounts due to unconsolidated affiliates on the Condensed Consolidated Balance Sheets, when right of offset exists.
57
RECEIVABLES FROM REVENUES FROM CONTRACTS WITH CUSTOMERS  
(Dollars in millions)   
 September 30, 2019 December 31, 2018
Sempra Energy Consolidated:   
Accounts receivable – trade, net$875
 $1,106
Accounts receivable – other, net10
 11
Due from unconsolidated affiliates – current(1)
6
 4
Assets held for sale—
 6
Total$891
 $1,127
SDG&E:   
Accounts receivable – trade, net$446
 $368
Accounts receivable – other, net7
 6
Due from unconsolidated affiliates – current(1)
3
 3
Total$456
 $377
SoCalGas:   
Accounts receivable – trade, net$356
 $634
Accounts receivable – other, net3
 5
Total$359
 $639

(1)
Amount is presented net of amounts due to unconsolidated affiliates on the Condensed Consolidated Balance Sheets, when right of offset exists.


NOTE 4. REGULATORY MATTERS
We discuss regulatory matters in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report and provide updates to those discussions and information about new regulatory matters below.
REGULATORY ASSETS AND LIABILITIES
We show the details of regulatory assets and liabilities in the following table.
REGULATORY ASSETS (LIABILITIES)
(Dollars in millions)
September 30,
2020		December 31,
2019
 
SDG&E:  
Fixed-price contracts and other derivatives$(21)$8 
Deferred income taxes refundable in rates(20)(108)
Pension and other postretirement benefit plan obligations72 103 
Removal obligations(2,131)(2,056)
Environmental costs43 45 
Sunrise Powerlink fire mitigation120 121 
Regulatory balancing accounts(1)(2)
Commodity – electric173 102 
Gas transportation15 22 
Safety and reliability74 77 
Public purpose programs(146)(124)
2019 GRC retroactive impacts70 111 
Other balancing accounts284 106 
Other regulatory assets (liabilities), net(2)
25 (153)
Total SDG&E(1,442)(1,746)
SoCalGas:  
Deferred income taxes refundable in rates(125)(203)
Pension and other postretirement benefit plan obligations370 400 
Employee benefit costs44 44 
Removal obligations(698)(728)
Environmental costs37 40 
Regulatory balancing accounts(1)(2)
Commodity – gas, including transportation(118)(118)
Safety and reliability358 295 
Public purpose programs(349)(273)
2019 GRC retroactive impacts252 400 
Other balancing accounts(116)(7)
Other regulatory assets (liabilities), net(2)
46 (101)
Total SoCalGas(299)(251)
Sempra Mexico:
Deferred income taxes recoverable in rates83 83 
Other regulatory assets1 6 
Total Sempra Energy Consolidated$(1,657)$(1,908)
(1)    At September 30, 2020 and December 31, 2019, the noncurrent portion of regulatory balancing accounts – net undercollected for SDG&E was $127 million and $108 million, respectively, and for SoCalGas was $291 million and $500 million, respectively.
(2)    Includes regulatory assets earning a return.
58
REGULATORY ASSETS (LIABILITIES)
(Dollars in millions)
 September 30,
2019		 December 31,
2018
  
SDG&E:   
Fixed-price contracts and other derivatives$(136) $(150)
Deferred income taxes refundable in rates(118) (236)
Pension and other postretirement benefit plan obligations186
 186
Removal obligations(1,999) (1,848)
Environmental costs26
 28
Sunrise Powerlink fire mitigation120
 120
Regulatory balancing accounts(1)
   
Commodity – electric142
 (8)
Gas transportation17
 45
Safety and reliability76
 70
Public purpose programs(117) (62)
2019 GRC retroactive impacts81
 —
Other balancing accounts46
 145
Other regulatory liabilities, net(2)
(152) (170)
Total SDG&E(1,828) (1,880)
SoCalGas: 
  
Pension and other postretirement benefit plan obligations452
 470
Employee benefit costs49
 49
Removal obligations(754) (833)
Deferred income taxes refundable in rates(214) (336)
Environmental costs28
 28
Regulatory balancing accounts(1)
   
Commodity – gas, including transportation(85) 196
Safety and reliability310
 332
Public purpose programs(329) (325)
2019 GRC retroactive impacts286
 —
Other balancing accounts(30) (68)
Other regulatory liabilities, net(2)
(115) (114)
Total SoCalGas(402) (601)
Sempra Mexico:   
Deferred income taxes recoverable in rates81
 81
Other regulatory assets6
 6
Total Sempra Energy Consolidated$(2,143) $(2,394)
(1)

At September 30, 2019 and December 31, 2018, the noncurrent portion of regulatory balancing accounts – net undercollected for SDG&E was $117 million and $78 million, respectively, and for SoCalGas was $475 million and $185 million, respectively. 
(2)
Includes regulatory assets earning a rate of return.


CALIFORNIA UTILITIES
COVID-19 Pandemic Protections Memorandum Account
In March 2020, the CPUC required that all energy companies under its jurisdiction, including the California Utilities, take action to implement several emergency customer protection measures to support California customers in light of the COVID-19 pandemic. The customer protection measures, which are mandatory for all residential and small business customers, are effective from March 2020, will continue for up to one year, and may be extended by the CPUC. In June 2020, the CPUC approved disaster relief plans covering residential and small business customers affected by the COVID-19 pandemic that were submitted by each of the California Utilities. Each of the California Utilities also was authorized to establish a CPPMA to track and request recovery of incremental costs associated with complying with residential and small business customer protection measures implemented by the CPUC related to the COVID-19 pandemic, including costs associated with suspending service disconnections and uncollectible expenses that arise from these customers’ failure to pay. The California Utilities expect to pursue recovery in rates of the costs recorded to the CPPMA in a future CPUC proceeding, which recovery is not assured.
Arrearage Management Payment Plan
In June 2020, the CPUC issued a decision to adopt certain customer protections to reduce residential customer disconnections and improve reconnection processes, including, among other things, imposing limitations on service disconnections, elimination of deposit requirements and reconnection fees, establishment of the AMP that provides successfully participating, income-qualified residential customers with relief from outstanding utility bill amounts, and increased outreach and marketing efforts. The decision allows each of the California Utilities to establish a two-way balancing account to record the uncollectible expenses associated with residential customers’ inability to pay their electric or gas bills, including as a result of the relief from outstanding utility bill amounts provided under the AMP. The California Utilities may also request, at a future date, to transfer any such costs from the CPPMA to this new balancing account.
CPUC General Rate Case
The CPUC uses GRC proceedings to set rates designed to allow the California Utilities to recover their reasonable operating costs and to provide the opportunity to realize their authorized rates of return on their investments.
2019 General Rate Case
OnAs we discuss in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report, in September 26, 2019, the CPUC issued a final decision in the 2019 GRC approvingFD, which was effective retroactively to January 1, 2019. In the third quarter of 2019, SDG&E and SoCalGas recorded the retroactive after-tax earnings impact of $36 million and $84 million, respectively, for the first quarter of 2019 and $30 million and $46 million, respectively, for the second quarter of 2019.
The 2019 GRC FD approved SDG&E’s and SoCalGas’ test year revenues for 2019 and attrition year adjustments for 2020 and 2021. This isIn January 2020, the firstCPUC issued a final decision implementing a four-year GRC that includescycle for California IOUs. The California Utilities were directed to file a petition for modification to revise their 2019 GRC to add two additional attrition years, resulting in a transitional five-year GRC period (2019-2023). The California Utilities filed the petition in April 2020 and requested authorization of their post-test year ratemaking mechanism for two additional years. We have requested an increase in the revenue requirement for SDG&E and SoCalGas of approximately $95 million and $155 million, respectively, for 2022, and $96 million and $137 million, respectively, for 2023, reflecting certain adjustments. These amounts include revenues authorized for risk assessment mitigation phase activities.both O&M and capital cost attrition. In June 2020, the CPUC issued a ruling to further clarify the issues for review in the California Utilities’ petition, which are mainly whether the proposed revenue requirements and mechanisms for the two proposed additional attrition years are just and reasonable. In September 2020, the California Utilities filed a status report to summarize positions on how impacts of the COVID-19 pandemic should be incorporated into the proposed attrition rates. The California Utilities proposed to continue with the adopted attrition mechanism using the second quarter 2020 Global Insight utility cost forecast, which incorporates impacts of the COVID-19 pandemic. Intervenors have proposed other alternatives, including using escalation factors based on the Consumer Price Index. The procedural schedule provides for a proposed decision in the fourth quarter of 2020.
The 2019 GRC FD adopts a test year 2019 revenue requirement of $1,990 million for SDG&E’s combined operations ($1,590 million for its electric operationsclarified that differences between incurred and $400 million for its natural gas operations), which is $213 million lower than the $2,203 million that SDG&E had requested in its updated application. SDG&E’s adopted 2019 revenue requirement represents an increase of $107 million (5.70 percent) over its authorized 2018 revenue requirement.
The 2019 GRC FD adopts a test year 2019 revenue requirement of $2,770 million for SoCalGas, which is $167 million lower than the $2,937 million that SoCalGas had requested in its updated application. SoCalGas’ adopted 2019 revenue requirement represents an increase of $314 million (12.80 percent) over its authorized 2018 revenue requirement.
The 2019 GRC FD retains a three-year GRC cycle for both utilities, specifying the 2020 and 2021 revenue requirement increases. The increases include separately authorized components for O&M and capital-related costs, as follows:
AUTHORIZED REVENUE REQUIREMENT INCREASES FOR 2020 AND 2021
(Dollars in millions) 
 2020 increase from 2019 2021 increase from 2020
 Revenue increase Percent increase Revenue increase Percent increase
SDG&E:       
O&M$20
 2.64% $19
 2.47%
Capital-related costs114
 9.74
 83
 6.47
Total increase$134
 6.74
 $102
 4.83
SoCalGas:       
O&M$36
 2.64% $34
 2.40%
Capital-related costs184
 14.36
 116
 7.93
Total increase$220
 7.92
 $150
 5.00

We expect the adopted revenue requirements associated with the period from January 1, 2019 through September 30, 2019forecasted income tax expense due to be recovered in rates through December 2021. At September 30, 2019, SDG&E recorded an associated regulatory asset of $81 million, with $51 million as noncurrent, and SoCalGas recorded an associated regulatory asset of $286 million, with $179 million as noncurrent.
The 2019 GRC FD approves for the California Utilities the establishment of two-way liability insurance premium balancing accounts, including wildfire insurance premium costs based on a specific level of coverage. The 2019 GRC FD also permits the California Utilitiesforecasting differences are not subject to seek recovery of additional liability insurance coverage.
As we discuss in Notes 4 and 8 of the Notes to Consolidated Financial Statementstracking in the Annual Report, pursuant to the 2016 GRC FD, SDG&E and SoCalGas each established a two-way income tax expense memorandum account to track, among other items, certain revenue variances resulting from certain differences between the income tax expense forecastedbeginning in the GRC and the income tax expense incurred from 2016 through 2018.2019. SDG&E and SoCalGas previously recorded regulatory liabilities, inclusive of interest, associated with the 2016 through 2018 tracked forecasting differences of $86 million and $88$89 million, respectively. The 2019 GRC FD clarifies that forecasting differences, which we previously included in this tracked activity, are not subject to tracking inIn April 2020, the income tax expense memorandum account. However, its disposition is unclear. Final resolution of the scopeCPUC confirmed treatment of the two-way income tax expense memorandum account for thethese 2016 through 2018 period could impact the disposition of these regulatory liabilities.


The 2016 GRC FD revenue requirement was authorized using a federal income tax rate of 35 percent. As a result of the TCJA, the federal income tax rate of 21 percent became effective January 1, 2018. Since SDG&E and SoCalGas continued to collect authorized revenues based on a 35 percent tax rate, SDG&E and SoCalGas recorded regulatory liabilities of $88 million and $75 million, respectively. The 2019 GRC FD instructs SDG&E and SoCalGas to refund these balances, to customers in future rates. SDG&E also recorded a $79 million regulatory liability at September 30, 2019, relating to its FERC jurisdictional rates, in anticipation of amounts that will benefit customers in future rates for the decrease in the federal income tax rate.
The California Utilities recorded revenues in the first six months of 2019 based on levels authorized for 2018 under the 2016 GRC FD because a final decision in the 2019 GRC was not issued by June 30, 2019. Since the 2019 GRC FD is effective retroactive to January 1, 2019,which time the California Utilities recorded the retroactive impacts in the third quarter of 2019. For SDG&Ereleased these regulatory liability balances to revenues and SoCalGas, these amounts include an incremental earnings impact of $92 million ($66 million after tax) and $181 million ($130 million after tax), respectively, related to the first six months of 2019.regulatory interest.
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CPUC Cost of Capital
In AprilDecember 2019, the CPUC approved the cost of capital and rate structures (shown in the table below) for SDG&E and SoCalGas that are effective January 1, 2020 and will remain in effect through December 31, 2022. SDG&E did not propose a 2020 cost of preferred equity in this proceeding. In January 2020, SDG&E filed separate applications withan advice letter to continue the cost of preferred equity for test year 2020 at 6.22%, which the CPUC to update theirapproved in March 2020.
CPUC AUTHORIZED COST OF CAPITAL AND RATE STRUCTURE
SDG&ESoCalGas
Authorized weightingReturn on
rate base		Weighted
return on
rate base		Authorized weightingReturn on
rate base		Weighted
return on
rate base
45.25 %4.59 %2.08 %Long-Term Debt45.60 %4.23 %1.93 %
2.75 6.22 0.17 Preferred Equity2.40 6.00 0.14 
52.00 10.20 5.30 Common Equity52.00 10.05 5.23 
100.00 %7.55 %100.00 %7.30 %
The CCM was reauthorized in the 2020 cost of capital proceeding to continue through 2022. The CCM benchmark rate for the 2020 cost of capital is the average monthly utility bond index, as published by Moody’s, for the 12-month period from October 2018 through September 2019. SDG&E’s CCM benchmark rate is 4.498%, based on Moody’s Baa- utility bond index. SoCalGas’ CCM benchmark rate is 4.029%, based on Moody’s A- utility bond index. The index applicable to each utility is based on such utility’s credit rating.
The CCM benchmark rates for SDG&E and SoCalGas are the basis of comparison to determine if future measurement periods “trigger” the CCM. For the 12 months ended September 2020, the first “CCM Period,” the trigger did not occur for SDG&E or SoCalGas. The trigger occurs if the change in the applicable average Moody’s utility bond index relative to the CCM benchmark is larger than plus or minus 1.000%. Accordingly, if a change of more than plus or minus 1.000% occurs, SDG&E’s, SoCalGas’, or both utilities’ authorized ROE would be adjusted, upward or downward, by one half of the difference between the CCM benchmark and the 12-month average determined during the CCM Period. In addition, the authorized recovery rate for the California Utilities’ cost of debt and preferred equity would be adjusted to their respective actual weighted-average cost, with no change to the authorized capital structure. In the event of a CCM trigger, the CCM benchmark is also re-established. These adjustments would become effective in authorized rates on January 1 2020. SDG&E proposedof the year following the CCM trigger. The next CCM Period is from October 2020 to adjust its authorized capital structure by increasing the amount of its common equity from 52 percent to 56 percent. SDG&E also proposed to increase its authorized ROE from 10.2 percent to 14.3 percent (with the aggregate ROE proposal including a quantified premium for wildfire liability risk), and to increase its authorized return on rate base from 7.55 percent to 10.03 percent. On August 1, 2019, SDG&E filed supplemental testimony to update its ROE request to reflect the impacts of AB 1054 and AB 111. In that supplementary testimony, SDG&E modified its proposal to increase its authorized ROE from 10.2 percent to 12.38 percent, including a revised premium for wildfire liability risk, and its authorized return on rate base from 7.55 percent to 8.95 percent. SoCalGas proposed to adjust its authorized capital structure by increasing the amount of its common equity from 52 percent to 56 percent. SoCalGas also proposed to increase its authorized ROE from 10.05 percent to 10.7 percent and to increase its authorized return on rate base from 7.34 percent to 7.85 percent. Intervenors are proposing a ROE for SDG&E ranging from 8.49 percent to 9.65 percent and for SoCalGas ranging from 8.49 percent to 9.63 percent. Intervenors have also proposed authorized returns on rate base for SDG&E ranging from 6.62 percent to 7.22 percent and for SoCalGas ranging from 6.45 percent to 6.72 percent. Intervenors also propose that the common equity levels remain authorized at 52 percent at both SDG&E and SoCalGas. The schedule for the proceeding indicates a final decision in the fourth quarter of 2019.September 2021.
SDG&E
FERC Formulaic Rate Filing
In October 2018, SDG&E submitted its TO5 filing to the FERC. This proceeding establishes theFERC to establish its transmission revenue requirement, including rate of return, for SDG&E’s FERC-regulated electric transmission operations and assets. SDG&E’s TO5 filing proposed, among other items, an increase to SDG&E’s current authorized FERC ROE from 10.05 percent to 11.2 percent. OnIn December 31, 2018, the FERC issued its order accepting and suspending SDG&E’s TO5 filing and established hearing and settlement procedures. In the order, the FERC suspended the TO5 filing for five months, during which the existing TO4 rates remained in effect.effect, and established hearing and settlement procedures. The suspension period ended on June 1, 2019, when the proposed TO5 rates took effect, subject to refund and the outcome of the rate filing. As a result, until a new ROE is authorized, the currentTO4 ROE of 10.05 percent is10.05% was the basis of SDG&E’s FERC-related revenue recognition. In July 2019,recognition until March 2020, when the FERC approved the settlement judge reportedterms that SDG&E and the parties engaged in settlement negotiations had reached an impasse and directed the matter forward to hearings, which does not preclude continued settlement discussions among SDG&E and settling parties.
In September 2019, the settlement judge issued an order suspending the hearing schedule for 60 days in anticipation of a settlement between the parties. In October 2019, SDG&E andall settling parties reached an agreement on all issues set for hearing in the proceeding. October 2019.
The settlement agreement provides for a ROE of 10.60 percent,10.60%, consisting of a base ROE of 10.10 percent10.10% plus an additional 50 bps for participation in the California ISO. SDG&E will refund the California ISO additional 50 bps of ROE as of the refund effective date (June 1, 2019) in this proceeding ifIf the FERC issues an order ruling that California IOUs are no longer eligible for the additional California ISO ROE.ROE, SDG&E would refund the additional 50 bps of ROE associated with the California ISO as of the refund effective date (June 1, 2019) in this proceeding. The TO5 term is effective June 1, 2019 and shall remain in effect indefinitely, with parties having the annual right to terminate the agreement also includesbeginning in 2022.
In the collectionfirst quarter of 2020, SDG&E recorded retroactive revenues of $12 million related to 2019, and additional FERC revenues of $17 million to conclude a rate base matter, net of certain refunds to be paid to CPUC-jurisdictional customers. We expect a FERC order on the settlement terms in the first half of 2020.
When we receive a final decision, SDG&E expects to record the cumulative earnings effect of retroactive application to June 1, 2019 for any difference between the current ROE and the approved ROE.Energy Efficiency Program Inquiry


SOCALGAS
Billing Practices OII
In May 2017,January 2020, the CPUC issued an OII to determine whether SoCalGas violated any provisionsa ruling seeking comments on a report prepared by its consultant regarding SDG&E’s Upstream Lighting Program for the program year 2017. The CPUC subsequently expanded the scope of the California Public Utilities Code, General Orders,comments to cover
60

the program year 2018. The Upstream Lighting Program was one of SDG&E’s Energy Efficiency programs designed to produce energy efficiency savings for which SDG&E could earn a performance-based incentive.
Pursuant to the CPUC decisions, or other requirements pertainingruling, intervenors representing ratepayers have questioned SDG&E’s management of the program and alleged that certain program expenditures did not benefit the purpose of the program. As a result of the inquiry, SDG&E voluntarily expanded its review to billing practices from 2014 through 2016. The CPUC examinedinclude the timeliness of monthly bills, extending the billing period forprogram year 2019. Based on this review and discussions with intervenors, SDG&E concluded that some concessions were appropriate, which include refunding certain costs and certain performance-based incentives to customers and issuing estimated bills, including an examinationincurring a fine. Accordingly, in the three months and nine months ended September 30, 2020, SDG&E reduced revenues by $36 million and $51 million, respectively, and recorded a fine of SoCalGas’ gas tariff rules. In January 2019, the CPUC ordered SoCalGas to pay $8$6 million in penalties, including $3Other (Expense) Income, Net, on the SDG&E and Sempra Energy Condensed Consolidated Statements of Operations. The after-tax impact for the three months and nine months ended September 30, 2020 was $29 million that was paid in July 2019 to California’s general fund and $5$44 million, to be credited to customers that received delayed bills (greater than 45 days) in the form ofrespectively. In October 2020, SDG&E executed a $100 bill credit. SoCalGas filed an appealsettlement agreement with intervenors consistent with these concessions. CPUC approval of the CPUC’s conclusions in the order, which, in April 2019, the CPUC denied. SoCalGas filed a rehearing request on May 28, 2019, whichsettlement agreement is pending before the CPUC. The CPUC granted SoCalGas’ request to delay distribution of the $100 bill credit to customers until a final decision on the rehearing.required.
NOTE 5. ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS
We consolidate assets acquired and liabilities assumed as of the purchase date and include earnings from acquisitions in consolidated earnings after the purchase date.
ACQUISITIONSACQUISITION
Sempra Texas Utilities
Oncor HoldingsTTHC
On March 9, 2018, Sempra Energy completed the acquisition ofIn February 2020, STIH acquired an additional indirect 100-percent0.1975% interest in Oncor Holdings, which owned 80.03 percent of Oncor, and other EFH assets and liabilities unrelated to Oncor, pursuant to the Merger Agreement with EFH. Under the Merger Agreement, we paid Merger Consideration of $9.45 billion in cash and an additional $31 million representing an adjustment for dividends and payments pursuant to a tax sharing agreement with Oncor and Oncor Holdings. Also on March 9, 2018, in a separate transaction, Sempra Energy, through its acquisition of a 1% interest in Oncor Holdings, acquiredTTHC from Hunt Strategic Utility Investment, L.L.C. (Hunt), including notes receivable due from TTHC with an additional 0.22 percentaggregate outstanding balance of the outstanding membership interests in Oncor from OMIapproximately $6 million, for $26a total purchase price of approximately $23 million in cash, bringing Sempra Energy’s indirect ownership in Oncor to 80.25 percent.approximately 80.45%. TTHC indirectly owns 100% of TTI, an investment vehicle indirectly owned by third parties unaffiliated with Oncor Holdings or Sempra Energy, continues to own 19.75 percentwhich owns 19.75% of Oncor’s outstanding membership interests. At the acquisition date, we determined the fair value of the notes receivable was $7 million based on a discounted cash flow model, and attributed $16 million to the investment in TTHC, which we recorded as an equity method investment.
STIH’s acquisition of the 1% interest was the subject of a lawsuit filed in the Delaware Court of Chancery by the owners of the remaining 99% ownership interest in TTHC. STIH purchased its 1% interest in TTHC in February 2020 after the Delaware Court of Chancery decided, among other things, that STIH’s right to purchase the 1% interest was superior to that of the remaining owners of TTHC. The remaining owners appealed that decision and, in May 2020, the Delaware Supreme Court reversed the Delaware Court of Chancery’s ruling and remanded the case back to the Delaware Court of Chancery. In September 2020, the Delaware Court of Chancery ordered, among other things, the rescission of STIH’s purchase of the 1% interest in TTHC. The parties have complied with the court’s order and Sempra Energy’s indirect ownership in Oncor has returned to 80.25%. We discuss this acquisition, includingreceived a full refund of the purchase price allocation,from Hunt in Note 5 ofSeptember 2020 and have fully unwound the Notes to Consolidated Financial Statements in the Annual Report.
After satisfying all conditions precedent, including final approval from the PUCT, on May 16, 2019, Oncor completed the acquisition of 100 percent of the issued and outstanding shares of InfraREIT and 100 percent of the limited partnership units of its subsidiary, InfraREIT Partners, pursuant to the InfraREIT Merger Agreement. Under the InfraREIT Merger Agreement, Oncor paid merger consideration of $1,275 million, or $21 per share, plus certain transaction costs incurred by InfraREIT and its subsidiaries and paid by Oncor on their behalf, including $40 million for a management agreement termination fee. In connection with and immediately after the closing, Oncor also extinguished all of InfraREIT’s outstanding debt (totaling $953 million) by repaying an aggregate principal amount of $602 million on behalf of InfraREIT’s subsidiaries (using proceeds from a term loan and issuances of commercial paper), and exchanging an aggregate principal amount of $351 million of secured senior notes issued by InfraREIT subsidiaries for secured senior notes issued by Oncor. Oncor received a total of $1,330 million in capital contributions from Sempra Energy and certain indirect equity holders of TTI, proportionate to their respective ownership interest in Oncor, to fund the purchase price and certain expenses. We discuss Sempra Energy’s contribution in Note 6.
As part of Oncor’s acquisition of interests in InfraREIT, immediately prior to closing the InfraREIT Merger Agreement, SDTS accepted and assumed certain assets and liabilities of SU in exchange for certain SDTS assets, pursuant to the Asset Exchange Agreement. SDTS received real property and other assets used in the electric transmission and distribution business in Central, North and West Texas, as well as the equity interests in GS Project Entity, LLC (a wholly owned subsidiary of SU) and SU received real property and other assets used in the electric transmission and distribution business near the Texas-Mexico border. Pursuant to the Asset Exchange Agreement, immediately prior to the completion of the exchange, SDTS became a wholly owned, indirect subsidiary of InfraREIT Partners.


acquisition.
Sharyland Holdings
OnIn May 16, 2019, Sempra Energy acquired an indirect, 50-percent50% interest in Sharyland Holdings for $102$95 million (subject to customary closing(net of $7 million post-closing adjustments) pursuant to the Securities Purchase Agreement. In connection with and prior to the consummation of the Securities Purchase Agreement, Sharyland Holdings owned 100 percent100% of the membership interests in SUSharyland Utilities, LP and SUSharyland Utilities, LP converted into a limited liability company, named Sharyland Utilities, L.L.C. We account for our indirect, 50-percent50% interest in Sharyland Holdings as an equity method investment.
Sempra South American Utilities
Compañía Transmisora del Norte Grande S.A.
On December 18, 2018, Chilquinta Energía acquired a 100-percent interest in Compañía Transmisora del Norte Grande S.A. through a sales and purchase agreement with AES Gener S.A. and its subsidiary Sociedad Eléctrica Angamos S.A. We completed the acquisition for a purchase price of $226 million and paid $208 million (net of $18 million cash acquired) with available cash on hand at Sempra South American Utilities.
We accounted for this business combination using the acquisition method of accounting. We allocated the $208 million in cash paid ($226 million purchase price less $18 million of cash acquired) to the identifiable assets acquired and liabilities assumed based on their respective fair values, with the excess recognized as goodwill, which is included in assets held for sale in discontinued operations. We consider the purchase price allocation at the acquisition date to be final.
We discuss this acquisition, including the purchase price allocation, in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report.
DIVESTITURES
In June 2018, our board of directors approved a plan to divest certain non-utility natural gas storage assets in the southeast U.S., and all our U.S. wind and U.S. solar assets (collectively, the Assets). As a result of our plan to sell the Assets, we recorded impairment charges totaling $1.5 billion ($900 million after tax and NCI) in June 2018. These charges included $1.3 billion ($755 million after tax and NCI) at Sempra LNG, which is included in Impairment Losses on Sempra Energy’s Condensed Consolidated Statements of Operations, and $200 million ($145 million after tax) at Sempra Renewables, which is included in Equity Earnings on Sempra Energy’s Condensed Consolidated Statements of Operations for the nine months ended September 30, 2018. These impairment charges primarily represented an adjustment of the related assets’ carrying values to estimated fair values, less costs to sell when applicable, which we discuss in Notes 6 and 12 of the Notes to Consolidated Financial Statements in the Annual Report.
Sempra Renewables
In April 2019, Sempra Renewables completed the sale of its remaining wind assets and investments to AEP for $569 million, net of transaction costs, and recorded a $61 million ($45 million after tax and NCI) gain, which is included in (Loss) Gain on Sale of Assets on theSempra Energy’s Condensed Consolidated StatementsStatement of Operations for the nine months ended September 30, 2019.
61

Upon completion of the sale, remaining nominal business activities at Sempra Renewables were subsumed into Parent and other and the Sempra Renewables segment ceased to exist.
Sempra LNG
OnIn February 7, 2019, Sempra LNG completed the sale of its non-utility natural gas storage assets in the southeast U.S. (comprised of Mississippi Hub and Bay Gas), which we classified as held for sale at December 31, 2018, to an affiliate of ArcLight Capital Partners and received cash proceeds of $322 million, net of transaction costs. In January 2019, Sempra LNG completed the sale of other non-utility assets for $5 million.

DISCONTINUED OPERATIONS
OnIn January 25, 2019, our board of directors approved a plan to sell our South American businesses. We determined that these businesses, which previously constituted the Sempra South American Utilities segment, and certain activities associated with those businesses, met the held-for-sale criteria. These businesses are presented as discontinued operations, as the planned sales represent a strategic shift that will have a major effect on our operations and financial results. We do not plan toUpon completion of these sales, we no longer have significant continuing involvement in or be ablethe ability to exercise significant influence on the operating or financial policies of these operations after they are sold.operations. Accordingly, the results of operations, financial position and cash flows for these businesses have been reclassified topresented as discontinued operations for all periods presented.


Discontinued operations that were previously in the Sempra South American Utilities segment include our 100-percentformer 100% interest in Chilquinta Energía in Chile, our 83.6-percentformer 83.6% interest in Luz del Sur in Peru and our former interests in two2 energy-services companies, Tecnored and Tecsur, which provide electric construction and infrastructure services to Chilquinta Energía and Luz del Sur, respectively, as well as third parties. 
On September 27, 2019,April 24, 2020, we entered into a Purchase and Sale Agreement with China Yangtze Power International (Hongkong) Co., Limited to sellcompleted the sale of our equity interests in our Peruvian businesses, including our 83.6-percent 83.6% interest in Luz del Sur and its indirect ownershipour interest in Tecsur, to an affiliate of China Yangtze Power International (Hongkong) Co., Limited for an aggregate base purchase pricecash proceeds of $3.59 billion, subject to customary closing$3,549 million, net of transaction costs and as adjusted for post-closing adjustments, for working capital and changes in net indebtedness. The sale is subject to various conditions to closing, including approvals from the Peruvian anti-trust authority and the Bermuda Monetary Authority. We expectrecorded a pretax gain of $2,271 million ($1,499 million after tax).
On June 24, 2020, we completed the sale to close in the first quarter of 2020.
On October 12, 2019, we entered into a Purchase and Sale Agreement with State Grid International Development Limited to sell our equity interests in our Chilean businesses, including our 100-percent100% interest in Chilquinta Energía and Tecnored and our 50-percent50% interest in Eletrans, for an aggregate base purchase price of $2.23 billion, subject to customary adjustments for working capital and changes in net indebtedness and other adjustments. Chilquinta Energía also agreed to purchase the remaining 50-percent interest in Eletrans from Sociedad Austral de Electricidad S.A., contingent on the sale of our Chilean businesses to State Grid International Development Limited. This acquisition by Chilquinta EnergíLimited for cash proceeds of $2,216 million, net of transaction costs and as adjusted for post-closing adjustments, and recorded a would resultpretax gain of $628 million ($248 million after tax).
In the three months and nine months ended September 30, 2020, the pretax gains from the sales of our South American businesses are included in State Grid International Development Limited acquiring 100percent(Loss) Gain on Sale of Eletrans, which we do not expect will have a significant economic impactDiscontinued Operations in the table below and the after-tax gains are included in (Loss) Income from Discontinued Operations, Net of Income Tax, on the saleSempra Energy Condensed Consolidated Statements of our Chilean businesses. The sale of our Chilean businesses is subject to various conditions to closing, including approval by the Chilean anti-trust authority, certain Chinese regulatory approvals and approval by the Bermuda Monetary Authority, but is not subject to Chilquinta Energía purchasing the remaining 50-percent interest in Eletrans. We expect the sale to close in the first quarter of 2020.Operations.
Summarized results from discontinued operations were as follows:
DISCONTINUED OPERATIONS
(Dollars in millions)  
 Three months ended September 30,Nine months ended September 30,
 
2020(1)
2019
2020(2)
2019
Revenues$0 $398 $570 $1,222 
Cost of sales0 (249)(364)(765)
(Loss) gain on sale of discontinued operations(16)0 2,899 0 
Operating expenses0 (38)(66)(123)
Interest and other0 (3)(3)(12)
Income before income taxes and equity earnings(16)108 3,036 322 
Income tax benefit (expense)9 148 (1,186)(32)
Equity earnings0 0 0 2 
(Loss) income from discontinued operations, net of income tax(7)256 1,850 292 
Earnings attributable to noncontrolling interests0 (8)(10)(25)
(Losses) earnings from discontinued operations attributable
to common shares
$(7)$248 $1,840 $267 
(1)    Represents post-closing adjustments related to the sale of our equity interests in our Chilean businesses.
(2)    Results include activity until deconsolidation of our Peruvian businesses on April 24, 2020 and Chilean businesses on June 24, 2020.
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DISCONTINUED OPERATIONS
(Dollars in millions)       
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
Revenues$398
 $375
 $1,222
 $1,190
Cost of sales(249) (246) (765) (794)
Operating expenses(38) (41) (123) (151)
Interest and other(3) (6) (12) (15)
Income before income taxes and equity earnings108
 82
 322
 230
Income tax benefit (expense)148
 (28) (32) (94)
Equity earnings—
 —
 2
 1
Income from discontinued operations, net of income tax256
 54
 292
 137
Earnings attributable to noncontrolling interests(8) (8) (25) (22)
Earnings from discontinued operations attributable to common shares$248
 $46
 $267
 $115



The following table summarizes the carrying amounts of the major classes of assets and related liabilities classified as held for sale in discontinued operations.
ASSETS HELD FOR SALE IN DISCONTINUED OPERATIONS
(Dollars in millions)   
 September 30,
2019		 December 31, 2018
Cash and cash equivalents$359
 $88
Restricted cash(1)
1
 —
Accounts receivable, net290
 315
Due from unconsolidated affiliates2
 2
Inventories44
 38
Other current assets24
 16
Current assets$720
 $459
    
Due from unconsolidated affiliates$51
 $44
Goodwill and other intangible assets803
 819
Property, plant and equipment, net2,502
 2,357
Other noncurrent assets39
 39
Noncurrent assets$3,395
 $3,259
    
Short-term debt$75
 $55
Accounts payable165
 176
Dividends payable428
 8
Current portion of long-term debt and finance leases39
 29
Other current liabilities97
 100
Current liabilities$804
 $368
    
Long-term debt and finance leases$687
 $708
Deferred income taxes274
 250
Other noncurrent liabilities62
 55
Noncurrent liabilities$1,023
 $1,013

ASSETS HELD FOR SALE IN DISCONTINUED OPERATIONS
(Dollars in millions)
December 31, 2019
Cash and cash equivalents$74 
Restricted cash(1)
Primarily represents funds held in accordance with Peruvian tax law.1 
Accounts receivable, net303 
Due from unconsolidated affiliates2 
Inventories36 
Other current assets29 
Current assets$445 
Due from unconsolidated affiliates$54 
Goodwill and other intangible assets801 
Property, plant and equipment, net2,618 
Other noncurrent assets40 
Noncurrent assets$3,513 
Short-term debt$52 
Accounts payable201 
Current portion of long-term debt and finance leases85 
Other current liabilities106 
Current liabilities$444 
Long-term debt and finance leases$702 
Deferred income taxes284 
Other noncurrent liabilities66 
Noncurrent liabilities$1,052 

At September 30, 2019 and December 31, 2018, $549(1)Primarily represents funds held in accordance with Peruvian tax law.

As a result of the sales of our South American businesses, in the second quarter of 2020, we reclassified $645 million and $506 million, respectively, of cumulative foreign currency translation adjustments relatedlosses from AOCI to our South American businesses are(Loss) Gain on Sale of Discontinued Operations, which is included in AOCI.(Loss) Income from Discontinued Operations, Net of Income Tax, on the Sempra Energy Condensed Consolidated Statements of Operations.
NOTE 6. INVESTMENTS IN UNCONSOLIDATED ENTITIES
We generally account for investments under the equity method when we have significant influence over, but do not have control of, these entities. Equity earnings and losses, both before and net of income tax, are combined and presented as Equity Earnings on the Condensed Consolidated Statements of Operations. See Note 12 for information on equity earnings and losses, both before and net of income tax, by segment. See Note 1 for information on how equity earnings and losses before income taxes are factored into the calculations of our pretax income or loss and ETR.
Our equity method investments include various domestic and foreign entities. Our domestic equity method investees are typically partnerships that are pass-through entities for income tax purposes and therefore they do not record income tax. Sempra Energy’s income tax on earnings from these equity method investees, other than Oncor Holdings as we discuss below, is included in Income Tax (Expense) Benefit on the Condensed Consolidated Statement of Operations. Our foreign equity method investees are corporations whose operations are generally taxable on a standalone basis in the countries in which they operate, and we recognize our equity in such income or loss net of investee income tax.
Oncor is a domestic partnership for U.S. federal income tax purposes and is not included in the consolidated income tax return of Sempra Energy. Rather, only our pretax equity earnings from our investment in Oncor Holdings (a disregarded entity for tax purposes) are included in our consolidated income tax return. A tax sharing agreement with TTI, Oncor Holdings and Oncor provides for the calculation of an income tax liability substantially as if Oncor Holdings and Oncor were taxed as corporations


and requires tax payments determined on that basis. While partnerships are not subject to income taxes, in consideration of the tax sharing agreement and Oncor being subject to the provisions of U.S. GAAP governing rate-regulated operations, Oncor recognizes amounts determined under cost-based regulatory rate-setting processes (with such costs including income taxes), as if it were taxed as a corporation. As a result, since Oncor Holdings consolidates Oncor, we recognize equity earnings from our investment in Oncor Holdings net of its recorded income tax.
We provide additional information concerning our equity method investments in Note 5 above and in Notes 5 and 6 of the Notes to Consolidated Financial Statements in the Annual Report.
SEMPRA TEXAS UTILITIES
Oncor Holdings
We account for our 100-percent100% ownership interest in Oncor Holdings, which owns an 80.25% interest in Oncor, as an equity method investment. Due to the ring-fencing measures, governance mechanisms, and commitments in effect, following the Merger, we do not have the power to
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direct the significant activities of Oncor Holdings and Oncor. See Note 6 of the Notes to Consolidated Financial Statements in the Annual Report for additional information related to the restrictions on our ability to direct the significant activities of Oncor Holdings and Oncor.
In the nine months ended September 30, 2020, Sempra Energy contributed cash of $1,236 million and $117$209 million to Oncor Holdings, and Oncor Holdings distributed to Sempra Energy $220 million in dividends.
In the nine months ended September 30, 2019, and 2018, respectively. The 2019 contributions includeSempra Energy contributed $1,236 million to Oncor Holdings, which includes $1,067 million to fund Oncor’s May 2019 acquisition of interests in InfraREIT and certain acquisition-related expenses, which we discuss in Note 5. of the Notes to Consolidated Financial Statements in the Annual Report. In the nine months ended September 30, 2019, and 2018, Oncor Holdings distributed to Sempra Energy $162 million and $9 million, respectively, in dividends and $9 million and $15 million, respectively, in tax sharing payments.dividends.
We provide summarized income statement information for Oncor Holdings in the following table.
SUMMARIZED FINANCIAL INFORMATION – ONCOR HOLDINGS 
(Dollars in millions) 
 Three months ended September 30, Nine months ended September 30, 2019March 9 - September 30, 2018
 20192018 
Operating revenues$1,211
$1,095
 $3,268
$2,352
Operating expense(787)(748) (2,319)(1,663)
Income from operations424
347
 949
689
Interest expense(97)(89) (276)(198)
Income tax expense(53)(53) (106)(105)
Net income261
191
 511
351
Noncontrolling interest held by TTI(52)(38) (102)(70)
Earnings attributable to Sempra Energy209
153
 409
281

Sharyland Holdings
As we discuss in Note 5, on May 16, 2019, we acquired an indirect, 50-percent interest in Sharyland Holdings for $102 million (subject to customary closing adjustments), which we account for as an equity method investment.
SUMMARIZED FINANCIAL INFORMATION – ONCOR HOLDINGS
(Dollars in millions)
 Three months ended
September 30,		Nine months ended
September 30,
2020201920202019
Operating revenues$1,232 $1,211 $3,394 $3,268 
Operating expenses(819)(787)(2,387)(2,319)
Income from operations413 424 1,007 949 
Interest expense(102)(97)(305)(276)
Income tax expense(50)(53)(115)(106)
Net income255 261 557 511 
Noncontrolling interest held by TTI(50)(52)(111)(102)
Earnings attributable to Sempra Energy205 209 446 409 
SEMPRA MEXICOLNG
Sempra Mexico invested cash of $45 million in the IMGCameron LNG JV in
In the nine months ended September 30, 2018.
SEMPRA RENEWABLES
As we discuss in Note 5, Sempra Renewables recorded an other-than-temporary impairment on certain of its wind equity method investments totaling $200 million in June 2018. In April 2019, Sempra Renewables completed the sale of its remaining wind assets and investments.


SEMPRA LNG
2020, Sempra LNG capitalized $32contributed $54 million to Cameron LNG JV, and Cameron LNG JV distributed to Sempra LNG dividends of $209 million and $34 million of interesta distribution in the nine months ended September 30, 2019 and 2018, respectively, related to itsform of a return of investment in Cameron LNG JV. In August 2019, the first of three trains of the Cameron LNG liquefaction project commenced commercial operation under the JV’s tolling agreements. $803 million.
In the nine months ended September 30, 2019, and 2018, Sempra LNG invested cash of $77 million in Cameron LNG JV and, $149prior to commencing commercial operations in August 2019, Sempra LNG capitalized $32 million respectively, in this unconsolidated JV.
RBS SEMPRA COMMODITIES
In September 2018, we fully impaired our remaining equity methodof interest related to its investment in RBS Sempra Commodities by recording a chargeCameron LNG JV.
As of $65 million in Equity Earnings on Sempra Energy’s Condensed Consolidated Statement of Operations. We discuss matters related to RBS Sempra Commodities further in Note 11.
GUARANTEES
At September 30, 2019, we had outstanding2020, Sempra Energy has provided guarantees aggregating a maximum of $3.9 billion. The related$4.0 billion with an aggregate carrying value of these guarantees was fully amortized at September 30, 2019.$1 million, which is included in Other Current Liabilities on the Sempra Energy Condensed Consolidated Balance Sheet associated with Cameron LNG JV’s debt obligations. We discuss these guarantees in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.
Sempra Energy Support Agreement for CFIN
In July 2020, CFIN entered into a financing arrangement with Cameron LNG JV’s four project owners and received aggregate proceeds of $1.5 billion from two project owners and from external lenders on behalf of the other two project owners (collectively, the affiliate loans), based on their proportionate ownership interest in Cameron LNG JV. CFIN used the proceeds from the affiliate loans to provide a loan to Cameron LNG JV. The affiliate loans mature in 2039. Principal and interest will be paid from Cameron LNG JV’s project cash flows from its three-train natural gas liquefaction facility. Cameron LNG JV used the proceeds from its loan to return equity to its project owners. Sempra Energy used its $753 million share of the proceeds for working capital and other general corporate purposes, including the repayment of indebtedness.
Sempra Energy’s $753 million proportionate share of the affiliate loans, based on its 50.2% ownership interest in Cameron LNG JV, was funded by external lenders comprised of a syndicate of eight banks (the bank debt) to whom Sempra Energy has provided a guarantee pursuant to a Support Agreement. Under the terms of the Support Agreement, Sempra Energy has severally guaranteed repayment of the bank debt plus accrued and unpaid interest if CFIN fails to pay the external lenders. Additionally, the external lenders may exercise an option to put the bank debt to Sempra Energy on every one-year anniversary of the closing of the affiliate loans, as well as upon the occurrence of certain events, including a failure by CFIN to meet its payment obligations under the bank debt. In addition, some or all of the bank debt will be transferred by each external lender back to Sempra Energy on the
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five-year anniversary of the affiliate loans, unless the external lenders elect to waive their transfer rights six months prior to the five-year anniversary of the affiliate loans. Sempra Energy also has a right to call the bank debt back from, or to refinance the bank debt with, the external lenders at any time. The Support Agreement will terminate upon full repayment of the bank debt, including repayment following an event in which the bank debt is put to Sempra Energy. In exchange for this guarantee, the external lenders will pay a guarantee fee that is based on the credit rating of Sempra Energy’s long-term senior unsecured non-credit enhanced debt rating, which guarantee fee Sempra LNG will recognize as interest income as earned. Sempra Energy’s maximum exposure to loss is the bank debt plus any accrued and unpaid interest and related fees, subject to a liability cap of 130% of the bank debt, or $979 million. We measure the Support Agreement at fair value, net of related guarantee fees, on a recurring basis (see Note 9). At September 30, 2020, the fair value of the Support Agreement was $6 million, which is included in Other Current Assets on the Sempra Energy Condensed Consolidated Balance Sheet.
RBS SEMPRA COMMODITIES
As we discuss in Note 11, in the first quarter of 2020, we recorded a charge of $100 million in Equity Earnings on Sempra Energy’s Condensed Consolidated Statement of Operations for losses from our investment in RBS Sempra Commodities. We recognized a corresponding liability of $25 million in Other Current Liabilities and $75 million in Deferred Credits and Other for our share of estimated losses in excess of the carrying value of our equity method investment.
NOTE 7. DEBT AND CREDIT FACILITIES
LINES OF CREDIT
Primary U.S. Committed Lines of Credit
Sempra Energy and Sempra Global
On May 17, 2019, Sempra Energy and Sempra Global each entered into a separate five-year credit agreement, both expiring in May 2024. The credit agreements permit borrowings of up to $1.25 billion by Sempra Energy and $3.19 billion by Sempra Global. For both credit facilities, Citibank, N.A. serves as administrative agent for a syndicate of 23 lenders and no single lender has greater than a 6-percent share of either credit facility. The credit agreements supersede Sempra Energy’s $1.25 billion credit agreement and Sempra Global’s $3.19 billion credit agreement, which were both set to expire in 2020. Borrowings for each credit facility bear interest at benchmark rates plus a margin based on Sempra Energy’s credit ratings.
California Utilities
On May 17, 2019, SDG&E and SoCalGas each entered into a separate five-year credit agreement, both expiring in May 2024. The credit agreements permit borrowings of up to $1.5 billion by SDG&E and $750 million by SoCalGas. For both credit facilities, JPMorgan Chase Bank, N.A. serves as administrative agent for a syndicate of 23 lenders and no single lender has greater than a 6-percent share of either credit facility. The credit agreements replaced the California Utilities’ combined $1 billion credit agreement, which had a maximum of $750 million that could be borrowed by either utility, that was set to expire in 2020. Borrowings for each credit facility bear interest at benchmark rates plus a margin based on the borrowing utility’s credit ratings.
At September 30, 2019, these2020, Sempra Energy Consolidated had an aggregate capacity of $6.7 billion in four primary U.S. committed lines of credit, permit Sempra Energy Consolidated to borrow an aggregate amount of approximately $6.69 billion.which provide liquidity and support commercial paper. The principal terms of these committed lines of credit, which provide liquidity and support commercial paper,expire in May 2024, are described below.below and in Note 7 of the Notes to Consolidated Financial Statements in the Annual Report.


PRIMARY U.S. COMMITTED LINES OF CREDIT  
(Dollars in millions)  
   September 30, 2019
   Total facility 
Commercial paper outstanding(1)
 Available unused credit
Sempra Energy(2)
 $1,250
 $—
 $1,250
Sempra Global(3)
 3,185
 (2,345) 840
SDG&E(4)
 1,500
 —
 1,500
SoCalGas(4)
 750
 (108) 642
Total $6,685
 $(2,453) $4,232
PRIMARY U.S. COMMITTED LINES OF CREDIT
(Dollars in millions)
September 30, 2020
Total facility(1)
(1)Sempra Energy(2)
Because the commercial paper programs are supported by these lines, we reflect the amount of commercial paper outstanding as a reduction to the available unused credit.$1,250 
Sempra Global3,185 
(2)SDG&E(3)
The facility also provides for issuance of $200 million of letters of credit on behalf of Sempra Energy with the amount of borrowings otherwise available under the facility reduced by the amount of outstanding letters of credit. Subject to obtaining commitments from existing or new lenders and satisfaction of other specified conditions, Sempra Energy has the right to increase the letter of credit commitment up to $500 million. No letters of credit were outstanding at September 30, 2019.
1,500 
SoCalGas(3)
Commercial paper outstanding is before reductions of unamortized discount of $3 million. Sempra Energy guarantees Sempra Global’s obligations under the credit facility.
750 
(4)Total
The facility also provides for issuance of $100 million of letters of credit on behalf of the borrowing utility with the amount of borrowings otherwise available under the facility reduced by the amount of outstanding letters of credit. Subject to obtaining commitments from existing or new lenders and satisfaction of other specified conditions, the borrowing utility has the right to increase the letter of credit commitment up to $250 million. No letters of credit were outstanding at September 30, 2019.$6,685 
(1)    All amounts are unused and available as of September 30, 2020.
(2)    The facility also provides for issuance of $200 million of letters of credit on behalf of Sempra Energy with the amount of borrowings otherwise available under the facility reduced by the amount of outstanding letters of credit. Subject to obtaining commitments from existing or new lenders and satisfaction of other specified conditions, Sempra Energy has the right to increase the letter of credit commitment up to $500 million. No letters of credit were outstanding at September 30, 2020.
(3)    The facility also provides for issuance of $100 million of letters of credit on behalf of the borrowing utility with the amount of borrowings otherwise available under the facility reduced by the amount of outstanding letters of credit. Subject to obtaining commitments from existing or new lenders and satisfaction of other specified conditions, the borrowing utility has the right to increase the letter of credit commitment up to $250 million. No letters of credit were outstanding at September 30, 2020.

Sempra Energy, SDG&E and SoCalGas each must maintain a ratio of indebtedness to total capitalization (as defined in each of the applicable credit facilities) of no more than 65 percent65% at the end of each quarter. At September 30, 2019,2020, each entity was in compliance with this ratio and all other financial covenants under its respective credit facility.
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Foreign Committed Lines of Credit
In February 2019, IEnova revised thehas additional general-purpose credit facilities aggregating $1.8 billion at September 30, 2020. The principal terms of its five-yearthese credit facilities are described below.
FOREIGN COMMITTED LINES OF CREDIT
(U.S. dollar equivalent in millions)
September 30, 2020
Expiration date of facilityTotal facilityAmounts outstandingAvailable unused credit
February 2024(1)
$1,500 $(492)$1,008 
September 2021(2)
280 (280)0 
Total$1,780 $(772)$1,008 
(1)    Five-year revolving credit facility by increasing the amount available under the facility from $1.17 billion to $1.50 billion, extending the expiration of the facility from August 2020 to February 2024 and increasing thewith a syndicate of lenders from 810 lenders. Borrowings bear interest at a per annum rate equal to 10. At September 30, 2019, available unused credit on this line was approximately $642 million.3-month LIBOR plus 80 bps.
On April 11, 2019, IEnova entered into a three-year, $100 million(2)    Two-year revolving credit agreement with Scotiabank Inverlat, S.A. Under the agreement, withdrawals may be made for up to one year in either U.S. dollars or Mexican pesos. At September 30, 2019, available unused credit was $100 million.
On September 23, 2019, IEnova entered into a two-year, $280 million revolving credit agreementfacility with The Bank of Nova Scotia. Under the agreement, withdrawalsBorrowings may be made for up to two years from September 23, 2019 in U.S. dollars. Borrowings bear interest at a per annum rate equal to 3-month LIBOR plus 54 bps.

In addition to its committed lines of credit, IEnova had a three-year $100 million uncommitted revolving credit facility with Scotiabank Inverlat S.A. that was canceled in October 2020. At September 30, 2019, there was no2020, available unused credit.credit on this line was $100 million. In October 2020, IEnova entered into a three-year $20 million uncommitted revolving credit facility with Scotiabank Inverlat S.A. (borrowings may be made in either U.S. dollars or Mexican pesos) and a three-year $100 million uncommitted revolving credit facility with The Bank of Nova Scotia (borrowings can only be made in U.S. dollars).
Letters of Credit
Outside of our domestic and foreign committed credit facilities, we have bilateral unsecured standby letter of credit capacity with select lenders that is uncommitted and supported by reimbursement agreements. At September 30, 2019,2020, we had approximately $648$560 million in standby letters of credit outstanding under these agreements.agreements.
TERM LOANS
In March 2020 and April 2020, Sempra Energy borrowed a total of $1,599 million, net of $1 million of debt discounts and issuance costs, under a 364-day term loan, which had a maturity date of March 16, 2021 with an option to extend the maturity date to September 16, 2021, subject to receiving the consent of the lenders. Sempra Energy used the proceeds from the term loan to repay borrowings on its committed lines of credit and for other general corporate purposes. This term loan was repaid in full in September 2020.
In March 2020, SDG&E borrowed $200 million under a 364-day term loan, which has a maturity date of March 18, 2021 with an option to extend the maturity date to September 17, 2021, subject to receiving the consent of the lenders. Borrowings bear interest at benchmark rates plus 80 bps (0.95% at September 30, 2020). The term loan provides SDG&E with additional liquidity outside of its committed line of credit. SDG&E classified this term loan as long-term debt based on management’s intent and ability to maintain this level of borrowing on a long-term basis by issuing long-term debt. At September 30, 2020, this term loan was included in Current Portion of Long-Term Debt and Finance Leases on SDG&E’s Condensed Consolidated Balance Sheet.
WEIGHTED-AVERAGE INTEREST RATES
The weighted-average interest rates on the total short-term debt at Sempra Energy Consolidated were 2.62 percent and 2.99 percent at September 30, 20192020 and December 31, 2018, respectively. The weighted-average interest rate on total short-term debt at SDG&E was 2.97 percent at December 31, 2018. The weighted-average interest rates on total short-term debt at SoCalGas2019 were 2.06 percent and 2.58 percent at September 30, 2019 and December 31, 2018, respectively.as follows:

WEIGHTED-AVERAGE INTEREST RATES
September 30, 2020December 31, 2019
Sempra Energy Consolidated0.93 %2.31 %
SDG&EN/A1.97 
SoCalGasN/A1.86 
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LONG-TERM DEBT
Sempra EnergySDG&E
In June 2019, weSeptember 2020, SDG&E issued $758$800 million of 5.75-percent, junior subordinated notes1.70% first mortgage bonds maturing in 2079, with a par value of $25 per note. We2030 and received proceeds of $735$792 million (net of debt discount, underwriting discounts and debt issuance costs of $23$8 million). We usedSDG&E intends to use a portion of the proceeds from the offering to repay outstanding commercial paperapproximately $250 million of debt, prior to its scheduled maturity. As a result, this amount was classified as Current Portion of Long-Term Debt and Finance Leases on the SDG&E and Sempra Energy Condensed Consolidated Balance Sheets at September 30, 2020. SDG&E intends to use the remaining proceeds for other general corporate purposes. We may redeem some or allpurposes, including repayment of the notes before their maturity, as follows:
▪
on or after October 1, 2024, at a redemption price equal to 100 percent of the principal amount, plus accrued and unpaid interest;
▪before October 1, 2024, if the U.S. federal tax law or regulations are amended or certain other events occur such that there is more than insubstantial risk that interest payable on the notes would no longer be deductible for federal income tax purposes, at a redemption price equal to 100 percent of the principal amount, plus accrued and unpaid interest; or
▪before October 1, 2024, if a credit rating agency publicly changes certain equity credit methodology for securities such as these notes that results in a shortening of the length of time for equity credit initially assigned or lowers the equity credit initially assigned, at a redemption price equal to 102 percent of the principal amount, plus accrued and unpaid interest.
The notes are unsecured obligations and rank junior and subordinate in right of payment to our existing and future senior indebtedness. The notes will rank equally in right of payment with any future unsecured indebtedness that we may incur if the terms of such indebtedness provide that it ranks equally with the notes in right of payment. The notes are effectively subordinated in right of payment to any secured indebtedness that we have or may incur and to all indebtedness and other liabilities of our subsidiaries.
SDG&Ecommercial paper.
In May 2019,April 2020, SDG&E issued $400 million of 4.10-percent,3.32% first mortgage bonds maturing in 2049. We2050 and received proceeds of $396$395 million (net of debt discount, underwriting discounts and debt issuance costs of $5 million). SDG&E used $200 million of the proceeds from the offering to repay line of credit borrowings, and the remaining proceeds for working capital and other general corporate purposes.
SoCalGas
In September 2020, SoCalGas issued $300 million of senior unsecured floating rate notes maturing in 2023 and received proceeds of $298 million (net of underwriting discounts and debt issuance costs of $4$2 million). SDG&EThe notes bear interest at a per annum rate equal to the 3-month LIBOR rate (or, under certain circumstances, a benchmark replacement rate), reset quarterly, plus 35 bps. SoCalGas may, at its option, redeem some or all of the floating rate notes at any time on or after March 14, 2021 at a redemption price equal to 100% of the principal amount of, plus accrued and unpaid interest on, the notes being redeemed. SoCalGas intends to use the proceeds from the offering for general corporate purposes, including repayment of commercial paper.
In January 2020, SoCalGas issued $650 million of 2.55% first mortgage bonds maturing in 2030 and received proceeds of $643 million (net of debt discount, underwriting discounts and debt issuance costs of $7 million). SoCalGas used the proceeds from the offering to repay outstanding commercial paper and for other general corporate purposes.
As we discussSempra Mexico
In September 2020, IEnova offered and sold in “Variable Interest Entities” in Note 1, on August 23, 2019, SDG&E deconsolidated Otay Mesa VIE. Prior to deconsolidation, on August 14, 2019, OMEC LLC paid in full the $211 million outstanding balance on its variable-rate loan that was scheduled to mature in August 2024. We describe this loan agreement and related floating-to-fixed interest rate swaps in Note 7 of the Notes to Consolidated Financial Statements in the Annual Report. We provide additional information concerning the interest rate swaps in Note 8.
SoCalGas
In June 2019, SoCalGas issued $350a private placement $800 million of 3.95-percent, first mortgage bonds4.75% senior unsecured notes maturing in 2050. We2051 and received proceeds of $346$770 million (net of debt discount, underwriting discounts and debt issuance costs of $4$30 million). SoCalGasIEnova used the proceeds from the offering to repay outstanding commercial paperline of credit borrowings and for other general corporate purposes.
INTEREST RATE SWAPS
In FebruaryNovember 2019, Sempra EnergyIEnova entered into a financing agreement with International Finance Corporation and North American Development Bank to finance and/or refinance the construction of solar generation projects in Mexico. Under this agreement, in April 2020, IEnova borrowed $100 million from Japan International Cooperation Agency, with loan proceeds of $98 million (net of debt issuance costs of $2 million). The loan matures in November 2034 and bears interest based on 6-month LIBOR plus 150 bps. In April 2020, IEnova entered into a floating-to-fixed interest rate swaps to hedge interest payments on the $850 million of variable rate notes issued in October 2017 and maturing in March 2021,swap, resulting in an all-ina fixed rate of 3.069 percent. We2.38%. Also under the financing agreement, in June 2020, IEnova borrowed $241 million from U.S. International Development Finance Corporation, with loan proceeds of $236 million (net of debt issuance costs of $5 million). The loan matures in November 2034 and bears interest at a fixed rate of 2.90%.
Sempra LNG
As we discuss our interest rate swaps to hedge cash flowsin “Shareholders’ Equity and Noncontrolling Interests – Other Noncontrolling Interests – Sempra LNG” in Note 8.1, notes payable totaling $22 million due October 1, 2026 were converted to equity by the minority partner in Liberty Gas Storage LLC and are no longer outstanding.
NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS
We use derivative instruments primarily to manage exposures arising in the normal course of business. Our principal exposures are commodity market risk, benchmark interest rate risk and foreign exchange rate exposures. Our use of derivatives for these risks is integrated into the economic management of our anticipated revenues, anticipated expenses, assets and liabilities. Derivatives may be effective in mitigating these risks (1) that could lead to declines in anticipated revenues or increases in anticipated expenses, or (2) that could cause our asset values mayto fall or our liabilities to increase. Accordingly, our derivative activity summarized below generally represents an impact that is intended to offset associated revenues, expenses, assets or liabilities that are not included in the tables below.

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In certain cases, we apply the normal purchase or sale exception to derivative instruments and have other commodity contracts that are not derivatives. These contracts are not recorded at fair value and are therefore excluded from the disclosures below.
In all other cases, we record derivatives at fair value on the Condensed Consolidated Balance Sheets. We have derivatives that are either (1) cash flow hedges, (2) fair value hedges, or (3) undesignated. Depending on the applicability of hedge accounting and, for the California Utilities and other operations subject to regulatory accounting, the requirement to pass impacts through to customers, the impact of derivative instruments may be offset in OCI (cash flow hedges), on the balance sheet (regulatory offsets), or recognized in earnings (fair value hedges)hedges and undesignated derivatives not subject to rate recovery). We classify cash flows from the principal settlements of cross-currency swaps that hedge exposure related to Mexican peso-denominated debt as financing activities and settlements of other derivative instruments as operating activities on the Condensed Consolidated Statements of Cash Flows.
HEDGE ACCOUNTING
We may designate a derivative as a cash flow hedging instrument if it effectively converts anticipated cash flows associated with revenues or expenses to a fixed dollar amount. We may utilize cash flow hedge accounting for derivative commodity instruments, foreign currency instruments and interest rate instruments. Designating cash flow hedges is dependent on the business context in which the instrument is being used, the effectiveness of the instrument in offsetting the risk that the future cash flows of a given revenue or expense item may vary, and other criteria.
ENERGY DERIVATIVES
Our market risk is primarily related to natural gas and electricity price volatility and the specific physical locations where we transact. We use energy derivatives to manage these risks. The use of energy derivatives in our various businesses depends on the particular energy market, and the operating and regulatory environments applicable to the business, as follows:
▪The California Utilities use natural gas and electricity derivatives, for the benefit of customers, with the objective of managing price risk and basis risks, and stabilizing and lowering natural gas and electricity costs. These derivatives include fixed price natural gas and electricity positions, options, and basis risk instruments, which are either exchange-traded or over-the-counter financial instruments, or bilateral physical transactions. This activity is governed by risk management and transacting activity plans that have been filed with and approved by the CPUC. Natural gas and electricity derivative activities are recorded as commodity costs that are offset by regulatory account balances and are recovered in rates. Net commodity cost impacts on the Condensed Consolidated Statements of Operations are reflected in Cost of Electric Fuel and Purchased Power or in Cost of Natural Gas.
▪SDG&E is allocated and may purchase CRRs, which serve to reduce the regional electricity price volatility risk that may result from local transmission capacity constraints. Unrealized gains and losses do not impact earnings, as they are offset by regulatory account balances. Realized gains and losses associated with CRRs, which are recoverable in rates, are recorded in Cost of Electric Fuel and Purchased Power on the Condensed Consolidated Statements of Operations.
▪Sempra Mexico and Sempra LNG may use natural gas and electricity derivatives, as appropriate, to optimize the earnings of their assets which support the following businesses: LNG, natural gas transportation and storage, and power generation. Gains and losses associated with undesignated derivatives are recognized in Energy-Related Businesses Revenues or in Energy-Related Businesses Cost of Sales on the Condensed Consolidated Statements of Operations. Certain of these derivatives may also be designated as cash flow hedges. Sempra Mexico may also use natural gas energy derivatives with the objective of managing price risk and lowering natural gas prices at its distribution operations. These derivatives, which are recorded as commodity costs that are offset by regulatory account balances and recovered in rates, are recognized in Cost of Natural Gas on the Condensed Consolidated Statements of Operations.
▪From time to time, our various businesses, including the California Utilities, may use other energy derivatives to hedge exposures such as the price of vehicle fuel and GHG allowances.

▪The California Utilities use natural gas and electricity derivatives, for the benefit of customers, with the objective of managing price risk and basis risks, and stabilizing and lowering natural gas and electricity costs. These derivatives include fixed-price natural gas and electricity positions, options, and basis risk instruments, which are either exchange-traded or over-the-counter financial instruments, or bilateral physical transactions. This activity is governed by risk management and transacting activity plans that have been filed with and approved by the CPUC. Natural gas and electricity derivative activities are recorded as commodity costs that are offset by regulatory account balances and are recovered in rates. Net commodity cost impacts on the Condensed Consolidated Statements of Operations are reflected in Cost of Electric Fuel and Purchased Power or in Cost of Natural Gas.
▪SDG&E is allocated and may purchase CRRs, which serve to reduce the regional electricity price volatility risk that may result from local transmission capacity constraints. Unrealized gains and losses do not impact earnings, as they are offset by regulatory account balances. Realized gains and losses associated with CRRs, which are recoverable in rates, are recorded in Cost of Electric Fuel and Purchased Power on the Condensed Consolidated Statements of Operations.
▪Sempra Mexico and Sempra LNG may use natural gas and electricity derivatives, as appropriate, to optimize the earnings of their assets which support the following businesses: LNG, natural gas transportation and storage, and power generation. Gains and losses associated with undesignated derivatives are recognized in Energy-Related Businesses Revenues or in Energy-Related Businesses Cost of Sales on the Condensed Consolidated Statements of Operations. Certain of these derivatives may also be designated as cash flow hedges. Sempra Mexico may also use natural gas energy derivatives with the objective of managing price risk and lowering natural gas prices at its distribution operations. These derivatives, which are recorded as commodity costs that are offset by regulatory account balances and recovered in rates, are recognized in Cost of Natural Gas on the Condensed Consolidated Statements of Operations.
▪From time to time, our various businesses, including the California Utilities, may use other energy derivatives to hedge exposures such as the price of vehicle fuel and greenhouse gas allowances.
68

The following table summarizes net energy derivative volumes.
NET ENERGY DERIVATIVE VOLUMES
(Quantities in millions)
CommodityUnit of measure September 30,
2019		 December 31,
2018
Sempra Energy Consolidated:     
Natural gasMMBtu 30
 35
ElectricityMWh 2
 2
Congestion revenue rightsMWh 47
 52
SDG&E:     
Natural gasMMBtu 34
 33
ElectricityMWh 2
 2
Congestion revenue rightsMWh 47
 52


NET ENERGY DERIVATIVE VOLUMES
(Quantities in millions)
CommodityUnit of measureSeptember 30, 2020December 31, 2019
Sempra Energy Consolidated:
Natural gasMMBtu19 32 
ElectricityMWh2 2 
Congestion revenue rightsMWh43 48 
SDG&E:
Natural gasMMBtu23 37 
ElectricityMWh1 2 
Congestion revenue rightsMWh43 48 
SoCalGas:
Natural gasMMBtu0 2 
In addition to the amounts noted above, we use commodity derivatives to manage risks associated with the physical locations of contractual obligations and assets, such as natural gas purchases and sales.
INTEREST RATE DERIVATIVES
We are exposed to interest rates primarily as a result of our current and expected use of financing. The California Utilities, as well as Sempra Energy and its other subsidiaries and JVs, periodically enter into interest rate derivative agreements intended to moderate our exposure to interest rates and to lower our overall costs of borrowing. In addition, we may utilize interest rate swaps, typically designated as cash flow hedges, to lock in interest rates on outstanding debt or in anticipation of future financings. Separately, Otay Mesa VIE previously entered into interest rate swap agreements, designated as cash flow hedges, to moderate its exposure to interest rate changes.
The following table presents the net notional amounts of our interest rate derivatives, excluding JVs.
INTEREST RATE DERIVATIVESINTEREST RATE DERIVATIVESINTEREST RATE DERIVATIVES
(Dollars in millions)(Dollars in millions)(Dollars in millions)
September 30, 2019 December 31, 2018 September 30, 2020December 31, 2019
Notional debt Maturities Notional debt Maturities Notional debtMaturitiesNotional debtMaturities
Sempra Energy Consolidated:       Sempra Energy Consolidated:    
Cash flow hedges(1)
$1,259
 2019-2032
 $594
 2019-2032
SDG&E:       
Cash flow hedge(1)
—
 —
 142
 2019
Cash flow hedgesCash flow hedges$1,500 2020-2034$1,445 2020-2034
(1)
Includes Otay Mesa VIE. All of SDG&E’s interest rate derivatives relate to Otay Mesa VIE. On August 14, 2019, OMEC LLC paid in full its variable-rate loan and terminated its interest rate swaps.
FOREIGN CURRENCY DERIVATIVES
We utilize cross-currency swaps to hedge exposure related to Mexican peso-denominated debt at our Mexican subsidiaries and JVs. These cash flow hedges exchange our Mexican peso-denominated principal and interest payments into the U.S. dollar and swap Mexican variable interest rates for U.S. fixed interest rates. From time to time, Sempra Mexico and its JVs may use other foreign currency derivatives to hedge exposures related to cash flows associated with revenues from contracts denominated in Mexican pesos that are indexed to the U.S. dollar.
We are also exposed to exchange rate movements at our Mexican subsidiaries and JVs, which have U.S. dollar-denominated cash balances, receivables, payables and debt (monetary assets and liabilities) that give rise to Mexican currency exchange rate movements for Mexican income tax purposes. They also have deferred income tax assets and liabilities denominated in the Mexican peso, which must be translated to U.S. dollars for financial reporting purposes. In addition, monetary assets and liabilities and certain nonmonetary assets and liabilities are adjusted for Mexican inflation for Mexican income tax purposes. We utilize foreign currency derivatives as a means to manage the risk of exposure to significant fluctuations in our income tax expense and equity earnings from these impacts; however, we generally do not hedge our deferred income tax assets and liabilities or for inflation.

We also utilized foreign currency derivatives to hedge exposure to fluctuations in the Peruvian sol and Chilean peso related to the sales of our operations in Peru and Chile, respectively.
69


The following table presents the net notional amounts of our foreign currency derivatives, excluding JVs.
FOREIGN CURRENCY DERIVATIVESFOREIGN CURRENCY DERIVATIVESFOREIGN CURRENCY DERIVATIVES
(Dollars in millions)(Dollars in millions)(Dollars in millions)
September 30, 2019 December 31, 2018 September 30, 2020December 31, 2019
Notional amount Maturities Notional amount Maturities Notional amountMaturitiesNotional amountMaturities
Sempra Energy Consolidated:       Sempra Energy Consolidated:    
Cross-currency swaps$306
 2019-2023 $306
 2019-2023Cross-currency swaps$306 2020-2023$306 2020-2023
Other foreign currency derivatives1,242
 2019-2021 1,158
 2019-2020Other foreign currency derivatives1,341 2020-20221,796 2020-2021
FINANCIAL STATEMENT PRESENTATION
The Condensed Consolidated Balance Sheets reflect the offsetting of net derivative positions and cash collateral with the same counterparty when a legal right of offset exists. The following tables provide the fair values of derivative instruments on the Condensed Consolidated Balance Sheets, including the amount of cash collateral receivables that were not offset asbecause the cash collateral was in excess of liability positions.


DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
 September 30, 2019
 
Current
assets:
Other(1)
 Other
assets:
Sundry		 Current liabilities:
Other		 Deferred
credits
and other
liabilities:
Deferred credits and other
Sempra Energy Consolidated:       
Derivatives designated as hedging instruments:       
Interest rate and foreign exchange instruments$—
 $—
 $(12) $(157)
Derivatives not designated as hedging instruments:       
Foreign exchange instruments12
 —
 (3) —
Associated offsetting foreign exchange instruments(3) —
 3
 —
Commodity contracts not subject to rate recovery31
 11
 (39) (9)
Associated offsetting commodity contracts(29) (1) 29
 1
Commodity contracts subject to rate recovery22
 245
 (48) (53)
Associated offsetting commodity contracts(5) (2) 5
 2
Associated offsetting cash collateral—
 —
 13
 2
Net amounts presented on the balance sheet28
 253
 (52) (214)
Additional cash collateral for commodity contracts
not subject to rate recovery
18
 —
 —
 —
Additional cash collateral for commodity contracts
subject to rate recovery
17
 —
 —
 —
Total(2)
$63
 $253
 $(52) $(214)
SDG&E:       
Derivatives not designated as hedging instruments:       
Commodity contracts subject to rate recovery$14
 $245
 $(42) $(53)
Associated offsetting commodity contracts(3) (2) 3
 2
Associated offsetting cash collateral—
 —
 13
 2
Net amounts presented on the balance sheet11
 243
 (26) (49)
Additional cash collateral for commodity contracts
subject to rate recovery
14
 —
 —
 —
Total(2)
$25
 $243

$(26)
$(49)
SoCalGas:       
Derivatives not designated as hedging instruments:       
Commodity contracts subject to rate recovery$8
 $—
 $(6) $—
Associated offsetting commodity contracts(2) —
 2
 —
Net amounts presented on the balance sheet6
 —
 (4) —
Additional cash collateral for commodity contracts
subject to rate recovery
3
 —
 —
 —
Total$9
 $—
 $(4) $—
DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
 September 30, 2020
 
Other current assets(1)
Other long-term assetsOther current liabilitiesDeferred credits and other
Sempra Energy Consolidated:    
Derivatives designated as hedging instruments:    
Interest rate and foreign exchange instruments$6 $2 $(22)$(188)
Derivatives not designated as hedging instruments:    
Foreign exchange instruments13 0 (22)0 
Associated offsetting foreign exchange instruments(13)0 13 0 
Commodity contracts not subject to rate recovery102 7 (114)(7)
Associated offsetting commodity contracts(100)(4)100 4 
Commodity contracts subject to rate recovery17 84 (32)(29)
Associated offsetting commodity contracts(2)0 2 0 
Net amounts presented on the balance sheet23 89 (75)(220)
Additional cash collateral for commodity contracts
not subject to rate recovery
41 0 0 0 
Additional cash collateral for commodity contracts
subject to rate recovery
24 0 0 0 
Total(2)
$88 $89 $(75)$(220)
SDG&E:    
Derivatives not designated as hedging instruments:    
Commodity contracts subject to rate recovery$14 $84 $(26)$(29)
Associated offsetting commodity contracts(2)0 2 0 
Net amounts presented on the balance sheet12 84 (24)(29)
Additional cash collateral for commodity contracts
subject to rate recovery
22 0 0 0 
Total(2)
$34 $84 $(24)$(29)
SoCalGas:    
Derivatives not designated as hedging instruments:    
Commodity contracts subject to rate recovery$3 $0 $(6)$0 
Net amounts presented on the balance sheet3 0 (6)0 
Additional cash collateral for commodity contracts
subject to rate recovery
2 0 0 0 
Total$5 $0 $(6)$0 
(1)Included in Current Assets: Fixed-Price Contracts and Other Derivatives for SDG&E.
(2)Normal purchase contracts previously measured at fair value are excluded.




70

DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETSDERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETSDERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)(Dollars in millions)(Dollars in millions)
December 31, 2018 December 31, 2019
Current
assets:
Other(1)
 Other
assets:
Sundry		 Current liabilities:
Other		 Deferred
credits
and other
liabilities:
Deferred credits and other
Other current assets(1)
Other long-term assetsOther current liabilitiesDeferred credits and other
Sempra Energy Consolidated:       Sempra Energy Consolidated:    
Derivatives designated as hedging instruments:       Derivatives designated as hedging instruments:    
Interest rate and foreign exchange instruments(2)
$2
 $—
 $(3) $(147)
Interest rate and foreign exchange instrumentsInterest rate and foreign exchange instruments$0 $3 $(17)$(140)
Derivatives not designated as hedging instruments:       Derivatives not designated as hedging instruments:    
Foreign exchange instrumentsForeign exchange instruments41 0 (20)0 
Associated offsetting foreign exchange instrumentsAssociated offsetting foreign exchange instruments(20)0 20 0 
Commodity contracts not subject to rate recovery153
 7
 (164) (6)Commodity contracts not subject to rate recovery34 11 (41)(10)
Associated offsetting commodity contracts(133) (3) 133
 3
Associated offsetting commodity contracts(32)(2)32 2 
Commodity contracts subject to rate recovery64
 233
 (42) (72)Commodity contracts subject to rate recovery41 76 (47)(47)
Associated offsetting commodity contracts(6) (2) 6
 2
Associated offsetting commodity contracts(6)(3)6 3 
Associated offsetting cash collateral—
 —
 —
 2
Associated offsetting cash collateral0 0 14 0 
Net amounts presented on the balance sheet80
 235
 (70) (218)Net amounts presented on the balance sheet58 85 (53)(192)
Additional cash collateral for commodity contracts
not subject to rate recovery
19
 —
 —
 —
Additional cash collateral for commodity contracts
not subject to rate recovery
43 0 0 0 
Additional cash collateral for commodity contracts
subject to rate recovery
33
 —
 —
 —
Additional cash collateral for commodity contracts
subject to rate recovery
25 0 0 0 
Total(3)
$132
 $235
 $(70) $(218)
Total(2)
Total(2)
$126 $85 $(53)$(192)
SDG&E:       SDG&E:    
Derivatives designated as hedging instruments:       
Interest rate instruments(2)
$—
 $—
 $(1) $—
Derivatives not designated as hedging instruments:       Derivatives not designated as hedging instruments:    
Commodity contracts subject to rate recovery60
 233
 (37) (72)Commodity contracts subject to rate recovery$30 $76 $(41)$(47)
Associated offsetting commodity contracts(6) (2) 6
 2
Associated offsetting commodity contracts(4)(3)4 3 
Associated offsetting cash collateral—
 —
 —
 2
Associated offsetting cash collateral0 0 14 0 
Net amounts presented on the balance sheet54
 231
 (32) (68)Net amounts presented on the balance sheet26 73 (23)(44)
Additional cash collateral for commodity contracts
subject to rate recovery
28
 —
 —
 —
Additional cash collateral for commodity contracts
subject to rate recovery
16 0 0 0 
Total(3)
$82
 $231
 $(32) $(68)
Total(2)
Total(2)
$42 $73 $(23)$(44)
SoCalGas:       SoCalGas:    
Derivatives not designated as hedging instruments:       Derivatives not designated as hedging instruments:    
Commodity contracts subject to rate recovery$4
 $—
 $(5) $—
Commodity contracts subject to rate recovery$11 $0 $(6)$0 
Associated offsetting commodity contractsAssociated offsetting commodity contracts(2)0 2 0 
Net amounts presented on the balance sheet4
 —
 (5) —
Net amounts presented on the balance sheet9 0 (4)0 
Additional cash collateral for commodity contracts
subject to rate recovery
5
 —
 —
 —
Additional cash collateral for commodity contracts
subject to rate recovery
9 0 0 0 
Total$9
 $—
 $(5) $—
Total$18 $0 $(4)$0 
(1)Included in Current Assets: Fixed-Price Contracts and Other Derivatives for SDG&E.
(2) Includes Otay Mesa VIE. All of SDG&E’s amounts relate to Otay Mesa VIE.
(3)Normal purchase contracts previously measured at fair value are excluded.


71

The table below includes the effects of derivative instruments designated as cash flow hedges on the Condensed Consolidated Statements of Operations and in OCI and AOCI:
CASH FLOW HEDGE IMPACTS
(Dollars in millions)
Pretax gain (loss)
recognized in OCI		Pretax (loss) gain reclassified
from AOCI into earnings
Three months ended September 30, Three months ended September 30,
 20202019Location20202019
Sempra Energy Consolidated:     
Interest rate and foreign
exchange instruments(1)
$14 $(7)
Interest Expense(1)
$(3)$(1)
Other Income (Expense), Net4 (5)
Interest rate and foreign
exchange instruments
24 (62)Equity Earnings(5)(2)
Foreign exchange instruments(2)1 
Total$36 $(68) $(4)$(8)
SDG&E:     
Interest rate instruments(1)
$0 $0 
Interest Expense(1)
$0 $(1)
SoCalGas:
Interest rate instruments$0 $0 Interest Expense$0 $(1)
 Nine months ended September 30, Nine months ended September 30,
 20202019Location20202019
Sempra Energy Consolidated:     
Interest rate and foreign
exchange instruments(1)
$(73)$(25)
Interest Expense(1)
$(7)$(2)
Other Income (Expense), Net(33)0 
Interest rate instruments0 0 (Loss) Gain on Sale of Assets0 (10)
Interest rate and foreign
exchange instruments		(166)(222)Equity Earnings(6)(3)
Foreign exchange instruments14 (3)Revenues: Energy-
Related Businesses		2 (1)
Other Income (Expense), Net1 0 
Total$(225)$(250) $(43)$(16)
SDG&E:     
Interest rate instruments(1)
$0 $(1)
Interest Expense(1)
$0 $(3)
SoCalGas:
Interest rate instruments$0 $0 Interest Expense$0 $(1)
CASH FLOW HEDGE IMPACTS
(Dollars in millions)
 
Pretax (loss) gain
recognized in OCI
   
Pretax (loss) gain reclassified
from AOCI into earnings
 Three months ended September 30,   Three months ended September 30,
 2019 2018 Location 2019 2018
Sempra Energy Consolidated:         
Interest rate and foreign
exchange instruments(1)
$(7) $16
 
Interest Expense(1)
 $(1) $—
     Other (Expense) Income, Net (5) 11
Interest rate and foreign
exchange instruments
(62) 20
 Equity Earnings (2) (3)
Foreign exchange instruments1
 (5) 
Revenues: Energy-
Related Businesses
 —
 —
Total$(68) $31
   $(8) $8
SDG&E:         
Interest rate instruments(1)
$—
 $—
 
Interest Expense(1)
 $(1) $(2)
SoCalGas:         
Interest rate instruments$—
 $—
 Interest Expense $(1) $—
          
 Nine months ended September 30,   Nine months ended September 30,
 2019 2018 Location 2019 2018
Sempra Energy Consolidated:         
Interest rate and foreign
exchange instruments(1)
$(25) $57
 
Interest Expense(1)
 $(2) $1
     Other (Expense) Income, Net —
 11
Interest rate instruments—
 —
 (Loss) Gain on Sale of Assets (10) —
Interest rate and foreign
exchange instruments		(222) 123
 Equity Earnings (3) (8)
Foreign exchange instruments(3) (7) Revenues: Energy-
Related Businesses		 (1) 1
Total$(250) $173
   $(16) $5
SDG&E:         
Interest rate instruments(1)
$(1) $1
 
Interest Expense(1)
 $(3) $(6)
SoCalGas:         
Interest rate instruments$—
 $—
 Interest Expense $(1) $—
(1)    Amounts in 2019 include Otay Mesa VIE. All of SDG&E’s interest rate derivative activity relates to Otay Mesa VIE. On August 14, 2019, Otay Mesa Energy Center LLC paid in full its variable-rate loan and terminated its interest rate swaps.
(1)

Amounts include Otay Mesa VIE. All of SDG&E’s interest rate derivative activity relates to Otay Mesa VIE.

For Sempra Energy Consolidated, we expect that net losses of $12$72 million, which are net of income tax benefit, that are currently recorded in AOCI related to cash flow hedges will be reclassified into earnings during the next 12 months as the hedged items affect earnings. SoCalGas expects that $1 million of losses, net of income tax benefit, that are currently recorded in AOCI related to cash flow hedges will be reclassified into earnings during the next 12 months as the hedged items affect earnings. Actual amounts ultimately reclassified into earnings depend on the interest rates in effect when derivative contracts mature.
For all forecasted transactions, the maximum remaining term over which we are hedging exposure to the variability of cash flows at September 30, 20192020 is approximately 1314 years for Sempra Energy Consolidated. The maximum remaining term for which we are hedging exposure to the variability of cash flows at our equity method investees is 1519 years.

72

The following table summarizes the effects of derivative instruments not designated as hedging instruments on the Condensed Consolidated Statements of Operations.
UNDESIGNATED DERIVATIVE IMPACTS    
(Dollars in millions)    
  Pretax (loss) gain on derivatives recognized in earnings
  Three months ended
September 30,		 Nine months ended
September 30,
 Location2019 2018 2019 2018
Sempra Energy Consolidated:        
Foreign exchange instrumentsOther (Expense) Income, Net$(12) $28
 $7
 $35
Commodity contracts not subject
to rate recovery
Revenues: Energy-Related
Businesses
(8) 9
 9
 —
Commodity contracts subject
to rate recovery
Cost of Electric Fuel
and Purchased Power
18
 62
 (7) 70
Commodity contracts subject
to rate recovery
Cost of Natural Gas(3) (2) (1) (1)
Total $(5) $97
 $8
 $104
SDG&E:        
Commodity contracts subject
to rate recovery
Cost of Electric Fuel
and Purchased Power
$18
 $62
 $(7) $70
SoCalGas:        
Commodity contracts subject
to rate recovery
Cost of Natural Gas$(3) $(2) $(1) $(1)

UNDESIGNATED DERIVATIVE IMPACTS
(Dollars in millions)
  Pretax gain (loss) on derivatives recognized in earnings
  Three months ended
September 30,		Nine months ended
September 30,
 Location2020201920202019
Sempra Energy Consolidated:     
Foreign exchange instrumentsOther Income (Expense), Net$15 $(12)$(97)$7 
Commodity contracts not subject
to rate recovery
Revenues: Energy-Related
Businesses
(39)(8)25 9 
Commodity contracts subject
to rate recovery
Cost of Electric Fuel
and Purchased Power
41 18 41 (7)
Commodity contracts subject
to rate recovery
Cost of Natural Gas0 (3)(6)(1)
Total $17 $(5)$(37)$8 
SDG&E:     
Commodity contracts subject
to rate recovery
Cost of Electric Fuel
and Purchased Power
$41 $18 $41 $(7)
SoCalGas:     
Commodity contracts subject
to rate recovery
Cost of Natural Gas$0 $(3)$(6)$(1)
CONTINGENT FEATURES
For Sempra Energy Consolidated, SDG&E and SoCalGas, certain of our derivative instruments contain credit limits which vary depending on our credit ratings. Generally, these provisions, if applicable, may reduce our credit limit if a specified credit rating agency reduces our ratings. In certain cases, if our credit ratings were to fall below investment grade, the counterparty to these derivative liability instruments could request immediate payment or demand immediate and ongoing full collateralization. 
For Sempra Energy Consolidated, the total fair value of this group of derivative instruments in a net liability position at September 30, 20192020 and December 31, 20182019 was $7$8 million and $16$21 million, respectively. For SoCalGas, the total fair value of this group of derivative instruments in a net liability position at September 30, 20192020 and December 31, 20182019 was $4$7 million and $5$4 million, respectively. At September 30, 2019,2020, if the credit ratings of Sempra Energy or SoCalGas were reduced below investment grade, $8 million and $4$7 million, respectively, of additional assets could be required to be posted as collateral for these derivative contracts.
For Sempra Energy Consolidated, SDG&E and SoCalGas, some of our derivative contracts contain a provision that would permit the counterparty, in certain circumstances, to request adequate assurance of our performance under the contracts. Such additional assurance, if needed, is not material and is not included in the amounts above.
NOTE 9. FAIR VALUE MEASUREMENTS
We discuss the valuation techniques and inputs we use to measure fair value and the definition of the three levels of the fair value hierarchy in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

73

RECURRING FAIR VALUE MEASURES
The three tables below, by level within the fair value hierarchy, set forth our financial assets and liabilities that were accounted for at fair value on a recurring basis at September 30, 20192020 and December 31, 2018.2019. We classify financial assets and liabilities in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair valued assets and liabilities, and their placement within the fair value hierarchy. We have not changed the valuation techniques or types of inputs we use to measure recurring fair value since December 31, 2018.2019.
The fair value of commodity derivative assets and liabilities is presented in accordance with our netting policy, as we discuss in Note 8 under “Financial Statement Presentation.”
The determination of fair values, shown in the tables below, incorporates various factors, including but not limited to, the credit standing of the counterparties involved and the impact of credit enhancements (such as cash deposits, letters of credit and priority interests).
Our financial assets and liabilities that were accounted for at fair value on a recurring basis in the tables below include the following (other than a $6$5 million investment at September 30,December 31, 2019, measured at net asset value):
▪Nuclear decommissioning trusts reflect the assets of SDG&E’s NDT, excluding cash balances. A third-party trustee values the trust assets using prices from a pricing service based on a market approach. We validate these prices by comparison to prices from other independent data sources. Securities are valued using quoted prices listed on nationally recognized securities exchanges or based on closing prices reported in the active market in which the identical security is traded (Level 1). Other securities are valued based on yields that are currently available for comparable securities of issuers with similar credit ratings (Level 2).
▪For commodity contracts, interest rate derivatives and foreign exchange instruments, we primarily use a market or income approach with market participant assumptions to value these derivatives. Market participant assumptions include those about risk, and the risk inherent in the inputs to the valuation techniques. These inputs can be readily observable, market corroborated, or generally unobservable. We have exchange-traded derivatives that are valued based on quoted prices in active markets for the identical instruments (Level 1). We also may have other commodity derivatives that are valued using industry standard models that consider quoted forward prices for commodities, time value, current market and contractual prices for the underlying instruments, volatility factors, and other relevant economic measures (Level 2). Level 3 recurring items relate to CRRs and long-term, fixed-price electricity positions at SDG&E, as we discuss below in “Level 3 Information.”
▪Rabbi Trust investments include marketable securities that we value using a market approach based on closing prices reported in the active market in which the identical security is traded (Level 1). These investments in marketable securities were negligible at both September 30, 2019 and December 31, 2018.

▪Nuclear decommissioning trusts reflect the assets of SDG&E’s NDT, excluding cash balances. A third-party trustee values the trust assets using prices from a pricing service based on a market approach. We validate these prices by comparison to prices from other independent data sources. Securities are valued using quoted prices listed on nationally recognized securities exchanges or based on closing prices reported in the active market in which the identical security is traded (Level 1). Other securities are valued based on yields that are currently available for comparable securities of issuers with similar credit ratings (Level 2).

▪For commodity contracts, interest rate derivatives and foreign exchange instruments, we primarily use a market or income approach with market participant assumptions to value these derivatives. Market participant assumptions include those about risk, and the risk inherent in the inputs to the valuation techniques. These inputs can be readily observable, market corroborated, or generally unobservable. We have exchange-traded derivatives that are valued based on quoted prices in active markets for the identical instruments (Level 1). We also may have other commodity derivatives that are valued using industry standard models that consider quoted forward prices for commodities, time value, current market and contractual prices for the underlying instruments, volatility factors, and other relevant economic measures (Level 2). Level 3 recurring items relate to CRRs and long-term, fixed-price electricity positions at SDG&E, as we discuss below in “Level 3 Information – SDG&E.”
▪Rabbi Trust investments include marketable securities that we value using a market approach based on closing prices reported in the active market in which the identical security is traded (Level 1). These investments in marketable securities were negligible at both September 30, 2020 and December 31, 2019.
▪As we discuss in Note 6, in July 2020, Sempra Energy entered into a Support Agreement for the benefit of CFIN. We measure the Support Agreement, which includes a guarantee obligation, a put option and a call option, net of related guarantee fees, at fair value on a recurring basis. We use a discounted cash flow model to value the Support Agreement, net of related guarantee fees. Because some of the inputs that are significant to the valuation are less observable, the Support Agreement is classified as Level 3, as we describe below in “Level 3 Information – Sempra LNG.”
74

RECURRING FAIR VALUE MEASURES – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
 Fair value at September 30, 2019
 Level 1 Level 2 Level 3 Total
Assets:       
Nuclear decommissioning trusts:       
Equity securities$465
 $5
 $—
 $470
Debt securities:       
Debt securities issued by the U.S. Treasury and other       
U.S. government corporations and agencies39
 12
 —
 51
Municipal bonds—
 291
 —
 291
Other securities—
 236
 —
 236
Total debt securities39
 539
 —
 578
Total nuclear decommissioning trusts(1)
504
 544
 —
 1,048
Interest rate and foreign exchange instruments—
 9
 —
 9
Commodity contracts not subject to rate recovery—
 12
 —
 12
Effect of netting and allocation of collateral(2)
18
 —
 —
 18
Commodity contracts subject to rate recovery1
 6
 253
 260
Effect of netting and allocation of collateral(2)
11
 —
 6
 17
Total$534
 $571
 $259
 $1,364
        
Liabilities:       
Interest rate and foreign exchange instruments$—
 $169
 $—
 $169
Commodity contracts not subject to rate recovery—
 18
 —
 18
Commodity contracts subject to rate recovery15
 5
 74
 94
Effect of netting and allocation of collateral(2)
(15) —
 —
 (15)
Total$—
 $192
 $74
 $266
        
 Fair value at December 31, 2018
 Level 1 Level 2 Level 3 Total
Assets:       
Nuclear decommissioning trusts:       
Equity securities$407
 $4
 $—
 $411
Debt securities:       
Debt securities issued by the U.S. Treasury and other       
U.S. government corporations and agencies43
 10
 —
 53
Municipal bonds—
 269
 —
 269
Other securities—
 234
 —
 234
Total debt securities43
 513
 —
 556
Total nuclear decommissioning trusts(1)
450
 517
 —
 967
Interest rate and foreign exchange instruments—
 2
 —
 2
Commodity contracts not subject to rate recovery—
 24
 —
 24
Effect of netting and allocation of collateral(2)
19
 —
 —
 19
Commodity contracts subject to rate recovery2
 9
 278
 289
Effect of netting and allocation of collateral(2)
28
 —
 5
 33
Total$499
 $552
 $283
 $1,334
        
Liabilities:       
Interest rate and foreign exchange instruments$—
 $150
 $—
 $150
Commodity contracts not subject to rate recovery—
 34
 —
 34
Commodity contracts subject to rate recovery2
 5
 99
 106
Effect of netting and allocation of collateral(2)
(2) —
 —
 (2)
Total$—
 $189
 $99
 $288
RECURRING FAIR VALUE MEASURES – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
 Fair value at September 30, 2020
 Level 1Level 2Level 3Total
Assets:    
Nuclear decommissioning trusts:    
Equity securities$382 $7 $0 $389 
Debt securities:    
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies
26 23 0 49 
Municipal bonds0 335 0 335 
Other securities0 271 0 271 
Total debt securities26 629 0 655 
Total nuclear decommissioning trusts(1)
408 636 0 1,044 
Interest rate and foreign exchange instruments0 8 0 8 
Commodity contracts not subject to rate recovery0 5 0 5 
Effect of netting and allocation of collateral(2)
41 0 0 41 
Commodity contracts subject to rate recovery9 4 86 99 
Effect of netting and allocation of collateral(2)
18 0 6 24 
Support Agreement, net of related guarantee fees0 0 6 6 
Total$476 $653 $98 $1,227 
Liabilities:    
Interest rate and foreign exchange instruments$0 $219 $0 $219 
Commodity contracts not subject to rate recovery0 17 0 17 
Commodity contracts subject to rate recovery0 6 53 59 
Total$0 $242 $53 $295 
 Fair value at December 31, 2019
 Level 1Level 2Level 3Total
Assets:    
Nuclear decommissioning trusts:    
Equity securities$503 $6 $0 $509 
Debt securities:   
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies
46 11 0 57 
Municipal bonds0 282 0 282 
Other securities0 226 0 226 
Total debt securities46 519 0 565 
Total nuclear decommissioning trusts(1)
549 525 0 1,074 
Interest rate and foreign exchange instruments0 24 0 24 
Commodity contracts not subject to rate recovery0 11 0 11 
Effect of netting and allocation of collateral(2)
43 0 0 43 
Commodity contracts subject to rate recovery5 8 95 108 
Effect of netting and allocation of collateral(2)
11 8 6 25 
Total$608 $576 $101 $1,285 
Liabilities:    
Interest rate and foreign exchange instruments$0 $157 $0 $157 
Commodity contracts not subject to rate recovery0 17 0 17 
Commodity contracts subject to rate recovery14 4 67 85 
Effect of netting and allocation of collateral(2)
(14)0 0 (14)
Total$0 $178 $67 $245 
(1)    Excludes cash and cash equivalents.(1)
Excludes cash and cash equivalents.
(2)
Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.


(2)    Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.
75

RECURRING FAIR VALUE MEASURES – SDG&E
(Dollars in millions)
 Fair value at September 30, 2019
 Level 1 Level 2 Level 3 Total
Assets:       
Nuclear decommissioning trusts:       
Equity securities$465
 $5
 $—
 $470
Debt securities:       
Debt securities issued by the U.S. Treasury and other       
U.S. government corporations and agencies39
 12
 —
 51
Municipal bonds—
 291
 —
 291
Other securities—
 236
 —
 236
Total debt securities39
 539
 —
 578
Total nuclear decommissioning trusts(1)
504
 544
 —
 1,048
Commodity contracts subject to rate recovery—
 1
 253
 254
Effect of netting and allocation of collateral(2)
8
 —
 6
 14
Total$512
 $545
 $259
 $1,316
        
Liabilities:       
Commodity contracts subject to rate recovery$15
 $1
 $74
 $90
Effect of netting and allocation of collateral(2)
(15) —
 —
 (15)
Total$—
 $1
 $74
 $75
        
 Fair value at December 31, 2018
 Level 1 Level 2 Level 3 Total
Assets:       
Nuclear decommissioning trusts:       
Equity securities$407
 $4
 $—
 $411
Debt securities:       
Debt securities issued by the U.S. Treasury and other       
U.S. government corporations and agencies43
 10
 —
 53
Municipal bonds—
 269
 —
 269
Other securities—
 234
 —
 234
Total debt securities43
 513
 —
 556
Total nuclear decommissioning trusts(1)
450
 517
 —
 967
Commodity contracts subject to rate recovery1
 6
 278
 285
Effect of netting and allocation of collateral(2)
23
 —
 5
 28
Total$474
 $523
 $283
 $1,280
        
Liabilities:       
Interest rate instruments$—
 $1
 $—
 $1
Commodity contracts subject to rate recovery2
 —
 99
 101
Effect of netting and allocation of collateral(2)
(2) —
 —
 (2)
Total$—
 $1
 $99
 $100
(1)
Excludes cash and cash equivalents.
(2)
Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.
RECURRING FAIR VALUE MEASURES – SDG&E
(Dollars in millions)
 Fair value at September 30, 2020
 Level 1Level 2Level 3Total
Assets:    
Nuclear decommissioning trusts:    
Equity securities$382 $7 $0 $389 
Debt securities:    
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies
26 23 0 49 
Municipal bonds0 335 0 335 
Other securities0 271 0 271 
Total debt securities26 629 0 655 
Total nuclear decommissioning trusts(1)
408 636 0 1,044 
Commodity contracts subject to rate recovery9 1 86 96 
Effect of netting and allocation of collateral(2)
16 0 6 22 
Total$433 $637 $92 $1,162 
Liabilities:    
Commodity contracts subject to rate recovery$0 $0 $53 $53 
Total$0 $0 $53 $53 
 Fair value at December 31, 2019
 Level 1Level 2Level 3Total
Assets:    
Nuclear decommissioning trusts:    
Equity securities$503 $6 $0 $509 
Debt securities:    
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies
46 11 0 57 
Municipal bonds0 282 0 282 
Other securities0 226 0 226 
Total debt securities46 519 0 565 
Total nuclear decommissioning trusts(1)
549 525 0 1,074 
Commodity contracts subject to rate recovery1 3 95 99 
Effect of netting and allocation of collateral(2)
10 0 6 16 
Total$560 $528 $101 $1,189 
Liabilities:    
Commodity contracts subject to rate recovery$14 $0 $67 $81 
Effect of netting and allocation of collateral(2)
(14)0 0 (14)
Total$0 $0 $67 $67 

(1)    Excludes cash and cash equivalents.
(2)    Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.

76

RECURRING FAIR VALUE MEASURES – SOCALGASRECURRING FAIR VALUE MEASURES – SOCALGASRECURRING FAIR VALUE MEASURES – SOCALGAS
(Dollars in millions)(Dollars in millions)(Dollars in millions)
Fair value at September 30, 2019 Fair value at September 30, 2020
Level 1 Level 2 Level 3 Total Level 1Level 2Level 3Total
Assets:       Assets:    
Commodity contracts subject to rate recovery$1
 $5
 $—
 $6
Commodity contracts subject to rate recovery$0 $3 $0 $3 
Effect of netting and allocation of collateral(1)
3
 —
 —
 3
Effect of netting and allocation of collateral(1)
2 0 0 2 
Total$4
 $5
 $—
 $9
Total$2 $3 $0 $5 
       
Liabilities:       Liabilities:    
Commodity contracts subject to rate recovery$—
 $4
 $—
 $4
Commodity contracts subject to rate recovery$0 $6 $0 $6 
Total$—
 $4
 $—
 $4
Total$0 $6 $0 $6 
       
Fair value at December 31, 2018 Fair value at December 31, 2019
Level 1 Level 2 Level 3 Total Level 1Level 2Level 3Total
Assets:       Assets:    
Commodity contracts subject to rate recovery$1
 $3
 $—
 $4
Commodity contracts subject to rate recovery$4 $5 $0 $9 
Effect of netting and allocation of collateral(1)
5
 —
 —
 5
Effect of netting and allocation of collateral(1)
1 8 0 9 
Total$6
 $3
 $—
 $9
Total$5 $13 $0 $18 
       
Liabilities:       Liabilities:    
Commodity contracts subject to rate recovery$—
 $5
 $—
 $5
Commodity contracts subject to rate recovery$0 $4 $0 $4 
Total$—
 $5
 $—
 $5
Total$0 $4 $0 $4 
(1)    Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.(1)
Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.
Level 3 Information
SDG&E
The table below sets forth reconciliations of changes in the fair value of CRRs and long-term, fixed-price electricity positions classified as Level 3 in the fair value hierarchy for Sempra Energy Consolidated and SDG&E.
LEVEL 3 RECONCILIATIONS(1)
(Dollars in millions)
 Three months ended September 30,
 20202019
Balance at July 1$17 $176 
Realized and unrealized losses(4)(24)
Allocated transmission instruments1 0 
Settlements19 27 
Balance at September 30$33 $179 
Change in unrealized gains (losses) relating to instruments still held at September 30$7 $1 
Nine months ended September 30,
20202019
Balance at January 1$28 $179 
Realized and unrealized losses(18)(32)
Allocated transmission instruments2 0 
Settlements21 32 
Balance at September 30$33 $179 
Change in unrealized gains (losses) relating to instruments still held at September 30$(1)$12 
LEVEL 3 RECONCILIATIONS(1)
(Dollars in millions)
 Three months ended September 30,
 2019 2018
Balance at July 1$176
 $(31)
Realized and unrealized (losses) gains(24) 6
Settlements27
 13
Balance at September 30$179
 $(12)
Change in unrealized gains (losses) relating to instruments still held at September 30$1
 $6
 Nine months ended September 30,
 2019 2018
Balance at January 1$179
 $(28)
Realized and unrealized (losses) gains(32) 21
Allocated transmission instruments—
 3
Settlements32
 (8)
Balance at September 30$179
 $(12)
Change in unrealized gains (losses) relating to instruments still held at September 30$12
 $—
(1)    Excludes the effect of the contractual ability to settle contracts under master netting agreements.
(1)

Excludes the effect of the contractual ability to settle contracts under master netting agreements.

Inputs used to determine the fair value of CRRs and fixed-price electricity positions are reviewed and compared with market conditions to determine reasonableness. SDG&E expects all costs related to these instruments to be recoverable through customer rates. As such, there is no impact to earnings from changes in the fair value of these instruments.

77

CRRs are recorded at fair value based almost entirely on the most current auction prices published by the California ISO, an objective source. Annual auction prices are published once a year, typically in the middle of November, and are the basis for valuing CRRs settling in the following year. For the CRRs settling from January 1 to December 31, the auction price inputs, at a given location, were in the following ranges for the years indicated below:
CONGESTION REVENUE RIGHTS AUCTION PRICE INPUTS
  
Settlement yearPrice per MWhMedian price per MWh
2019$(8.57)to$35.21
$(2.94)
2018(7.25)to11.99
0.09

CONGESTION REVENUE RIGHTS AUCTION PRICE INPUTS
Settlement yearPrice per MWhMedian price per MWh
2020$(3.77)to$6.03 $(1.58)
2019(8.57)to35.21 (2.94)
The impact associated with discounting is negligible. Because these auction prices are a less observable input, these instruments are classified as Level 3. The fair value of these instruments is derived from auction price differences between two locations. Positive values between two locations represent expected future reductions in congestion costs, whereas negative values between two locations represent expected future charges. Valuation of our CRRs is sensitive to a change in auction price. If auction prices at one location increase (decrease) relative to another location, this could result in a higher (lower) fair value measurement. We summarize CRR volumes in Note 8.
Long-term, fixed-price electricity positions that are valued using significant unobservable data are classified as Level 3 because the contract terms relate to a delivery location or tenor for which observable market rate information is not available. The fair value of the net electricity positions classified as Level 3 is derived from a discounted cash flow model using market electricity forward price inputs. The range and weighted-average price of these inputs at September 30 were as follows:
LONG-TERM, FIXED-PRICE ELECTRICITY POSITIONS PRICE INPUTS  
   
Settlement year Price per MWh Weighted-average price per MWh
2019$21.60
to$57.20
$38.29
2018 20.40
to 57.70
 38.87

LONG-TERM, FIXED-PRICE ELECTRICITY POSITIONS PRICE INPUTS
Settlement yearPrice per MWhWeighted-average price per MWh
2020$19.45 to$71.25 $38.14 
201921.60 to57.20 38.29 
A significant increase (decrease) in market electricity forward prices would result in a significantly higher (lower) fair value. We summarize long-term, fixed-price electricity position volumes in Note 8.
Realized gains and losses associated with CRRs and long-term, fixed-price electricity positions, which are recoverable in rates, are recorded in Cost of Electric Fuel and Purchased Power on the Condensed Consolidated Statements of Operations. Because unrealized gains and losses are recorded as regulatory assets and liabilities, they do not affect earnings.
Sempra LNG
The table below sets forth a reconciliation of changes in the fair value of Sempra Energy’s Support Agreement for the benefit of CFIN classified as Level 3 in the fair value hierarchy for Sempra Energy Consolidated.
LEVEL 3 RECONCILIATION
(Dollars in millions)
Three months ended September 30, 2020
Balance at July 1$0 
Realized and unrealized gains(1)
7 
Settlements(1)
Balance at September 30(2)
$6 
Change in unrealized gains (losses) relating to instruments still held at September 30$6 
(1)    Net gains are included in Interest Income and net losses are included in Interest Expense on the Sempra Energy Condensed Consolidated Statements of Operations.
(2)    Included in Other Current Assets on the Sempra Energy Condensed Consolidated Balance Sheets.

The fair value of the Support Agreement, net of related guarantee fees, is based on a discounted cash flow model using a probability of default and survival methodology. Our estimate of fair value considers inputs such as third-party default rates, credit ratings, recovery rates, and risk-adjusted discount rates, which may be readily observable, market corroborated or generally unobservable inputs. Because CFIN’s credit rating and related default and survival rates are unobservable inputs that are
78

significant to the valuation, the Support Agreement, net of related guarantee fees, is classified as Level 3. We assigned CFIN an internally developed credit rating of A3 and relied on default rate data published by Moody’s to assign a probability of default. A hypothetical change in the credit rating up or down one notch would not result in a significant change in the fair value of the Support Agreement.
Fair Value of Financial Instruments
The fair values of certain of our financial instruments (cash, accounts and notes receivable, dividends receivable from discontinued operations, short-term amounts due to/from unconsolidated affiliates, dividends and accounts payable, short-term debt and customer deposits) approximate their carrying amounts because of the short-term nature of these instruments. Investments in life insurance contracts that we hold in support of our Supplemental Executive Retirement, Cash Balance Restoration and Deferred Compensation Plans are carried at cash surrender values, which represent the amount of cash that could be realized under the contracts. The following table provides the carrying amounts and fair values of certain other financial instruments that are not recorded at fair value on the Condensed Consolidated Balance Sheets.

FAIR VALUE OF FINANCIAL INSTRUMENTS
(Dollars in millions)
 September 30, 2020
 Carrying
amount		Fair value
 Level 1Level 2Level 3Total
Sempra Energy Consolidated:     
Long-term amounts due from unconsolidated affiliates(1)
$620 $0 $649 $0 $649 
Long-term amounts due to unconsolidated affiliates271 0 280 0 280 
Total long-term debt(2)
23,588 0 26,105 0 26,105 
SDG&E:     
Total long-term debt(3)
$6,505 $0 $7,481 $0 $7,481 
SoCalGas:     
Total long-term debt(4)
$4,759 $0 $5,573 $0 $5,573 
 December 31, 2019
 Carrying
amount		Fair value
 Level 1Level 2Level 3Total
Sempra Energy Consolidated:     
Long-term amounts due from unconsolidated affiliates$742 $0 $759 $— $759 
Long-term amounts due to unconsolidated affiliates195 0 184 0 184 
Total long-term debt(2)
21,247 0 22,638 26 22,664 
SDG&E:     
Total long-term debt(3)
$5,140 $0 $5,662 $0 $5,662 
SoCalGas:     
Total long-term debt(4)
$3,809 $0 $4,189 $0 $4,189 

(1)    Before allowances for credit losses of $3 million at September 30, 2020.
(2)    Before reductions of unamortized discount and debt issuance costs of $263 million and $225 million at September 30, 2020 and December 31, 2019, respectively, and excluding finance lease obligations of $1,335 million and $1,289 million at September 30, 2020 and December 31, 2019, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
(Dollars in millions)
 September 30, 2019
 Carrying
amount		 Fair value
  Level 1 Level 2 Level 3 Total
Sempra Energy Consolidated:         
Long-term amounts due from unconsolidated affiliates$712
 $—
 $735
 $—
 $735
Long-term amounts due to unconsolidated affiliates39
 —
 38
 —
 38
Total long-term debt(1)
21,554
 —
 23,142
 26
 23,168
SDG&E:         
Total long-term debt(2)
$5,141
 $—
 $5,780
 $—
 $5,780
SoCalGas:         
Total long-term debt(3)
$3,809
 $—
 $4,290
 $—
 $4,290
          
 December 31, 2018
 Carrying
amount		 Fair value
  Level 1 Level 2 Level 3 Total
Sempra Energy Consolidated:         
Long-term amounts due from unconsolidated affiliates$644
 $—
 $648
 $4
 $652
Long-term amounts due to unconsolidated affiliates37
 —
 35
 —
 35
Total long-term debt(4)(5)
21,340
 —
 20,616
 247
 20,863
SDG&E:         
Total long-term debt(4)(6)
$4,996
 $—
 $4,897
 $220
 $5,117
SoCalGas:         
Total long-term debt(7)
$3,459
 $—
 $3,505
 $—
 $3,505
(3)    Before reductions of unamortized discount and debt issuance costs of $59 million and $48 million at September 30, 2020 and December 31, 2019, respectively, and excluding finance lease obligations of $1,278 million and $1,270 million at September 30, 2020 and December 31, 2019, respectively.
(1)
(4)    Before reductions of unamortized discount and debt issuance costs of $41 million and $34 million at September 30, 2020 and December 31, 2019, respectively, and excluding finance lease obligations of $57 million and $19 million at September 30, 2020 and December 31, 2019, respectively.

Before reductions of unamortized discount and debt issuance costs of $221 million and excluding finance lease obligations of $1,285 million.
(2)
Before reductions of unamortized discount and debt issuance costs of $49 million and excluding finance lease obligations of $1,270 million.
(3)
Before reductions of unamortized discount and debt issuance costs of $35 million and excluding finance lease obligations of $15 million.
(4)
Level 3 instruments include $220 million related to Otay Mesa VIE.
(5)
Before reductions of unamortized discount and debt issuance costs of $206 million and excluding build-to-suit and capital lease obligations of $1,413 million.
(6)
Before reductions of unamortized discount and debt issuance costs of $49 million and excluding capital lease obligations of $1,272 million.
(7)
Before reductions of unamortized discount and debt issuance costs of $32 million and excluding capital lease obligations of $3 million.

We provide the fair values for the securities held in the NDT related to SONGS in Note 10.
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NOTE 10. SAN ONOFRE NUCLEAR GENERATING STATION
We provide below updates to ongoing matters related to SONGS, a nuclear generating facility near San Clemente, California that ceased operations in June 2013, and in which SDG&E has a 20 percent20% ownership interest. We discuss SONGS further in Note 15 of the Notes to Consolidated Financial Statements in the Annual Report.
NUCLEAR DECOMMISSIONING AND FUNDING
As a result of Edison’s decision to permanently retire SONGS Units 2 and 3, Edison began the decommissioning phase of the plant. TheWe expect the majority of the dismantlementdecommissioning work is expected to take 10 years after receipt of all the required permits. The coastal development permit, the last permit required to be obtained, was issued in October 2019. The Samuel Lawrence Foundation filed a writ petition under the California Coastal Act in LA Superior Court in December 2019 seeking to invalidate this permit and we expect majorto obtain injunctive relief to stop decommissioning work. In September 2020, the Samuel Lawrence Foundation filed another writ petition under the California Coastal Act in LA Superior Court seeking to set aside the California Coastal Commission’s July 2020 approval of the inspection and maintenance plan for the SONGS’ canisters and to obtain injunctive relief to stop decommissioning work. Major decommissioning work to beginbegan in 2020.2020 and has not been interrupted by the writ petitions filed by the Samuel Lawrence Foundation. Decommissioning of Unit 1, removed from service in 1992, is largely complete. The remaining work for Unit 1 will be completed once Units 2 and 3 are dismantled and the spent fuel is removed from the site. The spent fuel is currently being stored on-site, until the DOE identifies a spent fuel storage facility and puts in place a program for the fuel’s disposal, as we discuss below. SDG&E is responsible for approximately 20 percent20% of the total contract price.
In accordance with state and federal requirements and regulations, SDG&E has assets held in the NDT to fund its share of decommissioning costs for SONGS Units 1, 2 and 3. The amounts collected in rates for SONGS’ decommissioning are invested in the NDT, which is comprised of externally managed trust funds. Amounts held by the NDT are invested in accordance with


CPUC regulations. SDG&E classifies debt and equity securities held in the NDT as available-for-sale. The NDT assets are presented on the Sempra Energy and SDG&E Condensed Consolidated Balance Sheets at fair value with the offsetting credits recorded in noncurrent Regulatory Liabilities.
Except for the use of funds for the planning of decommissioning activities or NDT administrative costs, CPUC approval is required for SDG&E to access the NDT assets to fund SONGS decommissioning costs for Units 2 and 3. In March 2020, SDG&E has received authorization from the CPUC to access NDT funds of up to $455$109 million for 2013 through 2019 (2019 forecasted) SONGS decommissioningforecasted 2020 costs. This includes up to $93 million authorized by the CPUC in January 2019 to be withdrawn from the NDT for forecasted 2019 SONGS Units 2 and 3 costs as decommissioning costs are incurred.
In December 2016,September 2020, the IRS and the U.S. Department of the Treasury issued proposedpublished final regulations that clarify the definition of “nuclear decommissioning costs,” which are costs that may be paid for or reimbursed from a qualified trust fund. The proposedfinal regulations state that costs related toadopted most of the construction and maintenanceprovisions of independent spent fuel management installations are included in the definition of “nuclear decommissioning costs.” The proposed regulations will be effective prospectively once they are finalized; however, the IRS has stated that it will not challenge taxpayer positions consistent with the proposed regulations forissued in December 2016. The final regulations apply to taxable years ending on or after September 4, 2020 and confirm that the date the proposed regulations were issued. SDG&E is awaiting the adoptiondefinition of or additional refinement“nuclear decommissioning costs” includes amounts related to the proposedstorage of spent nuclear fuel at both on-site and off-site ISFSIs.
The final regulations before determining whetheralso clarify that costs incurred for ISFSIs that may be or are expected to be reimbursed by the proposedDOE may be paid or reimbursed from a qualified trust fund. Accordingly, the final regulations will allow SDG&E the option to access the NDTqualified trust funds for reimbursement or payment of the spent fuel management costs incurred in 2017 and subsequent years. Further clarification of the proposed regulations could enable SDG&E to access the NDT to recover spent fuel managementstorage costs before Edison reaches final settlement with the DOE regarding the DOE’s reimbursement of these costs. Historically, the DOE’s reimbursements of spent fuel storage costs have not resulted in timely or complete recovery of these costs. We discuss the DOE’s responsibility for spent nuclear fuel below. The IRS held public hearings on the proposed regulations in October 2017. It is unclear when clarification of the proposed regulations might be provided or when the proposed regulations will be finalized.
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The following table shows the fair values and gross unrealized gains and losses for the securities held in the NDT. We provide additional fair value disclosures for the NDT in Note 9.
NUCLEAR DECOMMISSIONING TRUSTS
(Dollars in millions)
 CostGross
unrealized
gains		Gross
unrealized
losses		Estimated
fair
value
At September 30, 2020:    
Debt securities:    
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies(1)
$48 $1 $0 $49 
Municipal bonds(2)
318 18 (1)335 
Other securities(3)
258 14 (1)271 
Total debt securities624 33 (2)655 
Equity securities147 254 (12)389 
Cash and cash equivalents13 0 0 13 
Total$784 $287 $(14)$1,057 
At December 31, 2019:    
Debt securities:    
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies$57 $0 $0 $57 
Municipal bonds270 12 0 282 
Other securities218 9 (1)226 
Total debt securities545 21 (1)565 
Equity securities176 339 (6)509 
Cash and cash equivalents8 0 0 8 
Total$729 $360 $(7)$1,082 
(1)Note 9.    Maturity dates are 2022-2050.
(2)Maturity dates are 2020-2056.
NUCLEAR DECOMMISSIONING TRUSTS
(Dollars in millions)
 Cost 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair
value
At September 30, 2019:       
Debt securities:       
Debt securities issued by the U.S. Treasury and other       
U.S. government corporations and agencies(1)
$51
 $—
 $—
 $51
Municipal bonds(2)
278
 13
 —
 291
Other securities(3)
228
 9
 (1) 236
Total debt securities557
 22
 (1) 578
Equity securities170
 309
 (9) 470
Cash and cash equivalents1
 —
 —
 1
Total$728
 $331
 $(10) $1,049
At December 31, 2018:       
Debt securities:       
Debt securities issued by the U.S. Treasury and other       
U.S. government corporations and agencies$52
 $1
 $—
 $53
Municipal bonds266
 4
 (1) 269
Other securities238
 1
 (5) 234
Total debt securities556
 6
 (6) 556
Equity securities168
 253
 (10) 411
Cash and cash equivalents7
 —
 —
 7
Total$731
 $259
 $(16) $974
(1)(3)    Maturity dates are 2020-2072.
Maturity dates are 2021-2050.
(2)
Maturity dates are 2020-2056.
(3)
Maturity dates are 2019-2060.



The following table shows the proceeds from sales of securities in the NDT and gross realized gains and losses on those sales.
SALES OF SECURITIES IN THE NDT
(Dollars in millions)
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
Proceeds from sales$294 $231 $1,091 $728 
Gross realized gains9 5 108 18 
Gross realized losses(2)(1)(13)(4)
SALES OF SECURITIES IN THE NDT    
(Dollars in millions)    
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
Proceeds from sales$231
 $216
 $728
 $703
Gross realized gains5
 3
 18
 32
Gross realized losses(1) (1) (4) (6)


Net unrealized gains and losses, as well as realized gains and losses that are reinvested in the NDT, are included in noncurrent Regulatory Liabilities on Sempra Energy’s and SDG&E’s Condensed Consolidated Balance Sheets. We determine the cost of securities in the trusts on the basis of specific identification.
ASSET RETIREMENT OBLIGATION AND SPENT NUCLEAR FUEL
The present value of SDG&E’s ARO related to decommissioning costs for the SONGS units was $614$593 million at September 30, 2019.2020. That amount includes the cost to decommission Units 2 and 3, and the remaining cost to complete the decommissioning of Unit 1, which is substantially complete. The ARO for all three units is based on a cost study prepared in 2017 that is pending CPUC approval. The ARO for Units 2 and 3 reflects the acceleration of the start of decommissioning of these units as a result of the early closure of the plant. SDG&E’s share of total decommissioning costs in 20192020 dollars is approximately $834$860 million.

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U.S. DEPARTMENT OF ENERGY NUCLEAR FUEL DISPOSAL
Spent nuclear fuel from SONGS is currently stored on-site in an ISFSI licensed by the NRC or temporarily in spent fuel pools.Nuclear Regulatory Commission. In October 2015, the California Coastal Commission approved Edison’s application forto expand the proposed expansion of the ISFSI at SONGS.ISFSI. The ISFSI expansion began construction in 2016 and the transfer of the spent nuclear fuel from Units 2 and 3 to the ISFSI began in 2018. Edison suspended this transfer2018 and was completed in August 2018 due to an incident that was subsequently resolved to the NRC’s satisfaction according to the NRC’s supplemental inspection report released in July 2019. Edison resumed spent fuel transfer operations in July 2019.2020. The ISFSI will operate until 2049, when it is assumed that the DOE will have taken custody of all the SONGS spent fuel. The ISFSI would then be decommissioned, and the site restored to its original environmental state. Until then, SONGS owners are responsible for interim storage of spent nuclear fuel at SONGS.
The Nuclear Waste Policy Act of 1982 made the DOE responsible for accepting, transporting, and disposing of spent nuclear fuel. However, it is uncertain when the DOE will begin accepting spent nuclear fuel from SONGS. This delay will lead to increased costs for spent fuel storage. In November 2019, Edison filed a claim for spent fuel management costs in the U.S. Court of Federal Claims for the time period from January 2017 through July 2018. It is unclear when Edison will pursue litigation claims for spent fuel management costs incurred on or after August 1, 2018. SDG&E will continue to support Edison in its pursuit of claims on behalf of the SONGS co-owners against the DOE for its failure to timely accept the spent nuclear fuel. However, it is unclear whether Edison will enter into a new settlement with the DOE or pursue litigation claims for spent fuel management costs incurred on or after January 1, 2017.
NUCLEAR INSURANCE
SDG&E and the other owners of SONGS have insurance to cover claims from nuclear liability incidents arising at SONGS. Currently, this insurance provides $450 million in coverage limits, the maximum amount available, including coverage for acts of terrorism. In addition, the Price-Anderson Act provides an additional $110 million of coverage. If a nuclear liability loss occurs at SONGS and exceeds the $450 million insurance limit, this additional coverage would be available to provide a total of $560 million in coverage limits per incident.
TheAs a result of updated coverage assessments, the SONGS owners including SDG&E, also maintainhave nuclear property damage insurance at $1.5 billion, with a $500of $130 million, property damage sublimit on the ISFSI, which exceeds the minimum federal requirements of $1.06 billion.$50 million. This insurance coverage is provided through NEIL. The NEIL policies have specific exclusions and limitations that can result in reduced or eliminated coverage. Insured members as a group are subject to retrospective premium assessments to cover losses sustained by NEIL under all issued policies. SDG&E could be assessed up to $10.4$3.5 million of retrospective premiums based on overall member claims.


The nuclear property insurance program includes an industry aggregate loss limit for non-certified acts of terrorism (as defined by the Terrorism Risk Insurance Act) of $3.24 billion. This is the maximum amount that will be paid to insured members who suffer losses or damages from these non-certified terrorist acts.
NOTE 11. COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS
We accrue losses for a legal proceeding when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. However, the uncertainties inherent in legal proceedings make it difficult to reasonably estimate the costs and effects of resolving these matters. Accordingly, actual costs incurred may differ materially from amounts accrued, may exceed applicable insurance coverage and could materially adversely affect our business, cash flows, results of operations, financial condition and prospects. Unless otherwise indicated, we are unable to estimate reasonably possible losses in excess of any amounts accrued.
At September 30, 2019,2020, loss contingency accruals for legal matters, including associated legal fees, that are probable and estimable were $97$444 million for Sempra Energy Consolidated, including $50$299 million for SoCalGas. Amounts for Sempra Energy Consolidated and SoCalGas include $49$273 million for matters related to the Aliso Canyon natural gas storage facility gas leak, which we discuss below.
SDG&E
2007 Wildfire Litigation and Net Cost Recovery Status
SDG&E has resolved all civil litigation associated with three wildfires that occurred in October 2007.
As a result of a CPUC decision denying SDG&E’s request to recover wildfire costs, SDG&E wrote off the wildfire regulatory asset, resulting in a charge of $351 million ($208 million after-tax) in the third quarter of 2017. SDG&E applied to the CPUC for rehearing of its decision but, in July 2018, the CPUC denied SDG&E’s rehearing request. In November 2018, the California Court of Appeal denied SDG&E’s petition to reverse the CPUC’s decision. In January 2019, the California Supreme Court denied SDG&E’s petition to reverse the decisions of the CPUC and the California Court of Appeal. In October 2019, the U.S. Supreme Court declined to review the case, effectively ending SDG&E’s efforts to recover the wildfire regulatory asset.
SoCalGas
Aliso Canyon Natural Gas Storage Facility Gas Leak
OnFrom October 23, 2015 through February 11, 2016, SoCalGas discoveredexperienced a natural gas leak atfrom one of itsthe injection-and-withdrawal wells, SS25, at its Aliso Canyon natural gas storage facility in Los Angeles County. The Aliso Canyon natural gas storage facility has been operated by SoCalGas since 1972. SS25 is one of more than 100 injection-and-withdrawal wells at the storage facility. SoCalGas worked closely with several of the world’s leading experts to stop the Leak, and on February 18, 2016, DOGGR confirmed that the well was permanently sealed.
As discussed in “Cost Estimates and Accounting Impact” below, SoCalGas incurred significant costs for temporary relocation, to control the well and to stop the Leak, as well as to purchase natural gas to replace that lost through the Leak. As discussed in “Local Community Mitigation Efforts” below, during the Leak and in the months following the sealing of the well, SoCalGas provided support to nearby residents who wished to temporarily relocate as a result of the Leak. These programs ended in July 2016.
SoCalGas has additionally incurred significant costs to defend against and, in certain cases, settle, civil and criminal litigation arising from the Leak; to pay the costs of the government-ordered response to the Leak including the costs for an independent third party to conduct a root cause analysis to investigate the technical cause of the Leak; to respond to various government and agency investigations regarding the Leak; and to comply with increased regulation imposed as a result of the Leak. As further described below in “Civil and Criminal Litigation,Litigation” and “Regulatory Proceedings,” “Regulatory Proceedings”numerous lawsuits, investigations and “Governmental Investigations and Orders and Additional Regulation,” these activities are ongoing and SoCalGas anticipates that it will incur additional suchregulatory proceedings have been
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initiated in response to the Leak, resulting in significant costs, which may also be significant.


Local Community Mitigation Efforts. Pursuant to a directive by the DPH and orders by the LA Superior Court, SoCalGas provided temporary relocation support to residents in the nearby community who requested it. The DPH issued a second directive generally requiring SoCalGas to professionally clean the homes of Porter Ranch residents (the Directive), which is addressed within the Government Plaintiffs Settlement that we discusstogether with other Leak-related costs are discussed below in “Civil“Cost Estimates, Accounting Impact and Criminal Litigation.Insurance.”
The costs incurred to mitigate local community impacts have been significant. If any of these costs are not covered by insurance (including any costs in excess of applicable policy limits), if there are significant delays in receiving insurance recoveries, or if the insurance recoveries are subject to income taxes while the associated costs are not tax deductible, such amounts could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.
Civil and Criminal Litigation. As of October 28, 2019, 390November 2, 2020, 394 lawsuits, including approximately 36,000 plaintiffs, are pending against SoCalGas related to the Leak, some of which have also named Sempra Energy. All these cases, other than a matter brought by the Los Angeles County District Attorney and the federal securities class action discussed below, are coordinated before a single court in the LA Superior Court for pretrial management.
In November 2017, in the coordinated proceeding, individuals and business entities asserting tort and Proposition 65 claims filed a Third Amended Consolidated Master Case Complaint for Individual Actions, through which their separate lawsuits will be managed for pretrial purposes. The consolidated complaint asserts causes of action for negligence, negligence per se, private and public nuisance (continuing and permanent), trespass, inverse condemnation, strict liability, negligent and intentional infliction of emotional distress, fraudulent concealment, loss of consortium, wrongful death and violations of Proposition 65 against SoCalGas, with certain causes of action also naming Sempra Energy. The consolidated complaint seeks compensatory and punitive damages for personal injuries, lost wages and/or lost profits, property damage and diminution in property value, injunctive relief, costs of future medical monitoring, civil penalties (including penalties associated with Proposition 65 claims alleging violation of requirements for warning about certain chemical exposures), and attorneys’ fees. The court has scheduled an initial trial previously scheduled for June 24, 2020 for a small number of randomly selected individual plaintiffs.plaintiffs was postponed, with a new trial date to be determined by the court.
In January 2017, 2 consolidated class action complaints were filed against SoCalGas and Sempra Energy, 1 on behalf of a putative class of persons and businesses who own or lease real property within a five-mile radius of the well (the Property Class Action), and a second on behalf of a putative class of all persons and entities conducting business within five miles of the facility (the Business Class Action). Both complaints assertThe Property Class Action asserts claims for strict liability for ultra-hazardous activities, negligence, andnegligence per se, violation of the California Unfair Competition Law. The Property Class Action also asserts claims for negligence per se,Law, trespass, permanent and continuing public and private nuisance, and inverse condemnation. The Business Class Action also asserts a claim for negligent interference with prospective economic advantage.violation of the California Unfair Competition Law. Both complaints seek compensatory, statutory and punitive damages, injunctive relief and attorneys’ fees. In May 2019, the California Supreme Court ruled that the purely economic damages alleged in the Business Class Action are not recoverable under the law, and in September 2019, in accordance with the ruling, the LA Superior Court dismissed the strict liability, negligence and negligent interference with prospective economic advantage causes of action in the Business Class Action complaint.
Complaints byThree property developers were filed complaints in 2017July and October of 2018 against SoCalGas and Sempra Energy alleging causes of action for strict liability, negligence per se, negligence, continuing nuisance, permanent nuisance and violation of the California Unfair Competition Law, as well as claims for negligence against certain directors of SoCalGas. The complaints seek compensatory, statutory and punitive damages, injunctive relief and attorneys’ fees.
In October 2018 and January 2019, complaints were filed on behalf of 51 plaintiffs who are firefighters stationed near the Aliso Canyon natural gas storage facility andwho allege they were injured by exposure to chemicals released during the Leak. The complaints against SoCalGas and Sempra Energy assert causes of actions for negligence, negligence per se, private and public nuisance (continuing and permanent), trespass, inverse condemnation, strict liability, negligent and intentional infliction of emotional distress, fraudulent concealment and loss of consortium. The complaints seek compensatory and punitive damages for personal injuries, lost wages and/or lost profits, property damage and diminution in property value, and attorney’s fees.
NaN shareholder derivative actions are also pending alleging breach of fiduciary duties against certain officers and certain directors of Sempra Energy and/or SoCalGas, three of which were joined in an Amended Consolidated Shareholder Derivative Complaint filed in February 2020.
In addition, a federal securities class action alleging violation of the federal securities laws was filed against Sempra Energy and certain of its officers and certain of its directorsin July 2017 in the U.S. District Court for the Southern District of California. In March 2018, the court dismissed the action with prejudice. The plaintiffs filed a notice of appeal ofhave appealed the dismissal.
Five shareholder derivative actions are also pending alleging breach of fiduciary duties against certain officers and certain directors of Sempra Energy and/or SoCalGas, four of which were joined in a Consolidated Shareholder Derivative Complaint in August 2017.
NaN actions by public entities were filed, including complaints byIn February 2019, the County of Los Angeles, on behalf of itself and the people of the State of California, the California Attorney General, acting in an independent capacity and on behalf of the people of the State of California and the CARB, and the Los Angeles City Attorney alleging public nuisance, unfair competition, and violations


of California Health and Safety Code provisions regarding discharge of contaminants, among other things, which sought injunctive relief, abatement, civil penalties and damages. The County of Los Angeles also filed a petition seeking a writ of mandate requiring DOGGR and the State Oil and Gas Supervisor to comply with SB 380 and the California Environmental Quality Act, as well as declaratory and injunctive relief against their authorization allowing SoCalGas to inject natural gas at the facility.
In August 2018, SoCalGas entered intoLA Superior Court approved a settlement agreement withbetween SoCalGas and the Los Angeles City Attorney’s Office, the County of Los Angeles, the California Office of the Attorney General and CARB (collectively, the Government Plaintiffs)of 3 actions filed by these entities under which SoCalGas made payments and agreed to settle these public entity actions and the Directive for payments andprovide funding for environmental projects totaling $120 million, including $21 million in civil penalties, (the Government Plaintiffs Settlement). Under the settlement agreement,as well as other safety-related commitments.
In September 2016, SoCalGas also agreed to continue its fence-line methane monitoring program, establishsettled a safety committee and hire an independent ombudsman to monitor and report on the safety at the facility. This settlement also fully resolves SoCalGas’ commitment to mitigate the actual natural gas released during the Leak and fulfills the requirements of the Governor’s Order, described below, for SoCalGas to pay for a mitigation program developed by CARB. The Government Plaintiffs Settlement was approved by the LA Superior Courtmisdemeanor criminal complaint filed in February 2019.
Separately, in February 2016 by the Los Angeles County District Attorney’s Office filed a misdemeanor criminal complaint against SoCalGas, seeking penalties and other remedies for alleged failurepleading no contest to a charge that it failed to provide timely notice of the Leak pursuant to California Health and Safety Code section 25510(a), Los Angeles County Code section 12.56.030, and Title 19 California Code of Regulations section 2703(a), and for allegedly violating California Health and Safety Code section 41700 prohibiting discharge of air contaminants that cause annoyance to the public. Pursuant to a settlement agreement with the Los Angeles County District Attorney’s Office, SoCalGas agreed to plead no contest to the notice charge under Health and Safety Code section 25510(a) and agreed to pay the maximum fine of $75,000, penalty assessments of approximately $233,500, and operational commitments estimated to cost approximately $6 million, reimbursements and assessments in exchange for the Los Angeles County District Attorney’s Office moving to dismiss the remaining counts at sentencing and settling the complaint (the District Attorney Settlement). SoCalGas completed the commitments and obligations under the District Attorney Settlement, and inIn November 2016, the LA Superior Court approved the settlement and entered judgment on the notice charge. Under the settlement, SoCalGas paid a $75,000 fine, $233,500 in penalties, and $246,673 to reimburse costs incurred by Los Angeles County Fire Department’s Health and Hazardous Materials Division, as well as completed operational commitments estimated to cost approximately $6 million. Certain individuals who objectobjected to the settlement petitioned the Court of Appeal to vacate the judgment, contending they should be granted restitution. In July 2019, the Court of Appeal denied the petition in part, but remanded the matter to the trial court to permitgive the petitioners an opportunity to
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prove damages stemming from only from the three-day delay in reporting the Leak.
The costs of defending against these civil and criminal lawsuits, and any compensatory, statutory or punitive damages, restitution, and civil, administrative and criminal fines, penalties and other costs, if awarded or imposed, as well as Following the costs of mitigatinghearing, the actual natural gas released, could be significant. If any of these costs are not covered by insurance (including any costs in excess of applicable policy limits), if there are significant delays in receiving insurance recoveries, or if the insurance recoveries are subject to income taxes while the associated costs are not tax deductible, such amounts could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.trial court denied restitution.
Regulatory Proceedings. In January 2016, DOGGRCalGEM and the CPUC selected Blade to conduct, under their supervision,directed an independent analysis of the technical root cause of the Leak to be fundedconducted by SoCalGas.Blade. In May 2019, Blade released its report, regarding its root cause analysis of the Leak. The report concludeswhich concluded that the Leak occurred on the morning of October 23, 2015, beginning with an axial rupturewas caused by a failure of the production casing of the well caused by external microbialdue to corrosion as a result of contact with groundwater, followed within hours by the complete separation of the casing. Blade assertsand that attempts to stop the Leak were unsuccessful due to insufficient kill fluid density and pump rates. Blade’s report assesses whether SoCalGas complied with gas storage regulations in existence at the time of the Leak, andnot effectively conducted, but did not identify any instances of non-compliance by SoCalGas. Blade concludesconcluded that SoCalGas’ compliance activities conducted prior to the Leak did not find indications of a casing integrity issue. In Blade’s opinion,Blade opined, however, that there were measures, none of which were required by gas storage regulations at the time, that could have been taken to aid in the early identification of corrosion and that, in Blade’s opinion, would have prevented or mitigated the Leak. The report also identified well safety practices and regulations that have since been adopted by DOGGRCalGEM and implemented by SoCalGas, which address most of the root cause of the Leak identified during Blade’s investigation.
In June 2019, the CPUC opened an OII to consider penalties against SoCalGas for the Leak, which it later bifurcated into two phases. The first phase will consider whether SoCalGas violated California Public Utilities Code Section 451 or other laws, CPUC orders or decisions, rules or requirements, whether SoCalGas engaged in unreasonable and/or imprudent practices with respect to its operation and maintenance of the Aliso Canyon natural gas storage facility or its related record-keeping practices, whether SoCalGas cooperated sufficiently with the Safety Enforcement Division (SED) and Blade during the pre-formal investigation, and whether any of the mitigation proposed by Blade should be implemented to the extent not already done. In November 2019, SED, based largely on the Blade report, alleged a total of 330 violations, asserting that SoCalGas violated California Public Utilities Code Section 451 and failed to cooperate in the investigation and to keep proper records. We expect hearings in the first phase of the OII to begin in the first quarter of 2021. The second phase will consider whether SoCalGas should be sanctioned for the Leak and what damages, fines or other penalties or sanctions, if any, should be imposed for any violations, unreasonable or imprudent practices, or failure to sufficiently cooperate with the SED as determined by the CPUC in the first phase. In addition, the second phase will determine the amounts of various costs incurred by SoCalGas and other parties in connection with the Leak and the ratemaking treatment or other disposition of such costs, which could result in little or no recovery of such costs by SoCalGas. SoCalGas is engaged in settlement discussions in connection with this proceeding.
In February 2017, the CPUC opened a proceeding pursuant to SB 380 to determine the feasibility of minimizing or eliminating the use of the Aliso Canyon natural gas storage facility while still maintaining energy and electric reliability for the region. The CPUC indicated it intends to conduct the proceeding in two phases, with Phase 1 undertaking a comprehensive effort to develop the appropriate analyses and scenarios to evaluate the impact of reducing or eliminating the use of the Aliso Canyon natural gas storage facility and Phase 2 using those analyses and scenarios to evaluate the impacts of reducing or eliminating the use of the Aliso Canyon natural gas storage facility.
The order establishing the scope of the proceeding expressly excludesregion, but excluding issues with respect to air quality, public health, causation, culpability or cost responsibility regarding the Leak. In January 2019, the CPUC concluded Phase 1The first phase of the proceeding by


establishingestablished a framework for the hydraulic, production cost and economic modeling assumptions for the potential reduction in usage or elimination of the Aliso Canyon natural gas storage facility. Phase 2 of the proceeding, which will evaluate the impacts of reducing or eliminating the Aliso Canyon natural gas storage facility using the established framework and models, began in the first quarter of 2019. The CPUC has indicated that it expectsis scheduled to issue its report in 2020.
for Phase 2 by March 31, 2021. In JuneDecember 2019, the CPUC opened an OIIadded a third phase of the proceeding to consider penalties against SoCalGasalternative means for meeting or avoiding the demand for the Leak. In September 2019, the CPUC issued an order bifurcating the proceeding into two phases and establishing the scope and schedule for the first phase. The issues to be determinedfacility’s services if it were eliminated in the first phase are whether SoCalGas violated Public Utilities Code section 451either 2027 or other laws, CPUC orders or decisions, rules or requirements, whether SoCalGas engaged in unreasonable and/or imprudent practices with respect to its operation and maintenance of2045.
If the Aliso Canyon natural gas storage facility were to be permanently closed, or if future cash flows from its related record-keeping practices, whether SoCalGas cooperated sufficiently with the Safety Enforcement Division and Blade during the pre-formal investigation, and whether anyoperation were otherwise insufficient to recover its carrying value, it could result in an impairment of the mitigation proposed by Blade shouldfacility and significantly higher than expected operating costs and/or additional capital expenditures, and natural gas reliability and electric generation could be implemented tojeopardized. At September 30, 2020, the extent not already done. The second phase will consider whether SoCalGas should be sanctioned for the LeakAliso Canyon natural gas storage facility had a net book value of $788 million. Any significant impairment of this asset, or higher operating costs and what penalties, if any, should be imposed for any violations proven in the first phase, as well as determine the amounts of various costsadditional capital expenditures incurred by SoCalGas that may not be recoverable in customer rates, could have a material adverse effect on SoCalGas’ and other partiesSempra Energy’s results of operations, financial condition and cash flows.
Cost Estimates, Accounting Impact and Insurance. SoCalGas has incurred significant costs for temporary relocation of community residents; to control the well and stop the Leak; to mitigate the natural gas released; to purchase natural gas to replace what was lost through the Leak; to defend against and, in certain cases, settle, civil and criminal litigation arising from the Leak; to pay the costs of the government-ordered response to the Leak, including the costs for Blade to conduct the root cause analysis described above; to respond to various government and agency investigations regarding the Leak; and to comply with increased regulation imposed as a result of the Leak. At September 30, 2020, SoCalGas estimates these costs related to the Leak are $1,440 million (the cost estimate), which includes the $1,279 million of costs recovered or probable of recovery from insurance. This cost estimate may increase significantly as more information becomes available. A substantial portion of the cost estimate has been paid, and $268 million is accrued as Reserve for Aliso Canyon Costs and $7 million is accrued in Deferred Credits and Other as of September 30, 2020 on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets.
In the first quarter of 2020, SoCalGas recorded an accrual of $277 million, inclusive of estimated legal costs, of which $177 million was recorded in Insurance Receivable for Aliso Canyon Costs on the SoCalGas and Sempra Energy Condensed
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Consolidated Balance Sheets and $100 million ($72 million after tax) was recorded in O&M on the SoCalGas and Sempra Energy Condensed Consolidated Statements of Operations related to settlement discussions in connection with the Leakprivate plaintiffs’ actions described in “Civil and Criminal Litigation” above. SoCalGas continues to monitor and evaluate the status of the private plaintiffs’ actions and the ratemaking treatmentOII described in “Regulatory Proceedings” above and, in the third quarter of 2020, recorded an additional accrual of $27 million ($22 million after tax) in O&M on SoCalGas’ and Sempra Energy’s Condensed Consolidated Statement of Operations. These accruals are included in the cost estimate that we describe above.
Except for the amounts paid or other disposition of such costs.
Theestimated to settle certain actions, as described in “Civil and Criminal Litigation” above, the cost estimate does not include all litigation, regulatory proceedings or regulatory costs to respondthe extent it is not possible to predict at this investigation and anytime the outcome of these actions or reasonably estimate the costs to defend or resolve the actions or the amount of damages, restitution, or civil, administrative or criminal fines, sanctions, fines, penalties or other costs or remedies that may be imposed or incurred. The cost estimate also does not include certain other costs incurred by Sempra Energy associated with defending against shareholder derivative lawsuits and other potential costs that we currently do not anticipate incurring or that we cannot reasonably estimate. These costs not included in the CPUCcost estimate could be significant and may not be covered completely by insurance (including costs in excess of applicable policy limits). Such amounts could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.
Governmental Investigations and Orders and Additional Regulation. Various governmental agencies, including DOE, DOGGR, DPH, South Coast Air Quality Management District, CARB, Los Angeles Regional Water Quality Control Board, California Division of Occupational Safety and Health, CPUC, PHMSA, EPA, Los Angeles County District Attorney’s Office and California Attorney General’s Office,We have investigated or are investigating this incident.
In January 2016, the Governorreceived insurance payments for many of the State of California proclaimed a state of emergencycosts included in Los Angeles County due to the Leak. The proclamation ordered various actions with respect to the Leak, including: (1) applicable agencies must convene an independent panel of scientific and medical experts to review public health concerns stemming from the Leak and evaluate whether additional measures are needed to protect public health; (2) the CPUC must ensure that SoCalGas covers costs related to the Leak and its response while protecting ratepayers; (3) CARB must develop a program, to be funded by SoCalGas, to fully mitigate the Leak’s emissions of methane; and (4) DOGGR, CPUC, CARB and the CEC must submit to the Governor’s Office a report that assesses the long-term viability of natural gas storage facilities in California. The Government Plaintiffs Settlement described above satisfies the mitigation requirement of the Governor’s emergency proclamation.
Cost Estimates and Accounting Impact. At September 30, 2019, SoCalGas estimates its costs related to the Leak are $1,099 million (the cost estimate), which includes $1,069 million of costs recovered or probable of recovery from insurance. Approximately 52 percent of the cost estimate, is for theincluding temporary relocation program (including cleaningand associated processing costs, and certain labor costs). The remaining portion of the cost estimate includes costs incurred to defend litigation, thecontrol-of-well expenses, costs of the government-ordered response to the Leak, includingcertain legal costs and lost gas. We intend to pursue the full extent of our insurance coverage for the costs we have incurred. Other than directors’ and officers’ liability insurance, after taking into consideration the additional accrual related to litigation matters described above, we have exhausted all of our insurance in this matter, except as to certain defense costs we may incur in the future, including those related to the shareholder derivative lawsuits described above. We continue to pursue other sources of insurance coverage for costs related to this matter, but we may not be successful in obtaining additional insurance recovery for any of these costs. If we are not able to secure additional insurance recovery for all or a substantial portion of these costs, if any costs we have recorded as an independent third partyinsurance receivable are not collected, if there are delays in receiving insurance recoveries, or if the insurance recoveries are subject to conduct a root cause analysis, efforts to controlincome taxes while the well, to mitigate the natural gas released, the cost of replacing the lost gas, theassociated costs of settlements with government entities and other costs. The cost estimate doesare not include potential additional litigation costs, regulatory-related costs or other costs described below,tax deductible, such amounts, which could be material. SoCalGas adjusts the cost estimate as additional information becomes available. A substantial portion of the cost estimate has been paid, and $45 million is accrued in Reserve for Aliso Canyon Costs and $9 million is accrued in Deferred Credits and Other as of September 30, 2019significant, could have a material adverse effect on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets.cash flows, financial condition and results of operations.
As of September 30, 2019,2020, we recorded the expected recovery of the cost estimate related to the Leak of $354$504 million as Insurance Receivable for Aliso Canyon Costs on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets. This amount is netexclusive of insurance retentions and $715$775 million of insurance proceeds we received through September 30, 2019. The Insurance Receivable for Aliso Canyon Costs and insurance proceeds received to date relate to portions of the cost estimate described above, including temporary relocation and associated processing costs, control-of-well expenses, costs of the government-ordered response including for an independent third party to conduct a root cause analysis, the costs to settle certain claims as described above, the estimated costs to perform obligations pursuant to settlement of some of those claims, legal costs and lost gas.2020. If we were to conclude that this receivable or a portion of it is no longer probable of recovery from insurers, some or all of this receivable would be charged against earnings, which could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.
As described in “Civil and Criminal Litigation” above, the actions seek compensatory, statutory and punitive damages, restitution, and civil, administrative and criminal fines, penalties and other costs, which, except for the amounts paid or estimated to settle certain actions as described above, are not included in the cost estimate as it is not possible at this time to predict the outcome of


these actions or reasonably estimate the amount of damages, restitution or civil, administrative or criminal fines, penalties or other costs that may be imposed. The recorded amounts above also do not include future legal costs necessary to defend litigation, and other potential costs that we currently do not anticipate incurring or that we cannot reasonably estimate. Furthermore, the cost estimate does not include any sanctions, fines, penalties or other costs that may be imposed by the CPUC in connection with the OII opened in June 2019 and certain other costs incurred by Sempra Energy associated with defending against shareholder derivative lawsuits.
Insurance. Excluding directors’ and officers’ liability insurance, we have at least four kinds of insurance policies that together we estimate provide between $1.2 billion to $1.4 billion in insurance coverage, depending on the nature of the claims. At September 30, 2019, SoCalGas’ estimate of costs related to the Leak of $1,099 million include $1,069 million of costs recovered or probable of recovery from insurance. This estimate may rise significantly as more information becomes available. Costs not included in the $1,099 million cost estimate could be material. We cannot predict all of the potential categories of costs or the total amount of costs that we may incur as a result of the Leak. Subject to various policy limits, exclusions and conditions, based on what we know as of the filing date of this report, we believe that costs in the following categories should be recoverable through insurance: costs incurred for temporary relocation and associated processing costs (including cleaning costs and certain labor costs), costs to address the Leak and stop or reduce emissions, costs of the government-ordered response to the Leak including the costs for an independent third party to conduct a root cause analysis, the value of lost gas, costs incurred to mitigate the actual natural gas released, costs associated with litigation and claims by nearby residents and businesses, and, in some circumstances depending on their nature and manner of assessment, fines and penalties. We have been communicating with our insurance carriers and, as discussed above, we have received insurance payments for portions of the costs described above, including temporary relocation and associated processing costs, control-of-well expenses, costs of the government-ordered response to the Leak, legal costs and lost gas. We intend to pursue the full extent of our insurance coverage for the costs we have incurred or may incur. There can be no assurance that we will be successful in obtaining additional insurance recovery for these costs.
If any costs are not covered by insurance (including any costs in excess of applicable policy limits), if there are significant delays in receiving insurance recoveries, or if the insurance recoveries are subject to income taxes while the associated costs are not tax deductible, such amounts could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.
Natural Gas Storage Operations and Reliability.Natural gas withdrawn from storage is important for service reliability during peak demand periods, including peak electric generation needs in the summer and heating needs in the winter. The Aliso Canyon natural gas storage facility, with a capacity of 86 Bcf (representing 63 percent of SoCalGas’ natural gas storage capacity), is the largest SoCalGas storage facility and an important element of SoCalGas’ delivery system. As a result of the Leak, SoCalGas suspended injection of natural gas into the Aliso Canyon natural gas storage facility beginning in October 2015, and following a comprehensive safety review and authorization by DOGGR and the CPUC’s Executive Director, resumed limited injection operations in July 2017.
During the suspension period, SoCalGas advised the California ISO, CEC, CPUC and PHMSA of its concerns that the inability to inject natural gas into the Aliso Canyon natural gas storage facility posed a risk to energy reliability in Southern California. Following the resumption of injection operations, the CPUC has issued a series of directives to SoCalGas specifying the range of working gas to be maintained in the Aliso Canyon natural gas storage facility to help ensure safety and reliability for the region and just and reasonable rates in California, the most recent of which, issued in July 2018, directed SoCalGas to maintain up to 34 Bcf of working gas. Limited withdrawals of natural gas from the facility were made in 2018 and 2019 to augment natural gas supplies during critical demand periods. In July 2019, the CPUC issued a protocol authorizing withdrawals of natural gas from the facility if gas supply is low in the region, to maintain system reliability and price stability.
If the Aliso Canyon natural gas storage facility were to be permanently closed, or if future cash flows were otherwise insufficient to recover its carrying value, it could result in an impairment of the facility and significantly higher than expected operating costs and/or additional capital expenditures, and natural gas reliability and electric generation could be jeopardized. At September 30, 2019, the Aliso Canyon natural gas storage facility had a net book value of $771 million. Any significant impairment of this asset could have a material adverse effect on SoCalGas’ and Sempra Energy’s results of operations for the period in which it is recorded. Higher operating costs and additional capital expenditures incurred by SoCalGas may not be recoverable in customer rates and could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.
Sempra Mexico
Property Disputes and Permit Challenges


Energía Costa Azul. Azul
IEnova has been engaged in a long-running land dispute relating to property adjacent to its ECA LNG terminal near Ensenada, Mexico.Regasification facility that allegedly overlaps with land owned by the ECA LNG Regasification facility (the facility, however, is not situated on the land that is the subject of this dispute). A claimant to the adjacent property filed complaints in the federal Agrarian Court challenging the refusal of SEDATU in 2006 to issue a title to him for the disputed property. In November 2013, the federal Agrarian Court ordered that SEDATU issue the requested title and cause it to be registered. Both SEDATU and IEnova challenged the ruling due to lack of notification of the underlying process. In May 2019, a federal court in Mexico reversed the ruling. IEnova expects additionalruling and ordered a retrial.
NaN other cases involving two adjacent areas of real property on which part of the ECA LNG Regasification facility is situated, each brought by a single plaintiff or her descendants, remain pending against the facility. The first disputed area is subject to a claim in the federal Agrarian Court that has been ongoing since 2006, in which the plaintiffs seek to annul the property title for a portion of the land on which the ECA LNG Regasification facility is situated and to obtain possession of a different parcel that allegedly overlaps with the site of the ECA LNG Regasification facility. The second disputed area is one parcel adjacent to the ECA LNG Regasification facility that allegedly overlaps with land on which the ECA LNG Regasification facility is situated, which is subject to a claim in the Agrarian Court and two claims in civil courts. The Agrarian Court proceeding, which seeks an order that SEDATU issue title to the plaintiff, was initiated in 2013 and the parties are awaiting a final decision. The two civil court proceedings, regardingwhich seek to invalidate the claims.contract by which the ECA LNG Regasification facility purchased the applicable parcel of land on which the ECA LNG Regasification facility is situated on the grounds that the purchase price was allegedly unfair, are progressing at different stages. In the first, initiated in 2013, a lower court ruled in favor of the ECA LNG Regasification facility and the ruling has been appealed by the plaintiff. The same plaintiff filed the second civil case in 2019, which is in its initial stages.
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Certain of these land disputes involve land on which portions of the proposed ECA LNG liquefaction facility are anticipated to be situated or on which portions of the ECA LNG Regasification facility that would be necessary for the operation of the proposed ECA LNG liquefaction facility are situated.
Several administrative challenges are pending in Mexico before theMexico’s Secretariat of Environment and Natural Resources (the Mexican environmental protection agencyagency) and the Federal Tax and Administrative Courts, seeking revocation of the environmental impact authorization issued to the ECA LNG Regasification facility in 2003. These cases generally allege that the conditions and mitigation measures in the environmental impact authorization are inadequate and challenge findings that the activities of the terminal are consistent with regional development guidelines.
Additionally, in AugustIn 2018, a claimant2 related claimants filed a challengeseparate challenges in the federal district court in Ensenada, Baja California in relation to the environmental and social impact permits issued by each of Agencia de Seguridad, Energía y Ambiente (ASEA) and SENER to ECA in September 2017 and December 2017, respectively, to allowLNG JV authorizing natural gas liquefaction activities at the ECA LNG terminal. TheRegasification facility. In the first case, the court issued a provisional injunction onin September 28, 2018 and maintained that provisional injunction at an April 11, 2019 hearing.2018. In December 2018, the relevant Mexican regulatorsASEA approved modifications to the environmental permit that facilitate the development of the proposed natural gas liquefaction facility at the ECA LNG terminal in two phases. OnIn May 17, 2019, the court canceled the provisional injunction. The claimant has appealed the court’s decision. That appeal anddecision canceling the injunction, but was not successful. The claimant’s underlying challenge to the permits remainremains pending.
Cases involving two parcels of real property have been filed against ECA. In onethe second case, filedthe initial request for a provisional injunction was denied. That decision was reversed on appeal in January 2020, resulting in the federal Agrarian Courtissuance of a new injunction against the same environmental and social impact permits that were already issued by ASEA and SENER. This injunction has uncertain application absent clarification by the court. The reversal and issuance of the injunction in 2006, the plaintiffs seek to annulsecond case is under further appeal.
In September 2020, parties claiming a property interest in the recorded property title for a parcelland on which the ECA LNG terminalRegasification facility is situated and the proposed ECA LNG liquefaction facility is anticipated to obtain possessionbe situated filed an administrative proceeding with the Municipality of Ensenada against the construction permit for the construction of the proposed liquefaction export projects at the ECA LNG Regasification facility. The construction permit has been suspended pending resolution of the claim and the ECA LNG Regasification facility and ECA LNG JV are contesting the validity of the claim.
In May 2020, the two third-party capacity customers at the ECA LNG Regasification facility, Shell Mexico and Gazprom, asserted that a different parcel that allegedly sits2019 update of the general terms and conditions for service at the facility, as approved by the CRE, resulted in a breach of contract by IEnova and a force majeure event. Citing these circumstances, the customers subsequently stopped making payments of amounts due under their respective LNG storage and regasification agreements. IEnova has rejected the customers’ assertions and has drawn (and expects to continue to draw) on the customers’ letters of credit provided as payment security. The parties engaged in discussions under the applicable contractual dispute resolution procedures without coming to a mutually acceptable resolution. In July 2020, Shell Mexico submitted a request for arbitration of the dispute. IEnova will avail itself of its available claims, defenses and remedies in the same place. Another civil complaint filedarbitration proceeding. Gazprom has since replenished the amounts drawn on its letter of credit and has resumed making regular monthly payments under its LNG storage and regasification agreement. In October 2020, IEnova was informed by Gazprom of its consent to join the arbitration proceeding initiated by Shell Mexico against the ECA LNG Regasification facility and is awaiting the formalization of Gazprom’s recognition as a claimant party in such arbitration. IEnova intends to enforce its rights in the state court was served in April 2012arbitration process, seeking to invalidatedismiss the contract by which ECA purchased anothercustomers’ claims. Shell Mexico also filed a constitutional challenge to the CRE’s approval of the terminal parcels, onupdate to the grounds the purchase pricegeneral terms and conditions. In October 2020, Shell Mexico’s request to stay CRE’s approval was unfair; the plaintiffdenied and, subsequently, Shell Mexico filed a second complaint in 2013 in the federal Agrarian Court seeking an orderappeal of that SEDATU issue title to her. In January 2016, the federal Agrarian Court ruled against the plaintiff, and the plaintiff appealed the ruling. In May 2018, the state court dismissed the civil complaint, and the plaintiff has appealed. IEnova expects further proceedingsdecision.
One or more unfavorable final decisions on these two matters.
An unfavorable final decision on these property disputes or permit challenges, could materially and adversely affect our existing natural gasificationgas regasification operations and our planned natural gasproposed LNG liquefaction projects currently in development at ECA.the site of the ECA LNG Regasification facility.
Guaymas-El Oro Segment of the Sonora Pipeline.Pipeline
IEnova’s Sonora natural gas pipeline consists of two segments, the Sasabe-Puerto Libertad-Guaymas segment, and the Guaymas-El Oro segment. Each segment has its own service agreement with the CFE. In 2015, the Yaqui tribe, with the exception of some members living in the Bácum community, granted its consent and a right-of-way easement agreement for the construction of the Guaymas-El Oro segment of the Sonora natural gas pipeline that crosses its territory. Representatives of the Bácum community filed a legal challenge in Mexican federal court demanding the right to withhold consent for the project, the stoppage of work in the Yaqui territory and damages. In 2016, the judge granted a suspension order that prohibited the construction of such segment through the Bácum community territory. Because the pipeline does not pass through the Bácum community, IEnova did not believe the 2016 suspension order prohibited construction in the remainder of the Yaqui territory. Construction of the Guaymas-El Oro segment was completed, and commercial operations began in May 2017.
Following the start of commercial operations of the Guaymas-El Oro segment, IEnova reported damage to the Guaymas-El Oro segment of the Sonora pipeline in the Yaqui territory that has made that section inoperable since August 23, 2017 and, as a result, IEnova declared a force majeure event. In 2017, an appellate court ruled that the scope of the 2016 suspension order encompassed
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the wider Yaqui territory, which has prevented IEnova from making repairs to put the pipeline back in service. In July 2019, a federal district court ruled in favor of IEnova and held that the Yaqui tribe was properly consulted and that consent from the Yaqui tribe was properly received. Representatives of the Bácum community appealed this decision, causing the suspension order preventing IEnova from repairing the damage to the Guaymas-El Oro segment of the Sonora pipeline in the Yaqui territory to remain in place until the appeals process is exhausted.
IEnova exercised its rights under the contract, which included seeking force majeure payments for the two-year period such force majeure payments were required to be made, which ended onin August 22, 2019.
In July 2019, the CFE filed a request for arbitration generally to nullify certain contract terms that provide for fixed capacity payments in instances of force majeure and made a demand for substantial damages in connection with the force majeure event. In September 2019, the arbitration process ended when IEnova and the CFE reached an agreement to restart natural gas transportation service on the earlier of completion of repair of the damaged pipeline or January 15, 2020, and to modify the tariff structure and extend the term of the contract by 10 years. Subsequently, IEnova and the CFE agreed to extend the service start date to May 15, 2020 and then again to September 15, 2020. In the third quarter of 2020, the parties agreed to further extend the service start date to March 14, 2021. Under the revised agreement, the CFE will resume making payments only when the damaged section of the Guaymas-El Oro segment of the Sonora pipeline is repaired. If the pipeline is not repaired


by January 15, 2020March 14, 2021 and the parties do not agree on a new service start date, IEnova retains the right to terminate the contract and seek to recover its reasonable and documented costs and lost profits.
If IEnova is unable to make such repairs and resume operations in the Guaymas-El Oro segment of the Sonora pipeline within this time frame or if IEnova terminates the contract and is unable to obtain recovery, there may be a material adverse impact on Sempra Energy’s results of operations and cash flows and our ability to recover the carrying value of our investment. At September 30, 2020, the Guaymas-El Oro segment of the Sonora pipeline had a net book value of $446 million. The Sasabe-Puerto Libertad-Guaymas segment of the Sonora pipeline remains in full operation and is not impacted by these developments.
Regulatory Actions by the Mexican Government that Impact Renewable Energy Facilities
In April 2020, Mexico’s CENACE issued an order that it claims would safeguard Mexico’s national power grid from interruptions that may be caused by renewable energy projects. The main provision of the order suspends all legally mandated pre-operative testing that would be needed for new renewable energy projects to commence operations and prevents such projects from connecting to the national power grid until further notice. IEnova’s renewable energy projects affected by the order filed for legal protection through amparo claims (constitutional protection lawsuits) and, in June 2020, received injunctive relief until the claims are resolved by the courts.
In May 2020, Mexico’s SENER published a resolution to establish guidelines intended to guarantee the security and reliability of the national grid’s electricity supply by reducing the threat that it claims is caused by clean, intermittent energy. The resolution includes the following key elements:
Sur de Texas-Tuxpan Marine Pipeline. ▪Sempra Mexico has a 40-percent interestprovides non-renewable electricity generation facilities, primarily non-renewable power plants, preferential access or easier access to Mexico’s national power grid, while increasing restrictions on access to the grid by renewable energy facilities;
▪grants the CRE and CENACE broad authority to approve or deny permits and interconnection requests by producers of renewable energy; and
▪imposes restrictive measures on the renewable energy sector, including requiring all permits and interconnection agreements to include an early termination clause in IMG, a JVthe event the renewable energy project fails to make certain additional improvements, at the request of the CRE or CENACE, in accordance with a subsidiary of TC Energy to build, ownspecific schedule.
IEnova’s renewable energy projects, including those in construction and operatein service, filed amparo claims against the Sur de Texas-Tuxpan natural gas marine pipelineSENER resolution in Mexico. The JV has an agreement to provide the CFE with natural gas transportation services under a 25-year agreement, denominatedJune 2020 and received injunctive relief in U.S. dollars. IMG previously received force majeure payments from the CFE from November 2018 through April 2019, after construction delays extended the commercial operation date.July 2020. In addition, in June 2019, the CFE2020, COFECE, Mexico’s antitrust regulator, filed a requestcomplaint with Mexico’s Supreme Court against the SENER resolution. COFECE’s complaint was upheld by the court and, pending the court’s final ruling, the decision suspends indefinitely the resolution.
In May 2020, the CRE approved an update to the transmission rates included in legacy renewables and cogeneration energy contracts, based on the claim that the legacy transmission rates did not reflect fair and proportional costs for arbitration generallyproviding the applicable services and, therefore, created inequitable competitive conditions. Three of IEnova’s renewables’ facilities are currently holders of contracts with such legacy rates, and any increases in the transmission rates would be passed through directly to nullify certain contract termstheir customers. IEnova filed amparo claims for its affected facilities and, in August 2020, was granted injunctive relief.
IEnova and other companies affected by these new orders and regulations have challenged the orders and regulations by filing amparo claims, some of which have been granted injunctive relief. The court-ordered injunctions provide relief until Mexico’s Federal District Court ultimately resolves the amparo claims or, with respect to the SENER resolution, until Mexico’s Supreme
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Court issues its final ruling on COFECE’s complaint, the timing of which is uncertain. An unfavorable final decision on these amparo challenges, or the potential for an extended dispute, could impact our ability to successfully complete construction of our solar facilities, or to complete them in a timely manner and within expected budgets, may impact our ability to operate our wind and solar facilities already in service at existing levels or at all, and may adversely affect our ability to develop new projects, any of which may have a material adverse impact on our results of operations and cash flows and our ability to recover the carrying values of our renewable energy investments in Mexico.
In October 2020, the CRE approved a resolution to amend the rules for the inclusion of new offtakers of legacy generation and self-supply permits (the Offtaker Resolution), which became effective immediately. The Offtaker Resolution prohibits self-supply permit holders from adding new offtakers that provide for fixed capacity paymentswere not included in instancesthe original development or expansion plans, making modifications to the amount of force majeureenergy allocated to the named offtakers, and madeincluding load centers that have entered into a demand for substantial damagessupply arrangement under Mexico’s Electricity Industry Law. Don Diego Solar and Border Solar (two of IEnova’s projects currently in connection with the force majeure event. In September 2019, the JVconstruction) and the CFE amendedVentika wind power generation facilities are holders of legacy self-supply permits and are impacted by the gas transportation services agreementOfftaker Resolution. If IEnova is not able to modifyobtain legal protection for these impacted facilities, IEnova expects it will sell capacity affected by the tariff structure and extendOfftaker Resolution into the term ofspot market. Currently, prices in the contract by 10 years, which endedspot market are significantly lower than the arbitration process. Construction and commissioning activities onfixed prices in the pipelinePPAs that were completed in June 2019, and, in September 2019, IMG received acceptance fromentered into through self-supply permits. IEnova is evaluating the CFE allowinglegal procedures to challenge the pipeline to enter commercial operation and for service under the gas transportation contract to commence.Offtaker Resolution.
Other Litigation
RBS Sempra Commodities
Sempra Energy holds an NCIequity method investment in RBS Sempra Commodities, a limited liability partnership in the process of being liquidated. RBS, now NatWest Markets plc, formerly RBS, our partner in the JV, paid an assessment of £86 million (approximately $138 million in U.S. dollars) in October 2014 to HMRC for denied VAT refund claims filed in connection with the purchase of carbon credit allowances by RBS SEE, a subsidiary of RBS Sempra Commodities. RBS SEE has since been sold to JPJ.P. Morgan Chase & Co. and later to Mercuria Energy Group, Ltd. HMRC asserted that RBS was not entitled to reduce its VAT liability by VAT paid on certain carbon credit purchases during 2009 because RBS knew or should have known that certain vendors in the trading chain did not remit their own VAT to HMRC. After paying the assessment, RBS filed a Notice of Appeal of the assessment with the First-Tier Tribunal. Trial on the matter, has beenwhich could include the assessment of a penalty of up to 100% of the claimed amount, is scheduled between November 2, 2020 and December 11, 2020.to begin in June 2021.
In 2015, liquidators filed a claim in the High Court of Justice against RBS and Mercuria Energy Europe Trading Limited (the Defendants) on behalf of 10 companies (the Liquidating Companies) that engaged in carbon credit trading via chains that included a company that traded directly with RBS SEE. The claim alleges that the Defendants’ participation in the purchase and sale of carbon credits resulted in the Liquidating Companies’ carbon credit trading transactions creating a VAT liability they were unable to pay, and that the Defendants are liable to provide for equitable compensation due to dishonest assistance and for compensation under the U.K. Insolvency Act of 1986. Trial on the matter was held in June and July of 2018, at2018. In March 2020, the closeHigh Court of whichJustice rendered its judgment mostly in favor of the Liquidating Companies asserted that the Defendants were liable to the Liquidating Companies in the amountand awarded damages of £71.5approximately £45 million (approximately $88$58 million in U.S. dollars at September 30, 2019) for dishonest assistance2020), plus costs and to the extent that claim is unsuccessful, to the liquidators in the same amount under the U.K. Insolvency Act of 1986. Ifinterest. In October 2020, the High Court of Justice findsissued an order granting the Defendants liable, it will determinepermission to appeal its March 2020 judgment to the amount. JP Morgan has notified us that Mercuria Energy Group, Ltd. has sought indemnityCourt of Appeal, and the Defendants have filed an application for such appeal.
Although the claim,final outcome of both the High Court of Justice case and JP Morgan has in turn sought indemnity from Sempra Energy and RBS.
While the ultimate outcomeFirst-Tier Tribunal case remains uncertain, we recorded $100 million in the third quarter of 2018, we impairedequity losses from our remaining $65 million equity method investment in RBS Sempra Commodities.Commodities in Equity Earnings on the Sempra Energy Condensed Consolidated Statement of Operations in the nine months ended September 30, 2020, which represents an estimate of our obligations to settle pending tax matters and related legal costs.
Asbestos Claims Against EFH Subsidiaries
Certain EFH subsidiaries that we acquired as part of the Mergermerger of EFH with an indirect subsidiary of Sempra Energy are defendants in personal injury lawsuits brought in state courts throughout the U.S. As of October 28, 2019, 103November 2, 2020, 275 such lawsuits are pending and 1,608with 182 such lawsuits havehaving been filed but not served. These cases allege illness or death as a result of exposure to asbestos in power plants designed and/or built by companies whose assets were purchased by predecessor entities to the EFH subsidiaries, and generally assert claims for product defects, negligence, strict liability and wrongful death. They seek compensatory and punitive damages. Additionally, in connection with the EFH bankruptcy proceeding, approximately 28,000 proofs of claim were filed on behalf of persons who allege exposure to asbestos under similar circumstances and assert the right to file such lawsuits in the future. We anticipate additional lawsuits will be filed. None of these claims or lawsuits were discharged in the EFH bankruptcy proceeding. The costs to defend or resolve these lawsuits and the amount of damages that may be imposed or incurred could have a material adverse effect on Sempra Energy’s cash flows, financial condition and results of operations.
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We are also defendants in ordinary routine litigation incidental to our businesses, including personal injury, employment litigation, product liability, property damage and other claims. Juries have demonstrated an increasing willingness to grant large awards, including punitive damages, in these types of cases.



LEASES
We discuss leases further in Note 16 of the Notes to Consolidated Financial Statements in the Annual Report.
A lease exists when a contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. We determine if an arrangement is or contains a lease at inception of the contract.
Some of our lease agreements contain nonlease components, which represent activities that transfer a separate good or service to the lessee. As the lessee for both operating and finance leases, we have elected to combine lease components and nonlease components for all existing classes of underlying assets as a single lease component for real estate, fleet vehicles, power generating facilities, and pipelines, whereby fixed or in-substance fixed payments allocable to the nonlease component are accounted for as part of the related lease liability and ROU asset. As the lessor, we have elected to combine lease and nonlease components as a single lease component for real estate and power generating facilities if the timing and pattern of transfer of the lease components and nonlease components are the same and the lease component would be classified as an operating lease if accounted for separately, we combine the lease components and nonlease components.separately.
Lessee Accounting
We have operating and finance leases for real and personal property (including office space, land, fleet vehicles, machinery and equipment, warehouses and other operational facilities) and finance leases for PPAs with renewable energy and peaker plant facilities.
Some of our leases include options to extend the lease termsWe provide supplemental noncash information for up to 25 years, while others include options to terminate the lease within one year. Our lease liabilities and ROU assets are based on lease terms that may include such options to extend or terminate the lease when it is reasonably certain that we will exercise that option.
Certain of our contracts are short-term leases, which have a lease term of 12 months or less at lease commencement. We do not recognize a lease liability or ROU asset arising from short-term leases for all existing classes of underlying assets. In such cases, we recognize short-term lease costs on a straight-line basis over the lease term. Our short-term lease costs for the period reasonably reflect our short-term lease commitments.
Certain of our leases contain escalation clauses requiring annual increases in rent ranging from 2 percent to 5 percent or based on the Consumer Price Index. The rentals payable under these leases may increase by a fixed amount each year or by a percentage of a base year. Variable lease payments that are based on an index or rate are included in the initial measurement of our lease liability and ROU asset based on the index or rate at lease commencement and are not remeasured because of changes to the index or rate. Rather, changes to the index or rate are treated as variable lease payments and recognized in the period in which the obligation for those payments is incurred.
Similarly, PPAs for the purchase of renewable energy at SDG&E require lease payments based on a stated rate per MWh produced by the facilities, and we are required to purchase substantially all the output from the facilities. SDG&E is required to pay additional amounts for capacity charges and actual purchases of energy that exceed the minimum energy commitments. Under these contracts, we do not recognize a lease liability or ROU asset for leases for which there are no fixed lease payments. Rather, these variable lease payments are recognized separately as variable lease costs.
As of the lease commencement date, we recognize a lease liability for our obligation to make future lease payments, which we initially measure at present value using our incremental borrowing rate at the date of lease commencement, unless the rate implicit in the lease is readily determinable. We determine our incremental borrowing rate based on the rate of interest that we would have to pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. We also record a ROU asset for our right to use the underlying asset, which is initially equal to the lease liability and adjusted for lease payments made at or before lease commencement, lease incentives, and any initial direct costs. Like other long-lived assets, we test ROU assets for recoverability whenever events or changes in circumstances have occurred that may affect the recoverability or the estimated useful lives of the ROU assets.
For our operating leases, our non-regulated entities recognize a single lease cost on a straight-line basis over the lease term in operating expenses. The California Utilities recognize this single lease cost on a basis that is consistent with the recovery of such costs in accordance with U.S. GAAP governing rate-regulated operations.
For our finance leases, the interest expense on the lease liability and amortization of the ROU asset are accounted for separately. Our non-regulated entities use the effective interest rate method to account for the imputed interest on the lease liability and amortize the ROU asset on a straight-line basis over the lease term. The California Utilities recognize amortization of the ROU asset on a basis that is consistent with the recovery of such costs in accordance with U.S. GAAP governing rate-regulated operations.
Our leases do not contain any material residual value guarantees, restrictions or covenants.


Classification of ROU assets and lease liabilities and the weighted-average remaining lease term and discount rate associated with operating and finance leases are summarized in the table below.
LESSEE INFORMATION ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
 September 30, 2019
 Sempra Energy Consolidated SDG&E SoCalGas
Right-of-use assets:     
Operating leases:     
Right-of-use assets$595
 $126
 $99
 
 
 
Finance leases:     
Property, plant and equipment1,342
 1,322
 20
Accumulated depreciation(57) (52) (5)
Property, plant and equipment, net1,285
 1,270
 15
Total right-of-use assets$1,880
 $1,396
 $114
      
Lease liabilities:     
Operating leases:     
Other current liabilities$47
 $22
 $19
Deferred credits and other447
 102
 79
 494
 124
 98
Finance leases:     
Current portion of long-term debt and finance leases24
 19
 5
Long-term debt and finance leases1,261
 1,251
 10
 1,285
 1,270
 15
Total lease liabilities$1,779
 $1,394
 $113
      
Weighted-average remaining lease term (in years):     
Operating leases14
 7
 6
Finance leases20
 20
 6
Weighted-average discount rate:     
Operating leases6.02% 3.69% 3.75%
Finance leases14.81% 14.86% 3.41%




The components of lease costs were as follows:
LESSEE INFORMATION ON THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(1)
(Dollars in millions)      
 Three months ended September 30, 2019 Nine months ended September 30, 2019
 Sempra Energy Consolidated SDG&E SoCalGas Sempra Energy Consolidated SDG&E SoCalGas
Operating lease costs$23
 $8
 $7
 $72
 $25
 $21
 
 
 
      
Finance lease costs:           
Amortization of ROU assets6
 4
 2
 17
 13
 4
Interest on lease liabilities47
 47
 —
 141
 141
 —
Total finance lease costs53
 51
 2
 158
 154
 4
            
Short-term lease costs(2)
3
 1
 —
 5
 1
 —
Variable lease costs(2)
156
 155
 1
 396
 389
 7
Total lease costs$235
 $215
 $10
 $631
 $569
 $32
(1)
Includes costs capitalized in PP&E.
(2)
Short-term leases with variable lease costs are recorded and presented as variable lease costs.

Cash paid for amounts included in the measurement of lease liabilities was as follows:
LESSEE INFORMATION ON THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 Nine months ended September 30, 2019
 Sempra Energy Consolidated SDG&E SoCalGas
Operating activities:     
Cash paid for operating leases$81
 $25
 $21
Cash paid for finance leases130
 130
 —
Financing activities:     
Cash paid for finance leases17
 13
 4
Increase in operating lease obligations for right-of-use assets571
 147
 117
Increase in finance lease obligations for investment in PP&E27
 12
 15



The table below presents the maturity analysis of our lease liabilities and reconciliation to the present value of lease liabilities:
LESSEE MATURITY ANALYSIS OF LIABILITIES
(Dollars in millions)
 September 30, 2019
 Sempra Energy Consolidated SDG&E SoCalGas
 Operating leases Finance leases Operating leases Finance leases Operating leases Finance leases
2019 (excluding first nine months of 2019)$17
 $50
 $7
 $48
 $6
 $2
202072
 195
 26
 191
 23
 4
202169
 192
 26
 190
 20
 2
202262
 191
 22
 189
 17
 2
202353
 191
 17
 189
 13
 2
Thereafter494
 2,811
 43
 2,807
 30
 4
Total undiscounted lease payments767
 3,630
 141
 3,614
 109
 16
Less: imputed interest(273) (2,345) (17) (2,344) (11) (1)
Total lease liabilities494
 1,285
 124
 1,270
 98
 15
Less: current lease liabilities(47) (24) (22) (19) (19) (5)
Long-term lease liabilities$447
 $1,261
 $102
 $1,251
 $79
 $10


Leases that Have Not Yet Commenced
SDG&E has PPAs for 3 battery storage facilities that are currently under construction. When construction is complete and delivery of contracted power commences, which is scheduled to occur in 2019 through 2021, we will account for the PPAs as finance leases. The future minimum lease payments are expected to be $1 million per year in 2020 through 2023 and $18 million thereafter. These PPAs expire at various dates from 2031 through 2039.
SDG&E and SoCalGas have lease agreements for future acquisitions of fleet vehicles with an aggregate maximum lease limit of $180 million. SDG&E and SoCalGas have utilized $53 million and $74 million, respectively, as of September 30, 2019.
Lease Disclosures Under Previous U.S. GAAP
The table below presents the future minimum lease payments under previous U.S. GAAP:
FUTURE MINIMUM LEASE PAYMENTS
(Dollars in millions)
 December 31, 2018
 Sempra Energy Consolidated SDG&E SoCalGas
 Build-to-suit lease Operating leases Capital leases Operating leases Capital leases Operating leases Capital leases
2019$10
 $77
 $215
 $23
 $212
 $26
 $3
202011
 55
 210
 22
 210
 22
 —
202111
 53
 211
 22
 211
 21
 —
202211
 50
 211
 21
 211
 20
 —
202311
 42
 211
 17
 211
 16
 —
Thereafter217
 253
 3,196
 48
 3,196
 28
 —
Total undiscounted lease payments$271
 $530
 4,254
 $153
 4,251
 $133
 3
Less: estimated executory costs    (480)   (480)   —
Less: imputed interest    (2,483)   (2,483)   —
Total future minimum lease payments    $1,291
   $1,288
   $3

SUPPLEMENTAL NONCASH INFORMATION
(Dollars in millions)
Nine months ended September 30, 2020
Sempra Energy ConsolidatedSDG&ESoCalGas
Increase in operating lease obligations for right-of-use assets$24 $0 $4 
Increase in finance lease obligations for investment in PP&E72 26 46 
Nine months ended September 30, 2019
Sempra Energy ConsolidatedSDG&ESoCalGas
Increase in operating lease obligations for right-of-use assets$571 $147 $117 
Increase in finance lease obligations for investment in PP&E27 12 15 
Lessor Accounting
Sempra Mexico is a lessor for certain of its natural gas and ethane pipelines, compressor stations and LPG storage facilities. These operating leases expire at various dates from 2021 through 2039.


Sempra Mexico expects to continue to derive value from the underlying assets associated with its pipelines following the end of their respective lease terms based on the expected remaining useful life, expected market conditions and plans to re-market and re-contract the underlying assets.
Generally, we recognize operating lease income on a straight-line basis over the lease term and evaluate the underlying asset for impairment. Certain of our leases contain rate adjustments or are based on foreign currency exchange rates that may result in lease payments received that vary in amount from one period to the next.
We provide information below for leases for which we are the lessor.
LESSOR INFORMATION ON THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – SEMPRA ENERGY
(Dollars in millions)
Three months ended September 30,Nine months ended September 30,
2020201920202019
Fixed lease payments$48 $51 $145 $150 
Variable lease payments1 0 1 6 
Total revenues from operating leases(1)
$49 $51 $146 $156 
Depreciation expense$10 $10 $29 $29 
LESSOR INFORMATION – SEMPRA ENERGY 
(Dollars in millions) 
 September 30, 2019
Assets subject to operating leases: 
Property, plant and equipment(1)
$1,112
Accumulated depreciation(181)
Property, plant and equipment, net$931
Maturity analysis of operating lease payments: 
2019 (excluding first nine months of 2019)$50
2020199
2021199
2022199
2023199
Thereafter2,588
Total undiscounted cash flows$3,434
(1) (1)     Included in Revenues: Energy-Related Businesses on the Condensed Consolidated Statements of Operations.
Included in Machinery and Equipment — Pipelines and Storage within the major functional categories of PP&E.

LESSOR INFORMATION ON THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – SEMPRA ENERGY
(Dollars in millions)
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
Minimum lease payments$51
 $47
 $150
 $143
Variable lease payments—
 26
 6
 63
Total revenues from operating leases$51
 $73
 $156
 $206
        
Depreciation expense$10
 $19
 $29
 $55


89

OTHER CONTRACTUAL COMMITMENTS
We discuss below significant changes in the first nine months of 20192020 to contractual commitments discussed in Notes 1 and 16 of the Notes to Consolidated Financial Statements in the Annual Report.
Natural Gas Contracts
SoCalGas’ minimum purchase obligations for natural gas have increased by $54 million since December 31, 2019 primarily due to new purchase obligations entered into in the first nine months of 2020. Net future payments are expected to increase by $11 million in 2020, $43 million in 2021 and decrease by negligible amounts thereafter compared to December 31, 2019.
SoCalGas’ interstate pipeline capacity agreement commitments have increased by $597 million since December 31, 2019 primarily due to new capacity agreements entered into in the first nine months of 2020, which replace existing or expiring agreements. Net future payments are expected to decrease by $90 million in 2020, and increase by $17 million in 2021, $88 million in 2022, $100 million in 2023, $90 million in 2024 and $392 million thereafter compared to December 31, 2019.
Sempra LNG’s natural gas contracts and natural gas storage and transportation commitments have increased by $567 million since December 31, 2019, primarily from entering into new storage and transportation contracts in the first nine months of 2020. We expect future payments to decrease by $44 million in 2020, and increase by $73 million in 2021, $38 million in 2022, $34 million in 2023, $30 million in 2024 and $436 million thereafter compared to December 31, 2019.
LNG Purchase Agreement
Sempra LNG has a sale and purchase agreement for the supply of LNG to the ECA terminal.LNG Regasification facility. The commitment amount is calculated using a predetermined formula based on estimated forward prices of the index applicable from 20192020 to 2029. At September 30, 2019, we expect the commitment amount to decrease by $281 million in 2019, $9 million in 2020, $16 million in 2021, $8 million in 2022, $1 million in 2023 and $24 million thereafter (through contract termination in 2029) compared to December 31, 2018, reflecting changes in estimated forward prices since December 31, 2018 and actual transactions for the first nine months of 2019. These LNG commitment amounts are based on the assumption that all LNG cargoes, less those already confirmed to be diverted, under the agreement are delivered. Although this agreement specifies a number of cargoes to be delivered, under its terms, the customer may divert certain cargoes, which would reduce amounts paid under the agreement by Sempra LNG. At September 30, 2020, we expect the commitment amount to decrease by $238 million in 2020, increase by $94 million in 2021, increase by $40 million in 2022, increase by $7 million in 2023, decrease by $12 million in 2024 and decrease by $56 million thereafter (through contract termination in 2029) compared to December 31, 2019, reflecting changes in estimated forward prices since December 31, 2019 and actual transactions for the first nine months of 2020. These LNG commitment amounts are based on the assumption that all LNG cargoes, less those already confirmed to be diverted, under the agreement are delivered. Actual LNG purchases in the current and prior years have been significantly lower than the maximum amount provided under the agreement due to the customer electing to divert cargoes as allowed by the agreement.

90

Purchased-Power Contracts
SDG&E’s commitments under purchased-power contracts increased by $372 million since December 31, 2018, primarily due to $262 million from the resource adequacy capacity agreement that SDG&E entered into with OMEC LLC, which we discuss in “Variable Interest Entities – SDG&E – Otay Mesa VIE” in Note 1. Net future payments are expected to increase by $13 million in 2019, $45 million in 2020, $52 million in 2021, $69 million in 2022, $74 million in 2023, and $119 million thereafter compared to December 31, 2018.
CONCENTRATION OF CREDIT RISK
We maintain credit policies and systems designed to manage our overall credit risk. These policies include an evaluation of potential counterparties’ financial condition and an assignment of credit limits. These credit limits are established based on risk and return considerations under terms customarily available in the industry. We grant credit to utility customers and counterparties, substantially all of whom are located in our service territory, which covers most of Southern California and a portion of central California for SoCalGas, and all of San Diego County and an adjacent portion of Orange County for SDG&E. Sempra Mexico also grants credit to its utility customers and counterparties in Mexico.
Projects and businesses owned or partially owned by Sempra Energy place significant reliance on the ability of their suppliers, customers and partners to perform on long-term agreements and on our ability to enforce contract terms in the event of nonperformance. We consider many factors, including the negotiation of supplier and customer agreements, when we evaluate and approve development projects and investment opportunities.

NOTE 12. SEGMENT INFORMATION
At September 30, 2019, we hadWe have 5 separately managed reportable segments, as follows:
▪
▪SDG&E provides electric service to San Diego and southern Orange counties and natural gas service to San Diego County.
▪SoCalGas is a natural gas distribution utility, serving customers throughout most of Southern California and part of central California.
▪Sempra Texas Utilities holds our investment in Oncor Holdings, which owns an 80.25% interest in Oncor, a regulated electric transmission and distribution utility serving customers in the north-central, eastern, and western and panhandle regions of Texas; and our indirect, 50% interest in Sharyland Holdings, which owns Sharyland Utilities L.L.C., a regulated electric transmission and distribution utility serving customers near the Texas-Mexico border. As we discuss in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report, we acquired our investment in Sharyland Holdings in May 2019.
▪ provides electric service to San Diego and southern Orange counties and natural gas service to San Diego County.
▪
SoCalGas is a natural gas distribution utility, serving customers throughout most of Southern California and part of central California.
▪
Sempra Texas Utilities holds our investment in Oncor Holdings, which owns an 80.25-percent interest in Oncor, a regulated electric transmission and distribution utility serving customers primarily in the north-central, eastern, western and panhandle regions of Texas, and our indirect, 50-percent interest in Sharyland Holdings, which owns a regulated electric transmission and distribution utility serving customers near the Texas-Mexico border. As we discuss in Note 5, we acquired an indirect, 50-percent interest in Sharyland Holdings in May 2019.
▪
Sempra Mexico develops, owns and operates, or holds interests in, natural gas, electric, LNG, LPG, ethane and liquid fuels infrastructure, and has marketing operations for the purchase of LNG and the purchase and sale of natural gas in Mexico.
▪
Sempra LNG (previously known as Sempra LNG & Midstream) develops, owns and operates, or holds interests in, terminals for the import and export of LNG and sale of natural gas in Mexico.
▪Sempra LNG develops projects for the export of LNG, holds an interest in a facility for the export of LNG, owns and operates natural gas pipelines, and buys, sells and transports natural gas through its marketing operations, all within the U.S. and Mexico. In February 2019, we completed the sale of our natural gas storage assets at Mississippi Hub and Bay Gas.
In December 2018, Sempra Renewables completed the sale of all its operating solarour natural gas storage assets solarat Mississippi Hub and battery storage development projects and one wind generation facility. Bay Gas.
In April 2019, Sempra Renewables completed the sale of its remaining wind assets and investments. Upon completion of this sale, remaining nominal business activities at Sempra Renewables were subsumed into Parent and other and the Sempra Renewables segment ceased to exist. The tables below include amounts from Sempra Renewables up until the cessation of the segment.
As we discuss in Note 5, the financial information related to our businesses that constituted the Sempra South American Utilities segment has been reclassified tois presented as discontinued operations for all periods presented. The information in the tables below excludes amounts from discontinued operations unless otherwise noted.


 We completed the sales of our discontinued operations in the second quarter of 2020.
We evaluate each segment’s performance based on its contribution to Sempra Energy’s reported earnings and cash flows. The California Utilities operate in essentially separate service territories, under separate regulatory frameworks and rate structures set by the CPUC. The California Utilities’ operations are based on rates set by the CPUC and the FERC. We describe the accounting policies of all of our segments in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
The cost of common services shared by the business segments is assigned directly or allocated based on various cost factors, depending on the nature of the service provided. Interest income and expense is recorded on intercompany loans. The loan balances and related interest are eliminated in consolidation.
The following tables show selected information by segment from our Condensed Consolidated Statements of Operations and Condensed Consolidated Balance Sheets. Amounts labeled as “All other” in the following tables consist primarily of activities of parent organizations and include certain nominal amounts from our South American businesses that did not qualify for treatment as discontinued operations.

91


SEGMENT INFORMATION   
(Dollars in millions)   
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
REVENUES    
SDG&E$1,472 $1,427 $3,976 $3,666 
SoCalGas842 975 3,247 3,142 
Sempra Mexico351 357 935 1,058 
Sempra Renewables0 0 0 10 
Sempra LNG63 100 255 327 
All other0 1 1 1 
Adjustments and eliminations2 (2)0 (3)
Intersegment revenues(1)
(86)(100)(215)(315)
Total$2,644 $2,758 $8,199 $7,886 
INTEREST EXPENSE    
SDG&E$103 $106 $307 $311 
SoCalGas39 36 119 104 
Sempra Mexico31 30 95 89 
Sempra Renewables0 0 0 3 
Sempra LNG8 11 39 18 
All other93 117 304 336 
Intercompany eliminations(10)(21)(46)(64)
Total$264 $279 $818 $797 
INTEREST INCOME    
SDG&E$1 $1 $2 $3 
SoCalGas0 0 2 1 
Sempra Mexico14 20 47 58 
Sempra Renewables0 0 0 11 
Sempra LNG25 15 65 45 
All other0 1 3 2 
Intercompany eliminations(13)(15)(43)(56)
Total$27 $22 $76 $64 
DEPRECIATION AND AMORTIZATION  
SDG&E$200 $196 $598 $571 
SoCalGas165 154 486 449 
Sempra Mexico47 46 141 136 
Sempra LNG2 2 7 7 
All other4 4 10 11 
Total$418 $402 $1,242 $1,174 
INCOME TAX EXPENSE (BENEFIT)  
SDG&E$33 $71 $161 $111 
SoCalGas(6)35 95 50 
Sempra Mexico92 0 (161)116 
Sempra Renewables0 0 0 4 
Sempra LNG18 (2)59 4 
All other(38)(43)(94)(135)
Total$99 $61 $60 $150 
EQUITY EARNINGS (LOSSES)    
Equity earnings (losses), before income tax:    
Sempra Texas Utilities$1 $0 $1 $1 
Sempra Renewables0 0 0 5 
Sempra LNG116 17 257 19 
All other0 0 (100)(1)
117 17 158 24 
Equity earnings, net of income tax:   
Sempra Texas Utilities208 212 457 418 
Sempra Mexico1 37 207 43 
209 249 664 461 
Total$326 $266 $822 $485 
92

SEGMENT INFORMATION       
SEGMENT INFORMATION (CONTINUED)SEGMENT INFORMATION (CONTINUED)
(Dollars in millions)(Dollars in millions)      (Dollars in millions)
Three months ended September 30, Nine months ended September 30,Three months ended September 30,Nine months ended
September 30,
2019 2018 2019 20182020201920202019
REVENUES       
EARNINGS (LOSSES) ATTRIBUTABLE TO COMMON SHARESEARNINGS (LOSSES) ATTRIBUTABLE TO COMMON SHARES   
SDG&E$1,427
 $1,299
 $3,666
 $3,405
SDG&E$178 $263 $633 $582 
SoCalGas975
 802
 3,142
 2,700
SoCalGas(24)143 425 437 
Sempra Texas UtilitiesSempra Texas Utilities209 212 458 419 
Sempra Mexico357
 410
 1,058
 1,028
Sempra Mexico50 84 302 214 
Sempra Renewables—
 38
 10
 103
Sempra Renewables0 0 0 59 
Sempra LNG100
 147
 327
 330
Sempra LNG71 2 207 13 
Discontinued operationsDiscontinued operations(7)248 1,840 267 
All other1
 —
 1
 —
All other(126)(139)(515)(383)
Eliminations and adjustments(2) —
 (3) (2)
Intersegment revenues(1)
(100) (131) (315) (288)
Total$2,758
 $2,565
 $7,886
 $7,276
Total$351 $813 $3,350 $1,608 
INTEREST EXPENSE       
SDG&E(2)
$106
 $56
 $311
 $161
SoCalGas36
 29
 104
 82
Sempra Mexico30
 30
 89
 90
Sempra Renewables—
 5
 3
 15
Sempra LNG11
 3
 18
 18
All other117
 122
 336
 371
Intercompany eliminations(21) (23) (64) (81)
Total$279
 $222
 $797
 $656
INTEREST INCOME       
SDG&E$1
 $1
 $3
 $3
SoCalGas—
 —
 1
 1
Sempra Mexico20
 17
 58
 48
Sempra Renewables—
 2
 11
 6
Sempra LNG15
 10
 45
 36
All other1
 1
 2
 14
Intercompany eliminations(15) (12) (56) (42)
Total$22
 $19
 $64
 $66
DEPRECIATION AND AMORTIZATION       
EXPENDITURES FOR PROPERTY, PLANT & EQUIPMENTEXPENDITURES FOR PROPERTY, PLANT & EQUIPMENT  
SDG&E$196
 $174
 $571
 $509
SDG&E$1,323 $1,071 
SoCalGas154
 141
 449
 414
SoCalGas1,345 1,019 
Sempra Mexico46
 45
 136
 131
Sempra Mexico443 420 
Sempra Renewables—
 —
 —
 27
Sempra Renewables0 2 
Sempra LNG2
 2
 7
 24
Sempra LNG196 74 
All other4
 4
 11
 10
All other6 4 
Total$402
 $366
 $1,174
 $1,115
Total$3,313 $2,590 
INCOME TAX EXPENSE (BENEFIT)       
September 30,
2020		December 31,
2019
ASSETSASSETS
SDG&E$71
 $53
 $111
 $151
SDG&E$22,421 $20,560 
SoCalGas35
 (7) 50
 75
SoCalGas17,943 17,077 
Sempra Texas UtilitiesSempra Texas Utilities12,063 11,619 
Sempra Mexico—
 126
 116
 226
Sempra Mexico10,730 9,938 
Sempra Renewables—
 (2) 4
 (67)
Sempra LNGSempra LNG3,643 3,901 
Discontinued operationsDiscontinued operations0 3,958 
All otherAll other2,398 749 
Intersegment receivablesIntersegment receivables(1,976)(2,137)
TotalTotal$67,222 $65,665 
EQUITY METHOD AND OTHER INVESTMENTSEQUITY METHOD AND OTHER INVESTMENTS
Sempra Texas UtilitiesSempra Texas Utilities$12,063 $11,619 
Sempra MexicoSempra Mexico920 741 
Sempra LNG(2) 6
 4
 (488)Sempra LNG433 1,256 
All other(43) (37) (135) (118)All other1 6 
Total$61
 $139
 $150
 $(221)Total$13,417 $13,622 
EQUITY EARNINGS (LOSSES)       
Equity earnings (losses), before income tax:       
Sempra Texas Utilities$—
 $—
 $1
 $—
Sempra Renewables—
 12
 5
 (170)
Sempra LNG17
 —
 19
 1
All other—
 (64) (1) (67)
17
 (52) 24
 (236)
Equity earnings (losses), net of income tax:       
Sempra Texas Utilities212
 154
 418
 283
Sempra Mexico37
 (28) 43
 2
249
 126
 461
 285
Total$266
 $74
 $485
 $49

(1)    Revenues for reportable segments include intersegment revenues of $1 million, $23 million, $12 million and $50 million for the three months ended September 30, 2020; $4 million, $61 million, $69 million and $81 million for the nine months ended September 30, 2020; $1 million, $16 million, $29 million and $54 million for the three months ended September 30, 2019; and $4 million, $50 million, $89 million and $172 million for the nine months ended September 30, 2019 for SDG&E, SoCalGas, Sempra Mexico and Sempra LNG, respectively.

SEGMENT INFORMATION (CONTINUED)       
(Dollars in millions)       
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019
2018
EARNINGS (LOSSES) ATTRIBUTABLE TO COMMON SHARES      
SDG&E$263
 $205
 $582
 $521
SoCalGas143
 (14) 437
 244
Sempra Texas Utilities212
 154
 419
 283
Sempra Mexico84
 44
 214
 161
Sempra Renewables—
 34
 59
 (54)
Sempra LNG2
 16
 13
 (764)
Discontinued operations248
 46
 267
 115
All other(139) (211) (383) (446)
Total$813
 $274
 $1,608
 $60
EXPENDITURES FOR PROPERTY, PLANT & EQUIPMENT      
SDG&E


 


 $1,071
 $1,194
SoCalGas


 


 1,019
 1,127
Sempra Mexico


 


 420
 255
Sempra Renewables


 


 2
 46
Sempra LNG


 


 74
 19
All other


 


 4
 13
Total


 


 $2,590
 $2,654
        
     
September 30,
2019
 December 31, 2018
ASSETS    
SDG&E    $20,336
 $19,225
SoCalGas    16,023
 15,389
Sempra Texas Utilities    11,248
 9,652
Sempra Mexico    9,759
 9,165
Sempra Renewables    —
 2,549
Sempra LNG    3,755
 4,060
Discontinued operations    4,115
 3,718
All other    1,585
 1,070
Intersegment receivables    (2,236) (4,190)
Total    $64,585
 $60,638
EQUITY METHOD AND OTHER INVESTMENTS    
Sempra Texas Utilities    $11,248
 $9,652
Sempra Mexico    750
 747
Sempra Renewables    —
 291
Sempra LNG    1,216
 1,271
All other    7
 11
Total    $13,221
 $11,972
(1)
Revenues for reportable segments include intersegment revenues of $1 million, $16 million, $29 million and $54 million for the three months ended September 30, 2019; $4 million, $50 million, $89 million and $172 million for the nine months ended September 30, 2019; $1 million, $15 million, $31 million and $84 million for the three months ended September 30, 2018; and $3 million, $47 million, $88 million, and $150 million for the nine months ended September 30, 2018 for SDG&E, SoCalGas, Sempra Mexico and Sempra LNG, respectively.
(2)
As we discuss in Note 2, in accordance with adoption of the lease standard on January 1, 2019, on a prospective basis, a significant portion of finance lease costs for PPAs that have historically been presented in Cost of Electric Fuel and Purchased Power are now presented in Interest Expense.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with the Condensed Consolidated Financial Statements and the Notes thereto and “Part II – Item 1A. Risk Factors” contained in this Form 10-Q,report, and the Consolidated Financial Statements and the Notes thereto, “Item“Part I – Item 1A. Risk Factors” and “Part II – Item 7. MD&A” and “Item 1A. Risk Factors” contained in the Annual Report.

93

OVERVIEW
Sempra Energy is a California-based energy-services holding company whose businesses invest in, develop and operate energy infrastructure, and provide electric and gas services to customers in North America. Up until the April 2019 cessation of the Sempra Renewables segment thatAs we discuss in Notes 5 andNote 12 of the Notes to Condensed Consolidated Financial Statements, our businesses consistedconsist of sixfive separately managed reportable segments.
OnIn January 25, 2019, our board of directors approved a plan to sell our South American businesses, which were previously included in our Sempra South American Utilities segment. We completed the sales in the second quarter of 2020. Our South American businesses and certain activities associated with those businesses have been reclassified toare presented as discontinued operations for all periods presented. Nominal activities that are not classified as discontinued operations have been subsumed into Parent and other. Our discussions below exclude discontinued operations, unless otherwise noted.
In the first quarter of 2019, our Sempra LNG & Midstream segment was renamed “Sempra LNG.” This segment name change had no impact on our historical position, results of operations, cash flow or segment results previously reported.
We provide additional information about discontinued operations in Note 5 of the Notes to Condensed Consolidated Financial Statements and about our reportable segments in Note 12 of the Notes to Condensed Consolidated Financial Statements hereinin this report and in “Item“Part I – Item 1. Business” in the Annual Report.
This report includes information for the following separate registrants:
▪Sempra Energy and its consolidated entities
▪SDG&E and its consolidated VIE (until deconsolidation of the VIE on August 23, 2019)
▪SoCalGas
▪Sempra Energy and its consolidated entities;
▪SDG&E and its consolidated VIE (until deconsolidation of Otay Mesa VIE in August 2019); and
▪SoCalGas.
References to “we,” “us,” “our” and “Sempra Energy Consolidated” are to Sempra Energy and its consolidated entities, collectively, unless otherwise indicated by the context. We refer to SDG&E and SoCalGas collectively as the California Utilities, which do not include our Texas utilities or the utility in our Sempra Mexico segment. It also does not include utilities within our South American businesses that have been reclassifiedpresented as discontinued operations. All references in this MD&A to our reportable segments are not intended to refer to any legal entity with the same or similar name.
Throughout this report, we refer to the following as Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements when discussed together or collectively:
▪the Condensed Consolidated Financial Statements and related Notes of Sempra Energy and its subsidiaries and VIEs;
▪the Condensed Consolidated Financial Statements and related Notes of SDG&E and its VIE (until deconsolidation of Otay Mesa VIE in August 2019); and
▪the Condensed Financial Statements and related Notes of SoCalGas.
▪the Condensed Consolidated Financial Statements and related Notes of Sempra Energy and its subsidiaries and VIEs;
▪the Condensed Consolidated Financial Statements and related Notes of SDG&E and its VIE (until deconsolidation of the VIE on August 23, 2019); and
▪the Condensed Financial Statements and related Notes of SoCalGas.
RESULTS OF OPERATIONS
We discuss the following in Results of Operations:
▪Overall results of our operations
▪Segment results
▪Adjusted earnings and adjusted EPS
▪Significant changes in revenues, costs and earnings between periods
▪Impact of foreign currency and inflation rates on our results of operations
▪Overall results of operations of Sempra Energy;

▪Segment results;
▪Significant changes in revenues, costs and earnings; and
▪Impact of foreign currency and inflation rates on our results of operations.

OVERALL RESULTS OF OPERATIONS OF SEMPRA ENERGY
In the three months ended September 30, 2019,2020, we reported earnings of $351 million and diluted EPS of $1.21 compared to earnings of $813 million and diluted EPS of $2.84 compared to earnings of $274 million and diluted EPS of $0.99 for the same period in 2018.2019. In the nine months ended September 30, 2019,2020, we reported earnings of $1,608 million$3.35 billion and diluted EPS of $11.43 compared to earnings of $1.61 billion and diluted EPS of $5.74 compared to earnings of $60 million and diluted EPS of $0.23 for the same period in 2018.2019. The change in diluted EPS in the three months andended September 30, 2020 compared to the same period in 2019 included an increase of $0.02 due to a decrease in weighted-average common shares outstanding. The change in diluted EPS in the nine months ended September 30, 2020 compared to the same period in 2019 included a decrease of $0.20 and $0.31, respectively,$0.53 due to an increase in weighted-average common shares outstanding. Our results and diluted EPS were impacted by variances discussed in “Segment Results” below and by the items included in the table “Sempra Energy Adjusted Earnings and Adjusted EPS,” also below.

94

SEGMENT RESULTS
The followingThis section presents earnings (losses) by Sempra Energy segment, as well as Parent and other and thediscontinued operations, and a related discussion of the changes in segment earnings (losses). Throughout the MD&A, our reference to earnings represents earnings attributable to Sempra Energy common shares. Variance amounts presented are the after-tax earnings impact (based on applicable statutory tax rates), unless otherwise noted, and before NCI, where applicable.
SEMPRA ENERGY EARNINGS (LOSSES) BY SEGMENT 
(Dollars in millions) 
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
SDG&E$178 $263 $633 $582 
SoCalGas(24)143 425 437 
Sempra Texas Utilities209 212 458 419 
Sempra Mexico50 84 302 214 
Sempra Renewables— — — 59 
Sempra LNG71 2 207 13 
Parent and other(1)
(126)(139)(515)(383)
Discontinued operations(7)248 1,840 267 
Earnings attributable to common shares$351 $813 $3,350 $1,608 
SEMPRA ENERGY EARNINGS (LOSSES) BY SEGMENT  
(Dollars in millions)  
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
SDG&E$263
 $205
 $582
 $521
SoCalGas143
 (14) 437
 244
Sempra Texas Utilities212
 154
 419
 283
Sempra Mexico84
 44
 214
 161
Sempra Renewables—
 34
 59
 (54)
Sempra LNG2
 16
 13
 (764)
Parent and other(1)
(139) (211) (383) (446)
Discontinued operations248
 46
 267
 115
Earnings (losses) attributable to common shares$813
 $274
 $1,608
 $60
(1)(1)    Includes intercompany eliminations recorded in consolidation and certain corporate costs.
Includes intercompany eliminations recorded in consolidation and certain corporate costs.

The
Due to the delay in the issuance of the CPUC’s 2019 GRC FD, the California Utilities recorded revenues in the first six monthshalf of 2019 based on levels authorized for 2018 under the 2016 GRC FD because a final decision in the 2019 GRC was not issued by June 30, 2019.GRC. The 2019 GRC FD, which was issued by the CPUC in September 2019, and iswas effective retroactiveretroactively to January 1, 2019. The California Utilities recorded the retroactive impacts of the 2019 GRC FD in the third quarter of 2019. We provide additional information on the 2019 GRC FD in Note 4 of the Notes to Condensed Consolidated Financial Statements in this report and in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.

SDG&E
The increasedecrease in earnings of $58$85 million (28%(32%) in the three months ended September 30, 20192020 was primarily due to:
▪$66 million favorable impact from the retroactive application of the 2019 GRC FD for the first six months of 2019; and
▪
$19 million higher CPUC base operating margin authorized for 2019, net of operating expenses; offset by
▪$24 million lower earnings from electric transmission operations, primarily due to a FERC formulaic rate adjustment benefit in 2018.
▪$66 million favorable impact in 2019 from the retroactive application of the 2019 GRC FD for the first six months of 2019;
▪$29 million expected to be refunded to customers and a fine related to the Energy Efficiency Program inquiry, which we discuss in Note 4 of the Notes to Condensed Consolidated Financial Statements; and
▪$10 million lower CPUC base operating margin, including higher non-refundable operating costs in 2020, due to the timing impact of the delayed 2019 GRC FD; offset by
▪$13 million higher electric transmission margin; and
▪$6 million higher AFUDC equity.
The increase in earnings of $61$51 million (12%(9%) in the first nine months of 20192020 was primarily due to:
▪$62 million due to the release of a regulatory liability in 2020 related to 2016-2018 forecasting differences that are not subject to tracking in the income tax expense memorandum account, which we discuss in Note 4 of the Notes to Condensed Consolidated Financial Statements;
▪$38 million higher CPUC base operating margin authorized for 2019, net of operating expenses; and
▪$31 million income tax benefit from the release of a regulatory liability established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed be allocated to shareholders in a January 2019 decision.
▪$57 million higher electric transmission margin, including an increase in authorized ROE and the following impacts from the March 2020 FERC-approved TO5 settlement:
◦$18 million to conclude a rate base matter, and
◦$9 million favorable impact from the retroactive application of the final TO5 settlement for 2019;
▪$19 million higher AFUDC equity; and
▪$5 million higher CPUC base operating margin authorized for 2020, net of higher non-refundable operating costs; offset by
▪$44 million expected to be refunded to customers and a fine related to the Energy Efficiency Program inquiry;
▪$31 million income tax benefit in 2019 from the release of a regulatory liability established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed to be allocated to shareholders in a January 2019 decision; and
▪$11 million higher amortization and accretion of the Wildfire Fund asset and liability, respectively.
95

SoCalGas
EarningsLosses of $143$24 million in the three months ended September 30, 20192020 compared to lossesearnings of $14$143 million for the same period in 20182019 was primarily due to:
▪
▪$130 million favorable impact in 2019 from the retroactive application of the 2019 GRC FD for the first six months of 2019; and
▪
$41 million higher CPUC base operating margin authorized for 2019, net of operating expenses; offset by


▪$32 million lower income tax benefits primarily from flow-through items due to higher pretax income in 2019 resulting from the implementation of the 2019 GRC FD; and
▪$21 million impairment of non-utility native gas assets in 2019.
▪$22 million from impacts associated with Aliso Canyon natural gas storage facility litigation and regulatory matters; offset by
▪$21 million impairment of non-utility native gas assets in 2019.
The increasedecrease in earnings of $193$12 million (3%) in the first nine months of 20192020 was primarily due to:
▪$94 million from impacts associated with Aliso Canyon natural gas storage facility litigation and regulatory matters; and
▪$166 million higher CPUC base operating margin authorized for 2019, net of operating expenses;
▪
▪$38 million income tax benefit in 2019 from the impact of the January 2019 CPUC decision allocating certain excess deferred income tax balances to shareholders; and
▪
$22 million from impacts associated with Aliso Canyon natural gas storage facility litigation in 2018; offset by
▪$64 million due to the release of a regulatory liability in 2020 related to 2016-2018 income tax expense forecasting differences;
▪$30 million higher CPUC base operating margin authorized for 2020, net of operating expenses;
▪$21 million impairment of non-utility native gas assets in 2019; and
▪$8 million in penalties in 2019 related to the SoCalGas billing practices OII.
▪$21 million impairment of non-utility native gas assets in 2019;
▪$16 million higher net interest expense; and
▪$8 million penalties in 2019 related to the SoCalGas billing practices OII.
Sempra Texas Utilities
The increasedecrease in earnings of $58$3 million (38%(1%) in the three months ended September 30, 20192020 was primarily representsdue to lower equity earnings from Oncor Holdings in 2020, driven mainly by:
▪unfavorable weather and increased operating costs and expenses attributable to invested capital, including depreciation and amortization expense, interest expense and taxes other than income; offset by
▪increased revenues from rate updates to reflect invested capital.
The increase in earnings of $39 million (9%) in the first nine months of 2020 was primarily due to higher equity earnings from Oncor Holdings in 2020, driven primarily by mainly by:
▪increased revenues from rate updates to reflect invested capital;
▪the impactsimpact of Oncor’s acquisition of InfraREIT in May 2019, 2019; and
▪higher distribution revenues resulting from an increase in volumes driven primarilyAFUDC equity; offset by
▪unfavorable weather and higher transmission revenues dueincreased operating costs and expenses attributable to rates.
The increase in earnings of $136 million (48%) in the first nine months of 2019 primarily represents higher equity earnings from Oncor Holdings, which we acquired in March 2018, primarily as a result of higher revenues due to the impacts of Oncor’s acquisition of InfraREIT in May 2019 and higher transmission revenues driven by rates.invested capital.
Sempra Mexico
Because Ecogas, our natural gas distribution utility in Mexico, uses the local currency as its functional currency, its revenues and expenses are translated into U.S. dollars at average exchange rates for the period for consolidation in Sempra Energy’s results of operations. Prior year amounts used in the variances discussed below are as adjusted for the difference in foreign currency translation rates between years. We discuss these and other foreign currency effects below in “Impact of Foreign Currency and Inflation Rates on Results of Operations.”
The increasedecrease in earnings of $40$34 million (40%) in the three months ended September 30, 20192020 was primarily due to:
▪$73 million favorable impact from foreign currency and inflation effects net of foreign currency derivatives effects, comprised of:
◦in 2019, $30 million favorable foreign currency and inflation effects, offset by a $9 million loss from foreign currency derivatives, and
◦in 2018, $73 million unfavorable foreign currency and inflation effects, offset by a $21 million gain from foreign currency derivatives. We discuss these effects below in “Impact of Foreign Currency and Inflation Rates on Results of Operations;” and
▪
$13 million lower income tax expense in 2019 primarily from the outside basis differences in JV investments and a two-year tax abatement that expires in 2020; offset by
▪$50 million earnings attributable to NCI at IEnova in 2019 compared to $15 million earnings in 2018; and
▪$8 million lower earnings primarily from force majeure payments that ended on August 22, 2019 with respect to the Guaymas-El Oro segment of the Sonora pipeline.
▪$57 million unfavorable impact from foreign currency and inflation effects net of foreign currency derivatives effects, comprised of:
◦in 2020, $44 million unfavorable foreign currency and inflation effects, offset by an $11 million gain from foreign currency derivatives, and
◦in 2019, $33 million favorable foreign currency and inflation effects, offset by a $9 million loss from foreign currency derivatives;
▪$12 million higher income tax expense in 2020 primarily from the outside basis differences in JV investments and a valuation allowance; and
▪$6 million higher interest expense; offset by
▪$22 million earnings attributable to NCI at IEnova in 2020 compared to $50 million earnings in 2019; and
▪$7 million higher earnings primarily due to the start of commercial operations of the Sur de Texas-Tuxpan marine pipeline at IMG JV in September 2019.

96

The increase in earnings of $53$88 million (33%(41%) in the first nine months of 20192020 was primarily due to:
▪$191 million favorable impact from foreign currency and inflation effects net of foreign currency derivatives effects, comprised of:
▪$51 million lower income tax expense in 2019 primarily from the outside basis differences in JV investments and a two-year tax abatement that expires in 2020; and
▪$40 million favorable impact from foreign currency and inflation effects net of foreign currency derivatives effects, comprised of:
◦
in 2019, $15 million unfavorable foreign currency and inflation effects, offset by a $5 million gain
◦in 2020, $251 million favorable foreign currency and inflation effects, offset by a $68 million loss from foreign currency derivatives, and
◦in 2019, $13 million unfavorable foreign currency and inflation effects, offset by a $5 million gain from foreign currency derivatives; and
▪$28 million higher earnings primarily due to the start of commercial operations of the Sur de Texas-Tuxpan marine pipeline at IMG JV in September 2019; offset by
▪$193 million earnings attributable to NCI at IEnova in 2020 compared to $114 million earnings in 2019;
▪$21 million lower earnings at the Guaymas-El Oro segment of the Sonora pipeline primarily from force majeure payments that ended in August 2019;
▪$13 million higher interest expense;
▪$11 million higher income tax expense in 2020 primarily from lower income tax credits associated with a two-year tax abatement that expires in 2020, and from a valuation allowance and outside basis differences in JV investments; and
▪$5 million lower earnings at TdM primarily due to lower volumes.
◦
in 2018, $77 million unfavorable foreign currency and inflation effects, offset by a $27 million gain from foreign currency derivatives; offset by
▪$114 million earnings attributable to NCI at IEnova in 2019 compared to $77 million earnings in 2018; and
▪$11 million lower earnings primarily from force majeure payments that ended on August 22, 2019 with respect to the Guaymas-El Oro segment of the Sonora pipeline.
Sempra Renewables
As we discuss in Note 5 of the Notes to Condensed Consolidated Financial Statements in the Annual Report, Sempra Renewables sold its remaining wind assets and investments in April 2019, upon which date the segment ceased to exist.
Earnings of $59 million in the first nine months of 2019 compared to losses of $54 million for the same period in 2018 were primarily due to:


▪$145 million other-than-temporary impairment of certain U.S. wind equity method investments in 2018; and
▪
$45 million gain on sale of wind assets in 2019; offset by
▪lower earnings from assets sold in December 2018 and April 2019, net of lower general and administrative and other costs due to the wind-down of this business.
Sempra LNG
The decreaseincrease in earnings of $14$69 million in the three months ended September 30, 20192020 was primarily due to lower earnings from our marketing operations mainly driven by changes in natural gas prices, offset by $9to:
▪$79 million higher equity earnings from Cameron LNG JV primarily due to Traincommencement of Phase 1 commencing commercial operation under its tolling agreements in August 2019.operations; offset by
Earnings▪$17 million lower earnings from Sempra LNG’s marketing operations primarily driven by changes in natural gas prices.
The increase in earnings of $13$194 million in the first nine months of 2019 compared to losses of $764 million for the same period in 2018 were2020 was primarily due to:
▪$185 million higher equity earnings from Cameron LNG JV primarily due to commencement of Phase 1 commercial operations; and
▪$801 million impairment of certain non-utility natural gas storage assets in the southeast U.S. in 2018;
▪$23 million higher earnings from our
▪$20 million higher earnings from Sempra LNG’s marketing operations primarily driven by optimization of natural gas transport contracts;
▪$11 million higher equity earnings from Cameron LNG JV primarily due to Train 1 commencing commercial operation under its tolling agreements in August 2019; and
▪
$9 million unfavorable adjustment in 2018 to TCJA provisional amounts recorded in 2017 related to the remeasurement of deferred income taxes; offset by changes in natural gas prices.
▪$46 million losses attributable to NCI in 2018 related to the impairment.
Parent and Other
The decrease in losses of $72$13 million (34%(9%) in the three months ended September 30, 20192020 was primarily due to a $65 million impairment of the RBS Sempra Commodities equity method investment in 2018.to:
▪$14 million lower operating costs retained at Parent; and
▪$13 million lower net interest expense; offset by
▪$12 million higher preferred stock dividends due to the issuance of series C preferred stock in June 2020.
The decreaseincrease in losses of $63$132 million (14%(34%) in the first nine months of 20192020 was primarily due to:
▪$100 million equity losses from our investment in RBS Sempra Commodities to settle pending tax matters and related legal costs, which we discuss in Note 11 of the Notes to Condensed Consolidated Financial Statements;
▪$65 million impairment of the RBS Sempra Commodities equity method investment in 2018;
▪$25 million higher investment gains in 2019 on dedicated assets in support of our employee non-qualified benefit plan obligations, net of deferred compensation expenses; and
▪
$10 million income tax benefit in 2019 to reduce a valuation allowance against certain NOL carryforwards as a result of our decision to sell our South American businesses;
▪$20 million lower net investment gains on dedicated assets in support of our employee nonqualified benefit plan and deferred compensation obligations;
▪$14 million income tax expense in 2020 compared to a $6 million income tax benefit in 2019 primarily due to:
◦$19 million consolidated California state income tax expense in 2020 associated with income from our investments in Sempra LNG entities, and
◦$10 million income tax benefit in 2019 from a reduction in a valuation allowance against certain NOL carryforwards as a result of our decision to sell our South American businesses, offset by
◦$10 million income tax benefit in 2020 compared to a $3 million income tax expense in 2019 related to share-based compensation; and
▪$14 million higher preferred stock dividends due to the issuance of series C preferred stock in June 2020; offset by
▪$21 million lower net interest expense.
97

▪$18 million increase in mandatory convertible preferred stock dividends primarily from the issuance of series B preferred stock in July 2018; and
▪$16 million primarily related to settlement charges from our non-qualified pension plan.
Discontinued Operations
Discontinued operations that were previously in our Sempra South American Utilities segment include our 100-percentformer 100% interest in Chilquinta Energía in Chile, our 83.6-percentformer 83.6% interest in Luz del Sur in Peru and our former interests in two energy-services companies, Tecnored and Tecsur, which provide electric construction and infrastructure services to Chilquinta Energía and Luz del Sur, respectively, as well as third parties. Discontinued operations also include activities, mainly income taxes related to the South American businesses, that were previously included in the holding company of the South American businesses at Parent and other.
The increaseAs we discuss in earningsNote 5 of $202the Notes to Condensed Consolidated Financial Statements, we completed the sales of our South American businesses in the second quarter of 2020. On April 24, 2020, we sold our equity interests in our Peruvian businesses, including our 83.6% interest in Luz del Sur and its interest in Tecsur, for cash proceeds of $3,549 million, net of transaction costs and as adjusted for post-closing adjustments, and on June 24, 2020, we sold our equity interests in our Chilean businesses, including our 100% interest in Chilquinta Energía and Tecnored and our 50% interest in Eletrans, for cash proceeds of $2,216 million, net of transaction costs and as adjusted for post-closing adjustments.
Losses of $7 million in the three months ended September 30, 2020 compared to earnings of $248 million for the same period in 2019 from our discontinued operations was primarily due to:
▪$192 million income tax benefit in 2019 associated with outside basis differences in our South American businesses primarily related to a change in the anticipated structure of the sale of those businesses; and
▪
$25 million higher earnings from South American operations mainly from higher rates, lower cost of purchased power at Peru, and including $11 million lower depreciation expense due to assets classified as held for sale; offset by
▪$12 million income tax expense related to the increase in outside basis differences from 2019 earnings.
▪$192 million income tax benefit in 2019 associated with outside basis in our South American businesses primarily related to a change in the anticipated structure of the sale of those businesses;
▪$80 million lower operational earnings mainly as a result of the sales of our Peruvian businesses in April 2020 and Chilean businesses in June 2020;and
▪$7 million reduction to the gain on sale of our Chilean businesses as a result of post-closing adjustments; offset by
▪$12 million income tax expense in 2019 related to changes in outside basis differences from earnings since January 25, 2019.
The increase in earnings from our discontinued operations of $152$1,573 million in the first nine months of 20192020 was primarily due to:
▪$1,499 million gain on the sale of our Peruvian businesses;
▪$89 million income tax benefit in 2019 from outside basis differences in our South American businesses primarily related to the change in our indefinite reinvestment assertion from our decision on January 25, 2019 to hold those businesses for sale and a change in the anticipated structure of the sale;
▪$76 million higher earnings from South American operations mainly from higher rates, lower cost of purchased power at Peru, and including $27 million lower depreciation expense due to assets classified as held for sale; and

▪$248 million gain on the sale of our Chilean businesses; and

▪
$16 million income tax expense in 2018 to adjust TCJA provisional amounts recorded in 2017 primarily related to withholding tax on our expected future repatriation of foreign undistributed earnings; offset by
▪$32 million income tax expense related to the increase▪$7 million income tax benefit in 2020 compared to $32 million income tax expense in 2019 related to changes in outside basis differences from 2019 earnings since January 25, 2019.
ADJUSTED EARNINGS AND ADJUSTED EPS
We prepare the Condensed Consolidated Financial Statements in conformity with U.S. GAAP. However, management may use earnings and diluted EPS adjusted to exclude certain items (referred toforeign currency effects since January 25, 2019; offset by
▪$134 million lower operational earnings mainly as Adjusted Earnings and Adjusted EPS) internally for financial planning, for analysis of performance and for reporting of results to the board of directors. We may also use Adjusted Earnings and Adjusted EPS when communicating our financial results and earnings outlook to analysts and investors. Adjusted Earnings and Adjusted EPS are non-GAAP financial measures. Becausea result of the significance and/or naturesales of our Peruvian and Chilean businesses; and
▪$89 million income tax benefit in 2019 related to outside basis differences existing as of the excluded items, management believes that these non-GAAP financial measures provide a meaningful comparisonJanuary 25, 2019 approval of the performance of business operationsour plan to prior and future periods. Non-GAAP financial measures are supplementary information that should be considered in addition to, but not as a substitute for, the information prepared in accordance with U.S. GAAP.sell our South American businesses.
For each period in which a non-GAAP financial measure is used, we provide in the table below a reconciliation of Sempra Energy Adjusted Earnings, Adjusted Diluted EPS and Weighted-Average Common Shares Outstanding – Adjusted to GAAP Earnings, GAAP Diluted EPS and Weighted-Average Common Shares Outstanding – GAAP, which we consider to be the most directly comparable financial measures calculated in accordance with U.S. GAAP.



SEMPRA ENERGY ADJUSTED EARNINGS AND ADJUSTED EPS
(Dollars in millions, except per share amounts; shares in thousands)
 Pretax amount 
Income tax expense (benefit)(1)
 Non-controlling interests Earnings Diluted EPS
 Three months ended September 30, 2019
Sempra Energy GAAP Earnings for GAAP EPS(2)
      $839
 $2.84
Less series A preferred stock dividends(2)
      (26) (0.09)
Sempra Energy GAAP Earnings      813
  
Impact of dilutive shares included in GAAP EPS(2)
        0.13
Excluded items:         
SDG&E retroactive impact of 2019 GRC FD for first half of 2019$(92) $26
 $—
 (66) (0.24)
SoCalGas retroactive impact of 2019 GRC FD for first half of 2019(181) 51
 —
 (130) (0.46)
Associated with holding the South American businesses for sale:         
Change in indefinite reinvestment assertion of basis differences and structure of sale of discontinued operations—
 (192) —
 (192) (0.68)
Sempra Energy Adjusted Earnings      $425
 $1.50
Weighted-average common shares outstanding, diluted – GAAP        295,789
Less series A preferred stock shares(2)
        (13,238)
Weighted-average common shares outstanding, diluted – Adjusted        282,551
 Three months ended September 30, 2018
Sempra Energy GAAP Earnings      $274
 $0.99
Excluded item:         
Impairment of investment in RBS Sempra Commodities$65
 $—
 $—
 65
 0.24
Sempra Energy Adjusted Earnings      $339
 $1.23
Weighted-average common shares outstanding, diluted – GAAP        275,907
 Nine months ended September 30, 2019
Sempra Energy GAAP Earnings      $1,608
 $5.74
Excluded items:         
Gain on sale of certain Sempra Renewables assets$(61) $16
 $—
 (45) (0.16)
Associated with holding the South American businesses for sale:

 

 

 

  
Change in indefinite reinvestment assertion of basis differences and structure of sale of discontinued operations—
 (89) —
 (89) (0.32)
Reduction in tax valuation allowance against certain NOL carryforwards—
 (10) —
 (10) (0.03)
Sempra Energy Adjusted Earnings      $1,464
 $5.23
Weighted-average common shares outstanding, diluted – GAAP        279,809
 Nine months ended September 30, 2018
Sempra Energy GAAP Earnings      $60
 $0.23
Impact of potentially dilutive shares excluded from GAAP EPS(3)
        (0.01)
Excluded items:         
Impacts associated with Aliso Canyon litigation$1
 $21
 $—
 22
 0.08
Impairment of U.S. wind equity method investments200
 (55) —
 145
 0.54
Impairment of non-utility natural gas storage assets1,300
 (499) (46) 755
 2.82
Impairment of investment in RBS Sempra Commodities65
 —
 —
 65
 0.24
Impact from the TCJA—
 25
 —
 25
 0.10
Sempra Energy Adjusted Earnings      $1,072
 $4.00
Weighted-average common shares outstanding, diluted – GAAP        265,963
Add potentially dilutive shares(3)
        1,681
Weighted-average common shares outstanding, diluted – Adjusted        267,644
(1)
Except for adjustments that are solely income tax and tax related to outside basis differences, income taxes on pretax amounts were primarily calculated based on applicable statutory tax rates.
(2)
In the three months ended September 30, 2019, the assumed conversion of the series A preferred stock is dilutive for GAAP Earnings, however, it is antidilutive for the lower Adjusted Earnings. As such, the series A preferred stock dividends have been subtracted from the numerator and the series A preferred stock shares have been subtracted from the denominator when calculating Adjusted EPS.
(3)
In the nine months ended September 30, 2018, the total weighted-average potentially dilutive stock options and RSUs of 736 and common shares sold forward of 945 were not included in the denominator of GAAP Diluted EPS due to the losses from continuing operations attributable to common shares, but have been added to the denominator when calculating Adjusted Diluted EPS.



For each period in which a non-GAAP financial measure is used, we provide in the tables below a reconciliation of SDG&E and SoCalGas Adjusted Earnings to GAAP Earnings, which we consider to be the most directly comparable financial measure calculated in accordance with U.S. GAAP.
SDG&E ADJUSTED EARNINGS
(Dollars in millions)
 Pretax amount 
Income tax expense(1)
 Earnings
 Three months ended September 30, 2019
SDG&E GAAP Earnings    $263
Excluded item:     
Retroactive impact of 2019 GRC FD for first half of 2019$(92) $26
 (66)
SDG&E Adjusted Earnings    $197
(1)
Income taxes on pretax amounts were primarily calculated based on applicable statutory tax rates.

SOCALGAS ADJUSTED EARNINGS
(Dollars in millions)
 Pretax amount 
Income tax expense(1)
 Earnings
 Three months ended September 30, 2019
SoCalGas GAAP Earnings    $143
Excluded item:     
Retroactive impact of 2019 GRC FD for first half of 2019$(181) $51
 (130)
SoCalGas Adjusted Earnings    $13
 Nine months ended September 30, 2018
SoCalGas GAAP Earnings    $244
Excluded item:     
Impacts associated with Aliso Canyon litigation$1
 $21
 22
SoCalGas Adjusted Earnings    $266
(1)
Except for adjustments that are solely income tax, income taxes on pretax amounts were primarily calculated based on applicable statutory tax rates.
SIGNIFICANT CHANGES IN REVENUES, COSTS AND EARNINGS
This section contains a discussion of the differences between periods in the specific line items of the Condensed Consolidated Statements of Operations for Sempra Energy, SDG&E and SoCalGas.
Utilities Revenues and Cost of Sales
Our utilities revenues include natural gas revenues at our California Utilities and Sempra Mexico’s Ecogas 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.
SoCalGas and SDG&E currently operate under a regulatory framework that:that permits:
▪permits the cost of natural gas purchased for core customers (primarily residential and small commercial and industrial customers) to be passed through to customers in rates substantially as incurred. However, SoCalGas’ 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 benchmarks. This mechanism permits full recovery of costs incurred when average purchase costs are within a price range around the benchmark price. Any higher costs incurred or savings realized outside this range are shared between the core customers and SoCalGas. We provide further discussion in Note 3 of the Notes to Condensed Consolidated Financial Statements herein and in “Item 1. Business – Ratemaking Mechanisms” in the Annual Report.
▪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 or refunded in subsequent periods through rates.
▪permits the California Utilities to recover certain expenses for programs authorized by the CPUC, or “refundable programs.”
▪The cost of natural gas purchased for core customers (primarily residential and small commercial and industrial customers) to be passed through to customers in rates substantially as incurred. However, SoCalGas’ Gas Cost Incentive Mechanism 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 benchmarks. This mechanism permits full recovery of costs incurred when average purchase costs are within a price range around the benchmark price. Any higher costs incurred or savings realized outside this range are shared between the core customers and SoCalGas. We provide further discussion in Note 3 of the Notes to Consolidated Financial Statements and in “Part I – Item 1. Business – Ratemaking Mechanisms” in the Annual Report.
▪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 or refunded in subsequent periods through rates.
▪The California Utilities to recover certain program expenditures and other costs authorized by the CPUC, or “refundable programs.”
98

Because changes in SoCalGas’ and SDG&E’s cost of natural gas and/or electricity are substantially recovered in rates, changes in


these costs are offset in the changes in revenues, and therefore do not impact earnings. In addition to the changes in cost or market prices, natural gas or electric revenues recorded during a period are impacted by customer billing cycles causing a difference between customer billings and recorded or 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 4 of the Notes to Condensed Consolidated Financial Statements hereinin this report and in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.
The California Utilities’ revenues are decoupled from, or not tied to, actual sales volumes. SoCalGas recognizes annual authorized revenue for core natural gas customers using seasonal factors established in the Triennial Cost Allocation Proceeding. Accordingly, a significant portion of SoCalGas’ annual earnings are recognized in the first and fourth quarters of each year. SDG&E’s authorized revenue recognition is also impacted by seasonal factors, resulting in higher earnings in the third quarter when electric loads are typically higher than in the other three quarters of the year. We discuss this decoupling mechanism and its effects further in Note 3 of the Notes to Consolidated Financial Statements in the Annual Report.
The table below summarizes revenues and cost of sales for our consolidated utilities.
UTILITIES REVENUES AND COST OF SALES 
(Dollars in millions)  
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
Natural gas revenues:  
SoCalGas$842 $975 $3,247 $3,142 
SDG&E134 156 498 482 
Sempra Mexico12 14 42 56 
Eliminations and adjustments(23)(16)(62)(52)
Total965 1,129 3,725 3,628 
Electric revenues:
SDG&E1,338 1,271 3,478 3,184 
Eliminations and adjustments(2)(2)(4)(4)
Total1,336 1,269 3,474 3,180 
Total utilities revenues$2,301 $2,398 $7,199 $6,808 
Cost of natural gas(1):
SoCalGas$92 $101 $476 $660 
SDG&E27 23 118 136 
Sempra Mexico2 2 8 10 
Eliminations and adjustments(7)(4)(20)(17)
Total$114 $122 $582 $789 
Cost of electric fuel and purchased power(1):
SDG&E$430 $411 $921 $934 
Eliminations and adjustments(1)(1)(3)(5)
Total$429 $410 $918 $929 
(1)     Excludes depreciation and amortization, which are presented separately on the Sempra Energy, SDG&E and SoCalGas Condensed Consolidated Statements of Operations.

99
UTILITIES REVENUES AND COST OF SALES        
(Dollars in millions)        
  Three months ended September 30, Nine months ended September 30,
  2019 2018 2019 2018
Natural gas revenues:        
SoCalGas $975
 $802
 $3,142
 $2,700
SDG&E 156
 107
 482
 391
Sempra Mexico 14
 17
 56
 58
Eliminations and adjustments (16) (15) (52) (48)
Total 1,129
 911
 3,628
 3,101
Electric revenues:        
SDG&E 1,271
 1,192
 3,184
 3,014
Eliminations and adjustments (2) (1) (4) (3)
Total 1,269
 1,191
 3,180
 3,011
Total utilities revenues $2,398
 $2,102
 $6,808
 $6,112
Cost of natural gas:        
SoCalGas $101
 $224
 $660
 $663
SDG&E 23
 30
 136
 110
Sempra Mexico 2
 2
 10
 17
Eliminations and adjustments (4) (1) (17) (8)
Total $122
 $255
 $789
 $782
Cost of electric fuel and purchased power:        
SDG&E $411
 $448
 $934
 $1,045
Eliminations and adjustments (1) (2) (5) (8)
Total $410
 $446
 $929
 $1,037

Natural Gas Revenues and Cost of Natural Gas
The table below summarizes the average cost of natural gas sold by the California Utilities and included in Cost of Natural Gas.Gas on the Condensed Consolidated Statements of Operations. The average cost of natural gas sold at each utility is impacted by market prices, as well as transportation, tariff and other charges.
CALIFORNIA UTILITIES AVERAGE COST OF NATURAL GAS    
(Dollars per thousand cubic feet)    
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
SoCalGas$2.12
 $4.82
 $2.89
 $3.17
SDG&E3.29
 4.56
 3.96
 3.58

CALIFORNIA UTILITIES AVERAGE COST OF NATURAL GAS
(Dollars per thousand cubic feet)
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
SoCalGas$1.95 $2.12 $2.21 $2.89 
SDG&E3.79 3.29 3.56 3.96 
In the three months ended September 30, 2019, Sempra Energy’s2020, our natural gas revenues increaseddecreased by $218$164 million (24%(15%) to $1.1 billion$965 million primarily due to:
▪$173 million increase at SoCalGas, which included:
◦$181 million favorable impact from the retroactive application of the 2019 GRC FD for the first six months of 2019,

▪$133 million decrease at SoCalGas, which included:

◦$181 million favorable impact in 2019 from the retroactive application of the 2019 GRC FD for the first six months of 2019, and
◦$61 million higher authorized revenue in 2019, and
◦
$35 million higher recovery of costs associated with CPUC-authorized refundable programs, which revenues are offset in O&M,
◦$9 million decrease in cost of natural gas sold, which we discuss below, offset by
◦$59 million lower authorized revenues from incremental capital projects in 2019 due to implementation of the 2019 GRC FD, and
◦$18 million higher recovery of costs associated with CPUC-authorized refundable programs, which revenues are offset in O&M; and
▪$22 million decrease at SDG&E, which included:
◦$38 million favorable impact in 2019 from the retroactive application of the 2019 GRC FD for the first six months of 2019, offset by
◦$8 million higher recovery of costs associated with CPUC-authorized refundable programs, which revenues are offset in O&M, and
◦$5 million higher non-service component of net periodic benefit cost in 2020, which fully offsets in Other Income (Expense), Net.
◦$123 million decrease in cost of natural gas sold, which we discuss below; and
▪$49 million increase at SDG&E, which included:
◦$38 million favorable impact from the retroactive application of the 2019 GRC FD for the first six months of 2019, and
◦$11 million higher authorized revenue in 2019.
In the three months ended September 30, 2019,2020 our cost of natural gas decreased by $133$8 million (7%) to $122$114 million primarily due to:
▪$123 million decrease at SoCalGas primarily due to lower average natural gas prices; and
▪$7 million decrease at SDG&E primarily due to lower average natural gas prices.
▪$9 million decrease at SoCalGas primarily due to lower average natural gas prices; offset by
▪$4 million increase at SDG&E primarily due to higher average natural gas prices.
In the first nine months of 2019, Sempra Energy’s2020, our natural gas revenues increased by $527$97 million (17%(3%) to $3.6$3.7 billion primarily due to:
▪$105 million increase at SoCalGas, which included:
▪$442 million increase at SoCalGas, which included:
◦$273 million higher authorized revenue in 2019,
◦$98 million higher recovery of costs associated with CPUC-authorized refundable programs, which revenues are offset in O&M,
◦$19 million lower non-service component of net periodic benefit credit in 2019, which fully offsets in Other (Expense) Income, Net,
◦$12 million higher net revenues from capital projects, and
◦$7 million higher regulatory awards in 2019; and
▪$91 million increase at SDG&E, which included:
◦$49 million higher authorized revenue in 2019, and
◦$26 million increase in cost of natural gas sold, which we discuss below.
◦$132 million higher CPUC-authorized revenues,
◦$84 million due to the release of a regulatory liability in 2020 related to 2016-2018 income tax expense forecasting differences,
◦$54 million higher recovery of costs associated with CPUC-authorized refundable programs, which revenues are offset in O&M, and
◦$34 million higher net revenues from incremental capital projects, offset by
◦$184 million decrease in cost of natural gas sold, which we discuss below; and
▪$16 million increase at SDG&E, which included:
◦$11 million higher CPUC-authorized revenues,
◦$9 million higher recovery of costs associated with CPUC-authorized refundable programs, which revenues are offset in O&M,
◦$6 million due to the release of a regulatory liability in 2020 related to 2016-2018 income tax expense forecasting differences, and
◦$3 million non-service component of net periodic benefit cost in 2020 compared to a $3 million credit in 2019, which fully offsets in Other Income (Expense), Net, offset by
◦$18 million decrease in cost of natural gas sold, which we discuss below; offset by
▪$14 million decrease at Sempra Mexico primarily due to a regulatory rate adjustment and foreign currency effects.
100

In the first nine months of 2019,2020, our cost of natural gas increaseddecreased by $7$207 million (1%(26%) to $789$582 million primarily due to:
▪$184 million decrease at SoCalGas due to $145 million from lower average natural gas prices and $39 million from lower volumes driven primarily by weather; and
▪
$26 million increase at SDG&E, including $13 million from higher average natural gas prices and $13 million from higher volumes driven by weather; offset
▪$18 million decrease at SDG&E due to lower average natural gas prices and lower volumes driven primarily by weather.
▪$9 million higher intercompany eliminations primarily associated with sales between Sempra LNG and SoCalGas; and
▪$3 million decrease at SoCalGas, including $64 million due to lower average natural gas prices, offset by $61 million from higher volumes driven by weather.
Electric Revenues and Cost of Electric Fuel and Purchased Power
In the three months ended September 30, 2019,2020, our electric revenues, substantially all of which are at SDG&E, increased by $78$67 million (7%(5%) toremaining at $1.3 billion, including:
▪$54 million favorable impact from the retroactive application of the 2019 GRC FD for the first six months of 2019, including $50 million of liability insurance premium costs that are now balanced;
▪$37 million higher authorized revenue in 2019, including $29 million of revenues to cover liability insurance premium costs that are now balanced and offset in O&M; and
▪
$14 million higher cost of electric fuel and purchased power, which we discuss below; offset by
▪$27 million lower revenues from transmission operations, including a FERC formulaic rate adjustment benefit in 2018.
Our▪$96 million higher recovery of costs associated with CPUC-authorized refundable programs, which revenues are offset in O&M;
▪$27 million higher revenues from transmission operations;
▪$13 million higher non-service component of net periodic benefit cost in 2020, which fully offsets in Other Income (Expense), Net; and
▪$12 million higher CPUC-authorized revenues; offset by
▪$54 million favorable impact in 2019 from the retroactive application of the 2019 GRC FD for the first six months of 2019, including $50 million of liability insurance premium that are now balanced; and
▪$36 million expected to be refunded to customers related to the Energy Efficiency Program inquiry.
In the three months ended September 30, 2020, our utility cost of electric fuel and purchased power, substantially all of which is at SDG&E, increased by $19 million (5%) to $429 million primarily due to $17 million associated with Otay Mesa VIE, which we deconsolidated in August 2019.
In the first nine months of 2020, our electric revenues, substantially all of which are at SDG&E, increased by $294 million (9%) to $3.5 billion, including:
▪$157 million higher recovery of costs associated with CPUC-authorized refundable programs, which revenues are offset in O&M;
▪$110 million higher revenues from transmission operations, including an increase in authorized ROE and the following impacts related to the March 2020 FERC-approved TO5 settlement:
◦$26 million to settle a rate base matter, and
◦$12 million favorable impact from the retroactive application of the final TO5 settlement for 2019;
▪$77 million due to the release of a regulatory liability in 2020 related to 2016-2018 income tax expense forecasting differences;
▪$26 million higher CPUC-authorized revenues;
▪$19 million higher revenues associated with SDG&E’s wildfire mitigation plan; and
▪$9 million non-service component of net periodic benefit cost in 2020 compared to a $7 million credit in 2019, which fully offsets in Other Income (Expense), Net; offset by
▪$65 million lower cost of electric fuel and purchased power, which we discuss below; and
▪$51 million expected to be refunded to customers related to the Energy Efficiency Program inquiry.
In the first nine months of 2020, our utility cost of electric fuel and purchased power, substantially all of which is at SDG&E, decreased by $36$11 million (8%(1%) to $410$918 million in the three months ended September 30, 2019, including:primarily due to:
▪
$51 million of finance lease costs for PPAs in 2018. Similar amounts are now included in Interest Expense and Depreciation and Amortization Expense as a result of the 2019 adoption of the lease standard, which we discuss in Note 2 of the Notes to Condensed Consolidated Financial Statements; offset by
▪$14 million higher electricity market costs and an additional capacity contract.
In the first nine▪ months of 2019, our electric revenues, substantially all of which are at SDG&E, increased by $169$65 million (6%) to $3.2 billion, including:


▪$86 million higher authorized revenue in 2019, including $79 million of revenues to cover liability insurance premium costs that are now balanced and offset in O&M;
▪$41 million higher cost of electric fuel and purchased power, which we discuss below;
▪$28 million higher recovery of costs associated with CPUC-authorized refundable programs, which revenues are offset in O&M; and
▪$17 million higher revenues from transmission operations, net of a FERC formulaic rate adjustment benefit in 2018.
Our utilitylower recoverable cost of electric fuel and purchased power substantially all ofprimarily due to a decrease in residential demand mainly from an increase in rooftop solar adoption; offset by
▪$52 million associated with Otay Mesa VIE, which is at SDG&E, decreased by $108 million (10%) to $929 millionwe deconsolidated in the first nine months of 2019, including:August 2019.
▪
101
$152 million of finance lease costs for PPAs in 2018. Similar amounts are now included in Interest Expense and Depreciation and Amortization Expense as a result of the 2019 adoption of the lease standard; offset by
▪$41 million higher electricity market costs and an additional capacity contract.
Energy-Related Businesses: Revenues and Cost of Sales
The table below shows revenues and cost of sales for our energy-related businesses.
ENERGY-RELATED BUSINESSES: REVENUES AND COST OF SALES
(Dollars in millions)       
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
REVENUES       
Sempra Mexico$343
 $393
 $1,002
 $970
Sempra Renewables—
 38

10

103
Sempra LNG100
 147
 327
 330
All other1
 —
 1
 —
Eliminations and adjustments(84) (115) (262) (239)
Total revenues$360
 $463
 $1,078
 $1,164
COST OF SALES(1)
       
Sempra Mexico$99
 $132
 $284
 $259
Sempra LNG78
 101
 235
 230
All other1
 —
 1
 —
Eliminations and adjustments(84) (114) (255) (231)
Total cost of sales$94
 $119
 $265
 $258
(1)
Excludes depreciation and amortization, which are presented separately on the Sempra Energy Condensed Consolidated Statements of Operations.

ENERGY-RELATED BUSINESSES: REVENUES AND COST OF SALES
(Dollars in millions)
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
REVENUES  
Sempra Mexico$339 $343 $893 $1,002 
Sempra Renewables— — — 10 
Sempra LNG63 100 255 327 
Parent and other(1)
(59)(83)(148)(261)
Total revenues$343 $360 $1,000 $1,078 
COST OF SALES(2)
  
Sempra Mexico$89 $99 $202 $284 
Sempra LNG62 78 145 235 
Parent and other(1)
(61)(83)(147)(254)
Total cost of sales$90 $94 $200 $265 
In(1)    Includes eliminations of intercompany activity.
(2)    Excludes depreciation and amortization, which are presented separately on the three months ended September 30, 2019, revenues from our energy-related businesses decreased by $103 million (22%) to $360 million primarily due to:Sempra Energy Condensed Consolidated Statements of Operations.
▪$50 million decrease at Sempra Mexico primarily due to:
◦$30 million from the marketing business primarily from lower natural gas prices,
◦$17 million at TdM due to lower volumes and prices, offset by higher financial settlements, and
◦$12 million lower revenues primarily from force majeure payments that ended on August 22, 2019 with respect to the Guaymas-El Oro segment of the Sonora pipeline;
▪$47 million decrease at Sempra LNG primarily due to:
◦$21 million lower natural gas sales to Sempra Mexico due to lower natural gas prices and volumes,
◦$10 million lower natural gas storage revenues primarily due to the sale of storage assets in February 2019, and
◦$9 million from natural gas marketing activities primarily due to lower natural gas prices; and
▪

$38 million decrease at Sempra Renewables primarily due to the sale of assets in December 2018 and April 2019; offset by
▪$31 million lower intercompany eliminations primarily associated with sales between Sempra LNG and Sempra Mexico.
In the three months ended September 30, 2019,2020, revenues from our energy-related businesses decreased by $17 million (5%) to $343 million primarily due to:
▪$37 million decrease at Sempra LNG primarily due to:
◦$19 million decrease in revenues from LNG marketing operations primarily from lower natural gas sales to Sempra Mexico mainly as a result of lower volumes and natural gas prices,
◦$11 million decrease from natural gas marketing operations primarily due to changes in natural gas prices, and
◦$6 million lower revenues from the expiration of capacity release contracts in the fourth quarter of 2019; offset by
▪$24 million increase primarily from lower intercompany eliminations associated with sales between Sempra LNG and Sempra Mexico.
In the three months ended September 30, 2020, the cost of sales for our energy-related businesses decreased by $25$4 million (21%(4%) to $94$90 million primarily due to:

▪$16 million decrease at Sempra LNG mainly from natural gas marketing activities primarily from lower natural gas purchases; and

▪$33 million decrease at Sempra Mexico mainly associated with lower revenues from the marketing business as a result of▪$10 million decrease at Sempra Mexico primarily due to lower natural gas prices, and lower prices offset by higher volumes at the marketing business and lower volumes at TdM; and
▪
$23 million decrease at Sempra LNG mainly from natural gas marketing activities primarily from lower natural gas purchases; offset by
▪$30 million lower intercompany eliminations primarily associated with sales between Sempra LNG and Sempra Mexico.
▪$22 million increase primarily from lower intercompany eliminations associated with sales between Sempra LNG and Sempra Mexico.
In the first nine months of 2019,2020, revenues from our energy-related businesses decreased by $86$78 million (7%) to $1.1$1 billion primarily due to:
▪$109 million decrease at Sempra Mexico primarily due to:
▪$93 million decrease at Sempra Renewables primarily due to the sale of assets in December 2018 and April 2019;
▪$23 million higher intercompany eliminations primarily associated with sales between Sempra LNG and Sempra Mexico; and
▪$3 million decrease at Sempra LNG primarily due to:
◦$34 million lower natural gas storage revenues primarily due to the sale of storage assets in February 2019, and
◦
$12 million from LNG sales to Cameron LNG JV in January 2018, offset by
◦
$39 million from natural gas marketing activities due to optimization of natural gas transport contracts;offset by
▪$32 million increase at Sempra Mexico primarily due to:
◦$20 million from the marketing business, primarily from higher volumes, including higher volumes due to new regulations that went into effect on March 1, 2018 that require high consumption end users (previously serviced by Ecogas and other natural gas utilities) to procure their natural gas needs from natural gas marketers, including Sempra Mexico’s marketing business, offset by lower natural gas prices,
◦$11 million at TdM primarily due to higher financial settlements and resource adequacy revenues, offset by lower volumes, and
◦
$9 million from the Pima Solar project commencing operations in April 2019, offset by
◦$17 million lower revenues primarily from force majeure payments that ended on August 22, 2019 with respect to the Guaymas-El Oro segment of the Sonora pipeline.
◦$63 million from the marketing business primarily due to lower natural gas prices and volumes,
◦$26 million lower revenues primarily from force majeure payments that ended in August 2019 with respect to the Guaymas-El Oro segment of the Sonora pipeline, and
◦$25 million lower revenues from TdM primarily due to lower volumes, offset by higher natural gas prices; and
▪$72 million decrease at Sempra LNG primarily due to:
◦$89 million decrease in revenues from LNG marketing operations primarily from lower natural gas sales to Sempra Mexico mainly as a result of lower volumes and natural gas prices, and from lower diversion fees mainly due to lower natural gas prices, and
◦$16 million lower revenues from the expiration of capacity release contracts in the fourth quarter of 2019, offset by
◦$34 million increase from natural gas marketing operations primarily due to changes in natural gas prices; offset by
102

▪$113 million increase primarily from lower intercompany eliminations associated with sales between Sempra LNG and Sempra Mexico.
In the first nine months of 2019,2020, the cost of sales for our energy-related businesses increaseddecreased by $7$65 million (3%(25%) to $265$200 million primarily due to:
▪$90 million decrease at Sempra LNG mainly from natural gas marketing activities primarily due to lower natural gas purchases; and
▪
▪$82 million decrease at Sempra Mexico mainly associated with lower revenues from the marketing business and from TdM as a result of lower natural gas prices and volumes; offset by
▪$107 million increase primarily from lower intercompany eliminations associated with sales between Sempra LNG and Sempra Mexico.
$25 million increase at Sempra Mexico mainly associated with higher revenues from the marketing business as a result of higher volumes, includinghigher volumes due to new regulations that went into effect in 2018; offset by
▪$24 million higher intercompany eliminations primarily associated with sales between Sempra LNG and Sempra Mexico.
Operation and Maintenance
Our O&M increased by $53$199 million (7%(24%) to $845 million$1.0 billion in the three months ended September 30, 20192020 primarily due to:
▪$33 million increase at SoCalGas primarily due to $35 million higher expenses associated with CPUC-authorized refundable programs for which costs incurred are recovered in revenue (refundable program expenses); and
▪$27 million increase at SDG&E, excluding $6 million of impairment losses discussed below, but including:
◦
$29 million higher expenses associated with CPUC-authorized refundable programs, including $30 million of 2019 liability insurance premium costs that are now balanced in revenue, offset by
◦
$2 million lower non-refundable operating costs, including a $21 million decrease from liability insurance premium costs for 2018 that were not balanced, offset by $19 million higher operating costs; offset by
▪$24 million decrease at Sempra Renewables primarily due to lower general and administrative and other costs due to the wind-down of the business.
▪$124 million increase at SDG&E, excluding impairment losses discussed below, but including:
◦$104 million higher expenses associated with CPUC-authorized refundable programs for which costs incurred are recovered in revenue, and
◦$20 million higher non-refundable operating costs; and
▪$94 million increase at SoCalGas primarily due to:
◦$49 million higher non-refundable operating costs,
◦$27 million from impacts associated with Aliso Canyon natural gas storage facility litigation and regulatory matters, and
◦$18 million higher expenses associated with CPUC-authorized refundable programs; offset by
▪$19 million decrease at Parent and other primarily from lower retained operating costs.
In the first nine months of 2019,2020, O&M increased by $240$378 million (11%(15%) to $2.5$2.9 billion primarily due to:
▪$235 million increase at SoCalGas primarily due to:
▪
$131 million increase at SoCalGas, which included:
◦$127 million from impacts associated with Aliso Canyon natural gas storage facility litigation and regulatory matters,
◦$54 million higher expenses associated with CPUC-authorized refundable programs, and
◦$54 million higher non-refundable operating costs; and
▪$198 million increase at SDG&E, excluding impairment losses discussed below, but including:
◦$166 million higher expenses associated with CPUC-authorized refundable programs, and
◦$32 million higher non-refundable operating costs, including $14 million from amortization of the Wildfire Fund asset and accretion of the Wildfire Fund obligation; offset by
▪$41 million decrease at Parent and other primarily from lower deferred compensation expense; and
▪$18 million decrease at Sempra Renewables primarily due to lower general and administrative and other costs due to the wind-down of the business in 2019.
◦$98 million higher expenses associated with CPUC-authorized refundable programs, and
◦$30 million higher non-refundable operating costs, including higher administrative and support costs;
▪$90 million increase at SDG&E, excluding $6 million of impairment losses discussed below, but including:
◦
$117 million higher expenses associated with CPUC-authorized refundable programs, including $82 million of 2019 liability insurance premium costs that are now balanced in revenue, offset by
◦$27 million lower non-refundable operating costs, including $77 million decrease from liability insurance premium costs for 2018 that were not balanced, offset by $50 million of higher operating costs;


▪$25 million increase at Sempra Mexico primarily due to expenses associated with growth in the business and operating lease costs in 2019; and
▪
$24 million increase at Sempra LNG primarily from higher liquefaction project costs, net of reimbursements, and higher retained operating costs; offset by
▪$46 million decrease at Sempra Renewables primarily due to lower general and administrative and other costs due to the wind-down of the business.
Impairment Losses
In September 2019, SoCalGas recognized a $29 million impairment loss related to non-utility native gas assets. In September 2019, SDG&E and SoCalGas recognized impairment losses of $6 million and $8 million, respectively, for certain disallowed capital costs in the 2019 GRC FD. In June 2018, Sempra LNG recognized a $1.3 billion impairment loss for certain non-utility natural gas storage assets in the southeast U.S. These assets were sold in February 2019. We discuss the impairment and sale of the non-utility natural gas storage assets in Note 5 of the Notes to Condensed Consolidated Financial Statements.
Gain on Sale of Assets
In April 2019, Sempra Renewables recognized a $61 million gain on the sale of its remaining wind assets and investments to AEP, as we discuss in Note 5 of the Notes to Condensed Consolidated Financial Statements.
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Other Income (Expense) Income,, Net
As part of our central risk management function, we enter into foreign currency derivatives to hedge Sempra Mexico parent’s exposure to movements in the Mexican peso from its controlling interest in IEnova. The gains/losses associated with these derivatives are included in Other Income (Expense) Income,, Net, as described below, and partially mitigate the transactional effects of foreign currency and inflation included in Income TaxesTax Expense for Sempra Mexico’s consolidated entities and in earnings fromEquity Earnings for Sempra Mexico’s equity method investments. We also utilized foreign currency derivatives to hedge exposure to fluctuations in the Peruvian sol and Chilean peso related to the sales of our operations in Peru and Chile, respectively. We discuss policies governing our risk management in “Item“Part II – Item 7A. Quantitative and Qualitative Disclosure aboutDisclosures About Market Risk” in the Annual Report.
Other expense,income, net, in the three months ended September 30, 2020 was $29 million compared to other expense, net, of $7 million in the same period in 2019. The change was primarily due to:
▪$34 million net gains in 2020 from interest rate and foreign exchange instruments and foreign currency transactions compared to net losses of $30 million for the same period in 2019 primarily due to:
◦$15 million gains in 2020 compared to $17 million losses in 2019 on a Mexican peso-denominated loan to IMG JV, which is offset in Equity Earnings, and
◦$15 million gains in 2020 compared to $12 million losses in 2019 on foreign currency derivatives as a result of fluctuation of the Mexican peso;
▪$9 million higher AFUDC equity, including $6 million at SDG&E; and
▪$7 million higher investment gains in 2020 on dedicated assets in support of our executive retirement and deferred compensation plans; offset by
▪$35 million higher non-service component of net periodic benefit cost in 2020, including $13 million settlement charges in 2020 for lump sum payments from one of our nonqualified pension plans; and
▪$6 million fine at SDG&E related to the Energy Efficiency Program inquiry.
Other expense, net, in the first nine months of 2020 was $7$163 million compared to other income, net, of $96$103 million in the same period in 2018.2019. The change was primarily due to:
▪$30 million net losses in 2019
▪$224 million net losses in 2020 from interest rate and foreign exchange instruments and foreign currency transactions compared to $67 million net gains of $5 million for the same period in 2018 primarily due to:
◦$17 million foreign currency losses in 2019 compared to $33 million foreign currency gains in 2018 on a Mexican peso-denominated loan to the IMG JV, which is offset in Equity Earnings, and
◦$12 million losses in 2019 compared to $28 million gains in 2018 on foreign currency derivatives as a result of fluctuation of the Mexican peso in 2019; and
▪$10 million higher non-service component of net periodic benefit cost in 2019.
Other income, net, decreased by $89 million to $103 million in the nine months ended September 30, 2019 primarily due to:
▪$57
◦$120 million higher foreign currency losses on a Mexican peso-denominated loan to IMG JV, which is offset in Equity Earnings, and
◦$94 million losses in 2020 compared to $7 million lower net gains from interest rate and foreign exchange instruments and foreign currency transactions primarily due to:
◦$28 million lower gains in 2019 on foreign currency derivatives as a result of fluctuation of the Mexican peso, and
◦negligible foreign currency losses in 2019 compared to $25 million foreign currency gains in 2018 on a Mexican peso-denominated loan to the IMG JV, which is offset in Equity Earnings;
▪$19 million non-service component of net periodic benefit cost in 2019 compared to a $37 million credit in 2018, including $22 million settlement charges in 2019 for lump sum payments from our non-qualified pension plan;
▪$10 million decrease in equity-related AFUDC, including $7 million at SDG&E and $5 million at SoCalGas; and
▪
$8 million penalties in 2019 related to the SoCalGas billing practices OII; offset by
▪$33 million higher investment gains in 2019 on dedicated assets in support of our executive retirement and deferred compensation plans.
Interest Expense
Interest expense increased by $57 million (26%) to $279 million and by $141 million (21%) to $797 million in the three months and nine months ended September 30, 2019, respectively, primarily due to the inclusion of finance lease costs for SDG&E’s PPAs as a result of adoptionfluctuation of the lease standard. PriorMexican peso;
▪$37 million lower investment gains in 2020 on dedicated assets in support of our executive retirement and deferred compensation plans;
▪$26 million higher non-service component of net periodic benefit cost in 2020; and
▪$6 million fine at SDG&E related to 2019, such costs were included in Cost of Electric Fuelthe Energy Efficiency Program inquiry; offset by
▪$27 million higher AFUDC equity, including $19 million at SDG&E and Purchased Power. The$4 million at SoCalGas;
▪$8 million increase in regulatory interest at the nine months ended September 30, 2019 was alsoCalifornia Utilities due to higher interestthe release of a regulatory liability in 2020 related to 2016-2018 income tax expense atforecasting differences; and
▪$8 million in penalties in 2019 related to the SoCalGas due to long-termbilling practices OII.

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debt issuances net of maturities, partially offset by lower interest expense at Parent and other primarily due to long-term debt maturities net of issuances.
Income Taxes
The table below shows the income tax expense (benefit) and ETRETRs for Sempra Energy Consolidated, SDG&E and SoCalGas.
INCOME TAX EXPENSE (BENEFIT) AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
Three months ended September 30,Nine months ended September 30,
2020201920202019
Sempra Energy Consolidated:
Income tax expense from continuing operations$99 $61 $60 $150 
Income from continuing operations before income taxes
and equity earnings
$201 $448 $1,061 $1,235 
Equity earnings, before income tax(1)
117 17 158 24 
Pretax income$318 $465 $1,219 $1,259 
Effective income tax rate31 %13 %5 %12 %
SDG&E:
Income tax expense$33 $71 $161 $111 
Income before income taxes$211 $337 $794 $700 
Effective income tax rate16 %21 %20 %16 %
SoCalGas:
Income tax (benefit) expense$(6)$35 $95 $50 
(Loss) income before income taxes$(30)$178 $521 $488 
Effective income tax rate20 %20 %18 %10 %
INCOME TAX EXPENSE (BENEFIT) AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
Sempra Energy Consolidated:       
Income tax expense (benefit) from continuing operations$61
 $139
 $150
 $(221)
        
Income (loss) from continuing operations before income taxes       
 and equity earnings$448
 $345
 $1,235
 $(245)
Equity earnings (losses), before income tax(1)
17
 (52) 24
 (236)
Pretax income (loss)$465
 $293
 $1,259
 $(481)
        
Effective income tax rate13% 47% 12% 46%
SDG&E:       
Income tax expense$71
 $53
 $111
 $151
Income before income taxes$337
 $269
 $700
 $682
Effective income tax rate21% 20% 16% 22%
SoCalGas:       
Income tax expense (benefit)$35
 $(7) $50
 $75
Income (loss) before income taxes$178
 $(21) $488
 $320
Effective income tax rate20% 33% 10% 23%
(1)(1)    We discuss how we recognize equity earnings in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.
We discuss how we recognize equity earnings in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.
Sempra Energy Consolidated
The decreaseincrease in income tax expense in the three months ended September 30, 20192020 was due to a lowerhigher ETR offset by higherlower pretax income. The change in ETR was primarily due to a$41 million income tax expense in 2020 compared to $32 million income tax benefit in 2019 compared to a $69 million income tax expense in 2018 from foreign currency and inflation effects primarily as a result of fluctuation of the Mexican peso.
IncomeThe decrease in income tax expense in the first nine months ended September 30, 2019 compared to an income tax benefit for the same period in 2018of 2020 was due to lower pretax income in 2019 compared to pretax loss in 2018 and a lower ETR. Pretax losses in 2018 include impairments at our Sempra LNG and Sempra Renewables segments. The change in ETR was primarily due to:
▪$69
▪$237 million income tax benefit in 2020 compared to $7 million income tax expense in 2019 from foreign currency and inflation effects primarily as a result of fluctuation of the Mexican peso; and
▪$19 million income tax benefit in 2020 compared to $5 million total income tax benefits from the release of regulatory liabilities at SDG&E and SoCalGas established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed be allocated to shareholders in a January 2019 decision;
▪$57 million lower income tax expense in 2019 from foreign currency and inflation effects primarily as a result of fluctuation of the Mexican peso;
▪$21 million income tax expense in 2018 associated with Aliso Canyon natural gas storage facility litigation;
▪$11 million lower income tax expense related to share-based compensation;
▪$10 million income tax benefit in 2019 from a reduction in a valuation allowance against certain NOL carryforwards as a result of our decision to sell our South American businesses; and
▪
$9 million income tax expense in 2018 to adjust provisional estimates recorded in 2017 for the effects of tax reform; offset by
▪$69 million total income tax benefits in 2019 from the release of regulatory liabilities at SDG&E and SoCalGas established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed be allocated to shareholders in a January 2019 decision; and
▪$10 million income tax benefit in 2019 from a reduction in a valuation allowance against certain NOL carryforwards as a result of our decision to sell our South American businesses.
▪$131 million income tax benefit in 2018 resulting from the reduced outside basis difference in Sempra LNG as a result of the impairment of certain non-utility natural gas storage assets.
We discuss the impact of foreign currency exchange rates and inflation on income taxes below in “Impact of Foreign Currency and Inflation Rates on Results of Operations.” See Note 1 of the Notes to Condensed Consolidated Financial Statements hereinin this report and Notes 1 and 8 of the Notes to Consolidated Financial Statements in the Annual Report for further details about our accounting for income taxes and items subject to flow-through treatment.


SDG&E
The increasedecrease in SDG&E’s income tax expense in the three months ended September 30, 20192020 was due to lower pretax income and a lower ETR. The change in ETR was primarily due to higher forecasted flow-through items as a percentage of pretax income.
The decreaseincrease in SDG&E’s income tax expense in the first nine months ended September 30, 2019of 2020 was due to a lower ETR offset by higher pretax income.income and a higher ETR. The change in ETR was primarily due to:to $31 million income tax benefit in 2019 from the release of a regulatory liability established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed be allocated to shareholders in a January 2019 decision.
▪$31 million income tax benefit from the release of a regulatory liability established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed be allocated to shareholders in a January 2019 decision; and
▪higher income tax benefits from forecasted flow-through deductions.
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SoCalGas
SoCalGas’ income tax expensebenefit in the three months ended September 30, 20192020 compared to an income tax benefitexpense in the same period in 20182019 was due to a pretax loss in the three months ended September 30, 2020 compared to pretax income in 2019 compared to pretax lossthe same period in 2018.2019.
The decreaseincrease in SoCalGas’ income tax expense in the first nine months ended September 30, 2019of 2020 was due to a lower ETR offset by higher pretax income.income and a higher ETR. The change in ETR was primarily due to:to $38 million income tax benefit in 2019 from the release of a regulatory liability established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed be allocated to shareholders in a January 2019 decision.
▪$38 million income tax benefit from the release of a regulatory liability established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed be allocated to shareholders in a January 2019 decision; and
▪$21 million income tax expense in 2018 associated with Aliso Canyon natural gas storage facility litigation.
Equity Earnings
In the three months ended September 30, 2019,2020, equity earnings increased by $192$60 million (23%) to $266$326 million primarily due to:
▪$65 million impairment of our RBS Sempra Commodities equity method investment in 2018;
▪$37 million equity earnings, net of income tax, at Sempra Mexico in 2019 compared to $28 million equity losses, net of income tax, in 2018, which included:
◦$17 million foreign currency gains in 2019 compared to $33 million foreign currency losses in 2018 at the IMG JV on its Mexican peso-denominated loans from its JV owners, which is fully offset in Other (Expense) Income, Net, and
◦$11 million higher equity earnings at the TAG JV primarily due to lower income tax expense;
▪$58 million higher equity earnings, net of income tax, from our investment in Oncor Holdings; and
▪$17 million higher equity earnings at Cameron LNG JV primarily due to Train 1 commencing commercial operation under its tolling agreements in August 2019.
▪$99 million higher equity earnings at Cameron LNG JV primarily due to commencement of Phase 1 commercial operations; offset by
▪$29 million lower equity earnings at IMG JV, primarily due to foreign currency effects, including $15 million foreign currency losses in 2020 compared to $17 million foreign currency gains in 2019 on IMG JV’s Mexican peso-denominated loans from its JV owners, which is fully offset in Other Income (Expense), Net, and lower AFUDC equity, offset by higher revenues from the start of commercial operations of the Sur de Texas-Tuxpan marine pipeline.
In the first nine months of 2019,2020, equity earnings increased by $436$337 million to $485$822 million primarily due to:
▪$238 million higher equity earnings at Cameron LNG JV primarily due to commencement of Phase 1 commercial operations;
▪$200 million other-than-temporary impairment of certain wind equity method investments at Sempra Renewables in 2018;
▪$135 million higher equity earnings, net of income tax, from our investment in Oncor Holdings, which we acquired in March 2018;
▪$65 million impairment of our RBS Sempra Commodities equity method investment in 2018;
▪negligible foreign currency gains in 2019 compared to $25 million foreign currency losses in 2018 at the IMG JV on its Mexican peso-denominated loans from its JV owners, which is fully offset in Other (Expense) Income, Net; and
▪$18 million higher equity earnings at Cameron LNG JV primarily due to Train 1 commencing commercial operation under its tolling agreements in August 2019.
▪$144 million higher equity earnings at IMG JV, primarily due to foreign currency effects, including $120 million higher foreign currency gains in 2020 on IMG JV’s Mexican peso-denominated loans from its JV owners, which is fully offset in Other Income (Expense), Net, and higher revenues from the start of commercial operations of the Sur de Texas-Tuxpan marine pipeline, offset by lower AFUDC equity;
▪$39 million higher equity earnings at Oncor Holdings primarily due to increased revenues, the acquisition of InfraREIT in May 2019 and higher AFUDC equity, offset by unfavorable weather and increased operating costs; and
▪$18 million higher equity earnings at TAG JV primarily due to income tax benefit in 2020 compared to income tax expense in 2019; offset by
▪$100 million equity losses at RBS Sempra Commodities in 2020, which represents an estimate of our obligations to settle pending tax matters and related legal costs at our equity method investment.
Earnings Attributable to Noncontrolling Interests
Earnings attributable to NCI increased by $36 million to $60 million inIn the three months ended September 30, 20192020, earnings attributable to NCI decreased by $38 million to $22 million, primarily due to highera decrease in earnings attributable to NCI at Sempra Mexico.Mexico mainly from foreign currency effects as a result of fluctuation of the Mexico peso, and from the sales of our Peruvian businesses in April 2020 and Chilean businesses in June 2020.
EarningsIn the first nine months of 2020, earnings attributable to NCI increased by $134$55 million (38%) to $146 million in the nine months ended September 30, 2019 primarily due to:
▪$1 million earnings attributable to NCI at Sempra Renewables in 2019 compared to $50 million losses in 2018 primarily due to the sales of our tax equity investments in December 2018 and April 2019;
▪$46 million lower losses attributable to NCI at Sempra LNG related to the impairment of certain non-utility natural gas storage assets in 2018; and
▪$37 million higher earnings attributable to NCI at Sempra Mexico.
Mandatory Convertible Preferred Stock Dividends


In the nine months ended September 30, 2019, mandatory convertible preferred stock dividends increased by $18 million to $107$201 million, primarily due to dividends associated withan increase in earnings attributable to NCI at Sempra Mexico mainly from foreign currency effects as a result of fluctuation of the Mexico peso, offset by a decrease due to the sales of our series B preferred stock, which were issuedPeruvian businesses in July 2018.April 2020 and Chilean businesses in June 2020.

IMPACT OF FOREIGN CURRENCY AND INFLATION RATES ON RESULTS OF OPERATIONS
Because operations in South America and our natural gas distribution utility in Mexico uses itsuse their local currency as itstheir functional currency, revenues and expenses are translated into U.S. dollars at average exchange rates for the period for consolidation in Sempra Energy Consolidated’sEnergy’s results of operations. We discuss further the impact of foreign currency and inflation rates on results of operations, including impacts on income taxes and related hedging activity, in “Item“Part II – Item 7. MD&A – Impact of Foreign Currency and Inflation Rates on Results of Operations” in the Annual Report.
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Foreign Currency Translation
Any difference in average exchange rates used for the translation of income statement activity from year to year can cause a variance in Sempra Energy’s comparative results of operations. In the three months and nine months ended September 30, 20192020 compared to the prior-year periods, the changeschange in our earnings as a result of foreign currency translation werewas not material.
Foreign Currency Transactional Impacts
Income statement activities at our foreign operations and their JVs are also impacted by transactional gains and losses. Alosses, a summary of these foreign currency transactional gains and losses included in our reported resultswhich is shown in the table below:
TRANSACTIONAL GAINS (LOSSES) FROM FOREIGN CURRENCY AND INFLATION
(Dollars in millions)
 Total reported amountsTransactional gains (losses) included in reported amounts
 Three months ended September 30,
 2020201920202019
Other income (expense), net$29 $(7)$34 $(30)
Income tax expense(99)(61)(41)32 
Equity earnings326 266 (23)17 
Income from continuing operations, net of income tax428 653 (33)21 
(Loss) income from discontinued operations, net of income tax(7)256 — — 
Earnings attributable to common shares351 813 (18)11 
 Nine months ended September 30,
 2020201920202019
Other income (expense), net$(163)$103 $(224)$5 
Income tax expense(60)(150)237 (7)
Equity earnings822 485 141 (5)
Income from continuing operations, net of income tax1,823 1,570 179 (10)
(Loss) income from discontinued operations, net of income tax1,850 292 15 1 
Earnings attributable to common shares3,350 1,608 111 (4)
TRANSACTIONAL (LOSSES) GAINS FROM FOREIGN CURRENCY AND INFLATION
(Dollars in millions)
 Total reported amounts  
Transactional (losses) gains included
in reported amounts
 Three months ended September 30,
 2019 2018  2019 2018
Other (expense) income, net$(7) $96
  $(30) $67
Income tax (expense) benefit(61) (139)  32
 (69)
Equity earnings266
 74
  17
 (43)
Income from continuing operations, net of income tax653
 280
  21
 (53)
Income from discontinued operations, net of income tax256
 54
  —
 —
Earnings attributable to common shares813
 274
  11
 (28)
 Nine months ended September 30,
 2019 2018  2019 2018
Other (expense) income, net$103
 $192
  $5
 $62
Income tax (expense) benefit(150) 221
  (7) (64)
Equity earnings485
 49
  (5) (40)
Income from continuing operations, net of income tax1,570
 25
  (10) (51)
Income from discontinued operations, net of income tax292
 137
  1
 1
Earnings attributable to common shares1,608
 60
  (4) (24)
CAPITAL RESOURCES AND LIQUIDITY
OVERVIEW
Sempra Energy Consolidated
Impact of the COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared the COVID-19 outbreak to be a pandemic. President Donald Trump officially declared a national emergency on March 13, 2020, and the Mexican government announced a national state of sanitary emergency on March 30, 2020. The COVID-19 pandemic is having a significant impact on the economy and people’s livelihoods, including substantial volatility in financial markets and a historic surge in unemployment claims, and has resulted in sweeping action by governments and other authorities to help address these effects. For example:
▪The CPUC required that all energy companies under its jurisdiction, including the California Utilities, take action to implement several emergency customer protection measures to support California customers. The measures apply to all residential and small business customers affected by the COVID-19 pandemic and include suspending service disconnections due to nonpayment, waiving late payment fees, and offering flexible payment plans for all customers experiencing difficulty paying their electric or gas bills. The CPUC approved a resolution authorizing each of the California Utilities to establish a CPPMA to track and request recovery of incremental costs associated with complying with residential and small business customer protection measures implemented by the CPUC related to the COVID-19 pandemic, including costs associated with suspending service disconnections and uncollectible expenses that arise from these customers’ failure to pay. Although we are tracking these costs in various regulatory mechanisms, recovery is not assured. The continuation of these circumstances could result in a further reduction in payments received from the California Utilities’ customers and a further increase in uncollectible accounts, which could become material, and any inability to recover these costs could have a material adverse effect on the cash flows,
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financial condition and results of operations of Sempra Energy, SDG&E and SoCalGas. We discuss regulatory mechanisms in Note 4 of the Notes to Condensed Consolidated Financial Statements.
▪In Texas, the PUCT issued orders creating the COVID-19 Electricity Relief Program and suspending service disconnections due to nonpayment for customers enrolled in the program through September 30, 2020. The COVID-19 Electricity Relief Program created a fund through which transmission and distribution utilities and retail electric providers in Texas may seek to recover certain costs (including transmission and distribution utility electricity delivery charges) of providing uninterrupted services to customers facing financial hardship due to the effects of the COVID-19 pandemic. Financial assistance under the program was available to enrolled residential customers for electricity bills issued on or after March 26, 2020 through September 30, 2020. The PUCT has also authorized the use of a regulatory asset accounting mechanism and a subsequent process through which regulated utility companies may seek future recovery of other expenses resulting from the effects of the COVID-19 pandemic. Rate regulation is premised on the full recovery of prudently incurred costs. The regulatory assets established with respect to COVID-19 pandemic costs are subject to PUCT review for reasonableness and possible disallowance. Any inability to recover these costs could have an adverse effect on the cash flows, financial condition and results of operations of Sempra Energy.
▪On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted and signed into law in response to the COVID-19 pandemic. Among other things, the CARES Act contains significant business tax provisions, including a delay of payment of employer payroll taxes and an acceleration of refunds of corporate alternative minimum tax (AMT) credits. Sempra Energy, SDG&E and SoCalGas expect to benefit from deferring payment of the employer’s share of payroll taxes through the end of 2020, with half of such taxes to be paid by the end of 2021 and the other half to be paid by the end of 2022. Sempra Energy has filed a refund claim for its corporate AMT credits and expects to receive approximately $56 million in 2020 rather than in installments through 2021.
Our businesses that invest in, develop and operate energy infrastructure and provide electric and gas services to customers have been identified as critical or essential services in the U.S. and Mexico and have continued to operate throughout the COVID-19 pandemic. As our businesses continue to operate, our priority is the safety of our employees, customers, partners and the communities we serve. We and other companies, including our partners, are taking steps to try to protect the health and well-being of our employees and other stakeholders. For example, we have activated our business continuity plans and continue to work closely with local, state and federal authorities to provide essential services with minimum interruption to customers and in accordance with applicable shelter-in-place and other orders. We have implemented precautionary measures across our businesses, including requiring employees to work remotely when possible, restricting non-essential business travel, increasing facility sanitization and communicating proper health and safety protocols to employees. We also have engaged an infectious disease expert to advise us during this public health crisis. Through the end of the third quarter of 2020, these actions have not required significant outlays of capital and have not had a material impact on our results of operations, but these or other measures that we may implement in the future could have a material adverse effect on our liquidity, cash flows, financial position and results of operations if circumstances related to the COVID-19 pandemic worsen or continue for an extended period of time.
The COVID-19 pandemic and its widespread effects also have impacted our capital plans, including a slowdown of certain of our capital spending, liquidity and asset values, as we discuss with respect to each of our segments below. We perform recovery testing of our recorded asset values when market conditions indicate that such values may not be recoverable. Given the current environment (including the decline in the price of our common stock, financial market volatility, record-high unemployment rates, potential reduction in customer collections, inability to secure permits and other authorizations due to government closures, and governments pursuing new laws or policies that modify pre-existing contract terms or alter operations), we considered whether these events or changes in circumstances triggered the need for an interim impairment analysis for our long-lived assets, intangible assets and goodwill. We determined that, given the nominal impact on our cash flows, assessment of the impact of these conditions on our businesses and existing headroom in our prior quantitative tests for goodwill, there was no triggering event in the nine months ended September 30, 2020. However, as the effects of the COVID-19 pandemic continue to evolve, we will continue to periodically assess the need to perform an interim impairment test and, consistent with prior years, plan to perform our annual goodwill impairment test on October 1, 2020. To the extent the results of any such impairment test reveal that the recorded (carrying) value is in excess of the fair value, we would record an impairment charge in the period of such test. A significant impairment charge related to our long-lived assets, intangible assets or goodwill would have a material adverse effect on our results of operations in the period in which it is recorded.
For a further discussion of risks and uncertainties related to the COVID-19 pandemic, see below in “Part II – Item 1A. Risk Factors.”

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Liquidity
We expect to meet our cash requirements through cash flows from operations, unrestricted cash and cash equivalents, proceeds from recent and planned asset sales, borrowings under our credit facilities, distributions from our equity method investments, issuances of debt, and equity securities (including through the physical settlement of forward sales agreements), project financing and other equity sales, including partnering in JVs.
Our lines of credit provide liquidity and support commercial paper. As we discuss in Note 7 of the Notes to Condensed Consolidated Financial Statements, Sempra Energy, Sempra Global, SDG&E and SoCalGas each have five-year credit agreements expiring in 2024. These credit agreements replaced the credit agreements that were set to expire in 2020. The table


below shows the amount of available funds at September 30, 2019, including available unused credit on these primary U.S. credit facilities. In addition, IEnova has $1.88 billion in lines of credit, with approximately $742 million available unused credit at September 30, 2019.
AVAILABLE FUNDS AT SEPTEMBER 30, 2019
(Dollars in millions)
 
Sempra Energy
Consolidated
 SDG&E SoCalGas
Unrestricted cash and cash equivalents(1)
$106
 $24
 $5
Available unused credit(2)(3)
4,232
 1,500
 642
(1)
Amounts at Sempra Energy Consolidated include $64 million held in non-U.S. jurisdictions. We discuss repatriation in Note 1 of the Notes to Condensed Consolidated Financial Statements.
(2)
Available unused credit is the total available on Sempra Energy’s, Sempra Global’s, SDG&E’s and SoCalGas’ credit facilities that we discuss in Note 7 of the Notes to Condensed Consolidated Financial Statements.
(3)
Because the commercial paper programs are supported by these lines, we reflect the amount of commercial paper outstanding as a reduction to the available unused credit.
Sempra Energy Consolidated
We believe that these available funds,cash flow sources, combined with cash flows from operations, proceeds from recent and planned asset sales, distributions from our equity method investments, issuances of debt and equity securities (including through the physical settlement of forward sale agreements), project financing and other equity sales, including partnering in JVs,available funds, will be adequate to fund our current operations, including to:
▪finance capital expenditures;
▪meet liquidity requirements;
▪fund dividends;
▪fund new business or asset acquisitions or start-ups;
▪fund capital contribution requirements;
▪repay maturing long-term debt; and
▪fund expenditures related to the natural gas leak at SoCalGas’ Aliso Canyon natural gas storage facility.
▪finance capital expenditures
▪meet liquidity requirements
▪fund dividends
▪fund new business or asset acquisitions or start-ups
▪fund capital contribution requirements
▪repay maturing long-term debt
▪fund expenditures related to the natural gas leak at SoCalGas’ Aliso Canyon natural gas storage facility
Sempra Energy and the California Utilities currently have readyreasonable access to the long-term debt markets and are not currently constrained in their ability to borrow money at reasonable rates. rates from commercial banks, under existing revolving credit facilities or through public offerings registered with the SEC. However, the capital markets in general, including particularly the commercial paper markets, and the availability of financing from commercial banks have experienced distress due to the COVID-19 pandemic, and our ability to access the capital markets or obtain credit from commercial banks outside of our committed revolving credit facilities could become materially constrained if changing economic conditions and disruptions to the capital markets, due to the COVID-19 pandemic or otherwise, worsen or continue for an extended period. In addition, our financing activities and actions by credit rating agencies, as well as many other factors, could negatively affect the availability and cost of both short-term and long-term financing. Also, cash flows from operations may be impacted by the timing of commencement and completion, and potentially cost overruns, of large projects. If cash flows from operations were to be significantly reduced or we were unable to borrow under acceptable terms, we would likely first reduce or postpone discretionary capital expenditures (not related to safety) and investments in new businesses. We monitor our ability to finance the needs of our operating, investing and financing activities in a manner consistent with our intention to maintain our investment-grade credit ratings and capital structure.
We use short-term debt primarily to meet liquidity requirements, fund shareholder dividends, and temporarily finance capital expenditures, acquisitions or start-ups. Our corporate short-term, unsecured promissory notes, or commercial paper, were our primary sources of short-term debt funding in the first nine months of 2019. Our California Utilities use short-term debt primarily to meet working capital needs.
At September 30, 2019, Sempra Energy had a loan to an unconsolidated affiliate totaling $712 million and a loan from an unconsolidated affiliate totaling $39 million, which we discuss in Note 1 of the Notes to Condensed Consolidated Financial Statements.
We have significant investments in several trusts to provide for future payments of pensions and other postretirement benefits and nuclear decommissioning. Changes in asset values, which are dependent on the activity in the equity and fixed income markets, have not affected the trust funds’ abilities to make required payments. However, changes in asset values may, along with a number of other factors, such as changes to discount rates, assumed rates of return, mortality tables and regulations, may impact funding requirements for pension and other postretirement benefit plansbenefits plans. Funding requirements for SDG&E’s NDT could also be impacted by the timing and SDG&E’s NDT.amount of SONGS decommissioning costs. At the California Utilities, funding requirements are generally recoverable in rates. We discuss our employee benefit plans and SDG&E’s NDT, including our investment allocation strategies for assets in these trusts, in Notes 9 and 15, respectively, of the Notes to Consolidated Financial Statements in the Annual Report.

Available Funds

Common Stock Under Forward Sale Agreements
Our committed lines of credit provide liquidity and support commercial paper. As we discuss in Note 147 of the Notes to Condensed Consolidated Financial Statements, Sempra Energy, Sempra Global, SDG&E and SoCalGas each have five-year credit agreements expiring in 2024. In addition, Sempra Mexico has general-purpose credit facilities that expire in 2021 and 2024. The table below shows the amount of available funds at September 30, 2020, including available unused credit on these primary U.S. and foreign lines of credit.
AVAILABLE FUNDS AT SEPTEMBER 30, 2020
(Dollars in millions)
 Sempra Energy
Consolidated		SDG&ESoCalGas
Unrestricted cash and cash equivalents(1)
$3,515 $733 $304 
Available unused credit(2)
7,793 1,500 750 
(1)    Amounts at Sempra Energy Consolidated include $439 million held in non-U.S. jurisdictions. We discuss repatriation in Note 1 of the Notes to Condensed Consolidated Financial Statements.
(2)    Available unused credit is the total available on Sempra Energy’s, Sempra Global’s, SDG&E’s, SoCalGas’ and Sempra Mexico’s credit facilities that we discuss in Note 7 of the Notes to Condensed Consolidated Financial Statements.

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Short-Term Borrowings
We use short-term debt primarily to meet liquidity requirements, fund shareholder dividends, and temporarily finance capital expenditures, acquisitions or start-ups. Our California Utilities use short-term debt primarily to meet working capital needs. Due to volatility in commercial paper markets shortly following the start of the COVID-19 pandemic, commercial paper borrowing became less desirable and, in some cases, not competitive or unavailable. To secure sufficient sources of liquidity during this period, Sempra Energy, Sempra Global, SDG&E, SoCalGas and IEnova each drew amounts under their respective credit facilities and Sempra Energy and SDG&E each also obtained short-term term loans, much of which has been subsequently repaid. Revolving lines of credit, term loans and commercial paper were our primary sources of short-term debt funding in the Annual Report,first nine months of 2020.
We discuss our forward sale agreements permit usshort-term debt activities in Note 7 of the Notes to elect cash settlement or net share settlementCondensed Consolidated Financial Statements.
Long-Term Debt Activities
Major issuances of and payments on long-term debt in the first nine months of 2020 included the following:
LONG-TERM DEBT ISSUANCES AND PAYMENTS
(Dollars in millions)
Issuances:Amount at issuanceMaturity
SDG&E variable rate 364-day term loan$200 2021
SDG&E variable rate revolving line of credit200 2024
SDG&E 1.70% first mortgage bonds800 2030
SDG&E 3.32% first mortgage bonds400 2050
SoCalGas senior unsecured variable rate notes300 2023
SoCalGas 2.55% first mortgage bonds650 2030
Sempra Mexico 2.38% notes100 2034
Sempra Mexico 2.90% notes241 2034
Sempra Mexico 4.75% senior unsecured notes800 2051
Payments:PaymentsMaturity
Sempra Energy 2.4% notes$500 2020
Sempra Energy 2.4% notes500 2020
SDG&E 1.914% amortizing first mortgage bonds36 2020-2022
SDG&E variable rate revolving line of credit200 2024
Sempra Mexico variable rate notes46 2024-2032

SDG&E intends to use the proceeds from its long-term debt offerings to repay commercial paper and its line of credit borrowings, for all orworking capital and other general corporate purposes. Additionally, SDG&E intends to use a portion of the proceeds from its $800 million 1.70% first mortgage bonds offering to repay approximately $250 million of debt, prior to its scheduled maturity.
SoCalGas intends to use the proceeds from its long-term debt offerings to repay commercial paper and for general corporate purposes.
Sempra Mexico used the proceeds from its issuances of long-term debt to finance the construction of solar generation projects, repay line of credit borrowings and for other general corporate purposes.
We discuss our obligations underlong-term debt activities in Note 7 of the forward sale agreements.Notes to Condensed Consolidated Financial Statements.

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Sempra Energy Series C Preferred Stock Offering
On June 19, 2020, we issued 900,000 shares of our series C preferred stock in a registered public offering at a price to the public of $1,000 per share and received net proceeds of $889 million after deducting the underwriting discount and equity issuance costs of $11 million. We have fully settled all shares underused the January 2018 forward sale agreements, asnet proceeds for working capital and other general corporate purposes, including the repayment of indebtedness. We provide additional discussion about this equity offering in Note 1 of the Notes to Condensed Consolidated Financial Statements.
Sempra Energy Common Stock Repurchase Programs
As we discuss in Note 1 of the Notes to Condensed Consolidated Financial Statements. We expectStatements and below in “Part II – Item 2. Unregistered Sales of Equity Securities and Use of Proceeds,” on July 1, 2020, we entered into an ASR program under which we prepaid $500 million to settle the July 2018 forward sale agreements entirely by the physical delivery ofrepurchase shares of our common stock in exchange for cash proceeds. Asa share forward transaction. The program was completed on August 4, 2020 with an aggregate of November 1, 2019, based on the initial forward sale4,089,375 shares of Sempra Energy common stock repurchased at an average price of approximately $111.87$122.27 per share. We funded the $500 million share in July 2018, we expect that the net proceeds from full physical settlementrepurchase with a portion of the 9,750,000 shares underproceeds received from the July 2018 forward sale agreements would be approximately $1.1 billion (net of underwriting discounts, but before deducting equity issuance costs, and subject to certain adjustments pursuant to the forward sale agreements). If we were to elect cash settlement or net share settlement, the amount of cash proceeds we receive upon settlement could differ, perhaps substantially, or we may not receive any cash proceeds, or we may deliver cash (in an amount which could be significant) or shares of our common stock to the forward purchasers. We may settle the July 2018 forward sale agreements in one or more settlements no later than December 15, 2019, which is the final settlement date under the agreements.
Discontinued Operations
On January 25, 2019, our board of directors approved a plan to sell our South American businesses. As such, we have reclassified these businesses
Credit Ratings
We provide additional information about the credit ratings of Sempra Energy, SDG&E and SoCalGas in “Part I – Item 1A. Risk Factors” and “Part II – Item 2. MD&A – Capital Resources and Liquidity” in the Annual Report.
The credit ratings of Sempra Energy, SDG&E and SoCalGas remained at investment grade levels during the first nine months of 2020. On May 29, 2020, Moody’s downgraded SoCalGas’ senior unsecured credit rating to held for saleA2 with a stable outlook. On June 9, 2020, Moody’s downgraded Sempra Energy’s senior unsecured and presented them as discontinued operations.
issuer credit ratings to Baa2 with a stable outlook. On September 27, 2019, we entered into a Purchase16, 2020, S&P revised its outlook on SDG&E from stable to negative and Sale Agreement with China Yangtze Power International (Hongkong) Co., Limited to sell our equity interests in our Peruvian businesses, including our83.6-percentaffirmed its BBB+ issuer credit rating.
CREDIT RATINGS AT SEPTEMBER 30, 2020
Sempra EnergySDG&ESoCalGas
Moody’sBaa2 with a stable outlookBaa1 with a positive outlookA2 with a stable outlook
S&PBBB+ with a negative outlookBBB+ with a negative outlookA with a negative outlook
FitchBBB+ with a stable outlookBBB+ with a stable outlookA with a stable outlook
Our credit ratings may affect the rates at which borrowings bear interest in Luz del Sur and its indirect ownership interest in Tecsur, for an aggregate base purchase price of $3.59 billion, subject to customary closing adjustments for working capital and changes in net indebtedness. The sale is subject to various conditions to closing, including approvals from the Peruvian anti-trust authority and the Bermuda Monetary Authority. We expect the salecommitment fees on available unused credit. A downgrade of Sempra Energy’s or any of its subsidiaries’ credit ratings or rating outlooks may result in a requirement for collateral to closebe posted in the first quartercase of 2020.certain financing arrangements and may materially and adversely affect the market prices of their equity and debt securities, the rates at which borrowings are made and commercial paper is issued, and the various fees on their outstanding credit facilities. This could make it more costly for Sempra Energy, SDG&E, SoCalGas and Sempra Energy’s other subsidiaries to issue debt securities, to borrow under credit facilities and to raise certain other types of financing.
On October 12, 2019, we entered into a Purchase and Sale Agreement with State Grid International Development Limited to sell our equity interests in our Chilean businesses, including our 100-percent interest in Chilquinta Energía and Tecnored and our 50-percent interest in Eletrans, for an aggregate base purchase priceSempra Energy has agreed that, if the credit rating of $2.23 billionOncor’s senior secured debt by any of the three major rating agencies falls below BBB (or the equivalent), subject to customary adjustments for working capital and changes in net indebtednessOncor will suspend dividends and other adjustments. Chilquinta Energía also agreed to purchase the remaining 50-percent interest in Eletrans from Sociedad Austral de Electricidad S.A.distributions (except for contractual tax payments), contingent on the sale of our Chilean businesses to State Grid International Development Limited. This acquisition by Chilquinta Energía would result in State Grid International Development Limited acquiring100 percent of Eletrans, which we do not expect will have a significant economic impact on the sale of our Chilean businesses. The sale of our Chilean businesses is subject to various conditions to closing, including approvalunless otherwise allowed by the Chilean anti-trust authority, certain Chinese regulatory approvalsPUCT. Oncor’s senior secured debt was rated A2, A+ and approval by the Bermuda Monetary Authority, but is not subjectA at Moody’s, S&P and Fitch, respectively, at September 30, 2020.
Loans to/from Affiliates
At September 30, 2020, Sempra Energy had $642 million in loans due from unconsolidated affiliates and $271 million in loans due to Chilquinta Energía purchasing the remaining 50-percent interest in Eletrans. We expect the sale to close in the first quarter of 2020.unconsolidated affiliates.
Our utilities in South America
California Utilities
SDG&E’s and SoCalGas’ operations have historically provided relatively stable earnings and liquidity. We intend to useTheir future performance and liquidity will depend primarily on the proceeds fromratemaking and regulatory process, environmental regulations, economic conditions, actions by the sales to focus on capital investmentCalifornia legislature and the changing energy marketplace, as well as the other matters described in North America to support additional growth opportunitiesthis report and strengthen our balance sheet by reducing debt. We expect the cash provided by earnings from our focused capital investment will exceed the absence of cash flows from these discontinued operations. However, there can be no assurance that we will derive these anticipated benefits. Further, there can be no assurance that we will be able to redeploy the capital that we obtain from such sales, if completed, in a way that would result in cash flows or earnings exceeding those historically generated by these businesses.Annual Report.
California Utilities
SDG&E and SoCalGas expect that the available unused credit from their credit facilities described above, cash flows from operations, and debt issuances will continue to be adequate to fund their respective current operations and planned capital expenditures. The California Utilities are continuing to monitor the impacts of the COVID-19 pandemic on cash flows and results of operations. As we discuss below in “Item 3. QuantitativeSome customers are experiencing a diminished ability to pay their electric or gas bills, leading to slower payments and Qualitative Disclosures About Market Risk –Credit Ratings,”higher levels of nonpayment than has been the credit ratings of SDG&Ecase historically. These impacts could become significant and SoCalGas may affect the rates at which borrowings bear interest, collateralcould require
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modifications to be posted and fees on outstanding credit facilities. our financing plans. The California Utilities manage their capital structure and pay dividends when appropriate and as approved by their respective boards of directors.
SDG&E declared common stock dividends of $250 million in the year ended December 31, 2018. SDG&E’s declared common stock dividends on an annual historical basis may not be indicative of future declarations, and could be impacted over the next few years in order for SDG&E to maintain its authorized capital structure while managing its capital investment program (approximately $1.7 billion in 2019).


SoCalGas declared common stock dividends of $150 million in the third quarter of 2019, which were paid on October 11, 2019, and declared and paid common stock dividends of $50 million in the year ended December 31, 2018. SoCalGas’ declared common stock dividends on an annual historical basis may not be indicative of future declarations, and could be impacted over the next few years in order for SoCalGas to maintain its authorized capital structure while managing its capital investment program (approximately $1.6 billion in 2019).
As we discuss in Note 4 of the Notes to Condensed Consolidated Financial Statements hereinin this report and in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report, changes in balancing accounts for significant costs at SDG&E and SoCalGas, particularly a change between over- and undercollected status, including commodity and transportation balancing accounts, may have a significant impact on cash flows. These changes generally represent the difference between when costs are incurred and when they are ultimately recovered in rates through billings to customers.
SoCalGasArrearage Management Payment Plan
Aliso Canyon Natural Gas Storage Facility Gas Leak
We provide informationIn June 2020, the CPUC issued a decision addressing service disconnections that, among other things, allows each of the California Utilities to establish a two-way balancing account to record the uncollectible expenses associated with residential customers’ inability to pay their electric or gas bills. This decision also directs the California Utilities to establish an AMP that provides successfully participating, income-qualified residential customers with relief from outstanding utility bill amounts. The California Utilities have recorded increases in their allowances for uncollectible accounts as of September 30, 2020 primarily related to expected forgiveness of outstanding bill amounts for customers eligible under the AMP. The AMP could result in a reduction in payments received from the California Utilities’ customers and further increase uncollectible accounts, which could become material, and any inability to recover these costs could have a material adverse effect on the natural gas leakcash flows, financial condition and results of operations of Sempra Energy, SDG&E and SoCalGas.
Pipeline Safety Enhancement Plan (PSEP)
In November 2018, SoCalGas and SDG&E filed a joint application with the CPUC for a reasonableness review of PSEP project costs totaling $941 million for 83 pipeline safety enhancement projects. SoCalGas and SDG&E subsequently entered into a settlement agreement for cost recovery of $935 million ($806 million for SoCalGas and $129 million for SDG&E). A final decision was approved in August 2020, granting the proposed settlement agreement as well as the amortization schedule for recovery of costs. The final decision was implemented in rates on October 1, 2020.
SDG&E
Wildfire Fund
In 2019, SDG&E recorded a Wildfire Fund asset for committed shareholder contributions to the Wildfire Fund. We describe the Wildfire Legislation and related accounting treatment in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
SDG&E is exposed to the risk that the participating California electric IOUs may incur third-party wildfire claims for which they will seek recovery from the Wildfire Fund. In such a situation, SDG&E may recognize a reduction of its Wildfire Fund asset and record a charge against earnings in the period when there is a reduction of the available coverage due to recoverable claims from any of the participating IOUs. As a result, if any California electric IOU’s equipment is determined to be a cause of a fire, it could have a material adverse effect on SDG&E’s and Sempra Energy’s financial condition and results of operations up to the carrying value of our Wildfire Fund asset, with additional potential material exposure if SDG&E’s equipment is determined to be a cause of a fire. In addition, the Wildfire Fund could be completely exhausted due to fires in the other California electric IOUs’ service territories, by fires in SDG&E’s service territory or by a combination thereof. In 2020, California has experienced some of the largest wildfires in its history (measured by acres burned), including fires in SDG&E’s service territory, and there can be no assurance that the equipment of a California electric IOU will not be determined to be a cause of one or more of these fires. In the event that the Wildfire Fund is materially diminished, exhausted or terminated, SDG&E will lose the protection afforded by the Wildfire Fund, and as a consequence, a fire in SDG&E’s service territory could cause a material adverse effect on SDG&E’s and Sempra Energy’s cash flows, results of operations and financial condition.
SoCalGas
SoCalGas’ future performance will depend on the resolution of legal, regulatory and other matters concerning the Leak at the Aliso Canyon natural gas storage facility, which we discuss further in Note 11 of the Notes to Condensed Consolidated Financial Statements herein, in “Factors Influencing Future Performance” belowthis report and in “Item“Part 1 – Item 1A. Risk Factors” in the Annual Report. The

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Aliso Canyon Natural Gas Storage Facility Gas Leak
From October 23, 2015 through February 11, 2016, SoCalGas experienced a natural gas leak from one of the injection-and-withdrawal wells, SS25, at its Aliso Canyon natural gas storage facility located in Los Angeles County. In February 2016, CalGEM confirmed that the well was permanently sealed.
Cost Estimates, Accounting Impact and Insurance.At September 30, 2020, SoCalGas estimates certain costs incurredrelated to remediate and stop the Leak and to mitigate local community impacts are significant and$1,440 million (the cost estimate). This cost estimate may increase significantly as more information becomes available. A substantial portion of the cost estimate has been paid, and $268 million is accrued as Reserve for Aliso Canyon Costs and $7 million is accrued in Deferred Credits and Other as of September 30, 2020 on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets.
Except for the amounts paid or estimated to settle certain actions, the cost estimate does not include all litigation or regulatory costs to the extent it is not possible to predict at this time the outcome of these actions or reasonably estimate the costs of defending againstto defend or resolve the related civil and criminal lawsuits and cooperating with related investigations, and anyactions or the amount of damages, restitution, andor civil, administrative andor criminal fines, sanctions, penalties or other costs or remedies that may be imposed or incurred. The cost estimate also does not include certain other costs incurred by Sempra Energy associated with defending against shareholder derivative lawsuits and other potential costs if awardedthat we currently do not anticipate incurring or imposed, as well asthat we cannot reasonably estimate. These costs of mitigatingnot included in the actual natural gas released,cost estimate could be significant and could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.
We have received insurance payments for many of the costs included in the cost estimate, including temporary relocation and associated processing costs, control-of-well expenses, costs of the government-ordered response to the Leak, certain legal costs and lost gas. We intend to pursue the full extent of our insurance coverage for the costs we have incurred. Other than directors’ and officers’ liability insurance, after taking into consideration the additional accrual related to litigation matters described in Note 11 of the Notes to Condensed Consolidated Financial Statements, we have exhausted all of our insurance in this matter, except as to certain defense costs we may incur in the future, including those related to the shareholder derivative lawsuits. We continue to pursue other sources of insurance coverage for costs related to this matter, but we may not covered bybe successful in obtaining additional insurance (includingrecovery for any of these costs. If we are not able to secure additional insurance recovery for all or a substantial portion of these costs, if any costs in excess of applicable policy limits),we have recorded as an insurance receivable are not collected, if there were to be significantare delays in receiving insurance recoveries, or if the insurance recoveries are subject to income taxes while the associated costs are not tax deductible, such amounts, which could be significant, could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations. Also, higher operating costs
As of September 30, 2020, we recorded the expected recovery of the cost estimate related to the Leak of $504 million as Insurance Receivable for Aliso Canyon Costs on SoCalGas’ and additional capital expenditures incurred by SoCalGas asSempra Energy’s Condensed Consolidated Balance Sheets. This amount is exclusive of insurance retentions and $775 million of insurance proceeds we received through September 30, 2020. If we were to conclude that this receivable or a resultportion of new laws, orders, rules and regulations arising outit is no longer probable of recovery from insurers, some or all of this incident or our responses theretoreceivable would be charged against earnings, which could be significant and may not be recoverable in customer rates, which may have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.
Natural Gas Storage Operations and Reliability.Natural gas withdrawn from storage is important for service reliability during peak demand periods, including peak electric generation needs in the summer and heating needs in the winter. The Aliso Canyon natural gas storage facility is the largest SoCalGas storage facility and an important element of SoCalGas’ delivery system. As a result of the Leak, SoCalGas suspended injection of natural gas into the Aliso Canyon natural gas storage facility beginning in October 2015 and, following a comprehensive safety review and authorization by CalGEM and the CPUC’s Executive Director, resumed limited injection operations in July 2017.
During the suspension period, SoCalGas advised the California ISO, California Energy Commission, CPUC and Pipeline and Hazardous Materials Safety Administration of its concerns that the inability to inject natural gas into the Aliso Canyon natural gas storage facility posed a risk to energy reliability in Southern California. The CPUC has issued a series of directives to SoCalGas specifying the range of working gas to be maintained in the Aliso Canyon natural gas storage facility as well as protocols for the withdrawal of gas, to help ensure safe and reliable natural gas service, while helping to maintain stable energy prices in Southern California. Limited withdrawals of natural gas from the facility were made in 2018, 2019 and 2020 to augment natural gas supplies during critical demand periods.
In February 2017, the CPUC opened a proceeding pursuant to SB 380 to determine the feasibility of minimizing or eliminating the use of the Aliso Canyon natural gas storage facility. If the Aliso Canyon natural gas storage facility were to be permanently closed, or if future cash flows from its operation were otherwise insufficient to recover its carrying value, it could result in an impairment of the facility and significantly higher than expected operating costs and/or additional capital expenditures, and natural gas reliability and electric generation could be jeopardized. At September 30, 2020, the Aliso Canyon natural gas storage
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facility had a net book value of $788 million. Any significant impairment of this asset, or higher operating costs and additional capital expenditures incurred by SoCalGas that may not be recoverable in customer rates, could have a material adverse effect on SoCalGas’ and Sempra Energy’s results of operations, financial condition and cash flows.
Sempra Texas Utilities
Oncor’s business is capital intensive, and it relies on external financing as a significant source of liquidity for its capital requirements. In the past, Oncor has financed a substantial portion of its cash needs from operations and with proceeds from indebtedness. In the event that Oncor fails to meet its capital requirements, we may be required to make additional investments incapital contributions to Oncor, or if Oncor is unable to access sufficient capital to finance its ongoing needs, we may elect to make additional investments incapital contributions to Oncor (as our commitments to the PUCT prohibit us from making loans to Oncor) which could be substantial and which would reduce the cash available to us for other purposes, could increase our indebtedness and could ultimately materially adversely affect our results of operations, liquidity, financial condition and prospects. In that regard, our commitments
Oncor’s ability to pay dividends may be limited by factors such as its credit ratings, regulatory capital requirements, debt-to-equity ratio approved by the PUCT prohibit us from making loansand other restrictions. In addition, Oncor will not pay dividends if a majority of Oncor’s independent directors or any minority member director determines it is in the best interests of Oncor to Oncor. As a result, if Oncor requires additional financing and cannot obtain it from other sources, we may be requiredretain such amounts to make a capital contribution to Oncor.meet expected future requirements.
Sempra Mexico
Construction Projects and Related Regulatory Matters
Sempra Mexico is currently building or developing terminals for the receipt, storage, and delivery of liquid fuels in the new port of Veracruz and vicinity of Mexico City, Puebla, Topolobampo, Manzanillo, and Ensenada. Sempra Mexico is also constructing new solar facilities in Juárez, Chihuahua, and Benjamin Hill, Sonora, through which it intends to supply renewable energy to several private companies. We expect to fund these capital expenditures and investments, operations and dividends at IEnova with available funds, including credit facilities, and funds internally generated by the Sempra Mexico businesses, as well as funds from project financing, sales of securities, interim funding from the parent or affiliates, and partnering in JVs.
In October 2019, IEnova’s board We expect the projects to commence commercial operations on various dates in 2020 and 2021. However, expected commencement dates could be delayed by worsening or extended disruptions of directors declared dividendsproject construction or development caused by the COVID-19 pandemic. Sempra Mexico is continuing to monitor the impacts of $73 million to minority shareholders payable in November 2019. IEnova paid $71 millionthe COVID-19 pandemic on cash flows and results of dividends to minority shareholders in the year ended December 31, 2018.
IEnova’s shareholders approved the formation of a fund for IEnova to repurchase its own shares for a maximum amount of $250 million. Repurchases shall not exceed IEnova’s total net profits, including retained earnings, as stated in their financial statements. In the nine months ended September 30, 2019, IEnova repurchased 2,620,000 shares of its outstanding common stock held by NCI for approximately $10 million, resulting in an increase in Sempra Energy’s ownership interest in IEnova from 66.5 percent at December 31, 2018 to 66.6 percent at September 30, 2019.


Sempra Renewablesoperations. See “Part II – Item 1A. Risk Factors” below.
As we discuss in Note 5 of the Notes to Condensed Consolidated Financial Statements herein and below in “Factors Influencing Future Performance,” in April 2019, Sempra Renewables sold its remaining wind assets and investments for $569 million, net of transaction costs. The proceeds from the sale were used to pay down debt and redeploy capital to support the strategic growth of Sempra Energy in North America.
Sempra LNG
Sempra LNG, through its interest in Cameron LNG JV, is constructing a natural gas liquefaction export facility at the Cameron LNG JV terminal. The majority of the costs of the current three-train liquefaction project is project-financed, with most or all of the remainder of the capital requirements to be provided by the project partners, including Sempra Energy, through equity contributions under the project equity agreements. In August 2019, the first train of the three-train project commenced commercial operation under the tolling agreements. We expect that our remaining equity requirements to complete the project will be met by a combination of our share of cash generated from each liquefaction train as it comes on line and, if required, additional cash contributions. Sempra Energy guarantees 50.2 percent of Cameron LNG JV’s obligations under the financing agreements for a maximum amount of up to $3.9 billion. The guarantees will terminate upon satisfaction of certain conditions, including all three trains commencing commercial operation and meeting certain operational performance tests (Financial Completion). We anticipate that the guarantees will be terminated approximately nine months after all three trains commence commercial operation. However, if Financial Completion does not occur by September 30, 2021 (subject to extension by up to 365 days in case of force majeure) or if certain other events of default occur, a demand could be made under the guarantee for Sempra Energy’s 50.2 percent of Cameron LNG JV’s obligations under the financing agreements then due and payable. We discuss Cameron LNG JV and the JV financing further in Note 6 of the Notes to Consolidated Financial Statements, in “Item 1A. Risk Factors” and in “Item 7. MD&A – Factors Influencing Future Performance” in the Annual Report. We also discuss Cameron LNG JV below in “Factors Influencing Future Performance.”
We expect Sempra LNG to require funding for the development and expansion of its remaining portfolio of projects, which may be financed through a combination of operating cash flow, funding from the parent, project financing and partnering in JVs.
CASH FLOWS FROM OPERATING ACTIVITIES
CASH PROVIDED BY OPERATING ACTIVITIES
(Dollars in millions)
 Nine months ended
September 30, 2019		  2019 change  Nine months ended
September 30, 2018
Sempra Energy Consolidated$2,118
  $(541) (20)%  $2,659
SDG&E754
  (477) (39)  1,231
SoCalGas813
  (69) (8)  882
Sempra Energy Consolidated
Cash provided by operating activities at Sempra Energy decreased in 2019 primarily due to:
$323 million from SDG&E’s contribution to the Wildfire Fund in September 2019;
$74 million increase in net undercollected regulatory balancing accounts (including long-term amounts included in regulatory assets) at SDG&E in 2019 compared to a $247 million decrease in 2018;
$220 million higher income tax payments, net of refunds;
$106 million net decrease in Reserve for Aliso Canyon Costs in 2019 compared to a $57 million net increase in 2018. The $106 million net decrease in 2019 includes $150 million of cash paid, offset by $44 million of additional accruals;
▪$148 million decrease in accounts payable in 2019 compared to a $2 million increase in 2018;
▪$57 million increase in net undercollected regulatory balancing accounts (including long-term amounts included in regulatory assets) at SoCalGas in 2019 compared to a $53 million decrease in 2018; and
▪
$8 million increase in interest payable in 2019 compared to a $79 million increase in 2018; offset by
▪$202 million higher net income, adjusted for noncash items included in earnings, in 2019 compared to 2018;
▪$205 million decrease in accounts receivable in 2019 compared to a $15 million decrease in 2018;
▪$107 million net decrease in Insurance Receivable for Aliso Canyon Costs in 2019 compared to a $56 million net increase in 2018. The $107 million net decrease in 2019 includes $149 million in insurance proceeds received, offset by $44 million of additional accruals;


▪$153 million higher distributions of earnings from Oncor Holdings; and
▪$112 million higher intercompany activities with discontinued operations.
Our discontinued operations provided cash from operating activities of $289 million in 2019 compared to $220 million in 2018. The change was primarily due to a decrease in accounts receivable in 2019 compared to an increase in 2018.
SDG&E
Cash provided by operating activities at SDG&E decreased in 2019 primarily due to:
$323 million contribution to the Wildfire Fund in September 2019; and
•
$74 million increase in net undercollected regulatory balancing accounts (including long-term amounts included in regulatory assets) in 2019 compared to a $247 million decrease in 2018; offset by
▪$57 million increase in accounts receivable in 2019 compared to a $144 million increase in 2018; and
▪$50 million higher net income, adjusted for noncash items included in earnings, in 2019 compared to 2018.
SoCalGas
Cash provided by operating activities at SoCalGas decreased in 2019 primarily due to:
▪$192 million decrease in accounts payable in 2019 compared to a $19 million decrease in 2018;
▪$106 million net decrease in Reserve for Aliso Canyon Costs in 2019 compared to a $57 million net increase in 2018. The $106 million net decrease in 2019 includes $150 million of cash paid, offset by $44 million of additional accruals; and
▪
$57 million increase in net undercollected regulatory balancing accounts (including long-term amounts included in regulatory assets) in 2019 compared to a $53 million decrease in 2018; offset by
▪$107 million net decrease in Insurance Receivable for Aliso Canyon Costs in 2019 compared to a $56 million net increase in 2018. The $107 million net decrease in 2019 includes $149 million in insurance proceeds received, offset by $44 million of additional accruals;
▪$115 million higher net income, adjusted for noncash items included in earnings, in 2019 compared to 2018; and
▪$301 million decrease in accounts receivable in 2019 compared to a $196 million decrease in 2018.
CASH FLOWS FROM INVESTING ACTIVITIES
CASH USED IN INVESTING ACTIVITIES
(Dollars in millions)
 Nine months ended September 30, 2019  2019 change  Nine months ended September 30, 2018
Sempra Energy Consolidated(3,439)  $(9,353) (73)%  $(12,792)
SDG&E(1,097)  (97) (8)  (1,194)
SoCalGas(1,018)  (191) (16)  (1,209)
Sempra Energy Consolidated
Cash used in investing activities at Sempra Energy decreased in 2019 primarily due to:
▪$9.57 billion paid, including $9.45 billion of Merger Consideration, for the acquisition of our investment in Oncor Holdings in March 2018, as we discuss in Note 5 of the Notes to Condensed Consolidated Financial Statements;
▪$583 million dividends received from the Peruvian businesses in discontinued operations;
▪
$569 million net proceeds from the April 2019 sale of Sempra Renewables’ remaining wind assets and investments;
▪
$327 million net proceeds from the February 2019 sale of Sempra LNG’s non-utility natural gas storage assets;
▪$129 million dividends received from the Chilean businesses in discontinued operations;
▪$65 million lower advances to unconsolidated affiliates; and
▪
$64 million decrease in capital expenditures; offset by
▪$1.1 billion higher contributions to Oncor Holdings, primarily to fund Oncor’s purchase of InfraREIT in May 2019;
▪$583 million contributions to the Peruvian businesses in discontinued operations;
▪$394 million contributions to the Chilean businesses in discontinued operations; and
▪$102 million paid for the acquisition of our investment in Sharyland Holdings in May 2019.


We discuss the May 2019 transactions in Notes 5 and 6 of the Notes to Condensed Consolidated Financial Statements.
Our discontinued operations used cash in investing activities of $63 million in 2019 compared to $161 million in 2018. The change was primarily from proceeds received in 2019 from repayment of a loan to an unconsolidated affiliate.
SDG&E
Cash used in investing activities at SDG&E decreased in 2019 primarily due to:
▪
$123 million decrease in capital expenditures; offset by
▪$25 million increase in net advances to Sempra Energy in 2019.
SoCalGas
Cash used in investing activities at SoCalGas decreased in 2019 primarily due to:
▪$108 million decrease in capital expenditures; and
▪$88 million increase in net advances to Sempra Energy in 2018.
Capital Expenditures
EXPENDITURES FOR PROPERTY, PLANT AND EQUIPMENT
(Dollars in millions)

Nine months ended September 30,
 2019 2018
SDG&E:
 
Improvements to electric and natural gas distribution systems, including certain pipeline safety

 

and generation systems, plant and equipment$741
 $811
PSEP22
 13
Improvements to electric transmission systems308
 370
SoCalGas:

 

Improvements to natural gas distribution, transmission and storage systems, and for certain   
pipeline safety886
 1,007
PSEP133
 120
Sempra Mexico:

 

Construction of liquid fuels terminal139
 53
Construction of natural gas pipeline projects and other capital expenditures100
 78
Construction of renewables projects181
 124
Sempra Renewables:
  
Construction costs for wind and solar projects2
 46
Sempra LNG:

  
LNG liquefaction development costs74
 17
Other—
 2
Parent and other4
 13
Total$2,590
 $2,654

The amounts and timing of capital expenditures and certain investments are generally subject to approvals by various regulatory and other governmental and environmental bodies, including the CPUC and the FERC. Excluding discontinued operations, in 2019, we expect to make capital expenditures and investments of approximately $6.2 billion, an increase from the $5.8 billion summarized in “Item 7. MD&A – Capital Resources and Liquidity” in the Annual Report. The increase is primarily attributable to LNG development projects at Sempra LNG, as well as renewables and natural gas pipeline projects at Sempra Mexico.


CASH FLOWS FROM FINANCING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
(Dollars in millions)
 Nine months ended
September 30, 2019		  2019 change  Nine months ended September 30, 2018
Sempra Energy Consolidated$1,575
  $(8,490)  $10,065
SDG&E330
  352
  (22)
SoCalGas192
  (131)  323
Sempra Energy Consolidated
Cash provided by financing activities at Sempra Energy decreased in 2019 primarily due to:
▪
$5.2 billion lower issuances of debt with maturities greater than 90 days, including:
◦
$4.8 billion for long-term debt ($1.5 billion in 2019 compared to $6.3 billion in 2018 primarily to fund the acquisition of our investment in Oncor Holdings), and
◦
$387 million for commercial paper and other short-term debt ($1.8 billion in 2019 compared to $2.1 billion in 2018);
▪
$2.3 billion proceeds, net of $41 million in offering costs, from issuances of mandatory convertible preferred stock in 2018;
▪
$757 million proceeds, net of $13 million in offering costs, from the issuances of common stock in 2019, compared to $2.3 billion proceeds, net of $41 million in offering costs, in 2018; and
▪
$128 million decrease in loans from discontinued operations in 2019 compared to a $70 million increase in 2018; offset by
▪$336 million lower payments of debt with maturities greater than 90 days and finance leases, including:
◦$333 million for commercial paper and other short-term debt ($1.2 billion in 2019 compared to $1.5 billion in 2018), and
◦$3 million for long-term debt and finance leases ($1.3 billion in both 2019 and 2018);
▪$888 million increase in short-term debt in 2019 compared to a $715 million increase in 2018;
▪$175 million contribution from OMEC LLC; and
▪$85 million lower distributions to NCI in 2019.
Financing activities at our discontinued operations were a source of cash of $49 million in 2019 compared to a use of cash of $34 million in 2018. The change was primarily due to a $977 million equity contribution from Sempra Energy, partially offset by $851 million higher common dividends paid.
SDG&E
At SDG&E, financing activities were a source of cash in 2019 compared to a use of cash in 2018, primarily due to:
▪$322 million equity contribution from Sempra Energy in 2019; and
▪
$175 million contribution from OMEC LLC in 2019; offset by
▪$291 million decrease in short-term debt in 2019 compared to a $205 million decrease in 2018; and
▪$65 million higher payments of long-term debt and finance leases in 2019.
SoCalGas
Cash provided by financing activities at SoCalGas decreased in 2019 primarily due to:
▪$600 million lower issuances of long-term debt in 2019; and
▪
$148 million decrease in short-term debt in 2019 compared to a $116 million decrease in 2018; offset by
▪$496 million lower payments of long-term debt and finance leases in 2019.
FACTORS INFLUENCING FUTURE PERFORMANCE
We discuss various factors that could influence our future performance below and in “Item 7. MD&A – Factors Influencing Future Performance” in the Annual Report. We describe below significant developments to capital projects and any significant new capital projects in 2019. You should read the information below together with “Item 7. MD&A – Factors Influencing Future Performance” and “Item 1A. Risk Factors” contained in the Annual Report.


SEMPRA ENERGY
Capital Rotation
We regularly review our portfolio of assets with a view toward allocating capital to those businesses that we believe can further improve shareholder value. Following a comprehensive strategic review of our businesses and asset portfolio by our board of directors and management, in June 2018, we announced our intention to sell several energy infrastructure assets. We completed the sales of our U.S. solar assets in December 2018, our non-utility natural gas storage assets in February 2019 and our remaining U.S. wind assets in April 2019. In January 2019, our board of directors approved a plan to sell our South American businesses based on our strategic shift to be geographically focused on North America. Our South American businesses and certain activities associated with those businesses have been presented as discontinued operations. We expect to complete these sales in the first quarter of 2020. We discuss these sales and discontinued operations further in Note 5 of the Notes to Condensed Consolidated Financial Statements herein and in Notes 5 and 6 of the Notes to Consolidated Financial Statements in the Annual Report.
SDG&E
Capital Project Updates
CAPITAL PROJECTS PENDING REGULATORY RESOLUTION – SDG&E
Project description
Estimated capital cost
(in millions)
Status
Electric Vehicle Charging
§January 2018 application, pursuant to SB 350, to make investments to support medium-duty and heavy-duty electric vehicles with an estimated implementation cost of $34 million of O&M.$121§In August 2019, the CPUC issued a final decision approving the settlement agreement filed in November 2018.
Energy Storage Projects
§
February 2018 application, pursuant to AB 2868, to make investments to accelerate the widespread deployment of distributed energy storage systems. SDG&E’s application requests approval of 100 MW of utility-owned energy storage.


$161
§


In June 2019, the CPUC declined to approve SDG&E’s application and provided guidance on future solicitations and filings for energy storage resources.
Wildfire Legislation
Senate Bill 901
On September 21, 2018, the Governor of California signed into law SB 901, which includes a number of measures primarily intended to address certain wildfire risks relevant to consumers and utilities and guidelines for the CPUC to determine whether utilities acted reasonably in order to recover costs related to wildfires. Among other things, SB 901 also contains provisions for utility issuance of recovery bonds with respect to certain wildfire costs, subject to CPUC approval, wildfire mitigation plans, and creation of a commission to explore establishment of a fund and options for cost socialization with respect to catastrophic wildfires associated with utility infrastructure. SB 901 does not apply to the wildfires in SDG&E’s service territory in 2007.
SDG&E filed its proposed wildfire mitigation plan in February 2019, and the CPUC approved this plan in May 2019. The wildfire mitigation plan does not include cost recovery. Pursuant to SB 901, the CPUC authorized SDG&E to establish a memorandum account to track the costs incurred for fire risk mitigation. The costs recorded to the memorandum account shall be incremental to the utility’s authorized recovery and will be reviewed as part of the utility’s next GRC proceeding. The CPUC issued a decision in June 2019 providing guidance on the electric utility wildfire mitigation plans. The decision held that approval of a utility’s wildfire mitigation plan meant that it had met all the statutory requirements in SB 901. While SB 901 provides for cost recovery related to the wildfire mitigation plan in a utility’s GRC proceeding, plan approval does not determine whether SDG&E acted reasonably when seeking recovery of plan-related costs.
Assembly Bill 1054 and Assembly Bill 111
On July 12, 2019, the Governor of California signed into law AB 1054 and AB 111 (together, the Wildfire Legislation), which took effect immediately. The Wildfire Legislation addresses certain important issues related to catastrophic wildfires in the State


of California and their impact on electric IOUs. We describe the Wildfire Legislation and related accounting treatment in Note 1 of the Notes to Condensed Consolidated Financial Statements.
The Wildfire Legislationestablishes a fund (the Wildfire Fund) to provide liquidity to SDG&E, PG&E and Edison (each a California electric IOU) to pay IOU wildfire-related claims in the event that the governmental agency responsible for determining causation determines the applicable IOU’s equipment caused the ignition of a wildfire, the primary insurance coverage is exceeded and certain other conditions are satisfied. The primary purpose of the Wildfire Fund is to pool resources provided by shareholders and ratepayers of the IOUs and make those resources available to reimburse the IOUs for third-party wildfire claims incurred after July 12, 2019, the effective date of the Wildfire Legislation, subject to certain limitations.
SDG&E recorded a Wildfire Fund asset for committed shareholder contributions to the Wildfire Fund. SDG&E is exposed to the risk that any California IOU may incur third-party wildfire claims for which they will seek recovery from the Wildfire Fund. In such a situation, SDG&E may recognize a reduction of its Wildfire Fund asset and record a charge against earnings in the period when there is a reduction of the available coverage due to recoverable claims from the IOUs. As a result, if any California IOU’s equipment is determined to be a cause of a fire, it could have a material adverse effect on SDG&E’s and Sempra Energy’s financial condition and results of operation up to the carrying value of our Wildfire Fund asset. In addition, the Wildfire Fund could be completely exhausted due to fires in the other California IOUs’ service territories, by fires in SDG&E’s service territory or by a combination thereof. In the event that the Wildfire Fund is materially diminished, exhausted or terminated, SDG&E will lose the protection afforded by the Wildfire Fund, and as a consequence, a fire in SDG&E’s service territory could cause a material adverse effect on SDG&E’s and Sempra Energy’s cash flows, results of operations and financial condition.
Other SDG&E Matters
See “Item 7. MD&A – Factors Influencing Future Performance” in the Annual Report for a discussion about:
▪Electric Rate Reform – California Assembly Bill 327
▪Potential Impacts of Community Choice Aggregation and Direct Access
▪Renewable Energy Procurement
SOCALGAS
Aliso Canyon Natural Gas Storage Facility Gas Leak
In October 2015, SoCalGas discovered a leak at one of its injection-and-withdrawal wells, SS25, at its Aliso Canyon natural gas storage facility located in Los Angeles County. SoCalGas worked closely with several of the world’s leading experts to stop the Leak. In February 2016, DOGGR confirmed that the well was permanently sealed.
See Note 11 of the Notes to Condensed Consolidated Financial Statements, in the second quarter of 2020, certain Mexican governmental agencies issued orders and regulations that would reduce or limit the renewable energy sector’s participation in the country’s energy market. Those orders would, among other things, create barriers for discussions ofrenewable energy facilities to enter the following relatedwholesale electricity market, prevent renewable energy projects currently in construction from reaching operations and increase grid fees for legacy renewables and cogeneration energy contract holders. IEnova and other companies affected by such measures, certain non-governmental environmental organizations or advocacy groups, and COFECE, Mexico’s antitrust regulator, have filed legal complaints with the respective Mexican courts to prevent such measures from going into effect. In most cases, the courts have sided with the complainants and such measures have been stayed temporarily. The court-ordered injunctions provide relief until Mexico’s Federal District Court ultimately resolves the amparo claims (constitutional protection lawsuits) or, with respect to the Leak:
▪Local Community Mitigation Efforts
▪Civil and Criminal Litigation
▪Regulatory Proceedings
▪Governmental Investigations and Orders and Additional Regulation
▪Insurance
The costs incurredSENER resolution, until Mexico’s Supreme Court issues its final ruling on COFECE’s complaint, the timing of which is uncertain. An unfavorable final decision on these amparo challenges, or the potential for an extended dispute, could impact our ability to remediatesuccessfully complete construction of our solar facilities, or to complete them in a timely manner and stop the Leakwithin expected budgets, may impact our ability to operate our wind and to mitigate local community impacts have been significantsolar facilities already in service at existing levels or at all, and may increase, and we may be subjectadversely affect our ability to potential significant damages, restitution, and civil, administrative and criminal fines, penalties and other costs. In addition, the costs of defending against civil and criminal lawsuits, cooperating with investigations, and any damages, restitution, and civil, administrative and criminal fines, penalties and other costs, if awarded or imposed, as well as the costs of mitigating the natural gas released, could be significant. To the extentdevelop new projects, any of these costs are not covered by insurance (including any costs in excess of applicable policy limits), if there were to be significant delays in receiving insurance recoveries, or if the insurance recoveries are subject to income taxes while the associated costs are not tax deductible, such amounts couldwhich may have a material adverse effectimpact on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.
Cost Estimates and Accounting Impact
At September 30, 2019, SoCalGas estimates its costs related to the Leak are $1,099 million (the cost estimate), which includes $1,069 million of costs recovered or probable of recovery from insurance. Approximately 52 percent of the cost estimate is for the temporary relocation program (including cleaning costs and certain labor costs). The remaining portion of the cost estimate includes costs incurred to defend litigation, the costs of the government-ordered response to the Leak including the costs for an


independent third party to conduct a root cause analysis, efforts to control the well, to mitigate the natural gas released, the cost of replacing the lost gas, the costs of settlements with government entities and other costs. The cost estimate does not include potential additional litigation costs, regulatory-related costs or other costs described below, which could be material. SoCalGas adjusts the cost estimate as additional information becomes available. A substantial portion of the cost estimate has been paid, and $45 million is accrued in Reserve for Aliso Canyon Costs and $9 million is accrued in Deferred Credits and Other as of September 30, 2019 on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets.
As of September 30, 2019, we recorded the expected recovery of the cost estimate related to the Leak of $354 million as Insurance Receivable for Aliso Canyon Costs on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets. This amount is net of insurance retentions and $715 million of insurance proceeds we received through September 30, 2019. The Insurance Receivable for Aliso Canyon Costs and insurance proceeds received to date relate to portions of the cost estimate described above, including temporary relocation and associated processing costs, control-of-well expenses, costs of the government-ordered response including for an independent third party to conduct a root cause analysis, the costs to settle certain claims as described in “Civil and Criminal Litigation” in Note 11 of the Notes to Condensed Consolidated Financial Statements, the estimated costs to perform obligations pursuant to settlement of some of those claims, legal costs and lost gas. If we were to conclude that this receivable or a portion of it is no longer probable of recovery from insurers, some or all of this receivable would be charged against earnings, which could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.
As described in “Civil and Criminal Litigation” in Note 11 of the Notes to Condensed Consolidated Financial Statements, the actions seek compensatory, statutory and punitive damages, restitution, and civil, administrative and criminal fines, penalties and other costs, which, except for the amounts paid or estimated to settle certain actions, are not included in the cost estimate as it is not possible at this time to predict the outcome of these actions or reasonably estimate the amount of damages, restitution or civil, administrative or criminal fines, penalties or other costs that may be imposed. The recorded amounts above also do not include future legal costs necessary to defend litigation, and other potential costs that we currently do not anticipate incurring or that we cannot reasonably estimate. Furthermore, the cost estimate does not include any sanctions, fines, penalties or other costs that may be imposed by the CPUC in connection with the OII opened in June 2019 and certain other costs incurred by Sempra Energy associated with defending against shareholder derivative lawsuits.
Natural Gas Storage Operations and Reliability
Natural gas withdrawn from storage is important for service reliability during peak demand periods, including peak electric generation needs in the summer and heating needs in the winter. The Aliso Canyon natural gas storage facility, with a capacity of 86 Bcf (representing 63 percent of SoCalGas’ natural gas storage capacity), is the largest SoCalGas storage facility and an important element of SoCalGas’ delivery system. As a result of the Leak, SoCalGas suspended injection of natural gas into the Aliso Canyon natural gas storage facility beginning in October 2015, and following a comprehensive safety review and authorization by DOGGR and the CPUC’s Executive Director, resumed limited injection operations in July 2017.
During the suspension period, SoCalGas advised the California ISO, CEC, CPUC and PHMSA of its concerns that the inability to inject natural gas into the Aliso Canyon natural gas storage facility posed a risk to energy reliability in Southern California. Following the resumption of injection operations, the CPUC has issued a series of directives to SoCalGas specifying the range of working gas to be maintained in the Aliso Canyon natural gas storage facility to help ensure safety and reliability for the region and just and reasonable rates in California, the most recent of which, issued in July 2018, directed SoCalGas to maintain up to 34 Bcf of working gas. Limited withdrawals of natural gas from the facility were made in 2018 and 2019 to augment natural gas supplies during critical demand periods. In July 2019, the CPUC issued a protocol authorizing withdrawals of natural gas from the facility if gas supply is low in the region, to maintain system reliability and price stability.
If the Aliso Canyon natural gas storage facility were to be permanently closed, or if future cash flows were otherwise insufficient to recover its carrying value, it could result in an impairment of the facility and significantly higher than expected operating costs and/or additional capital expenditures, and natural gas reliability and electric generation could be jeopardized. At September 30, 2019, the Aliso Canyon natural gas storage facility had a net book value of $771 million. Any significant impairment of this asset could have a material adverse effect on SoCalGas’ and Sempra Energy’s results of operations for the period in which it is recorded. Higher operating costs and additional capital expenditures incurred by SoCalGas may not be recoverable in customer rates and could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.



CALIFORNIA UTILITIES – JOINT MATTERS
Capital Project Updates
JOINT CAPITAL PROJECTS PENDING REGULATORY RESOLUTION – CALIFORNIA UTILITIES
Project description
Estimated capital cost
(in millions)
Status
Line 1600 Test or Replacement Project
§Pursuant to a CPUC order, in September 2018, SDG&E and SoCalGas submitted a plan to the CPUC to address Line 1600 PSEP requirements by replacing 37 miles of Line 1600 predominately in populated areas and testing 13 miles of Line 1600 in rural areas.$671§In January 2019, the CPUC approved the proposed plan to address Line 1600 PSEP requirements. Cost recovery will be addressed in future GRCs.
§Estimated O&M implementation cost of $45 million and cost to retire portions of Line 1600 of $14 million at SDG&E.§In May 2019, certain intervenors filed a petition to re-open the proceeding and review the proposed plan.
Mobile Home Park Utility Upgrade Program
§In April 2018, the CPUC opened an OIR to evaluate the Mobile Home Park Program to convert eligible units to direct utility service and determine if it should be extended beyond the initial three-year pilot to a permanent program, and if extended, to adopt programmatic modifications.
$471 to $508

§A final decision in the OIR is expected in the first half of 2020.
§In March 2019, the CPUC issued a resolution approving the extension of the pilot program through the earlier of 2021 or the issuance of a CPUC decision on pending proceedings.
Natural Gas Pipeline Operations Safety Assessments
As we discuss in “Item 7. MD&A – Factors Influencing Future Performance” in the Annual Report, since 2011, the California Utilities have incurred costs related to the implementation of the CPUC’s directives to test or replace natural gas transmission pipelines that do not have sufficient documentation of a pressure test and to address retrofitting pipelines to allow for in-line inspection tools and, where appropriate, automated or remote controlled shut-off valves (referred to as PSEP).
As shown in the table below, SoCalGas and SDG&E have made significant pipeline safety investments under the PSEP program, and SoCalGas expects to continue making significant investments as approved through various regulatory proceedings. SDG&E’s PSEP program was substantially completed in 2017, with the exception of Line 1600, which we discuss in the table above. Both utilities have filed joint applications and plan to file future applications with the CPUC for review of the PSEP project costs as follows:


PIPELINE SAFETY ENHANCEMENT PLAN – COST SUMMARY
  
(Dollars in millions)  
 2011 through September 30, 2019
 
Total
 invested(1)
 
CPUC review
completed(2)
 
CPUC review
pending(3)
 
2019 and future applications(4)(5)
Sempra Energy Consolidated:       
Capital$1,824
 $320
 $853
 $651
Operation and maintenance221
 96
 85
 40
Total$2,045
 $416
 $938
 $691
SoCalGas:       
Capital$1,455
 $306
 $731
 $418
Operation and maintenance210
 95
 78
 37
Total$1,665
 $401
 $809
 $455
SDG&E:       
Capital$369
 $14
 $122
 $233
Operation and maintenance11
 1
 7
 3
Total$380
 $15
 $129
 $236
(1)
Excludes certain pressure testing and pipeline replacement costs incurred through September 30, 2019 that were not eligible for recovery based on prior CPUC decisions. Also excludes $57 million incurred for SDG&E’s Line 1600 Test or Replacement Project.
(2)
Includes costs approved in the 2017 Forecast Application and 2019 GRC FD.
(3)
Includes costs subject to the 2018 Reasonableness Review Application filed in November 2018, with a decision expected in 2020.
(4)
Remaining costs not the subject of prior applications are to be included in subsequent GRCs.
(5)
Authorized to recover 50 percent of the Phase 1 revenue requirement annually, subject to refund.

If either SoCalGas or SDG&E are unable to recover a significant amount of these safety investments from ratepayers, it could have a material adverse effect on the cash flows,our results of operations and financial condition of SoCalGas, SDG&E and Sempra Energy.
SEMPRA TEXAS UTILITIES
Oncor Holdings
As we discuss in Note 5 of the Notes to Condensed Consolidated Financial Statements, on May 16, 2019, Oncor completed the acquisition of 100 percent of the issued and outstanding shares of InfraREIT and 100 percent of the limited partnership units of its subsidiary, InfraREIT Partners, pursuant to the InfraREIT Merger Agreement. Under the InfraREIT Merger Agreement, Oncor paid merger consideration of $1,275 million or $21 per share. On May 16, 2019, in connection with and immediately after the closing of the acquisition, Oncor extinguished all of InfraREIT’s outstanding debt (totaling $953 million) by repaying an aggregate principal amount of $602 million on behalf of InfraREIT’s subsidiaries (using proceeds from a term loan and issuances of commercial paper), and exchanging an aggregate principal amount of $351 million of secured senior notes issued by InfraREIT subsidiaries for secured senior notes issued by Oncor.
Sharyland Holdings
As we discuss in Note 5 of the Notes to Condensed Consolidated Financial Statements, on May 16, 2019, Sempra Energy acquired an indirect, 50-percent interest in Sharyland Holdings for $102 million (subject to customary closing adjustments), which we account for as an equity method investment.



SEMPRA MEXICO
Capital Project Updates
CAPITAL PROJECTS – SEMPRA MEXICO – GAS BUSINESS
Project description
Our share of
estimated capital cost
(in millions)
Status
Sur de Texas-Tuxpan Marine Pipeline
§IMG was awarded the right to build, own and operate the natural gas marine pipeline in June 2016 by the CFE.$1,040§Commercial operation commenced in September 2019.
§

Natural gas transportation services agreement, denominated in U.S. dollars, for a 25-year term, plus another 10 years in accordance with September 2019 revised agreement.§Estimated capital cost increased from $992 million.
§Sempra Mexico has a 40-percent interest in IMG, a JV with TC Energy, which owns the remaining 60-percent interest.
Terminals at Port of Veracruz, Puebla and Mexico City
§Awarded a 20-year concession in July 2017 to build and operate a marine terminal in the Port of Veracruz in Mexico for the receipt, storage and delivery of liquid fuels.$590 to $640§Change in expected commercial operation date to: first quarter of 2020.
§Planned storage capacity of 2.1 million barrels.§Expected commercial operation date of two inland storage terminals: first quarter of 2020.
§Working capacity of 1.4 million barrels of gasoline, diesel and jet fuel to supply the central region of Mexico.
§IEnova will also build and operate two storage terminals located near Puebla and Mexico City, each with storage capacities of 650,000 barrels.§Estimated capital cost increased from $440 million.
§Entered into three, long-term, U.S. dollar-denominated terminal services agreements in July 2017 with Valero Energy for the full capacity of the marine terminal and the two inland storage terminals.
§Pursuant to these agreements, Valero Energy has the option to purchase a 50-percent interest in each of the three terminals after commencement of commercial operations, subject to approval by the Port of Veracruz, Comisión Federal de Electricidad (Federal Electricity Commission in Mexico), the Comisión Reguladora de Energía (Energy Regulatory Commission in Mexico) and other regulatory bodies.
Baja Refinados Terminal
§Plan to develop, construct and operate a liquid fuels marine storage terminal within the La Jovita Energy Center, located 14 miles north of Ensenada, Baja California, Mexico.$130§Change in expected commercial operation date to: second quarter of 2021.
§Capacity of 1 million barrels of hydrocarbons, primarily gasoline and diesel, to increase fuel supply capacity and reliability in Baja California.
§Fully contracted under two, long-term, U.S. dollar-denominated contracts for the receipt, storage and delivery of hydrocarbons with Chevron and BP. Chevron has the option to acquire 20 percent of the equity of the terminal after commercial operations begin.
Manzanillo Terminal
§Plan to develop, construct and operate a marine terminal for the receipt, storage and delivery of refined products in Manzanillo, Colima.$153 to $235
§

Expected commercial operation date: first quarter of 2021.
§

Increased storage capacity to 2.2 million barrels is fully contracted under long-term, U.S. dollar-denominated agreements with BP, Trafigura Mexico, S.A. de C.V. and Marathon Petroleum Corporation.§Minimum estimated capital cost increased from $149 million due to increase in Sempra Mexico’s ownership interest in the terminal from 52.4 percent.
§Sempra Mexico has a 53.7-percent interest in TP Terminals, S. de. R.L. de C.V., a JV with Trafigura Mexico, S.A. de C.V., which owns the remaining 46.3-percent interest. Sempra Mexico has the option to increase its ownership interest up to 82.5 percent.
Ecogas
§Expansion plan to connect approximately 40 thousand new customers in the next two years.$78§Expected commercial operation dates: 2019 through 2021 as portions are completed.


CAPITAL PROJECTS – SEMPRA MEXICO – POWER BUSINESS
Project description
Our share of
estimated capital cost
(in millions)
Status
La Rumorosa Solar Complex
§Awarded 41-MW photovoltaic solar energy project located in Baja California, Mexico, in an auction conducted by Mexico’s National Center of Electricity Control (Centro Nacional de Control de Energía) in September 2016.$50§Commercial operation commenced in June 2019.
§Contracted by the CFE under a 15-year renewable energy agreement and a 20-year clean energy certificate agreement, denominated in U.S. dollars.
Tepezalá Solar Complex
§

Awarded 100-MW photovoltaic solar energy project located in Aguascalientes, Mexico, in an auction conducted by Mexico’s National Center of Electricity Control in September 2016.$100§Change in expected commercial operation date to: fourth quarter of 2019.
§

Contracted by the CFE under 15-year renewable energy and capacity agreements and a 20-year clean energy certificate agreement, denominated in U.S. dollars.§Estimated capital cost increased from $90 million.
§Trina Solar owns a 10-percent interest in the project. Sempra Mexico has the option to purchase, and Trina Solar has the option to sell, Trina Solar’s ownership interest within 30 days after the commercial operation date.
Energía Sierra Juárez 2
§108-MW wind power generation facility, located in La Rumorosa, Baja California.$150§Change in expected commercial operation date to: second quarter of 2021.
§Entered into a 20-year, U.S. dollar denominated PPA with SDG&E in November 2017.§Pending FERC approval.
§Received CPUC approval in December 2017.
Border Solar
§150-MW photovoltaic solar energy project located in Juárez, Chihuahua, Mexico.$160§Expected commercial operation date: fourth quarter of 2020.
§

Contracted under long-term, U.S. dollar-denominated, clean energy supply contracts with Comercializadora Círculo CCK, S.A. de C.V., El Puerto de Liverpool, S.A.B. de C.V. and Envases Universales de México, S.A.P.I. de C.V.

Certain past assertions made by the CFE and Mexican government, coupled with past arbitration requests and other statements and actions by the CFE, raise serious concerns over whether the terms of Sempra Mexico’s gas pipeline contracts will be honored or disputed in arbitration. The failure by the CFE or other customers to honor the terms of Sempra Mexico’s gas pipeline contracts and the inability to enter into gas pipeline contracts in the future could have a material adverse effect on Sempra Energy’s cash flows financial condition, resultsand our ability to recover the carrying values of operation and prospects.our renewable energy investments in Mexico.
The ability to successfully complete major construction projects is subject to a number of risks and uncertainties. For a discussion of these risks and uncertainties, see “Item“Part I – Item 1A. Risk Factors” in the Annual Report.
Guaymas-El Oro Segment of the Sonora Pipeline


Other Legal and Regulatory Matters
As we discuss in Note 11 of the Notes to Condensed Consolidated Financial Statements, IEnova has received force majeure payments for the Guaymas-El Oro segment of the Sonora pipeline sincefrom August 2017 which payments ended into August 2019, after damage to that segment of the pipeline made it inoperable and a court order has prevented repairs to put the pipeline back in service. In July 2019, the CFE filed a request for arbitration generally to nullify certain contract terms that provide for fixed capacity payments in instances of force majeure and made a demand for substantial damages in connection with the force majeure event. In September 2019, the arbitration process ended when2019. Under an agreement between IEnova and the CFE, reached an agreement to modify the tariff structure and extend the term of the contract for 10 years. Under the revised agreement, the CFE will resume making payments only when the damaged section of the Guaymas-El Oro segment of the Sonora pipeline is repaired. If the pipeline is not repaired by January 15, 2020March 14, 2021 and the parties do not agree on a new service start date, IEnova retains the right to terminate the contract and seek to recover its reasonable and documented costs and lost profits. If
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IEnova is unable to make such repairs (which have not commenced) and resume operations in the Guaymas-El Oro segment of the Sonora pipeline or if IEnova terminates the contract and is unable to obtain recovery, there may be a material adverse impact on Sempra Energy’s results of operations and cash flows and our ability to recover the carrying value of our investment. At September 30, 2020, the Guaymas-El Oro segment of the Sonora pipeline had a net book value of $446 million.
EnergíIn May 2020, the two third-party capacity customers at the ECA LNG Regasification facility, Shell Mexico and Gazprom, asserted that a Costa Azul2019 update of the general terms and conditions for service at the facility, as approved by the CRE, resulted in a breach of contract by IEnova and a force majeure event. Citing these circumstances, the customers subsequently stopped making payments of amounts due under their respective LNG Terminalstorage and regasification agreements. IEnova has rejected the customers’ assertions and has drawn (and expects to continue to draw) on the customers’ letters of credit provided as payment security. The parties engaged in discussions under the applicable contractual dispute resolution procedures without coming to a mutually acceptable resolution. In July 2020, Shell Mexico submitted a request for arbitration of the dispute. IEnova will avail itself of its available claims, defenses and remedies in the arbitration proceeding. Gazprom has since replenished the amounts drawn on its letter of credit and has resumed making regular monthly payments under its LNG storage and regasification agreement. In October 2020, IEnova was informed by Gazprom of its consent to join the arbitration proceeding initiated by Shell Mexico against the ECA LNG Regasification facility and is awaiting the formalization of Gazprom’s recognition as a claimant party in such arbitration. IEnova intends to enforce its rights in the arbitration process, seeking to dismiss the customers’ claims. Shell Mexico also filed a constitutional challenge to the CRE’s approval of the update to the general terms and conditions. In October 2020, Shell Mexico’s request to stay CRE’s approval was denied and, subsequently, Shell Mexico filed an appeal of that decision.
We discussIEnova Common Stock Repurchase Fund
In April 2020, IEnova’s participationshareholders approved an increase to a previously approved fund for IEnova to repurchase shares of its common stock for a maximum amount of $500 million, increased from $250 million. As of November 5, 2020, IEnova has repurchased 81,742,780 shares of its outstanding common stock held by NCI for approximately $248 million since the inception of the fund in potential2018.
Sempra LNG
Sempra LNG owns a 50.2% interest in Cameron LNG JV and is currently developing additional LNG export facilities on the Gulf coast and Pacific coast of North America through its proposed Cameron LNG JV liquefaction expansion project, ECA LNG JV liquefaction export project in Mexico, and Port Arthur LNG liquefaction export project in Texas. We expect Sempra LNG to require funding for the development and expansion of its portfolio of projects, which may be financed through a combination of operating cash flows, funding from the parent, project financing and participating in JVs, including ECA LNG JV with IEnova.
North American natural gas prices, when in decline, negatively affect profitability at IEnova’s ECA facility below in “SempraSempra LNG. Our LNG – Energíprojects currently under development have been delayed and could face additional delays due to, among other reasons, the worldwide economic slowdown as a Costa Azul LNG Terminal.”
SEMPRA RENEWABLES
As we discuss in Note 5result of the Notes to Condensed Consolidated Financial Statements,COVID-19 pandemic and the current uncertainty in April 2019, Sempra Renewables sold its remaining wind assetsthe global oil and investments and received cash proceedsgas markets, or a combination of $569 million, netthese factors. For a discussion of transaction costs. Upon completion of the sale, remaining nominal business activities at Sempra Renewables were subsumed into Parentthese risks and other risks involving changing commodity prices and the Sempra Renewables segment ceased to exist.
SEMPRArisk of completing LNG development projects, see “Part I – Item 1A. Risk Factors” in the Annual Report and in “Part II – Item 1A. Risk Factors” below.
Cameron LNG JV Three-Train Liquefaction Project (Phase 1)
Sempra LNG, through its interest in Cameron LNG JV, operates a three-train natural gas liquefaction facility with an export capability of 12 Mtpa of LNG. Construction on the current three-train liquefaction export project began in the second half of 20142014. The majority of the construction was project-financed at the JV, with most or all of the remainder of the capital requirements provided by the project partners, including Sempra Energy, through equity contributions under an EPC contract with athe project equity agreements. Cameron LNG JV between CB&I, LLC (as assigneeachieved commercial operations of CB&I Shaw Constructors, Inc.), a wholly owned subsidiary of McDermott International, Inc.,Train 1, Train 2 and Chiyoda International Corporation, a wholly owned subsidiary of Chiyoda Corporation.Train 3 under its tolling agreements in August 2019, February 2020 and August 2020, respectively.
Large-scale construction projects like the design, development andWhile construction of the Cameron LNG JV liquefactionPhase 1 facility involve numeroushas been completed, many of the risks and uncertainties,related to the construction of the facility continue to apply after completion, including among others, the potential for unforeseen design flaws, engineering challenges, substantial construction delaysequipment failures, severe weather events, global pandemics, and increasedother operational issues, which could cause the facility to suspend operations or operate at a reduced capacity or could materially increase the facility’s operating costs. The occurrence of any of these events could have a material adverse effect on Sempra Energy’s financial condition, results of operations, cash flows and prospects.
As we discuss below in “Off-Balance Sheet Arrangements” and in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report, Sempra Energy has guaranteed a maximum of up to $4.0 billion related to Cameron LNG JV’s project financing and financing-related agreements. These guarantees terminate upon Cameron LNG JV hasachieving “financial completion”
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of the initial three-train liquefaction project, including all three trains achieving commercial operation and meeting certain operational performance tests. Cameron LNG JV’s financing agreements contain events of default customary for such financings, including a turnkey EPC contract, and iffailure to achieve financial completion of the contractor becomes unwilling or unableproject by a financial completion deadline date of September 30, 2021 (with up to perform accordingan additional 365 days extension beyond such date permitted in cases of force majeure). Pursuant to the termsfinancing agreements, Cameron LNG JV is restricted from making distributions to its project owners during the nine-month period ending September 30, 2021 until it has achieved financial completion. Given the impacts of weather-related events in August and timetableSeptember of 2020 on Cameron LNG JV’s operations, including the EPC contract, the project could face substantial constructionability to commence certain operational performance tests, there will be delays and potentially significantly increased costs. If the contractor’s delays or failures are serious enough to cause the contractor to default under the EPC contract, such default could result in Cameron LNG JV’s engagementJV making distributions to its project owners, including Sempra LNG, until achieving financial completion, at which time any deferred distributions will be released. A delay that results in a failure to achieve financial completion by September 30, 2021 would result in an event of a substitute contractor, which would cause further delays.
In May 2019, construction of the first of three trains was completed and the first commissioning cargo carrying LNG was shipped. On July 26, 2019, Cameron LNG JV received authorization from the FERC to place Train 1 in service and on August 19, 2019, commercial operation of Train 1 commenceddefault under Cameron LNG JV’s tolling agreements. Duefinancing agreements and a potential demand on Sempra Energy’s guarantees. We anticipate that the guarantees will be terminated approximately nine months after all three trains achieved commercial operation. If, due to an issue with the residue gas compressor driver’s interface transformer reactor, Train 1 is operating at a reduced capacity depending on the ambient temperature and other factors. The reduction in Train 1’s operating capacity has not reduced Cameron LNG JV’s revenues under its tolling agreements. The manufacturer believes that it has identifiedfailure to satisfy the causefinancial completion criteria by the applicable deadline, we are required to repay some or all of the issue and has sent$4.0 billion under our guarantees, any such repayments could have a replacement for Train 1, which has been installed and is being tested. The replacements for Train 2 and Train 3 are scheduled to arrivematerial adverse effect on our business, results of operations, cash flows, financial condition and/or prospects.
For additional discussion about our investment in advance of the time they are required for commissioning. A delay in the arrival of these replacements in advance of the time they are required for commissioning or a failure of these replacements to work in accordance with specifications could delay the commencement of commercial operation of Train 2 and Train 3 under Cameron LNG JV’s tolling agreements.
In June 2019, Cameron LNG JV, entered into an amendment toJV financing, the EPC contract to provide for certain performance-based commercial considerations, including potential bonus payments to be paid by Cameron LNG JV if the contractor meets certain scheduled milestones and a resetting of the applicable start date for liquidated damages that would arise due to the delay of a train achieving substantial completion as contemplated by the EPC contract. The amendment also waives all of the contractor’s known and unknown claims prior to June 28, 2019. The amendment became effective on July 1, 2019.


This recent EPC contract amendment, a prior settlement agreement between Cameron LNG JV and the EPC contractor, and project delays increased the total estimated cost, including capitalized interest, of the integrated Cameron LNG JV facilityrisks discussed above the project budget and associated contingency adopted at the time of our final investment decision. We expect this increase will not be material to Sempra Energy, though the project may incur additional costs above what is currently anticipated that may be material to the overall cost of the project.
Based on a number of factors, we believe it is reasonable to expect Train 2 and Train 3 to begin producing LNG in the first and second quarters, respectively, of 2020. These factors include, among others, the EPC contractor’s progress to date, the current commissioning activities, the remaining work to be performed, the project schedules received from the EPC contractor, Cameron LNG JV’s own review of the project schedules, the assumptions underlying such schedules, and the inherent risks in constructing and testing facilities such as the Cameron LNG JV liquefaction facility. For a discussion of the Cameron LNG JV and of these risks and other risks relating to the development of the Cameron LNG JV liquefaction export project that could adversely affect our future performance, see Note 6 of the Notes to Consolidated Financial Statements and “Item“Part I – Item 1A. Risk Factors” in the Annual Report.
Proposed Cameron LNG JV Liquefaction Expansion Project (Phase 2)
Cameron LNG JV has received the major permits and FTA and non-FTA approvals necessary to expand the current configuration of the Cameron LNG JV liquefaction project from the current three liquefaction trains under construction.beyond Phase 1. The proposed expansion project includespermits obtained for Phase 2 include up to two additional liquefaction trains capable of increasing LNG production capacity by approximately 9 Mtpa to 10 Mtpa, and up to two additional full containment LNG storage tanks (one of which was permitted with the original three-train project).
Under the Cameron LNG JV financing agreements, expansionExpansion of the Cameron LNG JV facilitiesliquefaction facility beyond the first three trains is subject to certain restrictions and conditions under the JV project financing agreements, including among others, timing restrictions on expansion of the project unless appropriate prior consent is obtained from the project lenders. Under the Cameron LNG JV equity agreements, the expansion of the project requires the unanimous consent of all the partners, including with respect to the equity investment obligation of each partner. Discussions among all the Cameron LNG JV partners have been taking place regarding how an expansion may be structured.
In July 2018, TOTAL S.A. acquired Engie S.A.’s interest instructured and we expect that discussions will continue. There can be no assurance that the Cameron LNG JV. JV members will unanimously agree on an expansion structure, which, if not accomplished, could materially and adversely impact the development of the expansion project. In light of this and other considerations described below, we are unable to predict whether or when Cameron LNG JV might be able to move forward on expansion of the Cameron LNG JV liquefaction facility beyond the first three trains.
In November 2018, Sempra Energy and TOTAL S.A.SE entered into an MOU that provides a framework for cooperation for the development of the potential Cameron LNG JV expansion project and the potential ECA liquefaction-exportLNG JV liquefaction export project that we describe below in “Energía Costa Azul LNG Terminal.”below. The MOU contemplates TOTAL S.A.SE potentially contracting for up to approximately 9 Mtpa of LNG offtake across these two development projects. In addition, onin October 23, 2019, Sempra Energy and Mitsui & Co., Ltd. entered into an MOU that provides a framework for potential offtake by Mitsui & Co., Ltd. from the potential Cameron LNG JV expansion project and the second phase of the potential ECA liquefaction-export project, as well as Mitsui & Co., Ltd.’sLNG JV liquefaction project. In May 2020, Sempra Energy and Mitsubishi Corporation entered into an MOU that provides a framework for development of and potential acquisition of equity interest in the second phase ofofftake by Mitsubishi Corporation from the potential ECA liquefaction-exportCameron LNG JV expansion project. The ultimate participation of and offtake by TOTAL S.A. andSE, Mitsui & Co., Ltd. and Mitsubishi Corporation remains subject to negotiation and finalization of definitive agreements, among other factors, and TOTAL S.A. andSE, Mitsui & Co., Ltd. and Mitsubishi Corporation have no commitment to participate in or offtake from the projects.
We expect that discussions onThe development of the potential expansion will continue among all the Cameron LNG JV members. There can be no assurance that a mutually agreeable expansion structure will be agreed upon unanimously by the Cameron LNG JV members, which if not accomplished in a timely manner, could materially and adversely impact the development of the expansion project. In light of this, we are unable to predict when we and/or Cameron LNG JV might be able to move forward on this expansion project.
The expansion of the Cameron LNG JV facilities beyond the first three trainsproject is subject to a number ofnumerous other risks and uncertainties, including amending the Cameron LNG JV agreement among the partners, obtainingsecuring binding customer commitments,commitments; reaching unanimous agreement with our partners to proceed; obtaining a number of permits and regulatory approvals; securing financing; negotiating and completing the requiredsuitable commercial agreements, securing (or, in some cases, extending)including a definitive EPC contract, equity acquisition and maintaining all necessary permits, approvals and consents, obtaining financing,governance agreements; reaching a final investment decision among the Cameron LNG JV partners,decision; and other factors associated with thethis potential investment. See “ItemFor a discussion of these risks, see “Part I – Item 1A. Risk Factors” in the Annual Report.
Other
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ECA LNG JV Liquefaction Export Projects
Through a JV agreement, Sempra LNG and IEnova are developing two proposed natural gas liquefaction export projects at IEnova’s existing ECA LNG Regasification facility. The proposed liquefaction export projects, which are planned for development in two phases (a mid-scale project referred to as ECA LNG JV Phase 1 and a large-scale project referred to as ECA LNG JV Phase 2), are being developed to provide buyers with direct access to West Coast LNG supplies. The ECA LNG Regasification facility currently has long-term regasification contracts for 100% of the regasification facility’s capacity through 2028, which historically have been profitable (however, see the discussion under “Sempra Mexico” in Note 11 of the Notes to Condensed Consolidated Financial Statements regarding ongoing disputes with the two third-party capacity customers at the ECA LNG Regasification facility), making the decisions on whether and how to pursue the ECA LNG JV Phase 2 project dependent in part on whether the investment in a large-scale liquefaction facility would, over the long term, be more beneficial financially than continuing to supply regasification services under our existing contracts. We do not believe that the development of ECA LNG JV Phase 1 will disrupt operations at the ECA LNG Regasification facility.
In March 2019, ECA LNG JV received two authorizations from the DOE to export U.S.-produced natural gas to Mexico and to re-export LNG to non-FTA countries from its proposed ECA LNG JV Phase 1 project, a one-train natural gas liquefaction facility with a nameplate capacity of 3.25 Mtpa and initial offtake capacity of approximately 2.5 Mtpa, and its proposed ECA LNG JV Phase 2 project, each of which is in development.
On February 27, 2020, we entered into an EPC contract with TechnipFMC for the engineering, procurement and construction of ECA LNG JV Phase 1. We have no obligation to move forward on the EPC contract, and we may release TechnipFMC to perform portions of the work pursuant to limited notices to proceed. We plan to fully release TechnipFMC to perform all of the work to construct ECA LNG JV Phase 1 only after we reach a final investment decision with respect to the project and after certain other conditions are met. The total price of the EPC contract for ECA LNG JV Phase 1 is estimated at approximately $1.5 billion, which TechnipFMC has agreed to uphold until November 13, 2020, at which time the EPC contract, including the price, may be subject to renegotiation. We estimate that capital expenditures for the proposed ECA LNG JV Phase 1 will approximate $2.0 billion, including capitalized interest and project contingency. The actual cost of the EPC contract and the actual amount of these capital expenditures may differ, perhaps substantially, from our estimates.
In April 2020, ECA LNG JV executed definitive 20-year LNG sale and purchase agreements with Mitsui & Co., Ltd. and an affiliate of TOTAL SE for approximately 0.8 Mtpa of LNG and 1.7 Mtpa of LNG from ECA LNG JV Phase 1, respectively. Each agreement remains subject to certain customary conditions of effectiveness, including our final investment decision for the project. The MOU with TOTAL SE, provides a framework for it to acquire an equity interest in ECA LNG JV Phase 1. In addition, the MOU with Mitsui & Co., Ltd. provides a framework for Mitsui & Co., Ltd.’s potential offtake of LNG from, and potential acquisition of an equity interest in, ECA LNG JV Phase 2. We discuss these MOUs further under “Cameron LNG JV Liquefaction Expansion Project (Phase 2)” above.
A final investment decision for ECA LNG JV Phase 1 is contingent on the receipt of an export permit from the Mexican government. Operations at certain relevant regulatory agencies in Mexico remain limited due to the COVID-19 pandemic, which has added to the uncertainty of the timing of the receipt of this permit and is contributing to a delay of our final investment decision.
The development of both the ECA LNG JV Phase 1 and ECA LNG JV Phase 2 projects is subject to numerous risks and uncertainties, including obtaining binding customer commitments for Phase 2; the receipt of a number of permits and regulatory approvals; obtaining financing; negotiating and completing suitable commercial agreements, including a definitive EPC contract for Phase 2, equity acquisition and governance agreements, LNG sales agreements and gas supply and transportation agreements; reaching a final investment decision for Phase 1 and Phase 2; and other factors associated with this potential investment. In addition, as we discuss in Note 11 of the Notes to Condensed Consolidated Financial Statements, an unfavorable decision on certain property disputes or permit challenges, or an extended dispute with existing customers at the ECA LNG Regasification facility, could materially and adversely affect the development of these projects and Sempra Energy’s financial condition, results of operations, cash flows and prospects, including the impairment of all or a substantial portion of the capital costs invested in the projects to date. For a discussion of these risks, see “Part I – Item 1A. Risk Factors” in the Annual Report.
Port Arthur LNG Liquefaction Development
Design, regulatory and commercial activities are ongoing for potential LNG liquefaction developments at our Port Arthur, Texas site and at Sempra Mexico’s ECA facility. For these development projects, we have met with potential customers and determined there is an interest in long-term contracts for LNG supplies beginning in the 2023 through 2025 time frame.
Port ArthurExport Project
Sempra LNG is developing a proposed natural gas liquefaction export project on a greenfield site that it owns in the vicinity of Port Arthur, Texas, located along the Sabine-Neches waterway.


In April 2019, the FERC approved the siting, construction and operation of the Port Arthur liquefaction facility, along with certain natural gas pipelines, including the Louisiana Connector Pipeline, that could be used to supply feed gas to the liquefaction facility, assuming the project is completed.
Sempra LNG received authorizations from the DOE in August 2015 and May 2019 that collectively permit the LNG to be produced from the proposed Port Arthur LNG project to be exported to all current and future FTA and non-FTA countries.
In June 2018,April 2019, the FERC approved the siting, construction and operation of the proposed Port Arthur LNG liquefaction facility,
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along with certain natural gas pipelines, including the Louisiana Connector and Texas Connector Pipelines, that could be used to supply feed gas to the liquefaction facility, assuming the project is completed.
On February 28, 2020, we selectedentered into an EPC contract with Bechtel Corporation as the EPC contractor for the proposed Port Arthur LNG liquefaction project. The EPC contract contemplates the construction of two liquefaction trains with a nameplate capacity of approximately 13.5 Mtpa, two LNG storage tanks, a marine berth and associated loading facilities and related infrastructure necessary to provide liquefaction services. We have no obligation to move forward on the EPC contract, and we may release Bechtel Corporation is to perform portions of the engineering, execution planningwork pursuant to limited notices to proceed. We plan to fully release Bechtel to perform all of the work to construct the Port Arthur LNG liquefaction export project only after we reach a final investment decision with respect to the project and related activities necessary to prepare, negotiate and finalize a definitiveafter certain other conditions are met, including obtaining project financing. When the EPC contract forwas executed, the project. The current arrangementprice was estimated to be approximately $8.9 billion, depending on the timing of a full notice to proceed. Since we did not issue a full notice to proceed by October 15, 2020, we are in discussions with Bechtel Corporation does not commit any partyregarding changes to enter into a definitivethe project schedule and renegotiating the EPC contract or otherwise participate inprice. Any changes to the project.EPC contract will require the agreement of both parties, which cannot be assured.
In December 2018, Polish Oil & Gas Company (PGNiG) and Port Arthur LNG entered into a definitive 20-year agreement for the sale and purchase of 2 Mtpa of LNG per year.year from the Port Arthur LNG liquefaction export project. Under the agreement, LNG purchases by PGNiG from Port Arthur LNG will be made on a free-on-board basis, with PGNiG responsible for shipping the LNG from the Port Arthur terminalfacility to the final destination. Port Arthur LNG will manage the gas pipeline transportation, liquefaction processing and cargo loading. The agreement is subject to certain conditions precedent, including Port Arthur LNG making a positive final investment decision within certain agreed timelines. The failure of these conditions precedent to be satisfied or waived within the agreed timelines could result in the termination of the agreement.
In May 2019, Aramco Services Company and Sempra LNG signed a Heads of Agreement for the negotiation and finalization of a definitive 20-year LNG sale and purchase agreement for 5 Mtpa of LNG offtake.offtake from the Port Arthur LNG liquefaction export project. The Heads of Agreement also includes the negotiation and finalization of a 25-percent25% equity investment in the project. In January 2020, Aramco Services Company and Sempra LNG signed an Interim Project Participation Agreement, which sets forth certain mechanisms for the parties to work towards receipt of corporate approvals to enter into and proceed with the transaction, execution of the transaction agreements and the fulfillment or waiver of the conditions precedent contemplated by these agreements, making a final investment decision and other pre-final investment decision activities. The Heads of Agreement and Interim Project Participation Agreement do not obligate the parties to ultimately execute any agreements or participate in the project.
In JuneNovember 2019, Sempra LNG initiated with the FERC the pre-filing review of a proposed extension of Port Arthur Pipeline, LLC’s Louisiana Connector Pipeline to Delhi, Louisiana. The proposed extension would also include increasingLNG commenced the sizerelocation and upgrade of the pipeline from 42 inches to 48 inches.
In June 2017, Port Arthur signed an MOU with Korea Gas Corporation for potential participation inapproximately three miles of highway where the Port Arthur LNG liquefaction export project as an LNG buyer and equity participant. The MOU expired in accordance with its terms in June 2019.would be located.
Also, in June 2019,In February 2020, Sempra LNG initiated with the FERC the pre-filing review offiled a proposed FERC application for the siting, construction and operation of a second phase at the proposed Port Arthur facility. The pre-filing documentation contemplates, among other things,LNG facility, including the potential addition of two liquefaction trains attrains.
We continue to work on completing all necessary milestones so that we are prepared to make a final investment decision for the proposed Port Arthur facility.LNG liquefaction export project when appropriate. The impact of the COVID-19 pandemic on the global economy and the current uncertainty in the energy and financial markets has delayed the expected timing of our final investment decision from 2020 to 2021.
Development of the Port Arthur LNG liquefaction export project is subject to a number of risks and uncertainties, including obtaining additional customer commitments; completing the required commercial agreements, such as equity acquisitions and governance agreements, LNG sales agreements and gas supply and transportation agreements; completing construction contracts; securing all necessary permits and approvals; obtaining financing and incentives; reaching a final investment decision; and other factors associated with the potential investment. See “ItemAn unfavorable outcome with respect to any of these factors could have a material adverse effect on Sempra Energy’s financial condition, results of operations and prospects, including the impairment of all or a substantial portion of the capital costs invested in the project to date. For a discussion of these risks, see “Part I – Item 1A. Risk Factors” in the Annual Report.
Energía Costa Azul LNG Terminal
Discontinued Operations
As we discuss in “Item 7. MD&A – Factors Influencing Future Performance” in the Annual Report, Sempra LNG and IEnova are developing a proposed natural gas liquefaction project at the site of IEnova’s existing regasification terminal at ECA. The proposed liquefaction facility project, which we expect will be developed in two phases, is being developed to provide buyers with direct access to west coast LNG supplies. ECA currently has profitable long-term regasification contracts for 100 percent of the regasification facility’s capacity through 2028, making the decisions on whether and how to pursue a new liquefaction facility dependent in part on whether the investment in a new liquefaction facility would, over the long term, be more beneficial financially than continuing to supply regasification services under our existing contracts.
In March 2019, ECA LNG received two authorizations from the DOE to export U.S.-produced natural gas to Mexico and to re-export LNG to non-FTA countries from its Phase 1 and Phase 2 projects in development.
In June 2018, we selected a TechnipFMC plc and Kiewit Corporation partnership as the EPC contractor for the first phase of the proposed ECA LNG liquefaction facility project (ECA LNG Phase 1). The TechnipFMC-Kiewit partnership is to perform the engineering, planning and related activities necessary to prepare, negotiate and finalize a definitive EPC contract for ECA LNG Phase 1. The current arrangement with the TechnipFMC-Kiewit partnership does not commit any party to enter into a definitive EPC contract or otherwise participate in the project.
The ultimate participation of TOTAL S.A., Mitsui & Co., Ltd. and Tokyo Gas Co., Ltd. in the potential ECA LNG project as contemplated by a Heads of Agreements signed in November 2018 remains subject to finalization of definitive agreements, among other factors, and none of these parties has committed to participate in this project. The development of the ECA LNG Phase 1 and Phase 2 projects is subject to numerous risks and uncertainties, including obtaining binding customer commitments;


the receipt of a number of permits and regulatory approvals; obtaining financing; negotiating and completing suitable commercial agreements, including a definitive EPC contract, equity acquisition and governance agreements, LNG sales agreements and gas supply and transportation agreements; reaching a final investment decision; and other factors associated with this potential investment. In addition, as we discuss in Note 115 of the Notes to Condensed Consolidated Financial Statements, an unfavorable decision on certain property disputesin January 2019, our board of directors approved a plan to sell our South American businesses. On April 24, 2020, we completed the sale of our equity interests in our Peruvian businesses for cash proceeds of $3,549 million, net of transaction costs and permit challenges could materiallyas adjusted for post-closing adjustments. On June 24, 2020, we completed the sale of our equity interests in our Chilean businesses for cash proceeds of $2,216 million, net of transaction costs and adversely affectas adjusted for post-closing adjustments.
Our utilities in South America have historically provided relatively stable earnings and liquidity. We used a portion of the developmentproceeds from the sales of these projects. Forbusinesses to strengthen our balance sheet by repaying certain short-term borrowings and
118

repurchasing shares of our common stock, and we intend to use the remaining proceeds to focus on capital investment in North America to support additional growth opportunities. We expect the cash provided by earnings from our capital investment will exceed the absence of cash flows from these discontinued operations. However, there can be no assurance that we will derive these anticipated benefits. Further, there can be no assurance that we will be able to redeploy the capital that we obtained from such sales in a discussionway that results in cash flows or earnings exceeding those historically generated by these businesses.

SOURCES AND USES OF CASH
The following tables include only significant changes in cash flow activities for each of these risks, see “Item 1A. Risk Factors”our registrants.
CASH FLOWS FROM OPERATING ACTIVITIES
(Dollars in millions)
Nine months ended September 30,Sempra Energy ConsolidatedSDG&ESoCalGas
2020$1,629 $983 $1,388 
20192,118 754 813 
Change$(489)$229 $575 
Net increase in Insurance Receivable for Aliso Canyon primarily due to $149
higher accruals and $121 lower insurance proceeds received
$(272)$(272)
Change in intercompany activities with discontinued operations, net, primarily due
to $208 in common dividends received from our Peruvian businesses in 2019
(184)
Release of a regulatory liability related to 2016-2018 income tax expense
forecasting differences
(175)$(86)(89)
Change in accounts receivable(95)(53)
Increase in prepaid insurance premiums(44)
Change in income taxes receivable/payable, net105 117 
Higher net margin posted at Sempra LNG’s marketing operations46 
Higher distributions of earnings from Oncor Holdings58 
Change in accounts payable85 72 
Decrease in funding for Rabbi Trust112 
Change in net undercollected regulatory balancing accounts (including long-term
amounts in regulatory assets)
203 (118)321 
Higher net income, adjusted for noncash items included in earnings204 133 76 
Distributions of earnings from Cameron LNG JV in 2020209 
SDG&E’s initial shareholder contribution to the Wildfire Fund in September 2019323 323 
Net increase in Reserve for Aliso Canyon Costs primarily due to $280 higher
accruals and $85 lower payments
365 365 
Other(28)(31)(15)
Change in net cash flows from discontinued operations primarily due to $1,161
income taxes paid related to the sale of our South American businesses
(1,340)
$(489)$229 $575 

119

CASH FLOWS FROM INVESTING ACTIVITIES
(Dollars in millions)
Nine months ended September 30,Sempra Energy ConsolidatedSDG&ESoCalGas
2020$2,415 $(1,315)$(1,345)
2019(3,439)(1,097)(1,018)
Change$5,854 $(218)$(327)
Contributions to Oncor Holdings to fund Oncor’s purchase of InfraREIT in May 2019$1,067 
Distribution from Cameron LNG JV in 2020753 
Contributions to Peruvian businesses in discontinued operations in 2019583 
Contributions to Chilean businesses in discontinued operations in 2019394 
Acquisition of investment in Sharyland Holdings in May 2019102 
Dividends received from Chilean businesses in discontinued operations in 2019(129)
Net proceeds from the February 2019 sale of Sempra LNG’s non-utility natural gas storage assets(322)
Net proceeds from the April 2019 sale of Sempra Renewables’ wind assets and investments(569)
Dividends received from Peruvian businesses in discontinued operations in 2019(583)
Increase in capital expenditures(723)$(252)$(326)
Increase in loans to affiliate, net in 201925 
Other32 9 (1)
Change in net cash flows from discontinued operations mainly due to $5,781 proceeds, net of transaction costs paid, offset by $502 cash sold from the sale of our South American businesses5,249 
$5,854 $(218)$(327)
CASH FLOWS FROM FINANCING ACTIVITIES
(Dollars in millions)
Nine months ended September 30,Sempra Energy ConsolidatedSDG&ESoCalGas
2020$(710)$1,055 $251 
20191,575 330 192 
Change$(2,285)$725 $59 
Change in short-term debt, net$(2,759)$211 $(482)
Higher payments for commercial paper and other short-term debt with maturities greater than 90 days(1,886)
Net proceeds from issuance of common stock from settlement of forward sale agreements in 2019(728)
Repurchase of common stock under ASR program in 2020(500)
Capital contribution from Otay Mesa Energy Center LLC in 2019 to repay Otay Mesa VIE’s loan(175)(175)
Equity contribution from Sempra Energy to fund initial shareholder contribution to the Wildfire Fund in September 2019(322)
Higher common dividends paid(138)(200)(50)
Higher issuances of short-term debt with maturities greater than 90 days514 
Net proceeds from issuance of series C preferred stock890 
Higher issuances of long-term debt2,151 1,198 600 
Other(6)13 (9)
Change in net cash flows from discontinued operations primarily from a $250 intercompany loan and $29 net increase in short-term debt in 2020 and $977 equity contribution from Sempra Energy, partially offset by $920 common dividends paid in 2019352 
$(2,285)$725 $59 
120

Capital Expenditures, Investments and Acquisitions
EXPENDITURES FOR PP&E, INVESTMENTS AND ACQUISITIONS
(Dollars in millions)
Nine months ended September 30,
 20202019
SDG&E$1,323 $1,071 
SoCalGas1,345 1,019 
Sempra Texas Utilities225 1,338 
Sempra Mexico443 420 
Sempra Renewables— 2 
Sempra LNG200 183 
Parent and other6 6 
Total$3,542 $4,039 
The amounts and timing of capital expenditures and certain investments are generally subject to approvals by various regulatory and other governmental and environmental bodies, including the CPUC, the FERC and the PUCT. Excluding discontinued operations, in 2020, we expect to make capital expenditures and investments of approximately $5.6 billion, a decrease from the $5.9 billion projected in “Part II – Item 7. MD&A – Capital Resources and Liquidity” in the Annual Report. The decrease is primarily attributable to a deferral of capital expenditures to 2021 at Sempra Mexico and a delay in our final investment decision for Phase 1 of the ECA LNG JV liquefaction export project at Sempra LNG, partially offset by an increase in contributions to Oncor Holdings.
LITIGATIONCOMMITMENTS
We describe legal proceedings that could adversely affectdiscuss significant changes to contractual commitments in the first nine months of 2020, none of which were outside the ordinary course of our future performancebusiness, in NoteNotes 7 and 11 of the Notes to Condensed Consolidated Financial Statements.

OFF-BALANCE SHEET ARRANGEMENTS
In August 2014 and December 2019, Sempra Energy provided guarantees for 50.2% of Cameron LNG JV’s financing obligations for a maximum amount of up to $4.0 billion. The guarantees will terminate upon satisfaction of certain conditions, including all three trains achieving financial completion by September 30, 2021 (with up to an additional 365-day extension beyond such date permitted in cases of force majeure). However, if Cameron LNG JV fails to satisfy the financial completion criteria, a demand could be made under the guarantee for Sempra Energy’s 50.2% share of Cameron LNG JV’s obligations under the financing arrangements then due and payable, which could have a material adverse impact on Sempra Energy’s liquidity. We discuss these guarantees above in “Overview – Sempra LNG – Cameron LNG JV Three-Train Liquefaction Project (Phase 1),” in Note 6 of the Notes to Consolidated Financial Statements and “Part I – Item 1A. Risk Factors” in the Annual Report.
In July 2020, Sempra Energy entered into a Support Agreement, which contains a guarantee and represents a variable interest, for the benefit of CFIN with a maximum exposure to loss of $979 million. The guarantee will terminate upon full repayment of the guaranteed debt by 2039, including repayment following an event in which the guaranteed debt is put to Sempra Energy. We discuss this guarantee in Notes 1, 6 and 9 of the Notes to Condensed Consolidated Financial Statements.
SDG&E has entered into PPAs and tolling agreements that are variable interests. Our investments in Oncor Holdings and Cameron LNG JV are variable interests. Sempra Energy’s other businesses may also enter into arrangements that could include variable interests. We discuss variable interests in Note 1 of the Notes to Condensed Consolidated Financial Statements.
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 discuss these accounting policies in “Item“Part II – Item 7. MD&A” in the Annual Report.
We describe our significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report. We follow the same accounting policies for interim reporting purposes.
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NEW ACCOUNTING STANDARDS
We discuss the relevant pronouncements that have recently been issued or become effective and have had or may have an impact on our financial statements and/or disclosures in Note 2 of the Notes to Condensed Consolidated Financial Statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We provide disclosure regarding derivative activity in Note 8 of the Notes to Condensed Consolidated Financial Statements. We discuss our market risk and risk policies in detail in “Item“Part II – Item 7A. Quantitative and Qualitative Disclosures aboutAbout Market Risk” in the Annual Report.

COMMODITY PRICE RISK

In the first nine months of 2020, there were no significant changes in our exposure to commodity price risk.
INTEREST RATE RISK
The table below shows the nominal amount of our debt:
NOMINAL AMOUNT OF DEBT(1)
(Dollars in millions)
 September 30, 2019 December 31, 2018
 
Sempra Energy
Consolidated
 SDG&E SoCalGas 
Sempra Energy
Consolidated
 SDG&E SoCalGas
Short-term:           
California Utilities$108
 $—
 $108
 $547
 $291
 $256
Other3,483
 —
 —
 1,477
 —
 —
Long-term:           
California Utilities fixed-rate$8,950
 $5,141
 $3,809
 $8,377
 $4,918
 $3,459
California Utilities variable-rate—
 —
 —
 78
 78
 —
Other fixed-rate11,867
 —
 —
 10,804
 —
 —
Other variable-rate747
 —
 —
 2,091
 —
 —
(1)
After the effects of interest rate swaps. Before the effects of acquisition-related fair value adjustments and reductions for unamortized discount and debt issuance costs, and excluding finance lease obligations and build-to-suit lease.

NOMINAL AMOUNT OF DEBT(1)
(Dollars in millions)
 September 30, 2020December 31, 2019
 Sempra Energy
Consolidated		SDG&ESoCalGasSempra Energy
Consolidated		SDG&ESoCalGas
Short-term:
California Utilities$— $— $— $710 $80 $630 
Other772 — — 2,798 — — 
Long-term:
California Utilities fixed-rate$10,764 $6,305 $4,459 $8,949 $5,140 $3,809 
California Utilities variable-rate500 200 300 — — — 
Other fixed-rate11,598 — — 11,561 — — 
Other variable-rate734 — — 746 — — 
Interest(1)After the effects of interest rate swaps. Before the effects of acquisition-related fair value adjustments and reductions for unamortized discount and debt issuance costs, and excluding finance lease obligations.

An interest rate risk sensitivity analysis measures interest rate risk by calculating the estimated changes in earnings that would result from a hypothetical change in market interest rates. Earnings are affected by changes in interest rates on short-term debt and variablevariable-rate long-term debt. If weighted-average interest rates on short-term debt outstanding at September 30, 20192020 increased or decreased by 10 percent,10%, the change in earnings over the next 12-month period ended September 30, 20202021 would be approximately $9 million.negligible. If interest rates increased or decreased by 10 percent10% on all variable-rate long-term debt at September 30, 2019,2020, after considering the effects of interest rate swaps, the change in earnings over the next 12-month period ended September 30, 20202021 would be approximately $2$1 million.
CREDIT RATINGS
We provide additional information about the credit ratings of Sempra Energy, SDG&E and SoCalGas in “Item 1A. Risk Factors” and “Item 7A. Quantitative and Qualitative Disclosures about Market Risk – Credit Ratings” in the Annual Report.
The credit ratings of Sempra Energy, SDG&E and SoCalGas remained at investment grade levels in the first nine months of 2019. At September 30, 2019:
▪Moody’s issuer rating was Baa1 with a negative outlook for Sempra Energy, Baa1 with a positive outlook for SDG&E and A1 with a negative outlook for SoCalGas;
▪S&P’s issuer credit rating was BBB+ with a negative outlook for Sempra Energy, BBB+ with a stable outlook for SDG&E and A with a negative outlook for SoCalGas; and
▪Fitch long-term issuer default rating was BBB+ with a stable outlook for Sempra Energy, BBB+ with a stable outlook for SDG&E and A with a stable outlook for SoCalGas.
Our credit ratings may affect the rates at which borrowings bear interest and the commitment fees on available unused credit. A downgrade of Sempra Energy’s or any of its subsidiaries’ credit ratings or rating outlooks may result in a requirement for collateral to be posted in the case of certain financing arrangements and may materially and adversely affect the market prices of their equity and debt securities, the rates at which borrowings are made and commercial paper is issued, and the various fees on their outstanding credit facilities. This could make it more costly for Sempra Energy, SDG&E, SoCalGas and Sempra Energy’s other subsidiaries to issue debt securities, to borrow under credit facilities and to raise certain other types of financing.
Sempra Energy has agreed that, if the credit rating of Oncor’s senior secured debt by any of the three major rating agencies falls below BBB (or the equivalent), Oncor will suspend dividends and other distributions (except for contractual tax payments), unless otherwise allowed by the PUCT. Oncor’s senior secured debt is rated A2, A+ and A at Moody’s, S&P and Fitch, respectively, at September 30, 2019.


FOREIGN CURRENCY AND INFLATION RATE RISK
We discuss our foreign currency and inflation exposure in “Item“Part I – Item 2. MD&A – Impact of Foreign Currency and Inflation Rates on Results of Operations” hereinin this report and in “Item“Part II – Item 7. MD&A – Impact of Foreign Currency and Inflation Rates on Results of Operations” in the Annual Report. We completed the sales of our South American businesses in the second quarter of 2020 and are no longer exposed to changes in foreign currency and inflation rates in Peru and Chile. At September 30, 2019,2020, there were no other significant changes to our exposure to foreign currency rate risk since December 31, 2018.
2019.
122

ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Sempra Energy, SDG&E and SoCalGas have designed and maintain disclosure controls and procedures designed to ensure that information required to be disclosed in their respective reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to the management of each company, including each respective principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. In designing and evaluating these controls and procedures, the management of each company recognizes that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives; therefore, the management of each company applies judgment in evaluating the cost-benefit relationship of other possible controls and procedures.
Under the supervision and with the participation of management, including the principal executive officers and principal financial officers of Sempra Energy, SDG&E and SoCalGas, each companysuch company’s management evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of September 30, 2019,2020, the end of the period covered by this report. Based on these evaluations, the principal executive officers and principal financial officers of Sempra Energy, SDG&E and SoCalGas concluded that their respective company’s disclosure controls and procedures were effective at the reasonable assurance level.level as of such date.
INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in Sempra Energy’s, SDG&E’s or SoCalGas’ internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, 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)(1) described in Notes 10 and 11 of the Notes to Condensed Consolidated Financial Statements hereinin this report and in Notes 15 and 16 of the Notes to Consolidated Financial Statements in the Annual Report, or 2)(2) referred to in “Item“Part II – Item 7. MD&A” in the Annual Report.
ITEM 1A. RISK FACTORS
When evaluating our company and its subsidiaries, we urge you toshould consider carefully consider the risksrisk factors and all other information contained in this Quarterly Report on Form 10-Q,report, including the factors discussed above in “Item“Part I – Item 2. MD&A,”&A” and in this section, and in the riskother documents we file with the SEC, including the factors disclosed in “Item“Part I – Item 1A. Risk Factors” in the Annual Report. ThereExcept as set forth below, there have been no material changes from the risk factors as previously disclosed


in the Annual Report. Any of the risksrisk factors and other information discussed in this Quarterly Report on Form 10-Qreport or any of the risksrisk factors disclosed in “Item“Part I – Item 1A. Risk Factors” in the Annual Report, as well as additional risks and uncertainties not currently known to us or that we currently deem to be immaterial, could materially and adversely affect our businesses, cash flows, results of operations, financial condition, prospects and/or the trading prices of our securities or those of our subsidiaries.

123

Risks Related to All Sempra Energy Businesses
Our business faces risks related to the COVID-19 pandemic.
The COVID-19 pandemic is currently materially impacting communities, supply chains and markets around the world. The U.S. economy is experiencing a significant slowdown and claims for unemployment have increased to historic levels. To date, the COVID-19 pandemic has not had a material impact on our results of operations. However, we are conducting business with substantial modifications to employee travel, employee work locations, and virtualization or cancellation of certain business activities, among other modifications. If these or other similar measures were to increase or continue for an extended period, we could experience employee absenteeism, decreased efficiency and productivity by our workforce and other similar impacts that could jeopardize our ability to sustain operations and satisfy compliance requirements. We also have observed other companies, including our current and prospective counterparties, customers and partners, as well as many governments, including our regulators and other governing bodies that affect our businesses, taking precautionary, preemptive and responsive actions to address the effects of the COVID-19 pandemic, and they may take further actions that alter their normal operations. These actions by third parties could materially impact our operations, results, liquidity and ability to pursue capital projects and strategic initiatives. For example, the CPUC has required that all energy companies under its jurisdiction take action to implement several emergency customer protection measures to support California customers. The measures apply to all residential and small business customers affected by the COVID-19 pandemic and include suspending service disconnections due to nonpayment, waiving late payment fees, and offering flexible payment plans for customers experiencing difficulty paying their electric or gas bills. These actions have resulted in a reduction in payments received from our customers and an increase in uncollectible accounts, which could become material, and any inability to recover these costs could have a material adverse effect on the cash flows, financial condition and results of operations for Sempra Energy, SDG&E and SoCalGas. As another example, our final investment decision on Phase 1 of the proposed ECA LNG JV natural gas liquefaction project has been delayed due in part to the closure of non-essential activities in Mexico in response to the COVID-19 pandemic, which has further hindered our ability to obtain an export permit from the Mexican government that is necessary for the project to proceed. If this or other projects under development are further delayed due to continuing or worsening conditions caused by the COVID-19 pandemic or other related factors, the performance and prospects of our LNG export business could be materially adversely affected.
In addition, the economic slowdown caused by the COVID-19 pandemic and the current uncertainty in the global oil and gas markets, or a combination of these factors, have contributed to the delay of our projected final investment decision on our proposed Port Arthur LNG liquefaction export project from 2020 to 2021. These conditions, as well as potential disruptions of construction and development activity if our project counterparties implement or are required to implement stay-at-home or limited workforce measures in response to the pandemic, could result in substantial further delays of our LNG and other projects currently under development.
Further, the COVID-19 pandemic has adversely affected conditions in the capital markets and may adversely affect our cost of and access to capital, including from the capital markets generally, from commercial paper markets and from commercial banks. Although Sempra Energy, SDG&E and SoCalGas are not currently constrained in their ability to borrow money at reasonable rates, these circumstances could change if conditions worsen or continue for an extended period, which could have a material negative effect on our liquidity, results of operations, strategic initiatives and prospects. To date, the COVID-19 pandemic has resulted in a slowdown of our capital spending, which could worsen if conditions deteriorate or fail to improve in the near term and which could have a material adverse effect on Sempra Energy’s, SDG&E’s and SoCalGas’ results of operations and prospects.
We will continue to actively monitor the effects of the COVID-19 pandemic and may take further actions that alter our business operations as may be required by federal, state or local authorities, or that we determine are in the best interests of our employees, customers, partners and suppliers. However, we cannot at this time predict the extent to which the COVID-19 pandemic will further impact our liquidity, financial condition, results of operations and prospects.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
The following table sets forth information about our common stock repurchase activity for the three months ended September 30, 2020:
PURCHASES OF EQUITY SECURITIES
(Dollars in millions, except per share amounts)
Total number of shares purchased(1)
Average price paid per share(1)
Total number of shares purchased as part of publicly announced plans or programs(1)
Maximum dollar value of shares that may yet be purchased under the plans or programs(2)
July 1, 2020 - July 31, 20203,296,251 $122.27 3,296,251 $2,097 
August 1, 2020 - August 31, 2020793,124 $122.27 793,124 $2,000 
Total4,089,375 $122.27 4,089,375 $2,000 
(1)    On September 11, 2007, our board of directors authorized the repurchase of shares of our common stock, provided that the amounts spent for such purpose do not exceed the greater of $2 billion or amounts spent to purchase no more than 40 million shares. This repurchase authorization had no expiration date. On July 1, 2020, we entered into an ASR program with Citibank, N.A. under which we prepaid $500 million to repurchase shares of our common stock in a share forward transaction. The total number of shares purchased was determined by dividing the $500 million purchase price by the arithmetic average of the volume-weighted average trading prices of shares of our common stock during the valuation period of July 2, 2020 through August 4, 2020, minus a fixed discount. The ASR program was completed on August 4, 2020, upon which date the aggregate dollar amount authorized by the September 11, 2007 share repurchase authorization was exhausted.
(2)    On July 6, 2020, our board of directors authorized the repurchase of shares of our common stock at any time and from time to time in an aggregate amount not to exceed the lesser of $2 billion or amounts spent to purchase no more than 25 million shares. This repurchase authorization was publicly announced on August 5, 2020 and has no expiration date. No shares have been repurchased under this authorization.

We may also, from time to time, purchase shares of our common stock to which participants would otherwise be entitled from long-term incentive plan participants who elect to sell a sufficient number of shares in connection with the vesting of RSUs and stock options in order to satisfy minimum statutory tax withholding requirements.
125

ITEM 6. EXHIBITS
The following exhibits listed below relate to each registrant as indicated. Unless otherwise indicated, the exhibits that are incorporated by reference herein were filed under File Number 1-14201 (Sempra Energy), File Number 1-40 (Pacific Lighting Corporation), File Number 1-03779 (San Diego Gas & Electric Company) and/or File Number 1-01402 (Southern California Gas Company).
Incorporated by Reference
Exhibit NumberExhibit DescriptionFiled or Furnished HerewithFormExhibit or AppendixFiling Date
EXHIBIT 3 -- ARTICLES OF INCORPORATION AND BYLAWS
Sempra Energy
3.110-K3.102/27/20
3.28-K3.104/14/20
3.38-K3.101/09/18
3.48-K3.107/13/18
3.58-K3.106/15/20
San Diego Gas & Electric Company
3.610-K3.402/26/15
3.710-Q3.111/02/16
Southern California Gas Company
3.810-K3.0103/28/97
3.98-K3.101/31/17
EXHIBIT 4 -- INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
Certain instruments defining the rights of holders of long-term debt instruments are not required to be filed or incorporated by reference herein pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. Each registrant agrees to furnish a copy of such instruments to the SEC upon request.
San Diego Gas & Electric Company
4.18-K4.109/28/20
Southern California Gas Company
4.28-K4.109/21/20
4.38-K4.209/21/20
126

Incorporated by Reference
Exhibit NumberExhibit DescriptionFiled or Furnished HerewithFiled HerewithFormFormPeriod EndingExhibit or AppendixFiling Date
EXHIBIT 2 -- PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR SUCCESSION
Sempra Energy
2.1
Purchase and Sale Agreement, dated as of September 27, 2019, by and between Sempra International Holdings N.V. and China Yangtze Power International (Hongkong) Co., Limited.
8-KExhibit 2.19/30/2019
2.2
Letter of Undertaking, dated as of September 27, 2019, by and between Sempra Energy International Holdings N.V., China Three Gorges Corporation and China Three Gorges Construction Management Co., Ltd.
8-KExhibit 2.29/30/2019
2.3
Purchase and Sale Agreement, dated as of October 12, 2019, by and between Sempra Energy International Holdings N.V. and State Grid International Development Limited.
8-KExhibit 2.110/15/2019
EXHIBIT 10 -- MATERIAL CONTRACTS
Management Contract or Compensatory Plan, Contract or Arrangement
Sempra Energy / San Diego Gas & Electric Company / Southern California Gas Company
10.1X
Compensation
10.1Sempra Energy
10.2XX
10.3X
Sempra Energy / San Diego Gas & Electric Company
10.4X

127

Exhibit NumberExhibit DescriptionFiled or Furnished Herewith
Exhibit NumberExhibit DescriptionFiled Herewith
EXHIBIT 31 -- SECTION 302 CERTIFICATIONS
Sempra Energy
31.1X
31.2X
San Diego Gas & Electric Company
31.3X


31.4
31.4X
Southern California Gas Company
31.5X
31.6X
EXHIBIT 32 -- SECTION 906 CERTIFICATIONS
Sempra Energy
32.1X
32.2X
San Diego Gas & Electric Company
32.3X
32.4X
Southern California Gas Company
32.5
32.5X
32.6X
EXHIBIT 101 -- INTERACTIVE DATA FILE
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.X
101.SCHInline XBRL Taxonomy Extension Schema Document.X
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.X
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.X
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.X
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.X
EXHIBIT 104 -- COVER PAGE INTERACTIVE DATA FILE
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


128

SIGNATURES


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

(Registrant)
Date: November 1, 20195, 2020By: /s/ Peter R. Wall
Peter R. Wall
Senior Vice President, Controller and
Chief Accounting Officer (Duly Authorized Officer)

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

(Registrant)
Date: November 1, 20195, 2020By: /s/ BruceValerie A. FolkmannBille
BruceValerie A. Folkmann
Senior Bille
Vice President, Controller Chief Financial Officer and Chief Accounting Officer
(Duly Authorized Officer)
Southern California Gas Company:
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SOUTHERN CALIFORNIA GAS COMPANY,

(Registrant)
Date: November 1, 20195, 2020By: /s/ Mia L. DeMontigny
Mia L. DeMontigny
Vice President, Controller, Chief Financial Officer and
Chief Accounting Officer (Duly Authorized Officer)


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