Southern California Gas (SOCGP) 10-Q 2021 Q3 Quarterly report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549 

FORM 10-Q

(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended		September 30, 2021
		or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from			to

Commission File No.	Exact Name of Registrant as Specified in its Charter, Address of Principal Executive Office and Telephone Number		State of Incorporation	I.R.S. Employer Identification No.	Former name, former address and former fiscal year, if changed since last report
1-14201	SEMPRA ENERGY		California	33-0732627	No change
	488 8th Avenue
	San Diego, California 92101
	(619) 696-2000
1-03779	SAN DIEGO GAS & ELECTRIC COMPANY		California	95-1184800	No change
	8326 Century Park Court
	San Diego, California 92123
	(619) 696-2000
1-01402	SOUTHERN CALIFORNIA GAS COMPANY		California	95-1240705	No change
	555 West Fifth Street
	Los Angeles, California 90013
	(213) 244-1200

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
SEMPRA ENERGY:
Common Stock, without par value	SRE	New York Stock Exchange
5.75% Junior Subordinated Notes Due 2079, $25 par value	SREA	New York Stock Exchange
SAN DIEGO GAS & ELECTRIC COMPANY:
None
SOUTHERN CALIFORNIA GAS COMPANY:
None

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Sempra Energy	Yes	☒	No	☐
San Diego Gas & Electric Company	Yes	☒	No	☐
Southern California Gas Company	Yes	☒	No	☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Sempra Energy	Yes	☒	No	☐
San Diego Gas & Electric Company	Yes	☒	No	☐
Southern California Gas Company	Yes	☒	No	☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Sempra Energy:
☒ Large Accelerated Filer	☐ Accelerated Filer	☐ Non-accelerated Filer	☐ Smaller Reporting Company	☐ Emerging Growth Company
San Diego Gas & Electric Company:
☐ Large Accelerated Filer	☐ Accelerated Filer	☒ Non-accelerated Filer	☐ Smaller Reporting Company	☐ Emerging Growth Company
Southern California Gas Company
☐ Large Accelerated Filer	☐ Accelerated Filer	☒ Non-accelerated Filer	☐ Smaller Reporting Company	☐ Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Sempra Energy	Yes	☐	No	☐
San Diego Gas & Electric Company	Yes	☐	No	☐
Southern California Gas Company	Yes	☐	No	☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Sempra Energy	Yes	☐	No	☒
San Diego Gas & Electric Company	Yes	☐	No	☒
Southern California Gas Company	Yes	☐	No	☒
Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date.
Common stock outstanding on November 1, 2021:

Sempra Energy	319,337,462 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

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TABLE OF CONTENTS
		Page
Glossary		4
Information Regarding Forward-Looking Statements		7
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	9
	Notes to Condensed Consolidated Financial Statements
	Note 1. General Information and Other Financial Data	29
	Note 2. New Accounting Standards	51
	Note 3. Revenues	51
	Note 4. Regulatory Matters	55
	Note 5. Acquisitions, Divestitures and Discontinued Operations	59
	Note 6. Investments in Unconsolidated Entities	60
	Note 7. Debt and Credit Facilities	62
	Note 8. Derivative Financial Instruments	65
	Note 9. Fair Value Measurements	71
	Note 10. San Onofre Nuclear Generating Station	78
	Note 11. Commitments and Contingencies	80
	Note 12. Segment Information	91
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	93
	Overview	94
	Results of Operations	94
	Capital Resources and Liquidity	106
	Critical Accounting Policies and Estimates	121
	New Accounting Standards	121
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	121
Item 4.	Controls and Procedures	122
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	123
Item 1A.	Risk Factors	123
Item 6.	Exhibits	125
Signatures		128

This combined Form 10-Q is separately filed by Sempra Energy doing business as Sempra, San Diego Gas & Electric Company and Southern California Gas Company. Information contained herein relating to any one of these individual reporting entities is filed by such entity on its own behalf. Each reporting entity makes statements herein only as to itself and its consolidated entities and makes no statement whatsoever as to any other reporting entity.

You should read this report in its entirety as it pertains to each respective reporting entity. No one section of the report deals with all aspects of the subject matter. Separate Part I – Item 1 sections are provided for each reporting entity, except for the Notes to Condensed Consolidated Financial Statements. The Notes to Condensed Consolidated Financial Statements for all of the reporting entities are combined. All Items other than Part I – Item 1 are combined for the three reporting entities.

None of the website references in this report are active hyperlinks, and the information contained on, or that can be accessed through, any such website is not, and shall not be deemed to be, part of this report.

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

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, 2020
AOCI	accumulated other comprehensive income (loss)
ARO	asset retirement obligation
ASC	Accounting Standards Codification
ASEA	Agencia de Seguridad, Energía y Ambiente (Mexico’s National Agency for Industrial Safety and Environmental Protection)
ASR	accelerated share repurchase
ASU	Accounting Standards Update
Bechtel	Bechtel Oil, Gas and Chemicals, Inc.
Blade	Blade Energy Partners
bps	basis points
CalGEM	California Geologic Energy Management Division
California Utilities	San Diego Gas & Electric Company and Southern California Gas Company, collectively
Cameron LNG JV	Cameron LNG Holdings, LLC
CCM	cost of capital adjustment mechanism
CENACE	Centro Nacional de Control de Energía (Mexico’s National Energy Control Center)
CFE	Comisión Federal de Electricidad (Mexico’s Federal Electricity Commission)
CFIN	Cameron LNG FINCO, LLC, a wholly owned and unconsolidated affiliate of Cameron LNG JV
Chilquinta Energía	Chilquinta Energía S.A. and its subsidiaries
COVID-19	coronavirus disease 2019
CPUC	California Public Utilities Commission
CRE	Comisión Reguladora de Energía (Mexico’s Energy Regulatory Commission)
CRR	congestion revenue right
DOE	U.S. Department of Energy
ECA LNG	ECA LNG Phase 1 and ECA LNG Phase 2
ECA LNG Phase 1	ECA LNG Holdings B.V.
ECA LNG Phase 2	ECA LNG II Holdings B.V.
ECA Regas Facility	Energía Costa Azul, S. de R.L. de C.V. LNG regasification
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	Eletrans S.A., Eletrans II S.A. and Eletrans III S.A., collectively
EPC	engineering, procurement and construction
EPS	earnings (losses) per common share
ERCOT	Electric Reliability Council of Texas, Inc., the independent system operator and the regional coordinator of various electricity systems within Texas
ESJ	Energía Sierra Juárez, S. de R.L. de C.V.
ETR	effective income tax rate
FERC	U.S. Federal Energy Regulatory Commission
Fitch	Fitch Ratings, Inc.
FTA	Free Trade Agreement
Gazprom	Gazprom Marketing & Trading México S. de R.L. de C.V.
GRC	General Rate Case
HMRC	Her Majesty’s Revenue and Customs (United Kingdom’s Revenue and Customs Department)
IEnova	Infraestructura Energética Nova, S.A.B. de C.V., renamed Infraestructura Energética Nova, S.A.P.I. de C.V. on November 1, 2021
IMG JV	Infraestructura Marina del Golfo
IOU	investor-owned utility
ISO	Independent System Operator

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GLOSSARY (CONTINUED)
JV	joint venture
KKR	KKR Pinnacle Investor L.P. (as successor-in-interest to KKR Pinnacle Aggregator L.P.), an affiliate of Kohlberg Kravis Roberts & Co. L.P.
LA Superior Court	Los Angeles County Superior Court
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
LNG	liquefied natural gas
LPG	liquid petroleum gas
Luz del Sur	Luz del Sur S.A.A. and its subsidiaries
MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Mexican Stock Exchange	Bolsa Mexicana de Valores, S.A.B. de C.V., or BMV
MMBtu	million British thermal units (of natural gas)
Moody’s	Moody’s Investors Service
MOU	Memorandum of Understanding
Mtpa	million tonnes per annum
MW	megawatt
MWh	megawatt hour
NCI	noncontrolling interest(s)
NDT	nuclear decommissioning trusts
NEIL	Nuclear Electric Insurance Limited
O&M	operation and maintenance expense
OCI	other comprehensive income (loss)
OII	Order Instituting Investigation
OIR	Order Instituting a Rulemaking
Oncor	Oncor Electric Delivery Company LLC
Oncor Holdings	Oncor Electric Delivery Holdings Company LLC
OSC	Order to Show Cause
PG&E	Pacific Gas and Electric Company
PP&E	property, plant and equipment
PPA	power purchase agreement
PSEP	Pipeline Safety Enhancement Plan
PUCT	Public Utility Commission of Texas
PXiSE	PXiSE Energy Solutions, LLC
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
S&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
SDSRA	Senior Debt Service Reserve Account
SEC	U.S. Securities and Exchange Commission
SEDATU	Secretaría de Desarrollo Agrario, Territorial y Urbano (Mexico’s agency in charge of agriculture, land and urban development)
Sempra	Sempra Energy doing business as Sempra, together with its consolidated entities unless otherwise stated or indicated by the context
Sempra Global	holding company for most of Sempra’s subsidiaries not subject to California or Texas utility regulation, renamed Sempra Infrastructure Partners on September 30, 2021
SENER	Secretaría de Energía de México (Mexico’s Ministry of Energy)
series A preferred stock	Sempra’s 6% mandatory convertible preferred stock, series A

5

GLOSSARY (CONTINUED)
series B preferred stock	Sempra’s 6.75% mandatory convertible preferred stock, series B
series C preferred stock	Sempra’s 4.875% fixed-rate reset cumulative redeemable perpetual preferred stock, series C
Shell Mexico	Shell México Gas Natural, S. de R.L. de C.V.
SoCalGas	Southern California Gas Company
SONGS	San Onofre Nuclear Generating Station
Support Agreement	support agreement, dated July 28, 2020 and amended on June 29, 2021, among Sempra and Sumitomo Mitsui Banking Corporation
TAG JV	TAG Norte Holding, S. de R.L. de C.V.
TdM	Termoeléctrica de Mexicali
Technip Energies	TP Oil & Gas Mexico, S. De R.L. De C.V., an affiliate of Technip Energies N.V.
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
TTI	Texas Transmission Investment LLC
U.S. GAAP	generally accepted accounting principles in the United States of America
VAT	value-added tax
Ventika	Ventika, S.A.P.I. de C.V. and Ventika II, S.A.P.I. de C.V., collectively
VIE	variable interest entity
Wildfire Fund	the fund established pursuant to AB 1054
Wildfire Legislation	AB 1054 and AB 111

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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

We make statements in this report that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on assumptions with respect to the future, involve risks and uncertainties, and are not guarantees. Future results may differ materially from those expressed in any forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the filing date of this report. We assume no obligation to update or revise any forward-looking statement as a result of new information, future events or other factors.

Forward-looking statements can be identified by words such as “believes,” “expects,” “anticipates,” “plans,” “estimates,” “projects,” “forecasts,” “should,” “could,” “would,” “will,” “confident,” “may,” “can,” “potential,” “possible,” “proposed,” “in process,” “under construction,” “in development,” “target,” “outlook,” “maintain,” “continue,” “goal,” “aim,” “commit,” or similar expressions, or when we discuss our guidance, priorities, strategy, goals, vision, mission, opportunities, projections, intentions or expectations.

Factors, among others, that could cause actual results and events to differ materially from those described in any forward-looking statements include risks and uncertainties relating to:

▪California wildfires, including the risks that we may be found liable for damages regardless of fault and that we may not be able to recover costs from insurance, the Wildfire Fund or in rates from customers

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

▪the success of business development efforts, construction projects and acquisitions and divestitures, including risks in (i) the ability to make a final investment decision, (ii) completing construction projects or other transactions on schedule and budget, (iii) the ability to realize anticipated benefits from any of these efforts if completed, and (iv) obtaining the consent or approval of partners or other third parties, including governmental entities

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

▪changes to laws, including proposed changes to the Mexican constitution that could materially limit access to the electric generation market and changes to Mexico’s trade rules that could materially limit our ability to import and export hydrocarbons

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

▪actions by credit rating agencies to downgrade our credit ratings or to place those ratings on negative outlook and our ability to borrow on favorable terms and meet our substantial debt service obligations

▪the impact of energy and climate goals, policies, legislation and rulemaking, including actions to reduce or eliminate reliance on natural gas generally and any deterioration of or increased uncertainty in the political or regulatory environment for California natural gas distribution companies

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

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

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

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

▪cybersecurity threats to the energy grid, storage and pipeline infrastructure, information and systems used to operate our businesses, and confidentiality of our proprietary information and personal information of our customers and employees, including ransomware attacks on our systems and the systems of third-party vendors and other parties with which we conduct business

▪the impact at SDG&E on competitive customer rates and reliability due to the growth in distributed and local power generation, including from departing retail load resulting from customers transferring to Direct Access and Community Choice Aggregation, and the risk of nonrecovery for stranded assets and contractual obligations

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

▪volatility in foreign currency exchange, inflation and interest rates and commodity prices and our ability to effectively hedge these risks and with respect to interest rates, the impact on the California Utilities’ cost of capital

▪changes in tax and trade policies, laws and regulations, including tariffs and revisions to international trade agreements that may increase our costs, reduce our competitiveness, or impair our ability to resolve trade disputes

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

We caution you not to rely unduly on any forward-looking statements. You should review and consider carefully the risks, uncertainties and other factors that affect our businesses as described herein, in our Annual Report and in other reports we file with the SEC.

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
	(unaudited)
REVENUES
Utilities	$	2,560	$	2,301	$	7,839	$	7,199
Energy-related businesses	453		343		1,174		1,000
Total revenues	3,013		2,644		9,013		8,199
EXPENSES AND OTHER INCOME
Utilities:
Cost of natural gas	(282)		(114)		(892)		(582)
Cost of electric fuel and purchased power	(312)		(429)		(828)		(918)
Energy-related businesses cost of sales	(220)		(90)		(448)		(200)
Operation and maintenance	(1,073)		(1,018)		(3,098)		(2,767)
Aliso Canyon litigation and regulatory matters	(1,571)		(27)		(1,571)		(127)
Depreciation and amortization	(471)		(418)		(1,376)		(1,242)
Franchise fees and other taxes	(151)		(139)		(442)		(397)
Other (expense) income, net	(55)		29		52		(163)
Interest income	16		27		50		76
Interest expense	(259)		(264)		(776)		(818)
(Loss) income from continuing operations before income taxes and equity earnings	(1,365)		201		(316)		1,061
Income tax benefit (expense)	342		(99)		45		(60)
Equity earnings	391		326		1,022		822
(Loss) income from continuing operations, net of income tax	(632)		428		751		1,823
(Loss) income from discontinued operations, net of income tax	—		(7)		—		1,850
Net (loss) income	(632)		421		751		3,673
Earnings attributable to noncontrolling interests	(5)		(22)		(48)		(201)
Preferred dividends	(11)		(48)		(52)		(121)
Preferred dividends of subsidiary	—		—		(1)		(1)
(Losses) earnings attributable to common shares	$	(648)	$	351	$	650	$	3,350
Basic EPS:
(Losses) earnings from continuing operations	$	(2.03)	$	1.23	$	2.10	$	5.17
(Losses) earnings from discontinued operations	$	—	$	(0.02)	$	—	$	6.31
(Losses) earnings	$	(2.03)	$	1.21	$	2.10	$	11.48
Weighted-average common shares outstanding	319,144		289,490		309,350		291,771
Diluted EPS:
(Losses) earnings from continuing operations	$	(2.03)	$	1.23	$	2.09	$	5.15
(Losses) earnings from discontinued operations	$	—	$	(0.02)	$	—	$	6.28
(Losses) earnings	$	(2.03)	$	1.21	$	2.09	$	11.43
Weighted-average common shares outstanding	319,144		290,582		310,854		292,935

See Notes to Condensed Consolidated Financial Statements.

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SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
	Sempra Energy shareholders’ equity
	Pretax amount		Income tax  benefit (expense)		Net-of-tax amount		Noncontrolling interests (after tax)		Total
	(unaudited)
	Three months ended September 30, 2021 and 2020
2021:
Net (loss) income	$	(979)	$	342	$	(637)	$	5	$	(632)
Other comprehensive income (loss):
Foreign currency translation adjustments	(4)		—		(4)		(2)		(6)
Financial instruments	38		(9)		29		—		29
Pension and other postretirement benefits	(7)		2		(5)		—		(5)
Total other comprehensive income (loss)	27		(7)		20		(2)		18
Comprehensive (loss) income	$	(952)	$	335	$	(617)	$	3	$	(614)
2020:
Net income	$	489	$	(90)	$	399	$	22	$	421
Other comprehensive income (loss):
Foreign currency translation adjustments	9		—		9		(1)		8
Financial instruments	36		(16)		20		5		25
Pension and other postretirement benefits	6		(1)		5		—		5
Total other comprehensive income	51		(17)		34		4		38
Comprehensive income	$	540	$	(107)	$	433	$	26	$	459
	Nine months ended September 30, 2021 and 2020
2021:
Net income	$	658	$	45	$	703	$	48	$	751
Other comprehensive income (loss):
Foreign currency translation adjustments	(4)		—		(4)		(2)		(6)
Financial instruments	145		(36)		109		9		118
Pension and other postretirement benefits	11		(2)		9		—		9
Total other comprehensive income	152		(38)		114		7		121
Comprehensive income	810		7		817		55		872
Preferred dividends of subsidiary	(1)		—		(1)		—		(1)
Comprehensive income, after preferred dividends of subsidiary	$	809	$	7	$	816	$	55	$	871
2020:
Net income	$	4,718	$	(1,246)	$	3,472	$	201	$	3,673
Other comprehensive income (loss):
Foreign currency translation adjustments	533		—		533		(16)		517
Financial instruments	(167)		41		(126)		(9)		(135)
Pension and other postretirement benefits	27		(3)		24		—		24
Total other comprehensive income (loss)	393		38		431		(25)		406
Comprehensive income	5,111		(1,208)		3,903		176		4,079
Preferred dividends of subsidiary	(1)		—		(1)		—		(1)
Comprehensive income, after preferred dividends of subsidiary	$	5,110	$	(1,208)	$	3,902	$	176	$	4,078

See Notes to Condensed Consolidated Financial Statements.    

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SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2021		2020(1)
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	873	$	960
Restricted cash	31		22
Accounts receivable – trade, net	1,416		1,578
Accounts receivable – other, net	470		403
Due from unconsolidated affiliates	30		20
Income taxes receivable	93		113
Inventories	371		308
Regulatory assets	290		190
Greenhouse gas allowances	546		553
Other current assets	473		364
Total current assets	4,593		4,511
Other assets:
Restricted cash	3		3
Due from unconsolidated affiliates	684		780
Regulatory assets	2,280		1,822
Nuclear decommissioning trusts	1,003		1,019
Investment in Oncor Holdings	12,475		12,440
Other investments	1,483		1,388
Goodwill	1,602		1,602
Other intangible assets	376		202
Dedicated assets in support of certain benefit plans	539		512
Insurance receivable for Aliso Canyon costs	414		445
Deferred income taxes	151		136
Greenhouse gas allowances	356		101
Right-of-use assets – operating leases	499		543
Wildfire fund	342		363
Other long-term assets	914		753
Total other assets	23,121		22,109
Property, plant and equipment:
Property, plant and equipment	57,474		53,928
Less accumulated depreciation and amortization	(14,716)		(13,925)
Property, plant and equipment, net	42,758		40,003
Total assets	$	70,472	$	66,623

(1)    Derived from audited financial statements.

See Notes to Condensed Consolidated Financial Statements.

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SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
	September 30,		December 31,
	2021		2020(1)
	(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	3,068	$	885
Accounts payable – trade	1,400		1,359
Accounts payable – other	179		154
Due to unconsolidated affiliates	42		45
Dividends and interest payable	592		551
Accrued compensation and benefits	454		446
Regulatory liabilities	515		140
Current portion of long-term debt and finance leases	2,994		1,540
Reserve for Aliso Canyon costs	1,962		150
Greenhouse gas obligations	546		553
Other current liabilities	1,192		1,016
Total current liabilities	12,944		6,839
Long-term debt and finance leases	20,042		21,781
Deferred credits and other liabilities:
Due to unconsolidated affiliates	286		234
Pension and other postretirement benefit plan obligations, net of plan assets	964		1,059
Deferred income taxes	2,882		2,871
Regulatory liabilities	3,378		3,372
Reserve for Aliso Canyon costs	14		301
Greenhouse gas obligations	190		—
Asset retirement obligations	3,187		3,113
Deferred credits and other	1,981		2,119
Total deferred credits and other liabilities	12,882		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)	—		1,693
Mandatory convertible preferred stock, series B (5.75 million shares outstanding at December 31, 2020)	—		565
Preferred stock, series C (0.9 million shares outstanding)	889		889
Common stock (750 million shares authorized; 319 million and 288 million shares outstanding at September 30, 2021 and December 31, 2020, respectively; no par value)	10,791		7,053
Retained earnings	13,292		13,673
Accumulated other comprehensive income (loss)	(418)		(500)
Total Sempra Energy shareholders’ equity	24,554		23,373
Preferred stock of subsidiary	20		20
Other noncontrolling interests	30		1,541
Total equity	24,604		24,934
Total liabilities and equity	$	70,472	$	66,623

(1)    Derived from audited financial statements.

See Notes to Condensed Consolidated Financial Statements.

12

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Nine months ended September 30,
	2021		2020
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	751	$	3,673
Less: Income from discontinued operations, net of income tax	—		(1,850)
Income from continuing operations, net of income tax	751		1,823
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,376		1,242
Deferred income taxes and investment tax credits	(159)		(12)
Equity earnings	(1,022)		(822)
Foreign currency transaction losses, net	10		95
Share-based compensation expense	48		57
Fixed-price contracts and other derivatives	338		25
Other	70		107
Reserve for Aliso Canyon costs	1,525		259
Net change in other working capital components	(186)		(396)
Distributions from investments	727		429
Insurance receivable for Aliso Canyon costs	31		(165)
Changes in other noncurrent assets and liabilities, net	(528)		38
Net cash provided by continuing operations	2,981		2,680
Net cash used in discontinued operations	—		(1,051)
Net cash provided by operating activities	2,981		1,629
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	(3,606)		(3,313)
Expenditures for investments and acquisitions	(216)		(229)
Proceeds from sale of assets	—		22
Distributions from investments	365		761
Purchases of nuclear decommissioning trust assets	(729)		(1,091)
Proceeds from sales of nuclear decommissioning trust assets	729		1,091
Advances to unconsolidated affiliates	(8)		(32)
Repayments of advances to unconsolidated affiliates	—		7
Other	9		13
Net cash used in continuing operations	(3,456)		(2,771)
Net cash provided by discontinued operations	—		5,186
Net cash (used in) provided by investing activities	(3,456)		2,415

See Notes to Condensed Consolidated Financial Statements.

13

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in millions)
	Nine months ended September 30,
	2021		2020
	(unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid	$	(981)	$	(872)
Preferred dividends paid	(77)		(107)
Issuances of preferred stock	—		890
Issuances of common stock	5		10
Repurchases of common stock	(39)		(565)
Issuances of debt (maturities greater than 90 days)	1,992		5,934
Payments on debt (maturities greater than 90 days) and finance leases	(2,315)		(4,387)
Increase (decrease) in short-term debt, net	1,999		(1,871)
Advances from unconsolidated affiliates	40		64
Proceeds from sales of noncontrolling interests	7		—
Purchases of noncontrolling interests	(221)		(178)
Other	(13)		(29)
Net cash provided by (used in) continuing operations	397		(1,111)
Net cash provided by discontinued operations	—		401
Net cash provided by (used in) financing activities	397		(710)
Effect of exchange rate changes in continuing operations	—		(2)
Effect of exchange rate changes in discontinued operations	—		(3)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—		(5)
(Decrease) increase in cash, cash equivalents and restricted cash, including discontinued operations	(78)		3,329
Cash, cash equivalents and restricted cash, including discontinued operations, January 1	985		217
Cash, cash equivalents and restricted cash, including discontinued operations, September 30	$	907	$	3,546
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	741	$	781
Income tax payments, including discontinued operations, net of refunds	101		1,376
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Increase in Cameron LNG JV investment for guarantee	$	22	$	—
Accrued capital expenditures	572		460
Increase in ARO for investment in PP&E, net	33		—
Increase in finance lease obligations for investment in PP&E	35		72
Derecognized PP&E for net investment in sales-type lease	44		—
Issuance of common stock in exchange for NCI and related AOCI	1,373		—
Contribution to Cameron LNG JV	—		50
Distribution from Cameron LNG JV	—		50
Distribution from Oncor Holdings	8		—
Equitization of long-term debt for deficit held by NCI	—		22
Conversion of mandatory convertible preferred stock	2,258		—
Preferred dividends declared but not paid	22		50
Common dividends issued in stock	—		23
Common dividends declared but not paid	351		301

See Notes to Condensed Consolidated Financial Statements.

14

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Dollars in millions)
	Preferred stock		Common stock		Retained earnings		Accumulated other comprehensive income (loss)		Sempra Energy shareholders' equity		Non- controlling interests		Total equity
	(unaudited)
	Three months ended September 30, 2021
Balance at June 30, 2021	$	1,454	$	10,150	$	14,291	$	(444)	$	25,451	$	241	$	25,692
Net (loss) income					(637)				(637)		5		(632)
Other comprehensive income (loss)							20		20		(2)		18
Share-based compensation expense			14						14				14
Dividends declared:
Series C preferred stock ($12.19/share)					(11)				(11)				(11)
Common stock ($1.10/share)					(351)				(351)				(351)
Conversion of series B preferred stock	(565)		565						—				—
Repurchases of common stock			(1)						(1)				(1)
Noncontrolling interest activities:
Purchases			63				6		69		(194)		(125)
Balance at September 30, 2021	$	889	$	10,791	$	13,292	$	(418)	$	24,554	$	50	$	24,604
	Three months ended September 30, 2020
Balance at June 30, 2020	$	3,147	$	7,490	$	13,511	$	(542)	$	23,606	$	1,780	$	25,386
Net income					399				399		22		421
Other comprehensive income							34		34		4		38
Share-based compensation expense			19						19				19
Dividends declared:
Series A preferred stock ($1.50/share)					(26)				(26)				(26)
Series B preferred stock ($1.68/share)					(10)				(10)				(10)
Series C preferred stock ($14.08/share)					(12)				(12)				(12)
Common stock ($1.05/share)					(302)				(302)				(302)
Repurchases of common stock			(501)						(501)				(501)
Noncontrolling interest activities:
Purchases			26				(5)		21		(178)		(157)
Balance at September 30, 2020	$	3,147	$	7,034	$	13,560	$	(513)	$	23,228	$	1,628	$	24,856

See Notes to Condensed Consolidated Financial Statements.

15

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
(Dollars in millions)
	Preferred stock		Common stock		Retained earnings		Accumulated other comprehensive income (loss)		Sempra Energy shareholders' equity		Non- controlling interests		Total equity
	(unaudited)
	Nine months ended September 30, 2021
Balance at December 31, 2020	$	3,147	$	7,053	$	13,673	$	(500)	$	23,373	$	1,561	$	24,934
Net income					703				703		48		751
Other comprehensive income							114		114		7		121
Share-based compensation expense			48						48				48
Dividends declared:
Series B preferred stock ($3.38/share)					(19)				(19)				(19)
Series C preferred stock ($36.57/share)					(33)				(33)				(33)
Common stock ($3.30/share)					(1,031)				(1,031)				(1,031)
Preferred dividends of subsidiary					(1)				(1)				(1)
Conversion of series A preferred stock	(1,693)		1,693						—				—
Conversion of series B preferred stock	(565)		565						—				—
Issuances of common stock			5						5				5
Repurchases of common stock			(39)						(39)				(39)
Noncontrolling interest activities:
Purchases			1,462				(32)		1,430		(1,567)		(137)
Sales			4						4		1		5
Balance at September 30, 2021	$	889	$	10,791	$	13,292	$	(418)	$	24,554	$	50	$	24,604
	Nine months ended September 30, 2020
Balance at December 31, 2019	$	2,258	$	7,480	$	11,130	$	(939)	$	19,929	$	1,876	$	21,805
Adoption of ASU 2016-13					(7)				(7)		(2)		(9)
Adjusted balance at December 31, 2019	2,258		7,480		11,123		(939)		19,922		1,874		21,796
Net income					3,472				3,472		201		3,673
Other comprehensive income (loss)							431		431		(25)		406
Share-based compensation expense			57						57				57
Dividends declared:
Series A preferred stock ($4.50/share)					(78)				(78)				(78)
Series B preferred stock ($5.06/share)					(29)				(29)				(29)
Series C preferred stock ($15.71/share)					(14)				(14)				(14)
Common stock ($3.14/share)					(913)				(913)				(913)
Preferred dividends of subsidiary					(1)				(1)				(1)
Issuance of series C preferred stock	889								889				889
Issuances of common stock			33						33				33
Repurchases of common stock			(565)						(565)				(565)
Noncontrolling interest activities:
Distributions											(1)		(1)
Purchases			29				(5)		24		(208)		(184)
Acquisition											1		1
Equitization of long-term debt for deficit held by NCI											22		22
Deconsolidation											(236)		(236)
Balance at September 30, 2020	$	3,147	$	7,034	$	13,560	$	(513)	$	23,228	$	1,628	$	24,856

See Notes to Condensed Consolidated Financial Statements.

16

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
	(unaudited)
Operating revenues
Electric	$	1,307	$	1,338	$	3,534	$	3,478
Natural gas	157		134		585		498
Total operating revenues	1,464		1,472		4,119		3,976
Operating expenses
Cost of electric fuel and purchased power	324		430		869		921
Cost of natural gas	37		27		159		118
Operation and maintenance	389		414		1,152		1,050
Depreciation and amortization	226		200		659		598
Franchise fees and other taxes	93		86		264		237
Total operating expenses	1,069		1,157		3,103		2,924
Operating income	395		315		1,016		1,052
Other income (expense), net	4		(2)		61		47
Interest income	—		1		1		2
Interest expense	(104)		(103)		(307)		(307)
Income before income taxes	295		211		771		794
Income tax expense	(90)		(33)		(168)		(161)
Net income/Earnings attributable to common shares	$	205	$	178	$	603	$	633

See Notes to Condensed Financial Statements.

17

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
	Pretax amount		Income tax expense		Net-of-tax amount
	(unaudited)
	Three months ended September 30, 2021 and 2020
2021:
Net income	$	295	$	(90)	$	205
Other comprehensive income (loss):
Pension and other postretirement benefits	1		—		1
Total other comprehensive income	1		—		1
Comprehensive income	$	296	$	(90)	$	206
2020:
Net income/Comprehensive income	$	211	$	(33)	$	178
	Nine months ended September 30, 2021 and 2020
2021:
Net income	$	771	$	(168)	$	603
Other comprehensive income (loss):
Pension and other postretirement benefits	1		—		1
Total other comprehensive income	1		—		1
Comprehensive income	$	772	$	(168)	$	604
2020:
Net income	$	794	$	(161)	$	633
Other comprehensive income (loss):
Pension and other postretirement benefits	5		(1)		4
Total other comprehensive income	5		(1)		4
Comprehensive income	$	799	$	(162)	$	637

See Notes to Condensed Financial Statements.

18

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2021		2020(1)
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	239	$	262
Accounts receivable – trade, net	642		573
Accounts receivable – other, net	96		143
Due from unconsolidated affiliates	1		—
Income taxes receivable, net	18		—
Inventories	112		104
Prepaid expenses	197		153
Regulatory assets	253		174
Fixed-price contracts and other derivatives	73		56
Greenhouse gas allowances	113		113
Other current assets	4		22
Total current assets	1,748		1,600
Other assets:
Regulatory assets	751		534
Nuclear decommissioning trusts	1,003		1,019
Greenhouse gas allowances	83		83
Right-of-use assets – operating leases	82		102
Wildfire fund	342		363
Other long-term assets	213		189
Total other assets	2,474		2,290
Property, plant and equipment:
Property, plant and equipment	25,824		24,436
Less accumulated depreciation and amortization	(6,263)		(6,015)
Property, plant and equipment, net	19,561		18,421
Total assets	$	23,783	$	22,311

(1)    Derived from audited financial statements.

See Notes to Condensed Financial Statements.

19

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
	September 30,		December 31,
	2021		2020(1)
	(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	375	$	—
Accounts payable	602		553
Due to unconsolidated affiliates	61		64
Interest payable	74		46
Accrued compensation and benefits	138		135
Accrued franchise fees	59		56
Regulatory liabilities	53		61
Current portion of long-term debt and finance leases	48		611
Customer deposits	33		56
Greenhouse gas obligations	113		113
Asset retirement obligations	130		117
Other current liabilities	233		199
Total current liabilities	1,919		2,011
Long-term debt and finance leases	7,587		6,866
Deferred credits and other liabilities:
Pension obligation, net of plan assets	61		92
Deferred income taxes	2,203		2,019
Deferred investment tax credits	13		13
Regulatory liabilities	2,311		2,195
Greenhouse gas obligations	30		—
Asset retirement obligations	744		759
Deferred credits and other	581		626
Total deferred credits and other liabilities	5,943		5,704
Commitments and contingencies (Note 11)	0		0
Shareholder's equity:
Preferred stock (45 million shares authorized; NaN issued)	—		—
Common stock (255 million shares authorized; 117 million shares outstanding; no par value)	1,660		1,660
Retained earnings	6,683		6,080
Accumulated other comprehensive income (loss)	(9)		(10)
Total shareholder’s equity	8,334		7,730
Total liabilities and shareholder's equity	$	23,783	$	22,311

(1)    Derived from audited financial statements.

See Notes to Condensed Financial Statements.

20

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Nine months ended September 30,
	2021		2020
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	603	$	633
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	659		598
Deferred income taxes and investment tax credits	133		36
Other	(1)		13
Net change in working capital components	(187)		(184)
Changes in noncurrent assets and liabilities, net	(183)		(113)
Net cash provided by operating activities	1,024		983
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	(1,560)		(1,323)
Purchases of nuclear decommissioning trust assets	(729)		(1,091)
Proceeds from sales of nuclear decommissioning trust assets	729		1,091
Other	7		8
Net cash used in investing activities	(1,553)		(1,315)
CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid	—		(200)
Issuances of debt (maturities greater than 90 days)	1,120		1,598
Payments on debt (maturities greater than 90 days) and finance leases	(606)		(252)
Decrease in short-term debt, net	—		(80)
Debt issuance costs	(8)		(11)
Net cash provided by financing activities	506		1,055
(Decrease) increase in cash and cash equivalents	(23)		723
Cash and cash equivalents, January 1	262		10
Cash and cash equivalents, September 30	$	239	$	733
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	275	$	276
Income tax payments, net of refunds	64		20
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued capital expenditures	$	217	$	184
Increase in ARO for investment in PP&E	18		—
Increase in finance lease obligations for investment in PP&E	23		26

See Notes to Condensed Financial Statements.

21

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDER’S EQUITY
(Dollars in millions)
	Common stock		Retained earnings		Accumulated other comprehensive income (loss)		Total shareholder's equity
	(unaudited)
	Three months ended September 30, 2021
Balance at June 30, 2021	$	1,660	$	6,478	$	(10)	$	8,128
Net income			205				205
Other comprehensive income					1		1
Balance at September 30, 2021	$	1,660	$	6,683	$	(9)	$	8,334
	Three months ended September 30, 2020
Balance at June 30, 2020	$	1,660	$	5,711	$	(12)	$	7,359
Net income			178				178
Balance at September 30, 2020	$	1,660	$	5,889	$	(12)	$	7,537
	Nine months ended September 30, 2021
Balance at December 31, 2020	$	1,660	$	6,080	$	(10)	$	7,730
Net income			603				603
Other comprehensive income					1		1
Balance at September 30, 2021	$	1,660	$	6,683	$	(9)	$	8,334
	Nine months ended September 30, 2020
Balance at December 31, 2019	$	1,660	$	5,456	$	(16)	$	7,100
Net income			633				633
Other comprehensive income					4		4
Common stock dividends declared ($1.72/share)			(200)				(200)
Balance at September 30, 2020	$	1,660	$	5,889	$	(12)	$	7,537

See Notes to Condensed Financial Statements.

22

SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
	(unaudited)
Operating revenues	$	1,106	$	842	$	3,738	$	3,247
Operating expenses
Cost of natural gas	240		92		736		476
Operation and maintenance	546		494		1,574		1,399
Aliso Canyon litigation and regulatory matters	1,571		27		1,571		127
Depreciation and amortization	180		165		533		486
Franchise fees and other taxes	54		48		163		142
Total operating expenses	2,591		826		4,577		2,630
Operating (loss) income	(1,485)		16		(839)		617
Other (expense) income, net	(39)		(7)		(2)		21
Interest income	—		—		—		2
Interest expense	(39)		(39)		(118)		(119)
(Loss) income before income taxes	(1,563)		(30)		(959)		521
Income tax benefit (expense)	437		6		335		(95)
Net (loss) income	(1,126)		(24)		(624)		426
Preferred dividends	—		—		(1)		(1)
(Losses) earnings attributable to common shares	$	(1,126)	$	(24)	$	(625)	$	425

See Notes to Condensed Financial Statements.

23

SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
	Pretax amount		Income tax benefit (expense)		Net-of-tax amount
	(unaudited)
	Three months ended September 30, 2021 and 2020
2021:
Net loss	$	(1,563)	$	437	$	(1,126)
Other comprehensive income (loss):
Pension and other postretirement benefits	1		—		1
Total other comprehensive income	1		—		1
Comprehensive loss	$	(1,562)	$	437	$	(1,125)
2020:
Net loss/Comprehensive loss	$	(30)	$	6	$	(24)
	Nine months ended September 30, 2021 and 2020
2021:
Net loss	$	(959)	$	335	$	(624)
Other comprehensive income (loss):
Pension and other postretirement benefits	2		—		2
Total other comprehensive income	2		—		2
Comprehensive loss	$	(957)	$	335	$	(622)
2020:
Net income	$	521	$	(95)	$	426
Other comprehensive income (loss):
Pension and other postretirement benefits	1		—		1
Total other comprehensive income	1		—		1
Comprehensive income	$	522	$	(95)	$	427

See Notes to Condensed Financial Statements.

24

SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2021		2020(1)
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	226	$	4
Accounts receivable – trade, net	462		786
Accounts receivable – other, net	86		64
Due from unconsolidated affiliates	11		22
Income taxes receivable, net	16		—
Inventories	168		153
Regulatory assets	37		16
Greenhouse gas allowances	384		390
Other current assets	62		47
Total current assets	1,452		1,482
Other assets:
Regulatory assets	1,449		1,208
Insurance receivable for Aliso Canyon costs	414		445
Greenhouse gas allowances	262		9
Right-of-use assets – operating leases	61		74
Other long-term assets	575		499
Total other assets	2,761		2,235
Property, plant and equipment:
Property, plant and equipment	22,445		21,180
Less accumulated depreciation and amortization	(6,739)		(6,437)
Property, plant and equipment, net	15,706		14,743
Total assets	$	19,919	$	18,460

(1)    Derived from audited financial statements.

See Notes to Condensed Financial Statements.

25

SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
	September 30,		December 31,
	2021		2020(1)
	(unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	—	$	113
Accounts payable – trade	488		600
Accounts payable – other	133		122
Due to unconsolidated affiliates	45		31
Accrued compensation and benefits	203		189
Regulatory liabilities	462		79
Current portion of long-term debt and finance leases	10		10
Customer deposits	15		48
Reserve for Aliso Canyon costs	1,962		150
Greenhouse gas obligations	384		390
Asset retirement obligations	58		59
Other current liabilities	310		291
Total current liabilities	4,070		2,082
Long-term debt and finance leases	4,769		4,763
Deferred credits and other liabilities:
Pension obligation, net of plan assets	784		853
Deferred income taxes	1,032		1,406
Deferred investment tax credits	7		8
Regulatory liabilities	1,067		1,177
Reserve for Aliso Canyon costs	14		301
Greenhouse gas obligations	140		—
Asset retirement obligations	2,377		2,309
Deferred credits and other	413		417
Total deferred credits and other liabilities	5,834		6,471
Commitments and contingencies (Note 11)	0		0
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)	1,666		866
Retained earnings	3,587		4,287
Accumulated other comprehensive income (loss)	(29)		(31)
Total shareholders’ equity	5,246		5,144
Total liabilities and shareholders’ equity	$	19,919	$	18,460

(1)    Derived from audited financial statements.

See Notes to Condensed Financial Statements.

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SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Nine months ended September 30,
	2021		2020
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(624)	$	426
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	533		486
Deferred income taxes and investment tax credits	(467)		(38)
Other	47		42
Reserve for Aliso Canyon costs	1,525		259
Net change in other working capital components	385		254
Insurance receivable for Aliso Canyon costs	31		(165)
Changes in other noncurrent assets and liabilities, net	(393)		124
Net cash provided by operating activities	1,037		1,388
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	(1,417)		(1,345)
Net cash used in investing activities	(1,417)		(1,345)
CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid	(75)		(50)
Preferred dividends paid	(1)		(1)
Equity contribution from Sempra Energy	800		—
Issuances of debt (maturities greater than 90 days)	—		949
Payments on finance leases	(9)		(9)
Decrease in short-term debt, net	(113)		(630)
Debt issuance costs	—		(8)
Net cash provided by financing activities	602		251
Increase in cash and cash equivalents	222		294
Cash and cash equivalents, January 1	4		10
Cash and cash equivalents, September 30	$	226	$	304
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	119	$	114
Income tax payments, net of refunds	170		1
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued capital expenditures	$	205	$	146
Increase in finance lease obligations for investment in PP&E	12		46
Common dividends declared but not paid	—		50

See Notes to Condensed Financial Statements.

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SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Dollars in millions)
	Preferred stock		Common stock		Retained earnings		Accumulated other comprehensive income (loss)		Total shareholders’ equity
	(unaudited)
	Three months ended September 30, 2021
Balance at June 30, 2021	$	22	$	866	$	4,713	$	(30)	$	5,571
Net loss					(1,126)				(1,126)
Other comprehensive income							1		1
Dividends declared:
Preferred stock ($0.38/share)					—				—
Equity contribution from Sempra Energy			800						800
Balance at September 30, 2021	$	22	$	1,666	$	3,587	$	(29)	$	5,246
	Three months ended September 30, 2020
Balance at June 30, 2020	$	22	$	866	$	4,282	$	(22)	$	5,148
Net loss					(24)				(24)
Dividends declared:
Preferred stock ($0.38/share)					—				—
Common stock ($0.55/share)					(50)				(50)
Balance at September 30, 2020	$	22	$	866	$	4,208	$	(22)	$	5,074
	Nine months ended September 30, 2021
Balance at December 31, 2020	$	22	$	866	$	4,287	$	(31)	$	5,144
Net loss					(624)				(624)
Other comprehensive income							2		2
Dividends declared:
Preferred stock ($1.13/share)					(1)				(1)
Common stock ($0.82/share)					(75)				(75)
Equity contribution from Sempra Energy			800						800
Balance at September 30, 2021	$	22	$	1,666	$	3,587	$	(29)	$	5,246
	Nine months ended September 30, 2020
Balance at December 31, 2019	$	22	$	866	$	3,883	$	(23)	$	4,748
Net income					426				426
Other comprehensive income							1		1
Dividends declared:
Preferred stock ($1.13/share)					(1)				(1)
Common stock ($1.10/share)					(100)				(100)
Balance at September 30, 2020	$	22	$	866	$	4,208	$	(22)	$	5,074

See Notes to Condensed Financial Statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. GENERAL INFORMATION AND OTHER FINANCIAL DATA

PRINCIPLES OF CONSOLIDATION

Sempra

Sempra’s Condensed Consolidated Financial Statements include the accounts of Sempra Energy, a California-based holding company doing business as Sempra, and its consolidated entities. Sempra’s business activities are organized under 5 reportable segments, which we discuss in Note 12. All references in these Notes to our reportable segments are not intended to refer to any legal entity with the same or similar name.

SDG&E

SDG&E’s common stock is wholly owned by Enova Corporation, which is a wholly owned subsidiary of Sempra.

SoCalGas

SoCalGas’ common stock is wholly owned by Pacific Enterprises, which is a wholly owned subsidiary of Sempra.

BASIS OF PRESENTATION

This is a combined report of Sempra, SDG&E and SoCalGas. We provide separate information for SDG&E and SoCalGas as required. References in this report to “we,” “our,” “us” and “Sempra” are to Sempra and its consolidated entities, collectively, unless otherwise stated or indicated by the context. We refer to SDG&E and SoCalGas collectively as the California Utilities. Sempra Infrastructure Partners (formerly Sempra Global) is the holding company for our subsidiaries that are not subject to California or Texas utility regulation. We have eliminated intercompany accounts and transactions within the consolidated financial statements of each reporting entity.

Throughout these Notes, we refer to the following as Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements when discussed together or collectively:

▪the Condensed Consolidated Financial Statements and related Notes of Sempra;

▪the Condensed Financial Statements and related Notes of SDG&E; and

▪the Condensed Financial Statements and related Notes of SoCalGas.

We have prepared our Condensed Consolidated Financial Statements in conformity with U.S. GAAP and in accordance with the interim-period-reporting requirements of Form 10-Q and applicable rules of the SEC. The financial statements reflect all adjustments that are necessary for a fair presentation of the results for the interim periods. These adjustments are only of a normal, recurring nature. Results of operations for interim periods are not necessarily indicative of results for the entire year or for any other period. We evaluated events and transactions that occurred after September 30, 2021 through the date the financial statements were issued and, in the opinion of management, the accompanying statements reflect all adjustments necessary for a fair presentation.

All December 31, 2020 balance sheet information in the Condensed Consolidated Financial Statements has been derived from our audited 2020 Consolidated Financial Statements in the Annual Report. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the interim-period-reporting provisions of U.S. GAAP and the SEC.

We describe our significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report and the impact of the adoption of new accounting standards on those policies in Note 2 below. We follow the same accounting policies for interim period reporting purposes.

You should read the information in this report in conjunction with the Annual Report.

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Discontinued Operations

In January 2019, our board of directors approved a plan to sell our South American businesses based on our strategic focus on North America. We determined that these businesses, which previously constituted the Sempra South American Utilities segment, and certain activities associated with these businesses, met the held-for-sale criteria. These businesses are presented as discontinued operations, which we discuss further in Note 5. We completed the sales of our South American businesses in the second quarter of 2020. Our discussions in the Notes below relate only to our continuing operations unless otherwise noted.

Regulated Operations

The California Utilities and Sempra Mexico’s natural gas distribution utility, Ecogas, prepare their financial statements in accordance with the provisions of U.S. GAAP governing rate-regulated operations. We discuss revenue recognition and the effects of regulation at our utilities in Notes 3 and 4 below and in Notes 1, 3 and 4 of the Notes to Consolidated Financial Statements in the Annual Report.

Our Sempra Texas Utilities segment is comprised of our equity method investments in holding companies that own interests in regulated electric transmission and distribution utilities in Texas.

Our Sempra Mexico segment includes the operating companies of our subsidiary, IEnova, as well as certain holding companies and risk management activity. Certain business activities at IEnova are regulated by the CRE and meet the regulatory accounting requirements of U.S. GAAP. Pipeline projects under construction at IEnova that meet the regulatory accounting requirements of U.S. GAAP record the impact of AFUDC related to equity. We discuss AFUDC below and in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on Sempra’s Condensed Consolidated Balance Sheets to the sum of such amounts reported on Sempra’s Condensed Consolidated Statements of Cash Flows. We provide information about the nature of restricted cash in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(Dollars in millions)
	September 30,		December 31,
	2021		2020
Cash and cash equivalents	$	873	$	960
Restricted cash, current	31		22
Restricted cash, noncurrent	3		3
Total cash, cash equivalents and restricted cash on the Condensed Consolidated Statements of Cash Flows	$	907	$	985

CREDIT LOSSES

We are exposed to credit losses from financial assets measured at amortized cost, including trade and other accounts receivable and amounts due from unconsolidated affiliates. We are also exposed to credit losses from off-balance sheet arrangements through Sempra’s guarantee related to Cameron LNG JV’s SDSRA, which we discuss in Note 6.

We regularly monitor and evaluate credit losses and record allowances for expected credit losses, if necessary, for trade and other accounts receivable using a combination of factors, including past-due status based on contractual terms, trends in write-offs, the age of the receivable, historical and industry trends, counterparty creditworthiness, economic conditions and specific events, such as bankruptcies. We write off financial assets measured at amortized cost in the period in which we determine they are not recoverable. We record recoveries of amounts previously written off when it is known that they will be recovered.

In connection with the COVID-19 pandemic, the California Utilities implemented certain measures to assist customers, including suspending service disconnections due to nonpayment for all customers (except for SoCalGas’ noncore customers), waiving late payment fees, and offering flexible payment plans. Such measures ended on June 30, 2021, except for the suspension of service disconnections that ended on September 30, 2021. At the CPUC’s direction, the California Utilities have started to automatically enroll residential and small business customers with past-due balances in long-term repayment plans. The CPUC is continuing to consider the impacts of any state or federal relief programs on customer arrearages and if further debt relief is warranted.

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As we discuss in Note 4, the CPUC authorized each of the California Utilities to track and request recovery of incremental costs, including uncollectible expenses, associated with complying with customer protection measures ordered by the CPUC related to the COVID-19 pandemic.

In connection with a separate CPUC decision addressing residential service disconnections, the California Utilities each established 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. We discuss the AMP in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.

The California Utilities have recorded increases in their allowances for expected credit losses primarily related to expected forgiveness of outstanding utility bill amounts, including increases due to the effect of the COVID-19 pandemic, for participating, income-qualified residential customers eligible under the AMP. Our businesses will continue to monitor macroeconomic factors and customer payment patterns when evaluating their allowances for credit losses, which may increase significantly due to the effects of the COVID-19 pandemic or other factors.

We provide below allowances and changes in allowances for credit losses for trade and other accounts receivable. The California Utilities record changes in the allowances for credit losses related to Accounts Receivable – Trade in regulatory accounts.

TRADE AND OTHER ACCOUNTS RECEIVABLE – ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
	2021		2020
Sempra:
Allowances for credit losses at January 1	$	138	$	29
Incremental allowance upon adoption of ASU 2016-13	—		1
Provisions for expected credit losses	96		84
Write-offs	(28)		(11)
Allowances for credit losses at September 30(1)	$	206	$	103
SDG&E:
Allowances for credit losses at January 1	$	69	$	14
Provisions for expected credit losses	30		44
Write-offs	(16)		(6)
Allowances for credit losses at September 30(2)	$	83	$	52
SoCalGas:
Allowances for credit losses at January 1	$	68	$	15
Provisions for expected credit losses	64		40
Write-offs	(12)		(5)
Allowances for credit losses at September 30(3)	$	120	$	50

(1)    At September 30, 2021, includes $146 million in Accounts Receivable – Trade, Net, $50 million in Accounts Receivable – Other, Net and $10 million in Other Long-Term Assets.

(2)    At September 30, 2021, includes $58 million in Accounts Receivable – Trade, Net, $21 million in Accounts Receivable – Other, Net and $4 million in Other Long-Term Assets.

(3)    At September 30, 2021, includes $85 million in Accounts Receivable – Trade, Net, $29 million in Accounts Receivable – Other, Net and $6 million in Other Long-Term Assets.

For amounts due from unconsolidated affiliates, on a quarterly basis, we evaluate credit losses and record allowances for expected credit losses, if necessary, based on credit quality indicators such as external credit ratings, published default rate studies, the maturity date of the instrument and past delinquencies. However, we do not record allowances for expected credit losses related to accrued interest receivable on loans due from unconsolidated affiliates because we write off such amounts, if any, through a reversal of interest income in the period we determine such amounts are uncollectible. In the absence of external credit ratings, we may utilize an internally developed credit rating based on our analysis of a counterparty’s financial statements to determine our expected credit losses.

As we discuss below in “Transactions with Affiliates,” Sempra has loans due from unconsolidated affiliates with varying tenors, interest rates and currencies. We provide below the allowances and changes in allowances for credit losses for loans and other amounts due from unconsolidated affiliates.

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AMOUNTS DUE FROM UNCONSOLIDATED AFFILIATES – ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
	2021		2020
Sempra:
Allowances for credit losses at January 1	$	3	$	—
Allowance established upon adoption of ASU 2016-13	—		6
Reductions to expected credit losses	(2)		(3)
Allowances for credit losses at September 30(1)	$	1	$	3

(1)    At September 30, 2021, $1 million is included in Due from Unconsolidated Affiliates – Noncurrent.

As we discuss in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report, Sempra previously provided guarantees for the benefit of Cameron LNG JV related to its construction-period debt obligations for a maximum aggregate amount of $4.0 billion. In March 2021, Cameron LNG JV reached financial completion of the three-train liquefaction project, which terminated the guarantees. There are no longer any expected credit losses related to these terminated guarantees.

As we discuss below in Note 6, Sempra provided a guarantee for the benefit of Cameron LNG JV related to amounts withdrawn by Sempra LNG from the SDSRA. At September 30, 2021, expected credit losses of $7 million related to this guarantee are included in Deferred Credits and Other on Sempra’s Condensed Consolidated Balance Sheet.

INVENTORIES

The components of inventories are as follows:

INVENTORY BALANCES
(Dollars in millions)
	Natural gas				LNG				Materials and supplies				Total
	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Sempra	$	169	$	118	$	17	$	7	$	185	$	183	$	371	$	308
SDG&E	—		—		—		—		112		104		112		104
SoCalGas	110		94		—		—		58		59		168		153

WILDFIRE FUND

In July 2019, the Wildfire Legislation was signed into law to address certain issues related to catastrophic wildfires in the State of California and their impact on electric IOUs. We discuss the Wildfire Legislation further in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

In July 2021, the CPUC approved SDG&E’s 2021 Wildfire Mitigation Plan Update. In July 2021, the CPUC’s Wildfire Safety Division became the Office of Energy Infrastructure Safety (OEIS) under the California Natural Resources Agency. As successor to the Wildfire Safety Division, OEIS maintains the duties and responsibilities of the former Wildfire Safety Division with respect to Wildfire Mitigation Plans.

SDG&E submitted its request to OEIS for a 2021 wildfire safety certification in September 2021. OEIS has until December 7, 2021 to issue the certification or provide written notice explaining why additional time is needed. SDG&E’s existing safety certification remains valid until this pending request is resolved.

In a complaint filed in U.S. District Court for the Northern District of California in July 2019, plaintiffs seek to invalidate AB 1054 based on allegations that the legislation violates federal law. The district court dismissed the complaint and the plaintiffs have petitioned the U.S. Court of Appeals for the Ninth Circuit for review.

CAPITALIZED FINANCING COSTS

Capitalized financing costs include capitalized interest costs and AFUDC related to both debt and equity financing of construction projects. We capitalize interest costs incurred to finance capital projects and interest at equity method investments that have not commenced planned principal operations.

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The table below summarizes capitalized interest and AFUDC.

CAPITALIZED FINANCING COSTS
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Sempra	$	52	$	51	$	166	$	149
SDG&E	24		26		82		79
SoCalGas	18		14		49		39

OTHER INTANGIBLE ASSETS

Other Intangible Assets included on Sempra’s Condensed Consolidated Balance Sheets are as follows:

OTHER INTANGIBLE ASSETS
(Dollars in millions)
	Amortization period (years)	September 30, 2021		December 31, 2020
Renewable energy transmission and consumption permits	15 to 19	$	169	$	169
O&M agreement	23	66		66
PPA	14	190		—
Other	10 to indefinite	15		15
		440		250
Less accumulated amortization:
Renewable energy transmission and consumption permits		(38)		(32)
O&M agreement		(11)		(9)
PPA		(7)		—
Other		(8)		(7)
		(64)		(48)
		$	376	$	202

Other Intangible Assets at September 30, 2021 primarily include:

▪renewable energy transmission and consumption permits previously granted by the CRE at the Ventika wind power generation facilities, Don Diego Solar and Border Solar;

▪a favorable O&M agreement acquired in connection with the acquisition of Ductos y Energéticos del Norte, S. de R.L. de C.V.; and

▪an intangible asset of $190 million, representing the relative fair value of the PPA that was acquired in connection with the acquisition of ESJ in March 2021.

Intangible assets subject to amortization are amortized over their estimated useful lives. Amortization expense for intangible assets was $6 million, including $4 million recorded against revenues, and $3 million in the three months ended September 30, 2021 and 2020, respectively, and $16 million, including $7 million recorded against revenues, and $8 million in the nine months ended September 30, 2021 and 2020, respectively. We estimate the remaining amortization expense in 2021 to be $7 million, including $3 million recorded against revenues, and amortization expense of $26 million per year for the next four years, including $13 million recorded against revenues.

VARIABLE INTEREST ENTITIES

We consolidate a VIE if we are the primary beneficiary of the VIE. Our determination of whether we are the primary beneficiary is based on qualitative and quantitative analyses, which assess:

▪the purpose and design of the VIE;

▪the nature of the VIE’s risks and the risks we absorb;

▪the power to direct activities that most significantly impact the economic performance of the VIE; and

▪the obligation to absorb losses or the right to receive benefits that could be significant to the VIE.

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We will continue to evaluate our VIEs for any changes that may impact our determination of whether an entity is a VIE and if we are the primary beneficiary.

SDG&E

SDG&E’s power procurement is subject to reliability requirements that may require SDG&E to enter into various PPAs that include variable interests. SDG&E evaluates the respective entities to determine if variable interests exist and, based on the qualitative and quantitative analyses described above, if SDG&E, and indirectly Sempra, is the primary beneficiary.

SDG&E has agreements under which it purchases power generated by facilities for which it supplies all of the natural gas to fuel the power plant (i.e., tolling agreements). SDG&E’s obligation to absorb natural gas costs may be a significant variable interest. In addition, SDG&E has the power to direct the dispatch of electricity generated by these facilities. Based on our analysis, the ability to direct the dispatch of electricity may have the most significant impact on the economic performance of the entity owning the generating facility because of the associated exposure to the cost of natural gas, which fuels the plants, and the value of electricity produced. To the extent that SDG&E (1) is obligated to purchase and provide fuel to operate the facility, (2) has the power to direct the dispatch, and (3) purchases all of the output from the facility for a substantial portion of the facility’s useful life, SDG&E may be the primary beneficiary of the entity owning the generating facility. SDG&E determines if it is the primary beneficiary in these cases based on a qualitative approach in which it considers the operational characteristics of the facility, including its expected power generation output relative to its capacity to generate and the financial structure of the entity, among other factors. If SDG&E determines that it is the primary beneficiary, SDG&E and Sempra consolidate the entity that owns the facility as a VIE.

In addition to tolling agreements, other variable interests involve various elements of fuel and power costs, and other components of cash flows expected to be paid to or received by our counterparties. In most of these cases, the expectation of variability is not substantial, and SDG&E generally does not have the power to direct activities, including the operation and maintenance activities of the generating facility, that most significantly impact the economic performance of the other VIEs. If our ongoing evaluation of these VIEs were to conclude that SDG&E becomes the primary beneficiary and consolidation by SDG&E becomes necessary, the effects could be significant to the financial position and liquidity of SDG&E and Sempra.

SDG&E determined that none of its PPAs and tolling agreements resulted in SDG&E being the primary beneficiary of a VIE at September 30, 2021 and December 31, 2020. PPAs and tolling agreements that relate to SDG&E’s involvement with VIEs are primarily accounted for as finance leases. The carrying amounts of the assets and liabilities under these contracts are included in PP&E, net, and finance lease liabilities with balances of $1,223 million and $1,237 million at September 30, 2021 and December 31, 2020, respectively. SDG&E recovers costs incurred on PPAs, tolling agreements and other variable interests through CPUC-approved long-term power procurement plans. SDG&E has no residual interest in the respective entities and has not provided or guaranteed any debt or equity support, liquidity arrangements, performance guarantees or other commitments associated with these contracts other than the purchase commitments described in Note 16 of the Notes to Consolidated Financial Statements in the Annual Report. As a result, SDG&E’s potential exposure to loss from its variable interest in these VIEs is not significant.

Sempra Texas Utilities

Our 100% interest in Oncor Holdings is a VIE that owns an 80.25% interest in Oncor. Sempra is not the primary beneficiary of this VIE because of the structural and operational ring-fencing and governance measures in place that prevent us from having the power to direct the significant activities of Oncor Holdings. As a result, we do not consolidate Oncor Holdings and instead account for our ownership interest as an equity method investment. See Note 6 of the Notes to Consolidated Financial Statements in the Annual Report for additional information about our equity method investment in Oncor Holdings and restrictions on our ability to influence its activities. Our maximum exposure to loss, which fluctuates over time, from our interest in Oncor Holdings does not exceed the carrying value of our investment, which was $12,475 million at September 30, 2021 and $12,440 million at December 31, 2020.

Sempra LNG

Cameron LNG JV

Cameron LNG JV is a VIE principally due to contractual provisions that transfer certain risks to customers. Sempra is not the primary beneficiary of this VIE because we do not have the power to direct the most significant activities of Cameron LNG JV, including LNG production and operation and maintenance activities at the liquefaction facility. Therefore, we account for our investment in Cameron LNG JV under the equity method. The carrying value of our investment, including amounts recognized in AOCI related to interest-rate cash flow hedges at Cameron LNG JV, was $454 million at September 30, 2021 and $433 million at

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December 31, 2020. Our maximum exposure to loss, which fluctuates over time, includes the carrying value of our investment and our obligation under the SDSRA, which we discuss in Note 6.

CFIN

As we discuss in Note 6, in July 2020, Sempra entered into a Support Agreement, which was amended in June 2021, for the benefit of CFIN, which is a VIE. Sempra is not the primary beneficiary of this VIE because we do not have the power to direct the most significant activities of CFIN, including modification, prepayment, and refinance decisions related to the financing arrangement with external lenders and Cameron LNG JV’s four project owners as well as the ability to determine and enforce remedies in the event of default. The conditional obligations of the Support Agreement represent a variable interest that we measure at fair value on a recurring basis (see Note 9). Sempra’s maximum exposure to loss under the terms of the Support Agreement is $979 million.

ECA LNG Phase 1

ECA LNG Phase 1 is a VIE because its total equity at risk is not sufficient to finance its activities without additional subordinated financial support. We expect that ECA LNG Phase 1 will require future capital contributions or other financial support to finance the construction of the facility. Sempra is the primary beneficiary of this VIE because we have the power to direct the development activities related to the construction of the liquefaction facility, which we consider to be the most significant activities of ECA LNG Phase 1 during the construction phase of its natural gas liquefaction export project. As a result, we consolidate ECA LNG Phase 1. Sempra LNG consolidated $522 million and $207 million of assets at September 30, 2021 and December 31, 2020, respectively, consisting primarily of PP&E, net, attributable to ECA LNG Phase 1 that could be used only to settle obligations of this VIE and that are not available to settle obligations of Sempra, and $367 million and $49 million of liabilities at September 30, 2021 and December 31, 2020, respectively, consisting primarily of long-term debt and accounts payable attributable to ECA LNG Phase 1 for which creditors do not have recourse to the general credit of Sempra. Additionally, as we discuss in Note 7 of the Notes to Consolidated Financial Statements in the Annual Report, Sempra, IEnova and TOTAL SE have provided guarantees for the loan facility supporting construction of the liquefaction facility based on their respective proportionate ownership interest in ECA LNG Phase 1.

PENSION AND OTHER POSTRETIREMENT BENEFITS

Settlement Accounting for Lump Sum Payments

Sempra recorded settlement charges of $7 million in the nine months ended September 30, 2021 and $13 million and $22 million in the three months and nine months ended September 30, 2020, respectively, in net periodic benefit cost for lump sum payments from its nonqualified pension plan that were in excess of the plan’s service cost plus interest cost.

Net Periodic Benefit Cost

The following three tables provide the components of net periodic benefit cost.

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NET PERIODIC BENEFIT COST – SEMPRA
(Dollars in millions)
	Pension benefits				Other postretirement benefits
	Three months ended September 30,
	2021		2020		2021		2020
Service cost	$	36	$	31	$	6	$	5
Interest cost	28		32		7		8
Expected return on assets	(44)		(41)		(14)		(14)
Amortization of:
Prior service cost (credit)	3		3		(1)		(1)
Actuarial loss (gain)	12		9		(3)		(2)
Settlement charges	—		13		—		—
Net periodic benefit cost (credit)	35		47		(5)		(4)
Regulatory adjustments	73		37		5		4
Total expense recognized	$	108	$	84	$	—	$	—
	Nine months ended September 30,
	2021		2020		2021		2020
Service cost	$	109	$	97	$	17	$	14
Interest cost	84		97		21		24
Expected return on assets	(130)		(126)		(44)		(41)
Amortization of:
Prior service cost (credit)	8		9		(2)		(2)
Actuarial loss (gain)	34		26		(7)		(7)
Settlement charges	7		22		—		—
Net periodic benefit cost (credit)	112		125		(15)		(12)
Regulatory adjustments	66		31		15		12
Total expense recognized	$	178	$	156	$	—	$	—

NET PERIODIC BENEFIT COST – SDG&E
(Dollars in millions)
	Pension benefits				Other postretirement benefits
	Three months ended September 30,
	2021		2020		2021		2020
Service cost	$	9	$	7	$	2	$	1
Interest cost	6		7		1		2
Expected return on assets	(11)		(12)		(2)		(3)
Amortization of:
Prior service cost	—		1		—		—
Actuarial loss (gain)	1		1		(1)		(1)
Net periodic benefit cost (credit)	5		4		—		(1)
Regulatory adjustments	21		22		—		1
Total expense recognized	$	26	$	26	$	—	$	—
	Nine months ended September 30,
	2021		2020		2021		2020
Service cost	$	26	$	23	$	4	$	3
Interest cost	18		22		4		5
Expected return on assets	(36)		(37)		(7)		(8)
Amortization of:
Prior service cost	—		2		—		—
Actuarial loss (gain)	2		3		(2)		(2)
Net periodic benefit cost (credit)	10		13		(1)		(2)
Regulatory adjustments	30		28		1		2
Total expense recognized	$	40	$	41	$	—	$	—

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NET PERIODIC BENEFIT COST – SOCALGAS
(Dollars in millions)
	Pension benefits				Other postretirement benefits
	Three months ended September 30,
	2021		2020		2021		2020
Service cost	$	23	$	20	$	5	$	3
Interest cost	19		22		5		7
Expected return on assets	(27)		(27)		(12)		(11)
Amortization of:
Prior service cost (credit)	2		2		(1)		(1)
Actuarial loss (gain)	8		6		(2)		(1)
Net periodic benefit cost (credit)	25		23		(5)		(3)
Regulatory adjustments	52		15		5		3
Total expense recognized	$	77	$	38	$	—	$	—
	Nine months ended September 30,
	2021		2020		2021		2020
Service cost	$	73	$	64	$	13	$	10
Interest cost	59		66		16		19
Expected return on assets	(85)		(81)		(36)		(32)
Amortization of:
Prior service cost (credit)	6		6		(2)		(2)
Actuarial loss (gain)	27		19		(5)		(5)
Net periodic benefit cost (credit)	80		74		(14)		(10)
Regulatory adjustments	36		3		14		10
Total expense recognized	$	116	$	77	$	—	$	—

RABBI TRUST

In support of its Supplemental Executive Retirement, Cash Balance Restoration and Deferred Compensation Plans, Sempra maintains dedicated assets, including a Rabbi Trust and investments in life insurance contracts, which totaled $539 million and $512 million at September 30, 2021 and December 31, 2020, respectively.

SEMPRA EARNINGS PER COMMON SHARE

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

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EARNINGS PER COMMON SHARE COMPUTATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Numerator for continuing operations:
(Loss) income from continuing operations, net of income tax	$	(632)	$	428	$	751	$	1,823
Earnings attributable to noncontrolling interests	(5)		(22)		(48)		(191)
Preferred dividends	(11)		(48)		(52)		(121)
Preferred dividends of subsidiary	—		—		(1)		(1)
(Losses) earnings from continuing operations attributable to common shares	$	(648)	$	358	$	650	$	1,510
Numerator for discontinued operations:
(Loss) income from discontinued operations, net of income tax	$	—	$	(7)	$	—	$	1,850
Earnings attributable to noncontrolling interests	—		—		—		(10)
(Losses) earnings from discontinued operations attributable to common shares	$	—	$	(7)	$	—	$	1,840
Numerator for (losses) earnings:
(Losses) earnings attributable to common shares	$	(648)	$	351	$	650	$	3,350
Denominator:
Weighted-average common shares outstanding for basic EPS(1)	319,144		289,490		309,350		291,771
Dilutive effect of stock options and RSUs(2)(3)	—		1,092		797		1,164
Dilutive effect of mandatory convertible preferred stock	—		—		707		—
Weighted-average common shares outstanding for diluted EPS	319,144		290,582		310,854		292,935
Basic EPS:
(Losses) earnings from continuing operations	$	(2.03)	$	1.23	$	2.10	$	5.17
(Losses) earnings from discontinued operations	$	—	$	(0.02)	$	—	$	6.31
(Losses) earnings	$	(2.03)	$	1.21	$	2.10	$	11.48
Diluted EPS:
(Losses) earnings from continuing operations	$	(2.03)	$	1.23	$	2.09	$	5.15
(Losses) earnings from discontinued operations	$	—	$	(0.02)	$	—	$	6.28
(Losses) earnings	$	(2.03)	$	1.21	$	2.09	$	11.43

(1)    Includes 451 and 535 fully vested RSUs held in our Deferred Compensation Plan for the three months ended September 30, 2021 and 2020, respectively, and 453 and 536 of such RSUs for the nine months ended September 30, 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.

(2)    In the three months ended September 30, 2021, the total weighted-average number of potentially dilutive stock options and RSUs was 699. However, these securities were not included in the computation of EPS because to do so would have decreased losses per share.

(3)    Due to market fluctuations of both Sempra 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 and nine months ended September 30, 2021 excludes 147,840 and 240,654 potentially dilutive shares, respectively, because to include them would be antidilutive for the period. The computation of diluted EPS for the three months and nine months ended September 30, 2020 excludes 142,100 and 204,426 potentially dilutive shares, respectively, of such potentially dilutive shares. However, these shares could potentially dilute basic EPS in the future.

The potentially dilutive impact from mandatory convertible preferred stock is calculated under the if-converted 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

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series A preferred stock into common stock on January 15, 2021 and our series B preferred stock into common stock on July 15, 2021. The computation of diluted EPS for the three months and nine months ended September 30, 2021 excludes 639,733 and 3,037,812 potentially dilutive shares, respectively. The computation of diluted EPS for both the three months and nine months ended September 30, 2020 excludes 19,292,641 potentially dilutive shares.

Pursuant to Sempra’s share-based compensation plans, the Compensation and Talent Committee of Sempra’s board of directors granted 222,620 nonqualified stock options, 323,889 performance-based RSUs and 143,980 service-based RSUs in the nine months ended September 30, 2021, primarily in January.

We discuss share-based compensation plans and related awards and the terms and conditions of Sempra’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 September 30, 2021 and 2020
Sempra:
Balance at June 30, 2021	$	(88)	$	(265)	$	(91)	$	(444)
OCI before reclassifications	—		15		(8)		7
Amounts reclassified from AOCI	—		16		3		19
Net OCI(2)	—		31		(5)		26
Balance at September 30, 2021	$	(88)	$	(234)	$	(96)	$	(418)
Balance at June 30, 2020	$	(83)	$	(361)	$	(98)	$	(542)
OCI before reclassifications	6		14		(7)		13
Amounts reclassified from AOCI	—		4		12		16
Net OCI(2)	6		18		5		29
Balance at September 30, 2020	$	(77)	$	(343)	$	(93)	$	(513)
SDG&E:
Balance at June 30, 2021					$	(10)	$	(10)
Amounts reclassified from AOCI					1		1
Net OCI					1		1
Balance at September 30, 2021					$	(9)	$	(9)
Balance as of June 30, 2020 and September 30, 2020					$	(12)	$	(12)
SoCalGas:
Balance at June 30, 2021			$	(13)	$	(17)	$	(30)
Amounts reclassified from AOCI			—		1		1
Net OCI			—		1		1
Balance at September 30, 2021			$	(13)	$	(16)	$	(29)
Balance as of June 30, 2020 and September 30, 2020			$	(13)	$	(9)	$	(22)

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

(2)    Total AOCI includes $(4) million and $3 million of foreign currency translation adjustments and $(2) million and $2 million of financial instruments associated with the IEnova cash tender offer in 2021 and purchases of NCI in 2020, respectively, which we discuss below in “Other Noncontrolling Interests – Sempra Mexico,” and which do not impact the Condensed Consolidated Statement of Comprehensive Income (Loss).

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1) (CONTINUED)
(Dollars in millions)
	Foreign currency translation adjustments		Financial instruments		Pension and other postretirement benefits		Total accumulated other comprehensive income (loss)
	Nine months ended September 30, 2021 and 2020
Sempra(2):
Balance as of December 31, 2020	$	(64)	$	(331)	$	(105)	$	(500)
OCI before reclassifications	(24)		52		(3)		25
Amounts reclassified from AOCI	—		45		12		57
Net OCI(3)	(24)		97		9		82
Balance as of September 30, 2021	$	(88)	$	(234)	$	(96)	$	(418)
Balance as of December 31, 2019	$	(607)	$	(215)	$	(117)	$	(939)
OCI before reclassifications(4)	(115)		(153)		(5)		(273)
Amounts reclassified from AOCI(4)	645		25		29		699
Net OCI(3)	530		(128)		24		426
Balance as of September 30, 2020	$	(77)	$	(343)	$	(93)	$	(513)
SDG&E:
Balance as of December 31, 2020					$	(10)	$	(10)
Amounts reclassified from AOCI					1		1
Net OCI					1		1
Balance at September 30, 2021					$	(9)	$	(9)
Balance as of December 31, 2019					$	(16)	$	(16)
Amounts reclassified from AOCI(4)					4		4
Net OCI					4		4
Balance as of September 30, 2020					$	(12)	$	(12)
SoCalGas:
Balance as of December 31, 2020			$	(13)	$	(18)	$	(31)
Amounts reclassified from AOCI			—		2		2
Net OCI			—		2		2
Balance as of September 30, 2021			$	(13)	$	(16)	$	(29)
Balance as of December 31, 2019			$	(13)	$	(10)	$	(23)
Amounts reclassified from AOCI			—		1		1
Net OCI			—		1		1
Balance as of September 30, 2020			$	(13)	$	(9)	$	(22)

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

(2)    Includes discontinued operations in 2020.

(3)    Total AOCI includes $20 million and $3 million of foreign currency translation adjustments and $12 million and $2 million of financial instruments associated with the IEnova exchange and cash tender offers in 2021 and purchases of NCI in 2020, respectively, which we discuss below in “Other Noncontrolling Interests – Sempra Mexico,” and which do not impact the Condensed Consolidated Statement of Comprehensive Income (Loss).

(4)    Pension and Other Postretirement Benefits and Total AOCI include $3 million in transfers of liabilities from SDG&E to Sempra in 2020 related to the nonqualified pension plans.

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RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
Details about accumulated other comprehensive income (loss) components	Amounts reclassified from accumulated other comprehensive income (loss)				Affected line item on Condensed Consolidated Statements of Operations
	Three months ended September 30,
	2021		2020
Sempra:
Financial instruments:
Interest rate instruments	$	(1)	$	3	Interest Expense
Interest rate instruments	19		5		Equity Earnings(1)
Interest rate and foreign exchange instruments	5		(4)		Other (Expense) Income, Net
Total before income tax	23		4
	(7)		—		Income Tax Benefit (Expense)
Net of income tax	$	16	$	4
Pension and other postretirement benefits(2):
Amortization of actuarial loss	$	3	$	3	Other (Expense) Income, Net
Amortization of prior service cost	1		1		Other (Expense) Income, Net
Settlement charges	—		13		Other (Expense) Income, Net
Total before income tax	4		17
	(1)		(5)		Income Tax Benefit (Expense)
Net of income tax	$	3	$	12
Total reclassifications for the period, net of tax	$	19	$	16
SDG&E:
Pension and other postretirement benefits(2):
Amortization of prior service cost	$	1	$	—	Other Income (Expense), Net
Total reclassifications for the period, net of tax	$	1	$	—
SoCalGas:
Pension and other postretirement benefits(2):
Amortization of actuarial loss	$	1	$	—	Other (Expense) Income, Net
Total reclassifications for the period, net of tax	$	1	$	—

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

(2)    Amounts are included in the computation of net periodic benefit cost (see “Pension and Other Postretirement Benefits” above).

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RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (CONTINUED)
(Dollars in millions)
Details about accumulated other comprehensive income (loss) components	Amounts reclassified from accumulated other comprehensive income (loss)				Affected line item on Condensed Consolidated Statements of Operations
	Nine months ended September 30,
	2021		2020
Sempra:
Foreign currency translation adjustments	$	—	$	645	(Loss) Income from Discontinued Operations, Net of Income Tax
Financial instruments:
Interest rate instruments	$	—	$	6	Interest Expense
Interest rate instruments	57		8		Equity Earnings(1)
Foreign exchange instruments	1		(2)		Revenues: Energy-Related Businesses
	—		(1)		Other (Expense) Income, Net
Foreign exchange instruments	1		(2)		Equity Earnings(1)
Interest rate and foreign exchange instruments	—		1		Interest Expense
	4		33		Other (Expense) Income, Net
Total before income tax	63		43
	(16)		(12)		Income Tax Benefit (Expense)
Net of income tax	47		31
	(2)		(6)		Earnings Attributable to Noncontrolling Interests
	$	45	$	25
Pension and other postretirement benefits(2):
Amortization of actuarial loss	$	6	$	6	Other (Expense) Income, Net
Amortization of actuarial loss	—		6		(Loss) Income from Discontinued Operations, Net of Income Tax
Amortization of prior service cost	3		3		Other (Expense) Income, Net
Settlement charges	7		22		Other (Expense) Income, Net
Total before income tax	16		37
	—		(2)		(Loss) Income from Discontinued Operations, Net of Income Tax
	(4)		(9)		Income Tax Benefit (Expense)
Net of income tax	$	12	$	26
Total reclassifications for the period, net of tax	$	57	$	696
SDG&E:
Pension and other postretirement benefits(2):
Amortization of prior service cost	$	1	$	1	Other Income (Expense), Net
Total reclassifications for the period, net of tax	$	1	$	1
SoCalGas:
Pension and other postretirement benefits(2):
Amortization of actuarial loss	$	1	$	—	Other (Expense) Income, Net
Amortization of prior service cost	1		1		Other (Expense) Income, Net
Total reclassifications for the period, net of tax	$	2	$	1

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

(2)    Amounts are included in the computation of net periodic benefit cost (see “Pension and Other Postretirement Benefits” above).

SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS

Sempra Series A Preferred Stock

On January 15, 2021, we converted 17,250,000 shares of series A preferred stock into 13,781,025 shares of our common stock based on a conversion rate of 0.7989 shares of our common stock for each issued and outstanding share of series A preferred

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stock. As a consequence, no shares of series A preferred stock were outstanding after January 15, 2021 and the 17,250,000 shares that were formerly series A preferred stock have returned to the status of authorized and unissued shares of preferred stock.

Sempra Series B Preferred Stock

The terms of our series B preferred stock require a notice to holders when the aggregate adjustment to the conversion rates at which shares of series B preferred stock are convertible into shares of Sempra common stock is more than 1%. On July 7, 2021, we notified the holders of the series B preferred stock of such an adjustment. These adjustments, which resulted from the incremental impact of our second quarter dividend declared on our common stock and which became effective as of July 6, 2021, the ex-dividend date for such dividend, included adjustments to the minimum and maximum conversion rates and the related initial and threshold appreciation prices.

As of July 15, 2021, we had converted, pursuant to either early conversions at the election of the holder or the mandatory conversion of all outstanding shares, all 5,750,000 shares of series B preferred stock into an aggregate of 4,256,720 shares of our common stock and a nominal amount of cash in lieu of fractional share interests, based on a conversion rate of 0.7403 shares of our common stock for each issued and outstanding share of series B preferred stock. As a consequence, no shares of series B preferred stock were outstanding after July 15, 2021 and the 5,750,000 shares that were formerly series B preferred stock have returned to the status of authorized and unissued shares of preferred stock.

Sempra Series C Preferred Stock

On June 19, 2020, we issued 900,000 shares of our 4.875% fixed-rate reset cumulative redeemable perpetual preferred stock, series C (series C preferred stock) in a registered public offering at a price to the public of $1,000 per share and received net proceeds of $889 million after deducting the underwriting discount and equity issuance costs of $11 million. We used the net proceeds for working capital and other general corporate purposes, including the repayment of indebtedness.

Sempra Common Stock Repurchases

On September 11, 2007, our board of directors authorized the repurchase of shares of our common stock, provided that the amounts spent for such purpose do not exceed the greater of $2 billion or amounts spent to purchase no more than 40,000,000 shares. On July 1, 2020, we entered into an ASR program under which we prepaid $500 million to repurchase shares of our common stock in a share forward transaction. The total number of shares purchased was determined by dividing the $500 million purchase price by the arithmetic average of the volume-weighted average trading prices of shares of our common stock during the valuation period of July 2, 2020 through August 4, 2020, minus a fixed discount. The program was completed on August 4, 2020 with an aggregate of 4,089,375 shares of Sempra common stock repurchased at an average price of $122.27 per share. Following the completion of the ASR program, the aggregate dollar amount authorized by the September 11, 2007 share repurchase authorization was exhausted.

On July 6, 2020, our board of directors authorized the repurchase of shares of our common stock at any time and from time to time in an aggregate amount not to exceed the lesser of $2 billion or amounts spent to purchase no more than 25 million shares. No shares have been repurchased under this authorization.

Other Noncontrolling Interests

The following table provides information about NCI held by others in subsidiaries or entities consolidated by us and recorded in Other Noncontrolling Interests in Total Equity on Sempra’s Condensed Consolidated Balance Sheets.

OTHER NONCONTROLLING INTERESTS
(Dollars in millions)
	Percent ownership held by noncontrolling interests				Equity held by noncontrolling interests
	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Sempra Mexico:
IEnova	0.1	%	29.8	%	$	2	$	1,487
ICM Ventures Holdings B.V.	—		17.5		—		7
Sempra LNG:
ECA LNG Phase 1	16.6		29.0		28		46
Parent and other:
PXiSE	20.0		20.0		—		1
Total Sempra					$	30	$	1,541

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Sempra Mexico

In May 2021, we acquired 381,015,194 publicly owned shares of IEnova in exchange for 12,306,777 newly issued shares of our common stock upon completion of our exchange offer launched in the U.S. and Mexico. In addition to being traded on the New York Stock Exchange, Sempra’s common stock is now also listed on the Mexican Stock Exchange under the ticker symbol SRE.MX. We acquired the IEnova shares at an exchange ratio of 0.0323 shares of our common stock for each one IEnova ordinary share. In connection with the exchange offer, we recorded an increase in Sempra’s shareholders’ equity of $1,361 million, net of $12 million in transactions costs, and increased our ownership interest in IEnova from 70.2% to 96.4%.

In September 2021, we acquired 51,014,545 publicly owned shares of IEnova for 4.0 billion Mexican pesos (approximately $202 million in U.S. dollars) in cash upon completion of our tender offer launched in the U.S. and Mexico in August 2021, which increased our ownership interest in IEnova from 96.4% to 99.9%. We acquired these IEnova shares at a price of 78.97 Mexican pesos per share (approximately $3.95 per share in U.S. dollars). Following the cash tender offer, we recorded a decrease in Sempra’s shareholders’ equity of $14 million, including $1 million in transaction costs. IEnova’s shares were delisted from the Mexican Stock Exchange effective October 15, 2021. In connection with the delisting, we are maintaining a trust for the purpose of purchasing the 1,212,981 remaining publicly owned IEnova shares for 78.97 Mexican pesos per share, the same price per share that was offered in our cash tender offer. The trust will be in place through the earlier of April 14, 2022 or the date on which we acquire all the remaining publicly owned IEnova shares.

As a result of the increase in our ownership interest in IEnova, we recorded an increase in Sempra’s shareholders’ equity of $84 million offset by a deferred income tax asset related to the outside basis difference in IEnova’s shares. Upon completing the sale of a 20% equity interest in Sempra Infrastructure Partners in October 2021, which we discuss below, we recorded $72 million in net income tax expense related to the utilization of this deferred income tax asset, net of the income tax effect reclassified from AOCI to earnings.

In the nine months ended September 30, 2020, IEnova repurchased 57,547,381 shares of its outstanding common stock held by NCI for $167 million, resulting in an increase in Sempra’s ownership interest in IEnova from 66.6% at December 31, 2019 to 69.2% at September 30, 2020.

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 a terminal for the receipt, storage and delivery of liquid fuels. In July 2021, IEnova acquired the remaining 17.5% interest held by NCI in ICM Ventures Holdings B.V. for $7 million.

Sempra LNG

In March 2020, Sempra LNG purchased for $7 million the 24.6% minority interest in Liberty Gas Storage LLC, which owns 100% of LA Storage, LLC, increasing Sempra LNG’s ownership in Liberty Gas Storage LLC to 100%. Prior to the purchase, the minority partner converted $22 million in notes payable due from Sempra LNG to equity. As a result of the purchase, we recorded an increase in Sempra’s shareholders’ equity of $2 million for the difference between the carrying value and fair value related to the change in ownership.

Sempra Infrastructure Partners

Sale of NCI. On October 1, 2021, Sempra, its wholly owned subsidiary, Sempra Infrastructure Partners (formerly Sempra Global), and KKR consummated the transactions contemplated under a purchase and contribution agreement dated April 4, 2021 (as amended on September 27, 2021 to reflect immaterial revisions prior to closing, the Purchase Agreement). Pursuant to the Purchase Agreement, KKR acquired for a purchase price of $3.37 billion, which remains subject to post-closing adjustments, newly designated Class A Units representing 20% of the equity interests of Sempra Infrastructure Partners. Prior to closing the transaction, we completed an internal legal reorganization to consolidate the assets of Sempra LNG and our ownership of IEnova under Sempra Global, which was renamed Sempra Infrastructure Partners. On October 1, 2021, Sempra Infrastructure Partners paid $149 million to KKR for reimbursement of certain expenses that KKR incurred in connection with closing the transaction. As of September 30, 2021, the composition of our reportable segments did not change.

At the closing of the transactions contemplated under the Purchase Agreement on October 1, 2021, we owned 99.9% of the outstanding ordinary shares of IEnova. Under the terms of the Purchase Agreement, the base purchase price was adjusted downward at closing by $1 million based on the number of IEnova ordinary shares we did not own at the closing. If we later acquire additional shares of IEnova after the closing, such additional shares will be acquired by Sempra Infrastructure Partners and KKR will provide 20% of the funding.

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We estimate that Sempra Infrastructure Partners had approximately $8.37 billion of direct and indirect net debt at the closing, and there will be a customary upward or downward adjustment to the purchase price to the extent the actual net debt at closing was greater or less than such estimated amount. Direct and indirect net debt at Sempra Infrastructure Partners includes consolidated long-term and short-term debt less cash at Sempra LNG and IEnova plus their proportionate ownership share of equity method investees’ long-term and short-term debt less cash.

Pursuant to the Purchase Agreement, we have agreed to indemnify Sempra Infrastructure Partners for, among other things, certain losses arising from liabilities of Sempra Infrastructure Partners and its subsidiaries to the extent not primarily relating to the undertaking of the business of Sempra Infrastructure Partners, and we have agreed to indemnify KKR for losses attributable to pre-closing taxes.

We have also entered into an accommodation and support agreement under which KKR has the ability to borrow from Sempra up to $300 million plus reimbursement of certain fees related to such borrowing, which we fully funded on November 1, 2021. This loan is due to be repaid in full no later than October 1, 2029 and bears compound interest at 5% per annum.

Limited Partnership Agreement. At the closing of the sale of NCI in Sempra Infrastructure Partners, Sempra and KKR entered into a limited partnership agreement (the LP Agreement), which governs our and their respective rights and obligations in respect of our ownership of Sempra Infrastructure Partners. We maintain control of Sempra Infrastructure Partners as the 80% owner with KKR having certain minority protections commensurate with the size of its investment.

Sempra Infrastructure Partners has 2 authorized classes of units, designated as “Class A Units” (which are common voting units) and “Sole Risk Interests.” If KKR approves our request that a project not be pursued jointly, or if KKR decides not to participate in any proposed project for which we nevertheless desire to make a positive final investment decision, we will be permitted to proceed with such project either independently through a different investment vehicle or as a “Sole Risk Project” within Sempra Infrastructure Partners and receive Sole Risk Interests in respect thereof. Sole Risk Projects are separated from other Sempra Infrastructure Partners projects and are conducted at our sole cost, expense and liability and we receive, through the acquisition of Sole Risk Interests, any economic and other benefits from such projects. KKR is not entitled to any benefits or rights in respect of any Sole Risk Project. The Guaymas-El Oro segment of the Sonora pipeline at IEnova currently constitutes a Sole Risk Project. Until a specified date, KKR has certain discretionary rights to cause the Guaymas-El Oro segment of the Sonora pipeline to cease to be a Sole Risk Project and be pursued jointly within Sempra Infrastructure Partners.

Under the LP Agreement, Sempra Infrastructure Partners is managed by a board of managers comprised of members designated by us and by KKR. Matters are generally decided by majority vote. The managers designated by us and the managers designated by KKR each, as a group, have voting power equivalent to the ownership percentage of their respective designating member. However, Sempra Infrastructure Partners and its controlled subsidiaries are prohibited from taking certain actions without the prior written approval of KKR (subject to KKR maintaining certain ownership thresholds in Sempra Infrastructure Partners).

The LP Agreement contains certain default remedies if we or KKR fails to fund any amounts required to be funded under the LP Agreement.

The LP Agreement also requires that Sempra Infrastructure Partners distribute to us and to KKR at least 85% of distributable cash flow of Sempra Infrastructure Partners and its subsidiaries on a quarterly basis, subject to certain exceptions and reserves. Generally, distributions from Sempra Infrastructure Partners are made to us and KKR on a pro rata basis in accordance with our and their respective ownership interests in Sempra Infrastructure Partners. However, KKR is entitled to certain priority distributions in the event of material deviations between certain specified projected cash flows and actual cash flows. Additionally, KKR is entitled to certain priority distributions in the event a specified project that reaches a positive final investment decision does not have projected internal rates of return over a specified threshold or in the event we have not made a positive final investment decision by a certain date on specified LNG projects that are currently in development.

In addition, under the LP Agreement, both parties are granted customary registration rights in the event of an initial public offering of Sempra Infrastructure Partners, which is subject to certain consent rights of KKR.

Management Agreement. At the closing of the transactions contemplated under the Purchase Agreement, Sempra Infrastructure Partners entered into a management agreement with Sempra to engage Sempra for certain staffing and general and administrative services. The management agreement governs the services that Sempra will provide to Sempra Infrastructure Partners and the charges associated with those services.

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Discontinued Operations

As we discuss in Note 5, we completed the sales of our equity interests in our Peruvian and Chilean businesses in the second quarter of 2020. The minority interests in Luz del Sur and Tecsur were deconsolidated upon the sale of our Peruvian businesses in April 2020, and the minority interests in Chilquinta Energía and its subsidiaries were deconsolidated upon the sale of our Chilean businesses in June 2020.

TRANSACTIONS WITH AFFILIATES

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

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AMOUNTS DUE FROM (TO) UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	September 30, 2021		December 31, 2020
Sempra:
Total due from various unconsolidated affiliates – current	$	30	$	20
Sempra Mexico(1):
ESJ – Note due December 31, 2022, net of negligible allowance for credit losses at December 31, 2020(2)	$	—	$	85
IMG JV – Note due March 15, 2022, net of allowance for credit losses of $1 and $3 at September 30, 2021 and December 31, 2020, respectively(3)	684		695
Total due from unconsolidated affiliates – noncurrent	$	684	$	780
Sempra Mexico – TAG Pipelines Norte, S. de. R.L. de C.V. – Note due December 20, 2021(1)(4)	$	(42)	$	(41)
Various affiliates	—		(4)
Total due to 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	$	(71)	$	(68)
5.5% Note due January 14, 2025	(21)		—
5.5% Note due July 16, 2025	(20)		—
TAG JV – 5.74% Note due December 17, 2029	(174)		(166)
Total due to unconsolidated affiliates – noncurrent	$	(286)	$	(234)
SDG&E:
Total due from various unconsolidated affiliates – current	$	1	$	—
Sempra	$	(45)	$	(38)
SoCalGas	(9)		(21)
Various affiliates	(7)		(5)
Total due to unconsolidated affiliates – current	$	(61)	$	(64)
Income taxes due from Sempra(6)	$	29	$	—
SoCalGas:
SDG&E	$	9	$	21
Various affiliates	2		1
Total due from unconsolidated affiliates – current	$	11	$	22
Sempra	$	(45)	$	(31)
Total due to unconsolidated affiliates – current	$	(45)	$	(31)
Income taxes due from (to) Sempra(6)	$	1	$	(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 $689 million U.S. dollar-equivalent at September 30, 2021, at a variable interest rate based on the 91-day Interbank Equilibrium Interest Rate plus 220 bps (7.02% at September 30, 2021), to finance construction of a natural gas marine pipeline. At both September 30, 2021 and December 31, 2020, $2 million of accrued interest receivable is included in Due from Unconsolidated Affiliates – Current. At September 30, 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 (3.06% at September 30, 2021).

(5)     U.S. dollar-denominated loans at fixed interest rates.

(6)    SDG&E and SoCalGas are included in the consolidated income tax return of Sempra, 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 income statement information from unconsolidated affiliates.

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INCOME STATEMENT IMPACT FROM UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Sempra:
Revenues	$	7	$	9	$	22	$	31
Cost of sales	—		9		11		35
Interest income	11		12		38		44
Interest expense	4		4		11		11
SDG&E:
Revenues	$	3	$	1	$	7	$	4
Cost of sales	20		17		75		56
SoCalGas:
Revenues	$	24	$	23	$	72	$	61
Cost of sales(1)	(2)		2		1		2

(1)    Includes net commodity costs from natural gas transactions with unconsolidated affiliates.

Guarantees

Sempra provided guarantees related to Cameron LNG JV’s construction-period debt, which were terminated in March 2021, as well as guarantees related to Cameron LNG JV’s SDSRA and CFIN’s Support Agreement, which remain outstanding. We discuss these guarantees in Note 6 below and in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

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OTHER (EXPENSE) INCOME, NET

Other (expense) income, net, consists of the following:

OTHER (EXPENSE) INCOME, NET
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Sempra:
Allowance for equity funds used during construction	$	31	$	34	$	103	$	96
Investment gains, net(1)	—		16		28		9
(Losses) gains on interest rate and foreign exchange instruments, net	(3)		19		(26)		(129)
Foreign currency transaction (losses) gains, net(2)	(17)		15		(10)		(95)
Non-service component of net periodic benefit cost	(66)		(48)		(52)		(45)
Fine related to Energy Efficiency Program inquiry	—		(6)		—		(6)
Interest on regulatory balancing accounts, net	2		—		5		13
Sundry, net	(2)		(1)		4		(6)
Total	$	(55)	$	29	$	52	$	(163)
SDG&E:
Allowance for equity funds used during construction	$	18	$	21	$	63	$	61
Non-service component of net periodic benefit cost	(15)		(18)		(10)		(15)
Fine related to Energy Efficiency Program inquiry	—		(6)		—		(6)
Interest on regulatory balancing accounts, net	2		—		5		8
Sundry, net	(1)		1		3		(1)
Total	$	4	$	(2)	$	61	$	47
SoCalGas:
Allowance for equity funds used during construction	$	13	$	11	$	36	$	29
Non-service component of net periodic benefit cost	(49)		(15)		(30)		(3)
Interest on regulatory balancing accounts, net	—		—		—		5
Sundry, net	(3)		(3)		(8)		(10)
Total	$	(39)	$	(7)	$	(2)	$	21

(1)    Represents net investment gains 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.

(2)    Includes losses of $18 million and $13 million in the three months and nine months ended September 30, 2021, respectively, and gains of $15 million and losses of $120 million in the three months and nine months ended September 30, 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.

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INCOME TAXES

We provide our calculations of ETRs in the following table.

INCOME TAX (BENEFIT) EXPENSE AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
Sempra:
Income tax (benefit) expense from continuing operations	$	(342)		$	99		$	(45)		$	60
(Loss) income from continuing operations before income taxes and equity earnings	$	(1,365)		$	201		$	(316)		$	1,061
Equity earnings, before income tax(1)	137			117			457			158
Pretax (loss) income	$	(1,228)		$	318		$	141		$	1,219
Effective income tax rate	28		%	31		%	(32)		%	5		%
SDG&E:
Income tax expense	$	90		$	33		$	168		$	161
Income before income taxes	$	295		$	211		$	771		$	794
Effective income tax rate	31		%	16		%	22		%	20		%
SoCalGas:
Income tax (benefit) expense	$	(437)		$	(6)		$	(335)		$	95
(Loss) income before income taxes	$	(1,563)		$	(30)		$	(959)		$	521
Effective income tax rate	28		%	20		%	35		%	18		%

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

Sempra, 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

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. Through the first quarter of 2021, such effects were offset by net gains (losses) from foreign currency derivatives that were hedging Sempra Mexico parent’s exposure to movements in the Mexican peso from its controlling interest in IEnova.

Discontinued Operations

In January 2019, our board of directors approved a plan to sell our South American businesses. We completed the sales in the second quarter of 2020, as we discuss in Note 5. Because of our decision to sell our South American businesses, we no longer asserted indefinite reinvestment of basis differences related to these businesses. Accordingly, in the nine months ended September 30, 2020, we recorded a $7 million income tax benefit from changes in outside basis differences in our discontinued operations in South America.

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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 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”: ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. In addition to other changes, this standard amends ASC 470-20, “Debt with Conversion and Other Options,” by removing the accounting models for instruments with beneficial conversion and cash conversion features. The standard also amends ASC 260, “Earnings Per Share,” as follows:

▪requires an entity to apply the if-converted method when calculating diluted EPS for convertible instruments and no longer use the treasury stock method, which was previously allowed for certain convertible instruments;

▪requires an entity to include the effect of potential share settlement in the diluted EPS calculation when an instrument may be settled in cash or shares, and no longer allows an entity to rebut the presumption of share settlement if it has a history or policy of cash settlement;

▪requires an entity to include equity-classified convertible preferred stock that contains down-round features whereby, if the down-round feature is 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 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods therein, with early adoption permitted for fiscal years beginning after December 15, 2020. An entity can use either a full or modified retrospective approach to adopt ASU 2020-06 and must disclose, in the period of adoption, EPS transition information about the effect of the change on affected per-share amounts. We plan to adopt the standard on January 1, 2022 and are currently evaluating the effect of the standard on our ongoing financial reporting.

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.

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.

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DISAGGREGATED REVENUES
(Dollars in millions)
	SDG&E		SoCalGas		Sempra Mexico		Sempra LNG		Consolidating adjustments and Parent and Other		Sempra
	Three months ended September 30, 2021
By major service line:
Utilities	$	1,369	$	966	$	17	$	—	$	(27)	$	2,325
Energy-related businesses	—		—		324		144		(145)		323
Revenues from contracts with customers	$	1,369	$	966	$	341	$	144	$	(172)	$	2,648
By market:
Gas	$	145	$	966	$	231	$	143	$	(165)	$	1,320
Electric	1,224		—		110		1		(7)		1,328
Revenues from contracts with customers	$	1,369	$	966	$	341	$	144	$	(172)	$	2,648
Revenues from contracts with customers	$	1,369	$	966	$	341	$	144	$	(172)	$	2,648
Utilities regulatory revenues	95		140		—		—		—		235
Other revenues	—		—		256		(25)		(101)		130
Total revenues	$	1,464	$	1,106	$	597	$	119	$	(273)	$	3,013
	Nine months ended September 30, 2021
By major service line:
Utilities	$	3,755	$	3,685	$	61	$	—	$	(79)	$	7,422
Energy-related businesses	—		—		859		260		(282)		837
Revenues from contracts with customers	$	3,755	$	3,685	$	920	$	260	$	(361)	$	8,259
By market:
Gas	$	580	$	3,685	$	635	$	257	$	(334)	$	4,823
Electric	3,175		—		285		3		(27)		3,436
Revenues from contracts with customers	$	3,755	$	3,685	$	920	$	260	$	(361)	$	8,259
Revenues from contracts with customers	$	3,755	$	3,685	$	920	$	260	$	(361)	$	8,259
Utilities regulatory revenues	364		53		—		—		—		417
Other revenues	—		—		448		107		(218)		337
Total revenues	$	4,119	$	3,738	$	1,368	$	367	$	(579)	$	9,013

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DISAGGREGATED REVENUES (CONTINUED)
(Dollars in millions)
	SDG&E		SoCalGas		Sempra Mexico		Sempra LNG		Consolidating adjustments and Parent and other		Sempra
	Three months ended September 30, 2020
By major service line:
Utilities	$	1,301	$	813	$	12	$	—	$	(25)	$	2,101
Energy-related businesses	—		—		244		35		(32)		247
Revenues from contracts with customers	$	1,301	$	813	$	256	$	35	$	(57)	$	2,348
By market:
Gas	$	126	$	813	$	159	$	33	$	(54)	$	1,077
Electric	1,175		—		97		2		(3)		1,271
Revenues from contracts with customers	$	1,301	$	813	$	256	$	35	$	(57)	$	2,348
Revenues from contracts with customers	$	1,301	$	813	$	256	$	35	$	(57)	$	2,348
Utilities regulatory revenues	171		29		—		—		—		200
Other revenues	—		—		95		28		(27)		96
Total revenues	$	1,472	$	842	$	351	$	63	$	(84)	$	2,644
	Nine months ended September 30, 2020
By major service line:
Utilities	$	3,610	$	3,261	$	42	$	—	$	(66)	$	6,847
Energy-related businesses	—		—		616		56		(40)		632
Revenues from contracts with customers	$	3,610	$	3,261	$	658	$	56	$	(106)	$	7,479
By market:
Gas	$	518	$	3,261	$	439	$	51	$	(98)	$	4,171
Electric	3,092		—		219		5		(8)		3,308
Revenues from contracts with customers	$	3,610	$	3,261	$	658	$	56	$	(106)	$	7,479
Revenues from contracts with customers	$	3,610	$	3,261	$	658	$	56	$	(106)	$	7,479
Utilities regulatory revenues	366		(14)		—		—		—		352
Other revenues	—		—		277		199		(108)		368
Total revenues	$	3,976	$	3,247	$	935	$	255	$	(214)	$	8,199

REVENUES FROM CONTRACTS WITH CUSTOMERS

Utilities Revenues

In connection with the COVID-19 pandemic, the California Utilities implemented certain measures to assist customers, including suspending service disconnections due to nonpayment for all customers (except for SoCalGas’ noncore customers), waiving late payment fees, and offering flexible payment plans. Such measures ended on June 30, 2021, except for the suspension of service disconnections that ended on September 30, 2021. At the CPUC’s direction, the California Utilities have started to automatically enroll residential and small business customers with past-due balances in long-term repayment plans. The CPUC is continuing to consider the impacts of any state or federal relief programs on customer arrearages and if further debt relief is warranted.

53

Remaining Performance Obligations

For contracts greater than one year, at September 30, 2021, we expect to recognize revenue related to the fixed fee component of the consideration as shown below. SoCalGas did not have any such performance obligations at September 30, 2021.

REMAINING PERFORMANCE OBLIGATIONS(1)
(Dollars in millions)
	Sempra		SDG&E
2021 (excluding first nine months of 2021)	$	88	$	1
2022	368		4
2023	367		4
2024	367		4
2025	364		4
Thereafter	4,129		67
Total revenues to be recognized	$	5,683	$	84

(1)    Excludes intercompany transactions.

Contract Liabilities from Revenues from Contracts with Customers

Activities within Sempra’s and SDG&E’s contract liabilities are presented below. There were no contract liabilities at SoCalGas in the nine months ended September 30, 2021 or 2020.

CONTRACT LIABILITIES
(Dollars in millions)
	2021		2020
Sempra:
Contract liabilities at January 1	$	(207)	$	(163)
Revenue from performance obligations satisfied during reporting period	36		3
Payments received in advance	(1)		—
Contract liabilities at September 30(1)	$	(172)	$	(160)
SDG&E:
Contract liabilities at January 1	$	(87)	$	(91)
Revenue from performance obligations satisfied during reporting period	3		3
Contract liabilities at September 30(1)	$	(84)	$	(88)

(1)     At September 30, 2021, includes $8 million and $4 million in Other Current Liabilities and $164 million and $80 million in Deferred Credits and Other on Sempra’s and SDG&E’s 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 the Condensed Consolidated Balance Sheets.

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RECEIVABLES FROM REVENUES FROM CONTRACTS WITH CUSTOMERS
(Dollars in millions)
	September 30, 2021		December 31, 2020
Sempra:
Accounts receivable – trade, net	$	1,216	$	1,447
Accounts receivable – other, net	17		12
Due from unconsolidated affiliates – current(1)	2		3
Other long-term assets	115		—
Total	$	1,350	$	1,462
SDG&E:
Accounts receivable – trade, net	$	642	$	573
Accounts receivable – other, net	11		8
Due from unconsolidated affiliates – current(1)	3		2
Other long-term assets	47		—
Total	$	703	$	583
SoCalGas:
Accounts receivable – trade, net	$	462	$	786
Accounts receivable – other, net	6		4
Other long-term assets	68		—
Total	$	536	$	790

(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. With the exception of regulatory balancing accounts, we generally do not earn a return on our regulatory assets until such time as a related cash expenditure has been made. Upon the occurrence of a cash expenditure associated with a regulatory asset, the related amounts are recoverable through a regulatory account mechanism for which we earn a return authorized by applicable regulators, which currently approximates the three-month commercial paper rate. The periods during which we recognize a regulatory asset while we do not earn a return vary by regulatory asset.

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REGULATORY ASSETS AND LIABILITIES

We show the details of regulatory assets and liabilities in the following table.

REGULATORY ASSETS (LIABILITIES)
(Dollars in millions)
	September 30, 2021		December 31, 2020
SDG&E:
Fixed-price contracts and other derivatives	$	(88)	$	(53)
Deferred income taxes recoverable in rates	72		22
Pension and other postretirement benefit plan obligations	19		50
Removal obligations	(2,228)		(2,121)
Environmental costs	55		56
Sunrise Powerlink fire mitigation	121		121
Regulatory balancing accounts(1)(2)
Commodity – electric	85		72
Gas transportation	23		35
Safety and reliability	60		67
Public purpose programs	(138)		(158)
2019 GRC retroactive impacts	14		56
Other balancing accounts	535		233
Other regulatory assets, net(2)	110		72
Total SDG&E	(1,360)		(1,548)
SoCalGas:
Deferred income taxes recoverable (refundable) in rates	9		(82)
Pension and other postretirement benefit plan obligations	342		417
Employee benefit costs	37		37
Removal obligations	(649)		(685)
Environmental costs	35		36
Regulatory balancing accounts(1)(2)
Commodity – gas, including transportation	(138)		(56)
Safety and reliability	299		335
Public purpose programs	(274)		(253)
2019 GRC retroactive impacts	51		202
Other balancing accounts	85		(58)
Other regulatory assets, net(2)	160		75
Total SoCalGas	(43)		(32)
Sempra Mexico:
Deferred income taxes recoverable in rates	80		80
Total Sempra	$	(1,323)	$	(1,500)

(1)    At September 30, 2021 and December 31, 2020, the noncurrent portion of regulatory balancing accounts – net undercollected for SDG&E was $331 million and $139 million, respectively, and for SoCalGas was $472 million and $218 million, respectively.

(2)    Includes regulatory assets earning a return authorized by applicable regulators, which currently approximates the three-month commercial paper rate.

CALIFORNIA UTILITIES

COVID-19 Pandemic Protections

In connection with the COVID-19 pandemic, the California Utilities implemented certain measures to assist customers, including suspending service disconnections due to nonpayment for all customers (except for SoCalGas’ noncore customers), waiving late payment fees, and offering flexible payment plans. Such measures ended on June 30, 2021, except for the suspension of service disconnections that ended on September 30, 2021. At the CPUC’s direction, the California Utilities have started to automatically enroll residential and small business customers with past-due balances in long-term repayment plans. The CPUC is continuing to consider the impacts of any state or federal relief programs on customer arrearages and if further debt relief is warranted.

Each of the California Utilities has been authorized 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

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with suspending service disconnections and uncollectible expenses that arise from customers’ failure to pay. The California Utilities expect to pursue recovery of small and medium-large commercial and industrial customers’ tracked costs in rates in a future CPUC proceeding, which recovery is not assured. Uncollectible expenses related to residential customers are recorded in a two-way balancing account as we discuss below.

Disconnection OIR

In June 2020, the CPUC issued a decision to adopt certain customer protections to reduce residential customer disconnections and improve reconnection processes, including, among other things, imposing limitations on service disconnections, elimination of deposit requirements and reconnection fees, establishment of the AMP that provides successfully participating, income-qualified residential customers with relief from outstanding utility bill amounts, and increased outreach and marketing efforts. As permitted by the decision, each of the California Utilities has established 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 GRCs 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.

In January 2020, the CPUC issued a final decision implementing a four-year GRC cycle for California 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.

In May 2021, the CPUC issued a final decision approving the California Utilities’ request to continue their authorized post-test year mechanisms for 2022 and 2023. For SDG&E, the decision authorizes revenue requirement increases of $87 million (3.92%) for 2022 and $86 million (3.70%) for 2023. For SoCalGas, the decision authorizes revenue requirement increases of $142 million (4.53%) for 2022 and $130 million (3.97%) for 2023.

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 and regulatory interest.

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

CPUC Cost of Capital

A CPUC cost of capital proceeding determines a utility’s authorized capital structure and authorized return on rate base. In December 2019, the CPUC approved the cost of capital and rate structures for SDG&E and SoCalGas that became effective on January 1, 2020 and will remain in effect through December 31, 2022, subject to the CCM. The CCM considers changes in interest rates based on the applicable utility bond index published by Moody’s (the CCM benchmark rate) for each 12-month period ending September 30 (the measurement period). The CCM benchmark rate is the basis of comparison to determine if the CCM is triggered, which occurs if the change in the applicable Moody’s utility bond index relative to the CCM benchmark rate is larger than plus or minus 1.000% at the end of the measurement period. The index applicable to SDG&E and SoCalGas is based on each utility’s credit rating. SDG&E’s CCM benchmark rate is 4.498% based on Moody’s Baa- utility bond index, and SoCalGas’ CCM benchmark rate is 4.029% based on Moody’s A- utility bond index.

Alternatively, under the CCM, each of the California Utilities is permitted to file a cost of capital application in an interim year in which an extraordinary or catastrophic event materially impacts its cost of capital. In August 2021, SDG&E filed an application with the CPUC to update its cost of capital effective January 1, 2022 due to the ongoing effects of the COVID-19 pandemic. In this application, SDG&E proposed to adjust its authorized capital structure by increasing its common equity ratio from 52% to 54%. SDG&E also proposed to increase its authorized ROE from 10.20% to 10.55% and decrease its authorized cost of debt from 4.59% to 3.84%. As a result, SDG&E’s proposed return on rate base would decrease from 7.55% to 7.46% if such application is approved by the CPUC as filed. SDG&E filed a joint motion with PG&E and Edison to consolidate all three utilities’ cost of capital applications given the overlapping issues of law and fact, which joint motion was granted in October 2021.

For the measurement period ended September 30, 2021, the CCM would trigger for SDG&E because the average Moody’s Baa- utility bond index between October 1, 2020 and September 30, 2021 was 1.17% below SDG&E’s CCM benchmark rate of

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4.498%. However, SDG&E’s application to update its cost of capital effective January 1, 2022, if accepted by the CPUC, would supersede the CCM from applying. If such application is not accepted, the CCM would be effective January 1, 2022 and would automatically adjust SDG&E’s authorized ROE from 10.20% to 9.62% and adjust its authorized cost of debt to reflect the then current embedded cost and projected interest rate. SDG&E has requested that a final CPUC decision on its interim cost of capital application be issued in the first half of 2022.

For the measurement period ended September 30, 2021, the CCM was not triggered for SoCalGas. SoCalGas expects to file its next cost of capital application in April 2022 for a January 1, 2023 effective date.

SDG&E

FERC Rate Matters and Cost of Capital

SDG&E files separately with the FERC for its authorized ROE on FERC-regulated electric transmission operations and assets.

SDG&E’s 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 on SDG&E’s TO5 filing. The settlement agreement 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 (the California ISO adder). If the FERC issues an order ruling that California IOUs are no longer eligible for the California ISO adder, SDG&E would refund the California ISO adder as of the refund effective date (June 1, 2019) if such a refund is determined to be required by the terms of the TO5 settlement. The TO5 term is effective June 1, 2019 and shall remain in effect each calendar year until terminated by a notice at least six months before the end of a calendar year. 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.

Energy Efficiency Program Inquiry

In January 2020, the CPUC issued a ruling seeking comments on a report prepared by its consultant regarding SDG&E’s Upstream Lighting Program for the program year 2017. The CPUC subsequently expanded the scope of the comments to cover the program year 2018. The Upstream Lighting Program was one of SDG&E’s Energy Efficiency Programs designed to produce energy efficiency savings for which SDG&E could earn a performance-based incentive.

Pursuant to the CPUC ruling, intervenors representing ratepayers questioned SDG&E’s management of the program and alleged that certain program expenditures did not benefit the purpose of the program. As a result of the inquiry, SDG&E voluntarily expanded its review to include the program year 2019. Based on this review, SDG&E concluded some concessions were appropriate, which included refunding certain costs to customers and reducing certain performance-based incentives. Accordingly, in the three months and nine months ended September 30, 2020, SDG&E reduced revenues by $36 million and $51 million, respectively, and recorded a fine of $6 million in Other (Expense) Income, Net, on the SDG&E and Sempra Condensed Consolidated Statements of Operations. The after-tax impact for the three months and nine months ended September 30, 2020 was $29 million and $44 million, respectively. In October 2020, SDG&E executed a settlement agreement with intervenors consistent with these concessions. In September 2021, the CPUC approved the settlement agreement.

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 short period 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 are awaiting a CPUC decision.

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. In April 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, which is currently under appeal by intervenors, orders customer refunds that SoCalGas expects will be negligible (subject to a CPUC audit). Additionally, the POD precludes SoCalGas

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from seeking cost recovery associated with EE codes and standards advocacy programs until lifted by the CPUC, and orders certain nonfinancial remedies.

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

Sempra Mexico

ESJ

In March 2021, IEnova completed the acquisition of 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). IEnova previously accounted for its 50% interest in ESJ as an equity method investment. This acquisition increased IEnova’s ownership interest in ESJ from 50% to 100%. We accounted for this asset acquisition using a cost accumulation model whereby the cost of the acquisition 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 $190 million intangible asset for the relative fair value of the PPA that will be amortized over a 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 the first quarter of 2022.

DISCONTINUED OPERATIONS

In April 2020, we completed the sale of our equity interests in our Peruvian 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 cash proceeds of $3,549 million, net of transaction costs and as adjusted for post-closing adjustments, and recorded a pretax gain of $2,271 million ($1,499 million after tax).

In June 2020, we completed the sale of our equity interests in our Chilean businesses, including our 100% interest in Chilquinta Energía and Tecnored and our 50% interest in Eletrans, to State Grid International Development Limited for cash proceeds of $2,216 million, net of transaction costs and as adjusted for post-closing adjustments, and recorded a pretax gain of $628 million ($248 million after tax).

In the three months and nine months ended September 30, 2020, the pretax gains from the sales of our South American businesses are included in (Loss) Gain on Sale of Discontinued Operations in the table below and the after-tax gains are included in (Loss) Income from Discontinued Operations, Net of Income Tax, on Sempra’s Condensed Consolidated Statements of Operations.

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Summarized results from discontinued operations were as follows:

DISCONTINUED OPERATIONS
(Dollars in millions)
	Three months ended September 30, 2020(1)		Nine months ended September 30, 2020(2)
Revenues	$	—	$	570
Cost of sales	—		(364)
(Loss) gain on sale of discontinued operations	(16)		2,899
Operating expenses	—		(66)
Interest and other	—		(3)
Income before income taxes	(16)		3,036
Income tax benefit (expense)	9		(1,186)
(Loss) income from discontinued operations, net of income tax	(7)		1,850
Earnings attributable to noncontrolling interests	—		(10)
(Losses) earnings from discontinued operations attributable to Sempra	$	(7)	$	1,840

(1)    Represents post-closing adjustments related to the sale of our equity interests in our Chilean businesses.    

(2)    Results include activity until the sale of our Peruvian businesses on April 24, 2020 and Chilean businesses on June 24, 2020.

As a result of the sales of our South American businesses, in the second quarter of 2020, we reclassified $645 million of cumulative foreign currency translation losses from AOCI to (Loss) Gain on Sale of Discontinued Operations, which is included in (Loss) Income from Discontinued Operations, Net of Income Tax, on Sempra’s Condensed Consolidated Statements of Operations.

NOTE 6. INVESTMENTS IN UNCONSOLIDATED ENTITIES

We generally account for investments under the equity method when we have significant influence over, but do not have control of, these entities. Equity earnings and losses, both before and net of income tax, are combined and presented as Equity Earnings on the Condensed Consolidated Statements of Operations. See Note 12 for information on equity earnings and losses, both before and net of income tax, by segment. See Note 1 for information on how equity earnings and losses before income taxes are factored into the calculations of our pretax income or loss and ETR.

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 nine months ended September 30, 2021 and 2020, Sempra contributed $151 million and $209 million, respectively, to Oncor Holdings, and Oncor Holdings distributed $239 million and $220 million, respectively, to Sempra. Additionally, in the nine months ended September 30, 2021, Oncor Holdings distributed a $361 million return of investment to Sempra.

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

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SUMMARIZED FINANCIAL INFORMATION – ONCOR HOLDINGS
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Operating revenues	$	1,286	$	1,232	$	3,572	$	3,394
Operating expenses	(866)		(819)		(2,531)		(2,387)
Income from operations	420		413		1,041		1,007
Interest expense	(104)		(102)		(308)		(305)
Income tax expense	(54)		(50)		(124)		(115)
Net income	255		255		587		557
Noncontrolling interest held by TTI	(51)		(50)		(118)		(111)
Earnings attributable to Sempra(1)	204		205		469		446

(1)    Excludes adjustments to equity earnings related to amortization of a tax sharing liability associated with a tax sharing arrangement and changes in basis differences in AOCI within the carrying value of our equity method investment.

SEMPRA MEXICO

ESJ

As we discuss in Note 5, in March 2021, IEnova completed the acquisition of the remaining 50% equity interest in ESJ and ESJ became a wholly owned, consolidated subsidiary. Prior to the acquisition date, IEnova owned 50% of ESJ and accounted for its interest as an equity method investment. In the nine months ended September 30, 2021 and 2020, ESJ distributed a $4 million and $8 million, respectively, return of investment to IEnova.

SEMPRA LNG

Cameron LNG JV

In the nine months ended September 30, 2021, Cameron LNG JV distributed to Sempra LNG $496 million, of which $165 million relates to the distribution from Cameron LNG JV’s SDSRA that we discuss below.

In the nine months ended September 30, 2020, Sempra LNG contributed $54 million to Cameron LNG JV, and Cameron LNG JV distributed to Sempra LNG $209 million and a return of investment of $803 million.

In March 2021, Cameron LNG JV reached financial completion of the three-train liquefaction project, and Sempra’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 Promissory Note for SDSRA Distribution

Cameron LNG JV’s debt agreements require Cameron LNG JV to maintain the SDSRA, which is an additional reserve account beyond the Senior Debt Service Accrual Account, where funds accumulate from operations to satisfy senior debt obligations due and payable on the next payment date. Both accounts can be funded with cash or authorized investments. In June 2021, Sempra LNG received a distribution of $165 million based on its proportionate share of the SDSRA, for which Sempra provided a promissory note and letters of credit to secure a proportionate share of Cameron LNG JV’s obligation to fund the SDSRA. Sempra’s maximum exposure to loss is replenishment of the amount withdrawn by Sempra LNG from the SDSRA, or $165 million. We recorded a guarantee liability of $22 million in June 2021, with an associated carrying value of $22 million at September 30, 2021, for the fair value of the promissory note, which is being reduced over the duration of the guarantee through Sempra LNG’s investment in Cameron LNG JV. The guarantee will terminate upon full repayment of Cameron LNG JV’s debt, scheduled to occur in 2039, or replenishment of the amount withdrawn by Sempra LNG from the SDSRA.

Sempra Support Agreement for CFIN

In July 2020, CFIN entered into a financing arrangement with Cameron LNG JV’s four project owners and received aggregate proceeds of $1.5 billion from two project owners and from external lenders on behalf of the other two project owners (collectively, the affiliate loans), based on their proportionate ownership interest in Cameron LNG JV. CFIN used the proceeds from the affiliate loans to provide a loan to Cameron LNG JV. The affiliate loans mature in 2039. Principal and interest will be paid from Cameron LNG JV’s project cash flows from its three-train natural gas liquefaction facility. Cameron LNG JV used the

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proceeds from its loan to return equity to its project owners. Sempra used its $753 million share of the proceeds for working capital and other general corporate purposes, including the repayment of indebtedness.

Sempra LNG’s $753 million proportionate share of the affiliate loans, based on its 50.2% ownership interest in Cameron LNG JV, was funded by external lenders comprised of a syndicate of 8 banks (the bank debt) to whom Sempra has provided a guarantee pursuant to a Support Agreement, as amended on June 29, 2021, under which:

▪Sempra has severally guaranteed repayment of the bank debt plus accrued and unpaid interest if CFIN fails to pay the external lenders;

▪the external lenders may exercise an option to put the bank debt to Sempra LNG upon the occurrence of certain events, including a failure by CFIN to meet its payment obligations under the bank debt;

▪the external lenders will put some or all of the bank debt to Sempra LNG on the fifth, tenth, or fifteenth anniversary date of the affiliate loans, except the portion of the debt owed to any external lender that has elected not to participate in the put option six months prior to the respective anniversary date;

▪Sempra LNG also has a right to call the bank debt back from, or to refinance the bank debt with, the external lenders at any time; and

▪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 LNG.

In exchange for this guarantee, the external lenders will pay a guarantee fee that is based on the credit rating of Sempra’s long-term senior unsecured non-credit enhanced debt rating, which guarantee fee Sempra LNG will recognize as interest income as earned. Sempra’s maximum exposure to loss is the bank debt plus any accrued and unpaid interest and related fees, subject to a liability cap of 130% of the bank debt, or $979 million. We measure the Support Agreement at fair value, net of related guarantee fees, on a recurring basis (see Note 9). At September 30, 2021, the fair value of the Support Agreement was $5 million, of which $7 million is included in Other Current Assets offset by $2 million included in Deferred Credits and Other on Sempra’s Condensed Consolidated Balance Sheet.

PARENT AND OTHER

RBS Sempra Commodities

As we discuss in Note 11, in the nine months ended September 30, 2020, we recorded a charge of $100 million in Equity Earnings on Sempra’s Condensed Consolidated Statement of Operations representing our share of estimated losses in excess of the carrying value of our equity method investment in RBS Sempra Commodities. In the nine months ended September 30, 2021, we reduced this charge by $50 million based on the favorable outcome of a settlement with HMRC and revised assumptions on the High Court of Justice case.

NOTE 7. DEBT AND CREDIT FACILITIES

LINES OF CREDIT

Primary U.S. Committed Lines of Credit

In May 2021, Sempra Global assigned its $3.2 billion, five-year committed line of credit facility to Sempra and Sempra assumed all rights and responsibilities under the credit agreement. Also, in May 2021, Sempra established a commercial paper program to replace Sempra Global’s commercial paper program that was terminated in June 2021.

At September 30, 2021, Sempra had an aggregate capacity of $6.7 billion from 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.

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PRIMARY U.S. COMMITTED LINES OF CREDIT
(Dollars in millions)
	September 30, 2021
	Total facility		Commercial paper outstanding(1)(2)		Available unused credit
Sempra(3)	$	4,435	$	(2,112)	$	2,323
SDG&E(4)	1,500		—		1,500
SoCalGas(4)	750		—		750
Total	$	6,685	$	(2,112)	$	4,573

(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.

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

(3)    The facility also provides for issuance of $200 million of letters of credit on behalf of Sempra 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 has the right to increase the letter of credit commitment up to $500 million. No letters of credit were outstanding at September 30, 2021.

(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 September 30, 2021.

Sempra, 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 September 30, 2021, each entity was in compliance with this ratio under its respective credit facility.

Foreign Committed Lines of Credit

Our foreign operations in Mexico have committed lines of credit with an aggregate capacity of $1.9 billion at September 30, 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)
	September 30, 2021
Expiration date of facility	Total facility		Amounts outstanding		Available unused credit
February 2024	$	1,500	$	—	$	1,500
September 2023(1)	350		(294)		56
Total	$	1,850	$	(294)	$	1,556

(1)    In September 2021, IEnova amended this revolving credit facility to increase the amount available under the facility from $280 million to $350 million and extend the expiration of the facility from September 2021 to September 2023. Borrowings continue to bear interest at a per annum rate equal to 3-month LIBOR plus 54 bps.

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Foreign Uncommitted Lines of Credit

In addition to our committed lines of credit, our foreign operations in Mexico have uncommitted lines of credit with an aggregate capacity of $470 million at September 30, 2021, which are generally used for working capital requirements.

FOREIGN UNCOMMITTED LINES OF CREDIT
(U.S. dollar equivalent in millions)
		September 30, 2021
Expiration date of facility	Borrowing denomination	Total facility		Amounts outstanding		Available unused credit
September 2022(1)	U.S. dollars	$	250	$	(250)	$	—
August 2023(2)	U.S. dollars or Mexican pesos	100		(37)		63
October 2023(3)	U.S. dollars	100		—		100
October 2023(4)	U.S. dollars or Mexican pesos	20		—		20
Total		$	470	$	(287)	$	183

(1)    IEnova’s one-year credit agreement under which borrowings bear interest at a per annum rate equal to 3-month LIBOR plus 10 bps.

(2)    ECA LNG Phase 1’s two-year credit agreement under which outstanding amounts were borrowed in Mexican pesos and bear interest at a variable rate based on the 28-day Interbank Equilibrium Interest Rate plus 105 bps and are before reductions from negligible unamortized discount. Borrowings made in U.S. dollars bear interest at a variable rate based on the 1-month or 3-month LIBOR plus 105 bps.

(3)    IEnova’s three-year credit agreement under which borrowings bear interest at a per annum rate equal to 6-month LIBOR plus 52 bps.

(4)    IEnova’s three-year credit agreement under which borrowings made in Mexican pesos bear interest at a variable rate based on the 28-day Interbank Equilibrium Interest Rate plus an applicable margin. Borrowings made in U.S. dollars bear interest at a variable rate based on 1-month LIBOR plus an applicable margin. The applicable margin is determined on the date of borrowing.

Letters of Credit

Outside of our domestic and foreign committed credit facilities, we have bilateral unsecured standby letter of credit capacity with select lenders that is uncommitted and supported by reimbursement agreements. At September 30, 2021, we had approximately $697 million in standby letters of credit outstanding under these agreements.

TERM LOAN

In June 2021, SDG&E entered into a $375 million, 364-day term loan with a maturity date of June 27, 2022. At September 30, 2021, $375 million, net of negligible issuance costs, was outstanding under the term loan. The borrowing bears interest at benchmark rates plus 62.5 bps. The term loan provides SDG&E with additional liquidity outside of its line of credit.

WEIGHTED-AVERAGE INTEREST RATES

The weighted-average interest rates on the total short-term debt at September 30, 2021 and December 31, 2020 were as follows:

WEIGHTED-AVERAGE INTEREST RATES
	September 30, 2021		December 31, 2020
Sempra	0.39	%	0.83	%
SDG&E	0.76		—
SoCalGas	—		0.14

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LONG-TERM DEBT

SDG&E

In August 2021, SDG&E issued $750 million of 2.95% green first mortgage bonds maturing in 2051 and received proceeds of $737 million (net of debt discount, underwriting discounts and debt issuance costs of $13 million). SDG&E intends to use the net proceeds to finance or refinance eligible projects that fall into one or more of the following categories: climate change adaptation, clean energy solutions and clean transportation.

Sempra Mexico

As we discuss in Note 5, through its acquisition of ESJ, Sempra Mexico assumed a $177 million (net of $6 million in unamortized debt issuance costs) variable rate loan payable to a syndicate of 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 principal balance, resulting in a fixed rate of 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 (2.80% at September 30, 2021). On October 8, 2021, Sempra Mexico used proceeds from borrowings against its committed and uncommitted lines of credit to fully repay $175 million of outstanding principal plus accrued and unpaid interest on the ESJ loan prior to its scheduled maturity in 2033, and recognized approximately $16 million ($10 million after tax and NCI) in charges associated with hedge termination costs and a write-off of unamortized debt issuance costs.

On October 13, 2021, Sempra Mexico used proceeds from borrowings against its committed and uncommitted lines of credit to fully repay $375 million of outstanding principal plus accrued and unpaid interest on the Ventika fixed- and variable-rate loans prior to scheduled maturity dates through 2032, and recognized approximately $34 million ($20 million after tax and NCI) in charges associated with hedge termination costs and a write-off of unamortized debt issuance costs.

Sempra LNG

In December 2020, ECA LNG Phase 1 entered into a five-year loan agreement with a syndicate of 9 banks for an aggregate principal amount of up to $1.6 billion. At September 30, 2021 and December 31, 2020, $291 million and $17 million, respectively, was outstanding, with a weighted-average interest rate of 2.84% and 2.82%, respectively. We discuss the details of this agreement in Note 7 of the Notes to Consolidated Financial Statements in the Annual Report.

Parent and Other

On November 1, 2021, Sempra issued notices to redeem, at respective make-whole redemption prices, an aggregate principal amount of $2.35 billion of senior unsecured notes prior to scheduled maturities in 2022 through 2025. Upon redemption, which is scheduled to occur in December 2021, we expect to recognize approximately $128 million ($93 million after tax) in charges associated with the make-whole premiums from the early redemptions and write-off of unamortized discount and debt issuance costs. As a result of our expected early redemption, this debt was classified as Current Portion of Long-Term Debt and Finance Leases on Sempra’s Condensed Consolidated Balance Sheet at September 30, 2021.

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 to fall or our liabilities to increase. Accordingly, our derivative activity summarized below generally represents an impact that is intended to offset associated revenues, expenses, assets or liabilities that are not included in the tables below.

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

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recognized in earnings (fair value 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, 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 on the Condensed Consolidated Statements of Operations. Certain of these derivatives may also be designated as cash flow hedges.

▪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	September 30, 2021	December 31, 2020
Sempra:
Natural gas	MMBtu	(14)	5
Electricity	MWh	1	1
Congestion revenue rights	MWh	48	43
SDG&E:
Natural gas	MMBtu	10	16
Electricity	MWh	1	1
Congestion revenue rights	MWh	48	43
SoCalGas:
Natural gas	MMBtu	—	1

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.

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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 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)
	September 30, 2021			December 31, 2020
	Notional debt		Maturities	Notional debt		Maturities
Sempra:
Cash flow hedges	$	747	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 utilized foreign currency derivatives in 2020 to hedge exposure to fluctuations in the Peruvian sol and Chilean peso related to the 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
(Dollars in millions)
	September 30, 2021			December 31, 2020
	Notional amount		Maturities	Notional amount		Maturities
Sempra:
Cross-currency swaps	$	306	2021-2023	$	306	2021-2023
Other foreign currency derivatives	130		2021-2023	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 because the cash collateral was in excess of liability positions.

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DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30, 2021
	Other current assets(1)		Other long-term assets		Other current liabilities		Deferred credits and other
Sempra:
Derivatives designated as hedging instruments:
Interest rate and foreign exchange instruments	$	—	$	6	$	(42)	$	(134)
Derivatives not designated as hedging instruments:
Commodity contracts not subject to rate recovery	252		19		(300)		(21)
Associated offsetting commodity contracts	(225)		(15)		225		15
Associated offsetting cash collateral	—		—		11		—
Commodity contracts subject to rate recovery	50		76		(52)		(3)
Associated offsetting commodity contracts	(4)		—		4		—
Net amounts presented on the balance sheet	73		86		(154)		(143)
Additional cash collateral for commodity contracts not subject to rate recovery	47		—		—		—
Additional cash collateral for commodity contracts subject to rate recovery	30		—		—		—
Total(2)	$	150	$	86	$	(154)	$	(143)
SDG&E:
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	47	$	76	$	(18)	$	(2)
Associated offsetting commodity contracts	(3)		—		3		—
Net amounts presented on the balance sheet	44		76		(15)		(2)
Additional cash collateral for commodity contracts subject to rate recovery	28		—		—		—
Total(2)	$	72	$	76	$	(15)	$	(2)
SoCalGas:
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	3	$	—	$	(34)	$	(1)
Associated offsetting commodity contracts	(1)		—		1		—
Net amounts presented on the balance sheet	2		—		(33)		(1)
Additional cash collateral for commodity contracts subject to rate recovery	2		—		—		—
Total	$	4	$	—	$	(33)	$	(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.

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DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	December 31, 2020
	Other current assets(1)		Other long-term assets		Other current liabilities		Deferred credits and other
Sempra:
Derivatives designated as hedging instruments:
Interest rate and foreign exchange instruments	$	—	$	1	$	(26)	$	(160)
Derivatives not designated as hedging instruments:
Foreign exchange instruments	24		—		—		—
Commodity contracts not subject to rate recovery	82		17		(95)		(16)
Associated offsetting commodity contracts	(82)		(13)		82		13
Commodity contracts subject to rate recovery	35		95		(35)		(25)
Associated offsetting commodity contracts	(2)		—		2		—
Net amounts presented on the balance sheet	57		100		(72)		(188)
Additional cash collateral for commodity contracts not subject to rate recovery	21		—		—		—
Additional cash collateral for commodity contracts subject to rate recovery	30		—		—		—
Total(2)	$	108	$	100	$	(72)	$	(188)
SDG&E:
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	32	$	95	$	(28)	$	(25)
Associated offsetting commodity contracts	(1)		—		1		—
Net amounts presented on the balance sheet	31		95		(27)		(25)
Additional cash collateral for commodity contracts subject to rate recovery	24		—		—		—
Total(2)	$	55	$	95	$	(27)	$	(25)
SoCalGas:
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	3	$	—	$	(7)	$	—
Associated offsetting commodity contracts	(1)		—		1		—
Net amounts presented on the balance sheet	2		—		(6)		—
Additional cash collateral for commodity contracts subject to rate recovery	6		—		—		—
Total	$	8	$	—	$	(6)	$	—

(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.

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The following table includes the effects of derivative instruments designated as cash flow hedges on the Condensed Consolidated Statements of Operations and in OCI and AOCI.

CASH FLOW HEDGE IMPACTS
(Dollars in millions)
	Pretax gain (loss) recognized in OCI					Pretax gain (loss) reclassified from AOCI into earnings
	Three months ended September 30,					Three months ended September 30,
	2021		2020		Location	2021		2020
Sempra:
Interest rate instruments	$	7	$	8	Interest Expense	$	1	$	(3)
Interest rate instruments	3		25		Equity Earnings(1)	(19)		(5)
Foreign exchange instruments	5		(2)		Revenues: Energy- Related Businesses	—		—
Foreign exchange instruments	3		(1)		Equity Earnings(1)	—		—
Interest rate and foreign exchange instruments	(3)		6		Other (Expense) Income, Net	(5)		4
Total	$	15	$	36		$	(23)	$	(4)
	Nine months ended September 30,					Nine months ended September 30,
	2021		2020		Location	2021		2020
Sempra:
Interest rate instruments	$	27	$	(42)	Interest Expense	$	—	$	(6)
Interest rate instruments	54		(175)		Equity Earnings(1)	(57)		(8)
Foreign exchange instruments	7		14		Revenues: Energy- Related Businesses	(1)		2
					Other (Expense) Income, Net	—		1
Foreign exchange instruments	5		9		Equity Earnings(1)	(1)		2
Interest rate and foreign exchange instruments	(2)		(31)		Interest Expense	—		(1)
					Other (Expense) Income, Net	(4)		(33)
Total	$	91	$	(225)		$	(63)	$	(43)

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

For Sempra, we expect that net losses of $104 million, which are net of income tax benefit, that are currently recorded in AOCI related to cash flow hedges will be reclassified into earnings during the next 12 months as the hedged items affect earnings. SoCalGas expects that $1 million of losses, net of income tax benefit, that are currently recorded in AOCI related to cash flow hedges will be reclassified into earnings during the next 12 months as the hedged items affect earnings. Actual amounts ultimately reclassified into earnings depend on the interest rates in effect when derivative contracts mature.

For all forecasted transactions, the maximum remaining term over which we are hedging exposure to the variability of cash flows at September 30, 2021 is approximately 13 years for Sempra. The maximum remaining term for which we are hedging exposure to the variability of cash flows at our equity method investees is 18 years.

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The following table summarizes the effects of derivative instruments not designated as hedging instruments on the Condensed Consolidated Statements of Operations.

UNDESIGNATED DERIVATIVE IMPACTS
(Dollars in millions)
		Pretax (loss) gain on derivatives recognized in earnings
		Three months ended September 30,				Nine months ended September 30,
	Location	2021		2020		2021		2020
Sempra:
Commodity contracts not subject to rate recovery	Revenues: Energy-Related Businesses	$	(154)	$	(39)	$	(344)	$	25
Commodity contracts subject to rate recovery	Cost of Natural Gas	(26)		—		(24)		(6)
Commodity contracts subject to rate recovery	Cost of Electric Fuel and Purchased Power	8		41		51		41
Foreign exchange instruments	Other (Expense) Income, Net	2		15		(22)		(97)
Total		$	(170)	$	17	$	(339)	$	(37)
SDG&E:
Commodity contracts subject to rate recovery	Cost of Electric Fuel and Purchased Power	$	8	$	41	$	51	$	41
SoCalGas:
Commodity contracts subject to rate recovery	Cost of Natural Gas	$	(26)	$	—	$	(24)	$	(6)

CONTINGENT FEATURES

For Sempra, 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, the total fair value of this group of derivative instruments in a liability position at September 30, 2021 and December 31, 2020 was $63 million and $16 million, respectively. For SoCalGas, the total fair value of this group of derivative instruments in a liability position at September 30, 2021 and December 31, 2020 was $34 million and $6 million, respectively. At September 30, 2021, if the credit ratings of Sempra or SoCalGas were reduced below investment grade, $63 million and $34 million, respectively, of additional assets could be required to be posted as collateral for these derivative contracts.

For Sempra, 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.

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RECURRING FAIR VALUE MEASURES

The three tables below, by level within the fair value hierarchy, set forth our financial assets and liabilities that were accounted for at fair value on a recurring basis at September 30, 2021 and December 31, 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, 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:

▪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 pricing service based on a market approach. We validate these prices by comparison to prices from other independent data sources. Securities are valued using quoted prices listed on nationally recognized securities exchanges or based on closing prices reported in the active market in which the identical security is traded (Level 1). Other securities are valued based on yields that are currently available for comparable securities of issuers with similar credit ratings (Level 2).

▪For commodity contracts, interest rate derivatives and foreign exchange instruments, we primarily use a market or income approach with market participant assumptions to value these derivatives. Market participant assumptions include those about risk, and the risk inherent in the inputs to the valuation techniques. These inputs can be readily observable, market corroborated, or generally unobservable. We have exchange-traded derivatives that are valued based on quoted prices in active markets for the identical instruments (Level 1). We also may have other commodity derivatives that are valued using industry standard models that consider quoted forward prices for commodities, time value, current market and contractual prices for the underlying instruments, volatility factors, and other relevant economic measures (Level 2). Level 3 recurring items relate to CRRs and long-term, fixed-price electricity positions at SDG&E, as we discuss below in “Level 3 Information – SDG&E.”

▪Rabbi Trust investments include marketable securities that we value using a market approach based on closing prices reported in the active market in which the identical security is traded (Level 1). These investments in marketable securities were negligible at both September 30, 2021 and December 31, 2020.

▪As we discuss in Note 6, in July 2020, Sempra entered into a Support Agreement for the benefit of CFIN. We measure the Support Agreement, which includes a guarantee obligation, a put option and a call option, net of related guarantee fees, at fair value on a recurring basis. We use a discounted cash flow model to value the Support Agreement, net of related guarantee fees. Because some of the inputs that are significant to the valuation are less observable, the Support Agreement is classified as Level 3, as we describe below in “Level 3 Information – Sempra LNG.���

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RECURRING FAIR VALUE MEASURES – SEMPRA
(Dollars in millions)
	Fair value at September 30, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Nuclear decommissioning trusts:
Equity securities	$	350	$	6	$	—	$	356
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	40		12		—		52
Municipal bonds	—		320		—		320
Other securities	—		270		—		270
Total debt securities	40		602		—		642
Total nuclear decommissioning trusts(1)	390		608		—		998
Interest rate and foreign exchange instruments	—		6		—		6
Commodity contracts not subject to rate recovery	—