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SEMPRA ENERGY 10-Q 2013
Sempra Energy/SDG&E/SoCalGas June 30, 2013 10-Q


  
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 10-Q
 
(Mark One)
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended
June 30, 2013
   
 
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 Registrants as Specified in their Charters, Address and Telephone Number
States of Incorporation
I.R.S. Employer
Identification Nos.
Former name, former address and former fiscal year, if changed since last report
1-14201
SEMPRA ENERGY
California
33-0732627
No change
 
101 Ash Street
     
 
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
     
         
 
 
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
           
 
Yes
X
 
No
 

 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
           
Sempra Energy
Yes
X
 
No
 
San Diego Gas & Electric Company
Yes
X
 
No
 
Southern California Gas Company
Yes
X
 
No
 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
 
Large
accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Sempra Energy
[  X  ]
[      ]
[       ]
[      ]
San Diego Gas & Electric Company
[       ]
[      ]
[  X  ]
[      ]
Southern California Gas Company
[       ]
[      ]
[  X  ]
[      ]
 
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
X
San Diego Gas & Electric Company
Yes
   
No
X
Southern California Gas Company
Yes
   
No
X
           
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 August 2, 2013:
         
           
Sempra Energy
244,248,233 shares
San Diego Gas & Electric Company
Wholly owned by Enova Corporation, which is wholly owned by Sempra Energy
Southern California Gas Company
Wholly owned by Pacific Enterprises, which is wholly owned by Sempra Energy
 
 
 
 
 
 

SEMPRA ENERGY FORM 10-Q
SAN DIEGO GAS & ELECTRIC COMPANY FORM 10-Q
SOUTHERN CALIFORNIA GAS COMPANY FORM 10-Q
TABLE OF CONTENTS
 
 
 
Page
Information Regarding Forward-Looking Statements
4
   
PART I – FINANCIAL INFORMATION
 
Item 1.
Financial Statements
5
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
75
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
113
Item 4.
Controls and Procedures
114
     
PART II – OTHER INFORMATION
 
Item 1.
Legal Proceedings
115
Item 1A.
Risk Factors
115
Item 6.
Exhibits
117
     
Signatures
119
     

This combined Form 10-Q is separately filed by Sempra Energy, San Diego Gas & Electric Company and Southern California Gas Company. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes representations only as to itself and makes no other representation whatsoever as to any other company.

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

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
 

We make statements in this report that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are necessarily based upon assumptions with respect to the future, involve risks and uncertainties, and are not guarantees of performance. These forward-looking statements represent our estimates and assumptions only as of the filing date of this report. We assume no obligation to update or revise any forward-looking statement as a result of new information, future events or other factors.
 
In this report, when we use words such as “believes,” “expects,” “anticipates,” “plans,” “estimates,” “projects,” “forecasts,” “contemplates,” “intends,” “depends,” “should,” “could,” “would,” “will,” “may,” “potential,” “target,” “pursue,” “goals,” or similar expressions, or when we discuss our guidance, strategy, plans, goals, initiatives, objectives or intentions, we are making forward-looking statements.
 
Factors, among others, that could cause our actual results and future actions to differ materially from those described in forward-looking statements include
 
§  
local, regional, national and international economic, competitive, political, legislative and regulatory conditions and developments;
 
§  
actions and the timing of actions by the California Public Utilities Commission, California State Legislature, Federal Energy Regulatory Commission, U.S. Department of Energy, Nuclear Regulatory Commission, Atomic Safety and Licensing Board, California Energy Commission, California Air Resources Board, and other regulatory, governmental and environmental bodies in the United States and other countries in which we operate;
 
§  
capital markets conditions, including the availability of credit and the liquidity of our investments;
 
§  
inflation, interest and exchange rates;
 
§  
the impact of benchmark interest rates, generally Moody’s A-rated utility bond yields, on our California Utilities’ cost of capital;
 
§  
the timing and success of business development efforts and construction, maintenance and capital projects, including risks inherent in the ability to obtain, and the timing of granting of, permits, licenses, certificates and other authorizations;
 
§  
energy markets, including the timing and extent of changes and volatility in commodity prices;
 
§  
the availability of electric power, natural gas and liquefied natural gas, including disruptions caused by failures in the North American transmission grid, pipeline explosions, equipment failures and the decommissioning of San Onofre Nuclear Generating Station (SONGS);
 
§  
weather conditions, natural disasters, catastrophic accidents, and conservation efforts;
 
§  
risks inherent in nuclear power facilities and radioactive materials storage, including the catastrophic release of such materials, the disallowance of the recovery of the investment in or operating costs of the nuclear facility due to an extended outage and facility closure, and increased regulatory oversight;
 
§  
risks posed by decisions and actions of third parties who control the operations of investments in which we do not have a controlling interest;
 
§  
wars, terrorist attacks and cybersecurity threats;
 
§  
business, regulatory, environmental and legal decisions and requirements;
 
§  
expropriation of assets by foreign governments and title and other property disputes;
 
§  
the impact on reliability of SDG&E’s electric transmission and distribution system due to increased power supply from renewable energy sources;
 
§  
the impact on competitive customer rates of the growth in distributed and local power generation and the corresponding decrease in demand for power delivered through our electric transmission and distribution system;
 
§  
the inability or determination not to enter into long-term supply and sales agreements or long-term firm capacity agreements;
 
§  
the resolution of litigation; and
 
§  
other uncertainties, all of which are difficult to predict and many of which are beyond our control.
 
We caution you not to rely unduly on any forward-looking statements. You should review and consider carefully the risks, uncertainties and other factors that affect our business as described in this report and in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.
 
 
 
 
PART I – FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS
 

SEMPRA ENERGY
               
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
               
(Dollars in millions, except per share amounts)
               
             
   
Three months ended June 30,
 
Six months ended June 30,
   
2013 
2012 
 
2013 
2012 
   
(unaudited)
REVENUES
               
Utilities
$
 2,332 
$
 1,838 
$
 4,666 
$
 3,929 
Energy-related businesses
 
 319 
 
 251 
 
 635 
 
 543 
    Total revenues
 
 2,651 
 
 2,089 
 
 5,301 
 
 4,472 
EXPENSES AND OTHER INCOME
               
Utilities:
               
    Cost of natural gas
 
 (365)
 
 (221)
 
 (921)
 
 (652)
    Cost of electric fuel and purchased power
 
 (477)
 
 (349)
 
 (924)
 
 (737)
Energy-related businesses:
               
    Cost of natural gas, electric fuel and purchased power
 
 (94)
 
 (81)
 
 (205)
 
 (210)
    Other cost of sales
 
 (49)
 
 (41)
 
 (97)
 
 (74)
Operation and maintenance
 
 (740)
 
 (727)
 
 (1,464)
 
 (1,398)
Depreciation and amortization
 
 (247)
 
 (266)
 
 (542)
 
 (523)
Franchise fees and other taxes
 
 (81)
 
 (79)
 
 (187)
 
 (175)
Loss from plant closure
 
 (200)
 
 ― 
 
 (200)
 
 ― 
Gain on sale of assets
 
 ― 
 
 7 
 
 74 
 
 7 
Equity earnings (losses), before income tax
 
 8 
 
 (293)
 
 18 
 
 (281)
Other income, net
 
 26 
 
 18 
 
 63 
 
 93 
Interest income
 
 4 
 
 4 
 
 10 
 
 9 
Interest expense
 
 (138)
 
 (113)
 
 (276)
 
 (226)
Income (losses) before income taxes and equity earnings
               
    of certain unconsolidated subsidiaries
 
 298 
 
 (52)
 
 650 
 
 305 
Income tax (expense) benefit
 
 (32)
 
 118 
 
 (210)
 
 1 
Equity earnings, net of income tax
 
 1 
 
 8 
 
 5 
 
 19 
Net income
 
 267 
 
 74 
 
 445 
 
 325 
Earnings attributable to noncontrolling interests
 
 (21)
 
 (11)
 
 (19)
 
 (24)
Preferred dividends of subsidiaries
 
 (1)
 
 (1)
 
 (3)
 
 (3)
Earnings
$
 245 
$
 62 
$
 423 
$
 298 
                   
Basic earnings per common share
$
 1.00 
$
 0.26 
$
 1.74 
$
 1.24 
Weighted-average number of shares outstanding, basic (thousands)
 
 243,603 
 
 241,141 
 
 243,449 
 
 240,853 
                   
Diluted earnings per common share
$
 0.98 
$
 0.25 
$
 1.70 
$
 1.21 
Weighted-average number of shares outstanding, diluted (thousands)
 
 248,515 
 
 246,260 
 
 248,279 
 
 245,766 
Dividends declared per share of common stock
$
 0.63 
$
 0.60 
$
 1.26 
$
 1.20 
See Notes to Condensed Consolidated Financial Statements.
       


SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions)
   
Three months ended June 30,
   
2013
 
2012
   
(unaudited)
     
Non-
     
Non-
 
   
Sempra
controlling
   
Sempra
controlling
 
   
Energy
Interests
Total
 
Energy
Interests
Total
Net income
$
 246 
$
 21 
$
 267 
 
$
 63 
$
 11 
$
 74 
Other comprehensive income (loss), net of income tax:
                         
    Foreign currency translation adjustments
 
 134 
 
 (20)
 
 114 
   
 (33)
 
 (1)
 
 (34)
    Net actuarial gain
 
 1 
 
 ― 
 
 1 
   
 4 
 
 ― 
 
 4 
    Financial instruments
 
 23 
 
 15 
 
 38 
   
 (9)
 
 (9)
 
 (18)
Total other comprehensive income (loss)
 
 158 
 
 (5)
 
 153 
   
 (38)
 
 (10)
 
 (48)
Total comprehensive income
 
 404 
 
 16 
 
 420 
   
 25 
 
 1 
 
 26 
Preferred dividends of subsidiaries
 
 (1)
 
 ― 
 
 (1)
   
 (1)
 
 ― 
 
 (1)
Total comprehensive income, after preferred
                         
    dividends of subsidiaries
$
 403 
$
 16 
$
 419 
 
$
 24 
$
 1 
$
 25 
   
Six months ended June 30,
   
2013
 
2012
   
(unaudited)
     
Non-
     
Non-
 
   
Sempra
controlling
   
Sempra
controlling
 
   
Energy
Interests
Total
 
Energy
Interests
Total
Net income
$
 426 
$
 19 
$
 445 
 
$
 301 
$
 24 
$
 325 
Other comprehensive income (loss), net of income tax:
                         
    Foreign currency translation adjustments
 
 144 
 
 (24)
 
 120 
   
 34 
 
 3 
 
 37 
    Net actuarial gain
 
 4 
 
 ― 
 
 4 
   
 5 
 
 ― 
 
 5 
    Financial instruments
 
 9 
 
 18 
 
 27 
   
 (6)
 
 (9)
 
 (15)
Total other comprehensive income (loss)
 
 157 
 
 (6)
 
 151 
   
 33 
 
 (6)
 
 27 
Total comprehensive income
 
 583 
 
 13 
 
 596 
   
 334 
 
 18 
 
 352 
Preferred dividends of subsidiaries
 
 (3)
 
 ― 
 
 (3)
   
 (3)
 
 ― 
 
 (3)
Total comprehensive income, after preferred
                         
    dividends of subsidiaries
$
 580 
$
 13 
$
 593 
 
$
 331 
$
 18 
$
 349 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 

SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
   
June 30,
December 31,
 
2013 
2012(1)
   
(unaudited)
   
ASSETS
       
Current assets:
       
    Cash and cash equivalents
$
 954 
$
 475 
    Restricted cash
 
 89 
 
 46 
    Trade accounts receivable, net
 
 1,007 
 
 1,146 
    Other accounts and notes receivable, net
 
 154 
 
 153 
    Income taxes receivable
 
 129 
 
 56 
    Deferred income taxes
 
 76 
 
 148 
    Inventories
 
 357 
 
 408 
    Regulatory balancing accounts – undercollected
 
 325 
 
 395 
    Regulatory assets
 
 190 
 
 62 
    Fixed-price contracts and other derivatives
 
 81 
 
 95 
    U.S. Treasury grants receivable
 
 164 
 
 258 
    Asset held for sale, power plant
 
 ― 
 
 296 
    Other
 
 135 
 
 157 
        Total current assets
 
 3,661 
 
 3,695 
           
Investments and other assets:
       
    Restricted cash
 
 22 
 
 22 
    Regulatory assets arising from pension and other postretirement
       
        benefit obligations
 
 1,170 
 
 1,151 
    Regulatory assets arising from wildfire litigation costs
 
 352 
 
 364 
    Other regulatory assets
 
 1,872 
 
 1,227 
    Nuclear decommissioning trusts
 
 938 
 
 908 
    Investments
 
 1,466 
 
 1,516 
    Goodwill
 
 1,042 
 
 1,111 
    Other intangible assets
 
 431 
 
 436 
    Sundry
 
 895 
 
 878 
        Total investments and other assets
 
 8,188 
 
 7,613 
           
Property, plant and equipment:
       
    Property, plant and equipment
 
 33,728 
 
 33,528 
    Less accumulated depreciation and amortization
 
 (8,557)
 
 (8,337)
        Property, plant and equipment, net ($452 and $466 at June 30, 2013 and
            December 31, 2012, respectively, related to VIE)
 
 25,171 
 
 25,191 
Total assets
$
 37,020 
$
 36,499 
(1)
Derived from audited financial statements.
       
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
       

SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
   
June 30,
December 31,
 
2013 
2012(1)
   
(unaudited)
   
LIABILITIES AND EQUITY
       
Current liabilities:
       
    Short-term debt
$
 510 
$
 546 
    Accounts payable – trade
 
 959 
 
 976 
    Accounts payable – other
 
 114 
 
 134 
    Dividends and interest payable
 
 271 
 
 266 
    Accrued compensation and benefits
 
 235 
 
 337 
    Regulatory balancing accounts – overcollected
 
 290 
 
 141 
    Current portion of long-term debt
 
 1,540 
 
 725 
    Fixed-price contracts and other derivatives
 
 71 
 
 77 
    Customer deposits
 
 142 
 
 143 
    Reserve for wildfire litigation
 
 182 
 
 305 
    Other
 
 411 
 
 608 
        Total current liabilities
 
 4,725 
 
 4,258 
Long-term debt ($330 and $335 at June 30, 2013 and December 31, 2012, respectively,
        related to VIE)
 
 10,530 
 
 11,621 
           
Deferred credits and other liabilities:
       
    Customer advances for construction
 
 140 
 
 144 
    Pension and other postretirement benefit obligations, net of plan assets
 
 1,471 
 
 1,456 
    Deferred income taxes
 
 2,389 
 
 2,100 
    Deferred investment tax credits
 
 44 
 
 46 
    Regulatory liabilities arising from removal obligations
 
 2,842 
 
 2,720 
    Asset retirement obligations
 
 1,949 
 
 2,033 
    Fixed-price contracts and other derivatives
 
 237 
 
 252 
    Deferred credits and other
 
 1,066 
 
 1,107 
        Total deferred credits and other liabilities
 
 10,138 
 
 9,858 
Contingently redeemable preferred stock of subsidiary
 
 79 
 
 79 
           
Commitments and contingencies (Note 10)
       
           
Equity:
       
    Preferred stock (50 million shares authorized; none issued)
 
 ― 
 
 ― 
    Common stock (750 million shares authorized; 244 million and 242 million shares
       
        outstanding at June 30, 2013 and December 31, 2012, respectively; no par value)
 
 2,366 
 
 2,217 
    Retained earnings
 
 8,557 
 
 8,441 
    Accumulated other comprehensive income (loss)
 
 (219)
 
 (376)
        Total Sempra Energy shareholders’ equity
 
 10,704 
 
 10,282 
    Preferred stock of subsidiary
 
 20 
 
 20 
    Other noncontrolling interests
 
 824 
 
 381 
        Total equity
 
 11,548 
 
 10,683 
Total liabilities and equity
$
 37,020 
$
 36,499 
(1)
Derived from audited financial statements.
       
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
       

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
   
Six months ended June 30,
   
2013 
2012 
   
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
       
    Net income
$
 445 
$
 325 
    Adjustments to reconcile net income to net cash provided
       
        by operating activities:
       
            Depreciation and amortization
 
 542 
 
 523 
            Deferred income taxes and investment tax credits
 
 251 
 
 (53)
            Gain on sale of assets
 
 (74)
 
 (7)
            Loss from plant closure
 
 200 
 
 ― 
            Equity (earnings) losses
 
 (23)
 
 262 
            Fixed-price contracts and other derivatives
 
 (28)
 
 1 
            Other
 
 1 
 
 8 
    Net change in other working capital components
 
 20 
 
 28 
    Changes in other assets
 
 (237)
 
 13 
    Changes in other liabilities
 
 8 
 
 52 
        Net cash provided by operating activities
 
 1,105 
 
 1,152 
           
CASH FLOWS FROM INVESTING ACTIVITIES
       
    Expenditures for property, plant and equipment
 
 (1,130)
 
 (1,517)
    Expenditures for investments and acquisition of business, net of cash acquired
 
 (5)
 
 (303)
    Proceeds from sale of assets and investment
 
 384 
 
 9 
    Proceeds from U.S. Treasury grants
 
 74 
 
 ― 
    Distributions from investments
 
 95 
 
 31 
    Purchases of nuclear decommissioning and other trust assets
 
 (330)
 
 (327)
    Proceeds from sales by nuclear decommissioning and other trusts
 
 326 
 
 329 
    Decrease in restricted cash
 
 143 
 
 68 
    Increase in restricted cash
 
 (186)
 
 (61)
    Other
 
 2 
 
 (10)
        Net cash used in investing activities
 
 (627)
 
 (1,781)
           
CASH FLOWS FROM FINANCING ACTIVITIES
       
    Common dividends paid
 
 (299)
 
 (260)
    Preferred dividends paid by subsidiaries
 
 (3)
 
 (3)
    Issuances of common stock
 
 22 
 
 45 
    Repurchases of common stock
 
 (45)
 
 (16)
    Issuances of debt (maturities greater than 90 days)
 
 894 
 
 1,167 
    Payments on debt (maturities greater than 90 days)
 
 (1,134)
 
 (559)
    Proceeds from sale of noncontrolling interests, net of $25 in offering costs
 
 574 
 
 ― 
    (Decrease) increase in short-term debt, net
 
 (10)
 
 241 
    Distributions to noncontrolling interests
 
 (13)
 
 (10)
    Other
 
 18 
 
 (11)
        Net cash provided by financing activities
 
 4 
 
 594 
         
Effect of exchange rate changes on cash and cash equivalents
 
 (3)
 
 4 
           
Increase (decrease) in cash and cash equivalents
 
 479 
 
 (31)
Cash and cash equivalents, January 1
 
 475 
 
 252 
Cash and cash equivalents, June 30
$
 954 
$
 221 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
       

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in millions)
   
Six months ended June 30,
 
2013 
2012 
 
(unaudited)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
       
    Interest payments, net of amounts capitalized
$
 269 
$
 209 
    Income tax payments, net of refunds
 
 78 
 
 93 
           
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
       
    Acquisition of business:
       
 
Assets acquired
$
 ― 
$
 29 
 
Cash paid, net of cash acquired
 
 ― 
 
 (19)
 
Liabilities assumed
$
 ― 
$
 10 
           
    Nuclear facility plant reclassified to regulatory asset, net of depreciation and amortization
$
 512 
$
 ― 
    Accrued capital expenditures
 
 214 
 
 354 
    Capital expenditures recoverable by U.S. Treasury grants receivable
 
 3 
 
 42 
    Sequestration of U.S. Treasury grants receivable
 
 (23)
 
 ― 
           
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
       
    Dividends declared but not paid
$
 158 
$
 149 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
SAN DIEGO GAS & ELECTRIC COMPANY
       
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
       
(Dollars in millions)
       
           
 
Three months ended June 30,
 
Six months ended June 30,
 
2013 
2012 
 
2013 
 
2012 
 
(unaudited)
Operating revenues
               
    Electric
$
 943 
$
 680 
$
 1,715 
$
 1,351 
    Natural gas
 
 121 
 
 100 
 
 288 
 
 263 
        Total operating revenues
 
 1,064 
 
 780 
 
 2,003 
 
 1,614 
Operating expenses
               
    Cost of electric fuel and purchased power
 
 252 
 
 140 
 
 461 
 
 303 
    Cost of natural gas
 
 45 
 
 34 
 
 121 
 
 101 
    Operation and maintenance
 
 289 
 
 275 
 
 586 
 
 543 
    Depreciation and amortization
 
 107 
 
 119 
 
 241 
 
 231 
    Franchise fees and other taxes
 
 46 
 
 43 
 
 101 
 
 89 
    Loss from plant closure
 
 200 
 
 ― 
 
 200 
 
 ― 
        Total operating expenses
 
 939 
 
 611 
 
 1,710 
 
 1,267 
Operating income
 
 125 
 
 169 
 
 293 
 
 347 
Other income, net
 
 9 
 
 24 
 
 20 
 
 54 
Interest income
 
 ― 
 
 ― 
 
 1 
 
 ― 
Interest expense
 
 (49)
 
 (39)
 
 (97)
 
 (75)
Income before income taxes
 
 85 
 
 154 
 
 217 
 
 326 
Income tax expense
 
 (12)
 
 (53)
 
 (63)
 
 (113)
Net income
 
 73 
 
 101 
 
 154 
 
 213 
(Earnings) losses attributable to noncontrolling interest
 
 (7)
 
 (5)
 
 4 
 
 (11)
Earnings
 
 66 
 
 96 
 
 158 
 
 202 
Preferred dividend requirements
 
 (1)
 
 (1)
 
 (2)
 
 (2)
Earnings attributable to common shares
$
 65 
$
 95 
$
 156 
$
 200 
See Notes to Condensed Consolidated Financial Statements.
       



SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions)
 
Three months ended June 30,
 
2013
 
2012
 
(unaudited)
   
Non-
     
Non-
 
   
controlling
     
controlling
 
 
SDG&E
Interest
Total
 
SDG&E
Interest
Total
Net income
$
 66 
$
 7 
$
 73 
 
$
 96 
$
 5 
$
 101 
Other comprehensive income (loss), net of income tax:
                         
    Net actuarial gain
 
 1 
 
 ― 
 
 1 
   
 ― 
 
 ― 
 
 ― 
    Financial instruments
 
 ― 
 
 12 
 
 12 
   
 ― 
 
 (9)
 
 (9)
Total other comprehensive income (loss)
 
 1 
 
 12 
 
 13 
   
 ― 
 
 (9)
 
 (9)
Total comprehensive income (loss)
$
 67 
$
 19 
$
 86 
 
$
 96 
$
 (4)
$
 92 
 
Six months ended June 30,
 
2013
 
2012
 
(unaudited)
   
Non-
     
Non-
 
   
controlling
     
controlling
 
 
SDG&E
Interest
Total
 
SDG&E
Interest
Total
Net income
$
 158 
$
 (4)
$
 154 
 
$
 202 
$
 11 
$
 213 
Other comprehensive income (loss), net of income tax:
                         
    Net actuarial gain
 
 1 
 
 ― 
 
 1 
   
 ― 
 
 ― 
 
 ― 
    Financial instruments
 
 ― 
 
 15 
 
 15 
   
 ― 
 
 (9)
 
 (9)
Total other comprehensive income (loss)
 
 1 
 
 15 
 
 16 
   
 ― 
 
 (9)
 
 (9)
Total comprehensive income
$
 159 
$
 11 
$
 170 
 
$
 202 
$
 2 
$
 204 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
   
June 30,
December 31,
   
2013 
2012(1)
   
(unaudited)
   
ASSETS
       
Current assets:
       
    Cash and cash equivalents
$
 13 
$
 87 
    Restricted cash
 
 8 
 
 10 
    Accounts receivable – trade, net
 
 268 
 
 252 
    Accounts receivable – other, net
 
 26 
 
 21 
    Due from unconsolidated affiliates
 
 1 
 
 39 
    Income taxes receivable
 
 ― 
 
 35 
    Deferred income taxes
 
 29 
 
 ― 
    Inventories
 
 73 
 
 82 
    Regulatory balancing accounts, net
 
 325 
 
 395 
    Regulatory assets arising from fixed-price contracts and other derivatives
 
 39 
 
 39 
    Other regulatory assets
 
 140 
 
 10 
    Fixed-price contracts and other derivatives
 
 25 
 
 41 
    Other
 
 32 
 
 76 
        Total current assets
 
 979 
 
 1,087 
           
Other assets:
       
    Restricted cash
 
 22 
 
 22 
    Deferred taxes recoverable in rates
 
 760 
 
 718 
    Regulatory assets arising from fixed-price contracts and other derivatives
 
 104 
 
 110 
    Regulatory assets arising from pension and other postretirement
       
        benefit obligations
 
 299 
 
 303 
    Regulatory assets arising from wildfire litigation costs
 
 352 
 
 364 
    Other regulatory assets
 
 740 
 
 252 
    Nuclear decommissioning trusts
 
 938 
 
 908 
    Sundry
 
 147 
 
 117 
        Total other assets
 
 3,362 
 
 2,794 
           
Property, plant and equipment:
       
    Property, plant and equipment
 
 13,862 
 
 14,124 
    Less accumulated depreciation and amortization
 
 (3,307)
 
 (3,261)
        Property, plant and equipment, net ($452 and $466 at June 30, 2013 and
            December 31, 2012, respectively, related to VIE)
 
 10,555 
 
 10,863 
Total assets
$
 14,896 
$
 14,744 
(1)
Derived from audited financial statements.
       
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
       

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
   
June 30,
December 31,
   
2013 
2012(1)
   
(unaudited)
   
LIABILITIES AND EQUITY
       
Current liabilities:
       
    Short-term debt
$
 53 
$
 ― 
    Accounts payable
 
 296 
 
 300 
    Due to unconsolidated affiliates
 
 19 
 
 19 
    Income taxes payable
 
 28 
 
 ― 
    Deferred income taxes
 
 ― 
 
 26 
    Dividends and interest payable
 
 37 
 
 36 
    Accrued compensation and benefits
 
 64 
 
 129 
    Current portion of long-term debt
 
 146 
 
 16 
    Fixed-price contracts and other derivatives
 
 47 
 
 56 
    Customer deposits
 
 59 
 
 60 
    Construction deposits
 
 51 
 
 51 
    Reserve for wildfire litigation
 
 182 
 
 305 
    Other
 
 132 
 
 106 
        Total current liabilities
 
 1,114 
 
 1,104 
Long-term debt ($330 and $335 at June 30, 2013 and December 31, 2012,
    respectively, related to VIE)
 
 4,155 
 
 4,292 
           
Deferred credits and other liabilities:
       
    Customer advances for construction
 
 20 
 
 17 
    Pension and other postretirement benefit obligations, net of plan assets
 
 338 
 
 340 
    Deferred income taxes
 
 1,768 
 
 1,636 
    Deferred investment tax credits
 
 25 
 
 25 
    Regulatory liabilities arising from removal obligations
 
 1,641 
 
 1,603 
    Asset retirement obligations
 
 726 
 
 733 
    Fixed-price contracts and other derivatives
 
 183 
 
 209 
    Deferred credits and other
 
 380 
 
 408 
        Total deferred credits and other liabilities
 
 5,081 
 
 4,971 
Contingently redeemable preferred stock
 
 79 
 
 79 
           
Commitments and contingencies (Note 10)
       
           
Equity:
       
    Common stock (255 million shares authorized; 117 million shares outstanding;
       
        no par value)
 
 1,338 
 
 1,338 
    Retained earnings
 
 3,051 
 
 2,895 
    Accumulated other comprehensive income (loss)
 
 (10)
 
 (11)
        Total SDG&E shareholder's equity
 
 4,379 
 
 4,222 
    Noncontrolling interest
 
 88 
 
 76 
        Total equity
 
 4,467 
 
 4,298 
Total liabilities and equity
$
 14,896 
$
 14,744 
(1)
Derived from audited financial statements.
       
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
       

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 
Six months ended
June 30,
 
2013 
2012
 
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
       
    Net income
$
 154 
$
 213 
    Adjustments to reconcile net income to net cash provided by
       
        operating activities:
       
            Depreciation and amortization
 
 241 
 
 231 
            Deferred income taxes and investment tax credits
 
 34 
 
 308 
            Loss from plant closure
 
 200 
 
 ― 
            Fixed-price contracts and other derivatives
 
 (5)
 
 (6)
            Other
 
 (9)
 
 (51)
    Net change in other working capital components
 
 (115)
 
 (438)
    Changes in other assets
 
 (177)
 
 14 
    Changes in other liabilities
 
 6 
 
 38 
        Net cash provided by operating activities
 
 329 
 
 309 
         
CASH FLOWS FROM INVESTING ACTIVITIES
       
    Expenditures for property, plant and equipment
 
 (446)
 
 (729)
    Purchases of nuclear decommissioning trust assets
 
 (327)
 
 (325)
    Proceeds from sales by nuclear decommissioning trusts
 
 326 
 
 320 
    Decrease in restricted cash
 
 40 
 
 61 
    Increase in restricted cash
 
 (38)
 
 (48)
        Net cash used in investing activities
 
 (445)
 
 (721)
         
CASH FLOWS FROM FINANCING ACTIVITIES
       
    Preferred dividends paid
 
 (2)
 
 (2)
    Issuance of long-term debt
 
 ― 
 
 249 
    Payments on long-term debt
 
 (5)
 
 (5)
    Increase in short-term debt, net
 
 53 
 
 173 
    Other
 
 (4)
 
 (3)
        Net cash provided by financing activities
 
 42 
 
 412 
         
Decrease in cash and cash equivalents
 
 (74)
 
 ― 
Cash and cash equivalents, January 1
 
 87 
 
 29 
Cash and cash equivalents, June 30
$
 13 
$
 29 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
       
    Interest payments, net of amounts capitalized
$
 94 
$
 69 
    Income tax payments (refunds), net
 
 19 
 
 (26)
         
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
       
    Nuclear facility plant reclassified to regulatory asset, net of depreciation and amortization
$
 512 
$
 ― 
    Accrued capital expenditures
 
 68 
 
 108 
         
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
       
    Dividends declared but not paid
$
 1 
$
 1 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
       
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
       
(Dollars in millions)
       
           
 
Three months ended June 30,
 
Six months ended June 30,
 
2013 
2012 
 
2013 
 
2012 
 
(unaudited)
                 
Operating revenues
$
 904 
$
 720 
$
 1,887 
$
1,600 
Operating expenses
               
    Cost of natural gas
 
 303 
 
 179 
 
 757 
 
528 
    Operation and maintenance
 
 316 
 
 328 
 
 622 
 
617 
    Depreciation and amortization
 
 80 
 
 90 
 
 180 
 
177 
    Franchise fees and other taxes
 
 26 
 
 28 
 
 66 
 
64 
        Total operating expenses
 
 725 
 
 625 
 
 1,625 
 
 1,386 
Operating income
 
 179 
 
 95 
 
 262 
 
 214 
Other income, net
 
 3 
 
 4 
 
 7 
 
Interest expense
 
 (18)
 
 (17)
 
 (35)
 
 (34)
Income before income taxes
 
 164 
 
 82 
 
 234 
 
 188 
Income tax expense
 
 (45)
 
 (28)
 
 (69)
 
 (68)
Net income
 
 119 
 
 54 
 
 165 
 
 120 
Preferred dividend requirements
 
 (1)
 
 (1)
 
 (1)
 
 (1)
Earnings attributable to common shares
$
 118 
$
 53 
$
 164 
$
 119 
See Notes to Condensed Consolidated Financial Statements.
       



SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions)
 
Three months ended June 30,
 
2013
 
2012
 
(unaudited)
Net income
$
 119 
 
$
 54 
Other comprehensive income, net of income tax:
         
    Financial instruments
 
 1 
   
 1 
Total other comprehensive income
 
 1 
   
 1 
Total comprehensive income
$
 120 
 
$
 55 
 
Six months ended June 30,
 
2013
 
2012
 
(unaudited)
Net income
$
 165 
 
$
 120 
Other comprehensive income, net of income tax:
         
    Financial instruments
 
 1 
   
 1 
Total other comprehensive income
 
 1 
   
 1 
Total comprehensive income
$
 166 
 
$
 121 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 

SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
   
June 30,
December 31,
   
2013 
2012(1)
   
(unaudited)
   
ASSETS
       
Current assets:
       
    Cash and cash equivalents
$
 20 
$
 83 
    Accounts receivable – trade, net
 
 373 
 
 539 
    Accounts receivable – other, net
 
 56 
 
 51 
    Due from unconsolidated affiliates
 
 259 
 
 24 
    Income taxes receivable
 
 139 
 
 104 
    Deferred income taxes
 
 ― 
 
 3 
    Inventories
 
 69 
 
 151 
    Regulatory assets
 
 3 
 
 4 
    Other
 
 48 
 
 35 
        Total current assets
 
 967 
 
 994 
         
Other assets:
       
    Regulatory assets arising from pension and other postretirement
       
        benefit obligations
 
 858 
 
 835 
    Other regulatory assets
 
 269 
 
 148 
    Sundry
 
 118 
 
 77 
        Total other assets
 
 1,245 
 
 1,060 
         
Property, plant and equipment:
       
    Property, plant and equipment
 
 11,389 
 
 11,187 
    Less accumulated depreciation and amortization
 
 (4,240)
 
 (4,170)
        Property, plant and equipment, net
 
 7,149 
 
 7,017 
Total assets
$
 9,361 
$
 9,071 
(1)
Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 

SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
   
June 30,
December 31,
   
2013 
2012(1)
   
(unaudited)
   
LIABILITIES AND SHAREHOLDERS' EQUITY
       
Current liabilities:
       
    Accounts payable – trade
$
 353 
$
 383 
    Accounts payable – other
 
 66 
 
 82 
    Due to unconsolidated affiliate
 
 ― 
 
 37 
    Deferred income taxes
 
 31 
 
 ― 
    Accrued compensation and benefits
 
 103 
 
 116 
    Regulatory balancing accounts, net
 
 290 
 
 141 
    Current portion of long-term debt
 
 252 
 
 4 
    Customer deposits
 
 75 
 
 76 
    Other
 
 101 
 
 124 
        Total current liabilities
 
 1,271 
 
 963 
Long-term debt
 
 1,159 
 
 1,409 
Deferred credits and other liabilities:
       
    Customer advances for construction
 
 106 
 
 111 
    Pension and other postretirement benefit obligations, net of plan assets
 
 877 
 
 855 
    Deferred income taxes
 
 935 
 
 881 
    Deferred investment tax credits
 
 19 
 
 20 
    Regulatory liabilities arising from removal obligations
 
 1,187 
 
 1,103 
    Asset retirement obligations
 
 1,158 
 
 1,238 
    Deferred credits and other
 
 299 
 
 256 
        Total deferred credits and other liabilities
 
 4,581 
 
 4,464 
         
Commitments and contingencies (Note 10)
       
         
Shareholders' equity:
       
    Preferred stock
 
 22 
 
 22 
    Common stock (100 million shares authorized; 91 million shares outstanding;
       
        no par value)
 
 866 
 
 866 
    Retained earnings
 
 1,479 
 
 1,365 
    Accumulated other comprehensive income (loss)
 
 (17)
 
 (18)
        Total shareholders' equity
 
 2,350 
 
 2,235 
Total liabilities and shareholders' equity
$
 9,361 
$
 9,071 
(1)
Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 

SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 
Six months ended June 30,
 
2013 
2012 
 
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
       
    Net income
$
 165 
$
 120 
    Adjustments to reconcile net income to net cash provided by
       
        operating activities:
       
            Depreciation and amortization
 
 180 
 
 177 
            Deferred income taxes and investment tax credits
 
 43 
 
 26 
            Other
 
 (3)
 
 (4)
    Net change in other working capital components
 
 257 
 
 385 
    Changes in other assets
 
 (73)
 
 1 
    Changes in other liabilities
 
 (6)
 
 7 
        Net cash provided by operating activities
 
 563 
 
 712 
         
CASH FLOWS FROM INVESTING ACTIVITIES
       
    Expenditures for property, plant and equipment
 
 (340)
 
 (316)
    Increase in loans to affiliates, net
 
 (235)
 
 (270)
        Net cash used in investing activities
 
 (575)
 
 (586)
         
CASH FLOWS FROM FINANCING ACTIVITIES
       
    Common dividends paid
 
 (50)
 
 (150)
    Preferred dividends paid
 
 (1)
 
 (1)
        Net cash used in financing activities
 
 (51)
 
 (151)
         
Decrease in cash and cash equivalents
 
 (63)
 
 (25)
Cash and cash equivalents, January 1
 
 83 
 
 36 
Cash and cash equivalents, June 30
$
 20 
$
 11 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
       
    Interest payments, net of amounts capitalized
$
 32 
$