SCHEDULE 14C INFORMATION
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Southern California Gas
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Notes:
SOUTHERN CALIFORNIA GAS COMPANY
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NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
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The Annual Meeting of Shareholders of Southern California Gas Company will
be held on May 10, 2001 at 10:30 a.m. at the offices of Sempra Energy, 101 Ash
Street, San Diego, California, for the following purposes:
(1) To elect directors for the ensuing year.
(2) To transact any other business that may properly come before the
meeting.
Shareholders of record at the close of business on March 22, 2001 are
entitled to notice of and to vote at the Annual Meeting.
The Annual Meeting is a business-only meeting. It will not include any
presentations by management.
Only shareholders of Southern California Gas Company may attend the Annual
Meeting. Shareholders who own shares registered in their names will be
admitted to the meeting upon verification of record share ownership.
Shareholders who own shares through banks, brokerage firms, nominees or other
account custodians must present proof of beneficial share ownership (such as a
brokerage account statement) to be admitted.
By Order of the Board of Directors
Los Angeles, California
March 22, 2001
SOUTHERN CALIFORNIA GAS COMPANY
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INFORMATION STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
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WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
Southern California Gas Company ("SoCalGas" or the "Gas Company") is
providing this Information Statement in connection with its Annual Meeting of
Shareholders to be held on May 10, 2001. It is being mailed to shareholders
commencing April 5, 2001.
SOUTHERN CALIFORNIA GAS COMPANY
SoCalGas is a direct subsidiary of Pacific Enterprises and an indirect
subsidiary of Sempra Energy. It is a public utility supplying natural gas
throughout most of Southern and portions of Central California. It is the
nation's largest natural gas distribution utility.
SoCalGas became an indirect subsidiary of Sempra Energy upon the June 26,
1998 completion of a business combination of Pacific Enterprises (the direct
parent corporation of SoCalGas) and Enova Corporation (the direct parent
corporation of San Diego Gas & Electric Company). In the combination, Pacific
Enterprises and Enova Corporation became separate subsidiaries of Sempra
Energy, a newly formed holding company, and Pacific Enterprises Common Stock
and Enova Corporation Common Stock were converted into Sempra Energy Common
Stock. Shares of SoCalGas and San Diego Gas & Electric Company ("SDG&E") were
unaffected by the business combination and remain outstanding.
SoCalGas' principal executive offices are located at The Gas Company Tower,
555 West Fifth Street, Los Angeles, California. Its telephone number is (213)
244-1200.
OUTSTANDING SHARES AND VOTING RIGHTS
Shareholders who are present at the Annual Meeting will be entitled to one
vote for each of the Gas Company's shares which they held of record at the
close of business on March 22, 2001. At that date, the outstanding shares
consisted of 91,300,000 shares of Common Stock and 862,043 shares of Preferred
Stock. All of the shares of Common Stock and 50,877 shares of Preferred Stock
(together representing over 99% of the outstanding shares) are owned by
Pacific Enterprises.
In electing directors, shareholders will be entitled to cumulate votes if
any shareholder gives notice at the meeting, and prior to the voting, of an
intention to cumulate votes. If that notice is given, all shareholders will be
entitled to twelve votes (the number of directors to be elected) for each of
their shares and may cast all of their votes for any one director candidate
whose name has been placed in nomination prior to the voting or distribute
their votes among two or more such candidates in such proportions as they may
determine.
In voting upon other matters properly presented to the Annual Meeting, each
shareholder will be entitled to one vote for each share of SoCalGas Common or
Preferred Stock.
1
GOVERNANCE OF THE COMPANY
Board of Directors
The business and affairs of the Gas Company are managed under the direction
of its Board of Directors in accordance with the California General
Corporation Law as implemented by SoCalGas' Articles of Incorporation and By-
laws. Members of the board are kept informed through various reports routinely
sent to them as well as by operating and financial presentations made at board
and committee meetings by officers and others.
Shareholders who wish to suggest qualified candidates for consideration by
the Corporate Governance Committee as directors of the Gas Company should
write to: Corporate Secretary, Southern California Gas Company, The Gas
Company Tower, 555 West Fifth Street, Los Angeles, California, 90013, stating
in detail the qualifications of the suggested candidates.
During 2000, the Board of Directors held ten meetings. Each director
attended at least 75% of the combined number of meetings of the board and
board committees of which he or she was a member, other than Ms. Burr, who
attended 74% of such meetings. The standing committees listed below assisted
the board in carrying out its duties.
Committees Of the Board
Audit Compensation Corporate Governance Executive Finance Public Policy
----- ---------------------- --------------------- --------------------- ----------------------- ------------------
Richard A. Richard J. Stegemeier, Hyla H. Bertea, Edwin A. Guiles, Daniel W. Derbes, Herbert L. Carter,
Collato, Chair Chair Chair Chair Chair
Chair
Ann L. Burr Hyla H. Bertea Ann L. Burr Herbert L. Carter Richard A. Collato William D. Jones
Daniel W. Derbes Ralph R. Ocampo Richard J. Stegemeier Daniel W. Derbes Wilford D. Godbold, Jr. Ralph R. Ocampo
Wilford D. Thomas C. Stickel Diana L. Walker Richard J. Stegemeier William D. Jones William G. Ouchi
Godbold, Jr.
William G. Ouchi Thomas C. Stickel Diana L. Walker
Audit Committee
The Audit Committee met six times in 2000. Its duties and responsibilities
include:
. Assisting the Board of Directors in fulfilling its oversight
responsibilities for management's conduct of the financial reporting
processes.
. Recommending to the board the selection of independent auditors.
The charter of the Audit Committee is reprinted as the appendix to this
Information Statement.
Compensation Committee
The Compensation Committee met six times in 2000. Its duties and
responsibilities include:
. Establishing overall strategy with respect to compensation for directors
and senior officers.
. Evaluating the performance of the Chairman and the President for
compensation purposes.
. Reviewing and approving individual salary adjustments and awards under
incentive plans for senior officers.
. Overseeing executive succession plans.
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Corporate Governance Committee
The Corporate Governance Committee met three times in 2000. Its duties and
responsibilities include:
. Reviewing and recommending nominees for election as directors.
. Assessing the performance of the Board of Directors.
. Developing guidelines for board composition.
. Reviewing and considering issues relating to corporate governance.
Executive Committee
The Executive Committee did not meet in 2000. The committee meets on call
during the intervals between board meetings and, subject to the limitations
imposed by law, has all the authority of the board.
Finance Committee
The Finance Committee met five times in 2000. Its duties and
responsibilities include:
. Reviewing long term and short term financial requirements and financing
plans.
. Reviewing trading operations, financial guarantees and derivatives
positions and exposure.
. Reviewing pension plan investment results and insurance coverages.
Public Policy Committee
The Public Policy Committee met twice in 2000. Its duties and
responsibilities include:
. Reviewing public policy issues affecting the Gas Company, including
ethnic, social and political trends.
. Reviewing employment and contracting policies, consumer issues and
community relations.
. Reviewing charitable and political contributions and programs.
Directors' Compensation
All of the directors of the Gas Company are also directors or officers of
Sempra Energy. They are not separately compensated for services as directors
of the Gas Company.
Directors of Sempra Energy who are not also employees receive the following
retainer and fees for services as directors of Sempra Energy and its
subsidiaries:
Annual retainer..................................................... $35,000
Attendance fee for each Board meeting............................... $ 1,000
Attendance fee for each Committee meeting........................... $ 1,000
Additional meeting fee for each Committee meeting chaired........... $ 1,000
Each director must elect to receive an annual minimum of $9,000 of his or
her director's fees in shares of Sempra Energy Common Stock or to defer that
amount into phantom shares of Sempra Energy Common Stock. Directors also may
elect to receive the balance of their fees in shares of Sempra Energy Common
Stock instead of cash or to defer the balance into an interest-bearing
account, a phantom investment fund, or phantom shares of Sempra Energy Common
Stock.
Upon becoming a director, each non-employee director of Sempra Energy is
granted a ten-year option to purchase 15,000 shares of Sempra Energy Common
Stock. At each annual meeting of Sempra Energy (other than the annual meeting
that coincides with or first follows the director's election to the board)
each
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non-employee director who continues to serve as a director is granted an
additional ten-year option for 5,000 shares. Each option is granted at an
option exercise price equal to the fair market value of the option shares at
the date the option is granted and becomes fully exercisable commencing with
the first annual meeting of Sempra Energy following the date of the grant or
upon the director's earlier death, disability, retirement or involuntary
termination of board service other than for cause.
Non-employee directors of Sempra Energy who were directors of Pacific
Enterprises or Enova Corporation at the time of the business combination of
the two companies (currently all of the non-employee directors) continue to
accrue retirement benefits (subject to certain maximum years of service
credit) for service as non-employee directors of Sempra Energy. Benefits
commence upon the later of retirement as a director or attaining age 65 and
continue for a maximum period equal to the director's combined years of
service as a director of Sempra Energy and Pacific Enterprises or Enova
Corporation. The annual benefit is the sum of Sempra Energy's then current
annual retainer and ten times the then current board meeting fee.
INDEPENDENT AUDITORS
Representatives of Deloitte & Touche LLP, independent auditors for
SoCalGas, are expected to be present at the Annual Meeting. They will have the
opportunity to make a statement if they desire to do so and to respond to
appropriate questions from shareholders.
Audit Fees
Fees of Deloitte & Touche LLP for the audit of the Gas Company's 2000
financial statements were $421,900.
All Other Fees
Fees of Deloitte & Touche LLP for all other services provided to SoCalGas
for 2000 were $5,400. The Audit Committee of the Board of Directors has
considered whether the provision of these services is compatible with
maintaining the independence of Deloitte & Touche LLP.
AUDIT COMMITTEE REPORT
In accordance with its written charter adopted by the Board of Directors,
the Audit Committee of the Board assists the Board in fulfilling its oversight
responsibilities for management's conduct of Sempra Energy's financial
reporting processes. The Committee consists of five independent directors.
The Audit Committee reviewed the audited financial statements of the Gas
Company for the year ended December 31, 2000, with management and Deloitte &
Touche LLP, the Gas Company's independent auditors.
The Audit Committee has discussed and reviewed with Deloitte & Touche LLP
all the matters required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees). It has also received and
reviewed the written disclosures and the letter from Deloitte & Touche LLP
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and has discussed with Deloitte & Touche
LLP their independence.
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Based on this review and discussions, the Audit Committee recommended to the
Board of Directors that the Gas Company's audited financial statements be
included in its Annual Report on Form 10-K for the year ended December 31,
2000, for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
Richard A. Collato, Chair
Ann L. Burr
Daniel W. Derbes
Wilford D. Godbold, Jr.
William G. Ouchi
March 6, 2001
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SHARE OWNERSHIP
All of the outstanding SoCalGas Common Stock is owned by Pacific
Enterprises and none of the Gas Company's directors or executive officers owns
any SoCalGas Preferred Stock.
The following table sets forth the number of shares of Sempra Energy Common
Stock beneficially owned at February 15, 2001 by each director, by each of the
current executive officers of the Gas Company named in the compensation tables
of this Information Statement and by all directors and executive officers of
the Gas Company as a group. These shares, in the aggregate, represent less
than 1% of Sempra Energy's outstanding shares.
Sempra Energy Common Stock
Shares
Current Subject To
Beneficial Exercisable Phantom
Name Holdings Options(A) Shares(B) Total
---- ---------- ----------- --------- -------
Hyla H. Bertea....................... 9,630 25,000 5,256 39,886
Ann L. Burr.......................... 2,315 25,000 -0- 27,315
Herbert L. Carter.................... 1,604 25,000 8,373 34,977
Richard A. Collato................... 4,566 25,000 -0- 29,566
Daniel W. Derbes..................... 6,145 25,000 114 31,259
Wilford D. Godbold, Jr. ............. 3,006 25,000 3,195 31,201
Edwin A. Guiles...................... 22,906 61,835 14,071 98,812
William D. Jones..................... 2,690 25,000 -0- 27,690
Richard M. Morrow.................... 15,800 58,316 914 75,030
Ralph R. Ocampo...................... 14,702 25,000 9,463 49,165
William G. Ouchi..................... 10,000 25,000 114 35,114
Roy M. Rawlings...................... 9,632 64,886 1,525 76,043
Anne S. Smith........................ 6,986 68,813 1,782 77,581
Richard J. Stegemeier (C)............ 1,618 25,000 -0- 26,618
Lee M. Stewart....................... 17,429 123,964 2,534 143,927
Thomas C. Stickel.................... 2,059 25,000 114 27,173
Diana L. Walker...................... 986 25,000 114 26,100
Directors and Executive Officers as a
group (17 persons).................. 132,074 677,814 47,569 857,457
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(A) Shares which may be acquired through the exercise of stock options that
are exercisable on or before May 15, 2001.
(B) Represents deferred compensation deemed invested in shares of Sempra
Energy Common Stock. These phantom shares cannot be voted or transferred
but track the performance of Sempra Energy Common Stock.
(C) Mr. Stegemeier will retire as a director before the Annual Meeting and the
authorized number of directors will be reduced to twelve to reflect his
retirement.
Share ownership guidelines have been established for directors and officers
to further strengthen the link between performance and compensation. For non-
employee directors the guideline is ownership of a number of shares having a
market value equal to four times the annual retainer. For officers, the
guidelines are:
Sempra Energy Share
SoCalGas Executive Level Ownership Guidelines
------------------------ --------------------
Chairman.............................................. 3 X Base Salary
Presidents of Business Units.......................... 2 X Base Salary
Vice Presidents....................................... 1 X Base Salary
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In setting the guidelines the board considered then current share ownership
levels and the desirability of encouraging further share ownership. The
officer guidelines were established in 1998 and the director guidelines in
2000. They are expected to be met or exceeded within five years from adoption.
For purposes of the guidelines, shares owned include phantom shares into which
compensation is deferred and the vested portion of certain in-the-money stock
options as well as shares owned directly or through benefit plans.
Sempra Energy has approximately 185,000 shareholders. The only person known
to Sempra Energy to own more than 5% of its shares is Barclays Trust and
Banking Company (Japan) Ltd. (Ebisu Prime Square Tower, 1-1-39 Hiroo, Shibuya-
Ku, Tokyo, Japan 150-8402), which on February 14, 2001 reported that it and
related entities, held 10,326,404 shares of Sempra Energy Common Stock as to
which they had sole dispositive power (including 9,456,885 shares as to which
they had sole voting power) in trust accounts for the economic benefit of the
beneficiaries of those accounts. These shares represent approximately 5% of
the outstanding Sempra Energy Common Stock.
Employee savings and stock ownership plans of Sempra Energy and its
subsidiaries held 24,325,246 shares of Sempra Energy Common Stock
(approximately 12% of the outstanding shares) for the benefit of employees at
February 15, 2001.
7
ELECTION OF DIRECTORS
The Gas Company's Board of Directors will consist of twelve directors upon
giving effect to the retirement of a director who will retire before the
Annual Meeting of Shareholders and a corresponding reduction in the authorized
number of directors. At the Annual Meeting, twelve directors (comprising the
entire authorized number of directors) will be elected to hold office until
the next Annual Meeting and until their successors have been elected and
qualified. The twelve director candidates receiving the greatest number of
votes will be elected as directors.
The names of the Board of Directors' twelve nominees for election as
directors and biographical information regarding each nominee are set forth
below. Each nominee is currently a director of the Gas Company and also of
SDG&E. Each nominee (other than Mr. Guiles) is also a director of Pacific
Enterprises and Sempra Energy. Unless otherwise noted, each nominee has held
his or her principal occupation or other positions with the same or
predecessor organizations for at least the last five years.
[PHOTO OF HYLA H. BERTEA]
Hyla H. Bertea, 60, has been a director since 1993. She is a
realtor with Prudential California, a real estate sales company.
She is a trustee of Lewis & Clark College, a director of Orange
County Community Foundation, and a former commissioner of the
California Horse Racing Board. For a number of years she has been
involved in leadership positions with various other cultural,
educational and health organizations in the Orange County and Los
Angeles areas. Mrs. Bertea was a co-commissioner of gymnastics and
a member of the executive staff for the 1984 Olympics.
[PHOTO OF ANN L. BURR]
Ann L. Burr, 54, has been a director since 1998. She is an
Executive Vice President of Time Warner Cable. She is the former
President of Time Warner Communications in Rochester, New York and
Time Warner Cable in San Diego. Ms. Burr is a trustee of the
Rochester Institute of Technology. She served as Chair of the
Board of Directors of the California Cable Television Association
and chaired its Telecommunications Policy Committee. She is a
former Chair of the Greater San Diego Chamber of Commerce Board of
Directors and the founder and former Chair of the Chamber's
Business Roundtable for Education and the San Diego Communications
Council.
[PHOTO OF HERBERT L. CARTER]
Herbert L. Carter, DPA, 67, has been a director since 1993. He has
served as President of California State University, Dominguez
Hills, and Executive Vice Chancellor Emeritus and Trustee
Professor of Public Administration of the California State
University System. He was President and Chief Executive Officer of
United Way of Greater Los Angeles from 1992 until 1995, and
Executive Vice Chancellor of the California State University
System from 1987 until 1992. Dr. Carter is a director of Golden
State Mutual Insurance Company, and has served as a member of the
Board of Councilors of the School of Public Administration,
University of Southern California and the Board of Regents of
Loyola Marymount University.
[PHOTO OF RICHARD A. COLLATO]
Richard A. Collato, 57, has been a director since 1998. He is
President and Chief Executive Officer of the YMCA of San Diego
County. He is a former director of Y-Mutual Ltd., a reinsurance
company, and The Bank of San Diego. Mr. Collato is a former
trustee of Springfield College, and currently is a trustee of the
YMCA Retirement Fund and Bauce Foundation, and a director of Micro
Vision Optical, Inc. and Project Design Consultants.
8
[PHOTO OF DANIEL W. DERBES]
Daniel W. Derbes, 70, has been a director since 1998. He is
President of Signal Ventures. From 1985 until 1988, he was
President of Allied-Signal International Inc. and Executive Vice
President of Allied-Signal Inc., a multi-national advanced
technologies company. Mr. Derbes is Chairman of the Board of
Directors of WD-40 Company and a trustee of the University of San
Diego.
[PHOTO OF WILFORD D. GODBOLD, JR.]
Wilford D. Godbold, Jr., 62, has been a director since 1993. He is
the retired President and Chief Executive Officer of ZERO
Corporation, an international manufacturer primarily of enclosures
and thermal management equipment for the electronics market. He is
a director of Ceradyne, Inc. and K2, Inc., a trustee of the
Wellness Community, a past President of the Board of Trustees of
Marlborough School and a past Chairman of the Board of the
California Chamber of Commerce and The Employers Group.
[PHOTO OF EDWIN A. GUILES]
Edwin A. Guiles, 51, became a director in 2000. He is Chairman,
President and President of Energy Distribution Services of
Southern California Gas Company, Chairman of SDG&E and Group
President--Regulated Business Units of Sempra Energy. Mr. Guiles
is a member of the boards of the California Chamber of Commerce
and San Diego County YMCA. He formerly served as planning
commissioner for the City of Chula Vista, and is a former director
of the Arthritis Foundation, Wellness Communities and San Diego
Development Council.
[PHOTO OF WILLIAM D. JONES]
William D. Jones, 45, has been a director since 1998. He is the
President and Chief Executive Officer and a director of CityLink
Investment Corporation. From 1989 to 1993, he served as General
Manager/Senior Asset Manager and Investment Manager with certain
real estate subsidiaries of The Prudential. Prior to joining The
Prudential, he served as a San Diego City Council member from 1982
to 1987. Mr. Jones is Chairman of the Board of the Los Angeles
Branch of the Federal Reserve Bank of San Francisco, and a trustee
of the University of San Diego. He is a former director of The
Price Real Estate Investment Trust.
[PHOTO OF RALPH R. OCAMPO]
Ralph R. Ocampo, M.D., F.A.C.S., 69, has been a director since
1998. He is a practicing surgeon, Governor of the American College
of Surgeons, past President of the California Medical Association
and a Clinical Professor of Surgery at the University of
California, San Diego.
[PHOTO OF WILLIAM G. OUCHI]
William G. Ouchi, Ph.D., 57, has been a director since 1998. He is
the Sanford and Betty Sigoloff Professor in Corporate Renewal in
the Anderson Graduate School of Management at UCLA. Dr. Ouchi is a
director of Allegheny Technologies, EduVoice, FirstFed Financial
Corp., and Water-Pik Technologies. He is a trustee of Williams
College and a director of KCET Public Service Television.
9
[PHOTO OF THOMAS C. STICKEL]
Thomas C. Stickel, 51, has been a director since 1998. He is the
Chairman, Chief Executive Officer and founder of University
Ventures Network. He is the founder of Americana Partners Capital
Group, Inc. He previously was the Chairman, Chief Executive
Officer and President of TCS Enterprises, Inc. and the Bank of
Southern California, both of which he founded. Mr. Stickel is
Chairman of the Board of Onyx Acceptance Corporation, a director
of Blue Shield of California and Del Mar Thoroughbred Club and
Vice Chairman of the California Chamber of Commerce.
[PHOTO OF DIANA L. WALKER]
Diana L. Walker, 59, has been a director since 1993. Mrs. Walker
is a partner and General Counsel of the law firm of O'Melveny &
Myers LLP. She is a former director of United Way of Greater Los
Angeles, and Emeritus Governor and former Chair of the Board of
Governors of the Institute for Corporate Counsel, a former trustee
of Marlborough School and a member of various professional
organizations. O'Melveny & Myers LLP provides legal services to
Sempra Energy and its subsidiaries.
10
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Gas Company became an indirect subsidiary of Sempra Energy in
connection with a business combination of Pacific Enterprises (the direct
parent of the Gas Company) and Enova Corporation (the direct parent of SDG&E)
that was completed on June 26, 1998.
The Boards of Directors of the Gas Company, SDG&E and Sempra Energy each
maintain a Compensation Committee comprised of independent directors. The
directors comprising the three committees are identical and the committees
typically meet in joint session.
The Compensation Committees have the responsibility for establishing
compensation principles and strategies, as well as designing a compensation
program for executive officers. Their responsibilities also include
administering a base salary program, executive annual and long term incentive
plans, and executive benefit and perquisite programs.
During 2000, the Compensation Committees conducted a review of the
executive compensation programs and policies of Sempra Energy and its
subsidiaries that were originally developed in 1998 in connection with the
business combination of Pacific Enterprises and Enova Corporation and were
designed to assist the companies in realizing the key objective of creating
superior shareholder value in a rapidly changing and increasingly competitive
business environment. The committees engaged nationally recognized
compensation and benefit consultants to assist with this review. The
committees, also with the assistance of a nationally recognized compensation
firm, also reviewed board compensation during 2000.
Compensation Principles and Strategies
In developing compensation principles and strategies, the Compensation
Committees considered the current and prospective business environment for
Sempra Energy and its subsidiaries and took into account numerous factors,
including:
. The rapidly changing and increasingly competitive environment in which
Sempra Energy and its subsidiaries operate.
. The need to retain experienced executives of outstanding ability and to
motivate them to achieve superior performance.
. The need to attract executive talent from broader markets as the utility
and energy industries continue to rapidly evolve.
. The need to strongly link executive compensation to both annual and long
term corporate, business unit and individual performance.
. The need to strongly align the interests of executives with those of
shareholders.
As a result of this review, the Compensation Committees approved the
continuation of the compensation program developed in 1998 and designed to
meet these objectives and encourage executives to achieve superior shareholder
returns. The program includes the following elements.
. An emphasis on "pay-for-performance" with a substantial portion of total
compensation reflecting corporate, business unit and individual
performance.
. An emphasis on stock incentives closely aligning the interests of
executives with those of shareholders.
. An emphasis on total compensation with base salaries generally targeted
at or near median general industry levels for comparable sized companies
and with the annual cash and long term equity incentives providing
opportunities to earn total compensation at significantly higher levels
for superior corporate, business unit and individual performance.
11
. An appropriate balance of short term and long term compensation to
retain talented executives, reward effective long term strategic results
and encourage share ownership.
. An emphasis on placing at risk, through equity and other performance-
based incentives, a greater portion of an executive's total compensation
as levels of responsibility increase.
The Compensation Committees also considered provisions of the Internal
Revenue Code limiting to $1 million the annual amount of compensation, other
than compensation that qualifies as "qualified performance-based
compensation," that publicly held corporations may deduct for federal income
tax purposes as compensation expense for each of certain executive officers.
The committees consider tax deductibility to be an important factor but only
one factor to be considered in evaluating any executive officer compensation
program. Accordingly, the committees intend to design programs that will
maximize federal income tax deductions for compensation expense to the extent
that doing so is consistent with the compensation principles and strategies of
Sempra Energy and its subsidiaries. The committees believe, however, that
there are circumstances in which the interests of shareholders may be best
served by providing compensation that is not fully tax deductible, and may
exercise discretion to provide compensation (including incentive awards under
the Sempra Energy Long Term Incentive Plan) that will not qualify as a tax
deductible compensation expense.
Compensation Program
The primary components of the compensation program of Sempra Energy and its
subsidiaries are base salaries, annual cash incentive opportunities and long
term equity and equity-based incentive opportunities.
Base Salaries
Base salaries for executives are reviewed annually and, in general, are
targeted at the median of salaries for general industry companies of similar
size to Sempra Energy. This strategy, along with annual and long term
incentive opportunities at general industry levels, is intended to allow
Sempra Energy and its subsidiaries to retain and attract top quality executive
talent. However, the committees will continue to monitor this strategy as the
markets for executive talent change. In determining base salary adjustments,
the committees also take into account individual performance, executive
responsibilities, market characteristics and other factors.
Survey data for assessing base salaries are based upon companies in the
Fortune 1000 and size-adjusted based upon Sempra Energy's revenues using
regression analysis. The Compensation Committees believe that the Fortune 1000
appropriately reflects the broad group with which Sempra Energy and its
subsidiaries compete to retain and attract highly skilled and talented
executives.
Annual base salaries for executive officers of Sempra Energy and its
subsidiaries have been set at the approximate mid-point of these salary data.
For 2000, an annual base salary of $520,000 was established for Warren I.
Mitchell, Chairman of SoCalGas and SDG&E and Group President--Regulated
Business Units of Sempra Energy. Upon Mr. Mitchell's retirement, Edwin A.
Guiles became Chairman of SoCalGas and SDG&E and Group President--Regulated
Business Units of Sempra Energy at an annual base salary of $470,000.
Annual Incentives
Annual cash bonus performance-based incentive opportunities are provided to
executive officers through the Sempra Energy Executive Incentive Plan. This
plan permits the payment of bonuses based upon the attainment of objective
financial performance goals. Bonus opportunities vary with the individual
officer's position and prospective contribution to the attainment of these
goals and no bonuses are paid unless a threshold performance level is attained
for the related performance period. Bonus opportunities increase for
performance above the threshold level. Performance at targeted levels is
intended to compensate executive officers with bonuses at the mid-point for
bonuses for comparable levels of responsibility at Fortune 1000 companies.
12
For 2000, Executive Incentive Plan award levels were based on attainment of
earnings per share goals with target award levels of 70% of base salary for
Group Presidents, 50% of base salary for SoCalGas Presidents of Business
Units, and 45% of base salary for SoCalGas Vice Presidents, with maximum award
levels ranging from 140% to 90% of base salary. Performance for the year
resulted in cash bonuses of $364,000 for Mr. Mitchell (prorated for period of
service) and $468,900 for Mr. Guiles, with corresponding lesser amounts to
other executive officers. Mr. Guiles also received a special recognition bonus
of $35,800 relating to his services at SDG&E.
Long Term Incentives
Long term incentive opportunities are provided by equity and equity-based
awards under Sempra Energy's 1998 Long Term Incentive Plan. The plan permits a
wide variety of equity and equity-based incentive awards to allow the
Compensation Committees to respond to changes in market conditions and
compensation practices
During 2000, Sempra Energy granted to executives and other employees of
Sempra Energy and its subsidiaries non-qualified stock options to purchase
Sempra Energy Common Stock. These option grants to executive officers of the
Gas Company are described in this Proxy Statement under the caption "Executive
Compensation--Stock Options and Stock Appreciation Rights."
Share Ownership Guidelines
The Compensation Committees believe that a commitment to increased share
ownership by executives of Sempra Energy and its subsidiaries is an important
element in aligning the interests of executives with those of shareholders.
This belief has influenced the design of compensation plans and, in addition,
stock ownership guidelines have been established to further strengthen the
link between corporate performance and compensation. These guidelines are
summarized under the caption "Share Ownership."
COMPENSATION COMMITTEE
Richard J. Stegemeier, Chair
Hyla H. Bertea
Ralph R. Ocampo
Thomas C. Stickel
March 6, 2001
13
EXECUTIVE COMPENSATION
Summary of Cash and Other Compensation
The table below summarizes, for the last three years, the compensation paid
or accrued by Sempra Energy and its predecessors and subsidiaries to each of
the executive officers of the Gas Company named in the table.
Summary Compensation Table
Long Term Compensation
----------------------------
Awards Payouts
Annual ------------------- --------
Compensation LTIP
----------------- Securities Payouts
Name and Principal Underlying ($) (A) All Other
Position Year Salary $ Bonus $ Options / SARS (#) (B) Compensation (C)
- ------------------ ---- -------- -------- ------------------- -------- ----------------
Edwin A. Guiles (D)..... 2000 $373,740 $504,700 73,500 $ 35,685 $ 39,933
Chairman, President and 1999 $304,731 $243,750 54,500 $ 46,273 $ 46,931
President of Energy 1998 $284,539 $278,525 32,520 $ 74,388 $ 438,727
Distribution Services
Lee M. Stewart.......... 2000 $297,029 $298,000 70,600 $ -0- $ 40,895
President of Energy 1999 $288,659 $235,544 50,500 $ -0- $ 40,855
Transportation Services 1998 $264,813 $222,951 65,135 $ -0- $ 316,488
Roy M. Rawlings......... 2000 $224,259 $178,700 35,600 $ -0- $ 36,529
Vice President 1999 $216,895 $177,795 25,500 $ -0- $ 33,417
1998 $204,099 $166,635 28,138 $ -0- $ 177,295
Richard M. Morrow....... 2000 $205,397 $163,600 32,600 $ -0- $ 27,884
Vice President 1999 $195,415 $160,380 23,000 $ -0- $ 26,920
1998 $181,664 $143,474 26,354 $ -0- $ 89,225
Anne S. Smith........... 2000 $202,221 $161,200 32,100 $ -0- $ 28,352
Vice President 1999 $188,767 $155,034 22,200 $ -0- $ 23,902
1998 $186,682 $137,600 25,842 $ -0- $ 10,731
Warren I. Mitchell (E).. 2000 $269,135 $364,000 191,600 $233,504 $1,964,126
Chairman and President 1999 $474,769 $498,750 128,700 $ -0- $ 61,368
1998 $437,409 $506,230 140,296 $ -0- $ 816,659
Debra L. Reed (F)....... 2000 $160,328 $182,500 73,500 $ -0- $ 37,315
President of Energy 1999 $298,732 $243,750 52,300 $ -0- $ 38,432
Distribution Services 1998 $282,646 $237,526 66,355 $ -0- $ 326,134
- --------
(A) Long term incentive plan payouts represent the fair market value of shares
of restricted stock for which forfeiture and transfer restrictions
terminated during the year based upon satisfaction of long term
performance goals. No shares of restricted stock were granted in 2000.
(B) The aggregate holdings/value of restricted stock held on December 31, 2000
by the individuals listed in the table are: 6,172 shares/$143,499 for Mr.
Guiles; 4,908 shares/$114,111 for Mr. Stewart; 2,656 shares/$61,752 for
Mr. Rawlings; 2,304 shares/$53,568 for Mr. Morrow; 2,260 shares/$52,545
for Ms. Smith, 0 shares/$0 for Mr. Mitchell; and 5,212 shares/$121,179 for
Ms. Reed. Regular quarterly dividends are paid on restricted stock held by
these individuals.
(C) All other compensation includes amounts paid as (i) interest on deferred
compensation above 120% of the applicable federal rate, (ii) life
insurance premiums, (iii) financial and estate planning services,
(iv) contributions to defined benefit plans and related supplemental
plans, and (v) car allowances. The respective amounts paid in 2000 were
$446, $6,453, $5,809, $19,725 and $7,500 for Mr. Guiles, $4,918,
14
$1,070, $10,550, $17,357 and $7,000 for Mr. Stewart; $11,147, $952, $7,000,
$10,430, and $7,000 for Mr. Rawlings; $-0-, $1,534, $7,000, $12,350 and
$7,000 for Mr. Morrow; $3,791, $124, $5,517, $11,920 and $7,000 for Ms.
Smith; $7,533, $21,975, $10,000, $24,330 and $3,635 for Mr. Mitchell, and
$1,263, $435, $10,000, $18,617 and $7,000 for Ms. Reed.
Amounts for Mr. Mitchell for 2000 also include $1,896,653 paid upon his
retirement and are reflective of amounts he was entitled to receive under
his employment agreement with Sempra Energy.
Amounts for 1998 also include incentive/retention bonus accruals under
agreements entered into in 1997 in connection with the business combination
of Pacific Enterprises and Enova Corporation. These amounts are $405,000
for Mr. Guiles, $292,500 for Mr. Stewart, $156,600 for Mr. Rawlings,
$72,065 for Mr. Morrow, $136,228 for Ms. Smith, $782,000 for Mr. Mitchell
and $303,750 for Ms. Reed.
(D) Mr. Guiles became Chairman, President and President of Energy Distribution
Services of SoCalGas and Group President--Regulated Business Units of
Sempra Energy in June 2000. Amounts for prior periods include amounts paid
as an executive officer of SDG&E of which he continues to remain Chairman.
(E) Mr. Mitchell retired in July 2000.
(F) Ms. Reed transferred in June 2000 to become President of SDG&E.
Stock Options and Stock Appreciation Rights
The following table contains information concerning the grant of stock
options during 2000 to the executive officers of the Gas Company named in the
Summary Compensation Table. All options are to purchase Sempra Energy Common
Stock, were granted at an exercise price of 100% of the fair market value of
the option shares on the date of the grant and are for a ten-year term subject
to earlier expiration following termination of employment.
Option / SAR Grants in 2000
Number of % of Total
Shares Options / SARs
Underlying Granted to
Options / SARs Employees Exercise Expiration Grant Date
Name Granted (#) (A) in 2000 Price ($/Sh) Date Present Value
- ---- --------------- -------------- ------------ ---------- -------------
Edwin A. Guiles......... 73,500 1.69% $19.06 02/08/10 $279,300
Lee M. Stewart.......... 70,600 1.63% $19.06 02/08/10 $268,280
Roy A. Rawlings......... 35,600 0.82% $19.06 02/08/10 $135,280
Richard M. Morrow....... 32,600 0.75% $19.06 02/08/10 $123,880
Anne S. Smith........... 32,100 0.74% $19.06 02/08/10 $121,980
Warren I. Mitchell...... 191,600 4.42% $19.06 02/08/10 $728,080
Debra L. Reed........... 73,500 1.69% $19.06 02/08/10 $279,300
- --------
(A) Exercisable in cumulative installments of one-fourth of the shares
initially subject to the option on each of the first four anniversaries of
the grant date.
Sempra Energy used a modified Black-Scholes option pricing model to develop
the theoretical values set forth under the "Grant Date Present Value" column.
Grant date present value was $3.80 based on the following assumptions: share
volatility--19.35%; dividend yield--5.26%; risk-free rate of return--6.71%;
and outstanding term--10 years.
15
The following table contains information with respect to the executive
officers of the Gas Company named in the Summary Compensation Table concerning
the exercise of options and stock appreciation rights during 2000 and
unexercised options and stock appreciation rights held on December 31, 2000.
Option / SAR Exercises and Holdings
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options / SARs Options / SARs at
Shares at Year-End (#) Year-End ($)(A)
Acquired on Value ------------------------- -------------------------
Name Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ -------- ----------- ------------- ----------- -------------
Edwin A. Guiles......... -0- $ -0- 29,860 130,560 $ 30,600 $399,581
Lee M. Stewart.......... 22,557 $ 60,747 82,411 135,403 $119,670 $380,856
Roy A. Rawlings......... -0- $ -0- 53,452 66,914 $176,042 $192,106
Richard M. Morrow....... -0- $ -0- 40,657 61,147 $ 94,223 $175,325
Anne S. Smith........... -0- $ -0- 51,479 59,791 $174,185 $171,881
Warren I. Mitchell...... 360,902 $563,798 155,334 -0- $ -0- $ -0-
Debra L. Reed........... 15,000 $ 40,395 91,028 140,263 $160,734 $396,038
- --------
(A) The exercise price of outstanding options ranges from $16.12 to $27.92.
Pension Plans
The following table shows the estimated single life annual pension annuity
benefit provided to the executive officers of the Gas Company named in the
Summary Compensation Table under the Sempra Energy Supplemental Executive
Retirement Plan (combined with benefits payable under the other pension plans
of the Gas Company and its affiliates in which the officers also participate)
based on the specified compensation levels and years of credited service and
retirement at age 65.
Pension Plan Table
($000's)
Years of Service
Pension Plan ------------------------------------------------------------------------------
Compensation 5 10 20 30 40
------------ ---- ---- ---- ---- ----
$ 400 $ 80 $160 $240 $250 $260
$ 600 $120 $240 $360 $375 $390
$ 800 $160 $320 $480 $500 $520
$1,000 $200 $400 $600 $625 $650
$1,200 $240 $480 $720 $750 $780
Pension benefits are based on average salary for the highest two years of
service and the average of the three highest annual bonuses during the last
ten years of service. Years of service includes service with subsidiaries and
number 28 years for Mr. Guiles, 33 years for Mr. Stewart, 27 years for Mr.
Rawlings, 26 years for Mr. Morrow, 23 years for Ms. Smith, 42 years for Mr.
Mitchell, and 22 years for Ms. Reed.
Mr. Guiles is entitled to pension benefits at the greater of that provided
by Sempra Energy's pension plans or that to which he would have been entitled
under the Enova Corporation pension plans (including a supplemental pension
plan) had those plans remained in effect. Under the Enova Corporation plans
and retirement after attaining age 62, Mr. Guiles would be entitled to a
monthly pension benefit of 60% of his final pay. Final pay is defined as the
monthly base pay rate in effect during the month immediately preceding
retirement, plus one-twelfth of the average of the highest three years' gross
bonus awards. The plans provide for reduced pension benefits for retirement
between the ages of 55 and 61, and surviving spouse and disability benefits
equal to 50% and 100%, respectively, of pension benefits.
16
Employment-Related Agreements
Sempra Energy has entered into a severance agreement with each of the Gas
Company's executive officers providing for the payment of benefits in the
event Sempra Energy and its subsidiaries terminate the executive's employment
(other than for cause, death or disability) or the executive terminates his or
her employment for good reason.
The benefits payable under the severance agreements include (i) a lump sum
cash payment equal to the executive's annual base salary and average annual
bonus for the two years prior to termination multiplied, in certain cases
depending upon the officer's position, by as much as 200%; (ii) continuation
of health benefits for a period of two years; and (iii) financial planning and
outplacement services. In addition, if the termination occurs within two years
after a change in control of Sempra Energy, (i) the lump sum cash payment
multiple is increased to as much as 300%; (ii) all equity-based incentive
awards immediately vest and become exercisable or payable and all restrictions
on the awards immediately lapse; (iii) all deferred compensation is paid out
in a lump sum; (iv) a lump sum cash payment is made equal to the present value
of the executive's benefits under the Supplemental Executive Retirement Plan
calculated as if the executive had attained age 62 (or, if the executive is
older than 62, based on the executive's actual age) and applying certain early
retirement factors; and (v) continued life, disability, accident and health
insurance for two years. The agreements also provide for a gross up payment to
offset the effects of any excise tax imposed on the executive under Section
4999 of the Internal Revenue Code.
Good reason is defined in the severance agreements to include the
assignment to the executive of duties materially inconsistent with those
appropriate for an executive of Sempra Energy and its subsidiaries, a material
reduction in the executive's overall standing and responsibilities within
Sempra Energy and its subsidiaries and a material reduction in the executive's
annualized compensation and benefit opportunities other than across-the-board
reductions affecting all similarly situated executives of comparable rank. In
addition, following a change in control of Sempra Energy, good reason also
includes an adverse change in the executive's title, authority, duties,
responsibilities or reporting lines, a 10% or greater reduction in the
executive's annualized compensation and benefit opportunities, relocation of
the executive's principal place of employment by more than 30 miles, and a
substantial increase in business travel obligations. A change in control is
defined to include the acquisition by one person or group of 20% or more of
the voting power of Sempra Energy's shares; the election of a new majority of
the board comprised of individuals who are not recommended for election by
two-thirds of the current directors or successors to the current directors who
were so recommended for election; certain mergers, consolidations or sales of
assets that result in the shareholders of Sempra Energy owning less than 60%
of the voting power of Sempra Energy or of the surviving entity or its parent;
and shareholder approval of the liquidation or dissolution of Sempra Energy.
17
SHAREHOLDER PROPOSALS
Shareholders intending to bring any business before an Annual Meeting of
Shareholders of the Gas Company, including nominations of persons for election
as directors, must give written notice to the Secretary of SoCalGas of the
business to be presented. The notice must be received at the Gas Company's
offices within the specified periods and must be accompanied by the
information required by the By-laws. A copy of these By-law requirements will
be provided upon request in writing to the Secretary of the Gas Company.
The period for notice of business to be brought by shareholders before the
2001 Annual Meeting of Shareholders has expired. The period for the receipt by
SoCalGas of notice of business to be brought by shareholders before the 2002
Annual Meeting of Shareholders will commence on January 10, 2002 and end on
March 11, 2002.
ANNUAL REPORTS
The Gas Company's Annual Report to the Securities and Exchange Commission
on Form 10-K is being mailed to shareholders together with this Information
Statement.
18
Appendix to
Information Statement
SOUTHERN CALIFORNIA GAS COMPANY
AUDIT COMMITTEE CHARTER
Role
The primary purpose of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities for management's
conduct of the Company's financial reporting processes.
Membership and Meetings
The Audit Committee shall be comprised of not less than three members of
the Board of Directors. The Committee's composition will meet the requirements
of the New York Stock Exchange. Accordingly, the members of the Audit
Committee will be directors:
. None of whom have any relationship to the Company that may interfere
with the exercise of independence from management and the Company; and
. All of whom, as determined by the Board of Directors in its business
judgment, are financially literate or will become financially literate
within a reasonable period of time after appointment to the Committee
and at least one of whom, as so determined by the Board of Directors,
has accounting or related financial management expertise.
The Audit Committee will establish its meeting schedule, including
executive sessions with management, internal audit staff and the outside
auditors.
Responsibilities
The Company's management is responsible for preparing the Company's
financial statements and the outside auditors are responsible for auditing the
financial statements. Additionally, the Company's financial management
including the internal audit staff, as well as the outside auditors, have more
time, knowledge and more detailed information of the Company than does the
Audit Committee. Consequently, the Audit Committee's role is one of oversight
and it does not provide any expert assurance or certification as to the
Company's financial statements or the work of the outside auditors or that of
the internal audit staff. However, the outside auditor and the director of
internal audit are ultimately accountable to the Board of Directors and the
Audit Committee.
The following functions are the common recurring activities of the Audit
Committee in carrying out its oversight function:
. The Audit Committee will review and discuss with management the audited
financial statements.
. The Audit Committee will discuss with the outside auditors the matters
required to be discussed by Statement of Auditing Standards No. 61.
. The Audit Committee will:
-- Annually request from the outside auditors, a formal written
statement delineating all relationships between the auditor and the
Company consistent with Independence Standards Board No. 1;
-- Discuss with the outside auditors any such disclosed relationships
and their impact on the outside auditors' independence; and
-- Recommend that the Board of Directors take appropriate action in
response to the outside auditors' report to satisfy itself of the
auditors' independence.
. The Audit Committee will discuss with management, the director of
internal audit and the outside auditors the adequacy of the Company's
internal controls.
A-1
. The Audit Committee, based on the above review and discussions, will
make a recommendation to the Board of Directors as to the inclusion of
the Company's audited financial statements in the Company's Annual
Report to the Securities and Exchange Commission on Form 10-K.
. The Audit Committee has the responsibility to evaluate the outside
auditor and to recommend to the Board of Directors the retention of and,
where appropriate, replacement of the outside auditors.
. The Audit Committee will review the adequacy of this Charter on an
annual basis and recommend any changes believed to be appropriate to the
Board of Directors.
As adopted on March 7, 2000
A-2