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SEMPRA ENERGY 10-Q 2015
Sempra Energy/SDG&E/SoCalGas June 30, 2015 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, 2015
   
 
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
101 Ash Street
 
488 8th Avenue
   
San Diego,
 
San Diego, California 92101
   
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 July 29, 2015:
         
           
Sempra Energy
247,915,696 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
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
76
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
116
Item 4.
Controls and Procedures
117
     
PART II – OTHER INFORMATION
 
Item 1.
Legal Proceedings
118
Item 1A.
Risk Factors
118
Item 6.
Exhibits
118
     
Signatures
120
     

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,” “confident,”  “may,” “potential,” “possible,” “proposed,” “target,” “pursue,” “goals,” “outlook,” “maintain,” or similar expressions, or when we discuss our guidance, strategy, plans, goals, opportunities, projections, 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, including issuances of permits to construct and licenses for operation, by the California Public Utilities Commission, California State Legislature, U.S. Department of Energy, Federal Energy Regulatory Commission, Nuclear Regulatory Commission, Atomic Safety and Licensing Board, California Energy Commission, U.S. Environmental Protection Agency, California Air Resources Board, and other regulatory, governmental and environmental bodies in the United States and other countries in which we operate;
 
§  
the timing and success of business development efforts and construction, maintenance and capital projects, including risks in obtaining, maintaining or extending permits, licenses, certificates and other authorizations on a timely basis and risks in obtaining adequate and competitive financing for such projects;
 
§  
energy markets, including the timing and extent of changes and volatility in commodity prices, and the impact of any protracted reduction in oil prices from historical averages;
 
§  
the impact on the value of our natural gas storage assets from low natural gas prices, low volatility of natural gas prices and the inability to procure favorable long-term contracts for natural gas storage services;
 
§  
delays in the timing of costs incurred and the timing of the regulatory agency authorization to recover such costs in rates from customers;
 
§  
deviations from regulatory precedent or practice that result in a reallocation of benefits or burdens among shareholders and ratepayers;
 
§  
capital markets conditions, including the availability of credit and the liquidity of our investments;
 
§  
inflation, interest and currency exchange rates;
 
§  
the impact of benchmark interest rates, generally Moody’s A-rated utility bond yields, on our California Utilities’ cost of capital;
 
§  
the availability of electric power, natural gas and liquefied natural gas, and natural gas pipeline and storage capacity, including disruptions caused by failures in the North American transmission grid, pipeline explosions and equipment failures and the decommissioning of San Onofre Nuclear Generating Station (SONGS);
 
§  
cybersecurity threats to the energy grid, natural gas storage and pipeline infrastructure, the information and systems used to operate our businesses and the confidentiality of our proprietary information and the personal information of our customers, terrorist attacks that threaten system operations and critical infrastructure, and wars;
 
§  
the ability to win competitively bid infrastructure projects against a number of strong competitors willing to aggressively bid for these projects;
 
§  
weather conditions, conservation efforts, natural disasters, catastrophic accidents, and other events that may disrupt our operations, damage our facilities and systems, and subject us to third-party liability for property damage or personal injuries;
 
§  
risks that our partners or counterparties will be unable or unwilling to fulfill their contractual commitments;
 
§  
risks posed by decisions and actions of third parties who control the operations of investments in which we do not have a controlling interest;
 
§  
risks inherent with 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, including motions to modify settlements;
 
§  
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 San Diego Gas & Electric Company’s (SDG&E) electric transmission and distribution system due to increased amount and variability of 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 SDG&E’s 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 due to insufficient market interest, unattractive pricing or other factors;
 
§  
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 herein 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,
   
2015
2014
2015
2014
   
(unaudited)
REVENUES
               
Utilities
$
2,133
$
2,370
$
4,555
$
4,855
Energy-related businesses
 
234
 
308
 
494
 
618
    Total revenues
 
2,367
 
2,678
 
5,049
 
5,473
EXPENSES AND OTHER INCOME
               
Utilities:
               
    Cost of natural gas
 
(239)
 
(395)
 
(585)
 
(1,015)
    Cost of electric fuel and purchased power
 
(498)
 
(571)
 
(979)
 
(1,081)
Energy-related businesses:
               
    Cost of natural gas, electric fuel and purchased power
 
(73)
 
(126)
 
(171)
 
(264)
    Other cost of sales
 
(42)
 
(42)
 
(77)
 
(80)
Operation and maintenance
 
(713)
 
(729)
 
(1,371)
 
(1,405)
Depreciation and amortization
 
(307)
 
(288)
 
(610)
 
(574)
Franchise fees and other taxes
 
(96)
 
(92)
 
(203)
 
(197)
Plant closure adjustment
 
 
 
21
 
13
Gain on sale of equity interest and assets
 
62
 
2
 
62
 
29
Equity earnings, before income tax
 
27
 
23
 
46
 
40
Other income, net
 
37
 
49
 
76
 
89
Interest income
 
10
 
5
 
17
 
9
Interest expense
 
(139)
 
(138)
 
(273)
 
(274)
Income before income taxes and equity earnings
               
    of certain unconsolidated subsidiaries
 
396
 
376
 
1,002
 
763
Income tax expense
 
(98)
 
(93)
 
(261)
 
(220)
Equity earnings, net of income tax
 
22
 
9
 
37
 
15
Net income
 
320
 
292
 
778
 
558
Earnings attributable to noncontrolling interests
 
(24)
 
(22)
 
(45)
 
(41)
Preferred dividends of subsidiary
 
(1)
 
(1)
 
(1)
 
(1)
Earnings
$
295
$
269
$
732
$
516
                   
Basic earnings per common share
$
1.19
$
1.10
$
2.95
$
2.10
                   
Weighted-average number of shares outstanding, basic (thousands)
 
248,108
 
245,688
 
247,916
 
245,484
                   
Diluted earnings per common share
$
1.17
$
1.08
$
2.91
$
2.07
                   
Weighted-average number of shares outstanding, diluted (thousands)
 
251,491
 
250,061
 
251,264
 
249,816
                   
Dividends declared per share of common stock
$
0.70
$
0.66
$
1.40
$
1.32
See Notes to Condensed Consolidated Financial Statements.
       



SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions)
   
Sempra Energy shareholders' equity
       
   
Pretax
Income tax
Net-of-tax
Noncontrolling
 
   
amount
(expense) benefit
amount
interests (after-tax)
Total
   
Three months ended June 30, 2015 and 2014
   
(unaudited)
2015:
                   
Net income
$
394
$
(98)
$
296
$
24
$
320
Other comprehensive income (loss):
                   
    Foreign currency translation adjustments
 
(43)
 
 
(43)
 
(5)
 
(48)
    Pension and other postretirement benefits
 
2
 
(1)
 
1
 
 
1
    Financial instruments
 
95
 
(36)
 
59
 
6
 
65
    Total other comprehensive income
 
54
 
(37)
 
17
 
1
 
18
Comprehensive income
 
448
 
(135)
 
313
 
25
 
338
Preferred dividends of subsidiary
 
(1)
 
 
(1)
 
 
(1)
Comprehensive income, after preferred
                   
    dividends of subsidiary
$
447
$
(135)
$
312
$
25
$
337
2014:
                   
Net income
$
363
$
(93)
$
270
$
22
$
292
Other comprehensive income (loss):
                   
    Foreign currency translation adjustments
 
2
 
 
2
 
1
 
3
    Pension and other postretirement benefits
 
8
 
(3)
 
5
 
 
5
    Financial instruments
 
(12)
 
5
 
(7)
 
(1)
 
(8)
    Total other comprehensive loss
 
(2)
 
2
 
 
 
Comprehensive income
 
361
 
(91)
 
270
 
22
 
292
Preferred dividends of subsidiary
 
(1)
 
 
(1)
 
 
(1)
Comprehensive income, after preferred
                   
    dividends of subsidiary
$
360
$
(91)
$
269
$
22
$
291
 
   
Six months ended June 30, 2015 and 2014
   
(unaudited)
2015:
                   
Net income
$
994
$
(261)
$
733
$
45
$
778
Other comprehensive income (loss):
                   
    Foreign currency translation adjustments
 
(105)
 
 
(105)
 
(13)
 
(118)
    Pension and other postretirement benefits
 
4
 
(2)
 
2
 
 
2
    Financial instruments
 
6
 
(2)
 
4
 
1
 
5
    Total other comprehensive loss
 
(95)
 
(4)
 
(99)
 
(12)
 
(111)
Comprehensive income
 
899
 
(265)
 
634
 
33
 
667
Preferred dividends of subsidiary
 
(1)
 
 
(1)
 
 
(1)
Comprehensive income, after preferred
                   
    dividends of subsidiary
$
898
$
(265)
$
633
$
33
$
666
2014:
                   
Net income
$
737
$
(220)
$
517
$
41
$
558
Other comprehensive income (loss):
                   
    Foreign currency translation adjustments
 
(41)
 
 
(41)
 
(1)
 
(42)
    Pension and other postretirement benefits
 
13
 
(5)
 
8
 
 
8
    Financial instruments
 
(20)
 
8
 
(12)
 
(1)
 
(13)
    Total other comprehensive loss
 
(48)
 
3
 
(45)
 
(2)
 
(47)
Comprehensive income
 
689
 
(217)
 
472
 
39
 
511
Preferred dividends of subsidiary
 
(1)
 
 
(1)
 
 
(1)
Comprehensive income, after preferred
                   
    dividends of subsidiary
$
688
$
(217)
$
471
$
39
$
510
See Notes to Condensed Consolidated Financial Statements.
 
 

 
SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
   
June 30,
December 31,
 
2015
2014(1)
   
(unaudited)
   
ASSETS
       
Current assets:
       
    Cash and cash equivalents
$
636
$
570
    Restricted cash
 
8
 
11
    Trade accounts receivable, net
 
990
 
1,242
    Other accounts and notes receivable, net
 
164
 
152
    Due from unconsolidated affiliates
 
4
 
38
    Income taxes receivable
 
100
 
45
    Deferred income taxes
 
99
 
305
    Inventories
 
266
 
396
    Regulatory balancing accounts – undercollected
 
798
 
746
    Fixed-price contracts and other derivatives
 
85
 
93
    Asset held for sale, power plant
 
 
293
    Other
 
356
 
293
        Total current assets
 
3,506
 
4,184
           
Investments and other assets:
       
    Restricted cash
 
17
 
29
    Due from unconsolidated affiliates
 
169
 
188
    Regulatory assets
 
3,095
 
3,031
    Nuclear decommissioning trusts
 
1,145
 
1,131
    Investments
 
2,929
 
2,848
    Goodwill
 
885
 
931
    Other intangible assets
 
410
 
415
    Dedicated assets in support of certain benefit plans
 
483
 
512
    Sundry
 
674
 
561
        Total investments and other assets
 
9,807
 
9,646
           
Property, plant and equipment:
       
    Property, plant and equipment
 
36,523
 
35,407
    Less accumulated depreciation and amortization
 
(9,830)
 
(9,505)
        Property, plant and equipment, net ($396 and $410 at June 30, 2015 and
            December 31, 2014, respectively, related to VIE)
 
26,693
 
25,902
Total assets
$
40,006
$
39,732
(1)
Derived from audited financial statements.
       
See Notes to Condensed Consolidated Financial Statements.
       
 
 

 
SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
   
June 30,
December 31,
 
2015
2014(1)
   
(unaudited)
   
LIABILITIES AND EQUITY
       
Current liabilities:
       
    Short-term debt
$
738
$
1,733
    Accounts payable – trade
 
890
 
1,198
    Accounts payable – other
 
124
 
155
    Due to unconsolidated affiliate
 
 
2
    Dividends and interest payable
 
300
 
282
    Accrued compensation and benefits
 
271
 
373
    Current portion of long-term debt
 
1,273
 
469
    Fixed-price contracts and other derivatives
 
55
 
55
    Customer deposits
 
150
 
153
    Other
 
598
 
649
        Total current liabilities
 
4,399
 
5,069
Long-term debt ($310 and $315 at June 30, 2015 and December 31, 2014, respectively,
     related to VIE)
 
12,626
 
12,167
           
Deferred credits and other liabilities:
       
    Customer advances for construction
 
144
 
144
    Pension and other postretirement benefit plan obligations, net of plan assets
 
1,101
 
1,064
    Deferred income taxes
 
3,016
 
3,003
    Deferred investment tax credits
 
35
 
37
    Regulatory liabilities arising from removal obligations
 
2,762
 
2,741
    Asset retirement obligations
 
2,067
 
2,048
    Fixed-price contracts and other derivatives
 
300
 
255
    Deferred credits and other
 
1,081
 
1,104
        Total deferred credits and other liabilities
 
10,506
 
10,396
           
Commitments and contingencies (Note 11)
       
           
Equity:
       
    Preferred stock (50 million shares authorized; none issued)
 
 
    Common stock (750 million shares authorized; 248 million and 246 million shares
       
        outstanding at June 30, 2015 and December 31, 2014, respectively; no par value)
 
2,555
 
2,484
    Retained earnings
 
9,724
 
9,339
    Accumulated other comprehensive income (loss)
 
(596)
 
(497)
        Total Sempra Energy shareholders’ equity
 
11,683
 
11,326
    Preferred stock of subsidiary
 
20
 
20
    Other noncontrolling interests
 
772
 
754
        Total equity
 
12,475
 
12,100
Total liabilities and equity
$
40,006
$
39,732
(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,
   
2015
2014
   
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
       
    Net income
$
778
$
558
    Adjustments to reconcile net income to net cash provided by operating activities:
       
        Depreciation and amortization
 
610
 
574
        Deferred income taxes and investment tax credits
 
203
 
105
        Gain on sale of equity interest and assets
 
(62)
 
(29)
        Plant closure adjustment
 
(21)
 
(13)
        Equity earnings
 
(83)
 
(55)
        Fixed-price contracts and other derivatives
 
 
(17)
        Other
 
(8)
 
(6)
    Net change in other working capital components
 
(116)
 
(125)
    Changes in other assets
 
(89)
 
21
    Changes in other liabilities
 
7
 
21
        Net cash provided by operating activities
 
1,219
 
1,034
           
CASH FLOWS FROM INVESTING ACTIVITIES
       
    Expenditures for property, plant and equipment
 
(1,466)
 
(1,513)
    Expenditures for investments and acquisition of business
 
(161)
 
(160)
    Proceeds from sale of equity interest and assets, net of cash sold
 
347
 
66
    Distributions from investments
 
9
 
6
    Purchases of nuclear decommissioning and other trust assets
 
(229)
 
(356)
    Proceeds from sales by nuclear decommissioning and other trusts
 
221
 
350
    Decrease in restricted cash
 
49
 
87
    Increase in restricted cash
 
(34)
 
(87)
    Advances to unconsolidated affiliates
 
(20)
 
(24)
    Repayments of advances to unconsolidated affiliates
 
74
 
    Other
 
9
 
10
        Net cash used in investing activities
 
(1,201)
 
(1,621)
           
CASH FLOWS FROM FINANCING ACTIVITIES
       
    Common dividends paid
 
(308)
 
(301)
    Preferred dividends paid by subsidiary
 
(1)
 
(1)
    Issuances of common stock
 
31
 
28
    Repurchases of common stock
 
(66)
 
(37)
    Issuances of debt (maturities greater than 90 days)
 
1,547
 
2,345
    Payments on debt (maturities greater than 90 days)
 
(846)
 
(1,475)
    Decrease in short-term debt, net
 
(339)
 
(54)
    Net distributions to noncontrolling interests
 
(14)
 
(23)
    Other
 
46
 
(10)
        Net cash provided by financing activities
 
50
 
472
         
Effect of exchange rate changes on cash and cash equivalents
 
(2)
 
           
Increase (decrease) in cash and cash equivalents
 
66
 
(115)
Cash and cash equivalents, January 1
 
570
 
904
Cash and cash equivalents, June 30
$
636
$
789
See Notes to Condensed Consolidated Financial Statements.
       
 
 

 
SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in millions)
   
Six months ended June 30,
 
2015
2014
 
(unaudited)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
       
    Interest payments, net of amounts capitalized
$
260
$
269
    Income tax payments, net of refunds
 
72
 
148
           
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
       
    Acquisition of business:
       
          Assets acquired
$
10
$
          Liabilities assumed
 
(2)
 
          Accrued purchase price
 
(6)
 
          Cash paid
$
2
$
           
    Accrued capital expenditures
$
302
$
287
    Redemption of industrial development bonds
 
79
 
    Increase in capital lease obligations for investment in property, plant and equipment
 
 
60
    Dividends declared but not paid
 
178
 
165
    Financing of build-to-suit property
 
39
 
32
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,
 
2015
2014
2015
2014
 
(unaudited)
Operating revenues
               
    Electric
$
874
$
948
$
1,679
$
1,759
    Natural gas
 
98
 
115
 
259
 
291
        Total operating revenues
 
972
 
1,063
 
1,938
 
2,050
Operating expenses
               
    Cost of electric fuel and purchased power
 
251
 
329
 
479
 
595
    Cost of natural gas
 
31
 
51
 
85
 
126
    Operation and maintenance
 
255
 
256
 
472
 
508
    Depreciation
 
149
 
131
 
294
 
261
    Franchise fees and other taxes
 
59
 
54
 
120
 
110
    Plant closure adjustment
 
 
 
(21)
 
(13)
        Total operating expenses
 
745
 
821
 
1,429
 
1,587
Operating income
 
227
 
242
 
509
 
463
Other income, net
 
9
 
7
 
18
 
20
Interest expense
 
(52)
 
(51)
 
(104)
 
(101)
Income before income taxes
 
184
 
198
 
423
 
382
Income tax expense
 
(54)
 
(69)
 
(142)
 
(152)
Net income
 
130
 
129
 
281
 
230
Earnings attributable to noncontrolling interest
 
(4)
 
(6)
 
(8)
 
(8)
Earnings attributable to common shares
$
126
$
123
$
273
$
222
See Notes to Condensed Consolidated Financial Statements.
       
 

 

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions)
 
SDG&E shareholder's equity
   
 
Pretax
Income tax
Net-of-tax
Noncontrolling
 
 
amount
expense
amount
interest (after-tax)
Total
 
Three months ended June 30, 2015 and 2014
 
(unaudited)
2015:
                   
Net income
$
180
$
(54)
$
126
$
4
$
130
Other comprehensive income:
                   
    Financial instruments
 
 
 
 
3
 
3
    Total other comprehensive income
 
 
 
 
3
 
3
Comprehensive income
$
180
$
(54)
$
126
$
7
$
133
2014:
                   
Net income
$
192
$
(69)
$
123
$
6
$
129
Other comprehensive income (loss):
                   
    Pension and other postretirement benefits
 
2
 
(1)
 
1
 
 
1
    Financial instruments
 
 
 
 
(1)
 
(1)
    Total other comprehensive income (loss)
 
2
 
(1)
 
1
 
(1)
 
Comprehensive income
$
194
$
(70)
$
124
$
5
$
129
 
 
Six months ended June 30, 2015 and 2014
 
(unaudited)
2015:
                   
Net income
$
415
$
(142)
$
273
$
8
$
281
Other comprehensive income:
                   
    Financial instruments
 
 
 
 
1
 
1
    Total other comprehensive income
 
 
 
 
1
 
1
Comprehensive income
$
415
$
(142)
$
273
$
9
$
282
2014:
                   
Net income
$
374
$
(152)
$
222
$
8
$
230
Other comprehensive income (loss):
                   
    Pension and other postretirement benefits
 
2
 
(1)
 
1
 
 
1
    Financial instruments
 
 
 
 
(1)
 
(1)
    Total other comprehensive income (loss)
 
2
 
(1)
 
1
 
(1)
 
Comprehensive income
$
376
$
(153)
$
223
$
7
$
230
See Notes to Condensed Consolidated Financial Statements.
 
 

 
SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
   
June 30,
December 31,
   
2015
2014(1)
   
(unaudited)
   
ASSETS
       
Current assets:
       
    Cash and cash equivalents
$
23
$
8
    Restricted cash
 
7
 
8
    Accounts receivable – trade, net
 
314
 
285
    Accounts receivable – other, net
 
21
 
35
    Due from unconsolidated affiliates
 
1
 
1
    Income taxes receivable
 
59
 
    Inventories
 
67
 
73
    Regulatory balancing accounts – net undercollected
 
626
 
711
    Regulatory assets
 
116
 
54
    Fixed-price contracts and other derivatives
 
40
 
44
    Other
 
86
 
125
        Total current assets
 
1,360
 
1,344
           
Other assets:
       
    Restricted cash
 
12
 
11
    Deferred taxes recoverable in rates
 
848
 
824
    Other regulatory assets
 
1,026
 
1,086
    Nuclear decommissioning trusts
 
1,145
 
1,131
    Sundry
 
368
 
282
        Total other assets
 
3,399
 
3,334
           
Property, plant and equipment:
       
    Property, plant and equipment
 
15,882
 
15,478
    Less accumulated depreciation
 
(4,008)
 
(3,860)
        Property, plant and equipment, net ($396 and $410 at June 30, 2015 and
            December 31, 2014, respectively, related to VIE)
 
11,874
 
11,618
Total assets
$
16,633
$
16,296
(1)
Derived from audited financial statements.
       
See Notes to Condensed Consolidated Financial Statements.
       
 
 

 
SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
   
June 30,
December 31,
   
2015
2014(1)
   
(unaudited)
   
LIABILITIES AND EQUITY
       
Current liabilities:
       
    Short-term debt
$
40
$
246
    Accounts payable
 
361
 
441
    Due to unconsolidated affiliates
 
7
 
21
    Income taxes payable
 
 
30
    Deferred income taxes
 
185
 
53
    Interest payable
 
41
 
40
    Accrued compensation and benefits
 
74
 
124
    Current portion of long-term debt
 
470
 
365
    Asset retirement obligations
 
100
 
120
    Fixed-price contracts and other derivatives
 
45
 
40
    Customer deposits
 
70
 
71
    Other
 
203
 
237
        Total current liabilities
 
1,596
 
1,788
 
Long-term debt ($310 and $315 at June 30, 2015 and December 31, 2014,
    respectively, related to VIE)
 
4,498
 
4,319
           
Deferred credits and other liabilities:
       
    Customer advances for construction
 
42
 
41
    Pension and other postretirement benefit plan obligations, net of plan assets
 
225
 
216
    Deferred income taxes
 
2,133
 
2,121
    Deferred investment tax credits
 
20
 
22
    Regulatory liabilities arising from removal obligations
 
1,584
 
1,557
    Asset retirement obligations
 
745
 
754
    Fixed-price contracts and other derivatives
 
179
 
153
    Deferred credits and other
 
345
 
333
        Total deferred credits and other liabilities
 
5,273
 
5,197
           
Commitments and contingencies (Note 11)
       
           
Equity:
       
    Common stock (255 million shares authorized; 117 million shares outstanding;
       
        no par value)
 
1,338
 
1,338
    Retained earnings
 
3,879
 
3,606
    Accumulated other comprehensive income (loss)
 
(12)
 
(12)
        Total SDG&E shareholder's equity
 
5,205
 
4,932
    Noncontrolling interest
 
61
 
60
        Total equity
 
5,266
 
4,992
Total liabilities and equity
$
16,633
$
16,296
(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,
 
2015
2014
 
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
       
    Net income
$
281
$
230
    Adjustments to reconcile net income to net cash provided by operating activities:
       
        Depreciation
 
294
 
261
        Deferred income taxes and investment tax credits
 
103
 
132
        Plant closure adjustment
 
(21)
 
(13)
        Fixed-price contracts and other derivatives
 
(2)
 
(3)
        Other
 
(9)
 
(24)
    Net change in other working capital components
 
(40)
 
(231)
    Changes in other assets
 
(59)
 
37
    Changes in other liabilities
 
3
 
19
        Net cash provided by operating activities
 
550
 
408
         
CASH FLOWS FROM INVESTING ACTIVITIES
       
    Expenditures for property, plant and equipment
 
(600)
 
(543)
    Purchases of nuclear decommissioning trust assets
 
(227)
 
(354)
    Proceeds from sales by nuclear decommissioning trusts
 
221
 
350
    Decrease in restricted cash
 
19
 
62
    Increase in restricted cash
 
(19)
 
(64)
        Net cash used in investing activities
 
(606)
 
(549)
         
CASH FLOWS FROM FINANCING ACTIVITIES
       
    Issuances of long-term debt
 
388
 
100
    Payments on long-term debt
 
(105)
 
(20)
    (Decrease) increase in short-term debt, net
 
(206)
 
68
    Capital distributions made by Otay Mesa VIE
 
(6)
 
(13)
        Net cash provided by financing activities
 
71
 
135
         
Increase (decrease) in cash and cash equivalents
 
15
 
(6)
Cash and cash equivalents, January 1
 
8
 
27
Cash and cash equivalents, June 30
$
23
$
21
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
       
    Interest payments, net of amounts capitalized
$
99
$
98
    Income tax payments, net of refunds
 
99
 
12
         
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
       
    Accrued capital expenditures
$
118
$
103
    Increase in capital lease obligations for investment in property, plant and equipment
 
 
60
See Notes to Condensed Consolidated Financial Statements.
 
 

 
SOUTHERN CALIFORNIA GAS COMPANY
       
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
       
(Dollars in millions)
       
 
Three months ended June 30,
Six months ended June 30,
 
2015
2014
2015
2014
 
(unaudited)
                 
Operating revenues
$
780
$
917
$
1,828
$
2,002
Operating expenses
               
    Cost of natural gas
 
196
 
321
 
463
 
829
    Operation and maintenance
 
346
 
337
 
660
 
642
    Depreciation
 
113
 
107
 
226
 
212
    Franchise fees and other taxes
 
31
 
30
 
65
 
68
        Total operating expenses
 
686
 
795
 
1,414
 
1,751
Operating income
 
94
 
122
 
414
 
251
Other income, net
 
9
 
3
 
17
 
7
Interest income
 
3
 
 
3
 
Interest expense
 
(19)
 
(16)
 
(38)
 
(33)
Income before income taxes
 
87
 
109
 
396
 
225
Income tax expense
 
(16)
 
(28)
 
(111)
 
(66)
Net income
 
71
 
81
 
285
 
159
Preferred dividend requirements
 
(1)
 
(1)
 
(1)
 
(1)
Earnings attributable to common shares
$
70
$
80
$
284
$
158
See Notes to Condensed Consolidated Financial Statements.
       

 

 
SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions)
 
Pretax
Income tax
Net-of-tax
 
amount
expense
amount
 
Three months ended June 30, 2015 and 2014
 
(unaudited)
2015:
           
Net income/Comprehensive income
$
87
$
(16)
$
71
2014:
           
Net income/Comprehensive income
$
109
$
(28)
$
81

 
Six months ended June 30, 2015 and 2014
 
(unaudited)
2015:
           
Net income/Comprehensive income
$
396
$
(111)
$
285
2014:
           
Net income/Comprehensive income
$
225
$
(66)
$
159
See Notes to Condensed Consolidated Financial Statements.
           
 
 

 
SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
   
June 30,
December 31,
   
2015
2014(1)
   
(unaudited)
   
ASSETS
       
Current assets:
       
    Cash and cash equivalents
$
231
$
85
    Accounts receivable – trade, net
 
348
 
586
    Accounts receivable – other, net
 
76
 
51
    Due from unconsolidated affiliates
 
273
 
4
    Income taxes receivable
 
 
5
    Inventories
 
57
 
181
    Regulatory balancing accounts – net undercollected
 
172
 
35
    Regulatory assets
 
7
 
5
    Temporary LIFO liquidation
 
41
 
    Other
 
28
 
36
        Total current assets
 
1,233
 
988
         
Other assets:
       
    Regulatory assets arising from pension obligations
 
650
 
617
    Other regulatory assets
 
539
 
472
    Other postretirement benefit plan assets, net of plan obligations
 
5
 
4
    Sundry
 
146
 
136
        Total other assets
 
1,340
 
1,229
         
Property, plant and equipment:
       
    Property, plant and equipment
 
13,403
 
12,886
    Less accumulated depreciation
 
(4,767)
 
(4,642)
        Property, plant and equipment, net
 
8,636
 
8,244
Total assets
$
11,209
$
10,461
(1)
Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.
 
 

 
SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
   
June 30,
December 31,
   
2015
2014(1)
   
(unaudited)
   
LIABILITIES AND SHAREHOLDERS' EQUITY
       
Current liabilities:
       
    Short-term debt
$
$
50
    Accounts payable – trade
 
305
 
532
    Accounts payable – other
 
66
 
88
    Due to unconsolidated affiliate
 
 
13
    Income taxes payable
 
13
 
    Deferred income taxes
 
146
 
53
    Accrued compensation and benefits
 
118
 
129
    Current portion of long-term debt
 
9
 
    Customer deposits
 
73
 
75
    Other
 
142
 
149
        Total current liabilities
 
872
 
1,089
Long-term debt
 
2,498
 
1,906
Deferred credits and other liabilities:
       
    Customer advances for construction
 
102
 
102
    Pension obligation, net of plan assets
 
666
 
633
    Deferred income taxes
 
1,267
 
1,212
    Deferred investment tax credits
 
14
 
16
    Regulatory liabilities arising from removal obligations
 
1,160
 
1,167
    Asset retirement obligations
 
1,281
 
1,255
    Deferred credits and other
 
284
 
300
        Total deferred credits and other liabilities
 
4,774
 
4,685
         
Commitments and contingencies (Note 11)
       
         
Shareholders' equity:
       
    Preferred stock
 
22
 
22
    Common stock (100 million shares authorized; 91 million shares outstanding;
       
        no par value)
 
866
 
866
    Retained earnings
 
2,195
 
1,911
    Accumulated other comprehensive income (loss)
 
(18)
 
(18)
        Total shareholders' equity
 
3,065
 
2,781
Total liabilities and shareholders' equity
$
11,209
$
10,461
(1)
Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.
 
 

 
SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 
Six months ended June 30,
 
2015
2014
 
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
       
    Net income
$
285
$
159
    Adjustments to reconcile net income to net cash provided by operating activities:
       
        Depreciation
 
226
 
212
        Deferred income taxes and investment tax credits
 
76
 
59
        Other
 
(15)
 
(2)
    Net change in other working capital components
 
(58)
 
61
    Changes in other assets
 
(30)
 
(27)
    Changes in other liabilities
 
(1)
 
1
        Net cash provided by operating activities
 
483
 
463