EARNINGS (LOSSES) PER COMMON SHARE COMPUTATIONS
(Dollars in millions, except per share amounts; shares in thousands)
Three months ended March 31,
2020 2019
Numerator for continuing operations:
Income from continuing operations, net of income tax $ 867
$ 560
Earnings attributable to noncontrolling interests (143 ) (32 )
Mandatory convertible preferred stock dividends (36 ) (36 )
Earnings from continuing operations attributable to common shares for basic EPS 688
492
Add back dividends for dilutive mandatory convertible preferred stock⁽¹⁾
36
—
Earnings from continuing operations attributable to common shares for diluted EPS $ 724
$ 492

Numerator for discontinued operations:
Income (loss) from discontinued operations, net of income tax $ 80
$ (42 )
Earnings attributable to noncontrolling interests (8 ) (9 )
Earnings (losses) from discontinued operations attributable to common shares $ 72
$ (51 )

Numerator for earnings:
Earnings attributable to common shares for basic EPS $ 760
$ 441
Add back dividends for dilutive mandatory convertible preferred stock⁽¹⁾
36
—
Earnings attributable to common shares for diluted EPS $ 796
$ 441

Denominator:
Weighted-average common shares outstanding for basic EPS⁽²⁾
292,790
274,674
Dilutive effect of stock options and RSUs⁽³⁾
1,304
969
Dilutive effect of common shares sold forward —
1,585
Dilutive effect of mandatory convertible preferred stock 19,831
—
Weighted-average common shares outstanding for diluted EPS 313,925
277,228

Basic EPS:
Earnings from continuing operations $ 2.35
$ 1.79
Earnings (losses) from discontinued operations $ 0.25
$ (0.19 )
Earnings $ 2.60
$ 1.60

Diluted EPS:
Earnings from continuing operations $ 2.30
$ 1.78
Earnings (losses) from discontinued operations $ 0.23
$ (0.19 )
Earnings $ 2.53
$ 1.59


⁽¹⁾	In the three months ended March 31, 2020, due to the dilutive effect of mandatory convertible preferred stock, the numerator used to calculate diluted EPS includes an add-back of mandatory convertible preferred stock dividends declared in that quarter.


⁽²⁾	Includes 542 and 613 average fully vested RSUs held in our Deferred Compensation Plan for the three months ended March 31, 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.


EARNINGS PER COMMON SHARE COMPUTATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Three months ended March 31,
		2021		2020
Numerator for continuing operations:
Income from continuing operations, net of income tax		$	928	$	867
Earnings attributable to noncontrolling interests		(33)		(143)
Preferred dividends		(21)		(36)

Earnings from continuing operations attributable to common shares for basic EPS		874		688
Add back dividends for dilutive mandatory convertible preferred stock(1)		10		36
Earnings from continuing operations attributable to common shares for diluted EPS		$	884	$	724

Numerator for discontinued operations:
Income from discontinued operations, net of income tax		$	0	$	80
Earnings attributable to noncontrolling interests		0		(8)
Earnings from discontinued operations attributable to common shares		$	0	$	72

Numerator for earnings:
Earnings attributable to common shares for basic EPS		$	874	$	760
Add back dividends for dilutive mandatory convertible preferred stock(1)		10		36
Earnings attributable to common shares for diluted EPS		$	884	$	796

Denominator:
Weighted-average common shares outstanding for basic EPS(2)		300,905		292,790
Dilutive effect of stock options and RSUs(3)		887		1,304

Dilutive effect of mandatory convertible preferred stock		6,666		19,831
Weighted-average common shares outstanding for diluted EPS		308,458		313,925

Basic EPS:
Earnings from continuing operations		$	2.91	$	2.35
Earnings from discontinued operations		$	0	$	0.25
Earnings		$	2.91	$	2.60

Diluted EPS:
Earnings from continuing operations		$	2.87	$	2.30
Earnings from discontinued operations		$	0	$	0.23
Earnings		$	2.87	$	2.53

(1) In the three months ended March 31, 2021 and 2020, due to the dilutive effect of mandatory convertible preferred stock, the numerator used to calculate diluted EPS includes an add-back of dividends declared on our mandatory convertible preferred stock in those quarters.

(2) Includes 460 and 542 average fully vested RSUs held in our Deferred Compensation Plan for the three months ended March 31, 2021 and 2020, 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.

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 ended March 31, 2021 and 2020 excludes 428,875 and ~~2019~~ ~~excludes~~ 254,257 ~~and 316,385~~ potentially dilutive shares, respectively, because to include them would be antidilutive for the period. 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 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 until settlement. After settlement, those shares are included in weighted-average common shares outstanding for basic EPS.

The potentially dilutive impact from mandatory convertible preferred stock is calculated under the if-converted ~~method. The~~method until the mandatory conversion date. After the mandatory conversion date, the converted shares are included in weighted-average common shares outstanding for basic EPS. As we discuss below in “Shareholders’ Equity and Noncontrolling Interests,” we converted our series A preferred stock into common stock on January 15, 2021. There were no antidilutive shares to exclude from the computation of diluted EPS ~~for~~in the three months ended March 31, ~~2020 and 2019~~ excludes 0 and 18,601,085 potentially dilutive shares, respectively, because to include them would be antidilutive for the period. However, these shares could potentially dilute basic EPS in the future.2021 or 2020.

In January ~~2020,~~2021, pursuant to our Sempra Energy share-based compensation plans, the Compensation and Talent Committee of Sempra Energy’s ~~Board~~board of ~~Directors~~directors granted ~~154,860~~222,620 nonqualified stock options that vest over a three-year period, ~~258,470~~319,027 performance-based RSUs and ~~100,972~~132,388 service-based RSUs.

We discuss share-based compensation plans and related awards and the terms and conditions of Sempra Energy’s equity securities further in Notes 10, 13 and 14 of the Notes to Consolidated Financial Statements in the Annual Report.

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 March 31, 2021 and 2020
Sempra Energy Consolidated(2):
Balance at December 31, 2020	$	(64)	$	(331)	$	(105)	$	(500)

OCI before reclassifications	(5)		73		7		75
Amounts reclassified from AOCI	0		19		7		26
Net OCI	(5)		92		14		101
Balance at March 31, 2021	$	(69)	$	(239)	$	(91)	$	(399)

Balance at December 31, 2019	$	(607)	$	(215)	$	(117)	$	(939)

OCI before reclassifications	(138)		(154)		16		(276)
Amounts reclassified from AOCI	0		19		6		25
Net OCI	(138)		(135)		22		(251)
Balance at March 31, 2020	$	(745)	$	(350)	$	(95)	$	(1,190)
SDG&E:




Balance at December 31, 2020 and March 31, 2021					$	(10)	$	(10)





Balance at December 31, 2019 and March 31, 2020					$	(16)	$	(16)
SoCalGas:




Balance at December 31, 2020 and March 31, 2021			$	(13)	$	(18)	$	(31)




Balance at December 31, 2019 and March 31, 2020			$	(13)	$	(10)	$	(23)

(1) All amounts are net of income tax, if subject to tax, and exclude NCI.

(2) Includes discontinued operations in 2020.

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 March 31, 2020 and 2019
Sempra Energy Consolidated⁽²⁾:

Balance as of December 31, 2019 $ (607 ) $ (215 ) $ (117 ) $ (939 )
OCI before reclassifications (138 ) (154 ) 16
(276 )
Amounts reclassified from AOCI —
19
6
25
Net OCI (138 ) (135 ) 22
(251 )
Balance as of March 31, 2020 $ (745 ) $ (350 ) $ (95 ) $ (1,190 )

Balance as of December 31, 2018 $ (564 ) $ (82 ) $ (118 ) $ (764 )
Cumulative-effect adjustment from change in accounting principle —
(25 ) (17 ) (42 )
OCI before reclassifications 32
(45 ) 1
(12 )
Amounts reclassified from AOCI —
(1 ) 2
1
Net OCI 32
(46 ) 3
(11 )
Balance as of March 31, 2019 $ (532 ) $ (153 ) $ (132 ) $ (817 )
SDG&E:
Balance as of December 31, 2019 and March 31, 2020 $ (16 ) $ (16 )

Balance as of December 31, 2018 $ (10 ) $ (10 )
Cumulative-effect adjustment from change in accounting principle (2 ) (2 )
Balance as of March 31, 2019 $ (12 ) $ (12 )
SoCalGas:
Balance as of December 31, 2019 and March 31, 2020 $ (13 ) $ (10 ) $ (23 )

Balance as of December 31, 2018 $ (12 ) $ (8 ) $ (20 )
Cumulative-effect adjustment from change in accounting principle (2 ) (2 ) (4 )
Balance as of March 31, 2019 $ (14 ) $ (10 ) $ (24 )


⁽¹⁾	~~All amounts are net of income tax, if subject to tax, and exclude NCI.~~


⁽²⁾	~~Includes discontinued operations.~~


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 March 31,
	2021		2020
Sempra Energy Consolidated:


Financial instruments:
Interest rate instruments	$	2	$	2	Interest Expense
Interest rate instruments	19		2		Equity Earnings
Foreign exchange instruments	1		(2)		Revenues: Energy-Related Businesses
	0		(2)		Other Income (Expense), Net

Interest rate and foreign exchange instruments	6		41		Other Income (Expense), Net
Foreign exchange instruments	1		(2)		Equity Earnings
Total before income tax	29		39
	(8)		(12)		Income Tax (Expense) Benefit
Net of income tax	21		27
	(2)		(8)		Earnings Attributable to Noncontrolling Interests
	$	19	$	19
Pension and other postretirement benefits(1):
Amortization of actuarial loss	$	2	$	2	Other Income (Expense), Net

Amortization of prior service cost	1		1		Other Income (Expense), Net
Settlement charges	7		5		Other Income (Expense), Net
Total before income tax	10		8

	(3)		(2)		Income Tax (Expense) Benefit
Net of income tax	$	7	$	6

Total reclassifications for the period, net of tax	$	26	$	25

(1) 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 March 31,
2020 2019
Sempra Energy Consolidated:
Financial instruments:
Interest rate and foreign exchange instruments⁽¹⁾
$ 2
$ 1
Interest Expense
41
(3 ) Other (Expense) Income, Net
Interest rate and foreign exchange instruments —
1
Equity Earnings
Foreign exchange instruments (2 ) 1
Revenues: Energy-Related Businesses
(2 ) —
Other (Expense) Income, Net
Total before income tax 39
—

(12 ) —
Income Tax Benefit (Expense)
Net of income tax 27
—

(8 ) (1 ) Earnings Attributable to Noncontrolling Interests
$ 19
$ (1 )
Pension and other postretirement benefits⁽²⁾:

Amortization of actuarial loss $ 2
$ 2
Other (Expense) Income, Net
Amortization of prior service cost 1
1
Other (Expense) Income, Net
Settlement charges 5
—
Other (Expense) Income, Net
Total before income tax 8
3

(2 ) (1 ) Income Tax Benefit (Expense)
Net of income tax $ 6
$ 2

Total reclassifications for the period, net of tax $ 25
$ 1

SDG&E:
Financial instruments:
Interest rate instruments⁽¹⁾
$ —
$ 1
Interest Expense
—
(1 ) Earnings Attributable to Noncontrolling Interest
Total reclassifications for the period, net of tax $ —
$ —


⁽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).~~

For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, reclassifications out of AOCI to net income were negligible for SDG&E and SoCalGas.

SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS

~~Ownership interests that are held by owners other than~~ Sempra Energy ~~in subsidiaries or entities consolidated by us are accounted for and reported as NCI.~~

~~SoCalGas~~Series A Preferred Stock

~~The~~On January 15, 2021, we converted 17,250,000 shares of series A preferred stock ~~at SoCalGas is presented at Sempra Energy as~~into 13,781,025 shares of our common stock based on a ~~noncontrolling interest. Sempra Energy records charges against income related to NCI~~conversion rate of 0.7989 shares of our common stock for each issued and outstanding share of series A preferred stock. As a consequence, no shares of series A preferred stock ~~dividends declared by SoCalGas. We provide additional information regarding~~were outstanding after January 15, 2021 and the 17,250,000 shares that were formerly series A preferred stock ~~in Note 13~~have returned to the status of ~~the Notes to Consolidated Financial Statements in the Annual Report.~~

authorized and unissued shares of preferred stock.

Other Noncontrolling Interests

Sempra Mexico

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~~a terminal for the receipt, storage and delivery of liquid fuels.

In March 2021, IEnova entered into an agreement to acquire the ~~first quarter of 2019, IEnova repurchased 1,600,000 shares of its outstanding common stock held by NCI~~remaining 17.5% interest in ICM Ventures Holdings B.V. for ~~approximately~~ $6 million, ~~resulting~~subject to adjustments. We expect to complete this transaction in ~~an increase in Sempra Energy’s ownership interest in IEnova from 66.5%~~the second half of 2021, subject to ~~66.6%.~~customary closing conditions.

Sempra LNG

OnIn March ~~30,~~ 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 2019, Sempra LNG purchased for $20 million the 9.1% minority interest in Bay Gas immediately prior to the sale of 100% of Bay Gas.~~

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

The following table provides information about ~~noncontrolling ownership interests~~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 held by noncontrolling interests
	March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020
Sempra Mexico:
IEnova	29.8	%	29.8	%	$	1,534	$	1,487
ICM Ventures Holdings B.V.	17.5		17.5		6		7
Sempra LNG:
ECA LNG Phase 1	29.0		29.0		48		46
Parent and other:
PXiSE Energy Solutions, LLC	20.0		20.0		1		1
Total Sempra Energy					$	1,589	$	1,541

OTHER NONCONTROLLING INTERESTS
(Dollars in millions)
Percent ownership held by noncontrolling interests
Equity (deficit) held by
noncontrolling interests
March 31,
2020 December 31,
2019 March 31,
2020 December 31,
2019
Sempra Mexico:
IEnova 33.4 % 33.4 % $ 1,726
$ 1,608
IEnova subsidiaries⁽¹⁾
10.0 – 17.5 10.0 – 46.3 6
15
Sempra LNG:
Liberty Gas Storage LLC — 24.6 —
(13 )
ECA LNG JV 16.7 16.7 14
12
Parent and other:
PXiSE Energy Solutions, LLC 20.0 20.0 1
1
Discontinued Operations:
Chilquinta Energía subsidiaries⁽¹⁾
19.7 – 43.4 19.7 – 43.4 21
23
Luz del Sur 16.4 16.4 205
205
Tecsur 9.8 9.8 5
5
Total Sempra Energy $ 1,978
$ 1,856


⁽¹⁾	~~IEnova and Chilquinta Energía have subsidiaries with NCI held by others. Percentage range reflects the highest and lowest ownership percentages among these subsidiaries.~~

TRANSACTIONS WITH AFFILIATES

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

AMOUNTS DUE FROM (TO) UNCONSOLIDATED AFFILIATES
(Dollars in millions)
March 31,
2020 December 31,
2019
Sempra Energy Consolidated:
Total due from various unconsolidated affiliates – current, net of negligible allowance for credit losses at March 31, 2020⁽¹⁾⁽²⁾
$ 64
$ 32

Sempra Texas Utilities – TTHC, net of allowance for credit losses of $1 at March 31, 2020⁽²⁾⁽³⁾
$ 6
$ —
Sempra Mexico – IMG JV – Note due March 15, 2022, net of allowance for credit losses of $6 at March 31, 2020⁽²⁾⁽⁴⁾
586
742
Total due from unconsolidated affiliates – noncurrent $ 592
$ 742

Total due to various unconsolidated affiliates – current $ (8 ) $ (5 )

Sempra Mexico⁽²⁾:

TAG Pipelines Norte, S. de. R.L. de C.V.:
Note due December 20, 2021⁽⁵⁾
$ (40 ) $ (39 )
5.5% Note due January 9, 2024⁽⁶⁾
(65 ) —
TAG JV – 5.74% Note due December 17, 2029⁽⁶⁾
(158 ) (156 )
Total due to unconsolidated affiliates – noncurrent $ (263 ) $ (195 )
SDG&E:
Sempra Energy $ (45 ) $ (37 )
SoCalGas (6 ) (10 )
Various affiliates (8 ) (6 )
Total due to unconsolidated affiliates – current $ (59 ) $ (53 )

Income taxes due from Sempra Energy⁽⁷⁾
$ 64
$ 130
SoCalGas:
SDG&E $ 6
$ 10
Various affiliates 1
1
Total due from unconsolidated affiliates – current $ 7
$ 11

Sempra Energy $ (49 ) $ (45 )
Various affiliates —
(2 )
Total due to unconsolidated affiliates – current $ (49 ) $ (47 )

Income taxes due from Sempra Energy⁽⁷⁾
$ 104
$ 152

⁽¹⁾

Amount at March 31, 2020 includes $23 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 (3.54% at March 31, 2020) with a maturity date of June 30, 2020. Pursuant to the agreement, if ESJ is unable to meet certain conditions for an expansion project by May 13, 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⁾	~~U.S. dollar-denominated loans at fixed interest rates of 6.25% and 6.45% with maturity dates of November 5, 2028 and November 5, 2030, respectively.~~

⁽⁴⁾

Mexican peso-denominated revolving line of credit for up to 14.2 billion Mexican pesos or approximately $604 million U.S. dollar-equivalent, at a variable interest rate based on the 91-day Interbank Equilibrium Interest Rate plus 220 bps (8.79% at March 31, 2020), to finance construction of the natural gas marine pipeline. At March 31, 2020, $2 million of accrued interest receivable is included in Due From Unconsolidated Affiliates – Current.


⁽⁵⁾	~~U.S. dollar-denominated loan at a variable interest rate based on 6-month LIBOR plus 290 bps (4.08% at March 31, 2020).~~


⁽⁶⁾	~~U.S. dollar-denominated loan at a fixed interest rate.~~


⁽⁷⁾	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)
	March 31, 2021		December 31, 2020
Sempra Energy Consolidated:
Total due from various unconsolidated affiliates – current	$	26	$	20

Sempra Mexico(1):
ESJ – Note due December 31, 2022, net of negligible allowance for credit losses at December 31, 2020(2)	$	0	$	85
IMG JV – Note due March 15, 2022, net of allowance for credit losses of $1 and $3 at March 31, 2021 and December 31, 2020, respectively(3)	674		695
Total due from unconsolidated affiliates – noncurrent	$	674	$	780

Sempra Mexico – TAG Pipelines Norte, S. de. R.L. de C.V. – Note due December 20, 2021(1)(4)	$	(41)	$	(41)
Various affiliates	(1)		(4)
Total due to various unconsolidated affiliates – current	$	(42)	$	(45)

Sempra Mexico(1)(5):
TAG Pipelines Norte, S. de. R.L. de C.V.:
5.5% Note due January 9, 2024	$	(69)	$	(68)
5.5% Note due January 14, 2025	(20)		0
TAG JV – 5.74% Note due December 17, 2029	(169)		(166)
Total due to unconsolidated affiliates – noncurrent	$	(258)	$	(234)
SDG&E:




Sempra Energy	$	(44)	$	(38)
SoCalGas	(24)		(21)

Various affiliates	(11)		(5)
Total due to unconsolidated affiliates – current	$	(79)	$	(64)

Income taxes due to Sempra Energy(6)	$	(18)	$	0
SoCalGas:
SDG&E	$	24	$	21
Various affiliates	1		1
Total due from unconsolidated affiliates – current	$	25	$	22

Sempra Energy	$	(41)	$	(31)
Pacific Enterprises	(25)		0
Various affiliates	(1)		0
Total due to unconsolidated affiliates – current	$	(67)	$	(31)

Income taxes due to Sempra Energy(6)	$	(145)	$	(37)

(1) Amounts include principal balances plus accumulated interest outstanding.

(2) U.S. dollar-denominated loan at a variable interest rate based on 1-month LIBOR plus 196 bps (2.11% at December 31, 2020). At December 31, 2020, $1 million of accrued interest receivable is included in Due from Unconsolidated Affiliates – Current. In March 2021, IEnova acquired the 50% equity interest in ESJ that it did not already own and ESJ became a wholly owned, consolidated subsidiary, resulting in the elimination of this note receivable.

(3) Mexican peso-denominated revolving line of credit for up to 14.2 billion Mexican pesos or approximately $693 million U.S. dollar-equivalent at March 31, 2021, at a variable interest rate based on the 91-day Interbank Equilibrium Interest Rate plus 220 bps (6.45% at March 31, 2021), to finance construction of a natural gas marine pipeline. At both March 31, 2021 and December 31, 2020, $2 million of accrued interest receivable is included in Due from Unconsolidated Affiliates – Current. At March 31, 2021, we classified this revolving line of credit as noncurrent because we expect to extend the maturity date on a long-term basis prior to its stated maturity date.

(4) U.S. dollar-denominated loan at a variable interest rate based on 6-month LIBOR plus 290 bps (3.11% at March 31, 2021).

(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.

The following table summarizes ~~revenues and cost of sales~~income statement information from unconsolidated affiliates.

REVENUES AND COST OF SALES FROM UNCONSOLIDATED AFFILIATES
(Dollars in millions)
Three months ended March 31,
2020 2019
Revenues:
Sempra Energy Consolidated $ 12
$ 14
SDG&E 1
1
SoCalGas 18
17
Cost of Sales:
Sempra Energy Consolidated $ 11
$ 14
SDG&E 17
20
SoCalGas —
4


INCOME STATEMENT IMPACT FROM UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	Three months ended March 31,
		2021		2020
Sempra Energy Consolidated
Revenues		$	8	$	12
Cost of sales		11		11
Interest income		15		17
Interest expense		4		3
SDG&E
Revenues		$	2	$	1
Cost of sales		28		17
SoCalGas
Revenues		$	25	$	18
Cost of sales		3		0

Guarantees

Sempra Energy ~~has~~ provided guarantees related to ~~the financing of the~~ Cameron LNG JV, ~~project,~~which were terminated in March 2021, and CFIN, which remains outstanding, as we discuss in Note 6 below and in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

OTHER INCOME (EXPENSE) ~~INCOME,~~, NET

Other ~~(Expense) Income, Net~~income (expense), net, consists of the following:


OTHER INCOME (EXPENSE), NET
(Dollars in millions)
	Three months ended March 31,
	2021		2020
Sempra Energy Consolidated:
Allowance for equity funds used during construction	$	38	$	31
Investment gains (losses)(1)	9		(37)
Losses on interest rate and foreign exchange instruments, net	(30)		(153)
Foreign currency transaction losses, net(2)	(19)		(123)
Non-service component of net periodic benefit credit	29		26
Interest on regulatory balancing accounts, net	1		2
Sundry, net	7		0
Total	$	35	$	(254)
SDG&E:
Allowance for equity funds used during construction	$	23	$	21
Non-service component of net periodic benefit credit	9		8
Interest on regulatory balancing accounts, net	1		2
Sundry, net	2		0
Total	$	35	$	31
SoCalGas:
Allowance for equity funds used during construction	$	12	$	8
Non-service component of net periodic benefit credit	28		25
Sundry, net	(1)		(3)
Total	$	39	$	30

(1) Represents investment gains (losses) on dedicated assets in support of our executive retirement and deferred compensation plans. These amounts are offset by corresponding changes in compensation expense related to the plans, recorded in O&M on the Condensed Consolidated Statements of ~~Operations consists~~Operations.

(2) Includes losses of $23 million and $149 million in the ~~following:~~three months ended March 31, 2021 and 2020, 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 March 31,
2020 2019
Sempra Energy Consolidated:
Allowance for equity funds used during construction $ 31
$ 21
Investment (losses) gains⁽¹⁾
(37 ) 26
(Losses) gains on interest rate and foreign exchange instruments, net (153 ) 13
Foreign currency transaction (losses) gains, net⁽²⁾
(123 ) 7
Non-service component of net periodic benefit credit 26
24
Penalties related to billing practices OII —
(8 )
Interest on regulatory balancing accounts, net 2
(1 )
Total $ (254 ) $ 82
SDG&E:
Allowance for equity funds used during construction $ 21
$ 12
Non-service component of net periodic benefit credit 8
9
Interest on regulatory balancing accounts, net 2
—
Sundry, net —
1
Total $ 31
$ 22
SoCalGas:
Allowance for equity funds used during construction $ 8
$ 8
Non-service component of net periodic benefit credit 25
18
Penalties related to billing practices OII —
(8 )
Interest on regulatory balancing accounts, net —
(1 )
Sundry, net (3 ) (1 )
Total $ 30
$ 16


⁽¹⁾	Represents investment (losses) 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 $149 million and gains of $10 million in the three months ended March 31, 2020 and 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.

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 March 31,
		2021			2020
Sempra Energy Consolidated:
Income tax expense (benefit) from continuing operations		$	158		$	(207)

Income from continuing operations before income taxes and equity earnings		$	768		$	397
Equity earnings (losses), before income tax(1)		135			(43)
Pretax income		$	903		$	354

Effective income tax rate		18		%	(58)		%
SDG&E:
Income tax expense		$	45		$	58
Income before income taxes		$	257		$	320
Effective income tax rate		18		%	18		%
SoCalGas:
Income tax expense		$	94		$	52
Income before income taxes		$	501		$	355
Effective income tax rate		19		%	15		%

INCOME TAX (BENEFIT) EXPENSE AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
Three months ended March 31,
2020 2019
Sempra Energy Consolidated:
Income tax (benefit) expense from continuing operations $ (207 ) $ 42

Income from continuing operations before income taxes and equity earnings $ 397
$ 501
Equity (losses) earnings, before income tax⁽¹⁾
(43 ) 5
Pretax income $ 354
$ 506

Effective income tax rate (58 )% 8 %
SDG&E:
Income tax expense $ 58
$ 5
Income before income taxes $ 320
$ 182
Effective income tax rate 18 % 3 %
SoCalGas:
Income tax expense $ 52
$ 19
Income before income taxes $ 355
$ 283
Effective income tax rate 15 % 7 %
(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~~


▪	~~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~~Through the first quarter of 2021, such effects are ~~partially mitigated~~offset 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 three months ended March 31, 2019, SDG&E and SoCalGas recorded income tax benefits of $31 million and $35 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.

Discontinued Operations

In January 2019, our board of directors approved a plan to sell our South American ~~businesses,~~businesses. We completed the sales in the second quarter of 2020, as we discuss in Note ~~5. Prior~~5 of the Notes to ~~this decision, our repatriation estimate excluded post-2017 earnings and other basis differences related to our South American businesses.~~Consolidated Financial Statements in the Annual Report. Because of our decision to sell our South American businesses, we no longer ~~assert~~asserted indefinite reinvestment of basis differences related to these ~~basis differences.~~businesses. Accordingly, in the three months ended March 31, 2020, we recorded ~~the following~~a $7 million income tax ~~impacts~~benefit from changes in outside basis differences in our discontinued operations in South ~~America:~~America.


▪	~~$103 million income tax expense in 2019 related to outside basis differences existing as of the January 25, 2019 approval of our plan to sell our South American businesses; and~~


▪	$7 million income tax benefit in 2020 compared to $13 million income tax expense in 2019 related to changes in outside basis differences from earnings and foreign currency effects since January 25, 2019.

~~As of March 31, 2020, we have not changed our indefinite reinvestment assertion or repatriation plan.~~

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 ~~2016-13, “Measurement of Credit Losses on Financial Instruments”:~~ ~~ASU 2016-13, as amended by subsequently issued ASUs, changes how entities measure credit losses~~2020-06, “Accounting for ~~most financial assets~~Convertible Instruments and ~~certain other instruments. The standard introduces~~Contracts in 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. We adopted the standard on January 1, 2020 using a modified retrospective approach through a cumulative-effect adjustment to retained earnings. The adoption primarily impacted the expected credit losses associated with accounts receivable balances, amounts due from unconsolidated affiliates and off-balance sheet financial guarantees. There was an insignificant impact to SDG&E’s or SoCalGas’ balance sheets from adoption. The following table shows the initial (decreases) increases on Sempra Energy’s balance sheet at January 1, 2020 from adoption of ASU 2016-13.

IMPACT FROM ADOPTION OF ASU 2016-13
(Dollars in millions)
Sempra Energy Consolidated
Accounts receivable – trade, net $ (1 )
Due from unconsolidated affiliates – noncurrent (6 )
Deferred income tax assets 4
Other current liabilities 4
Deferred credits and other 2
Retained earnings (7 )
Other noncontrolling interests (2 )

~~ASU 2017-04, “Simplifying the Test for Goodwill Impairment”~~Entity’s Own Equity”: ASU ~~2017-04 removes~~2020-06 simplifies 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.~~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 ~~740, “Income Taxes,~~470-20, “Debt with Conversion and Other Options,” by removing the accounting models for instruments with beneficial conversion and cash conversion features. The standard also amends ASC 260, “Earnings Per Share,” 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;


▪	~~simplifies the recognition of deferred taxes related to basis differences as a result of ownership changes in investments;~~

▪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;


▪	~~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.~~

▪requires an entity to include equity-classified convertible preferred stock that contains down-round features whereby, if the down-round feature is triggered, its effect is treated as a dividend and as a reduction of income available to common 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 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 ~~2019-12~~2020-06 is effective for fiscal years beginning after December 15, ~~2020,~~2021, including interim periods therein, with early adoption ~~permitted. The~~permitted for fiscal years beginning after December 15, 2020. An entity can use either a full or modified retrospective approach to adopt ASU 2020-06 and must disclose, in the period of adoption, EPS transition ~~method related to~~information about the ~~amendments made by ASU 2019-12 varies based on the nature~~effect of the ~~change.~~change on affected per-share amounts. We ~~will~~plan to adopt the standard on January 1, ~~2021~~2022 and ~~do not expect it will have a material impact~~are currently evaluating the effect of the standard on our ongoing financial ~~statements.~~reporting.

~~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 and the hedging expedient to disregard the potential discontinuation of a reference rate when assessing whether a hedged forecasted interest payment is probable. We are applying these expedients prospectively from January 1, 2020. We are still evaluating the remaining optional expedients and exceptions for hedging relationships.

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.

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, 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 (including the CPPMA, 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 ended March 31, 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 REVENUES
(Dollars in millions)
	SDG&E		SoCalGas		Sempra Mexico		Sempra LNG		Consolidating adjustments and Parent and other		Sempra Energy Consolidated
	Three months ended March 31, 2021
By major service line:
Utilities	$	1,216	$	1,657	$	27	$	0	$	(27)	$	2,873
Energy-related businesses	0		0		281		68		(81)		268
Revenues from contracts with customers	$	1,216	$	1,657	$	308	$	68	$	(108)	$	3,141

By market:
Gas	$	273	$	1,657	$	224	$	67	$	(103)	$	2,118
Electric	943		0		84		1		(5)		1,023
Revenues from contracts with customers	$	1,216	$	1,657	$	308	$	68	$	(108)	$	3,141

Revenues from contracts with customers	$	1,216	$	1,657	$	308	$	68	$	(108)	$	3,141
Utilities regulatory revenues	121		(149)		0		0		0		(28)
Other revenues	0		0		59		128		(41)		146
Total revenues	$	1,337	$	1,508	$	367	$	196	$	(149)	$	3,259

	Three months ended March 31, 2020
By major service line:
Utilities	$	1,259	$	1,544	$	20	$	0	$	(19)	$	2,804
Energy-related businesses	0		0		198		12		(7)		203
Revenues from contracts with customers	$	1,259	$	1,544	$	218	$	12	$	(26)	$	3,007

By market:
Gas	$	254	$	1,544	$	147	$	11	$	(23)	$	1,933
Electric	1,005		0		71		1		(3)		1,074
Revenues from contracts with customers	$	1,259	$	1,544	$	218	$	12	$	(26)	$	3,007

Revenues from contracts with customers	$	1,259	$	1,544	$	218	$	12	$	(26)	$	3,007
Utilities regulatory revenues	10		(149)		0		0		0		(139)
Other revenues	0		0		91		111		(41)		161
Total revenues	$	1,269	$	1,395	$	309	$	123	$	(67)	$	3,029

DISAGGREGATED REVENUES
(Dollars in millions)
SDG&E SoCalGas Sempra Mexico Sempra Renewables Sempra LNG Consolidating adjustments and Parent and other Sempra Energy Consolidated
Three months ended March 31, 2020
By major service line:
Utilities $ 1,259
$ 1,544
$ 20
$ —
$ —
$ (19 ) $ 2,804
Energy-related businesses —
—
198
—
12
(7 ) 203
Revenues from contracts with customers $ 1,259
$ 1,544
$ 218
$ —
$ 12
$ (26 ) $ 3,007

By market:
Gas $ 254
$ 1,544
$ 147
$ —
$ 11
$ (23 ) $ 1,933
Electric 1,005
—
71
—
1
(3 ) 1,074
Revenues from contracts with customers $ 1,259
$ 1,544
$ 218
$ —
$ 12
$ (26 ) $ 3,007

Revenues from contracts with customers $ 1,259
$ 1,544
$ 218
$ —
$ 12
$ (26 ) $ 3,007
Utilities regulatory revenues 10
(149 ) —
—
—
—
(139 )
Other revenues —
—
91
—
111
(41 ) 161
Total revenues $ 1,269
$ 1,395
$ 309
$ —
$ 123
$ (67 ) $ 3,029

Three months ended March 31, 2019
By major service line:
Utilities $ 1,236
$ 1,528
$ 27
$ —
$ —
$ (18 ) $ 2,773
Energy-related businesses —
—
257
4
68
(59 ) 270
Revenues from contracts with customers $ 1,236
$ 1,528
$ 284
$ 4
$ 68
$ (77 ) $ 3,043

By market:
Gas $ 239
$ 1,528
$ 198
$ —
$ 67
$ (76 ) $ 1,956
Electric 997
—
86
4
1
(1 ) 1,087
Revenues from contracts with customers $ 1,236
$ 1,528
$ 284
$ 4
$ 68
$ (77 ) $ 3,043

Revenues from contracts with customers $ 1,236
$ 1,528
$ 284
$ 4
$ 68
$ (77 ) $ 3,043
Utilities regulatory revenues (91 ) (167 ) —
—
—
—
(258 )
Other revenues —
—
99
3
73
(62 ) 113
Total revenues $ 1,145
$ 1,361
$ 383
$ 7
$ 141
$ (139 ) $ 2,898

Remaining Performance Obligations

For contracts greater than one year, at March 31, ~~2020,~~2021, 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 March 31, ~~2020.~~2021.


REMAINING PERFORMANCE OBLIGATIONS(1)
(Dollars in millions)
	Sempra Energy Consolidated		SDG&E
2021 (excluding first three months of 2021)	$	266	$	3
2022	406		4
2023	407		4
2024	348		4
2025	351		4
Thereafter	4,391		67
Total revenues to be recognized	$	6,169	$	86

REMAINING PERFORMANCE OBLIGATIONS⁽¹⁾

(Dollars in millions)
Sempra Energy Consolidated SDG&E
2020 (excluding first three months of 2020) $ 306
$ 3
2021 402
4
2022 403
4
2023 400
4
2024 348
4
Thereafter 4,640
71
Total revenues to be recognized $ 6,499
$ 90


⁽¹⁾(1)	Excludes intercompany transactions.

Contract ~~Balances~~Liabilities 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&E~~SoCalGas in the three months ended March 31, ~~2019~~2021 or ~~SoCalGas in the~~ 2020.


CONTRACT LIABILITIES
(Dollars in millions)
	2021		2020
Sempra Energy Consolidated:
Contract liabilities at January 1	$	(207)	$	(163)

Revenue from performance obligations satisfied during reporting period	25		1

Contract liabilities at March 31(1)	$	(182)	$	(162)
SDG&E:
Contract liabilities at January 1	$	(87)	$	(91)
Revenue from performance obligations satisfied during reporting period	1		1

Contract liabilities at March 31(1)	$	(86)	$	(90)

(1)~~three months ended~~ At March 31, ~~2020~~2021, includes $28 million and ~~2019~~.$4 million in Other Current Liabilities and $154 million and $82 million in Deferred Credits and Other on the Sempra Energy and SDG&E Condensed Consolidated Balance Sheets, respectively.

CONTRACT LIABILITIES
(Dollars in millions)
Sempra Energy Consolidated SDG&E
Balance at January 1, 2020 $ (163 ) $ (91 )
Revenue from performance obligations satisfied during reporting period 1
1
Balance at March 31, 2020⁽¹⁾
$ (162 ) $ (90 )
Balance at January 1, 2019 $ (70 )
Revenue from performance obligations satisfied during reporting period 1

Payments received in advance (2 )
Balance at March 31, 2019 $ (71 )


⁽¹⁾	Includes $4 million and $4 million in Other Current Liabilities and $158 million and $86 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 ~~our~~the Condensed Consolidated Balance Sheets.


RECEIVABLES FROM REVENUES FROM CONTRACTS WITH CUSTOMERS
(Dollars in millions)
	March 31, 2021		December 31, 2020
Sempra Energy Consolidated:
Accounts receivable – trade, net	$	1,484	$	1,447
Accounts receivable – other, net	9		12
Due from unconsolidated affiliates – current(1)	2		3


Total	$	1,495	$	1,462
SDG&E:
Accounts receivable – trade, net	$	622	$	573
Accounts receivable – other, net	8		8
Due from unconsolidated affiliates – current(1)	3		2
Total	$	633	$	583
SoCalGas:
Accounts receivable – trade, net	$	772	$	786
Accounts receivable – other, net	1		4
Total	$	773	$	790

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

RECEIVABLES FROM REVENUES FROM CONTRACTS WITH CUSTOMERS
(Dollars in millions)
March 31, 2020 December 31, 2019
Sempra Energy Consolidated:
Accounts receivable – trade, net $ 1,142
$ 1,163
Accounts receivable – other, net 8
16
Due from unconsolidated affiliates – current⁽¹⁾
4
5
Total $ 1,154
$ 1,184
SDG&E:
Accounts receivable – trade, net $ 411
$ 398
Accounts receivable – other, net 7
5
Due from unconsolidated affiliates – current⁽¹⁾
3
2
Total $ 421
$ 405
SoCalGas:
Accounts receivable – trade, net $ 669
$ 710
Accounts receivable – other, net 1
11
Total $ 670
$ 721


⁽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)
	March 31, 2021		December 31, 2020

SDG&E:
Fixed-price contracts and other derivatives	$	(49)	$	(53)
Deferred income taxes recoverable in rates	48		22
Pension and other postretirement benefit plan obligations	52		50
Removal obligations	(2,159)		(2,121)
Environmental costs	56		56
Sunrise Powerlink fire mitigation	123		121
Regulatory balancing accounts(1)(2)
Commodity – electric	108		72
Gas transportation	5		35
Safety and reliability	64		67
Public purpose programs	(147)		(158)
2019 GRC retroactive impacts	42		56
Other balancing accounts	285		233
Other regulatory assets, net(2)	85		72
Total SDG&E	(1,487)		(1,548)
SoCalGas:
Deferred income taxes refundable in rates	(15)		(82)
Pension and other postretirement benefit plan obligations	430		417
Employee benefit costs	37		37
Removal obligations	(674)		(685)
Environmental costs	35		36
Regulatory balancing accounts(1)(2)
Commodity – gas, including transportation	(190)		(56)
Safety and reliability	331		335
Public purpose programs	(222)		(253)
2019 GRC retroactive impacts	152		202
Other balancing accounts	(162)		(58)
Other regulatory assets, net(2)	108		75
Total SoCalGas	(170)		(32)
Sempra Mexico:
Deferred income taxes recoverable in rates	80		80

Total Sempra Energy Consolidated	$	(1,577)	$	(1,500)

(1) At March 31, 2021 and December 31, 2020, the noncurrent portion of regulatory balancing accounts – net undercollected for SDG&E was $202 million and $139 million, respectively, and for SoCalGas was $261 million and $218 million, respectively.

(2) Includes regulatory assets earning a return.

REGULATORY ASSETS (LIABILITIES)
(Dollars in millions)
March 31,
2020 December 31,
2019

SDG&E:
Fixed-price contracts and other derivatives $ 23
$ 8
Deferred income taxes refundable in rates (68 ) (108 )
Pension and other postretirement benefit plan obligations 105
103
Removal obligations (1,999 ) (2,056 )
Environmental costs 45
45
Sunrise Powerlink fire mitigation 122
121
Regulatory balancing accounts⁽¹⁾⁽²⁾

Commodity – electric 116
102
Gas transportation 9
22
Safety and reliability 75
77
Public purpose programs (138 ) (124 )
2019 GRC retroactive impacts 98
111
Other balancing accounts 124
106
Other regulatory liabilities, net⁽²⁾
(126 ) (153 )
Total SDG&E (1,614 ) (1,746 )
SoCalGas:

Deferred income taxes refundable in rates (133 ) (203 )
Pension and other postretirement benefit plan obligations 416
400
Employee benefit costs 44
44
Removal obligations (719 ) (728 )
Environmental costs 38
40
Regulatory balancing accounts⁽¹⁾⁽²⁾

Commodity – gas, including transportation (202 ) (118 )
Safety and reliability 315
295
Public purpose programs (269 ) (273 )
2019 GRC retroactive impacts 351
400
Other balancing accounts (155 ) (7 )
Other regulatory liabilities, net⁽²⁾
(88 ) (101 )
Total SoCalGas (402 ) (251 )
Sempra Mexico:
Deferred income taxes recoverable in rates 83
83
Other regulatory assets 3
6
Total Sempra Energy Consolidated $ (1,930 ) $ (1,908 )


⁽¹⁾	At March 31, 2020 and December 31, 2019, the noncurrent portion of regulatory balancing accounts – net undercollected for SDG&E was $123 million and $108 million, respectively, and for SoCalGas was $375 million and $500 million, respectively.


⁽²⁾	~~Includes regulatory assets earning a return.~~

CALIFORNIA UTILITIES

COVID-19 Pandemic Protections ~~Memorandum Account~~

~~The COVID-19 pandemic is causing a significant impact on the economy and people’s livelihoods in California. On~~In March ~~4, 2020, Governor Gavin Newsom proclaimed a State of Emergency in California as a result of the threat of COVID-19. In response, on March 17,~~ 2020, the CPUC ~~announced~~required that ~~retroactive to March 4, 2020,~~ all energy companies under its jurisdiction, including the California Utilities, ~~should~~ take action to implement several emergency customer protection measures to support California ~~customers. On April 16, 2020, the CPUC approved a resolution establishing a disaster relief plan for residential and small business~~ customers affected by the COVID-19 ~~pandemic.~~pandemic for up to one year. The ~~resolution also authorizes each~~customer protection measures were mandatory for all residential and small business customers. In February 2021, the CPUC extended the customer protection measures through June 2021 and may extend them further.

In April 2021, the CPUC expanded suspending service disconnections to medium-large commercial and industrial customers through June 2021, thereby including the entire customer population except SoCalGas’ noncore customers. The measures are retroactively effective to December 30, 2020 and may be extended.

Each of the California Utilities ~~to establish a CPPMA~~has been authorized to track and request recovery of incremental costs associated with complying with customer protection measures implemented by the ~~resolution,~~CPUC related to the COVID-19 pandemic, including ~~but not limited to,~~ costs associated with suspending service disconnections ~~(such as costs~~and uncollectible expenses that arise from customers’ failure to pay). The customer relief measures are effective March 4, 2020 and shall continue for up to one year. SDG&E extended these accommodations to all of its customers and may continue to do so, while SoCalGas provides these benefits to its core gas customers.pay. The California Utilities expect to pursue recovery of tracked costs in rates ~~of the costs associated with the consumer protections that are offered~~ in a future CPUC proceeding, ~~subject to CPUC approval,~~ which recovery is not assured.

Disconnection OIR

In June 2020, the CPUC ~~General Rate Case~~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.

CPUC GRC

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~~

As we discuss in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report, in September 2019, the CPUC issued a final decision in the 2019 GRC. The 2019 GRC FD was effective retroactive 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.~~ In January 2020, the CPUC issued a final decision implementing a four-year GRC cycle for California ~~IOUs. The~~IOUs and 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~~which requested authorization of their post-test year ratemaking mechanism for two additional years. ~~If adopted,~~

In March 2021, the ~~estimated incremental increase in~~CPUC issued a proposed decision approving the ~~revenue requirement for SDG&E and SoCalGas would be approximately $106 million and $155 million, respectively,~~California Utilities’ request to continue their authorized post-test year mechanisms for 2022 and ~~$108~~2023 using the fourth quarter 2020 Global Insight utility cost forecast. For SDG&E, the proposed decision authorizes revenue requirement increases of $87 million (3.92%) for 2022 and $86 million (3.70%) for 2023 ($91 million and ~~$137~~$104 million, respectively, were requested). The proposed decision includes a reduction of $30 million to account for ~~2023. These amounts include revenues~~anticipated benefits from SDG&E’s implementation of a new customer information system in the second quarter of 2021. For SoCalGas, the proposed decision authorizes revenue requirement increases of $142 million (4.53%) for ~~both O&M~~2022 and ~~capital cost attrition. The California Utilities requested a decision by the end of 2020.~~$130 million (3.97%) for 2023 ($150 million and $131 million, respectively, were requested).

The 2019 GRC FD clarified that differences between incurred and forecasted income tax expense due to forecasting differences are not subject to tracking in the income tax expense memorandum account beginning in 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 $89 million, respectively. In April 2020, the CPUC confirmed treatment of the two-way income tax expense memorandum account for these 2016 through 2018 balances, at which time the California Utilities released these regulatory liability balances to ~~revenues.~~revenues and regulatory interest.

~~CPUC~~We provide additional information concerning the 2019 GRC FD in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.

SDG&E

FERC Rate Matters and Cost of Capital

~~In December 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 an advice letter to continue the cost of preferred equity for test year 2020 at 6.22%, which the CPUC approved in March 2020.

CPUC AUTHORIZED COST OF CAPITAL AND RATE STRUCTURE

SDG&E SoCalGas
Authorized weighting
Return on
rate base
Weighted
return on
rate base
Authorized weighting Return on
rate base Weighted
return on
rate base
45.25 % 4.59 % 2.08 % Long-Term Debt 45.60 % 4.23 % 1.93 %
2.75 6.22 0.17 Preferred Equity 2.40 6.00 0.14
52.00 10.20 5.30 Common Equity 52.00 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, based on its filing pending approvalfiles separately with the ~~CPUC, is 4.498%, based on Moody’s Baa- utility bond index. SoCalGas’ CCM benchmark rate, based on~~FERC for its ~~filing pending approval with the CPUC, 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. The 12 months ending September 2020 will be the first “CCM Period” to determine if there has been a trigger at 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 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 of the year following the CCM trigger.~~

~~SDG&E~~

~~FERC Formulaic Rate Filing~~

~~In October 2018, SDG&E submitted its TO5 filing to the FERC to establish its transmission revenue requirement, including rate of return, for SDG&E’s~~ FERC-regulated electric transmission operations and assets. ~~In December 2018, the FERC issued its order accepting and suspending~~

SDG&E’s TO5 filing for five months, during which the existing TO4 rates remained in 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, the TO4 ROE of 10.05% was the basis of SDG&E’s FERC-related revenue recognition until March 2020, when the FERC approved the settlement terms that SDG&E and all settling parties reached in October ~~2019.~~

2019 on SDG&E��s TO5 filing. The settlement agreement ~~provides~~provided for a ROE of 10.60%, consisting of a base ROE of 10.10% plus an additional 50 bps for participation in the California ISO. If the FERC issues an order ruling that California IOUs are no longer eligible for the additional California ISO 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 beginning in 2022.

In the first 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.

SOCALGAS

OSCs – Energy Efficiency and Advocacy

In October 2019, the CPUC issued an OSC to determine whether SoCalGas should be sanctioned for violation of certain CPUC code sections and orders. The OSC stemmed from a small amount of transitional energy efficiency (EE) codes and standards advocacy activities undertaken by SoCalGas in 2018, following a CPUC decision disallowing SoCalGas’ future engagement in EE statewide codes and standards advocacy. We expect a CPUC decision on this OSC in the second quarter of 2021.

In December 2019, the CPUC issued a second OSC to determine whether SoCalGas is entitled to the EE program’s shareholder incentives for codes and standards advocacy in 2016 and 2017, whether its shareholders should bear the costs of those advocacy activities, and to address whether any other remedies are appropriate. The scope of this OSC was later expanded to include EE program years 2014 and 2015, and SoCalGas’ engagement with local governments on proposed reach codes. On April 21, 2021, the assigned Administrative Law Judge issued a Presiding Officer’s Decision (POD) on the second OSC. The POD finds no violations and assesses no fines or penalties but finds that SoCalGas spent ratepayer funds on activities that were not aligned with the CPUC’s intent for EE codes and standards advocacy. The POD orders customer refunds that SoCalGas does not expect to be material (subject to a CPUC audit), precludes SoCalGas from seeking cost recovery associated with EE codes and standards advocacy programs until lifted by the CPUC, and orders certain nonfinancial remedies. The POD is subject to appeal or request for review within 30 days of date of issuance.

Intervenors in these OSCs have suggested the CPUC order various financial and non-financial penalties. If the CPUC were to assess fines or penalties on SoCalGas associated with these OSCs, they could be material.

NOTE 5. ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS

ACQUISITION

We consolidate assets acquired and liabilities assumed as of the purchase date and include earnings from acquisitions in consolidated earnings after the purchase date.

~~ACQUISITION~~Sempra Mexico

~~Sempra Texas Utilities~~ESJ

~~TTHC~~

~~In February 2020, Sempra Texas Intermediate Holding Company LLC acquired an additional indirect 0.1975%~~On March 19, 2021, IEnova completed the acquisition of Saavi Energía’s 50% equity interest in Oncor through its acquisition of a 1% interest in TTHC from Hunt Strategic Utility Investment, L.L.C., including notes receivable due from TTHC with an aggregate outstanding balance of approximately $6 million,ESJ for a ~~total~~ purchase price of approximately ~~$23~~$65 million (net of $14 million of acquired cash and cash equivalents) plus the assumption of $277 million in ~~cash, bringing Sempra Energy’s indirect~~debt (including $94 million owed from ESJ to IEnova that eliminates upon consolidation). IEnova previously accounted for its 50% interest in ESJ as an equity method investment. This acquisition increased IEnova’s ownership interest in ~~Oncor~~ESJ from 50% to ~~approximately 80.45%~~100%. ~~TTHC indirectly owns 100%~~We accounted for this asset acquisition using a cost accumulation model whereby the cost of ~~TTI, which owns 19.75% of Oncor’s outstanding membership interests. At~~ the acquisition ~~date, we determined~~and carrying value of our previously held interest in ESJ ($34 million) were allocated to assets acquired ($458 million) and liabilities assumed ($345 million) based on their relative fair values. ESJ owns a fully operating wind power generation facility with a nameplate capacity of 155 MW that is fully contracted by SDG&E under a long-term PPA. IEnova recorded a $198 million intangible asset for the relative fair value of the ~~notes receivable was $7 million based on~~PPA that will be amortized over a ~~discounted cash flow model, and attributed $16 million to the investment~~period of 14 years against revenues. ESJ is constructing a

second wind power generation facility with a nameplate capacity of 108 MW that we expect will be completed in ~~TTHC. We account for our investment in TTHC as an equity method investment, which we discuss further in Note 6.~~

~~DIVESTITURE~~

~~Sempra LNG~~

~~In February 2019, Sempra LNG completed the sale of its non-utility natural gas storage assets~~late 2021 or in the ~~southeast U.S. (comprised~~first quarter 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.2022.

DISCONTINUED OPERATIONS

In January 2019, our board of directors approved a plan to sell our South American businesses. We ~~determined that~~present 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 to have significant continuing involvement in or be able to exercise significant influence on the operating or financial policies of these operations after they are sold. Accordingly, the results of operations, financial position and cash flows for these businesses have been presented as discontinued operations for all periods presented.operations.

Discontinued operations that were previously in the Sempra South American Utilities segment include our former 100% interest in Chilquinta Energía in Chile, our former 83.6% interest in Luz del Sur in Peru and our former interests in 2 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 April 24, 2020,~~As we discuss in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report, we completed the ~~sale~~sales of our ~~equity interests in our Peruvian~~South American businesses ~~including our 83.6% interest in Luz del Sur and its interest in Tecsur, to an affiliate of China Yangtze Power International (Hongkong) Co., Limited for an aggregate base purchase price of~~ ~~$3.59 billion, subject to post-closing adjustments.~~

~~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%~~ ~~interest in Chilquinta Energía and Tecnored and our~~ ~~50%~~ ~~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%~~ 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 Energía, which we do not expect would have a significant economic impact on the sale of our Chilean businesses (including the net proceeds we receive from the sale), would result in State Grid International Development Limited acquiring 100% ~~of Eletrans. The sale of our Chilean businesses is subject to various conditions to closing, including certain Chinese regulatory approvals, but is not subject to Chilquinta Energía purchasing the remaining~~ ~~50%~~ ~~interest in Eletrans. We expect the sale to close~~ in the second quarter of 2020.

Summarized results from discontinued operations were as follows:

DISCONTINUED OPERATIONS
(Dollars in millions)
Three months ended March 31,
2020 2019
Revenues $ 400
$ 421
Cost of sales (253 ) (265 )
Operating expenses (46 ) (45 )
Interest and other —
(3 )
Income before income taxes and equity earnings 101
108
Income tax expense (21 ) (151 )
Equity earnings —
1
Income (loss) from discontinued operations, net of income tax 80
(42 )
Earnings attributable to noncontrolling interests (8 ) (9 )
Earnings (losses) from discontinued operations attributable to common shares $ 72
$ (51 )

~~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)
March 31,
2020 December 31, 2019
Cash and cash equivalents $ 180
$ 74
Restricted cash⁽¹⁾
1
1
Accounts receivable, net 316
303
Due from unconsolidated affiliates 2
2
Inventories 36
36
Other current assets 31
29
Current assets $ 566
$ 445

Due from unconsolidated affiliates $ 60
$ 54
Goodwill and other intangible assets 748
801
Property, plant and equipment, net 2,517
2,618
Other noncurrent assets 39
40
Noncurrent assets $ 3,364
$ 3,513

Short-term debt $ 158
$ 52
Accounts payable 192
201
Current portion of long-term debt and finance leases 82
85
Other current liabilities 106
106
Current liabilities $ 538
$ 444

Long-term debt and finance leases $ 663
$ 702
Deferred income taxes 282
284
Other noncurrent liabilities 61
66
Noncurrent liabilities $ 1,006
$ 1,052


⁽¹⁾DISCONTINUED OPERATIONS	~~Primarily represents funds held~~
(Dollars in ~~accordance with Peruvian~~millions)
		Three months ended March 31, 2020

Revenues			$	400
Cost of sales			(253)

Operating expenses			(46)

Income before income taxes			101
Income tax ~~law.~~expense			(21)

Income from discontinued operations, net of income tax			80
Earnings attributable to noncontrolling interests			(8)
Earnings from discontinued operations attributable to Sempra Energy			$	72

~~At March 31, 2020 and December 31, 2019, $693 million and $551 million, respectively, of cumulative foreign currency translation losses related to our South American businesses are included in AOCI.~~

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.

We provide additional information concerning our equity method investments 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% 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, we do not have the power to 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 three months ended March 31, 2021 and 2020,, Sempra Energy contributed $50 million and $70 million, respectively, to Oncor Holdings, and Oncor Holdings distributed $77 million and $73 million, respectively, in dividends to Sempra ~~Energy $73 million in dividends.~~

~~In the~~ ~~three months ended March 31, 2019, Sempra Energy contributed $56 million to Oncor, and Oncor Holdings distributed to Sempra Energy $54 million in dividends and $3 million in tax sharing payments.~~Energy.

We provide summarized income statement information for Oncor Holdings in the following table.

SUMMARIZED FINANCIAL INFORMATION – ONCOR HOLDINGS
(Dollars in millions)
Three months ended March 31,
2020 2019
Operating revenues $ 1,072
$ 1,016
Operating expense (801 ) (775 )
Income from operations 271
241
Interest expense (101 ) (86 )
Income tax expense (28 ) (23 )
Net income 129
114
Noncontrolling interest held by TTI (26 ) (23 )
Earnings attributable to Sempra Energy 103
91

~~TTHC~~


SUMMARIZED FINANCIAL INFORMATION – ONCOR HOLDINGS
(Dollars in millions)
	Three months ended March 31,
		2021		2020
Operating revenues		$	1,139	$	1,072
Operating expenses		(829)		(801)
Income from operations		310		271
Interest expense		(102)		(101)
Income tax expense		(36)		(28)
Net income		165		129
Noncontrolling interest held by TTI		(33)		(26)
Earnings attributable to Sempra Energy		132		103

SEMPRA MEXICO

ESJ

As we discuss in Note 5, ~~in February 2020, Sempra Texas Intermediate Holding Company LLC, acquired a 1%~~on March 19, 2021, IEnova completed the acquisition of the remaining 50% equity interest in ~~TTHC from Hunt Strategic Utility Investment, L.L.C.~~ESJ and ESJ became a wholly owned, consolidated subsidiary. Prior to the acquisition date, IEnova owned 50% of ESJ and accounted for $23 million in cash, of which $16 million of the fair value was attributed to our investment in TTHC. TTHC indirectly owns 100% of TTI, which owns 19.75% of Oncor’s outstanding membership interests, resulting in Sempra Energy acquiringits interest as an ~~additional indirect 0.1975% interest in Oncor and bringing Sempra Energy’s indirect ownership in Oncor to approximately 80.45%.~~

~~SEMPRA MEXICO~~equity method investment.

IMG JV

IEnova has a 40% interest in IMG JV, a JV with a subsidiary of TC Energy Corporation, and accounts for its interest as an equity method investment. IMG JV owns and operates the Sur de Texas-Tuxpan natural gas marine pipeline, which is fully contracted under a 35-year natural gas transportation service contract with the ~~CFE and commenced commercial operations in September 2019.~~CFE.

As we discuss in “Transactions with Affiliates” in Note 1, IEnova has provided IMG JV with a Mexican peso-denominated revolving line of credit to finance construction of the natural gas marine pipeline. Due to significant fluctuation of the Mexican peso and the impact of this fluctuation on the Mexican peso-denominated loan in the three months ended March 31, 2021 and 2020, equity earnings from IEnova’s investment in IMG JV ~~were higher in the three months ended March 31, 2020 compared to the same period in 2019, primarily due to~~included $23 million and $149 million, respectively, of foreign currency gains, ~~in 2020 compared to $10 million of foreign currency losses in 2019,~~ which are offset by corresponding amounts included in Other Income (Expense) ~~Income,~~, Net, on the Sempra Energy Condensed Consolidated ~~Statements~~Statement of Operations.

We provide summarized income statement information for IMG JV in the following table.

SUMMARIZED FINANCIAL INFORMATION – IMG JV

(Dollars in millions)
Three months ended March 31,
2020 2019
Operating revenues $ 122
$ —
Operating expenses (33 ) —
Income from operations 89
—
Other income, net 364
41
Interest expense (43 ) (46 )
Income tax benefit (expense) 10
(4 )
Net income (loss)/Earnings (losses) 420
(8 )


SUMMARIZED FINANCIAL INFORMATION – IMG JV
(Dollars in millions)
	Three months ended March 31,
	2021		2020
Operating revenues	$	122	$	122
Operating expenses	(27)		(33)
Income from operations	95		89
Other income, net	58		364
Interest expense	(29)		(43)
Income tax (expense) benefit	(31)		10
Net income/Earnings	93		420

SEMPRA LNG

Cameron LNG JV

In the three months ended March 31, ~~2019,~~2021, Cameron LNG JV distributed to Sempra LNG ~~invested cash~~dividends of $131 million.

In March 2021, Cameron LNG JV reached financial completion of the three-train liquefaction project and Sempra Energy’s related guarantees for a maximum aggregate amount of $4.0 billion were terminated. We discuss these guarantees in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

Sempra Energy Support Agreement for CFIN

~~$25~~ ~~million~~

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. ~~Prior~~CFIN used the proceeds from the affiliate loans to ~~commencing commercial operations~~provide a loan to Cameron LNG JV. The affiliate loans mature in ~~August 2019, Sempra~~2039. Principal and interest will be paid from Cameron LNG ~~capitalized~~ ~~$13 million of interest in~~JV’s project cash flows from its three-train natural gas liquefaction facility. Cameron LNG JV used the ~~three months ended March 31, 2019 related~~proceeds from its loan to return equity to its ~~investment~~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.~~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 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 March 31, 2021, the fair value of the Support Agreement was $3 million, of which $7 million is included in Other Current Assets offset by $4 million included in Deferred Credits and Other on the Sempra Energy Condensed Consolidated Balance Sheet.

RBS SEMPRA COMMODITIES

As we discuss in Note 11, in ~~March~~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~~representing our share of estimated losses in excess of the carrying value of our equity method ~~investment.~~

~~GUARANTEES~~

investment in RBS Sempra Commodities. At March 31, ~~2020,~~2021, $25 million is included in Other Current Liabilities and $75 million is included in Deferred Credits and Other on Sempra LNG has provided guarantees aggregating a maximum of $4.0 billion with an aggregate carrying value of $2 million associated with Cameron LNG JV’s debt obligations. We discuss these guarantees in Note 6 of the Notes toEnergy’s Condensed Consolidated ~~Financial Statements in the Annual Report.~~

Balance Sheet.

NOTE 7. DEBT AND CREDIT FACILITIES

LINES OF CREDIT

Primary U.S. Committed Lines of Credit

At March 31, ~~2020,~~2021, Sempra Energy Consolidated had an aggregate capacity of $6.7 billion in four primary U.S. committed lines of credit, which provide liquidity and support commercial paper. The principal terms of these committed lines of credit, which expire in May 2024, are described 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)
	March 31, 2021
	Total facility		Commercial paper outstanding(1)		Available unused credit
Sempra Energy(2)	$	1,250	$	0	$	1,250
Sempra Global(3)	3,185		(915)		2,270
SDG&E(3)(4)	1,500		(130)		1,370
SoCalGas(4)	750		0		750
Total	$	6,685	$	(1,045)	$	5,640

PRIMARY U.S. COMMITTED LINES OF CREDIT
(Dollars in millions)
March 31, 2020
Total facility
Commercial paper outstanding⁽¹⁾
Lines of credit outstanding Available unused credit
Sempra Energy⁽²⁾
$ 1,250
$ —
$ (1,250 ) $ —
Sempra Global⁽³⁾
3,185
(1,225 ) —
1,960
SDG&E⁽⁴⁾
1,500
—
(200 ) 1,300
SoCalGas⁽⁴⁾
750
—
—
750
Total $ 6,685
$ (1,225 ) $ (1,450 ) $ 4,010
(1) 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 currently does not have a commercial paper program in place.

⁽¹⁾

(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 March 31, 2021.

(3) Commercial paper outstanding is before reductions of a negligible amount of unamortized discount.

(4) 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 March 31, 2021.

~~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.~~

⁽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 March 31, 2020.


⁽³⁾	~~Commercial paper outstanding is before reductions of unamortized discount of $1 million at Sempra Global.~~

⁽⁴⁾

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 March 31, 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% at the end of each quarter. At March 31, ~~2020,~~2021, each entity was in compliance with this ratio and all other financial covenants under its respective credit facility.

At March 31, 2020, the $200 million outstanding under SDG&E’s line of credit was classified as long-term debt based on management’s intent and ability to maintain this level of borrowing on a long-term basis either supported by this credit facility or by issuing long-term debt. This classification had no impact on SDG&E’s cash flows.

Foreign Committed Lines of Credit

Our foreign operations in Mexico have additional ~~general-purpose~~committed lines of credit ~~facilities~~ aggregating ~~$1.9~~$1.8 billion at March 31, ~~2020.~~2021. The principal terms of these committed lines of credit are described in Note 7 of the Notes to Consolidated Financial Statements in the Annual Report.


FOREIGN COMMITTED LINES OF CREDIT
(U.S. dollar equivalent in millions)
	March 31, 2021
Expiration date of facility	Total facility		Amounts outstanding		Available unused credit
February 2024	$	1,500	$	(392)	$	1,108
September 2021	280		(280)		0
Total	$	1,780	$	(672)	$	1,108

In addition to its committed lines of credit, IEnova has 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 may only be made in U.S. dollars). Both credit facilities ~~are described below~~.expire in October 2023. At March 31, 2021, available unused credit on these lines was $20 million.

FOREIGN COMMITTED LINES OF CREDIT
(U.S. dollar equivalent in millions)
March 31, 2020
Expiration date of facility Total facility Amounts outstanding Available unused credit
February 2024⁽¹⁾
$ 1,500
$ (1,364 ) $ 136
April 2022⁽²⁾
100
(100 ) —
September 2021⁽³⁾
280
(280 ) —
Total $ 1,880
$ (1,744 ) $ 136


⁽¹⁾	~~Five-year revolving credit facility with a syndicate of 10 lenders.~~


⁽²⁾	~~Three-year revolving credit facility with Scotiabank Inverlat, S.A. Withdrawals may be made for up to one year from April 11, 2019 in either U.S. dollars or Mexican pesos.~~


⁽³⁾	~~Two-year revolving credit facility with The Bank of Nova Scotia. Withdrawals may be made for up to two years from September 23, 2019 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 March 31, ~~2020,~~2021, we had approximately ~~$615~~$521 million in standby letters of credit outstanding under these ~~agreement~~s.

~~TERM LOANS~~

In March 2020, Sempra Energy borrowed $1,524 million, net of $1 million of debt issuance costs, under a 364-day term loan, which has 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. Borrowings bear interest at benchmark rates plus 80 bps (1.72% at March 31, 2020). On April 1, 2020, Sempra Energy borrowed an additional $75 million under the term loan.

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 (1.73% at March 31, 2020). 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. This classification had no impact on SDG&E’s cash flows.

~~The term loans provide Sempra Energy and SDG&E with additional liquidity outside of their respective committed lines of credit.~~agreements.

WEIGHTED-AVERAGE INTEREST RATES

The weighted-average interest rates on the total short-term debt at March 31, ~~2020~~2021 and December 31, ~~2019~~2020 were as follows:

WEIGHTED-AVERAGE INTEREST RATES

March 31, 2020 December 31, 2019

Sempra Energy Consolidated 2.41 % 2.31 %
SDG&E N/A
1.97
SoCalGas N/A
1.86


WEIGHTED-AVERAGE INTEREST RATES

	March 31, 2021		December 31, 2020
Sempra Energy Consolidated	0.51	%	0.83	%
SDG&E	0.18		0
SoCalGas	0		0.14

LONG-TERM DEBT

~~SDG&E~~Sempra Mexico

~~In April 2020, SDG&E issued $400 million~~As we discuss in Note 5, through its acquisition of ~~3.32% first mortgage bonds maturing in 2050 and received proceeds of $395~~ESJ, Sempra Mexico assumed a $177 million (net of ~~debt discount, underwriting discounts and~~$6 million in unamortized debt issuance ~~costs~~costs) variable rate loan payable to a syndicate of ~~$5 million). SDG&E used $200 million~~five lenders that matures in June 2033. To moderate exposure to interest rate and associated cash flow variability, ESJ entered into floating-to-fixed rate swaps for 90% of the proceeds from the offering to repay borrowings on its line of credit and expects to use the remaining proceeds for working capital and other general corporate purposes, which may include the repayment of indebtedness.

~~SoCalGas~~

~~In January 2020, SoCalGas issued $650 million of 2.55% first mortgage bonds maturing in 2030.~~ ~~We 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.~~

~~Sempra Mexico~~

In November 2019, IEnova 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. IEnova entered into a floating-to-fixed interest rate swap,principal balance, resulting in a fixed rate of ~~2.38%~~6.13%. The remaining 10% of the principal balance bears interest at 6-month LIBOR plus a margin of 2.63% with an increase of 25 bps every four years (2.89% at March 31, 2021).

Sempra LNG

~~As we~~In December 2020, ECA LNG Phase 1 entered into a five-year loan agreement with a syndicate of nine banks for an aggregate principal amount of up to $1.6 billion. At March 31, 2021 and December 31, 2020, $119 million and $17 million, respectively, was outstanding, with a weighted-average interest rate of 2.91% and 2.82%, respectively. We discuss ~~in “Shareholders’ Equity and Noncontrolling Interests – Other Noncontrolling Interests – Sempra LNG”~~the details of this agreement in Note ~~1, notes payable totaling $22 million due October 1, 2026 were converted~~7 of the Notes to ~~equity by~~Consolidated Financial Statements in the ~~minority partner in Liberty Gas Storage LLC and are no longer outstanding.~~Annual Report.

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 ~~may~~to fall or our liabilities ~~may~~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.

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 (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, in an effort 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.

The following table summarizes net energy derivative volumes.

NET ENERGY DERIVATIVE VOLUMES

(Quantities in millions)

Commodity

Unit of measure

March 31, 2021

December 31, 2020

Sempra Energy Consolidated:

Natural gas

MMBtu

(7)

Electricity

MWh

Congestion revenue rights

MWh

SDG&E:

Natural gas

MMBtu

Electricity

MWh

Congestion revenue rights

MWh

SoCalGas:

Natural gas

MMBtu

NET ENERGY DERIVATIVE VOLUMES
(Quantities in millions)
Commodity Unit of measure March 31, 2020 December 31, 2019
Sempra Energy Consolidated:
Natural gas MMBtu 20
32
Electricity MWh 1
2
Congestion revenue rights MWh 45
48
SDG&E:
Natural gas MMBtu 29
37
Electricity MWh 2
2
Congestion revenue rights MWh 45
48
SoCalGas:
Natural gas MMBtu —
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.

The following table presents the net notional amounts of our interest rate derivatives, excluding JVs.

INTEREST RATE DERIVATIVES
(Dollars in millions)
March 31, 2020 December 31, 2019
Notional debt Maturities Notional debt Maturities
Sempra Energy Consolidated:
Cash flow hedges $ 1,531
2020-2034 $ 1,445
2020-2034

INTEREST RATE DERIVATIVES

(Dollars in millions)

March 31, 2021

December 31, 2020

Notional debt

Maturities

Notional debt

Maturities

Sempra Energy Consolidated:

Cash flow hedges

729

2021-2034

1,486

2021-2034

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 may 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 ~~utilize~~utilized foreign currency derivatives in 2020 to hedge exposure to fluctuations in the Peruvian sol and Chilean peso related to the ~~sale~~sales of our operations in Peru and Chile, respectively.

The following table presents the net notional amounts of our foreign currency derivatives, excluding JVs.


FOREIGN CURRENCY DERIVATIVES	FOREIGN CURRENCY DERIVATIVES						FOREIGN CURRENCY DERIVATIVES
(Dollars in millions)	(Dollars in millions)						(Dollars in millions)
	March 31, 2020			December 31, 2019				March 31, 2021			December 31, 2020
	Notional amount		Maturities	Notional amount		Maturities		Notional amount		Maturities	Notional amount		Maturities
Sempra Energy Consolidated:							Sempra Energy Consolidated:
Cross-currency swaps	$	306	2020-2023	$	306	2020-2023	Cross-currency swaps	$	306	2021-2023	$	306	2021-2023
Other foreign currency derivatives	1,939		2020-2021	1,796		2020-2021	Other foreign currency derivatives	1,438		2021-2022	1,764		2021-2022

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)
March 31, 2020

Other current assets⁽¹⁾
Other long-term assets Other current liabilities Deferred credits and other
Sempra Energy Consolidated:
Derivatives designated as hedging instruments:
Interest rate and foreign exchange instruments $ 15
$ —
$ (29 ) $ (210 )
Derivatives not designated as hedging instruments:
Foreign exchange instruments 23
—
(82 ) —
Associated offsetting foreign exchange instruments (23 ) —
23
—
Commodity contracts not subject to rate recovery 69
9
(69 ) (11 )
Associated offsetting commodity contracts (65 ) (3 ) 65
3
Commodity contracts subject to rate recovery 23
77
(47 ) (50 )
Associated offsetting commodity contracts (2 ) (2 ) 2
2
Associated offsetting cash collateral —
—
13
—
Net amounts presented on the balance sheet 40
81
(124 ) (266 )
Additional cash collateral for commodity contracts
not subject to rate recovery
37
—
—
—
Additional cash collateral for commodity contracts
subject to rate recovery
19
—
—
—
Total⁽²⁾
$ 96
$ 81
$ (124 ) $ (266 )
SDG&E:
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery $ 20
$ 77
$ (43 ) $ (50 )
Associated offsetting commodity contracts (2 ) (2 ) 2
2
Associated offsetting cash collateral —
—
13
—
Net amounts presented on the balance sheet 18
75
(28 ) (48 )
Additional cash collateral for commodity contracts
subject to rate recovery
15
—
—
—
Total⁽²⁾
$ 33
$ 75

$ (28 )
$ (48 )
SoCalGas:
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery $ 3
$ —
$ (4 ) $ —
Net amounts presented on the balance sheet 3
—
(4 ) —
Additional cash collateral for commodity contracts
subject to rate recovery
4
—
—
—
Total $ 7
$ —
$ (4 ) $ —


DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	March 31, 2021
	Other current assets(1)		Other long-term assets		Other current liabilities		Deferred credits and other
Sempra Energy Consolidated:
Derivatives designated as hedging instruments:
Interest rate and foreign exchange instruments	$	0	$	8	$	(22)	$	(161)

Derivatives not designated as hedging instruments:


Commodity contracts not subject to rate recovery	57		15		(73)		(20)
Associated offsetting commodity contracts	(53)		(15)		53		15

Commodity contracts subject to rate recovery	31		92		(29)		(26)


Net amounts presented on the balance sheet	35		100		(71)		(192)
Additional cash collateral for commodity contracts not subject to rate recovery	24		0		0		0
Additional cash collateral for commodity contracts subject to rate recovery	27		0		0		0
Total(2)	$	86	$	100	$	(71)	$	(192)
SDG&E:


Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	27	$	92	$	(25)	$	(25)


Net amounts presented on the balance sheet	27		92		(25)		(25)

Additional cash collateral for commodity contracts subject to rate recovery	26		0		0		0
Total(2)	$	53	$	92	$	(25)	$	(25)
SoCalGas:
Derivatives not designated as hedging instruments:


Commodity contracts subject to rate recovery	$	4	$	0	$	(4)	$	(1)


Net amounts presented on the balance sheet	4		0		(4)		(1)

Additional cash collateral for commodity contracts subject to rate recovery	1		0		0		0
Total	$	5	$	0	$	(4)	$	(1)

⁽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.


DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS	DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS												DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)	(Dollars in millions)												(Dollars in millions)
	December 31, 2019													December 31, 2020
	Other current assets⁽¹⁾			Other long-term assets			Other current liabilities			Deferred credits and other				Other current assets(1)		Other long-term assets		Other current liabilities		Deferred 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	$	—		$	3		$	(17	)	$	(140	)	Interest rate and foreign exchange instruments	$	0	$	1	$	(26)	$	(160)

Derivatives not designated as hedging instruments:													Derivatives not designated as hedging instruments:
Foreign exchange instruments	41			—			(20		)	—			Foreign exchange instruments	24		0		0		0
Associated offsetting foreign exchange instruments	(20		)	—			20			—

Commodity contracts not subject to rate recovery	34			11			(41		)	(10		)	Commodity contracts not subject to rate recovery	82		17		(95)		(16)
Associated offsetting commodity contracts	(32		)	(2		)	32			2			Associated offsetting commodity contracts	(82)		(13)		82		13

Commodity contracts subject to rate recovery	41			76			(47		)	(47		)	Commodity contracts subject to rate recovery	35		95		(35)		(25)
Associated offsetting commodity contracts	(6		)	(3		)	6			3			Associated offsetting commodity contracts	(2)		0		2		0
Associated offsetting cash collateral	—			—			14			—

Net amounts presented on the balance sheet	58			85			(53		)	(192		)	Net amounts presented on the balance sheet	57		100		(72)		(188)
Additional cash collateral for commodity contracts not subject to rate recovery	43			—			—			—			Additional cash collateral for commodity contracts not subject to rate recovery	21		0		0		0
Additional cash collateral for commodity contracts subject to rate recovery	25			—			—			—			Additional cash collateral for commodity contracts subject to rate recovery	30		0		0		0
Total⁽²⁾	$	126		$	85		$	(53	)	$	(192	)	Total(2)	$	108	$	100	$	(72)	$	(188)
SDG&E:													SDG&E:
Derivatives not designated as hedging instruments:													Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	30		$	76		$	(41	)	$	(47	)	Commodity contracts subject to rate recovery	$	32	$	95	$	(28)	$	(25)
Associated offsetting commodity contracts	(4		)	(3		)	4			3			Associated offsetting commodity contracts	(1)		0		1		0
Associated offsetting cash collateral	—			—			14			—

Net amounts presented on the balance sheet	26			73			(23		)	(44		)	Net amounts presented on the balance sheet	31		95		(27)		(25)

Additional cash collateral for commodity contracts subject to rate recovery	16			—			—			—			Additional cash collateral for commodity contracts subject to rate recovery	24		0		0		0
Total⁽²⁾	$	42		$	73		$	(23	)	$	(44	)	Total(2)	$	55	$	95	$	(27)	$	(25)
SoCalGas:													SoCalGas:
Derivatives not designated as hedging instruments:													Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	11		$	—		$	(6	)	$	—		Commodity contracts subject to rate recovery	$	3	$	0	$	(7)	$	0
Associated offsetting commodity contracts	(2		)	—			2			—			Associated offsetting commodity contracts	(1)		0		1		0

Net amounts presented on the balance sheet	9			—			(4		)	—			Net amounts presented on the balance sheet	2		0		(6)		0

Additional cash collateral for commodity contracts subject to rate recovery	9			—			—			—			Additional cash collateral for commodity contracts subject to rate recovery	6		0		0		0
Total	$	18		$	—		$	(4	)	$	—		Total	$	8	$	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.

The following 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:~~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 March 31,					Three months ended March 31,
	2021		2020		Location	2021		2020
Sempra Energy Consolidated:
Interest rate instruments	$	26	$	(47)	Interest Expense	$	(2)	$	(2)
Interest rate instruments	83		(185)		Equity Earnings(1)	(19)		(2)
Foreign exchange instruments	3		21		Revenues Energy- Related Businesses	(1)		2
					Other Income (Expense), Net	0		2
Interest rate and foreign exchange instruments	(6)		(45)		Other Income (Expense), Net	(6)		(41)

Foreign exchange instruments	3		13		Equity Earnings(1)	(1)		2
Total	$	109	$	(243)		$	(29)	$	(39)

(1) Equity earnings at Sempra Mexico are recognized after tax.

CASH FLOW HEDGE IMPACTS
(Dollars in millions)

Pretax (loss) gain
recognized in OCI

Pretax (loss) gain reclassified
from AOCI into earnings
Three months ended March 31, Three months ended March 31,
2020 2019 Location 2020 2019
Sempra Energy Consolidated:
Interest rate and foreign
exchange instruments⁽¹⁾
$ (92 ) $ (3 )
Interest Expense⁽¹⁾
$ (2 ) $ (1 )
Other (Expense) Income, Net (41 ) 3
Interest rate and foreign
exchange instruments (172 ) (68 ) Equity Earnings —
(1 )
Foreign exchange instruments 21
(3 ) Revenues: Energy-
Related Businesses 2
(1 )
Other (Expense) Income, Net 2
—
Total $ (243 ) $ (74 ) $ (39 ) $ —
SDG&E:
Interest rate instruments⁽¹⁾
$ —
$ —

Interest Expense⁽¹⁾
$ —
$ (1 )


⁽¹⁾	Amounts 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.

For Sempra Energy Consolidated, we expect that ~~net~~ losses of ~~$69~~$79 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 March 31, ~~2020~~2021 is approximately 1514 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 2019 years.

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 March 31,
Location 2020 2019
Sempra Energy Consolidated:
Foreign exchange instruments Other (Expense) Income, Net $ (114 ) $ 10
Commodity contracts not subject
to rate recovery
Revenues: Energy-Related
Businesses
51
—
Commodity contracts subject
to rate recovery
Cost of Electric Fuel
and Purchased Power
(9 ) 2
Commodity contracts subject
to rate recovery
Cost of Natural Gas (3 ) 2
Total $ (75 ) $ 14
SDG&E:
Commodity contracts subject
to rate recovery
Cost of Electric Fuel
and Purchased Power
$ (9 ) $ 2
SoCalGas:
Commodity contracts subject
to rate recovery
Cost of Natural Gas $ (3 ) $ 2


UNDESIGNATED DERIVATIVE IMPACTS
(Dollars in millions)
		Pretax (loss) gain on derivatives recognized in earnings
		Three months ended March 31,
	Location	2021		2020
Sempra Energy Consolidated:

Commodity contracts not subject to rate recovery	Revenues: Energy-Related Businesses	$	(48)	$	51
Commodity contracts subject to rate recovery	Cost of Natural Gas	2		(3)
Commodity contracts subject to rate recovery	Cost of Electric Fuel and Purchased Power	2		(9)
Foreign exchange instruments	Other Income (Expense), Net	(24)		(114)
Total		$	(68)	$	(75)
SDG&E:

Commodity contracts subject to rate recovery	Cost of Electric Fuel and Purchased Power	$	2	$	(9)

SoCalGas:

Commodity contracts subject to rate recovery	Cost of Natural Gas	$	2	$	(3)

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 March 31, ~~2020~~2021 and December 31, ~~2019~~2020 was $5$20 million and ~~$21~~$16 million, respectively. For SoCalGas, the total fair value of this group of derivative instruments in a net liability position at ~~both~~ March 31, ~~2020~~2021 and December 31, ~~2019~~2020 was ~~$4 million.~~$5 million and $6 million, respectively. At March 31, ~~2020,~~2021, if the credit ratings of Sempra Energy or SoCalGas were reduced below investment grade, $5$20 million and $4$5 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.

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 March 31, ~~2020~~2021 and December 31, ~~2019.~~2020. 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, ~~2019~~.2020.

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~~following:

▪Nuclear decommissioning trusts reflect the assets of SDG&E’s NDT, excluding cash balances, accounts receivable and accounts payable. A third-party trustee values the trust assets using prices from a ~~$5 million investment~~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 March 31, 2021 and December 31, ~~2019, measured~~2020.

▪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 ~~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 March 31, 2020 and December 31, 2019.

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.”

RECURRING FAIR VALUE MEASURES – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
Fair value at March 31, 2020
Level 1 Level 2 Level 3 Total
Assets:
Nuclear decommissioning trusts:
Equity securities $ 299
$ 5
$ —
$ 304
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies
46
24
—
70
Municipal bonds —
330
—
330
Other securities —
269
—
269
Total debt securities 46
623
—
669
Total nuclear decommissioning trusts⁽¹⁾
345
628
—
973
Interest rate and foreign exchange instruments —
15
—
15
Commodity contracts not subject to rate recovery —
10
—
10
Effect of netting and allocation of collateral⁽²⁾
37
—
—
37
Commodity contracts subject to rate recovery —
4
92
96
Effect of netting and allocation of collateral⁽²⁾
14
—
5
19
Total $ 396
$ 657
$ 97
$ 1,150

Liabilities:
Interest rate and foreign exchange instruments $ —
$ 298
$ —
$ 298
Commodity contracts not subject to rate recovery —
12
—
12
Commodity contracts subject to rate recovery 13
4
76
93
Effect of netting and allocation of collateral⁽²⁾
(13 ) —
—
(13 )
Total $ —
$ 314
$ 76
$ 390

Fair value at December 31, 2019
Level 1 Level 2 Level 3 Total
Assets:
Nuclear decommissioning trusts:
Equity securities $ 503
$ 6
$ —
$ 509
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies
46
11
—
57
Municipal bonds —
282
—
282
Other securities —
226
—
226
Total debt securities 46
519
—
565
Total nuclear decommissioning trusts⁽¹⁾
549
525
—
1,074
Interest rate and foreign exchange instruments —
24
—
24
Commodity contracts not subject to rate recovery —
11
—
11
Effect of netting and allocation of collateral⁽²⁾
43
—
—
43
Commodity contracts subject to rate recovery 5
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 $ —
$ 157
$ —
$ 157
Commodity contracts not subject to rate recovery —
17
—
17
Commodity contracts subject to rate recovery 14
4
67
85
Effect of netting and allocation of collateral⁽²⁾
(14 ) —
—
(14 )
Total $ —
$ 178
$ 67
$ 245


RECURRING FAIR VALUE MEASURES – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
	Fair value at March 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Nuclear decommissioning trusts:
Equity securities	$	358	$	6	$	0	$	364
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	47		20		0		67
Municipal bonds	0		324		0		324
Other securities	0		265		0		265
Total debt securities	47		609		0		656
Total nuclear decommissioning trusts(1)	405		615		0		1,020
Interest rate and foreign exchange instruments	0		8		0		8
Commodity contracts not subject to rate recovery	0		4		0		4
Effect of netting and allocation of collateral(2)	24		0		0		24
Commodity contracts subject to rate recovery	7		4		112		123
Effect of netting and allocation of collateral(2)	21		0		6		27
Support Agreement, net of related guarantee fees	0		0		7		7
Total	$	457	$	631	$	125	$	1,213

Liabilities:
Interest rate and foreign exchange instruments	$	0	$	183	$	0	$	183
Commodity contracts not subject to rate recovery	0		25		0		25
Commodity contracts subject to rate recovery	0		5		50		55

Support Agreement, net of related guarantee fees	0		0		4		4
Total	$	0	$	213	$	54	$	267

	Fair value at December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Nuclear decommissioning trusts:
Equity securities	$	358	$	6	$	0	$	364
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	41		24		0		65
Municipal bonds	0		326		0		326
Other securities	0		270		0		270
Total debt securities	41		620		0		661
Total nuclear decommissioning trusts(1)	399		626		0		1,025
Interest rate and foreign exchange instruments	0		25		0		25
Commodity contracts not subject to rate recovery	0		4		0		4
Effect of netting and allocation of collateral(2)	21		0		0		21
Commodity contracts subject to rate recovery	6		1		121		128
Effect of netting and allocation of collateral(2)	19		5		6		30
Support Agreement, net of related guarantee fees	0		0		7		7
Total	$	445	$	661	$	134	$	1,240

Liabilities:
Interest rate and foreign exchange instruments	$	0	$	186	$	0	$	186
Commodity contracts not subject to rate recovery	0		16		0		16
Commodity contracts subject to rate recovery	0		6		52		58

Support Agreement, net of related guarantee fees	0		0		4		4
Total	$	0	$	208	$	56	$	264

(1) Excludes cash, cash equivalents and receivables (payables), net.⁽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.

RECURRING FAIR VALUE MEASURES – SDG&E
(Dollars in millions)
Fair value at March 31, 2020
Level 1 Level 2 Level 3 Total
Assets:
Nuclear decommissioning trusts:
Equity securities $ 299
$ 5
$ —
$ 304
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies
46
24
—
70
Municipal bonds —
330
—
330
Other securities —
269
—
269
Total debt securities 46
623
—
669
Total nuclear decommissioning trusts⁽¹⁾
345
628
—
973
Commodity contracts subject to rate recovery —
1
92
93
Effect of netting and allocation of collateral⁽²⁾
10
—
5
15
Total $ 355
$ 629
$ 97
$ 1,081

Liabilities:
Commodity contracts subject to rate recovery $ 13
$ —
$ 76
$ 89
Effect of netting and allocation of collateral⁽²⁾
(13 ) —
—
(13 )
Total $ —
$ —
$ 76
$ 76

Fair value at December 31, 2019
Level 1 Level 2 Level 3 Total
Assets:
Nuclear decommissioning trusts:
Equity securities $ 503
$ 6
$ —
$ 509
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies
46
11
—
57
Municipal bonds —
282
—
282
Other securities —
226
—
226
Total debt securities 46
519
—
565
Total nuclear decommissioning trusts⁽¹⁾
549
525
—
1,074
Commodity contracts subject to rate recovery 1
3
95
99
Effect of netting and allocation of collateral⁽²⁾
10
—
6
16
Total $ 560
$ 528
$ 101
$ 1,189

Liabilities:
Commodity contracts subject to rate recovery $ 14
$ —
$ 67
$ 81
Effect of netting and allocation of collateral⁽²⁾
(14 ) —
—
(14 )
Total $ —
$ —
$ 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.~~


RECURRING FAIR VALUE MEASURES – SDG&E
(Dollars in millions)
	Fair value at March 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Nuclear decommissioning trusts:
Equity securities	$	358	$	6	$	0	$	364
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	47		20		0		67
Municipal bonds	0		324		0		324
Other securities	0		265		0		265
Total debt securities	47		609		0		656
Total nuclear decommissioning trusts(1)	405		615		0		1,020

Commodity contracts subject to rate recovery	7		0		112		119
Effect of netting and allocation of collateral(2)	20		0		6		26
Total	$	432	$	615	$	118	$	1,165

Liabilities:

Commodity contracts subject to rate recovery	$	0	$	0	$	50	$	50

Total	$	0	$	0	$	50	$	50

	Fair value at December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Nuclear decommissioning trusts:
Equity securities	$	358	$	6	$	0	$	364
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	41		24		0		65
Municipal bonds	0		326		0		326
Other securities	0		270		0		270
Total debt securities	41		620		0		661
Total nuclear decommissioning trusts(1)	399		626		0		1,025
Commodity contracts subject to rate recovery	5		0		121		126
Effect of netting and allocation of collateral(2)	18		0		6		24
Total	$	422	$	626	$	127	$	1,175

Liabilities:


Commodity contracts subject to rate recovery	$	0	$	0	$	52	$	52

Total	$	0	$	0	$	52	$	52

(1) Excludes cash, cash equivalents and receivables (payables), net.

(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 – SOCALGAS	RECURRING FAIR VALUE MEASURES – SOCALGAS								RECURRING FAIR VALUE MEASURES – SOCALGAS
(Dollars in millions)	(Dollars in millions)								(Dollars in millions)
	Fair value at March 31, 2020									Fair value at March 31, 2021
	Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:									Assets:
Commodity contracts subject to rate recovery	$	—	$	3	$	—	$	3	Commodity contracts subject to rate recovery	$	0	$	4	$	0	$	4
Effect of netting and allocation of collateral⁽¹⁾	4		—		—		4		Effect of netting and allocation of collateral(1)	1		0		0		1
Total	$	4	$	3	$	—	$	7	Total	$	1	$	4	$	0	$	5

Liabilities:									Liabilities:
Commodity contracts subject to rate recovery	$	—	$	4	$	—	$	4	Commodity contracts subject to rate recovery	$	0	$	5	$	0	$	5
Total	$	—	$	4	$	—	$	4	Total	$	0	$	5	$	0	$	5

	Fair value at December 31, 2019									Fair value at December 31, 2020
	Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:									Assets:
Commodity contracts subject to rate recovery	$	4	$	5	$	—	$	9	Commodity contracts subject to rate recovery	$	1	$	1	$	0	$	2
Effect of netting and allocation of collateral⁽¹⁾	1		8		—		9		Effect of netting and allocation of collateral(1)	1		5		0		6
Total	$	5	$	13	$	—	$	18	Total	$	2	$	6	$	0	$	8

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

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 March 31 were as follows:

LONG-TERM, FIXED-PRICE ELECTRICITY POSITIONS PRICE INPUTS

Settlement year Price per MWh Weighted-average price per MWh
2020 $ 16.51
to $ 52.45
$ 35.41
2019 23.25
to 81.75
42.49


LONG-TERM, FIXED-PRICE ELECTRICITY POSITIONS PRICE INPUTS

Settlement year	Price per MWh					Weighted-average price per MWh
2021	$	20.60	to	$	117.00	$	46.46
2020		16.51	to		52.45		35.41

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 March 31, 2021

Balance at January 1	$	3
Realized and unrealized gains(1)	2
Settlements	(2)
Balance at March 31(2)	$	3
Change in unrealized gains (losses) relating to instruments still held at March 31	$	2

(1) Net gains are included in Interest Income and net losses are included in Interest Expense on the Sempra Energy Condensed Consolidated Statement of Operations.

(2) Includes $7 million in Other Current Assets offset by $4 million in Deferred Credits and Other on the Sempra Energy Condensed Consolidated Balance Sheet.

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 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 could 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, 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)
	March 31, 2021
	Carrying amount		Fair value
			Level 1		Level 2		Level 3		Total
Sempra Energy Consolidated:
Long-term amounts due from unconsolidated affiliates(1)	$	677	$	0	$	702	$	0	$	702
Long-term amounts due to unconsolidated affiliates	299		0		292		0		292
Total long-term debt(2)	21,456		0		23,251		0		23,251
SDG&E:
Total long-term debt(3)	$	6,036	$	0	$	6,659	$	0	$	6,659
SoCalGas:
Total long-term debt(4)	$	4,759	$	0	$	5,263	$	0	$	5,263

	December 31, 2020
	Carrying amount		Fair value
			Level 1		Level 2		Level 3		Total
Sempra Energy Consolidated:
Long-term amounts due from unconsolidated affiliates(1)	$	786	$	0	$	817	$	0	$	817
Long-term amounts due to unconsolidated affiliates	275		0		266		0		266
Total long-term debt(2)	22,259		0		25,478		0		25,478
SDG&E:
Total long-term debt(3)	$	6,253	$	0	$	7,384	$	0	$	7,384
SoCalGas:
Total long-term debt(4)	$	4,759	$	0	$	5,655	$	0	$	5,655

FAIR VALUE OF FINANCIAL INSTRUMENTS
(Dollars in millions)
March 31, 2020
Carrying
amount Fair value
Level 1 Level 2 Level 3 Total
Sempra Energy Consolidated:
Long-term amounts due from unconsolidated affiliates⁽¹⁾
$ 599
$ —
$ 627
$ 6
$ 633
Long-term amounts due to unconsolidated affiliates 263
—
238
—
238
Total long-term debt⁽²⁾
21,204
—
22,049
—
22,049
SDG&E:
Total long-term debt⁽³⁾
$ 5,523
$ —
$ 6,281
$ —
$ 6,281
SoCalGas:
Total long-term debt⁽⁴⁾
$ 4,459
$ —
$ 4,894
$ —
$ 4,894

December 31, 2019
Carrying
amount Fair value
Level 1 Level 2 Level 3 Total
Sempra Energy Consolidated:
Long-term amounts due from unconsolidated affiliates $ 742
$ —
$ 759
$ —
$ 759
Long-term amounts due to unconsolidated affiliates 195
—
184
—
184
Total long-term debt⁽²⁾
21,247
—
22,638
26
22,664
SDG&E:
Total long-term debt⁽³⁾
$ 5,140
$ —
$ 5,662
$ —
$ 5,662
SoCalGas:
Total long-term debt⁽⁴⁾
$ 3,809
$ —
$ 4,189
$ —
$ 4,189
(1) Before allowances for credit losses of $1 million and $3 million at March 31, 2021 and December 31, 2020, respectively. Includes $2 million and $3 million in Due From Unconsolidated Affiliates – Current at March 31, 2021 and December 31, 2020, respectively.

⁽¹⁾

(2) Before reductions of unamortized discount and debt issuance costs of $264 million and $268 million at March 31, 2021 and December 31, 2020, respectively, and excluding finance lease obligations of $1,336 million and $1,330 million at March 31, 2021 and December 31, 2020, respectively.

(3) Before reductions of unamortized discount and debt issuance costs of $52 million at both March 31, 2021 and December 31, 2020, and excluding finance lease obligations of $1,276 million at both March 31, 2021 and December 31, 2020.

(4) Before reductions of unamortized discount and debt issuance costs of $40 million at both March 31, 2021 and December 31, 2020, and excluding finance lease obligations of $60 million and $54 million at March 31, 2021 and December 31, 2020, respectively.

~~Before allowances for credit losses of $7 million at March 31, 2020.~~


⁽²⁾	Before reductions of unamortized discount and debt issuance costs of $228 million and $225 million at March 31, 2020 and December 31, 2019, respectively, and excluding finance lease obligations of $1,301 million and $1,289 million at March 31, 2020 and December 31, 2019, respectively.


⁽³⁾	Before reductions of unamortized discount and debt issuance costs of $47 million and $48 million at March 31, 2020 and December 31, 2019, respectively, and excluding finance lease obligations of $1,268 million and $1,270 million at March 31, 2020 and December 31, 2019, respectively.


⁽⁴⁾	Before reductions of unamortized discount and debt issuance costs of $41 million and $34 million at March 31, 2020 and December 31, 2019, respectively, and excluding finance lease obligations of $33 million and $19 million at March 31, 2020 and December 31, 2019, respectively.

We provide the fair values for the securities held in the NDT related to SONGS in Note 10.

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 permanently ceased operations in June 2013, and in which SDG&E has a 20% 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. Major decommissioning work began in 2020. We expect the majority of the decommissioning work to take 10 years after receipt of the required permits. The coastal development permit 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 the permit and to obtain injunctive relief to stop decommissioning work. Major decommissioning work began in 2020.years. 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% of the total ~~contract price.~~decommissioning cost.

The Samuel Lawrence Foundation filed a writ petition under the California Coastal Act in LA Superior Court in December 2019 seeking to invalidate the coastal development permit and to 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. Decommissioning work has not been interrupted to date by the writ petitions filed by the Samuel Lawrence Foundation.

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~~December 2020, SDG&E received authorization from the CPUC to access NDT funds of up to ~~$109~~$89 million for forecasted ~~2020~~2021 costs.

In December 2016, the IRS and the U.S. Department of the Treasury issued proposed 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 proposed regulations state that costs related to the construction and maintenance 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. SDG&E is awaiting the adoption of, or additional refinement to, the proposed regulations before determining whether the proposed regulations will allow SDG&E to access the NDT 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 management 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.

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)
	Cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
At March 31, 2021:
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies(1)	$	67	$	0	$	0	$	67
Municipal bonds(2)	310		15		(1)		324
Other securities(3)	256		10		(1)		265
Total debt securities	633		25		(2)		656
Equity securities	111		255		(2)		364
Cash and cash equivalents	8		0		0		8
(Payables) receivables, net	(15)		1		0		(14)
Total	$	737	$	281	$	(4)	$	1,014
At December 31, 2020:
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	$	64	$	1	$	0	$	65
Municipal bonds	308		18		0		326
Other securities	253		17		0		270
Total debt securities	625		36		0		661
Equity securities	112		254		(2)		364
Cash and cash equivalents	3		0		0		3
Payables, net	(9)		0		0		(9)
Total	$	731	$	290	$	(2)	$	1,019

(1)~~Note 9~~ Maturity dates are 2022-2051.

(2). Maturity dates are 2021-2056.

(3) Maturity dates are 2021-2072.

NUCLEAR DECOMMISSIONING TRUSTS
(Dollars in millions)
Cost
Gross
unrealized
gains

Gross
unrealized
losses

Estimated
fair
value
At March 31, 2020:
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies⁽¹⁾
$ 68
$ 2
$ —
$ 70
Municipal bonds⁽²⁾
320
12
(2 ) 330
Other securities⁽³⁾
276
4
(11 ) 269
Total debt securities 664
18
(13 ) 669
Equity securities 141
185
(22 ) 304
Cash and cash equivalents 14
—
—
14
Total $ 819
$ 203
$ (35 ) $ 987
At December 31, 2019:
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies $ 57
$ —
$ —
$ 57
Municipal bonds 270
12
—
282
Other securities 218
9
(1 ) 226
Total debt securities 545
21
(1 ) 565
Equity securities 176
339
(6 ) 509
Cash and cash equivalents 8
—
—
8
Total $ 729
$ 360
$ (7 ) $ 1,082


⁽¹⁾	~~Maturity dates are 2021-2050.~~


⁽²⁾	~~Maturity dates are 2020-2056.~~


⁽³⁾	~~Maturity dates are 2020-2072.~~

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 March 31,
		2021		2020
Proceeds from sales		$	288	$	552
Gross realized gains		21		92
Gross realized losses		(2)		(5)

SALES OF SECURITIES IN THE NDT
(Dollars in millions)
Three months ended March 31,
2020 2019
Proceeds from sales $ 552
$ 225
Gross realized gains 92
5
Gross realized losses (5 ) (2 )

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 ~~$608~~$566 million at March 31, ~~2020.~~2021. 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 ~~2020~~2021 dollars is approximately ~~$860~~$886 million.

~~U.S. DEPARTMENT OF ENERGY NUCLEAR FUEL DISPOSAL~~

Spent nuclear fuel from SONGS is currently stored on-site in an ISFSI licensed by the Nuclear Regulatory Commission or temporarily in spent fuel pools. In October 2015, the California Coastal Commission approved Edison’s application to expand the 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. 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.

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.

~~As a result of updated coverage assessments, the~~The SONGS ~~owners~~co-owners have nuclear property damage insurance of $130 million, which exceeds the minimum federal requirements of $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 $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 March 31, ~~2020,~~2021, loss contingency accruals for legal matters, including associated legal fees and regulatory matters related to the Leak, that are probable and estimable were ~~$442~~$602 million for Sempra Energy Consolidated, including ~~$297~~$458 million for SoCalGas. Amounts for Sempra Energy Consolidated and SoCalGas include ~~$286~~$432 million for matters related to the ~~Aliso Canyon natural gas storage facility gas leak,~~Leak, which we discuss below.

SoCalGas

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 in Los Angeles County. As described below in “Civil ~~and Criminal~~ Litigation” and “Regulatory Proceedings,” numerous lawsuits, investigations and regulatory proceedings have been

initiated in response to the Leak, resulting in significant costs, which together with other Leak-related costs are discussed below in “Cost Estimates, Accounting Impact and Insurance.”

Civil ~~and Criminal~~ Litigation. As of April ~~29, 2020, 393~~30, 2021, 395 lawsuits, including approximately 36,000 plaintiffs, are pending against SoCalGas and Sempra Energy related to the ~~Leak, some of which have also named Sempra Energy.~~Leak. All these cases, other than ~~a matter brought by the Los Angeles County District Attorney and~~ the federal securities class action discussed below, which names only Sempra Energy, 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 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~~and 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. SoCalGas is engaged in settlement discussions in connection with these actions and has recorded a related accrual of $277 million, inclusive of estimated legal costs, in Reserve for Aliso Canyon Costs on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets. The initial trial previously scheduled for June 2020 for a small number of randomly selected individual plaintiffs ~~has been~~was postponed, with a new trial date yet 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). The Property Class Action asserts claims for strict liability for ultra-hazardous activities, negligence, negligence per se, violation of the California Unfair Competition Law, trespass, permanent and continuing public and private nuisance, and inverse condemnation. The Business Class Action asserts a claim for violation of the California Unfair Competition Law. Both complaints seek compensatory, statutory and punitive damages, injunctive relief and attorneys’ fees.

~~Three~~Five property developers filed complaints in July 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 firefighters stationed near the Aliso Canyon natural gas storage facility who 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~~attorneys’ fees.

NaN shareholder derivative actions ~~are also pending~~were filed alleging breach of fiduciary duties against certain officers and certain directors of Sempra Energy and/or ~~SoCalGas, all~~SoCalGas. Three of ~~which~~the actions were joined in an Amended Consolidated Shareholder Derivative Complaint, ~~filed in February 2020. A fifth shareholder derivative action filed in March 2017~~which was dismissed with prejudice in ~~November 2019 on the grounds that the plaintiff failed to adequately plead his claims,~~January 2021. The plaintiffs have filed a notice of appeal. The remaining action was also dismissed but ~~the court gave~~plaintiffs were given leave ~~for him~~ to amend ~~the complaint to cure the defects.~~their complaint.

In addition, a federal securities class action alleging violation of the federal securities laws was filed against Sempra Energy and certain of its officers in 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 have appealed the dismissal.

In February 2019, the LA Superior Court approved a settlement between SoCalGas and the Los Angeles City Attorney’s Office, the County of Los Angeles, the California Office of the Attorney General and CARB of 3 actions filed by these entities under which SoCalGas made payments and agreed to provide funding for environmental projects totaling $120 million, including $21 million in civil penalties, as well as other safety-related commitments.

In September 2016, SoCalGas settled a misdemeanor criminal complaint filed in February 2016 by the Los Angeles County District Attorney’s Office against SoCalGas, pleading 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). In 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 objected 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 give the petitioners an opportunity to prove damages stemming from only the three-day delay in reporting the Leak. Following the hearing, the trial court denied restitution. The alleged victims have asked the trial court to reconsider its order.

Regulatory Proceedings. In January 2016, CalGEM and the CPUC directed an independent analysis of the technical root cause of the Leak to be conducted by Blade. In May 2019, Blade released its report, which concluded that the Leak was caused by a failure of the production casing of the well due to corrosion and that attempts to stop the Leak were not effectively conducted, but did not identify any instances of non-compliance by SoCalGas. Blade concluded that SoCalGas’ compliance activities conducted prior to the Leak did not find indications of a casing integrity issue. 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 CalGEM 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) of the CPUC 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, the 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. Hearings on a subset of issues began in ~~the first phase of the OII have been postponed until further notice.~~March 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, ~~proven~~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 ~~as well as~~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. In a January 2016 emergency proclamation,~~costs, which could result in little or no recovery of such costs by SoCalGas. SoCalGas has engaged in settlement discussions with the ~~Governor ordered the CPUC to ensure that SoCalGas covers costs related to the Leak and its response, while protecting ratepayers. In addition, CalGEM is investigating the Leak.~~SED in connection with this proceeding.

In February 2017, the CPUC opened a proceeding pursuant to the SB 380 OII 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, but excluding issues with respect to air quality, public health, causation, culpability or cost responsibility regarding the Leak. The CPUC issued a decision on the interim range of gas inventory levels at the Aliso Canyon natural gas storage facility in November 2020 with a final determination to be made within the SB 380 OII proceeding. The first phase of the proceeding established 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 expects to issue its report for Phase 2 in 2020.~~ In December 2019, the CPUC added a third phase of the proceeding ~~to consider~~and engaged a consultant who is analyzing alternative means for meeting or avoiding the demand for the facility’s services if it were eliminated in either the 2027 or ~~2045.~~2035 timeframe.

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 March 31, ~~2020,~~2021, the Aliso Canyon natural gas storage facility had a net book value of ~~$771~~$840 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.

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 March 31, ~~2020,~~2021, SoCalGas estimates ~~the~~these costs related to the Leak are ~~$1,408~~$1,627 million (the cost estimate), which includes the ~~$1,277~~$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 ~~$284~~$437 million is accrued as Reserve for Aliso Canyon Costs ~~and $6 million is accrued in Deferred Credits and Other~~ as of March 31, ~~2020~~2021 on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets.

In the first quarter of 2020, SoCalGas recorded $277 million in costs, inclusive of estimated legal costs, related to settlement discussions in connection with civil litigation described above in “Civil Litigation.” Of this amount, $177 million was recorded in Insurance Receivable for Aliso Canyon Costs on the SoCalGas and Sempra Energy Condensed Consolidated Balance Sheets and $100 million ($72 million after tax) was recorded in Aliso Canyon Litigation and Regulatory Matters on the SoCalGas and Sempra Energy Condensed Consolidated Statements of Operations. These accruals are included in the cost estimate that we describe above.

Except for the amounts paid or estimated to settle certain actions, as described in “Civil Litigation” and ~~Criminal Litigation”~~“Regulatory Proceedings” above, the cost estimate does not include ~~all~~ litigation, regulatory proceedings 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 to defend or resolve the actions or the amount of

damages, restitution, civil or ~~civil,~~ administrative ~~or 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 that we currently do not anticipate incurring or that we cannot reasonably estimate. These costs not included in the 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. As of March 31, 2021, we recorded the expected recovery of the cost estimate related to the Leak of $414 million as Insurance Receivable for Aliso Canyon Costs on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets. This amount is exclusive of insurance retentions and $865 million of insurance proceeds we received through March 31, 2021. We intend to pursue the full extent of our insurance coverage for the costs we have incurred. Other than insurance for certain future defense costs we may incur as well as directors’ and officers’ liability, ~~insurance, after taking into consideration the additional accrual related to litigation matters described above,~~ we have ~~effectively~~ 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.~~matter. 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 insurance receivable are not collected, if there are 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.

As of March 31, 2020, we recorded the expected recovery of the cost estimate related to the Leak of $511 million as Insurance Receivable for Aliso Canyon Costs on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets. This amount is exclusive of insurance retentions and $766 million of insurance proceeds we received through March 31, 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.

Sempra Mexico

Energía Costa Azul

IEnova has been engaged in a long-running land dispute relating to property adjacent to its ECA ~~LNG Regasification~~Regas Facility that allegedly overlaps with land owned by the ECA Regas Facility (the facility, ~~near Ensenada, Mexico.~~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 and ordered a retrial. ~~IEnova expects additional~~

Four other cases involving two adjacent areas of real property on which part of the ECA Regas 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 Regas Facility is situated and to obtain possession of a different parcel that allegedly overlaps with the site of the ECA Regas Facility. The second disputed area is one parcel adjacent to the ECA Regas Facility that allegedly overlaps with land on which the ECA Regas 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, ~~regarding~~which seek to invalidate the ~~claims.~~contract by which the ECA Regas Facility purchased the applicable parcel of land on which the ECA Regas 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 Regas 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.

Certain of these land disputes involve land on which portions of the ECA LNG liquefaction facilities are proposed to be situated or on which portions of the ECA Regas Facility that would be necessary for the operation of the proposed ECA LNG liquefaction facilities are situated.

Several administrative challenges are pending ~~in Mexico~~ before ~~the~~Mexico’s Secretariat of Environment and Natural Resources (the Mexican environmental protection ~~agency~~agency) and ~~the~~ Federal Tax and Administrative Courts, seeking revocation of the environmental impact authorization issued to the ECA ~~LNG Regasification facility~~Regas 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 August~~In 2018, ~~a claimant~~two related claimants filed ~~a challenge~~separate 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 LNG ~~JV for the potential liquefaction-export project in September 2017 and December 2017, respectively, to allow~~authorizing natural gas liquefaction activities at the ECA ~~LNG Regasification facility. The~~Regas Facility. In the first case, the court issued a provisional injunction in September ~~2018 and maintained that provisional injunction at an April 2019 hearing.~~2018. In December 2018, ~~the relevant Mexican regulators~~ASEA approved modifications to the environmental permit that facilitate the development of the proposed natural gas liquefaction facility ~~by ECA LNG JV~~ in two phases. In May 2019, the court canceled the provisional injunction. The claimant appealed the court’s decision canceling the injunction, but was not successful. The claimant’s underlying

challenge to the permits ~~remain~~remains pending.

~~Cases involving two parcels~~ In the second case, the initial request for a provisional injunction was denied. That decision was reversed on appeal in January 2020, resulting in the issuance of ~~real property have been filed~~a new injunction against the ~~ECA LNG Regasification facility. In one case, filed~~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 the ~~federal Agrarian Court in 2006,~~second case is under further appeal.

In May 2020, the ~~plaintiffs seek to annul the recorded property title for a parcel on which~~two third-party capacity customers at the ECA Regas Facility, Shell Mexico and Gazprom, asserted that a 2019 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 ~~Regasification facility~~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 and although Gazprom has joined the 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 and as a consequence IEnova is ~~situated~~not currently drawing on its letter of credit. IEnova intends to avail itself of its available claims, defenses, rights and ~~to obtain possession of a different parcel that allegedly sits~~remedies in the ~~same place. Another civil~~

~~complaint filed in the state court was served in April 2012~~arbitration proceeding, including seeking ~~to invalidate the contract by which the ECA LNG Regasification facility purchased another~~dismissal of the ~~parcels, on~~customers’ claims. In addition to the ~~grounds the purchase price was unfair; the plaintiff~~arbitration proceeding, Shell Mexico also filed a ~~second complaint in 2013 in~~constitutional challenge to the ~~federal Agrarian Court seeking~~CRE’s approval of the update to the general terms and conditions. In October 2020, Shell Mexico’s request to stay the CRE’s approval was denied and, subsequently, Shell Mexico filed an ~~order~~appeal of that SEDATU issue title to her. In January 2016, the federal Agrarian Court ruled against the plaintiff. The plaintiff appealed the ruling and a partial retrial was ordered. We are awaiting a new decision from the Agrarian Court. In May 2018, the state court dismissed the civil complaint, and the plaintiff appealed but was not successful; however, the plaintiff can file adecision.

One or more unfavorable final ~~federal appeal. IEnova expects further proceedings~~decisions on these ~~two matters.~~

~~An unfavorable final decision on these property~~ disputes or ~~permit~~ challenges could materially and adversely affect our existing natural gas ~~gasification~~regasification operations and ~~our planned~~proposed natural gas liquefaction projects ~~currently in development~~ at the site of the ECA ~~LNG Regasification facility~~Regas Facility and ~~potential ECA LNG JV liquefaction-export project.~~have a material adverse effect on Sempra Energy’s cash flows, financial condition, results of operations and prospects.

Guaymas-El Oro Segment of the Sonora 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 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. ~~In January 2020,~~Subsequently, IEnova and the CFE agreed to extend the ~~January 15, 2020 new~~ service start date to ~~May 15, 2020.~~September 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 ~~May 15, 2020~~September 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. The parties are currently discussing a new service start date in the event the pipeline is not repaired by May 15, 2020, but there can be no assurance that the parties will have agreed on a new service start date if the pipeline is not repaired by that date.

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

March 31, 2021, the Guaymas-El Oro segment of the Sonora pipeline had a net book value of $442 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, 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. IEnova has since achieved commercial operations on its solar power generation projects that were impacted by the order. The second phase of ESJ is not impacted by the order because it is not interconnected to the Mexican electric grid.

In May 2020, the CRE approved an update to the transmission rates included in legacy renewable and cogeneration energy contracts, based on the claim that the legacy transmission rates did not reflect fair and proportional costs for providing the applicable services and, therefore, created inequitable competitive conditions. Three of IEnova’s renewable energy facilities (Don Diego Solar, Border Solar and Ventika) are currently holders of contracts with such legacy rates, and any increases in the transmission rates would be passed through directly to their customers. These renewable energy facilities have obtained injunctive relief, but are required to guarantee the difference in tariffs until the claims are resolved by the courts.

In March 2021, the Mexican government published a decree with amendments to Mexico’s Electricity Industry Law that include some public policy changes, including establishing priority of dispatch for CFE plants over privately owned plants. According to the decree, these amendments were to become effective on March 10, 2021, and SENER, the CRE and CENACE were to have 180 calendar days to modify, as necessary, all resolutions, policies, criteria, manuals and other regulations applicable to the power industry to conform with this decree. However, a Mexican court issued a definitive suspension of the amendments on March 19, 2021 and it is expected that Mexico’s Supreme Court will ultimately settle the matter.

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 were not included in the original development or expansion plans, making modifications to the amount of energy allocated to the named offtakers, and including load centers that have entered into a supply arrangement under Mexico’s Electricity Industry Law. Don Diego Solar, Border Solar and Ventika are holders of legacy self-supply permits and are impacted by the Offtaker Resolution. If IEnova is not able to obtain legal protection for these impacted facilities, IEnova expects it will sell Border Solar’s capacity and a portion of Don Diego Solar’s capacity affected by the Offtaker Resolution into the spot market. Currently, prices in the spot market are significantly lower than the fixed prices in the PPAs that were entered into through self-supply permits. IEnova has filed lawsuits against the Offtaker Resolution. Currently, Border Solar and Don Diego Solar are prohibited from delivering electric power to all (with respect to Border Solar) or a portion (with respect to Don Diego Solar) of their respective offtakers pending final resolution of these lawsuits.

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 or Supreme Court ultimately resolves the amparo claims. An unfavorable final decision on these amparo challenges, or the potential for an extended dispute, may impact our ability to operate our wind and solar facilities at existing levels or at all, may result in increased costs for IEnova and its customers, 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.

On April 23, 2021, the President of Mexico’s initiative to reform the Hydrocarbons Law was approved by Mexico’s Congress, leaving only its promulgation and publication pending. This reform grants SENER and the CRE additional powers to suspend and early terminate permits related to the midstream and downstream sectors. Suspension of permits will be determined by SENER or the CRE when a danger to national security, energy security, or to the national economy is foreseen. Likewise, new grounds for the revocation of permits are in place if the permit holder (i) carries out its activity with illegally imported products (smuggling); (ii) fails, on more than one occasion, to comply with the provisions applicable to quantity, quality and measurement of the products; or (iii) modifies the technical conditions of its infrastructure without authorization. Additionally, in the case of existing permits, authorities will revoke those permits that fail to comply with the minimum storage requirements established by SENER.

Other Litigation

RBS Sempra Commodities

Sempra Energy holds an equity method investment in RBS Sempra Commodities, a limited liability partnership in the process of being liquidated. RBS, now NatWest Markets plc, 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 J.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, which could include the assessment of a penalty of up to 100% of the claimed amount, ~~has been~~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. OnIn March ~~10,~~ 2020, the High Court of Justice rendered its judgment mostly in favor of the Liquidating Companies and awarded damages of approximately £45 million (approximately ~~$56~~$62 million in U.S. dollars at March 31, ~~2020)~~2021), plus costs and interest. In October 2020, the High Court of Justice assessed costs and interest ~~which will~~to be ~~determined after further proceedings.~~approximately £21 million (approximately $29 million in U.S. dollars at March 31, 2021) as of that date, with interest continuing to accrue. The Defendants appealed the March 2020 judgment, and a hearing in the Court of Appeal was held in March 2021. J.P. Morgan Chase & Co. has notified us that Mercuria Energy Group, Ltd. has sought indemnity for the claim, and J.P. Morgan Chase & Co. has in turn sought indemnity from Sempra Energy and RBS.

Although the final outcome of both the High Court of Justice case and First-Tier Tribunal case remains uncertain, we recorded $100 million in equity losses from our investment in RBS Sempra Commodities in Equity Earnings on the Sempra Energy Condensed Consolidated Statement of Operations in the three months ended March 31, 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 merger 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 April ~~29, 2020, 275~~30, 2021, 4 such lawsuits are pending, ~~with 182 such lawsuits having~~all of which have been 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.

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~~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 and nonlease components 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 and terminals if the timing and pattern of transfer of the lease and nonlease components are the same and the lease component would be classified as an operating lease if accounted for 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 PPAs with renewable energy and peaker plant facilities.

We provide supplemental noncash information for operating and finance leases below.

SUPPLEMENTAL NONCASH INFORMATION
(Dollars in millions)
Three months ended March 31, 2020
Sempra Energy Consolidated SDG&E SoCalGas
Increase in operating lease obligations for right-of-use assets $ 19
$ —
$ —
Increase in finance lease obligations for investment in PP&E 20
4
16
Three months ended March 31, 2019
Sempra Energy Consolidated SDG&E SoCalGas
Increase in operating lease obligations for right-of-use assets $ 552
$ 142
$ 117
Increase in finance lease obligations for investment in PP&E 7
4
3


SUPPLEMENTAL NONCASH INFORMATION
(Dollars in millions)
	Three months ended March 31, 2021
	Sempra Energy Consolidated		SDG&E		SoCalGas
Increase in operating lease obligations for ROU assets	$	1	$	0	$	1
Increase in finance lease obligations for investment in PP&E	15		6		9
	Three months ended March 31, 2020
	Sempra Energy Consolidated		SDG&E		SoCalGas
Increase in operating lease obligations for ROU assets	$	19	$	0	$	0
Increase in finance lease obligations for investment in PP&E	20		4		16

Leases that Have Not Yet Commenced

SDG&E ~~and SoCalGas have lease agreements for future acquisitions~~has entered into a battery storage tolling agreement that it expects will commence in the third quarter of ~~fleet vehicles with an aggregate maximum lease limit of $167 million.~~2021. SDG&E expects to account for the tolling agreement as an operating lease upon commencement, and ~~SoCalGas have utilized $62~~expects the future minimum lease payments to be $3 million in 2021, $10 million in each of 2022 through 2025 and ~~$80~~$101 million ~~respectively, of these maximum lease limits as of March 31, 2020.~~thereafter until expiration in 2036.

Lessor Accounting

Sempra Mexico is a lessor for certain of its natural gas and ethane pipelines, compressor stations, ~~and~~ LPG storage ~~facilities.~~facilities and a liquid fuels terminal.

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 March 31,
		2021		2020
Fixed lease payments(1)		$	53	$	50



Depreciation expense		10		10

(1) Included in Revenues: Energy-Related Businesses on the Condensed Consolidated Statements of Operations.


▪	~~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.~~

RESULTS OF OPERATIONS

We discuss the following in Results of Operations:


▪	~~Overall results of operations of Sempra Energy~~


▪	~~Segment results~~


▪	~~Significant changes in revenues, costs and earnings~~


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

▪Overall results of operations of Sempra Energy Consolidated;

▪Segment results;

▪Significant changes in revenues, costs and earnings; and

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

OVERALL RESULTS OF OPERATIONS OF SEMPRA ENERGY CONSOLIDATED

In the three months ended March 31, ~~2020~~,2021, we reported earnings of $874 million and diluted EPS of $2.87 compared to earnings of $760 million and diluted EPS of $2.53 ~~compared to earnings of $441 million and diluted EPS of $1.59~~ for the same period in ~~2019~~.2020. The change in diluted EPS in the three months ended March 31, 2021 compared to the same period in 2020 included ~~a decrease~~an increase of ~~$(0.34)~~$0.05 due to ~~an increase~~a decrease in weighted-average common shares outstanding. Our ~~results~~earnings and diluted EPS were impacted by variances discussed in “Segment Results” below.

SEGMENT RESULTS

This section presents earnings (losses) by Sempra Energy segment, as well as Parent and other ~~in the~~ ~~three months ended March 31, 2020~~ and ~~2019~~,discontinued operations, and ~~the~~a related discussion of the changes in segment earnings (losses) ~~between these periods.~~. Throughout the MD&A, our reference to earnings represents earnings attributable to common shares. Variance amounts presented are the after-tax earnings impact (based on applicable statutory tax rates), unless otherwise noted, and before NCI, where applicable.


SEMPRA ENERGY EARNINGS (LOSSES) BY SEGMENT
(Dollars in millions)
	Three months ended March 31,
		2021		2020
SDG&E		$	212	$	262
SoCalGas		407		303
Sempra Texas Utilities		135		105
Sempra Mexico		57		191
Sempra LNG		146		75
Parent and other(1)		(83)		(248)
Discontinued operations		—		72
Earnings attributable to common shares		$	874	$	760

SEMPRA ENERGY EARNINGS (LOSSES) BY SEGMENT
(Dollars in millions)
Three months ended March 31,
2020 2019
SDG&E $ 262
$ 176
SoCalGas 303
264
Sempra Texas Utilities 105
94
Sempra Mexico 191
57
Sempra Renewables —
13
Sempra LNG 75
5
Parent and other⁽¹⁾
(248 ) (117 )
Discontinued operations 72
(51 )
Earnings attributable to common shares $ 760
$ 441


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

Due to the delay in the issuance of the CPUC’s final decision in the California Utilities’ 2019 GRC, the California Utilities recorded revenues in the first quarter of 2019 based on levels authorized for 2018 under the 2016 GRC. The 2019 GRC FD, which was issued by the CPUC in September 2019, was effective retroactively to January 1, 2019. The California Utilities’ CPUC-authorized base revenues for the first quarter of 2020 are based on the revenues authorized for the 2019 test year plus the amount authorized for attrition for 2020. Had the 2019 GRC FD been in effect in the first quarter of 2019, SDG&E’s and SoCalGas’ earnings for the first quarter of 2019 would have been higher by $36 million and $84 million, respectively. These amounts were recorded in ~~earnings 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~~consolidation and ~~in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.~~certain corporate costs.

SDG&E

The ~~increase~~decrease in earnings of ~~$86~~$50 million ~~(49%~~(19%) in the three months ended March 31, 2021 compared to the same period in 2020 was primarily due to:


▪	~~$65 million higher CPUC base operating margin, net of operating expenses, including $36 million lower CPUC base operating margin in 2019 due to the delay in the issuance of the 2019 GRC FD;~~


▪	~~$38 million higher electric transmission margin, including the following impacts from the March 2020 FERC-approved TO5 settlement proceeding:~~


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


◦	$9 million favorable impact from the retroactive application of the final TO5 settlement for 2019. The settlement proceeding increased SDG&E’s authorized ROE from 10.05% to 10.60%, effective June 1, 2019; and

▪

~~$9 million higher AFUDC equity;~~ ~~offset by~~

▪$26 million lower electric transmission margin, including the following impacts in 2020 from the March 2020 FERC-approved TO5 settlement proceeding:

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

◦$9 million favorable impact from the retroactive application of the final T05 settlement for 2019; and

▪$21 million lower CPUC base operating margin, net of operating expenses, primarily due to favorable resolution of regulatory matters in 2020.


▪	$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


▪	~~$6 million amortization of Wildfire Fund asset.~~

SoCalGas

The increase in earnings of ~~$39~~$104 million ~~(15%~~(34%) in the three months ended March 31, 2021 compared to the same period in 2020 was primarily due to:


▪	~~$109 million higher CPUC base operating margin, net of operating expenses, including $84 million lower CPUC base operating margin in 2019 due to the delay in the issuance of the 2019 GRC FD;~~


▪	~~$21 million higher income tax benefits from flow-through items; and~~


▪	~~$8 million penalties in 2019 related to the SoCalGas billing practices OII;~~ ~~offset by~~$72 million charge in 2020 from impacts associated with the Aliso Canyon natural gas storage facility litigation; and ▪$35 million higher CPUC base operating margin, net of operating expenses. 78


▪	~~$72 million from impacts associated with Aliso Canyon natural gas storage facility litigation; and~~


▪	~~$35 million income tax benefit in 2019 from the impact of the January 2019 CPUC decision allocating certain excess deferred income tax balances to shareholders.~~

Sempra Texas Utilities

The increase in earnings of ~~$11~~$30 million ~~(12%~~(29%) in the three months ended March 31, 2021 compared to the same period in 2020 was primarily due to higher equity earnings from Oncor Holdings ~~in 2020,~~ driven ~~mainly by the impact of Oncor’s acquisition of InfraREIT, Inc. in May 2019 and higher~~by:

▪increased revenues ~~due to~~from rate updates to reflect increases in invested ~~transmission capital, partially~~ capital; and

▪higher consumption due to weather; offset by ~~higher~~

▪increased operating costs and ~~lower consumption due~~expenses attributable to ~~weather.~~

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 ~~increase~~decrease in earnings of $134 million in the three months ended March 31, 2021 compared to the same period in 2020 was primarily due to:


▪	~~$253 million favorable impact from foreign currency and inflation effects net of foreign currency derivatives effects, comprised of:~~


◦	~~in 2020, $326 million favorable foreign currency and inflation effects, offset by a $91 million loss from foreign currency derivatives, and~~


◦	~~in 2019, $25 million unfavorable foreign currency and inflation effects, offset by a $7 million gain from foreign currency derivatives; and~~


▪	~~$8 million primarily due to the start of commercial operations of the Sur de Texas-Tuxpan marine pipeline at IMG JV in the third quarter of 2019;~~ ▪$226 million unfavorable impact from foreign currency and inflation effects net of foreign currency derivative effects comprised of a $12 million favorable impact in 2021 compared to a $238 million favorable impact in 2020; offset by


▪	~~$144 million earnings attributable to NCI at IEnova in 2020 compared to $28 million earnings in 2019; and~~


▪	~~$9 million lower earnings at the Guaymas-El Oro segment of the Sonora pipeline primarily from force majeure payments that ended in August 2019.~~

~~Sempra Renewables~~

~~As we discuss~~▪$34 million earnings attributable to NCI at IEnova in ~~Note 5 of the Notes~~2021 compared to ~~Consolidated Financial Statements~~$144 million earnings in ~~the Annual Report, Sempra Renewables sold its remaining wind assets and investments in April 2019, upon which date the segment ceased to exist.~~2020.

Sempra LNG

The increase in earnings of ~~$70~~$71 million in the three months ended March 31, 2021 compared to the same period in 2020 was primarily due to:


▪	$43 million higher equity earnings from Cameron LNG JV primarily due to Train 1 and Train 2 commencing commercial operations under their tolling agreements in August 2019 and February 2020, respectively; and


▪	~~$42~~ ▪$62 million higher equity earnings from Cameron LNG JV primarily due to the three-train liquefaction project achieving commercial operations in August 2020; and ▪$6 million higher earnings from ~~Sempra LNG’s~~ marketing operations, primarily driven ~~by changes in natural gas prices;~~ ~~offset~~ by changes in natural gas prices.


▪	~~$5 million higher liquefaction project development costs.~~

Parent and Other

The ~~increase~~decrease in losses of ~~$131~~$165 million in the three months ended March 31, 2021 compared to the same period in 2020 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; and


▪	$19 million net investment losses in 2020 compared to $15 million net investment gains in 2019 on dedicated assets in support of our employee nonqualified benefit plan and deferred compensation obligations.

▪$100 million equity losses in 2020 from our investment in RBS Sempra Commodities to settle pending tax matters and related legal costs;

▪$2 million net investment gains in 2021 compared to $19 million net investment losses in 2020 on dedicated assets in support of our employee nonqualified benefit plan and deferred compensation obligations;

▪$19 million lower net interest expense;

▪$15 million lower operating costs retained at Parent and other; and

▪$15 million lower preferred dividends from $26 million lower dividends due to the mandatory conversion of all series A preferred stock in January 2021, offset by $11 million higher dividends due to the issuance of series C preferred stock in June 2020.

Discontinued Operations

Discontinued operations that were previously in our Sempra South American Utilities segment include our former 100% interest in Chilquinta Energía in Chile, our former 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. As we discuss in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report, we completed the sales of our South American businesses in the second quarter of 2020.

~~Earnings~~The decrease in earnings from our discontinued operations of $72 million in the three months ended March 31, ~~2020~~2021 compared to ~~losses of $51 million for~~ the same period in ~~2019~~2020 was primarily due toto:

▪$70 million lower operational earnings mainly as a result of the ~~following~~sales of our Peruvian and Chilean businesses; and

▪$7 million income tax ~~impacts resulting from~~benefit in 2020 related to changes in outside basis differences ~~in our South American businesses:~~from earnings and foreign currency effects.


▪	~~$103 million income tax expense in 2019 related to outside basis differences existing as of the January 25, 2019 approval of our plan to sell our South American businesses; and~~


▪	$7 million income tax benefit in 2020 compared to $13 million income tax expense in 2019 related to changes in outside basis differences from earnings and foreign currency effects since January 25, 2019.

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 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 Consolidated Financial Statements and in “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 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 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.”

Because changes in SoCalGas’ and SDG&E’s cost of natural gas and/or electricity are 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 in 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,~~Proceeding, resulting in a significant portion of SoCalGas’ ~~annual~~ earnings ~~are~~being 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 utilities revenues and cost of ~~sales for our consolidated utilities.~~sales.


UTILITIES REVENUES AND COST OF SALES
(Dollars in millions)
	Three months ended March 31,
	2021		2020
Natural gas revenues:
SoCalGas	$	1,508	$	1,395
SDG&E	268		219
Sempra Mexico	27		20
Eliminations and adjustments	(26)		(17)
Total	1,777		1,617
Electric revenues:
SDG&E	1,069		1,050
Eliminations and adjustments	(1)		(2)
Total	1,068		1,048
Total utilities revenues	$	2,845	$	2,665
Cost of natural gas(1):
SoCalGas	$	273	$	278
SDG&E	82		60
Sempra Mexico	6		3
Eliminations and adjustments	(12)		(4)
Total	$	349	$	337
Cost of electric fuel and purchased power(1):
SDG&E	$	241	$	231
Eliminations and adjustments	(9)		(2)
Total	$	232	$	229

UTILITIES REVENUES AND COST OF SALES
(Dollars in millions)
Three months ended March 31,
2020 2019
Natural gas revenues:
SoCalGas $ 1,395
$ 1,361
SDG&E 219
205
Sempra Mexico 20
27
Eliminations and adjustments (17 ) (17 )
Total 1,617
1,576
Electric revenues:
SDG&E 1,050
940
Eliminations and adjustments (2 ) (1 )
Total 1,048
939
Total utilities revenues $ 2,665
$ 2,515
Cost of natural gas:
SoCalGas $ 278
$ 455
SDG&E 60
79
Sempra Mexico 3
5
Eliminations and adjustments (4 ) (8 )
Total $ 337
$ 531
Cost of electric fuel and purchased power:
SDG&E $ 231
$ 258
Eliminations and adjustments (2 ) (2 )
Total $ 229
$ 256
(1) Excludes depreciation and amortization, which are presented separately on the Sempra Energy, SDG&E and SoCalGas Condensed Consolidated Statements of Operations.

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 March 31,
2020 2019
SoCalGas $ 2.54
$ 3.85
SDG&E 3.75
4.60


CALIFORNIA UTILITIES AVERAGE COST OF NATURAL GAS
(Dollars per thousand cubic feet)
	Three months ended March 31,
		2021		2020
SoCalGas		$	2.60	$	2.54
SDG&E		4.44		3.75

In the three months ended March 31, ~~2020, Sempra Energy’s~~2021, our natural gas revenues increased by ~~$41~~$160 million ~~(3%~~(10%) ~~remaining at $1.6~~to $1.8 billion compared to the same period in 2020 primarily due to:


▪	~~$34~~ ▪$113 million increase at SoCalGas, which included:


◦	~~$181 million higher CPUC-authorized revenues, including $116 million lower revenues in 2019 due to the delay in the issuance of the 2019 GRC FD, and~~


◦	~~$36 million higher recovery of costs associated with CPUC-authorized refundable programs, which revenues are offset in O&M,~~ ~~offset by~~


◦	~~$177 million decrease in cost of natural gas sold, which we discuss below; and~~


▪	~~$14 million increase at SDG&E, which included:~~


◦	~~$29 million higher CPUC-authorized revenues, including $23 million lower revenues in 2019 due to the delay in the issuance of the 2019 GRC FD,~~ ~~offset by~~


◦	~~$19 million decrease in the cost of natural gas sold, which we discuss below.~~

◦$59 million higher CPUC-authorized revenues,

◦$41 million higher recovery of costs associated with refundable programs, which revenues are offset in O&M, and

◦$11 million higher revenues from incremental and balanced capital projects; and

▪$49 million increase at SDG&E, which included:

◦$22 million increase in cost of natural gas sold, which we discuss below,

◦$16 million higher recovery of costs associated with refundable programs, which revenues are offset in O&M, and

◦$10 million higher CPUC-authorized revenues.

In the three months ended March 31, ~~2020,~~2021, our cost of natural gas ~~decreased~~increased by ~~$194~~$12 million ~~(37%~~(4%) to ~~$337~~$349 million compared to the same period in 2020 primarily due to:

▪

~~$177 million decrease at SoCalGas due to $143 million from lower~~

▪$22 million increase at SDG&E due to $13 million higher average natural gas prices~~and $34 million from lower volumes driven by weather~~; and $9 million from higher volumes primarily driven by weather; offset by

▪$5 million decrease at SoCalGas due to $11 million from lower volumes driven by weather, offset by $6 million from higher average natural gas prices.


▪	~~$19 million decrease at SDG&E due to lower average natural gas prices and lower volumes driven by weather.~~

Electric Revenues and Cost of Electric Fuel and Purchased Power

In the three months ended March 31, ~~2020,~~2021, our electric revenues, substantially all of which are at SDG&E, increased by ~~$109~~$20 million ~~(12%~~(2%) to ~~$1.0~~$1.1 billion ~~including:~~compared to the same period in 2020 primarily due to:


▪	~~$67 million increase in transmission operations, including the following impacts related to the March 2020 FERC-approved TO5 settlement proceeding:~~


◦	~~$26 million to settle a rate base matter, and~~


◦	~~$12 million favorable impact from the retroactive application of the final TO5 settlement for 2019; and~~

▪

~~$55~~

▪$54 million higher recovery of costs associated with ~~CPUC-authorized~~ refundable programs, which revenues are offset in O&M;

▪$10 million higher CPUC-authorized revenues; and

▪$10 million higher cost of electric fuel and purchased power, which we discuss below; offset by

▪$35 million lower revenues from transmission operations, including the following impacts in 2020 related to the March 2020 FERC-approved TO5 settlement proceeding:

◦$26 million to settle a rate base matter, and

◦$12 million favorable impact from the retroactive application of the final TO5 settlement for 2019; and

▪$22 million lower revenues due to favorable resolution of regulatory matters in 2020.


▪	~~$27 million lower cost of electric fuel and purchased power, which we discuss below.~~

Our utility cost of electric fuel and purchased power, substantially all of which is at SDG&E, ~~decreased~~increased by ~~$27~~$3 million ~~(11%~~(1%) to ~~$229~~$232 million in the three months ended March 31, 2021 compared to the same period in 2020 primarily due to an increase in market costs, offset by a decrease in ~~residential~~ demand ~~primarily~~ from ~~an increase in~~the adoption of rooftop ~~solar adoption.~~solar.

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 March 31,
2020 2019
REVENUES
Sempra Mexico $ 289
$ 356
Sempra Renewables —

7
Sempra LNG 123
141
Parent and other⁽¹⁾
(48 ) (121 )
Total revenues $ 364
$ 383
COST OF SALES⁽²⁾

Sempra Mexico $ 69
$ 121
Sempra LNG 39
103
Parent and other⁽¹⁾
(49 ) (116 )
Total cost of sales $ 59
$ 108


⁽¹⁾	~~Includes eliminations of intercompany activity.~~


⁽²⁾	~~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 March 31,
	2021		2020
REVENUES
Sempra Mexico	$	340	$	289

Sempra LNG	196		123
Parent and other(1)	(122)		(48)
Total revenues	$	414	$	364
COST OF SALES(2)
Sempra Mexico	$	119	$	69
Sempra LNG	101		39
Parent and other(1)	(111)		(49)
Total cost of sales	$	109	$	59

In(1) Includes eliminations of intercompany activity.

(2) Excludes depreciation and amortization, which are presented separately on the ~~three months ended March 31, 2020, revenues from our energy-related businesses decreased by~~ ~~$19 million~~ (5%~~) to $364 million primarily due to:~~Sempra Energy Condensed Consolidated Statements of Operations.


▪	~~$67 million decrease at Sempra Mexico primarily due to:~~


◦	~~$49 million from the marketing business primarily from lower natural gas prices and volumes,~~


◦	~~$26 million lower revenues at TdM primarily due to lower natural gas prices and volumes, and~~


◦	~~$10 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,~~ ~~offset by~~


◦	~~$14 million increase primarily due to higher volumes at the Ventika wind power generation facilities and from renewable assets placed in service in 2019; and~~


▪	~~$18 million decrease at Sempra LNG primarily due to:~~


◦	~~$55 million lower natural gas sales to Sempra Mexico due to lower natural gas prices and volumes and from fewer LNG cargoes sold,~~ ~~offset by~~


◦	~~$44 million increase from natural gas marketing operations primarily due to changes in natural gas prices;~~ ~~offset by~~


▪	~~$73 million increase primarily from lower intercompany eliminations associated with sales between Sempra LNG and Sempra Mexico.~~

In the three months ended March 31, 2021, revenues from our energy-related businesses increased by $50 million (14%) to $414 million compared to the same period in 2020 primarily due to:

▪$73 million increase at Sempra LNG primarily due to:

◦$61 million increase in revenues from LNG marketing operations primarily from higher natural gas sales to Sempra Mexico mainly as a result of higher natural gas prices, and from higher diversion revenues due to higher natural gas prices, and

◦$13 million increase from natural gas marketing operations primarily due to changes in natural gas prices; and

▪$51 million increase at Sempra Mexico primarily due to:

◦$59 million from the marketing business primarily due to higher natural gas prices, offset by

◦$13 million lower revenues from TdM mainly due to unrealized losses on commodity derivatives, offset by higher power prices; offset by

▪$74 million decrease primarily from higher intercompany eliminations associated with sales between Sempra LNG and Sempra Mexico.

In the three months ended March 31, 2021, the cost of sales for our energy-related businesses ~~decreased~~increased by ~~$49~~$50 million ~~(45%)~~ to ~~$59~~$109 million compared to the same period in 2020 primarily due to:


▪	~~$64 million decrease at Sempra LNG mainly from natural gas marketing activities primarily from lower natural gas purchases; and~~

▪

▪$62 million increase at Sempra LNG mainly from natural gas marketing activities due to higher natural gas purchases; and

▪$50 million increase at Sempra Mexico primarily due to higher natural gas prices at the marketing business and TdM; offset by

▪$62 million decrease primarily from higher intercompany eliminations associated with sales between Sempra LNG and Sempra Mexico.

~~$52 million decrease at Sempra Mexico mainly associated with lower revenues from the marketing business and TdM as a result of lower natural gas prices and volumes;~~ ~~offset by~~


▪	~~$67 million increase primarily from lower intercompany eliminations associated with sales between Sempra LNG and Sempra Mexico.~~

Operation and Maintenance

~~Our O&M increased by $119 million (14%) to $951 million in~~In the three months ended March 31, 2021, O&M increased by $150 million (18%) to $1.0 billion compared to the same period in 2020 primarily due to:


▪	~~$133~~ ▪$80 million increase ~~at SoCalGas primarily due to:~~


◦	~~$100 million from impacts associated with Aliso Canyon natural gas storage facility litigation, and~~


◦	~~$36 million higher expenses associated with CPUC-authorized refundable programs for which costs incurred are recovered in revenue; and~~

▪

~~$24 million increase~~ at SDG&E primarily due to:

◦$70 million higher expenses associated with refundable programs, which costs incurred are recovered in revenue, and

◦$10 million higher non-refundable operating costs;

▪$60 million increase at SoCalGas primarily due to:

◦$41 million higher expenses associated with refundable programs, which costs incurred are recovered in revenue, and

◦$19 million higher non-refundable operating costs; and

▪$15 million increase at Parent and other primarily from higher deferred compensation expense.

Aliso Canyon Litigation and Regulatory Matters

In March 2020, SoCalGas recorded a charge of $100 million in Aliso Canyon Litigation and Regulatory Matters related to settlement discussions in connection with civil litigation associated with the Leak, which we describe in Note 11 of the Notes to Condensed Consolidated Financial Statements.


◦	~~$57 million higher expenses associated with CPUC-authorized refundable programs,~~ ~~offset by~~


◦	~~$31 million lower non-refundable operating costs, including liability insurance premium costs for 2019 that were not balanced due to the delay in the 2019 GRC FD;~~ ~~offset by~~


▪	~~$36 million decrease at Parent and other primarily from lower deferred compensation expense.~~

Other Income (Expense) ~~Income,~~, Net

As part of our central risk management function, we may 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 Tax ~~Benefit (Expense)~~ Expense for Sempra Mexico’s consolidated entities and in Equity Earnings for Sempra Mexico’s equity method investments. We also ~~utilize~~utilized foreign currency derivatives in 2020 to hedge exposure to fluctuations in the Peruvian sol and Chilean peso related to the ~~sale~~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 Disclosures About Market Risk” in the Annual Report.

Other ~~expense,~~income, net, in the three months ended March 31, ~~2020~~2021 was ~~$254~~$35 million compared to other ~~income,~~expense, net, of ~~$82~~$254 million in the same period in ~~2019.~~2020. The change was primarily due to:

▪

~~$276~~

▪$227 million lower net losses from impacts associated with interest rate and foreign exchange instruments and foreign currency transactions primarily due to:

◦$126 million lower foreign currency losses on a Mexican peso-denominated loan to IMG JV, which is offset in Equity Earnings, and

◦$101 million lower losses ~~in 2020 from interest rate and foreign exchange instruments and foreign currency transactions compared to net gains of $20 million for the same period in 2019 primarily due to:~~


◦	~~$149 million foreign currency losses in 2020 compared to $10 million foreign currency gains in 2019 on a Mexican peso-denominated loan to IMG JV, which is offset in Equity Earnings, and~~

◦

~~$125 million losses in 2020 compared to $10 million gains in 2019~~ on foreign currency derivatives as a result of fluctuation of the Mexican peso, offset by

◦$11 million net gains in 2020 of foreign currency derivatives used to hedge exposure to fluctuations in the Peruvian sol and Chilean peso related to the sales of our businesses in Peru and Chile; and

▪$9 million investment gains in 2021 compared to $37 million investment losses in 2020 on dedicated assets in support of our executive retirement and deferred compensation plans.~~offset by~~


◦	~~$11 million net gains in 2020 of foreign currency derivatives used to hedge exposure to fluctuations in the Peruvian sol and Chilean peso related to the sale of our operations in Peru and Chile; and~~


▪	~~$37 million investment losses in 2020 compared to $26 million investment gains in 2019 on dedicated assets in support of our executive retirement and deferred compensation plans;~~ ~~offset by~~


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

Income Taxes

The table below shows the income tax expense (benefit) and ETRs for Sempra Energy Consolidated, SDG&E and SoCalGas.


INCOME TAX EXPENSE (BENEFIT) AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
	Three months ended March 31,
		2021			2020
Sempra Energy Consolidated:
Income tax expense (benefit) from continuing operations		$	158		$	(207)

Income from continuing operations before income taxes and equity earnings		$	768		$	397
Equity earnings (losses), before income tax(1)		135			(43)
Pretax income		$	903		$	354

Effective income tax rate		18		%	(58)		%
SDG&E:
Income tax expense		$	45		$	58
Income before income taxes		$	257		$	320
Effective income tax rate		18		%	18		%
SoCalGas:
Income tax expense		$	94		$	52
Income before income taxes		$	501		$	355
Effective income tax rate		19		%	15		%


⁽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

~~Income~~Sempra Energy’s income tax ~~benefit~~expense in the three months ended March 31, ~~2020~~2021 compared to an income tax ~~expense~~benefit in the same period in ~~2019~~2020 was due to ahigher pretax income and the following items:

▪$42 million income tax benefit in 2021 compared to $337 million income tax benefit in 2020 from foreign currency and inflation effects and associated derivatives; and

▪$11 million lower ~~ETR and lower pretax income. The change~~income tax benefit in ~~ETR was primarily due to:~~


▪	~~$308 million income tax benefit in 2020 compared to $23 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 $8 million income tax expense in 2019 related to share-based compensation;~~ ~~offset by~~2021 related to share-based compensation.


▪	$66 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.~~

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 in 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 increase in~~ SDG&E’s income tax expense decreased in the three months ended March 31, ~~2020 was due~~2021 compared to ~~a higher ETR and higher pretax income. The change~~the same period in ~~ETR was~~2020 primarily due 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.lower pretax income.

SoCalGas

~~The increase in~~ SoCalGas’ income tax expense increased in the three months ended March 31, ~~2020 was due~~2021 compared to ~~a higher ETR and higher pretax income. The change~~the same period in ~~ETR was~~2020 primarily due to $35 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.higher pretax income.

Equity Earnings

In the three months ended March 31, ~~2020,~~2021, equity earnings increased by ~~$162~~$55 million (21%) to ~~$263~~$318 million compared to the same period in 2020 primarily due to:

▪

$171 million higher equity earnings at IMG JV, primarily due to foreign currency effects, including $149 million foreign currency gains in 2020 compared to $10 million foreign currency losses in 2019 on IMG JV’s Mexican peso-denominated loans from its JV owners, which is fully offset in Other (Expense) Income, Net, and the start of commercial operations of the Sur de Texas-Tuxpan marine pipeline;


▪	$55 million higher equity earnings at Cameron LNG JV primarily due to Train 1 and Train 2 commencing commercial operations under their tolling agreements in August 2019 and February 2020, respectively; and

▪

~~$21 million higher equity earnings at TAG JV primarily due to higher income tax benefits in 2020;~~$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;

▪$77 million higher equity earnings at Cameron LNG JV primarily due to the three-train liquefaction project achieving commercial operations in August 2020; and

▪$30 million higher equity earnings at Oncor Holdings primarily due to higher revenues from rate updates and higher consumption due to weather, offset by increased operating costs and expenses attributable to invested capital; offset by

▪$153 million lower equity earnings at Sempra Mexico, which included:

◦$131 million lower equity earnings at IMG JV, primarily due to foreign currency effects, including $126 million lower foreign currency gains in 2021 on IMG JV’s Mexican peso-denominated loans from its JV owners, which is fully offset in Other Income (Expense), Net, and

◦$18 million lower equity earnings at TAG JV primarily due to income tax benefits in 2020.


▪	~~$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 $110 million to $151 million i~~nIn the three months ended March 31, 2021, earnings attributable to NCI decreased by $118 million to $33 million compared to the same period in 2020 primarily due to ~~an increase~~a decrease in earnings attributable to NCI at Sempra Mexico ~~primarily~~mainly from foreign currency and inflation effects as a result of fluctuation of the Mexico peso.

IMPACT OF FOREIGN CURRENCY AND INFLATION RATES ON RESULTS OF OPERATIONS

Because ~~operations in South America and~~ our natural gas distribution utility in Mexico, ~~use their~~Ecogas, uses its local currency as ~~their~~its functional currency, revenues and expenses are translated into U.S. dollars at average exchange rates for the period for consolidation in Sempra ~~Energy Consolidated’s~~Energy’s results of operations. Prior to the sales of our South American businesses in 2020, our operations in South America used their local currency as their functional currency. 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.

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 Consolidated’s~~Energy’s comparative results of operations. ~~Changes~~In the three months ended March 31, 2021, the change in our earnings as a result of foreign currency translation rates ~~between periods resulted in $4 million lower earnings within discontinued operations in the first three months of 2020~~was not material compared to the same period in ~~2019.~~2020.

Transactional Impacts

Income statement activities at our foreign operations and their JVs are also impacted by transactional gains and losses, a summary of which is shown in the table below:


TRANSACTIONAL (LOSSES) GAINS FROM FOREIGN CURRENCY AND INFLATION EFFECTS AND ASSOCIATED DERIVATIVES
(Dollars in millions)
	Total reported amounts				Transactional (losses) gains included in reported amounts
	Three months ended March 31,
	2021		2020		2021		2020
Other income (expense), net	$	35	$	(254)	$	(49)	$	(276)
Income tax (expense) benefit	(158)		207		42		337
Equity earnings	318		263		19		181
Income from continuing operations, net of income tax	928		867		12		242
Income from discontinued operations, net of income tax	—		80		—		16
Earnings attributable to noncontrolling interests	(33)		(151)		(9)		(108)
Earnings attributable to common shares	874		760		3		150

TRANSACTIONAL (LOSSES) GAINS FROM FOREIGN CURRENCY AND INFLATION
(Dollars in millions)
Total reported amounts
Transactional (losses) gains included
in reported amounts
Three months ended March 31,
2020 2019 2020 2019
Other (expense) income, net $ (254 ) $ 82
$ (276 ) $ 20
Income tax benefit (expense) 207
(42 ) 308
(23 )
Equity earnings 263
101
181
(12 )
Income from continuing operations, net of income tax 867
560
242
(18 )
Income (loss) from discontinued operations, net of income tax 80
(42 ) 16
—
Earnings attributable to common shares 760
441
150
(10 )

CAPITAL RESOURCES AND LIQUIDITY

OVERVIEW

~~The~~Sempra Energy Consolidated

Impact of the COVID-19 Pandemic

~~On March 11, 2020,~~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 ~~World Health Organization declared~~U.S. and Mexico and have continued to operate throughout the COVID-19 ~~outbreak to be a~~ pandemic. President Donald Trump officially declared a national emergency on March 13, 2020. The COVID-19 pandemic is causing a significant impact on the economy and people’s livelihoods, including substantial volatility and erosion of value in financial markets and a historic surge in unemployment claims while individuals adhere to shelter-in-place mandates and practice social distancing, and has resulted in sweeping action by governments and other authorities to help address these effects. The following describes some of these government actions and their current and anticipated impact on our businesses:

▪

On March 4, 2020, Governor Gavin Newsom proclaimed a State of Emergency in California as a result of the threat of COVID-19, and on March 19, 2020, the Governor imposed a California-wide shelter-in-place directive via an Executive Order that will remain in place indefinitely. The Governor’s Executive Order requires all individuals living in California to stay home or at their place of residence except as needed to maintain the continuity of 16 critical infrastructure sectors. Our businesses that invest in, develop and operate energy infrastructure and provide electric and gas services to customers in California have been identified as critical infrastructure under the Executive Order.


▪	~~On March 13, 2020, the California Utilities announced that they were voluntarily instituting a suspension of all customer disconnections for nonpayment of customer bills until further notice.~~

▪

On March 17, 2020, the CPUC announced that, retroactive to March 4, 2020, all energy companies under its jurisdiction, including the California Utilities, should 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. Similarly, on March 26, 2020, the PUCT issued orders that require retail electric providers to offer a deferred payment plan to customers, upon request, and authorized customer assistance programs for certain residential customers of electric service. The continuation of these circumstances could result in a material reduction in payments received from our customers and a material increase in uncollectible accounts that we may not be able to recover in rates, which could have a material adverse effect on the cash flows, financial condition and results of operations for Sempra Energy, SDG&E and SoCalGas.

▪

On March 30, 2020, the Mexican government announced a national state of sanitary emergency, suspending all non-essential activities and urging people in Mexico to stay at home until April 30, 2020, which was subsequently extended to May 30, 2020 and may be extended further. Essential business activities that may continue to operate during the health emergency include the conservation, maintenance and repair of critical infrastructure that ensures the production and distribution of electric and gas services.

▪

On April 16, 2020, 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 measures implemented by the CPUC related to the COVID-19 pandemic. Although we are tracking these costs, which will include incremental amounts associated with customer nonpayments, CPUC approval is required to collect all or any portion of the balance of the CPPMA, which is not assured. Similarly, the PUCT has provided for the use of a regulatory asset accounting mechanism and a subsequent process through which regulated utility companies may seek future recovery of expenses resulting from the effects of the COVID-19 pandemic, as well as the creation of a COVID-19 Electricity Relief Program fund through which transmission and distribution utilities and retail electric providers may seek to recover a reasonable portion of the cost of providing uninterrupted services to customers facing financial hardship due to the effects of the COVID-19 pandemic. There can be no assurance, however, that our Texas utilities will be able to recover any of the costs they incur from their response to the COVID-19 pandemic through these programs or otherwise.

▪

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. 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.

~~In addition, 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.~~ As our businesses continue to operate, our priority is the safety of our employees, customers, partners and the communities we serve. ~~For example, we have activated~~We and other companies, including our ~~business continuity plans~~partners, are taking steps to try to protect the health and well-being

of our employees and other stakeholders. We continue to work closely with local, state and federal authorities in an effort to provide essential services with minimum interruption to customers and in accordance with applicable ~~shelter-in-place~~social distancing 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. Additionally, SDG&E announced that it is postponing all noncritical planned outages, while continuing with those related to public safety, emergencies and wildfire mitigation, to try to protect employees and maintain service to customers as seamlessly as possible. We also have engaged an infectious disease expert to advise us during this public health crisis. Through the end of the first 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 substantial 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 may also impact our capital plans, liquidity and asset values. For example:~~

▪

Our capital projects and planned expenditures could experience delays due to the COVID-19 pandemic, either because we decide to postpone certain activities in an effort to preserve cash or other resources or for other reasons related to the pandemic that are beyond our control, including supply chain and contractor performance delays or delays in the issuance of required permits. Any such delay could have a material effect on our capital plans and results of operations. We discuss the potential for these delays in further detail with respect to each of our segments below.


▪	The decline and volatility in the financial markets has had a significant impact on certain of the markets that we typically access for working capital and other liquidity requirements. See the discussion in “Liquidity” below for more information.

▪

We have significant investments in several trusts to provide for future payments of pensions and other postretirement benefits and nuclear decommissioning. Although all of our trust funds’ investments are diversified and managed in compliance with applicable laws and regulations, the value of the investments in these trusts declined significantly in the second half of the first quarter of 2020 due to a decline in the equity markets and volatility in the fixed income market triggered by the COVID-19 pandemic. These markets continue to be volatile. The decrease in asset values has not affected the funds’ ability to make their required payments; however, this could change if conditions worsen or continue for an extended period. Moreover, if asset values do not recover, our funding requirements for pension and other postretirement benefit plans in 2021 may increase. Other factors may also impact funding requirements for pension and other postretirement benefit plans, including changes to discount rates, assumed rates of return, mortality tables and regulations. Funding requirements for SDG&E’s NDT could be impacted by the value of the assets as well as the timing and 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.

▪

We perform recovery testing of our recorded asset values when market conditions indicate that such values may not be recoverable. Given the current economic environment, including the significant decline in the price of our common stock, market volatility and potential reduction in customer collections, 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 existing headroom in our prior quantitative tests and assessment of the impact of these conditions on our businesses, there was no triggering event as of March 31, 2020. However, as the effects of the COVID-19 pandemic continue to evolve, we will continue to assess the need to perform an interim impairment test. To the extent the recorded (carrying) value is in excess of the fair value, we would record a noncash impairment charge. 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 “Item~~“Part I – Item 1A. Risk ~~Factors.”~~Factors” and “Part II – Item 7. MD&A – Capital Resources and Liquidity” in the Annual Report.

Sempra Infrastructure Partners

In April 2021, we entered into an agreement to sell a 20% equity interest in Sempra Infrastructure Partners, which generally represents the combined businesses of Sempra LNG and IEnova, for cash proceeds of $3.37 billion, subject to adjustments. We expect to complete this transaction in mid-2021. We intend to use the expected proceeds from the sale to fund capital investments to support additional growth opportunities and strengthen our balance sheet by reducing debt.

The completion of the sale of NCI in Sempra Infrastructure Partners will reduce our ownership interest in Sempra Infrastructure Partners and require us to share control over certain business decisions with our minority partner, which introduces a number of risks similar to those associated with sharing business control. Moreover, any decrease in our ownership of Sempra Infrastructure Partners would also decrease our share of the cash flows, profits and other benefits these businesses currently or may in the future produce, which could materially adversely affect our results of operations, cash flows, financial condition and/or prospects.

Our ability to complete this transaction is subject to a number of risks, including, among others, the ability to obtain governmental, regulatory and third-party approvals and satisfy other customary closing conditions. If we are not able to obtain these approvals and satisfy all other closing conditions in a timely manner or on satisfactory terms, then the proposed transaction may be abandoned and/or our prospects could be materially adversely affected. This transaction is subject to a number of risks and uncertainties that we discuss further in “Part I – Item 1A. Risk Factors” in the Annual Report.

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, project financing and partnering ~~in JVs.~~with NCI investors. We believe that these cash flow sources, combined with 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~~

▪finance capital expenditures

▪meet liquidity requirements


▪	~~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~~

▪fund dividends

▪fund new business or asset acquisitions or start-ups

▪fund capital contribution requirements

▪repay 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 reasonable access to the ~~long-term debt~~money markets and capital markets and are not currently constrained ~~in any significant way~~ in their ability to borrow money at reasonable rates from commercial banks, under existing revolving credit facilities or through public offerings registered with the SEC. There have been, however, substantial disruptions caused by the COVID-19 pandemic in the commercial paper markets during the second half of the first quarter of 2020, which have historically been a primary source of working capital for Sempra Energy and the California Utilities. In addition, the capital markets in general and the availability of financing from commercial banks also have shown periods of significant distress in the second half of the first quarter of 2020 due to the COVID-19 pandemic, andHowever, our ability to access the money markets and capital markets or obtain credit from commercial banks outside of our committed revolving credit facilities could become materially constrained ~~especially~~ if ~~these~~changing economic conditions ~~worsen~~and disruptions to the money markets and capital markets, due to the COVID-19 pandemic or ~~continue for an extended period.~~otherwise, worsen. 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~~structure.

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 activity in the equity and fixed income markets, have not materially and adversely affected the trust funds’ abilities to make required payments. However, changes in these or other factors in future periods, such as changes to discount rates, assumed rates of return, mortality tables and regulations, may impact funding requirements for pension and other postretirement benefits plans. Funding requirements for SDG&E’s NDT could also be impacted by the timing and 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

Our committed 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. In addition, Sempra Mexico has committed lines of credit that expire in 2021 and 2024 and uncommitted revolving credit facilities that expire in 2023. The table below shows the amount of available funds at March 31, ~~2020,~~2021, including available unused credit on these primary U.S. ~~credit facilities. In addition, IEnova has $1.9 billion in~~and foreign lines of credit.


AVAILABLE FUNDS AT MARCH 31, 2021
(Dollars in millions)
	Sempra Energy Consolidated		SDG&E		SoCalGas
Unrestricted cash and cash equivalents(1)	$	725	$	9	$	203
Available unused credit(2)(3)	6,768		1,370		750

(1) Amounts at Sempra Energy Consolidated include $285 million held in non-U.S. jurisdictions. We discuss repatriation in Note 8 of the Notes to Consolidated Financial Statements in the Annual Report.

(2) Available unused credit ~~with approximately $136 million~~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.

(3) Because our commercial paper programs are supported by these lines, we reflect the amount of commercial paper outstanding as a reduction to the available unused credit.

In anticipation of the closing of the sale of NCI in Sempra Infrastructure Partners, we anticipate that the Sempra Global credit agreement will be assigned to Sempra Energy and we are also planning to replace Sempra Global’s commercial paper program with financing arrangements at ~~March 31, 2020.~~Sempra Energy. Sempra Infrastructure Partners also may enter into its own revolving credit facility, although such a credit facility and its timing remain uncertain.

AVAILABLE FUNDS AT MARCH 31, 2020
(Dollars in millions)

Sempra Energy
Consolidated
SDG&E SoCalGas
Unrestricted cash and cash equivalents⁽¹⁾
$ 2,247
$ 203
$ 389
Available unused credit⁽²⁾⁽³⁾
4,010
1,300
750


⁽¹⁾	~~Amounts at Sempra Energy Consolidated include $542 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.~~

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. ~~Commercial paper, revolving~~Revolving lines of credit and ~~term loans~~commercial paper were our primary sources of short-term debt funding in the first ~~quarter~~three months of ~~2020. In an effort to protect~~2021.

We discuss our liquidity in light of the COVID-19 pandemic, Sempra Energy, Sempra Global, SDG&E, SoCalGas and IEnova each drew amounts under their respective credit facilities in the first quarter of 2020, a substantial portion of which were repaid through terms loans obtained in the first quarter of 2020 by Sempra Energy and SDG&E. As we discussshort-term debt activities in Note 7 of the Notes to Condensed Consolidated Financial ~~Statements, Sempra Energy~~Statements.

Long-Term Debt Activities

Issuances of and SDG&E obtained 364-day term loans with aggregate principal amounts outstanding at March 31, 2020, of $1,525 million and $200 million, respectively. At March 31, 2020, SDG&E classified a total of $400 million of its then outstanding revolving line of credit and term loan aspayments on long-term debt ~~based on management’s intent and ability~~in the first three months of 2021 included the following:


LONG-TERM DEBT ISSUANCES AND PAYMENTS
(Dollars in millions)
Issuances:	Amount at issuance		Maturity

Sempra LNG variable rate notes	$	102	2025

Payments:	Payments		Maturity
Sempra Energy variable rate notes	$	850	2021
SDG&E 1.914% amortizing first mortgage bonds	18		2021
SDG&E variable rate 364-day term loan	200		2021
Sempra Mexico variable rate notes	11		2021
Sempra Mexico variable and fixed rate bank loans	5		2021

We discuss our long-term debt activities in Note 7 of the Notes to maintain this level of borrowing on a long-term basis. In April 2020, SDG&E completed a $400 million public offering of first mortgage bonds maturing in 2050 and repaid the amounts borrowed under its revolving line of credit. On April 1, 2020, Sempra Energy borrowed an additional $75 million under its term loan.

Condensed Consolidated Financial Statements.

Credit Ratings

We provide additional information about the credit ratings of Sempra Energy, SDG&E and SoCalGas in ~~“Item~~“Part I – Item 1A. Risk Factors” and ~~“Item~~“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 in the first three months of ~~2020.~~

2021.

CREDIT RATINGS AT MARCH 31, 2021

~~CREDIT RATINGS AT MARCH 31, 2020~~

Sempra Energy

SDG&E

SoCalGas

Moody’s

Baa2 with a stable outlook

A3 with a stable outlook

A2 with a stable outlook

S&P

~~Sempra Energy~~

~~SDG&E~~

~~SoCalGas~~

~~Moody’s~~

~~Baa1 with a negative outlook~~

~~Baa1 with a positive outlook~~

~~A1 with a negative outlook~~

~~S&P~~

BBB+ with a negative outlook

A with a negative outlook

Fitch

BBB+ with a stable outlook

~~A with a negative outlook~~

~~Fitch~~

BBB+ with a stable outlook

~~BBB+ with a stable outlook~~

A with a stable outlook

~~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, depending on the severity, 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 was rated A2, A+ and A at Moody’s, S&P and Fitch, respectively, at March 31, ~~2020.~~

~~On April 15, 2020, Moody’s placed Sempra Energy on review for downgrade.~~2021.

Loans ~~to/from~~with Affiliates

At March 31, ~~2020,~~2021, Sempra Energy had ~~$615~~$676 million in loans todue from unconsolidated affiliates and ~~$263~~$299 million in loans ~~from~~due to unconsolidated affiliates.

California Utilities

SDG&E’s and SoCalGas’ operations have historically provided relatively stable earnings and liquidity. Their future performance and liquidity will depend primarily on the ratemaking and regulatory process, environmental regulations, economic conditions, actions by the California legislature, litigation and the changing energy marketplace, as well as ~~the~~ other matters described in this report.

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. Some of our customers will likely experience diminished ability to pay their electric or gas bills, leading to slower payments and higher levels of nonpayment than has been the case historically. ~~These impacts could be significant and could require modifications to our financing plans.~~ The California Utilities manage their capital structure and pay dividends when appropriate and as approved by their respective boards of directors.

As we discuss 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, 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.

COVID-19 Pandemic Protections

The California Utilities are continuing to monitor the impacts of the COVID-19 pandemic on cash flows and results of operations. Some customers have experienced and continue to experience a diminished ability to pay their electric or gas bills, leading to slower payments and higher levels of nonpayment than has been the case historically. These impacts could become significant and could require modifications to our financing plans.

The CPUC has 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 affected by the COVID-19 pandemic. The California Utilities have implemented certain measures to assist customers in response to these requirements, including suspending service disconnections due to nonpayment for residential, small business and medium-large commercial and industrial customers (which represent the entire customer population except for SoCalGas’ noncore customers), waiving late payment fees, and offering flexible payment plans to customers experiencing difficulty paying their electric or gas bills. The customer protection measures are in place through June 2021 and the CPUC may extend them further.

The CPUC authorized each of the California Utilities to track and request recovery of incremental costs associated with complying with 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 or delay in recovering all or a substantial portion of these costs could have a material adverse effect on the cash flows, 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.

Disconnection OIR

In 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 and became effective in February 2021. The California Utilities have recorded increases in their allowances for uncollectible accounts primarily related to expected forgiveness of outstanding bill amounts for customers eligible under the AMP. The AMP could result in a further reduction in payments received from the California Utilities’ customers and a further increase to 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 of Sempra Energy, SDG&E and SoCalGas.

CCM

A CPUC cost of capital proceeding determines a utility’s authorized capital structure and authorized return on rate base and addresses the CCM. The CCM, if triggered in 2021, would be effective January 1, 2022, and would automatically update the California Utilities’ authorized cost of debt based on actual costs and update the California Utilities’ authorized ROE. A trigger of the CCM that requires a downward adjustment beginning January 1, 2022 could materially adversely affect the results of operations and cash flows of Sempra Energy and, depending on the CCM that is triggered, SDG&E and SoCalGas. We discuss the CCM further in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.

SDG&E

Wildfire Fund

~~In 2019,~~The carrying value of SDG~~&E recorded a~~&E’s Wildfire Fund asset ~~for committed shareholder contributions to the Wildfire Fund.~~totals $385 million at March 31, 2021. 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~~costs 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.~~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 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.

Franchise Agreement

In December 2020, the City of San Diego and SDG&E agreed to extend the natural gas and electric franchises to June 1, 2021. The extension is intended to provide newly elected officials time to seek public input and additional information. In March 2021, the City announced a new competitive bid process, and in April 2021, SDG&E participated in the bid process. SDG&E and the City are in negotiations to reach an agreement on which the City Council will vote.

SoCalGas

SoCalGas’ future performance and liquidity will ~~also depend on~~be impacted by the resolution of legal, regulatory and other matters concerning the Leak, ~~at the Aliso Canyon natural gas storage facility,~~ which we discuss ~~further~~below and in Note 11 of the Notes to Condensed Consolidated Financial Statements in this report and in ~~“Item~~“Part I – Item 1A. Risk Factors” in the Annual Report.

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 March 31, ~~2020,~~2021, SoCalGas estimates ~~the~~certain costs related to the Leak are ~~$1,408~~$1,627 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 ~~$284~~$437 million is accrued as Reserve for Aliso Canyon Costs ~~and $6 million is accrued in Deferred Credits and Other as of March 31, 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, regulatory proceedings 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 to defend or resolve the actions or the amount of damages, restitution, civil or ~~civil,~~ administrative ~~or 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 that we currently do not anticipate incurring or that we cannot reasonably estimate. These costs not included in the 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. As of March 31, 2021, we recorded the expected recovery of the cost estimate related to the Leak of $414 million as Insurance Receivable for Aliso Canyon Costs on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets. This amount is exclusive of insurance retentions and $865 million of insurance proceeds we received through March 31, 2021. We intend to pursue the full extent of our insurance coverage for the costs we have incurred. Other than insurance for certain future defense costs we may incur as well as 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 ~~effectively~~ 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.~~matter. 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 insurance receivable are not collected, if there are 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.

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 consumer 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~~support 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.

service. In February 2017, the CPUC opened a proceeding pursuant to the SB 380 OII to determine the feasibility of minimizing or eliminating the use of the Aliso Canyon natural gas storage ~~facility.~~ facility while still maintaining energy and electric reliability for the region, including considering alternative means for meeting or avoiding the demand for the facility’s services if it were eliminated.

Sempra Texas Utilities

~~Oncor’s business is capital intensive, and it~~Oncor 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 capital contributions to Oncor,~~ or ~~if Oncor~~ is unable to access sufficient capital to finance its ongoing needs, we may elect to make additional capital 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 to the PUCT prohibit us from making loans to Oncor. As a result, if Oncor requires additional financing and cannot obtain it from other sources, we may elect to make a capital contribution to Oncor.

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 and 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 retain such amounts to meet expected future requirements.

Winter Weather Event

In February 2021, ERCOT required transmission companies, including Oncor, to significantly reduce demand on the grid due to insufficient electricity generation caused by extreme winter weather, resulting in power outages throughout ERCOT. As a result of the winter weather event, in February and March of 2021, the PUCT issued a moratorium on customer disconnections due to nonpayment and a waiver of certain late payment fees, and it or other governmental authorities or third parties, including Oncor’s customers, have taken or could take other measures to address financial challenges experienced as a result of the event, which could adversely impact Oncor’s collections and cash flows and, in turn, could adversely impact Sempra Energy. Legislation has been proposed in Texas that would impact the ERCOT market, and various regulatory and governmental entities have commenced investigations or indicated an intent to investigate the operation of the ERCOT grid during this extreme winter weather event. Any significant changes relating to the ERCOT market that impact transmission and distribution utilities as a result of such proceedings or otherwise could materially adversely impact Oncor. If Oncor does not successfully respond to these changes and any other legislative, regulatory, or market or industry developments applicable to it, Oncor could suffer a deterioration in its results of operations, financial condition, cash flows and/or prospects, which could materially adversely affect Sempra Energy’s results of operations, financial condition, cash flows and/or prospects.

Sempra Mexico

Construction Projects

Sempra Mexico began commercial operations of its new marine terminal for the receipt, storage and delivery of refined fuel products in the new port of Veracruz on March 19, 2021. The terminal has a storage capacity of more than two million barrels and its customer is Valero Energy Corporation. Sempra Mexico also completed construction and began commercial operations of a new solar facility (Border Solar) in Juárez, Chihuahua on March 25, 2021.

Sempra Mexico is currently ~~building or~~constructing additional terminals for the receipt, storage, and delivery of liquid fuels in the vicinity of Mexico City, Puebla and Topolobampo. Sempra Mexico is also 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, Guadalajara and Ensenada. Sempra Mexico is also developing new solar facilities in Juárez, Chihuahua, and Benjamin Hill, Sonora, through which it will supply renewable energy to several private companies. We expect the projects to commence commercial operations on various dates in 2020 and 2021, but these expected commencement dates could be delayed by worsening or extended disruptions of project construction or development caused by the COVID-19 pandemic. See “Item 1A. Risk Factors” below. We expect to fund these capital expenditures, investments 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. We expect the projects under construction to commence commercial operations on various dates in 2021. However, expected commencement dates could be delayed by worsening or extended disruptions of project construction or development caused by the COVID-19 pandemic or other factors outside our control. Sempra Mexico is continuing to monitor the impacts of the COVID-19 pandemic on cash flows and results of operations.

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 “Part I – Item 1A. Risk Factors” in the Annual Report.

Legal and Regulatory Matters

As we discuss in Note 11 of the Notes to Condensed Consolidated Financial Statements, ~~IEnova received force majeure payments for~~ the Guaymas-El Oro segment of the Sonora pipeline ~~from~~has been inoperable since August ~~2017 to August 2019.~~2017. Under an agreement between IEnova and the CFE, 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 ~~May 15, 2020~~September 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. The parties are currently discussing a new service start date in the event the pipeline is not repaired by May 15, 2020, but there can be no assurance that the parties will have agreed on a new service start date if the pipeline is not repaired by that date. If 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~~we may berecord an impairment of the carrying value of our investment that could have a material adverse impact on Sempra Energy’s results of operations. At March 31, 2021, the Guaymas-El Oro segment of the Sonora pipeline had a net book value of $442 million.

In May 2020, the two third-party capacity customers at the ECA Regas Facility, Shell Mexico and Gazprom, asserted that a 2019 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 and although Gazprom has joined the 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 and as a consequence IEnova is not currently drawing on its letter of credit. IEnova intends to avail itself of its available claims, defenses, rights and remedies in the arbitration proceeding, including seeking dismissal of the customers’ claims. In addition to the arbitration proceeding, 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 the CRE’s approval was denied and, subsequently, Shell Mexico filed an appeal of that decision.

As we discuss in Note 11 of the Notes to Condensed Consolidated Financial Statements, certain Mexican governmental agencies have 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 renewable energy facilities to enter the wholesale electricity market, threaten the prospects for private-party renewable energy generation in the country, limit the ability to dispatch renewable energy and to receive or maintain operation permits, and increase costs of electricity for legacy renewables and cogeneration energy contract holders. Most of these newly enacted regulations and policies have been temporarily suspended through litigation and judicial rulings obtained by businesses operating in the power sector, including by IEnova. IEnova cannot predict whether it will ultimately be successful in the ongoing litigation, or whether there will be new regulations or policies or further amendments to existing regulations with a similar intent or impact, which could have a material adverse impact on our results of operations and cash flows, ~~and~~ our ability to recover the carrying ~~value~~values of our ~~investment.~~renewable energy investments in Mexico, and our prospects for developing new renewable energy projects in the country.

~~The ability~~Acquisition of ESJ

As we discuss in Note 5 of the Notes to ~~successfully~~Condensed Consolidated Financial Statements, on March 19, 2021, IEnova increased its ownership interest in ESJ from 50% to 100% by acquiring Saavi Energía’s 50% equity interest in ESJ for a purchase price of approximately $65 million (net of $14 million of acquired cash and cash equivalents) plus the assumption of $277 million in debt (including $94 million owed from ESJ to IEnova that eliminates upon consolidation). ESJ owns a fully operating wind power generation facility with a nameplate capacity of 155 MW that is fully contracted by SDG&E under a long-term PPA. ESJ is constructing a second wind power generation facility with a nameplate capacity of 108 MW that we expect will be completed in late 2021 or in the first quarter of 2022.

Exchange Offer

In April 2021, we launched an offer to acquire up to 100% of the publicly held shares of IEnova in exchange for shares of our common stock at an exchange ratio of 0.0323 shares of our common stock for each one IEnova ordinary share. We expect to complete ~~major construction projects~~this transaction in the second quarter of 2021, subject to customary closing conditions. This proposed transaction is subject to a number of risks ~~and uncertainties. For a discussion of these risks and uncertainties, see “Item~~that we discuss in “Part I – Item 1A. Risk Factors” in the Annual Report.

Sempra LNG

Sempra LNG ~~develops and builds natural gas liquefaction facilities and~~ is pursuing ~~the~~ development of ~~five strategically located~~additional LNG export facilities on the Gulf Coast and Pacific Coast of North America through its proposed Cameron LNG JV Phase 2 liquefaction expansion project in Louisiana, ECA LNG liquefaction export projects in ~~North America with a long-term goal of enabling the delivery of natural gas to the largest world markets.~~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 Sempra LNG. Also, a reduction in projected global demand for LNG could result in increased competition among those developing projects in an environment of declining LNG demand, such as the Sempra Energy-sponsored LNG export initiatives. Our LNG projects currently under development could be delayed by the worldwide economic slowdown as a result of the COVID-19 pandemic, by the current uncertainty in the global oil and gas markets as a result of the unprecedented decline in oil prices or by a combination of these factors. For a discussion of these risks and other risks involving changing commodity prices, see “Item 1A. Risk Factors” in the Annual Report and in “Item 1A. Risk Factors” below.JVs.

Cameron LNG JV ~~Three-Train Liquefaction Project (Phase 1)~~

Sempra LNG, through its interest in Cameron LNG JV, is constructing a three-train natural gas liquefaction export facility with an expected export capability of 12 Mtpa of LNG. Construction on the three-train liquefaction project began in the second half of 2014 under an EPC contract with a JV between CB&I, LLC (as assignee of CB&I Shaw Constructors, Inc.), a wholly owned subsidiary of McDermott International, Inc., and Chiyoda International Corporation, a wholly owned subsidiary of Chiyoda Corporation. The majority of the construction is 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 the project equity 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 the first two liquefaction trains that have commenced operations and, if required, additional cash contributions. Sempra Energy signed 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.

Cameron LNG JV achieved commercial operations of Train 1 and Train 2 under its tolling agreements in August 2019 and February 2020, respectively. We expect Train 3 will commence commercial operations in the third quarter of 2020. However, the expected commencement of Train 3’s commercial operations could be delayed by worsening or extended disruptions of project construction and commissioning caused by the COVID-19 pandemic.

Large-scale construction projects such as the design, development and construction of the Cameron LNG JV liquefaction facility involve numerous risks and uncertainties, including among others, the potential for unforeseen engineering challenges, severe weather events, global pandemics, substantial construction delays and increased costs. In addition, once completed, the facility may be subject to design flaws, equipment failures and other operational issues, which could cause the facility to suspend operations or operate at a reduced capacity.

Cameron LNG JV has a lump-sum, turnkey EPC contract, and if the contractor becomes unwilling or unable to perform according to the terms and timetable of the EPC contract, the project could face substantial construction delays and potentially significantly increased costs. In January 2020, McDermott International, Inc. filed for bankruptcy protection under Chapter 11 of the U.S. bankruptcy code. McDermott International, Inc. has stated that it expects all of its projects, including the three-train liquefaction project at Cameron LNG JV, to continue on an uninterrupted basis. However, we cannot be certain the Cameron LNG JV project will not be interrupted. If the contractor defaults under the EPC contract due to the bankruptcy of McDermott International, Inc. or for any other reason, such default could result in Cameron LNG JV’s engagement of a substitute contractor. The inability to complete the project in a timely manner or within our current expectations, cost overruns, and the other risks described above could have a material adverse effect on our business, results of operations, cash flows, financial condition, credit ratings and/or prospects.

For a discussion of our investment in Cameron LNG JV, JV financing, Sempra Energy guarantees, the risks discussed above and other risks relating to the development of the Cameron LNG JV liquefaction project that could adversely affect our future performance, see Note 6 of the Notes to Consolidated Financial Statements and “Item 1A. Risk Factors” in the Annual Report.

~~Proposed Cameron~~ 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 beyond Phase 1. The permits ~~obtained~~ for the Phase 2 project include up to two additional liquefaction trains and up to two additional full containment LNG storage ~~tanks (one~~tanks.

Sempra Energy has entered MOUs with TOTAL SE, Mitsui & Co., Ltd. and Mitsubishi Corporation that provide a framework for cooperation for the development of ~~which was permitted~~and 100% of the offtake from the potential Cameron LNG JV Phase 2 project. The ultimate participation of and offtake by TOTAL SE, Mitsui & Co., Ltd. and Mitsubishi Corporation remains subject to negotiation and finalization of definitive agreements, among other factors, and TOTAL SE, Mitsui & Co., Ltd. and Mitsubishi Corporation have no commitment to participate in or enter into offtake agreements with the ~~original three-train project).~~Phase 2 project until such definitive agreements are established.

Expansion of the Cameron LNG JV liquefaction 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 Phase 1 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 and we expect that discussions will continue. There ~~can be~~is no assurance that the Cameron LNG JV members will unanimously agree in a timely manner or at all on an expansion structure, which, if not accomplished, ~~in a timely manner, could~~would materially and adversely impact the development of the Phase 2 expansion project. In light of this and other considerations, we are unable to predict whether or when Cameron LNG JV might be able to move forward on the Phase 2 expansion of the Cameron LNG JV liquefaction facility beyond the first three trains.

~~In November 2018, Sempra Energy and TOTAL S.A. entered into an MOU that provides a framework for cooperation for the~~The development of the potential Cameron LNG JV expansion project and the potential ECA LNG JV liquefaction-export project that we describe below in “ECA LNG JV Liquefaction Export Project.” The MOU contemplates TOTAL S.A. potentially contracting for up to approximately 9 Mtpa of LNG offtake across these two development projects and provides TOTAL S.A. the option to acquire an equity interest in the proposed ECA LNG JV project. In addition, in October 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 LNG JV project, as well as Mitsui & Co., Ltd.’s potential acquisition of an equity interest in the second phase of the potential ECA LNG JV project. In May 2020, Sempra Energy and Mitsubishi Corporation entered into an MOU that provides a framework for development of and potential offtake by Mitsubishi Corporation from the potential Cameron LNG JV expansion project. The ultimate participation of and offtake by TOTAL S.A., Mitsui & Co., Ltd. and Mitsubishi Corporation remains subject to negotiation and finalization of definitive agreements, among other factors, and TOTAL S.A., Mitsui & Co., Ltd. and Mitsubishi Corporation have no commitment to participate in and offtake from the projects.

~~The development of the potential Cameron LNG~~Phase 2 expansion project is subject to numerous other risks and uncertainties, including securing binding customer commitments; reaching unanimous agreement with our partners to proceed; obtaining a number of permits and regulatory approvals; securing financing; negotiating and completing suitable commercial agreements, including a definitive EPC contract, equity acquisition and governance agreements; reaching a positive final investment decision; and other factors associated with this potential investment. For a discussion of these risks, see ~~“Item~~“Part I – Item 1A. Risk Factors” in the Annual Report.

ECA LNG JV Liquefaction Export ~~Project~~Projects

~~Through a JV agreement,~~ Sempra LNG and IEnova are developing ~~a proposed~~two natural gas liquefaction ~~project~~export projects at IEnova’s existing ECA ~~LNG Regasification facility.~~Regas Facility. The ~~proposed~~ liquefaction ~~facility project,~~export projects, which isare planned for development in two phases (a mid-scale project ~~referred to as~~by ECA LNG JV Phase 1 that is under construction and a proposed large-scale project ~~referred to as~~by ECA LNG JV Phase 2), isare being developed to provide buyers with direct access to North American west coast LNG supplies. ~~The~~We do not expect the construction of the ECA LNG ~~Regasification facility~~Phase 1 project to disrupt operations at the ECA Regas Facility. However, construction of the ECA LNG Phase 2 project would conflict with the current operations at the ECA Regas Facility, which currently has ~~profitable~~ long-term regasification contracts for 100% of the regasification facility’s capacity through 2028, making the decisions on whether and how to pursue the ECA LNG JV Phase 2 ~~liquefaction~~ 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~~have planned measures to limit disruption of ~~ECA LNG JV Phase 1 will disrupt~~ operations at the ECA Regas Facility with the construction of the ECA LNG ~~Regasification facility.~~Phase 1 project.

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 ECA LNG JV Phase 1 project, which is a one-train natural gas liquefaction ~~export~~ facility with a nameplate capacity of 3.25 Mtpa and initial offtake capacity of approximately 2.5 Mtpa that is under construction, and its proposed ECA LNG JV Phase 2 project ~~each of which~~that is in development.

OnIn April 2020, ECA LNG Phase 1 executed definitive 20-year LNG sale and purchase agreements with Mitsui & Co., Ltd. for approximately 0.8 Mtpa of LNG and with an affiliate of TOTAL SE for approximately 1.7 Mtpa of LNG. In December 2020, an affiliate of TOTAL SE acquired a 16.6% ownership interest in ECA LNG Phase 1, with Sempra LNG and IEnova each retaining a 41.7% ownership interest. Our 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 Phase 2.

In February ~~27,~~ 2020, we entered into an EPC contract with ~~TechnipFMC~~Technip Energies for the engineering, procurement and construction of the 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~~project. Since reaching a positive final investment decision with respect to the project ~~and after certain other conditions are met.~~in November 2020, we released Technip Energies to commence work to construct the ECA LNG Phase 1 project. The total price of the EPC contract ~~for ECA LNG JV Phase 1~~ is estimated at approximately $1.5 billion. We estimate that capital expenditures ~~for ECA LNG JV Phase 1~~ will approximate ~~$1.9~~$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 November 2018, Sempra LNG and IEnova signed Heads of Agreements with affiliates of TOTAL S.A., Mitsui & Co., Ltd. and Tokyo Gas Co., Ltd. for ECA LNG JV Phase 1 in respect of LNG sales of approximately 2.5 Mtpa in the aggregate. In AprilDecember 2020, ECA LNG JV executed definitive 20-year LNG sale and purchase agreements with Mitsui & Co., Ltd. and an affiliate of TOTAL S.A. for approximately 0.8 Mtpa of LNG and 1.7 Mtpa of LNG, respectively. Each agreement remains subject to certain customary conditions of effectiveness, including our final investment decision for the project.

~~We continue to work towards reaching a final investment decision for ECA LNG JV~~ Phase 1 ~~in the second quarter~~entered into a five-year loan agreement for an aggregate principal amount of ~~2020. However, this project is contingent on the receipt~~up to $1.6 billion, of ~~an export permit~~which $119 million was outstanding at March 31, 2021. Proceeds from the ~~Mexican government. The closure~~loan are being used to finance the cost of ~~non-essential activities in Mexico in response to the COVID-19 pandemic has added to the uncertainty~~construction of ~~the timing of the receipt of this permit and could delay our final investment decision beyond the second quarter of 2020.~~

~~The development of both~~ the ECA LNG JV Phase 1 project. We discuss the details of this loan in Note 7 of the Notes to Condensed Consolidated Financial Statements in this report and in Note 7 of the Notes to Consolidated Financial Statements in the Annual Report.

The construction of the ECA LNG JVPhase 1 project and the development of the potential ECA LNG Phase 2 ~~projects is~~project are subject to numerous risks and ~~uncertainties, including~~uncertainties. For Phase 1, these include maintaining permits and regulatory approvals; construction delays; securing and maintaining commercial arrangements, such as gas supply and transportation agreements; and other factors associated with the project and its construction. For Phase 2, these include obtaining binding customer ~~commitments for Phase 2;~~commitments; 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 positive final investment decision; 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 ~~and~~or permit challenges, or an extended dispute with existing customers at the ECA

Regas Facility, could materially ~~and~~ adversely affect the development of these ~~projects.~~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 ~~“Item~~“Part I – Item 1A. Risk Factors” in the Annual Report.

Port Arthur LNG Liquefaction Export 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. 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 April 2019, the FERC approved the siting, construction and operation of the proposed Port Arthur LNG liquefaction facility, along with certain natural gas pipelines, including the Louisiana Connector ~~Pipeline,~~and Texas Connector Pipelines, that could be used to supply feed gas to the liquefaction facility, assuming the project is completed. In February 2020, Sempra LNG filed a FERC application for the siting, construction and operation of a second phase at the proposed Port Arthur LNG facility, including the potential addition of two liquefaction trains.

OnIn February ~~28,~~ 2020, we entered into an EPC contract with Bechtel 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 to perform portions of the work pursuant to limited notices to proceed. We ~~plan~~have the option to fully release Bechtel to perform all of the work to construct the Port Arthur LNG liquefaction export project only after we reach a positive final investment decision with respect to the project and after certain other conditions are met, including obtaining project financing. IfIn December 2020, we ~~issue~~amended and restated the EPC contract to reflect an estimated price of approximately $8.7 billion, depending on the timing of a full notice to proceed, which, if not issued by July 15, ~~2020, the price under the fixed-price EPC contract is estimated to be approximately $8.9 billion. This does not include costs associated with changes to the project’s scope or the occurrence~~2021, will require renegotiation of certain events that would entitle Bechtel to relief under the contract, including customary events for similar agreements of this type such as force majeure events, certain changes in law, the discovery of certain differing site conditions, and certain delays to the work that we may cause. If we issue the full notice to proceed after July 15, 2020, the price will be subject to price escalations. If the full notice to proceed is not issued by October 15, 2020, then the EPC ~~contract, including the price, will be subject to renegotiation.~~contract. Any changes to the 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 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 facility 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 potential 25% 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 February 2020, Sempra LNG filed a FERC application for the siting, construction and operation of a second phase at the proposed Port Arthur LNG facility, including the potential addition of two liquefaction trains.

In November 2019, Port Arthur LNG commenced the relocation and upgrade of approximately three miles of highway where the Port Arthur LNG liquefaction export project would be located.

We continue to ~~work on completing all necessary milestones so that we are prepared to make a final investment decision for~~progress development of the proposed Port Arthur LNG liquefaction ~~project when appropriate. The~~export project. Given the impact of the COVID-19 pandemic on the global economy and ~~the current uncertainty~~remaining uncertainties in the ~~financial and~~ energy markets, ~~has delayed~~we are working with our partners and customers to evaluate the ~~expected~~ timing of ~~our~~a final investment decision. At this time, we do not expect to make a final investment decision ~~from 2020 to~~in 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 positive final investment decision; and other factors associated with the potential investment. An 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 ~~“Item~~“Part I – Item 1A. Risk Factors” in the Annual Report.

~~Discontinued Operations~~

As we discuss in Note 5 of the Notes to Condensed Consolidated Financial Statements, in 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 an aggregate base purchase price of $3.59 billion, subject to post-closing adjustments. In October 2019, we entered into an agreement to sell our equity interests in our Chilean businesses 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. We expect the sale to close in the second quarter of 2020, subject to satisfaction of conditions to closing.

Our utilities in South America have historically provided relatively stable earnings and liquidity. We intend to use the proceeds from the sales to focus on capital investment in North America to support additional growth opportunities and strengthen our balance sheet by reducing debt. 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 obtain from such sales, if completed, in a way that would result 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 our registrants.


CASH FLOWS FROM OPERATING ACTIVITIES
(Dollars in millions)
Three months ended March 31,	Sempra Energy Consolidated		SDG&E		SoCalGas
2021	$	1,502	$	396	$	799
2020	1,318		498		757
Change	$	184	$	(102)	$	42

Higher net income, adjusted for noncash items included in earnings	$	332	$	8	$	121
Net decrease in Insurance Receivable for Aliso Canyon primarily due to $192 lower accruals and $12 higher insurance proceeds received	203				203
Change in accounts payable	135		(15)		74
Distribution of earnings from Cameron LNG JV in 2021	131
Change in income taxes receivable/payable, net	64		(41)		60
Net decrease in Reserve for Aliso Canyon Costs primarily due to $292 lower accruals and $3 lower payments	(290)				(290)
Change in net margin posted at Sempra LNG’s marketing operations	(155)
Increase in accounts receivable	(56)				(89)
Change in net undercollected regulatory balancing accounts (including long-term amounts in regulatory assets)	(43)		(62)		19
Decrease in customer deposits	(32)		(13)		(30)
Increase in greenhouse gas allowance purchases	(30)				(32)
Other	(7)		21		6
Cash provided by discontinued operations in 2020	(68)
	$	184	$	(102)	$	42


CASH FLOWS FROM INVESTING ACTIVITIES
(Dollars in millions)
Three months ended March 31,	Sempra Energy Consolidated		SDG&E		SoCalGas
2021	$	(1,301)	$	(555)	$	(459)
2020	(1,181)		(402)		(388)
Change	$	(120)	$	(153)	$	(71)

Increase in capital expenditures	$	(171)	$	(153)	$	(71)
Acquisition of 50% interest in ESJ in March 2021 for $79, net of $14 of cash and cash equivalents acquired	(65)
Lower advances to unconsolidated affiliates	22
Lower contributions to Oncor Holdings	20
Other	9
Cash used in discontinued operations in 2020	65
	$	(120)	$	(153)	$	(71)

CASH FLOWS FROM OPERATING ACTIVITIES
(Dollars in millions)
Three months ended March 31, Sempra Energy Consolidated SDG&E SoCalGas
2020 $ 1,318
$ 498
$ 757
2019 951
443
376
Change $ 367
$ 55
$ 381

Net increase in Reserve for Aliso Canyon Costs primarily due to $276 higher accruals and $98 lower payments $ 375
$ 375
Higher net income, adjusted for noncash items included in earnings 169
$ 109
121
Change in long-term GHG obligations 49
42
Higher distributions of earnings from Oncor Holdings 19

Net increase in Insurance Receivable for Aliso Canyon Costs primarily due to $176 higher accruals offset by $19 insurance proceeds received (156 ) (156 )
Deferred revenue due to the TCJA at the California Utilities in 2019 (43 ) (20 ) (23 )
Change in intercompany activities with discontinued operations (31 )
Change in net undercollected regulatory balancing accounts (including long-term amounts in regulatory assets) (46 ) 47
Other 10
12
(25 )
Change in net cash flows from discontinued operations (25 )
$ 367
$ 55
$ 381


CASH FLOWS FROM FINANCING ACTIVITIES
(Dollars in millions)
Three months ended March 31,	Sempra Energy Consolidated		SDG&E		SoCalGas
2021	$	(407)	$	(94)	$	(141)
2020	2,114		97		10
Change	$	(2,521)	$	(191)	$	(151)

(Decrease) increase in short-term debt, net	$	(1,195)	$	210	$	517
Lower issuances of long-term debt	(947)		(400)		(649)
Lower issuances of short-term debt with maturities greater than 90 days	(570)
Higher payments on long-term debt and finance leases	(53)		(201)
Lower advances from unconsolidated affiliates	(44)
(Higher) lower common dividends paid	(32)		200		(25)
Lower payments for commercial paper and other short-term debt with maturities greater than 90 days	393
Other	38				6
Cash provided by discontinued operations in 2020	(111)
	(2,521)		(191)		(151)

CASH FLOWS FROM INVESTING ACTIVITIES
(Dollars in millions)
Three months ended March 31, Sempra Energy Consolidated SDG&E SoCalGas
2020 $ (1,181 ) $ (402 ) $ (388 )
2019 (610 ) (356 ) (324 )
Change $ (571 ) $ (46 ) $ (64 )

Net proceeds from the February 2019 sale of Sempra LNG’s non-utility natural gas storage assets $ (322 )
Increase in capital expenditures (227 ) $ (46 ) $ (64 )
Other (27 )

Change in net cash flows from discontinued operations 5

$ (571 ) $ (46 ) $ (64 )

CASH FLOWS FROM FINANCING ACTIVITIES
(Dollars in millions)
Three months ended March 31, Sempra Energy Consolidated SDG&E SoCalGas
2020 $ 2,114
$ 97
$ 10
2019 (381 ) (75 ) (67 )
Change $ 2,495
$ 172
$ 77

Increase (decrease) in short-term debt, net $ 1,630
$ (27 ) $ (564 )
Higher issuances of long-term debt 1,048
400
649
Higher issuances of commercial paper and other short-term debt with maturities greater than 90 days 267

Higher payments on long-term debt and finance leases (503 )
Higher payments for commercial paper and other short-term debt with maturities greater than 90 days (93 )
Higher common dividends paid (200 )
Other (10 ) (1 ) (8 )
Change in net cash flows from discontinued operations mainly due to a net increase in short-term debt 156

$ 2,495
$ 172
$ 77

Capital Expenditures, ~~and~~ Investments and Acquisitions

EXPENDITURES FOR PP&E AND INVESTMENTS AND ACQUISITIONS
(Dollars in millions)

Three months ended March 31,
2020 2019
SDG&E $ 402
$ 356
SoCalGas 388
324
Sempra Texas Utilities 86
56
Sempra Mexico 170
85
Sempra LNG 47
56
Parent and other 3
—
Total $ 1,096
$ 877


EXPENDITURES FOR PP&E, INVESTMENTS AND ACQUISITIONS
(Dollars in millions)
	Three months ended March 31,
	2021		2020
SDG&E	$	555	$	402
SoCalGas	459		388
Sempra Texas Utilities	50		86
Sempra Mexico	142		170
Sempra LNG	89		47
Parent and other	1		3
Total	$	1,296	$	1,096

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,~~PUCT, and various other factors described in ~~2020,~~this MD&A and in “Part I – Item 1A. Risk Factors” in the Annual Report. In 2021, we expect to make capital expenditures and investments of approximately ~~$5.7~~$5.8 billion, ~~a decrease from the $5.9 billion summarized~~as we discuss in ~~“Item~~“Part II – Item 7. MD&A – Capital Resources and Liquidity” in the Annual Report.

COMMITMENTS

We discuss significant changes to contractual commitments in the first three months of 2021, none of which were outside the ordinary course of our business, in Notes 7 and 11 of the Notes to Condensed Consolidated Financial Statements.

OFF-BALANCE SHEET ARRANGEMENTS

In March 2021, Cameron LNG JV reached financial completion of the three-train liquefaction project and Sempra Energy’s guarantees for a maximum aggregate amount of $4.0 billion were terminated.

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 ~~decrease~~guarantee will terminate upon full repayment of the guaranteed debt by 2039, including repayment following an event in which the guaranteed debt is ~~primarily attributable~~put to ~~Phase~~Sempra Energy. We discuss this guarantee in Notes 1, 6 and 9 of the Notes to Condensed Consolidated Financial Statements.

Our investments in Oncor Holdings and Cameron LNG JV and our Support Agreement for the benefit of CFIN 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 ~~ECA LNG JV liquefaction export project at Sempra LNG.~~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.

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 About Market Risk” in the Annual Report.

COMMODITY PRICE RISK

In the first ~~quarter~~three months of ~~2020,~~2021, 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)
	March 31, 2021						December 31, 2020
	Sempra Energy Consolidated		SDG&E		SoCalGas		Sempra Energy Consolidated		SDG&E		SoCalGas
Short-term:
California Utilities	$	130	$	130	$	—	$	113	$	—	$	113
Other	1,687		—		—		772		—		—
Long-term:
California Utilities fixed-rate	$	10,495	$	6,036	$	4,459	$	10,512	$	6,053	$	4,459
California Utilities variable-rate	300		—		300		500		200		300
Other fixed-rate	10,498		—		—		11,204		—		—
Other variable-rate	170		—		—		51		—		—

NOMINAL AMOUNT OF DEBT⁽¹⁾
(Dollars in millions)
March 31, 2020 December 31, 2019

Sempra Energy
Consolidated
SDG&E SoCalGas
Sempra Energy
Consolidated
SDG&E SoCalGas
Short-term:
California Utilities $ —
$ —
$ —
$ 710
$ 80
$ 630
Other 5,744
—
—
2,798
—
—
Long-term:
California Utilities fixed-rate $ 9,582
$ 5,123
$ 4,459
$ 8,949
$ 5,140
$ 3,809
California Utilities variable-rate 400
400
—
—
—
—
Other fixed-rate 10,485
—
—
11,561
—
—
Other variable-rate 746
—
—
746
—
—
(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.


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

An interest rate risk sensitivity analysis measures interest rate risk by calculating the estimated changes in earnings that would result from a hypothetical change in market interest rates. Earnings are affected by changes in interest rates on short-term debt and ~~variable~~variable-rate long-term debt. If weighted-average interest rates on short-term debt outstanding at March 31, ~~2020~~2021 increased or decreased by 10%, the change in earnings over the ~~next~~ 12-month period ~~ended~~ending March 31, ~~2021~~2022 would be approximately ~~$14~~$1 million.

If interest rates increased or decreased by 10% on all variable-rate long-term debt at March 31, ~~2020,~~2021, after considering the effects of interest rate swaps, the change in earnings over the ~~next~~ 12-month period ~~ended~~ending March 31, ~~2021~~2022 would be ~~approximately $2 million.~~negligible.

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” in 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. At March 31, ~~2020,~~2021, there were no significant changes to our exposure to foreign currency rate risk since December 31, ~~2019.~~2020.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Sempra Energy, SDG&E and SoCalGas maintain disclosure controls and procedures designed to ensure that information required to be disclosed in their respective reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to the management of each company, including each respective principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. In designing and evaluating these controls and procedures, the management of each company recognizes that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives; therefore, the management of each company applies judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of the principal executive officers and principal financial officers of Sempra Energy, SDG&E and SoCalGas, each such company’s management evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of March 31, ~~2020,~~2021, the end of the period covered by this report. Based on these evaluations, the principal executive officers and principal financial officers of Sempra Energy, SDG&E and SoCalGas concluded that their respective company’s disclosure controls and procedures were effective at the reasonable assurance level as of such date.

INTERNAL CONTROL OVER FINANCIAL REPORTING

~~There~~In January 2021, IEnova implemented a new enterprise resource planning system (ERP system) to replace its legacy system. The implementation increases user access security and automation of internal controls in certain of IEnova’s business processes, including accounting, back office and financial reporting, which we consider to be material to Sempra Energy. Management has taken steps to help ensure that controls were appropriately designed and implemented in connection with the integration of and transition to the new ERP system. IEnova continues to review and enhance the design and related documentation of its internal control over financial reporting in connection with its implementation of the new ERP system in order to maintain an effective control framework.

Other than IEnova’s implementation of a new ERP system, 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’~~any such company’s internal control over financial reporting.

In April 2021, SDG&E implemented a new customer information system to replace its legacy system. The system has been designed and implemented to provide customers an enhanced digital experience and enhance the overall system of internal control over financial reporting through further automation and integration of business processes, including revenue. In connection with the implementation, SDG&E has been performing pre-implementation planning, design and testing of internal controls that will become effective in the second quarter of 2021. SDG&E will continue to conduct post-implementation monitoring and process modifications in order to maintain an effective control framework.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

When evaluating our company and its subsidiaries and any investment in our or their securities, you should consider carefully the risk factors and all other information contained in this report, including the factors discussed above in ~~“Item~~“Part I – Item 2. MD&A” ~~and in this section,~~ and in the other documents we file with the SEC (including those filed subsequent to this report), including the factors disclosed in ~~“Item~~“Part I – Item 1A. Risk Factors” in the Annual Report. ~~Except as set forth below, there~~There have been no material changes from the risk factors as previously disclosed in the Annual Report. Any of the ~~risk factors~~risks and other information discussed in this report or any of the risk 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.

~~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 countries, communities, supply chains and markets around the world. The U.S. economy is experiencing a significant slowdown and claims for unemployment are increasing 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 impact our operations, results, liquidity and ability to pursue capital projects and strategic initiatives. For example, the CPUC has requested 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 all customers experiencing difficulty paying their electric or gas bills. These actions could result in a material reduction in payments received from our customers and a material increase in uncollectible accounts that we may not be able to recover in rates, which could have a material adverse effect on the cash flows, financial condition and results of operations for Sempra Energy, SDG&E and SoCalGas.

In addition, the economic slowdown caused by the COVID-19 pandemic, together with the increase of the supply of oil in world markets, has caused a material and unprecedented decline in oil prices and the demand for energy. 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 increased competition among LNG project developers and substantial delays of some of our LNG and other projects currently under development. With respect to Phase 1 of the Cameron LNG JV liquefaction project currently under construction, although the project is considered a critical infrastructure project and is 99.5% complete, the impacts of the COVID-19 pandemic could cause unanticipated delays in completing the project.

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 any significant way 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 results of operations and on our 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.

ITEM 6. EXHIBITS

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

EXHIBIT INDEX

Incorporated by Reference

Exhibit Number

Exhibit Description

Filed or Furnished Herewith

Form

Exhibit or Appendix

Filing Date

EXHIBIT 3 -- ARTICLES OF INCORPORATION AND BYLAWS

Sempra Energy

3.1

Amended and Restated Articles of Incorporation of Sempra Energy effective May 23, 2008.

10-K

3.1

02/27/20

3.2

Bylaws of Sempra Energy (as amended through April 14, 2020).

8-K

3.1

04/14/20

3.3

Certificate of Determination of Preferences of the 6% Mandatory Convertible Preferred Stock, Series A, of Sempra Energy (including the form of certificate representing the 6% Mandatory Convertible Preferred Stock, Series A), filed with the Secretary of State of the State of California and effective January 5, 2018.

8-K

3.1

01/09/18

3.4

Certificate of Determination of Preferences of the 6.75% Mandatory Convertible Preferred Stock, Series B, of Sempra Energy (including the form of certificate representing the 6.75% Mandatory Convertible Preferred Stock, Series B) filed with the Secretary of State of the State of California and effective July 11, 2018.

8-K

3.1

07/13/18

3.5

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

8-K

3.1

06/15/20

San Diego Gas & Electric Company

3.6

Amended and Restated Articles of Incorporation of San Diego Gas & Electric Company effective August 15, 2014.

10-K

3.4

02/26/15

3.7

Bylaws of San Diego Gas & Electric Company (as amended through October 26, 2016).

10-Q

3.1

11/02/16

Southern California Gas Company

3.8

Restated Articles of Incorporation of Southern California Gas Company effective October 7, 1996.

10-K

3.01

03/28/97

3.9

Bylaws of Southern California Gas Company (as amended through January 30, 2017).

8-K

3.1

01/31/17

EXHIBIT 10 -- MATERIAL CONTRACTS

Management Contract or Compensatory Plan, Contract or Arrangement

Sempra Energy / San Diego Gas & Electric Company / Southern California Gas Company

10.1

Form of Sempra Energy 2019 Long-Term Incentive Plan 2021 Nonqualified Stock Option Award Agreement.

10-K

10.6

02/25/21

10.2

Form of Sempra Energy 2019 Long-Term Incentive Plan 2021 Performance-Based Restricted Stock Unit Award - EPS Growth Performance Measure.

10-K

10.7

02/25/21

10.3

F orm of Sempra Energy 2019 Long-Term Incentive Plan 2021 Performance-Based Restricted Stock Unit Award - Relative to Shareholder Return Performance Measure - S&P 500 Index.

10-K

10.8

02/25/21

10.4

Form of Sempra Energy 2019 Long-Term Incentive Plan 2021 Performance-Based Restricted Stock Unit Award - Relative to Shareholder Return Performance Measure - S&P 500 Utilities Index.

10-K

10.9

02/25/21

100

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

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

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

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

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

San Diego Gas & Electric Company
3.5
Amended and Restated Articles of Incorporation of San Diego Gas & Electric Company effective August 15, 2014.
10-K 3.4 02/26/15

3.6
Bylaws of San Diego Gas & Electric Company (as amended through October 26, 2016).
10-Q 3.1 11/02/16

Southern California Gas Company
3.7
Restated Articles of Incorporation of Southern California Gas Company effective October 7, 1996.
10-K 3.01 03/28/97

3.8
Bylaws of Southern California Gas Company (as amended through January 30, 2017).
8-K 3.1 01/31/17

EXHIBIT 10 -- MATERIAL CONTRACTS

Sempra Energy
10.1*
Engineering, Procurement and Construction Contract, dated as of February 28, 2020, between Port Arthur LNG, LLC, PALNG Common Facilities Company, LLC (but only for the limited purpose set forth therein), and Bechtel Oil, Gas and Chemicals, Inc.
X

Management Contract or Compensatory Plan, Contract or Arrangement
Sempra Energy/San Diego Gas & Electric/Southern California Gas Company
10.2
Severance Agreement and Mutual Release, dated March 30, 2020, between Sempra Energy and George Bilicic.
X

10.3
Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Nonqualified Stock Option Award Agreement.
10-K 10.5 02/27/20

10.4
Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Time-Based Restricted Stock Unit Award - Three Year Ratable Vest.
10-K 10.6 02/27/20

10.5
Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Performance-Based Restricted Stock Unit Award - EPS Growth Performance Measure.
10-K 10.7 02/27/20

10.6
Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Performance-Based Restricted Stock Unit Award - Relative to Shareholder Return Performance Measure - S&P 500 Index.
10-K 10.8 02/27/20

10.7
Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Performance-Based Restricted Stock Unit Award - Relative Total Shareholder Return Performance Measure - S&P 500 Utilities Index.
10-K 10.9 02/27/20

* Portions of the exhibit have been omitted in accordance with applicable SEC rules.

EXHIBIT INDEX (CONTINUED)

Exhibit Number

Exhibit Description

Filed or Furnished Herewith

~~Exhibit Number~~

~~Exhibit Description~~

~~Filed or Furnished Herewith~~

EXHIBIT 31 -- SECTION 302 CERTIFICATIONS

Sempra Energy

31.1

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

31.2

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

San Diego Gas & Electric Company

31.3

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

31.4

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

Southern California Gas Company

31.5

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

31.6

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

EXHIBIT 32 -- SECTION 906 CERTIFICATIONS

Sempra Energy

32.1

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

32.2

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

San Diego Gas & Electric Company

32.3

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

32.4

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

Southern California Gas Company

32.5

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

32.6

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

101

EXHIBIT INDEX (CONTINUED)

Exhibit Number

Exhibit Description

Filed or Furnished Herewith

EXHIBIT 101 -- INTERACTIVE DATA FILE

101.INS

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

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

EXHIBIT 104 -- COVER PAGE INTERACTIVE DATA FILE

104

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

~~SIGNATURES~~

102

SIGNATURES

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

Date: May ~~4, 2020~~5, 2021						By: /s/ Peter R. Wall
						Peter R. Wall
						Senior Vice President, Controller and Chief Accounting Officer (Duly Authorized Officer)



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

Date: May ~~4, 2020~~5, 2021						By: /s/ ~~Bruce~~Valerie A. ~~Folkmann~~Bille
						~~Bruce~~Valerie 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: May ~~4, 2020~~5, 2021						By: /s/ Mia L. DeMontigny
						Mia L. DeMontigny
						Vice President, Controller, Chief Financial Officer and Chief Accounting Officer (Duly Authorized Officer)

~~109~~

103



Sempra Energy	~~292,533,413~~	302,760,705 shares
San Diego Gas & Electric Company	Wholly owned by Enova Corporation, which is wholly owned by Sempra Energy
Southern California Gas Company	Wholly owned by Pacific Enterprises, which is wholly owned by Sempra Energy



SEMPRA ENERGY FORM 10-Q SAN DIEGO GAS & ELECTRIC COMPANY FORM 10-Q SOUTHERN CALIFORNIA GAS COMPANY FORM 10-Q TABLE OF CONTENTS

		Page
Glossary		4
Information Regarding Forward-Looking Statements		6

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	8
	Notes to Condensed Consolidated Financial Statements
	Note 1. General Information and Other Financial Data	27
	Note 2. New Accounting Standards	4342
	Note 3. Revenues	4442
	Note 4. Regulatory Matters	4745
	Note 5. Acquisitions, Divestitures and Discontinued Operations	4947
	Note 6. Investments in Unconsolidated Entities	5148
	Note 7. Debt and Credit Facilities	5451
	Note 8. Derivative Financial Instruments	5652
	Note 9. Fair Value Measurements	6257
	Note 10. San Onofre Nuclear Generating Station	6763
	Note 11. Commitments and Contingencies	7065
	Note 12. Segment Information	7773
	Note 13. Subsequent Event	75
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	7977
	Overview	7977
	Results of Operations	8078
	Capital Resources and Liquidity	8985
	Critical Accounting Policies and Estimates	~~102~~97
	New Accounting Standards	~~102~~97
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	~~102~~97
Item 4.	Controls and Procedures	~~103~~98

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	~~104~~99
Item 1A.	Risk Factors	~~105~~99
Item 6.	Exhibits	~~106~~100

Signatures		~~109~~103


GLOSSARY

~~GLOSSARY~~


2019 GRC FD	final decision in the California Utilities’ 2019 General Rate Case
AB		California Assembly Bill
AFUDC		allowance for funds used during construction
AMP		Arrearage Management Payment Plan
Annual Report		Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020
AOCI		accumulated other comprehensive income (loss)
ARO		asset retirement obligation
ASC		Accounting Standards Codification
ASU		Accounting Standards Update
~~Bay Gas~~Bechtel		~~Bay Gas Storage Company, Ltd.~~
~~Bechtel~~	Bechtel Oil, Gas and Chemicals, Inc.
Blade		Blade Energy Partners
bps		basis points
CalGEM		California Geologic Energy Management Division ~~(formerly known as Division of Oil, Gas, and Geothermal Resources or DOGGR)~~
California Utilities		San Diego Gas & Electric Company and Southern California Gas Company, collectively
Cameron LNG JV		Cameron LNG Holdings, LLC
~~CARB~~CCM		~~California Air Resources Board~~
~~CCM~~	cost of capital adjustment mechanism
~~CFE~~CENACE		Centro Nacional de Control de Energía (Mexico’s National Energy Control Center)
CFE		Comisión Federal de Electricidad ~~(Federal~~(Mexico’s Federal Electricity ~~Commission of Mexico)~~Commission)
CFIN		Cameron LNG FINCO, LLC, a wholly owned and unconsolidated affiliate of Cameron LNG JV
Chilquinta Energía		Chilquinta Energía S.A. and its subsidiaries
~~COVID-19~~CNBV		~~Coronavirus~~Comisión Nacional Bancaria y de Valores (Mexico’s National Banking and Securities Commission)
COVID-19		coronavirus disease 2019
~~CPPMA~~CPUC		~~COVID-19 Pandemic Protections Memorandum Account~~
~~CPUC~~	California Public Utilities Commission
~~CRR~~CRE		Comisión Reguladora de Energía (Mexico’s Energy Regulatory Commission)
CRR		congestion revenue right
DOE		U.S. Department of Energy
ECA LNG		ECA LNG JVPhase 1 and ECA LNG Phase 2
ECA LNG Phase 1		ECA LNG Holdings B.V.
ECA LNG Phase 2		ECA LNG II Holdings B.V.
ECA ~~LNG Regasification~~Regas Facility		Energía Costa Azul, S. de R.L. de C.V. LNG regasification
Ecogas		Ecogas México, S. de R.L. de C.V.
Edison		Southern California Edison Company, a subsidiary of Edison International
EFH		Energy Future Holdings Corp. (renamed Sempra Texas Holdings Corp.)
~~Eletrans~~EPC		~~Eletrans S.A., Eletrans II S.A. and Eletrans III S.A., collectively~~
~~EPC~~	engineering, procurement and construction
EPS		earnings per common share
~~ESJ~~ERCOT		Electric Reliability Council of Texas, Inc., the independent system operator and the regional coordinator of various electricity systems within Texas
ESJ		Energía Sierra ~~Juarez,~~Juárez, S. de R.L. de C.V.
ETR		effective income tax rate
FERC		Federal Energy Regulatory Commission
Fitch		Fitch Ratings, Inc.
FTA		Free Trade Agreement
~~GCIM~~Gazprom		~~Gas Cost Incentive Mechanism~~Gazprom Marketing & Trading México S. de R.L. de C.V.
~~GHG~~GRC		~~greenhouse gas~~
~~GRC~~	General Rate Case
HMRC		United Kingdom’s Revenue and Customs Department
IEnova		Infraestructura Energética Nova, S.A.B. de C.V.
IMG JV		Infraestructura Marina del Golfo
IOU		investor-owned utility
~~IRS~~ISFSI		~~Internal Revenue Service~~
~~ISFSI~~	independent spent fuel storage installation
ISO		Independent System Operator
JV		joint venture
LA Superior Court		Los Angeles County Superior Court
Leak		the leak at the SoCalGas Aliso Canyon natural gas storage facility injection-and-withdrawal well, SS25, discovered by SoCalGas on October 23, 2015
LIBOR		London Interbank Offered Rate
~~LIFO~~LNG		~~last in first out~~
~~LNG~~	liquefied natural gas
LPG		liquid petroleum gas
Luz del Sur		Luz del Sur S.A.A. and its subsidiaries


MD&A
~~GLOSSARY (CONTINUED)~~


~~MD&A~~	Management’s Discussion and Analysis of Financial Condition and Results of Operations


~~Mississippi Hub~~			~~Mississippi Hub, LLC~~GLOSSARY (CONTINUED)
~~MMBtu~~
Mexican Stock Exchange		Bolsa Mexicana de Valores, S.A.B. de C.V., or BMV
MMBtu		million British thermal units (of natural gas)
Moody’s		Moody’s Investors Service
MOU		Memorandum of Understanding
Mtpa		million tonnes per annum
~~MWh~~MW		megawatt ~~hour~~
~~NCI~~MWh		~~noncontrolling interest(s)~~megawatt hour
~~NDT~~NCI		noncontrolling interest(s)
NDT		nuclear decommissioning trusts
NEIL		Nuclear Electric Insurance Limited
~~NOL~~O&M		~~net operating loss~~operation and maintenance expense
OCI		other comprehensive income (loss)
OII		Order Instituting Investigation
~~O&M~~OIR		~~operation and maintenance expense~~Order Instituting a Rulemaking
Oncor		Oncor Electric Delivery Company LLC
Oncor Holdings		Oncor Electric Delivery Holdings Company LLC
~~Otay Mesa VIE~~OSC		~~Otay Mesa Energy Center LLC VIE~~Order to Show Cause
~~PPA~~PP&E		~~power purchase agreement~~
~~PP&E~~	property, plant and equipment
~~PUCT~~PPA		power purchase agreement
PUCT		Public Utility Commission of Texas
RBS		The Royal Bank of Scotland plc
RBS SEE		RBS Sempra Energy Europe
RBS Sempra Commodities		RBS Sempra Commodities LLP
ROE		return on equity
ROU		right-of-use
RSU		restricted stock unit
SBS&P		S&P Global Ratings
Saavi Energía		Saavi Energía S. de R.L. de C.V.
SB		California Senate Bill
SDG&E		San Diego Gas & Electric Company
SEC		U.S. Securities and Exchange Commission
SEDATU		Secretaría de Desarrollo Agrario, Territorial y Urbano ~~(Mexican~~(Mexico’s agency in charge of agriculture, land and urban development)
Sempra Global		holding company for most of Sempra Energy’s subsidiaries not subject to California or Texas utility regulation
SENER		Secretaría de Energía de México (Mexico’s Ministry of Energy)
series A preferred stock		Sempra Energy’s 6% mandatory convertible preferred stock, series A
series B preferred stock		Sempra Energy’s 6.75% mandatory convertible preferred stock, series B
series C preferred stock		Sempra Energy’s 4.875% fixed-rate reset cumulative redeemable perpetual preferred stock, series C
Sharyland Holdings		Sharyland Holdings, L.P.
Sharyland Utilities		Sharyland Utilities, L.L.C.
~~SoCalGas~~Shell Mexico		Shell México Gas Natural, S. de R.L. de C.V.
SoCalGas		Southern California Gas Company
SONGS		San Onofre Nuclear Generating Station
~~S&P~~Support Agreement		~~Standard & Poor’s~~support agreement, dated July 28, 2020, among Sempra Energy and Sumitomo Mitsui Banking Corporation
TAG JV		TAG Norte Holding, S. de R.L. de C.V.
~~TCJA~~TdM		~~Tax Cuts and Jobs Act of 2017~~
~~TdM~~	Termoeléctrica de Mexicali
~~TechnipFMC~~Technip Energies		TP Oil & Gas Mexico, S. De R.L. De C.V., an affiliate of ~~TechnipFMC plc~~Technip Energies N.V.
Tecnored		Tecnored S.A.
Tecsur		Tecsur S.A.
TO4		Electric Transmission Owner Formula Rate, effective through May 31, 2019
TO5		Electric Transmission Owner Formula Rate, effective June 1, 2019
~~TTHC~~TTI		~~Texas Transmission Holdings Corporation~~
~~TTI~~	Texas Transmission Investment LLC
U.S. GAAP		generally accepted accounting principles ~~generally accepted~~ in the United States of America
VAT		value-added tax
Ventika		Ventika, S.A.P.I. de C.V. and Ventika II, S.A.P.I. de C.V., collectively
VIE		variable interest entity
Wildfire Fund		the fund established pursuant to AB 1054
Wildfire Legislation		AB 1054 and AB 111



UNITED STATES
~~UNITED STATES~~ SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


▪	California wildfires and 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;


▪	decisions, investigations, regulations, issuances of permits and other authorizations, renewal of franchises, and other actions by the CFE, CPUC, DOE, PUCT, regulatory and governmental bodies and jurisdictions in the U.S. and other countries in which we operate;


▪	~~the resolution of civil and criminal litigation, regulatory 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 and unprecedented decline of oil prices on our businesses and development projects;~~


▪	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;


▪	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 power generation and from departing retail load resulting from customers transferring to Direct Access, Community Choice Aggregation or other forms of distributed 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 trade policies, laws and regulations, including 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;


▪	~~the impact of changes to federal and state tax laws and our ability to mitigate adverse impacts; and~~


▪	~~other uncertainties, some of which may be difficult to predict and are beyond our control.~~


SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Three months ended March 31,
	2021		2020
	(unaudited)
REVENUES
Utilities	$	2,845	$	2,665
Energy-related businesses	414		364
Total revenues	3,259		3,029

EXPENSES AND OTHER INCOME
Utilities:
Cost of natural gas	(349)		(337)
Cost of electric fuel and purchased power	(232)		(229)
Energy-related businesses cost of sales	(109)		(59)
Operation and maintenance	(1,001)		(851)
Aliso Canyon litigation and regulatory matters	0		(100)
Depreciation and amortization	(442)		(412)
Franchise fees and other taxes	(153)		(137)


Other income (expense), net	35		(254)
Interest income	19		27
Interest expense	(259)		(280)
Income from continuing operations before income taxes and equity earnings	768		397
Income tax (expense) benefit	(158)		207
Equity earnings	318		263
Income from continuing operations, net of income tax	928		867
Income from discontinued operations, net of income tax	0		80
Net income	928		947
Earnings attributable to noncontrolling interests	(33)		(151)
Preferred dividends	(21)		(36)

Earnings attributable to common shares	$	874	$	760

Basic EPS:
Earnings from continuing operations	$	2.91	$	2.35
Earnings from discontinued operations	$	0	$	0.25
Earnings	$	2.91	$	2.60
Weighted-average common shares outstanding	300,905		292,790

Diluted EPS:
Earnings from continuing operations	$	2.87	$	2.30
Earnings from discontinued operations	$	0	$	0.23
Earnings	$	2.87	$	2.53
Weighted-average common shares outstanding	308,458		313,925


SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
	Sempra Energy shareholders’ equity
	Pretax amount		Income tax (expense) benefit		Net-of-tax amount		Noncontrolling interests (after tax)		Total
	(unaudited)
	Three months ended March 31, 2021 and 2020






















2021:
Net income	$	1,053	$	(158)	$	895	$	33	$	928
Other comprehensive income (loss):
Foreign currency translation adjustments	(5)		0		(5)		(1)		(6)
Financial instruments	121		(29)		92		15		107
Pension and other postretirement benefits	17		(3)		14		0		14
Total other comprehensive income	133		(32)		101		14		115
Comprehensive income	$	1,186	$	(190)	$	996	$	47	$	1,043


2020:
Net income	$	610	$	186	$	796	$	151	$	947
Other comprehensive income (loss):
Foreign currency translation adjustments	(138)		0		(138)		(20)		(158)
Financial instruments	(188)		53		(135)		(12)		(147)
Pension and other postretirement benefits	24		(2)		22		0		22
Total other comprehensive loss	(302)		51		(251)		(32)		(283)
Comprehensive income	$	308	$	237	$	545	$	119	$	664


SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	March 31,		December 31,
	2021		2020(1)
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	725	$	960
Restricted cash	38		22
Accounts receivable – trade, net	1,595		1,578
Accounts receivable – other, net	393		403
Due from unconsolidated affiliates	26		20
Income taxes receivable	78		113
Inventories	274		308
Regulatory assets	183		190
Greenhouse gas allowances	555		553

Other current assets	333		364
Total current assets	4,200		4,511

Other assets:
Restricted cash	15		3
Due from unconsolidated affiliates	674		780
Regulatory assets	2,010		1,822
Nuclear decommissioning trusts	1,014		1,019
Investment in Oncor Holdings	12,553		12,440
Other investments	1,505		1,388
Goodwill	1,602		1,602
Other intangible assets	397		202
Dedicated assets in support of certain benefit plans	494		512
Insurance receivable for Aliso Canyon costs	414		445
Deferred income taxes	132		136
Greenhouse gas allowances	181		101
Right-of-use assets – operating leases	528		543
Wildfire fund	356		363
Other long-term assets	765		753
Total other assets	22,640		22,109

Property, plant and equipment:
Property, plant and equipment	55,251		53,928
Less accumulated depreciation and amortization	(14,270)		(13,925)
Property, plant and equipment, net	40,981		40,003
Total assets	$	67,821	$	66,623


SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
	March 31,		December 31,
	2021		2020(1)
	(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	1,817	$	885
Accounts payable – trade	1,354		1,359
Accounts payable – other	141		154
Due to unconsolidated affiliates	42		45
Dividends and interest payable	595		551
Accrued compensation and benefits	273		446
Regulatory liabilities	437		140
Current portion of long-term debt and finance leases	505		1,540
Reserve for Aliso Canyon costs	152		150
Greenhouse gas obligations	555		553
Other current liabilities	1,004		1,016
Total current liabilities	6,875		6,839

Long-term debt and finance leases	22,023		21,781

Deferred credits and other liabilities:
Due to unconsolidated affiliates	258		234
Pension and other postretirement benefit plan obligations, net of plan assets	1,069		1,059
Deferred income taxes	3,114		2,871
Regulatory liabilities	3,333		3,372
Reserve for Aliso Canyon costs	285		301
Asset retirement obligations	3,121		3,113
Greenhouse gas obligations	41		0
Deferred credits and other	2,094		2,119
Total deferred credits and other liabilities	13,315		13,069

Commitments and contingencies (Note 11)	0		0

Equity:
Preferred stock (50 million shares authorized):
Mandatory convertible preferred stock, series A (17.25 million shares outstanding at December 31, 2020)	0		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		889
Common stock (750 million shares authorized; 303 million and 288 million shares outstanding at March 31, 2021 and December 31, 2020, respectively; no par value)	8,730		7,053
Retained earnings	14,214		13,673
Accumulated other comprehensive income (loss)	(399)		(500)
Total Sempra Energy shareholders’ equity	23,999		23,373
Preferred stock of subsidiary	20		20
Other noncontrolling interests	1,589		1,541
Total equity	25,608		24,934
Total liabilities and equity	$	67,821	$	66,623



SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Three months ended March 31,
	2020			2019
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	947		$	518
Less: (Income) loss from discontinued operations, net of income tax	(80		)	42
Income from continuing operations, net of income tax	867			560
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	412			383
Deferred income taxes and investment tax credits	(243		)	24
Equity earnings	(263		)	(101		)
Foreign currency transaction losses (gains), net	123			(7		)
Share-based compensation expense	22			21
Other	124			(7		)
Intercompany activities with discontinued operations, net	—			31
Net change in other working capital components	217			169
Insurance receivable for Aliso Canyon costs	(172		)	(16		)
Changes in other noncurrent assets and liabilities, net	163			(199		)
Net cash provided by continuing operations	1,250			858
Net cash provided by discontinued operations	68			93
Net cash provided by operating activities	1,318			951

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	(1,010		)	(783		)
Expenditures for investments and acquisitions	(86		)	(94		)
Proceeds from sale of assets	5			327
Purchases of nuclear decommissioning trust assets	(552		)	(225		)
Proceeds from sales of nuclear decommissioning trust assets	552			225
Advances to unconsolidated affiliates	(30		)	—
Repayments of advances to unconsolidated affiliates	—			3
Intercompany activities with discontinued operations, net	(3		)	—
Other	8			7
Net cash used in continuing operations	(1,116		)	(540		)
Net cash used in discontinued operations	(65		)	(70		)
Net cash used in investing activities	(1,181		)	(610		)



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 March 31, 2020
Balance at December 31, 2019	$	2,258	$	7,480		$	11,130		$	(939	)	$	19,929		$	1,876		$	21,805
Cumulative-effect adjustment from change in accounting principle						(7		)				(7		)	(2		)	(9		)

Net income						796						796			151			947
Other comprehensive loss									(251		)	(251		)	(32		)	(283		)

Share-based compensation expense			22									22						22
Dividends declared:
Series A preferred stock ($1.50/share)						(26		)				(26		)				(26		)
Series B preferred stock ($1.69/share)						(10		)				(10		)				(10		)
Common stock ($1.05/share)						(306		)				(306		)				(306		)
Issuances of common stock			25									25						25
Repurchases of common stock			(57		)							(57		)				(57		)
Noncontrolling interest activities:
Purchases			2									2			(18		)	(16		)
Acquisition															1			1
Equitization of long-term debt for deficit held by NCI															22			22
Balance at March 31, 2020	$	2,258	$	7,472		$	11,577		$	(1,190	)	$	20,117		$	1,998		$	22,115

	Three months ended March 31, 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						477						477			41			518
Other comprehensive loss									(11		)	(11		)				(11		)

Share-based compensation expense			21									21						21
Dividends declared:
Series A preferred stock ($1.50/share)						(26		)				(26		)				(26		)
Series B preferred stock ($1.69/share)						(10		)				(10		)				(10		)
Common stock ($0.97/share)						(265		)				(265		)				(265		)
Issuances of common stock			24									24						24
Repurchases of common stock			(14		)							(14		)				(14		)
Noncontrolling interest activities:
Distributions															(4		)	(4		)
Purchases			(3		)							(3		)	(23		)	(26		)
Balance at March 31, 2019	$	2,258	$	5,568		$	10,337		$	(817	)	$	17,346		$	2,124		$	19,470
See Notes to Condensed Consolidated Financial Statements.



SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
	Pretax amount		Income tax expense			Net-of-tax amount
	(unaudited)
	Three months ended March 31, 2020 and 2019
2020:
Net income/Comprehensive income	$	355	$	(52	)	$	303
2019:
Net income/Comprehensive income	$	283	$	(19	)	$	264



SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED BALANCE SHEETS
(Dollars in millions)
	March 31, 2020			December 31, 2019⁽¹⁾
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	389		$	10
Accounts receivable – trade, net	669			710
Accounts receivable – other, net	74			87
Due from unconsolidated affiliates	7			11
Income taxes receivable, net	116			161
Inventories	79			136
Regulatory assets	9			7
Greenhouse gas allowances	60			52
Other current assets	48			44
Total current assets	1,451			1,218

Other assets:
Regulatory assets	1,297			1,407
Insurance receivable for Aliso Canyon costs	511			339
Greenhouse gas allowances	291			248
Right-of-use assets – operating leases	90			94
Other long-term assets	449			447
Total other assets	2,638			2,535

Property, plant and equipment:
Property, plant and equipment	19,661			19,362
Less accumulated depreciation and amortization	(6,140		)	(6,038		)
Property, plant and equipment, net	13,521			13,324
Total assets	$	17,610		$	17,077



SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
	March 31, 2020			December 31, 2019⁽¹⁾
	(unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	—		$	630
Accounts payable – trade	331			545
Accounts payable – other	105			110
Due to unconsolidated affiliates	49			47
Accrued compensation and benefits	111			182
Regulatory liabilities	375			243
Current portion of long-term debt and finance leases	9			6
Customer deposits	73			71
Reserve for Aliso Canyon costs	284			9
Greenhouse gas obligations	60			52
Asset retirement obligations	64			65
Other current liabilities	236			222
Total current liabilities	1,697			2,182

Long-term debt and finance leases	4,442			3,788

Deferred credits and other liabilities:
Pension obligation, net of plan assets	802			785
Deferred income taxes	1,477			1,403
Deferred investment tax credits	6			7
Regulatory liabilities	1,333			1,422
Asset retirement obligations	2,144			2,112
Greenhouse gas obligations	242			208
Deferred credits and other	416			422
Total deferred credits and other liabilities	6,420			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 earnings	4,186			3,883
Accumulated other comprehensive income (loss)	(23		)	(23		)
Total shareholders’ equity	5,051			4,748
Total liabilities and shareholders’ equity	$	17,610		$	17,077



SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Three months ended March 31,
	2020			2019
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	303		$	264
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	159			147
Deferred income taxes and investment tax credits	4			(65		)
Other	6			5
Net change in working capital components	343			287
Insurance receivable for Aliso Canyon costs	(172		)	(16		)
Changes in other noncurrent assets and liabilities, net	114			(246		)
Net cash provided by operating activities	757			376

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	(388		)	(324		)
Net cash used in investing activities	(388		)	(324		)

CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of debt (maturities greater than 90 days)	649			—
Decrease in short-term debt, net	(630		)	(66		)
Other	(9		)	(1		)
Net cash provided by (used in) financing activities	10			(67		)

Increase (decrease) in cash and cash equivalents	379			(15		)
Cash and cash equivalents, January 1	10			18
Cash and cash equivalents, March 31	$	389		$	3

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	37		$	26

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued capital expenditures	$	126		$	163
Increase in finance lease obligations for investment in property, plant and equipment	16			3



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 March 31, 2020
Balance at December 31, 2019	$	22	$	866	$	3,883	$	(23	)	$	4,748

Net income					303					303

Dividends declared:
Preferred stock ($0.38/share)					—					—
Balance at March 31, 2020	$	22	$	866	$	4,186	$	(23	)	$	5,051

	Three months ended March 31, 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					264					264

Dividends declared:
Preferred stock ($0.38/share)					—					—
Balance at March 31, 2019	$	22	$	866	$	3,656	$	(24	)	$	4,520


SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED STATEMENTS OF CHANGES IN EQUITY
(Dollars in millions)
	Common stock		Retained earnings		Accumulated other comprehensive income (loss)		Total shareholder's equity
	(unaudited)
	Three months ended March 31, 2021




























Balance at December 31, 2020	$	1,660	$	6,080	$	(10)	$	7,730

Net income			212				212




Balance at March 31, 2021	$	1,660	$	6,292	$	(10)	$	7,942

	Three months ended March 31, 2020
Balance at December 31, 2019	$	1,660	$	5,456	$	(16)	$	7,100

Net income			262				262


Common stock dividends declared ($1.72/share)			(200)				(200)
Balance at March 31, 2020	$	1,660	$	5,518	$	(16)	$	7,162


SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended March 31,
		2021		2020
		(unaudited)

Operating revenues		$	1,508	$	1,395
Operating expenses
Cost of natural gas		273		278
Operation and maintenance		503		443
Aliso Canyon litigation and regulatory matters		0		100
Depreciation and amortization		173		159
Franchise fees and other taxes		58		51
Total operating expenses		1,007		1,031
Operating income		501		364
Other income, net		39		30
Interest income		0		1
Interest expense		(39)		(40)
Income before income taxes		501		355
Income tax expense		(94)		(52)


Net income/Earnings attributable to common shares		$	407	$	303


RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(Dollars in millions)
	March 31,		December 31,
	2021		2020
Cash and cash equivalents	$	725	$	960
Restricted cash, current	38		22
Restricted cash, noncurrent	15		3
Total cash, cash equivalents and restricted cash on the Condensed Consolidated Statements of Cash Flows	$	778	$	985


TRADE AND OTHER ACCOUNTS RECEIVABLE – ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
	2021		2020
Sempra Energy Consolidated:
Allowances for credit losses at January 1	$	138	$	29
Incremental allowance upon adoption of ASU 2016-13	—		1
Provisions for expected credit losses	43		6
Write-offs	(5)		(4)
Recoveries	0		1
Allowances for credit losses at March 31(1)	$	176	$	33
SDG&E:
Allowances for credit losses at January 1	$	69	$	14
Provisions for expected credit losses	15		3
Write-offs	(3)		(3)
Recoveries	0		1
Allowances for credit losses at March 31(2)	$	81	$	15
SoCalGas:
Allowances for credit losses at January 1	$	68	$	15
Provisions for expected credit losses	28		3
Write-offs	(2)		(1)
Allowances for credit losses at March 31(3)	$	94	$	17