SECURITIES AND EXCHANGE COMMISSION  
 
WASHINGTON, D.C. 20549  
FORM 10-K 
 
(Mark One) 
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange 
Act of 1934 For the fiscal year ended                      December 31, 1995
   OR 
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities 
Exchange Act of 1934 For the transition period from                     to      
                Exact 
               Name of                                                   
Commission     Registrant                                 IRS Employer     
File           as specified        State of               Identification   
Number         in its charter      Incorporation          Number
- ----------     --------------      --------------         --------------      
1-3779         SAN DIEGO GAS &                                             
               ELECTRIC COMPANY      California           95-1184800        
                                                                     
1-11439        ENOVA CORPORATION     California           33-0643023        
                                                                        
101 ASH STREET, SAN DIEGO, CALIFORNIA                                    92101
- -----------------------------------------                           ---------- 
(Address of principal executive offices)                            (Zip Code) 
 
Registrant's telephone number, including area code               (619)696-2000 
                                                                -------------- 
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: 
                                                         Name of each exchange 
Title of each class                                        on which registered 
- -------------------                                      --------------------- 
San Diego Gas & Electric Company 
Preference Stock (Cumulative) 
  Without Par Value (except $1.70 and $1.7625 Series)                American   
  Cumulative Preferred Stock, $20 Par Value (except 4.60% Series)    American   
 
Enova Corporation                                          
Common Stock, Without Par Value                           New York and Pacific  
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: 
San Diego Gas & Electric Company                          None 
Enova Corporation                                         None 
 
Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months and (2) has been subject to such filing 
requirements for the past 90 days.  
Yes [ X ]   No  [   ]    
  
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 
of Regulation S-K is not contained herein, and will not be contained, to the 
best of registrant's knowledge, in definitive proxy or information statements 
incorporated by reference in Part III of this Form 10-K or any amendment to 
this Form 10-K.  [  ]   
 
Exhibit Index on page 34.  Glossary on page 42.  
 
Aggregate market value of the voting stock held by non-affiliates of the 
registrant as of January 31, 1996: 
Enova Corporation Common Stock                                $2.8 Billion 
San Diego Gas & Electric Company Preferred Stock              $18 Million 
 
Common Stock outstanding without par value as of January 31, 1996: 
 
Enova Corporation:                                          116,563,375 
 
San Diego Gas & Electric Company:            Wholly owned by Enova Corporation 
 
DOCUMENTS INCORPORATED BY REFERENCE: 
 
Portions of the 1995 Annual Report to Shareholders are incorporated by 
reference into Parts I, II, and IV. 
 
Portions of the March 1996 Proxy Statement prepared for the April 1996 annual 
meeting of shareholders are incorporated by reference into Part III. 
 

<PAGE> 
 
TABLE OF CONTENTS 
 

PART I 

Item 1.   Business . . . . . . . . . . . . . . . . . . . . . .  3 

Item 2.   Properties . . . . . . . . . . . . . . . . . . . . . 26 

Item 3.   Legal Proceedings  . . . . . . . . . . . . . . . . . 27 

Item 4.   Submission of Matters to a Vote of Security Holders. 31 
          Executive Officers of the Registrant . . . . . . . . 31 

PART II 

Item 5.   Market for Registrant's Common Equity and Related 
             Stockholder Matters . . . . . . . . . . . . . . . 32 

Item 6.   Selected Financial Data  . . . . . . . . . . . . . . 32 

Item 7.   Management's Discussion and Analysis of Financial   
             Condition and Results of Operations . . . . . . . 32 

Item 8.   Financial Statements and Supplementary Data  . . . . 32 

Item 9.   Changes in and Disagreements with Accountants on  
              Accounting and Financial Disclosure  . . . . . . 32 
 

PART III 

Item 10.  Directors and Executive Officers of the Registrant . 33 

Item 11.  Executive Compensation . . . . . . . . . . . . . . . 33 

Item 12.  Security Ownership of Certain Beneficial Owners  
              and Management . . . . . . . . . . . . . . . . . 33 

Item 13.  Certain Relationships and Related Transactions . . . 33 
 

PART IV 

Item 14.  Exhibits, Financial Statement Schedules and Reports 
              on Form 8-K  . . . . . . . . . . . . . . . . . . 34 
 
Independent Auditors' Consent  . . . . . . . . . . . . . . . . 41 
 
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 42 
 
GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 
 
                                      2 
 

<PAGE> 
 

PART I - Enova Corporation: 
 

Part I - San Diego Gas & Electric Company beginning on page 3 of this Annual 
Report on Form 10-K incorporated herein by reference. 
 
PART I - San Diego Gas & Electric Company: 
 

ITEM 1. BUSINESS 
 
Description of Business 
On December 6, 1995 San Diego Gas & Electric Company announced the formation 
of Enova Corporation as the parent company for itself and its subsidiaries. On
January 1, 1996 Enova Corporation became the parent of SDG&E. SDG&E's 
outstanding common stock was converted on a share-for-share basis into Enova 
Corporation common stock. SDG&E's debt securities, preferred stock and 
preference stock were unaffected and remain with SDG&E. On January 31, 1996 
SDG&E's ownership interests in its subsidiaries were transferred to Enova 
Corporation at book value, completing the organizational restructuring into 
the new parent company framework. Thus, the consolidated financial statements 
of SDG&E incorporated herein, which include SDG&E and its subsidiaries, also 
reflect what is now Enova Corporation and its subsidiaries. Beginning on 
January 1, 1996, SDG&E's financial statements for periods prior to 1996 will 
be restated to reflect the net results of nonutility subsidiaries as 
discontinued operations in accordance with Accounting Principles Board Opinion
No. 30 "Reporting the Effects of a Disposal of a Segment of Business." 
 
SDG&E is an operating public utility engaged in the electric and gas 
businesses. It generates and purchases electric energy and distributes it to 
1.2 million customers in San Diego County and an adjacent portion of Orange 
County, California. It also purchases and distributes natural gas to 700,000 
customers in San Diego County and also transports gas for others in SDG&E's 
service territory. Factors affecting SDG&E's utility operations include 
regulation, deregulation, competition, nonutility generation, customers' 
bypass of its electric and gas systems, population growth, changes in interest 
and inflation rates, and environmental and other laws. 
 
SDG&E has diversified into other businesses. Enova Financial, Inc. invests in 
limited partnerships representing approximately 800 affordable-housing 
projects located throughout the United States. Califia Company leases computer 
equipment. The investments in Enova Financial and Califia are expected to 
provide income tax benefits over the next several years. Enova Energy, Inc. is
an energy management consulting firm offering services to utilities and large 
consumers. Pacific Diversified Capital Company is the parent company for non-
utility subsidiaries, Phase One Development, Inc., which is engaged in real 
estate development, and Enova Technologies, Inc. Enova Technologies, whose 
ownership was transferred directly to Enova Corporation after December 31, 
1995, is in the business of developing new technologies generally related to 
utilities and energy, including certain research transferred from the utility. 
Enova Technologies has entered into a joint venture with Philips Home Services 
to establish a new electronic consumer network using the Philips screen phone 
as the network platform. Enova International was formed after December 31, 
1995 to develop and operate natural-gas and power projects outside the United 
States.  
 
                                           3 

<PAGE> 
 
 
As a result of the formation of Enova Corporation and the subsequent 
restructuring, Enova and its subsidiaries have more flexibility to pursue non-
regulated business opportunities than in the past. As new non-regulated 
businesses are undertaken, risks will increase. The intent is for rewards to 
increase correspondingly. 
 
Additional information regarding SDG&E's subsidiaries is described in 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations" beginning on page 18 in the 1995 Annual Report to Shareholders and 
in Notes 1 and 3 of the "Notes to Consolidated Financial Statements" beginning 
on page 35 of the 1995 Annual Report to Shareholders.  
 
GOVERNMENT REGULATION 
 
Local Regulation 
SDG&E has separate electric and gas franchises with the two counties and the 
25 cities in its service territory. These franchises allow SDG&E to locate 
facilities for the transmission and distribution of electricity and gas in the 
streets and other public places. The franchises do not have fixed terms, 
except for the electric and gas franchises with the cities of Chula Vista 
(expiring in 1997), Encinitas (2012), San Diego (2021), and Coronado (2028); 
and the gas franchises with the city of Escondido (2036) and the county of San 
Diego (2030). 
 
State Regulation 
The California Public Utilities Commission consists of five members appointed 
by the governor and confirmed by the senate for six-year terms. The commission 
regulates SDG&E's rates and conditions of service, sales of securities, rate 
of return, rates of depreciation, uniform systems of accounts, examination of 
records, and long-term resource procurement. The CPUC also conducts various 
reviews of utility performance and conducts investigations into various 
matters, such as deregulation, competition and the environment, to determine 
its future policies.  
 
The California Energy Commission has discretion over electric-demand forecasts 
for the state and for specific service territories. Based upon these 
forecasts, the CEC determines the need for additional energy sources and for 
conservation programs. The CEC sponsors alternative-energy research and 
development projects, promotes energy conservation programs, and maintains a 
state-wide plan of action in case of energy shortages. In addition, the CEC 
certifies power-plant sites and related facilities within California. 
 
Federal Regulation 
The Federal Energy Regulatory Commission regulates transmission access, the 
uniform systems of accounts, rates of depreciation and electric rates 
involving sales for resale. The FERC also regulates the interstate sale and 
transportation of natural gas. 
 
The Nuclear Regulatory Commission oversees the licensing, construction and 
operation of nuclear facilities. NRC regulations require extensive review of 
the safety, radiological and environmental aspects of these facilities. 
Periodically, the NRC requires that newly developed data and techniques be 
used to reanalyze the design of a nuclear power plant and, as a result, 
requires plant modifications as a condition of continued operation in some 
cases. 
 
                                          4 

<PAGE> 
 
 
Licenses and Permits 
SDG&E obtains a number of permits, authorizations and licenses in connection 
with the construction and operation of its generating plants. Discharge 
permits, San Diego Air Pollution Control District permits and NRC licenses are 
the most significant examples. The licenses and permits may be revoked or 
modified by the granting agency if facts develop or events occur that differ 
significantly from the facts and projections assumed in granting the approval. 
Furthermore, discharge permits and other approvals are granted for a term less 
than the expected life of the facility. They require periodic renewal, which 
results in continuing regulation by the granting agency. 
 
Other regulatory matters are described throughout this report. 
 
COMPETITION 
 
This topic is discussed in "Electric Operations" and "Rate Regulation" herein, 
in "Management's Discussion and Analysis of Financial Condition and Results of 
Operations" beginning on page 18 of the 1995 Annual Report to Shareholders, 
and in Note 11 of the "Notes to Consolidated Financial Statements" beginning 
on page 35 of the 1995 Annual Report to Shareholders. 
 
SOURCES OF REVENUE 
 
(In Millions of Dollars)                  1995      1994      1993 
- ------------------------------------------------------------------- 
Utility revenue by type of customer: 
 
Electric- 
        Residential                      $  610    $  612    $  615 
        Commercial                          589       600       572 
        Industrial                          250       231       250 
        Other                                55        67        77 
                                         ------    ------    ------ 
           Total Electric                 1,504     1,510     1,514 
                                         ------    ------    ------ 
Gas- 
        Residential                         189       204       195 
        Commercial                           60        65        63 
        Industrial                           25        31        40 
        Other                                36        46        49 
                                         ------    ------    ------ 
           Total Gas                        310       346       347 
                                         ------    ------    ------ 
           Total Utility                  1,814     1,856     1,861 
                                         ------    ------    ------ 
Diversified Operations                       57        56        36 
                                         ------    ------    ------ 
           Total                         $1,871    $1,912    $1,897 
                                         ======    ======    ====== 
 
 
Industry segment information is contained in "Statements of Consolidated 
Financial Information by Segments of Business" on page 34 of the 1995 Annual 
Report to Shareholders. 
 
                                         5 

<PAGE> 
 
CONSTRUCTION EXPENDITURES 
 
Construction expenditures, excluding nuclear fuel and the allowance for equity
funds used during construction, were $221 million in 1995 and are estimated to
be about $220 million in 1996. 
 
ELECTRIC OPERATIONS 
 
Introduction 
In December 1995 the CPUC issued its policy decision on the restructuring of 
California's electric utility industry to stimulate competition and reduce 
rates. These matters are discussed in "Competition-California" herein, 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations" beginning on page 18 of the 1995 Annual Report to Shareholders, 
and in Note 11 of the "Notes to Consolidated Financial Statements" beginning 
on page 35 of the 1995 Annual Report to Shareholders. 
 
Resource Planning 
SDG&E's ability to provide energy at the lowest possible cost has been based 
on a combination of production from its own plants and purchases from other 
producers. The purchases have been a combination of short-term and long-term 
contracts and spot purchases. Most resource acquisitions are obtained through 
a competitive bidding process. In  December 1994 the CPUC issued a decision 
ordering SDG&E, Pacific Gas & Electric and Southern California Edison to go 
forward with the Biennial Resource Plan Update proceeding, allowing qualified 
nonutility power producers that cogenerate or use renewable energy 
technologies to bid for a portion of SDG&E's future capacity needs. As a 
result of the decision, SDG&E would be required to enter into contracts 
(ranging in term from 17 to 30 years) to purchase 500 mw of power, including 
341 mw from cogenerators, 94 mw from geothermal sources, and the remainder 
from wind and other sources. The present value of ratepayer payments beginning
in 1997 over the life of these contracts was estimated to be $2.3 billion. 
Prices under these contracts could significantly exceed the future market 
price. In February 1995 the FERC issued an order declaring the BRPU auction 
procedures unlawful under federal law. In July 1995 the CPUC issued a ruling 
encouraging SDG&E, PG&E and Edison to reach settlements with the auction 
winners. SDG&E has reached settlement with two auction winners. Settlement 
discussions with the others are ongoing. 
 
In 1995 SDG&E also negotiated contracts for 760 mw of short-term purchased 
power.  
 
The CPUC has also ordered utilities in the state to implement pilot 
demonstration projects to allow others to bid to supply utilities' customers 
with energy-conservation services, which could reduce the need for generation 
capacity. 
 
Additional information concerning resource planning is provided in 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations" beginning on page 18 of the 1995 Annual Report to Shareholders and
in Notes 10 and 11 of the "Notes to Consolidated Financial Statements" 
beginning on page 35 of the 1995 Annual Report to Shareholders. 
 
                                        6 

<PAGE> 
 
Electric Resources 
Based on generating plants in service and purchased-power contracts in place 
as of January 31, 1996, the net megawatts of electric power expected to be 
available to SDG&E during the next summer (normally the time of highest 
demand) are as follows: 
 
    Source                               Net Megawatts 
    -------------------------------------------------- 
    Gas/oil generating plants                    1,641 
    Combustion turbines                            332 
    Nuclear generating plants                      430 
    Long-term contracts with other utilities       675 
    Short-term contracts with other utilities      350 
    Contracts with others                          510 
                                                 ----- 
            Total                                3,938    
                                                 ===== 
 
SDG&E's 1995 system peak demand of 3,260 mw occurred on August 30, when the 
net system capability, including power purchases, was 3,857 mw. The all-time 
record is 3,335 mw which was reached on August 17, 1992. 
 
Gas/Oil Generating Plants: SDG&E's South Bay and Encina power plants are 
equipped to burn either natural gas or fuel oil. The four South Bay units went 
into operation between 1960 and 1971 and can generate 690 mw. The five Encina 
units began operation between 1954 and 1978 and can generate 951 mw. SDG&E 
sold and leased back Encina Unit 5 (330 mw) in 1978. The lease term is through
2004, with renewal options for up to 15 additional years. 
 
SDG&E has 19 combustion turbines that were placed in service from 1966 to 
1979. They are located at various sites and are used only in times of peak 
demand. 
 
Nuclear Generating Plants: SDG&E owns 20 percent of the three nuclear units at 
San Onofre Nuclear Generating Station. The cities of Riverside and Anaheim own 
a total of 5 percent of SONGS 2 and 3. Southern California Edison Company owns 
the remaining interests and operates the units. 
 
SDG&E is currently recovering its existing capital investment in SONGS 1 over 
a four-year period that began in November 1992, when the CPUC issued a 
decision to permanently shut down the unit. SDG&E and Edison filed a 
decommissioning plan in November 1994, although final decommissioning will not 
occur until SONGS 2 and 3 are also decommissioned. The unit's spent nuclear 
fuel has been removed from the reactor and stored on-site. In March 1993 the 
NRC issued a Possession-Only License for SONGS 1, and the unit was placed in a 
long-term storage condition in May 1994. 
 
SONGS 2 and 3 began commercial operation in August 1983 and April 1984, 
respectively. SDG&E's share of the capacity is 214 mw of SONGS 2 and 216 mw of
SONGS 3. 
 
Between 1993 and 1995, SDG&E spent $69 million on capital modifications and 
additions for all three units and expects to spend $16 million in 1996 on 
SONGS. SDG&E deposits funds in an external trust to provide for 
 
                                          7 

<PAGE> 
 
the future dismantling and decontamination of the units. The shutdown of 
SONGS 1 does not affect contributions to the trust. 
 
In 1983 the CPUC adopted performance-based incentive plans for SONGS that set 
a Target Capacity Factor range of 55 percent to 80 percent for Units 2 and 3. 
Energy costs or savings outside that range were shared equally by SDG&E and 
its customers. Since the TCF was adopted, these units have operated above 55 
percent for each of their fuel cycles and have exceeded 80 percent a total of 
seven times in the fourteen completed cycles. However, there can be no 
assurance that they will continue to achieve a 55 percent capacity factor. 
 
In January 1996 the CPUC approved the accelerated recovery of the existing 
capital costs of Units 2 and 3. The decision allows SDG&E to recover more than 
$750 million over an eight-year period beginning in 1996, rather than over the 
anticipated operational life of the units, which is expected to extend to 
2013. During the eight-year period, the authorized rate of return on the 
equity portion of the investment will be 90 percent of SDG&E's embedded cost 
of debt and the return on the debt-financed component will be at 7.52 percent 
(SDG&E's 1995 authorized cost of debt). The decision includes a performance 
incentive plan that encourages continued, efficient operation of the plant 
during the eight-year period. During the eight-year period, customers will pay
about four cents per kilowatt-hour. This pricing structure replaces the 
traditional method of recovering the units' operating expenses and capital 
improvements. This is intended to make the units more competitive with other 
sources.  
 
Additional Information: Additional information concerning SDG&E's power 
plants, the SONGS units, nuclear decommissioning and the CPUC's industry 
restructuring proposal is presented under "Environmental Matters," "Electric 
Properties" and "Legal Proceedings" herein, in "Management's Discussion and 
Analysis of Financial Condition and Results of Operations" beginning on page 
18 of the 1995 Annual Report to Shareholders, and in Notes 6, 10 and 11 of the
"Notes to Consolidated Financial Statements" beginning on page 35 of the 1995 
Annual Report to Shareholders. 
 
 
                                         8 

<PAGE> 
 
Purchased Power: The following table lists contracts with the various suppliers:
 
                                                         Megawatt    
      Supplier                    Period                Commitment      Source
- ------------------------------------------------------------------------------
Long-Term Contracts with Other Utilities:   
   
Bonneville Power         May Through September 1996       300     Hydro Power
Administration                   
                         
Comision Federal de      Through August 1996              150     Geothermal
Electricidad (Mexico)                                   
                                                       
Portland General         Through December 1998             50     Hydro storage
Electric                 Through December 2013             75     Coal   
                                                     
Public Service Company   Through April 2001               100     System supply
of New Mexico                                            ----- 
               Total summer availability (see page 7)     675 
                                                         ===== 
Short-Term Contracts with Other Utilities:   
                                                     
Portland General         July Through September 1996      100     System Supply
Electric                 October 1996                      40*                
  
Public Service Company   January through May  1996        130*    System Supply
of New Mexico            June through September 1996      110  
                         October through December 1996    130* 
                                             
Puget Sound Power &      June through September 1996       40     System Supply
Light    
                                                       
Salt River Project       Through December 1996            100     System Supply
                                                         ----- 
               Total summer availability (see page 7)     350 
                                                         ===== 
Contracts with Others:   
   
Cities of Azusa, Banning  Through December 1996            40     Coal   
and Colton   
   
Electric Clearinghouse    Through December 1996            50     System Supply
 
Enron Power Marketing     Through December 1996           120     System Supply
                          September 1996                  150* 
 
Goal Line Limited         Through December 2024            50     Cogeneration
Partnership   
                                                              
Illinova Power Marketing  Through December 1996            70     System Supply
   
Sithe Energies USA        Through December 2019           102     Cogeneration
   
Yuma Cogeneration         Through June 2024                50     Cogeneration
   
Other                     Various                          28     Various 
                                                          ----- 
               Total summer availability (see page 7)     510 
                                                          ===== 
* Not included in total summer availability. 
 
The commitments with CFE and BPA are for energy and capacity. All short-term 
contracts with other utilities and the commitments with Electric Clearinghouse
and Enron are for firm energy only. All other contracts are for capacity only.  
 
Costs under contracts with qualifying facilities (identified above as sourced 
from cogeneration) represent SDG&E's avoided cost. Contracts with power 
marketers are at market value at the time the contracts were negotiated. 
Charges under contracts with other utilities are based on  
 
                                           9 

<PAGE> 
 
the selling utility's costs, including a return on and depreciation of the 
utility's rate base (or lease payments in cases where the utility does not own 
the property), fuel expenses, operating and maintenance expenses, transmission 
expenses, administrative and general expenses, and state and local taxes. 
 
Energy costs under the CFE contract are indexed to changes in Mayan crude oil 
prices and the dollar/peso exchange rate. 
 
The locations of the utilities which have long-term supply contracts with 
SDG&E and the primary transmission lines (and their capacities) used by SDG&E
are shown on the following map of the Western United States. Where applicable, 
interconnection to the primary lines is provided by contract.  
    
 
    
    
 
 
 
 
 
 
 
 
                         [ MAP ]    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
Long-Term Contracts with Other Utilities    
Bonneville Power Administration: In 1993 SDG&E and BPA entered into a four-
year agreement for the exchange of capacity and energy. SDG&E provides BPA 
with off-peak, non-firm energy in exchange for firm summer capacity and 
associated energy. In addition, SDG&E makes energy available for BPA to 
purchase during the period of January through April of each year. To 
facilitate the exchange, SDG&E has agreements with Southern California Edison
and the Los Angeles Department of Water and  Power for 200 MW of firm 
transmission service from the Nevada-Oregon border to SONGS. 
 
                                           10 

<PAGE> 
 
Comision Federal de Electricidad: The 10-year agreement under which SDG&E 
purchases firm energy and capacity of 150 MW from CFE will terminate on 
September 1, 1996. 
 
Portland General Electric: In 1985 SDG&E and PGE entered into an agreement for
the purchase of 75 MW of capacity from PGE's Boardman Coal Plant from January 
1989 through December 2013. SDG&E pays a monthly capacity charge plus a charge 
based upon the amount of energy received. In addition, SDG&E has 50 MW of 
available hydro storage service with PGE through December 1998. SDG&E has also 
purchased 75 MW of transmission service from PGE in the northern section of 
the Pacific Intertie through December 2013.  
 
Public Service Company of New Mexico: In 1985 SDG&E and PNM entered into an 
agreement for the purchase of 100 MW of capacity from PNM's system from June 
1988 through April 2001. SDG&E pays a capacity charge plus a charge based on 
the amount of energy received. 
 
Short-Term Contracts with Other Utilities    
Portland General Electric: In November 1995 SDG&E and PGE entered into 
agreements for the purchase of up to 100 MW of firm energy from July 1996 
through September 1996 and 40 MW in October 1996. The energy charge is based 
on the amount of energy received. 
 
Public Service Company of New Mexico: In November 1995 SDG&E and PNM entered 
into an agreement for the purchase of up to 130 MW of firm energy through 
1996, of which 110 MW will be available during the summer peak. The energy 
charge is based on the amount of energy received.  
 
Puget Sound Power & Light: In November 1995 SDG&E and PSP&L entered into an 
agreement for the purchase of up to 40 MW of firm energy from June through 
September 1996. The energy charge is based on the amount of energy received. 
 
Salt River Project: In October 1995 SDG&E and SRP entered into an agreement 
for the purchase of up to 100 MW of firm energy through December 1996. The 
energy charge is based on the amount of energy received. 
 
Contracts with Others     
Cities of Azusa, Banning and Colton: In 1993 SDG&E and the cities entered into
an agreement for the purchase of 40 MW of capacity. The agreement was extended 
through December 1996. SDG&E pays a capacity charge plus a charge based on the 
amount of energy received. 
 
Electric Clearinghouse: In October 1995 SDG&E and EC entered into an agreement 
for the purchase of up to 50 MW of firm energy through December 1996. The 
energy charge is based on the amount of energy received. 
 
Enron Power Marketing: In October 1995 SDG&E and Enron entered into an 
agreement for the purchase of 120 MW of firm energy through December 1996 and
an option on an additional 150 MW in September 1996. The energy charge is 
based on the amount of energy received. 
 
Goal Line Limited Partnership: In December 1990 SDG&E and Goal Line entered 
into a 30-year agreement for the purchase of 50 MW of firm 
 
                                        11 

<PAGE> 
 
capacity, beginning in February 1995. SDG&E pays a firm capacity charge plus a
charge based on the amount of energy received. 
 
Illinova Power Marketing: In November 1995 SDG&E and Illinova entered into an 
agreement for the purchase of up to 70 MW of capacity from January 1996 
through December 1996. SDG&E pays a capacity charge for the months of June 
through September plus a charge based on the amount of energy received.  
 
Sithe Energies USA: In April 1985 SDG&E entered into three 30-year agreements 
for the purchase of 102 MW of firm capacity from December 1989 through 
December 2019. SDG&E pays a firm capacity charge plus a charge based on the 
amount of energy received. 
 
Yuma Cogeneration: In March 1990 SDG&E and Yuma Cogeneration entered into a 
30-year agreement for the purchase of 50 MW of firm capacity which began in 
June 1994. SDG&E pays a firm capacity charge plus a charge based on the amount
of energy received. 
 
Other: SDG&E currently purchases capacity and energy from 115 as-available 
Qualifying Facilities. SDG&E also has two 20-year agreements with Pacific 
Energy and two 22-year agreements with Landfill Generating Partners for the 
purchase of 5 MW of firm capacity through the years 2007-2011. SDG&E pays a 
capacity charge plus a charge based on the amount of energy received. These 
account for 28 MW of capacity annually. 
 
Additional information concerning SDG&E's purchased-power contracts is 
described in "Legal Proceedings" herein, in "Management's Discussion and 
Analysis of Financial Condition and Results of Operations" beginning on page 
18 of the 1995 Annual Report to Shareholders, and in Notes 10 and 11 of the 
"Notes to Consolidated Financial Statements" beginning on page 35 of the 1995 
Annual Report to Shareholders. 
 
Power Pools     
In 1964 SDG&E, PG&E, and Edison entered into the California Power Pool 
Agreement. It provides for the transfer of electrical capacity and energy by 
purchase, sale or exchange during emergencies and at other mutually determined
times.  
 
SDG&E is a participant in the Western Systems Power Pool, which includes an 
electric power and transmission rate agreement with utilities and power 
agencies located throughout the United States and Canada. More than 100 
investor-owned and municipal utilities, state and federal power agencies, 
energy brokers, and power marketers share power and information in order to 
increase efficiency and competition in the bulk power market. Participants are 
able to target and coordinate delivery of cost-effective sources of power from
outside their service territories through a centralized exchange of 
information. 
 
Transmission Arrangements    
In addition to interconnections with other California utilities, SDG&E has 
firm transmission capabilities for purchased power from the Northwest, the 
Southwest and Mexico.  
 
Pacific Intertie: The Pacific Intertie, consisting of AC and DC transmission 
lines, enables SDG&E to purchase and receive surplus coal and hydroelectric 
power from the Northwest. SDG&E, PG&E, Edison and others share transmission 
capacity on the Pacific Intertie under an agreement that expires in July 2007.
SDG&E's share of the intertie is  
 
                                      12 

<PAGE> 
 
266 MW through July 2007, and SDG&E has obtained 200 MW of additional transfer 
capacity through 1996. (Repairs necessitated by damages caused by the January 
17, 1994 Northridge earthquake and by a major fire at the DC terminal at 
Sylmar in October 1994 have been completed.) 
 
Southwest Powerlink: SDG&E's 500-kilovolt Southwest Powerlink transmission 
line, which it shares with Arizona Public Service Company and Imperial 
Irrigation District, extends from Palo Verde, Arizona to San Diego and enables 
SDG&E to import power from the Southwest. SDG&E's share of the line is 914 MW, 
although it can be less, depending on specific system conditions. 
 
Mexico Interconnection: Mexico's Baja California Norte system is connected to 
SDG&E's system via two 230-kilovolt interconnections with firm capability of 
408 MW. SDG&E uses this interconnection for transactions with CFE.  
 
Additional Transmission Capabilities: Various studies have been undertaken or 
are ongoing to determine the extent to which various path ratings may be 
increased. SDG&E expects to receive an allocation of approximately 64 MW East-
of-the-Colorado-River and 94 MW West-of-the-Colorado-River as a result of 
these various studies. 
 
Transmission Access    
As a result of the enactment of the National Energy Policy Act of 1992, the 
FERC has established rules to implement the Act's transmission access 
provisions. These rules specify FERC-required procedures for others' requests 
for transmission service. Additional information regarding transmission access 
is described in "Management's Discussion and Analysis of Financial Condition 
and Results of Operations" beginning on page 18 of the 1995 Annual Report to 
Shareholders. 
 
Fuel and Purchased-Power Costs    
The following table shows the percentage of each electric fuel source used by 
SDG&E and compares the costs of the fuels with each other and with the total 
cost of purchased power:  
 
                          Percent of Kwhr            Cents per Kwhr    
- -----------------------------------------------------------------------    
                       1995    1994    1993        1995    1994    1993    
                       -----   -----   -----       ----    ----    ----    
Natural gas            21.7%   22.4%   24.4%        2.3     3.1     3.4    
Nuclear fuel           16.5    21.8    17.2         0.5     0.5     0.6    
Fuel oil                0.1     1.4     3.7         2.1     2.6     2.5    
                      -----   -----   -----              
Total generation       38.3    45.6    45.3    
Purchased power-net    61.7    54.4    54.7         3.3     3.7     3.5    
                      -----   -----   -----              
Total                 100.0%  100.0%  100.0%    
                      =====   =====   ===== 
 
The cost of purchased power includes capacity costs as well as the costs of 
fuel. The cost of natural gas includes transportation costs. The costs of 
natural gas, nuclear fuel and fuel oil do not include SDG&E's capacity costs. 
While fuel costs are significantly less for nuclear units than for other 
units, capacity costs are higher.     
 
Electric Fuel Supply 
Natural Gas: Information concerning natural gas is provided in "Natural Gas 
Operations" herein.  
 
                                     13 

<PAGE> 
 
Nuclear Fuel: The nuclear-fuel cycle includes services performed by others. 
These services and the dates through which they are under contract are as 
follows:  
									 
Mining and milling of uranium concentrate(1)                  -- 
Conversion of uranium concentrate to uranium hexafluoride(1)  -- 
Enrichment of uranium hexafluoride(2)                        1998 
Fabrication of fuel assemblies                               2000 
Storage and disposal of spent fuel(3)                         -- 
 
(1) Competitive bids are currently being sought for a multi-year contract to
supply uranium and conversion services beginning in mid-1996. 
 
(2) The United States Enrichment Corporation, a government-owned corporation, 
is committed to offer any required enrichment services through 2014.  
 
(3) Spent fuel is being stored at SONGS, where storage capacity will be 
adequate at least through 2003. If necessary, modifications in fuel-storage 
technology can be implemented to provide on-site storage capacity for 
operation through 2014, the expiration date of the NRC operating license. The 
DOE's plan is to provide a permanent storage site for the spent nuclear fuel 
by 2010. 
  
Pursuant to the Nuclear Waste Policy Act of 1982, SDG&E entered into a 
contract with the DOE for spent-fuel disposal. Under the agreement, the DOE is 
responsible for the ultimate disposal of spent fuel. SDG&E is paying a 
disposal fee of $0.91 per megawatt-hour of net nuclear generation. Disposal 
fees average $2.7 million per year. 
 
To the extent not currently provided by contract, the availability and the 
cost of the various components of the nuclear-fuel cycle for SDG&E's nuclear 
facilities cannot be estimated at this time.  
 
Additional information concerning nuclear-fuel costs is discussed in Note 10 
of the "Notes to Consolidated Financial Statements" beginning on page 35 of 
the 1995 Annual Report to Shareholders.  
 
Fuel Oil: SDG&E has no long-term commitments to purchase fuel oil. The use of 
fuel oil is dependent upon price differences between it and natural gas. 
During 1995 SDG&E burned 36,000 barrels of fuel oil. 
 
NATURAL-GAS OPERATIONS 
 
SDG&E purchases natural gas for resale to its customers and for fuel in its 
generating plants. All natural gas is delivered to SDG&E under a 
transportation and storage agreement with Southern California Gas Company 
through two transmission pipelines with a combined capacity of 430 million 
cubic feet per day.  
 
During 1995 SDG&E purchased approximately 89 billion cubic feet of natural 
gas. The majority of SDG&E's natural-gas requirements are met through 
contracts of less than one year. SDG&E purchases natural gas primarily from 
various spot-market suppliers and from suppliers under short-term contracts. 
These supplies originate in New Mexico, Oklahoma and Texas, and are 
transported to the SoCal Gas Company pipeline at the California border by El 
Paso Natural Gas Company and by Transwestern Pipeline Company. SDG&E also 
purchases natural gas under long-term 
 
                                       14 

<PAGE> 
 
contracts with four Canadian suppliers. These contracts have varying terms 
through 2004. Two of these suppliers have suspended sales to SDG&E while 
contractual disputes are in litigation. Natural gas from Canada is transported 
to SDG&E's system over Alberta Natural Gas, Pacific Gas Transmission, and PG&E 
pipelines. The natural gas transportation contracts have varying terms through
2023.   
 
Additional information concerning SDG&E's gas operations is provided under 
"Legal Proceedings" herein, in "Management's Discussion and Analysis of 
Financial Condition and Results of Operations" beginning on page 18 of the 
1995 Annual Report to Shareholders, and in Note 10 of the "Notes to 
Consolidated Financial Statements" beginning on page 35 of the 1995 Annual 
Report to Shareholders. 
 
RATE REGULATION 
 
Competition-California 
 
In December 1995 the CPUC issued its policy decision on the restructuring of 
California's electric utility industry to stimulate competition and reduce 
rates. The decision provides that, beginning in January 1998, customers can 
buy their electricity through a power exchange that will obtain power from the 
lowest-bidding suppliers. The exchange is a spot market with published 
pricing. An independent system operator (ISO) will schedule power transactions 
and access to the transmission system. Consumers also may to continue to 
purchase from their local utility under regulated tariffs. As a third option, 
a cross section of all customer groups (residential, industrial, commercial 
and agricultural) will be able to go directly to any energy supplier and enter 
into private contracts with generators, brokers or others (direct access). As 
the direct access mechanism has many technical issues to be resolved, a five-
year phase-in is planned. All California electricity customers of investor-
owned utilities will have the option to purchase generation services directly 
by 2003. The utilities will continue to provide transmission and distribution 
services to customers that choose to purchase their energy from other 
providers.  
 
Utilities will, within certain limits, be allowed recovery of generation-
related regulatory assets and the excess carrying amount of existing 
generation-investment costs over fair-market value over a transition period 
that ends in 2005. Obligations under long-term purchased-power contracts in 
excess of fair-market value will be recoverable over the duration of the 
contracts. The CPUC is currently working on building a consensus on the new 
market structure with the California legislature, the governor, utilities and 
customers. In addition, plans to implement the exchange and the ISO must be 
presented by the utilities to both the CPUC and the FERC by May 1996 for 
review and approval. This decision will change significantly some of the 
existing ratemaking mechanisms that are described below. 
 
Performance-based regulation will replace cost-of-service regulation for 
distribution services. SDG&E is currently participating in a performance-based 
ratemaking process on an experimental basis which commenced in 1993 and is 
expected to run through 1998. 
 
These matters are discussed in "Performance-Based Ratemaking" herein, 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations" beginning on page 18 of the 1995 Annual Report to Shareholders, 
and in Note 11 of the "Notes to Consolidated Financial 
 
                                      15 

<PAGE> 
 
Statements" beginning on page 35 of the 1995 Annual Report to Shareholders. 
 
Competition-Federal 
 
In March 1995 the FERC issued a proposed rule that, if adopted, would require 
all public utilities to offer wholesale "open-access" transmission service on 
a nondiscriminatory basis. In addition, public utilities would be required to 
functionally price their generation and transmission services separately from 
each other. The FERC also stated its belief that utilities should be allowed 
to recover the costs of assets and obligations made uneconomic by the changed
regulatory environment. In October 1995 SDG&E filed for approval of its open-
access tariffs for its service territory with the FERC in conjunction with its 
request for a marketing license for Enova Energy, a wholly-owned subsidiary 
which desires to transact business at market-based rates in the wholesale 
energy market. In December 1995 the FERC issued a draft order approving 
SDG&E's open-access tariff, but rejecting Enova Energy's filing. This limits 
Enova Energy to cost-based rates. All non-rate terms and conditions were 
accepted subject to the outcome of the FERC's restructuring rulemaking. Final 
approval of the FERC's rule and the CPUC's industry restructuring plan would 
result in the creation of a bid-based wholesale electricity spot market with 
open-access transmission. The FERC is expected to issue a final rule during 
the first half of 1996. 
 
Base Rates 
 
SDG&E files annually under its base-rates performance-based ratemaking 
mechanism formula to offset the effects of inflation. Base rates allow SDG&E 
to recover the cost of operating and maintaining the utility system, taxes, 
depreciation, and other non-fuel business costs. In addition, SDG&E files an 
annual application to establish its cost of capital (see "Cost of Capital" 
below), which reflects the cost of debt and equity. Additional information 
concerning PBR is described under "Performance-Based Ratemaking" herein. 
 
Cost of Capital 
 
In November 1995 the CPUC issued its decision on the 1996 Cost of Capital 
proceeding, adopting an 11.6 percent return on equity for 1996 for SDG&E, 
PG&E, Edison, SoCal Gas, and Sierra Pacific Power, resulting in an overall 
rate of return for SDG&E of 9.37 percent. SDG&E's 1995 authorized return on 
equity and rate of return were 12.05 percent and 9.76 percent, respectively.  
 
In October 1995 SDG&E filed a proposal with the CPUC to implement a mechanism,
in lieu of the existing, litigated proceeding, to establish its cost of 
capital beginning in January 1997. Under the mechanism, each October SDG&E's 
authorized rate of return would be adjusted if single-A bond rates change by 
one percent or more from a previously established benchmark rate. For example, 
a one-percent change in single-A bond rates would result in a one-half percent 
change in SDG&E's return on equity. In addition, SDG&E's embedded costs of 
debt and preferred stock would be adjusted to reflect SDG&E's outstanding 
long-term debt and preferred stock at each September 30 if the return on 
equity adjustment described above is triggered. The adjustments would be 
effective on January 1 of the following year. The proposal suggests a three-
year trial period during which SDG&E's authorized capital structure would not
change. 
 
                                 16 

<PAGE> 
 
Balancing Accounts 
 
The CPUC requires balancing accounts for fuel and purchased energy costs and 
for sales volumes. The CPUC sets balancing account rates based on estimated 
costs and sales volumes. Revenues are adjusted upward or downward to reflect 
the differences between authorized and actual volumes and costs. These 
differences are accumulated in the balancing accounts and represent amounts to
be either recovered from customers or returned to them. These balancing 
accounts were overcollected by $171 million at December 31, 1995 and by $112 
million at December 31, 1994. The CPUC adjusts SDG&E's rates annually to 
amortize the accumulated balances. As a result, changes in SDG&E's fuel and 
purchased-power costs or changes in electric and natural-gas sales volumes 
normally have not affected SDG&E's net income. As described under 
"Performance-Based Ratemaking," SDG&E can realize rewards or penalties 
depending on the achievement of certain benchmarks for operations and 
expenses.  
 
It is uncertain whether the CPUC will continue to allow these or some other 
form of balancing accounts once its electric industry restructuring decision 
takes effect in 1998. 
 
Electric Fuel Costs and Sales Volumes 
 
Rates to recover electric-fuel and purchased-power costs are determined in the 
Energy Cost Adjustment Clause proceeding. This proceeding normally takes place 
annually, in two phases. In the forecast phase, prices are set based on the 
estimated cost of fuel and purchased power for the following year and are 
adjusted to reflect any changes from the previous period. These adjustments 
are made by amortizing any accumulation in the balancing accounts described 
above. In the second phase, the reasonableness review, the CPUC evaluates the 
prudence of SDG&E's nuclear and natural-gas-storage operations. As described 
under "Performance-Based Ratemaking," reviews of fuel and purchased-power 
transactions, electric operations and natural-gas transactions now are 
required only if SDG&E's fuel and energy expenses vary significantly from the 
established benchmarks. The Electric Revenue Adjustment Mechanism compensates 
for variations in sales volume compared to the estimates used for setting the 
non-fuel component of rates. ERAM is designed to stabilize revenues, which 
otherwise may vary due to changes in sales volumes resulting from weather 
fluctuations and other factors. Any accumulation in the ERAM balancing account
is amortized when new rates are set in the ECAC proceeding.  
 
Natural-Gas Costs and Sales Volumes  
 
Rates to recover the cost of purchasing and transporting natural gas to SDG&E 
are determined in the Biennial Cost Allocation Proceeding. The BCAP proceeding 
normally occurs every two years and is updated in the interim year for 
purposes of amortizing any accumulation in the balancing accounts. Balancing 
accounts for natural-gas costs and sales volumes are similar to those for 
electric fuel costs and sales volumes. The natural-gas balancing accounts 
include the Purchased Gas Account for natural-gas costs and the Gas Fixed Cost
Account for sales volumes. Balancing account coverage includes both core 
customers (primarily residential and commercial customers) and noncore 
customers (primarily large industrial customers). However, SDG&E does not 
receive balancing account coverage on 25 percent of noncore GFCA 
overcollections and undercollections.  
 
                                    17 

<PAGE> 
 
Performance-Based Ratemaking  
 
SDG&E implemented performance-based ratemaking in 1993 for natural-gas 
procurement and transportation, and for electric generation and purchased 
energy; and in 1994 for base rates. 
 
The CPUC has authorized the first two mechanisms to remain in effect beyond 
their authorized July 31, 1995 expiration until the Division of Ratepayer 
Advocates and the Commission Advisory and Compliance Division file their final 
reports for the year ended July 31, 1995 (expected during the first quarter of 
1996). Thereafter, SDG&E will be applying for an extension and modification in 
conjunction with the restructuring of California's electric utility industry, 
and the existing mechanisms are expected to remain in place until the CPUC 
acts on the application. These mechanisms measure SDG&E's ability to purchase 
and transport natural gas, and to generate or purchase energy at the lowest 
possible cost, by comparing SDG&E's performance against various market 
benchmarks. SDG&E's shareholders and customers share in any savings or excess 
costs within predetermined ranges.  
 
Natural Gas: Under the natural-gas procurement and transportation mechanism, 
if SDG&E's actual commodity cost exceeds the benchmark by more than two 
percent or falls below the benchmark, the excess costs or savings is shared 
equally between customers and shareholders. If the delivered cost of gas 
(including interstate transmission charges) falls below the index, 95 percent 
of the savings goes to customers and five percent of the savings goes to 
SDG&E's shareholders. 
 
Electric Generation & Dispatch: The benchmark to measure SDG&E's electric 
generation and purchased energy performance ("generation and dispatch") is 
based upon the difference between SDG&E's actual and authorized electric-fuel 
and short-term purchased-energy expenses. SDG&E shareholders will receive 30 
percent to 50 percent of over- or under-expenditures in specified bands within 
six percent of the benchmark. SDG&E is allowed to recover expenses exceeding 
the six percent range, subject to a reasonableness review by the CPUC. SDG&E's
customers will receive 100 percent of the additional savings should expenses 
fall below the benchmark by more than six percent. 
 
In October 1995 SDG&E filed reports with the CPUC on the results of the 
generation and dispatch and the gas procurement mechanisms for the year ended 
July 31, 1995. SDG&E's fuel and purchased power expenses fell below the 
benchmarks for these mechanisms by a total of $27.9 million ($2.8 million for 
G&D and $25.1 million for gas). As a result, SDG&E's ECAC application (see 
above) and its current Biennial Cost Allocation Proceeding application request 
a total shareholder award of $3.4 million ($0.8 million for G&D and $2.6 
million for gas) and that the remainder of these savings be given to customers
through lower rates. 
 
Base Rates: The base-rate component of SDG&E's Performance-Based Ratemaking 
mechanism is expected to continue through 1998, replacing the traditional 
general rate case application. The base-rate mechanism has three segments. The 
first is a formula similar to the traditional attrition mechanism used to 
determine SDG&E's annual revenue requirement for operating, maintenance and 
capital costs. SDG&E's initial revenue requirements were based on SDG&E's 1993 
General Rate Case decision. The second is a set of indicators which determine 
performance standards for customer rates, employee safety, electric system 
reliability and  
 
                                   18 

<PAGE> 
 
customer satisfaction. Each indicator specifies a range of possible 
shareholder benefits and risks. SDG&E can be penalized up to a total of $21 
million should it fall significantly below these standards or earn up to $19 
million if it exceeds all of the performance targets. The third segment sets 
limits on SDG&E's rate of return. If SDG&E realizes an actual rate of return 
that exceeds its authorized rate of return by one percent to one-and-one-half 
percent, it is required to return 25 percent of the excess over one percent to
customers. If SDG&E's rate of return exceeds the authorized level by more than 
one-and-one-half percent, SDG&E also will return 50 percent of the excess over 
one-and-one-half percent to customers. SDG&E will be at risk if its rate of 
return falls below the authorized level. However, if SDG&E's rate of return is 
three percent or more below or above the authorized level, a rate case review 
would automatically occur. SDG&E may request a rate case review if at any time 
its rate of return drops one-and-one-half percent or more below the authorized 
level.  
 
SDG&E must file a report with the CPUC on the results of the 1995 PBR base-
rates mechanism by May 15, 1996. SDG&E expects to determine the final 1995 PBR
base-rate award or penalty in September 1996 when the Edison Electric 
Institute publishes its final report on 1995 national electric rates.  
 
SONGS: In 1983 the CPUC adopted performance incentive plans for SONGS that set 
a Target Capacity Factor range of 55 percent to 80 percent for Units 2 and 3. 
Energy costs or savings outside that range were shared equally by shareholders 
and customers. In January 1996 the CPUC approved the accelerated recovery of 
the units' existing capital costs. The decision includes a performance 
incentive plan. Additional information concerning the SONGS units, including 
its new incentive plan, is presented under "Nuclear Generating Plants" herein. 
 
Energy Conservation Program 
 
Over the past several years, SDG&E has promoted conservation programs to 
encourage efficient use of energy. The programs are designed to conserve 
energy through the use of energy-efficiency measures that will reduce 
customers' energy costs and reduce the need to build additional power plants. 
The costs of these programs are recovered from customers. The programs contain 
an incentive mechanism that could increase or decrease SDG&E's earnings, 
depending upon the performance of the programs in meeting specified efficiency 
and expenditure targets. The CPUC has encouraged expansion of these programs, 
authorizing annual expenditures ranging from $54 million in 1993 to $60 
million in 1996. However, the CPUC has also ordered utilities to conduct a 
test program to determine if unaffiliated suppliers could offer energy 
conservation services at a lower cost. 
 
Low-Emission Vehicle Programs 
 
SDG&E has conducted a CPUC-approved natural-gas-vehicle program since 1991. 
The program includes building refueling stations, demonstrating new 
technology, providing incentives and converting portions of SDG&E's fleet 
vehicles to natural gas. The cost of this program is being recovered in 
natural-gas rates. In November 1995 the CPUC issued its decision authorizing 
funding for limited electric-vehicle and natural-gas-vehicle programs through 
the year 2000 to allow recovery of costs for operation and maintenance of 
SDG&E's EV and NGV fleets and NGV fueling stations, and to allow recovery of 
transition costs to meet  
 
                                   19 

<PAGE> 
 
existing commitments to customers. The decision requires the sale of SDG&E's 
NGV fueling stations located on customer property within six years. The CPUC 
approved a six-year program that provides a total of $5.3 million for SDG&E's 
electric-vehicle program and $6.7 million for its natural-gas-vehicle program 
over the six-year period. 
 
Electric Rates 
The average price per kilowatt-hour charged to electric customers was 9.8 
cents in 1995 and 9.7 cents in 1994. 
 
Natural-Gas Rates 
The average price per therm of natural gas charged to customers was 55.7 cents 
in 1995 and 59.9 cents in 1994.  
 
Additional information concerning rate regulation is provided in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" 
beginning on page 18 of the 1995 Annual Report to Shareholders.  
 
ENVIRONMENTAL MATTERS 
 
SDG&E's operations are guided by federal, state and local environmental laws 
and regulations governing air quality, water quality, hazardous substance 
handling and disposal, land use, and solid waste. Compliance programs to meet 
these laws and regulations increase the cost of electric and natural-gas 
service by requiring changes and/or delays in the location, design, 
construction and operation of new facilities. SDG&E may also incur significant
costs to operate its facilities in compliance with these laws and regulations 
and to clean up the environment as a result of prior operations of SDG&E or 
others. The costs of compliance with environmental laws and regulations are 
normally recovered in customer rates. However, the CPUC has issued a decision 
for restructuring the California electric utility industry to stimulate 
competition (see "Rate Regulation" herein). This decision will change the way 
utility rates are set and costs are recovered. Depending on the final outcome 
of industry restructuring and the impact of competition, the costs of 
compliance with environmental regulations may not be fully recoverable. 
 
Electric and Magnetic Fields 
Scientists are researching the possibility that exposure to low-frequency 
magnetic fields causes adverse health effects. This research, although often 
referred to as relating to electric and magnetic fields, or EMFs, focuses on 
magnetic fields. To date, some laboratory studies suggest that such exposure 
creates biological effects, but those effects have not been shown to be 
harmful. 
 
The studies that have most concerned the public are certain epidemiological 
studies. Some of those studies reported a weak correlation between childhood 
leukemia and the proximity of homes to certain power lines and equipment. 
Other studies reported weak correlations between computer estimates of 
historic exposure and disease. Various wire-configuration categories and 
computer calculations were used as substitutes for historical exposure 
measurements, which were not available. However, some of the studies also 
measured actual field levels. When actual field levels were measured, no 
correlation was found with disease. 
 
                                    20 

<PAGE> 
 
Other epidemiological studies found no correlation between estimated exposure 
and any disease. No studies correlate measured fields with disease. Scientists
cannot explain why some studies using estimates of past exposure report 
correlations between estimated fields and disease, while others do not. 
 
To respond to public concern and scientific uncertainty, the CPUC created the 
California Consensus Group in 1991 and assigned this group the responsibility 
of reaching agreement on interim measures which could be implemented until 
science provides direction. In November 1993 the CPUC adopted an interim EMF 
policy, which implemented the Consensus Group's recommendations. Consistent 
with the more-than-twenty major scientific reviews of available research 
literature, the CPUC concluded that no health risk has been identified with 
exposure to low-frequency magnetic fields. The November 1993 decision created
two utility-funded programs (a public education program and a research 
program) and directed utilities to adopt a low-cost EMF-reduction policy for 
new projects. This policy entails design changes to new projects to achieve a 
noticeable reduction of magnetic-field levels. The CPUC indicated that 
utilities should use four percent of the cost of new or upgraded facilities as 
a benchmark in developing low-cost measures which produce a noticeable 
reduction in field levels. In May 1994 SDG&E adopted design guidelines which 
implement the low-cost measures, subject to safety, reliability, efficiency 
and other operational criteria.  
 
Litigation concerning EMFs is discussed under "Legal Proceedings" herein. 
 
Hazardous Substances 
In May 1994 the CPUC issued its decision on the Hazardous Waste Collaborative, 
approving a mechanism for utilities to recover their hazardous waste costs, 
including those related to Superfund sites or similar sites requiring cleanup. 
Basically, the decision allows utilities to recover 90 percent of their 
cleanup costs and related third-party litigation costs, and 70 percent of the 
related insurance-litigation expenses. 
 
SDG&E disposes of its hazardous wastes at facilities owned and operated by 
other entities. Operations at these facilities may result in actual or 
threatened risks to the environment or public health. Where the owner or 
operator of such a facility fails to complete any corrective action required 
by regulatory agencies to abate such risks, applicable environmental laws may 
impose an obligation on SDG&E and others who disposed of hazardous wastes at 
the facility to undertake corrective actions. 
 
Rosens: The above-mentioned type of obligation has been imposed upon SDG&E 
with respect to the Rosen's Electrical Equipment Supply Company located in 
Pico Rivera, California. In December 1993, SDG&E and eight other entities were 
named as potentially responsible parties with respect to the Rosen's site. In 
December 1995 SDG&E and the other entities received an Imminent and 
Substantial Endangerment Determination and Remedial Action Order from the 
California Department of Toxic Substances Control requiring site assessment 
and remediation. Additional information concerning this site is described in 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations" beginning on page 18 of the 1995 Annual Report to Shareholders.  
 
                                     21 

<PAGE> 
 
Underground Storage: California has enacted legislation to protect ground 
water from contamination by hazardous substances. Underground storage 
containers require permits, inspections and periodic reports, as well as 
specific requirements for new tanks, closure of old tanks and monitoring 
systems for all tanks. It is expected that cleanup of sites previously 
contaminated by underground tanks will occur for an unknown number of years. 
SDG&E cannot predict the cost of such cleanup. Specific known underground 
locations requiring assessment and/or remediation are indicated below: 
 
In May 1987 the San Diego Regional Water Quality Control Board issued SDG&E a 
cleanup and abatement order for gasoline contamination originating from an 
underground storage tank located at SDG&E's Mountain Empire Operation and 
Maintenance facility. SDG&E assessed the extent of the contamination and 
removed all contaminated soil and completed remediation of the site. SDG&E 
will continue to monitor the site to confirm its remediation. After such 
confirmation, SDG&E will apply for a site-closure letter from the Regional 
Board. 
 
In January 1993 SDG&E was issued a Notice of Unauthorized Release order by the 
San Diego County Division of Environmental Health Services relative to soil 
contamination from used motor oil associated with an underground tank located 
at SDG&E's South Bay Operation and Maintenance facility. SDG&E removed the 
tank and the associated contaminated soil. No actionable levels of 
contamination remain on the site. SDG&E has applied for and is awaiting the 
issuance of a site-closure letter from the San Diego County Division of 
Environmental Health Services. 
 
In 1993 SDG&E discovered a shallow underground tank-like structure while 
installing underground electric facilities under a public street immediately 
west of a former manufactured-gas plant. The past ownership, operation and use 
of the structure is unknown. Hydrocarbon contamination has been found in the 
vicinity of the structure, but it has not been established whether the 
structure was the source of the contamination. The San Diego County Division 
of Environmental Health Services has issued a Notice of Unauthorized Release 
order to SDG&E. The order requires SDG&E to conduct a site assessment to 
delineate the nature and scope of the contamination. SDG&E's duty to meet 
these requirements has been postponed pending the resolution of property 
ownership. SDG&E is unable to determine the extent of its responsibility, if 
any, or to estimate the nature and extent of the contamination or the 
potential remediation costs if SDG&E is found at all responsible. 
 
Station B: Station B is located in downtown San Diego and was operated as a 
steam and generating facility between 1911 and June 1993. During 1986, three 
100,000-gallon underground diesel-fuel storage tanks were removed from an 
adjacent substation. Pursuant to a cleanup and abatement order, SDG&E 
remediated the existing hydrocarbon contamination. In the course of the 
remediation effort, detectable levels of PCBs were discovered. Further 
information regarding the PCB contamination in the area was submitted by 
SDG&E, evidencing that no further action is required. SDG&E has applied for 
and is awaiting the issuance of a site-closure letter from the San Diego 
County Division of Environmental Health Services. 
 
Asbestos was used in the construction of the Station B power plant. 
Renovation, reconditioning or demolition of the facility will require the 
removal of the asbestos in a manner complying with all applicable 
environmental, health and safety laws. Additionally, reuse of the  
 
                                    22 

<PAGE> 
 
facility may require the removal or cleanup of PCBs, paints containing heavy 
metals, fuel oil or other substances. SDG&E has assessed the extent of any 
possible contamination by these or other hazardous materials at the facility. 
The estimated cost of this removal effort is estimated to be between $4 
million and $5 million. 
 
Encina Power Plant: During 1993 SDG&E discovered the presence of hydrocarbon 
contamination in subsurface soil at its Encina power plant. This contamination 
was located near the fuel-storage facilities and believed to be fuel oil 
originating from a 1950s refueling spill. SDG&E believes that it has 
remediated the contamination to the extent required by the San Diego County 
Division of Environmental Health Services and has applied for and is awaiting 
the issuance of a site-closure letter. 
 
Manufactured-Gas Plant Sites: During the early 1900s SDG&E and its 
predecessors manufactured gas from oil at its Station A facility and at small 
facilities in Escondido and Oceanside. 
 
In 1995 SDG&E commenced an environmental assessment of Station A. Some 
significant amounts of residual by-products from the gas-manufacturing process
have been discovered on portions of the facility during the assessment. 
However, the magnitude of such contamination has yet to be determined. The 
assessment will be completed in 1996 at which time the extent of any required 
remediation activities can be determined. Sufficient information is not 
currently available to estimate clean-up costs. SDG&E will be able to estimate 
a range of costs after completion of the site assessment. 
 
Residual by-products from the gas-manufacturing process at the Escondido 
facility were remediated at a cost of approximately $3 million during the 
period of 1990 through 1993. A site-closure letter for SDG&E's Escondido's 
facility was obtained from the San Diego County Department of Environmental 
Health Services. However, contaminants similar to the ones found on the 
Escondido site have been observed on adjacent parcels of property. SDG&E will 
assess these contaminants in 1996. 
 
SDG&E will also undertake an environmental assessment of its Oceanside 
facility in 1996. Some materials similar to residual by-products from the 
operation of town gas sites have been observed on an adjacent parcel of 
property. SDG&E's assessment of the Oceanside facility will include an 
evaluation of such materials. 
 
Air Quality 
The San Diego Air Pollution Control District (APCD) regulates air quality in 
San Diego County in conformance with the California and federal Clean Air 
Acts. California's standards are more restrictive than federal standards. 
 
Although SDG&E facilities comply with very strict emission limits and 
contribute only about three percent of the air emissions in San Diego County, 
the APCD is required by the California Clean Air Act to further reduce 
emissions from all San Diego industry. In January 1994 the APCD adopted Rule 
69 to further reduce nitrogen dioxide (NOx) emissions from SDG&E's power 
plants. As adopted, the rule required the retrofit of each of the nine boilers 
at Encina and South Bay power plant generating units with catalytic converters
to remove approximately 87 percent of current NOx emissions. In addition, the 
NOx emissions from all units were required to remain below a system-wide cap. 
The estimated capital cost to comply with Rule 69 was $110 million, with 
annual operating costs  
 
                                   23 

<PAGE> 
 
expected to increase about $6 million after all units were retrofitted. In 
December 1995 the APCD adopted amendments to Rule 69 which eliminated the 
requirement that each unit be retrofitted with catalytic converters, but which
retained the system-wide cap with further system-wide emission reductions to 
be achieved by 2005. The rule change provides SDG&E with greater flexibility 
to utilize effective and cost-efficient methods to achieve the required NOx 
emission reduction milestones. The estimated capital costs for compliance with 
the amended rule is approximately $60 million. The California Air Resources 
Board (ARB) expressed concern that the amendments to Rule 69 did not meet the 
requirements of the California Clean Air Act. However, the ARB withheld any 
formal objections pending its review of SDG&E's Rule 69 compliance plan to be 
submitted in 1996. The ARB may seek to overturn some or all of the Rule 69 
amendments or otherwise impose more restrictive emissions limitations which 
would cause SDG&E's Rule 69 compliance costs to increase. 
 
In 1990 the South Coast Air Quality Management District passed a rule which 
will require SDG&E's older natural-gas-compressor engines at its Moreno 
facility to either meet new, stringent nitrogen oxide emission levels or be 
converted to electric drive. In October 1993 the Air Quality District adopted 
a new program called RECLAIM, which replaced existing rules and requires 
SDG&E's natural-gas-compressor engines at its Moreno facility to reduce their 
nitrogen oxide emission levels by about 10 percent a year through 2003. This 
will be accomplished through the installation of new emission-monitoring 
equipment, operational changes to take advantage of low-emitting engines, and
engine retrofits. SDG&E has concluded negotiations with the Air Quality 
District, reclassifying three of these engines and thus eliminating the need 
for certain expensive monitoring equipment for those engines. The cost of 
complying with RECLAIM may be as much as $3 million. 
 
Water Quality 
Discharge permits are required to enable SDG&E to discharge its cooling water 
and its treated in-plant waste water, and are, therefore, a prerequisite to 
the continued operation of SDG&E's power plants. The promulgation or 
modification of water-quality-control plans by state and federal agencies may 
impose increasingly stringent cooling-water and treated-waste-water-discharge 
requirements on SDG&E in the future. 
 
SDG&E is unable to predict the terms and conditions of any renewed permits or 
their effects on plant or unit availability, the cost of constructing new 
cooling-water-treatment facilities, or the cost of modifying the existing 
treatment facilities. However, any modifications required by such permits 
could involve substantial expenditures, and certain plants or units may be 
unavailable for electric generation during such modification. Additional 
information concerning discharge permits for the South Bay, Encina and SONGS 
plants is provided in "Management's Discussion and Analysis of Financial 
Condition and Results of Operations" beginning on page 18 of the 1995 Annual 
Report to Shareholders.  
 
Wood Pole Preservatives  
The Pacific Justice Center (Pacific), a for-profit law firm, and the Mateel 
Environmental Justice Foundation (Mateel), a nonprofit corporation, claim that 
SDG&E, other utilities and other parties have violated California's Safe 
Drinking Water and Toxic Enforcement Act (Proposition 65) by failing to warn 
persons who may come into contact with the preservatives used in treated wood 
utility poles and by allowing these preservatives to be released into sources 
of drinking 
 
                                   24 

<PAGE> 
 
water. Some preservatives used in wood poles are included on California's list 
of chemicals known to cause cancer or reproductive harm. Proposition 65 
requires that prior warning be given to individuals who may be exposed to such 
chemicals unless the exposure will not pose a significant risk and that these 
substances not be released into sources of drinking water in significant 
quantities or otherwise in violation of the law. Violations of the Proposition 
65 warning requirement can result in penalties of up to $2,500 per violation. 
SDG&E believes, on the basis of studies and other information, that exposure 
to wood poles containing these preservatives does not give rise to a 
significant risk and, therefore, no warning is required, and that significant 
quantities of these preservatives are not released into any source of drinking 
water. SDG&E and others have responded to the claims by denying their 
validity. On June 20, 1995 Mateel, represented by Pacific, filed a complaint 
in San Francisco County Superior Court against Pacific Bell, PG&E and two 
wood-pole manufacturers alleging the violations noted above. Although SDG&E 
was not named in this lawsuit, it is anticipated that Mateel may file a 
separate lawsuit against SDG&E and other utilities on the same grounds. SDG&E 
is cooperating with PG&E, Pacific Bell and others to achieve an effective and 
favorable resolution of this matter. 
 
Additional information concerning SDG&E's environmental matters is provided in 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations" beginning on page 18 of the 1995 Annual Report to Shareholders and 
in Note 10 of the "Notes to Consolidated Financial Statements" beginning on 
page 35 of the 1995 Annual Report to Shareholders. 
 
OTHER 
 
Research, Development and Demonstration 
SDG&E conducts research and development in areas that provide value to SDG&E 
and its customers. Annual research, development and demonstration costs 
averaged $7 million over the past three years. The CPUC historically has 
permitted rate recovery of research, development and demonstration 
expenditures. 
 
Wages 
SDG&E and Local 465, International Brotherhood of Electrical Workers have a 
labor agreement through February 29, 1996. Negotiations are ongoing. 
 
Employees of Registrant 
As of December 31, 1995 SDG&E had 3,880 employees, compared to 3,998 at 
December 31, 1994. SDG&E's subsidiaries had 13 employees at December 31, 1995
compared to 550 at December 31, 1994 (of which 542 were employees of Wahlco 
Environmental Systems, Inc., which was sold on June 6, 1995).  
 
Foreign Operations 
SDG&E foreign operations in 1995 included power purchases and sales with CFE 
in Mexico; purchases of power and natural gas from suppliers in Canada; and 
purchases of uranium from suppliers in Canada, Australia, France, Niger, 
People's Republic of China and South Africa. 
 
SDG&E's subsidiary Wahlco Environmental Systems, which it sold on June 6, 
1995, operated in various foreign locations in 1995, including Great Britain,
Australia and Italy, and sold products and services to customers in additional 
foreign countries. 
 
                                   25 

<PAGE> 
 
Additional information concerning foreign operations is provided under 
"Electric Operations" and "Natural Gas Operations" herein, in "Management's 
Discussion and Analysis of Financial Condition and Results of Operations" 
beginning on page 18 of the 1995 Annual Report to Shareholders, and in Note 10
of the "Notes to Consolidated Financial Statements" beginning on page 35 of 
the 1995 Annual Report to Shareholders. 
 

I
TEM 2. PROPERTIES 
 
Substantially all utility plant is subject to the lien of the July 1, 1940 
mortgage and deed of trust and its supplemental indentures between SDG&E and 
the First Trust of California N.A. as trustee, securing the outstanding first-
mortgage bonds. 
  
Information concerning SDG&E's properties is provided below. Additional 
information is provided under "Electric Operations" and "Gas Operations" 
herein, in "Management's Discussion and Analysis of Financial Condition and 
Results of Operations" beginning on page 18 of the 1995 Annual Report to 
Shareholders, and in Notes 1 through 3, 6, 10 and 11 of the "Notes to 
Consolidated Financial Statements" beginning on page 35 of the 1995 Annual 
Report to Shareholders. 
 
Electric Properties 
 
As of December 31, 1995 SDG&E's installed generating capacity based on summer
ratings, was as follows: 
 
Plant                      Location                Net Megawatts 
- ----------------------------------------------------------------- 
Encina                     Carlsbad                     951 
South Bay                  Chula Vista                  690 
San Onofre                 South of San Clemente        430* 
Combustion Turbines (19)   Various                      332 
- ----------------------------------------------------------------- 
 
 *SDG&E's 20 percent share. 
 
Except for San Onofre and some of the combustion turbines, these plants are 
equipped to burn either oil or gas. 
 
The 1995 system load factor was 58 percent and ranged from 56 percent to 64 
percent for the past five years. 
 
SDG&E's electric transmission and distribution facilities include substations,
and overhead and underground lines. Periodically various areas of the service 
territory require expansion to handle customer growth.  
 
SDG&E owns an approved nuclear power-plant site near Blythe, California. 
 
Natural-Gas Properties 
 
SDG&E's natural-gas facilities are located in San Diego and Riverside counties 
and consist of the Moreno and Rainbow compressor stations, various high-
pressure transmission pipelines, high-pressure and low-pressure distribution 
mains, and service lines. SDG&E's natural-gas system is sufficient to meet 
customer demand and short-term growth. SDG&E is currently undergoing an 
expansion of its high-pressure transmission lines to accommodate expected 
long-term customer growth.  
 
                                   26 

<PAGE> 
 
General Properties 
 
The 21-story corporate office building at 101 Ash Street, San Diego is 
occupied pursuant to a capital lease through the year 2005. The lease has four
separate five-year renewal options. SDG&E also occupies an office complex at 
Century Park Court in San Diego pursuant to an operating lease ending in the 
year 2007. The lease can be renewed for two five-year periods. 
 
In addition, SDG&E occupies eight operating and maintenance centers, two 
business centers, six district offices, and five branch offices. 
 
Subsidiary Properties 
 
Phase One Development, a subsidiary of Pacific Diversified Capital, holds one 
property in San Diego County for future development and sale. Other, developed
properties were sold during 1995. Wahlco Environmental Systems, sold on June 
6, 1995, had manufacturing facilities in the continental United States, Puerto 
Rico, Great Britain and Australia, and a sales office in Italy. 
 

ITEM 3. LEGAL PROCEEDINGS 
 
The McCartin proceeding, described in SDG&E's 1994 Annual Report on Form 10-K, 
was concluded during the year ended December 31, 1995. Information concerning 
the conclusion of this proceeding is contained in SDG&E's Quarterly Report on 
Form 10-Q for the three-month period ended June 30, 1995. 
 
Century Power 
 
This FERC proceeding, arising from a rate dispute among Century Power 
Corporation, Tucson Electric Power Company, and SDG&E, has been resolved. On 
October 23, 1995 SDG&E filed with the FERC an offer of settlement which would 
result in the dismissal of all claims among SDG&E, Tucson and Century with 
prejudice. On January 18, 1996 FERC approved the settlement and all claims 
were dismissed. 
 
American Trails 
 
Prior to Pacific Diversified Capital's purchase of Wahlco Environmental 
Systems, a complaint was filed in 1985 in the Superior Court of San Diego 
County against Wahlco and others by Michael Bessey and others who owned 
American Trails, a membership campground company, for, among other things, 
breach of contract, negligence and fraud. In 1993 the court found in favor of 
Wahlco for all claims and causes of action by the plaintiffs against Wahlco. 
Subsequently, the plaintiffs filed a notice of appeal from the court's 
judgment and the appeal is pending. Wahlco intends to continue defending this 
lawsuit vigorously. 
 
Robert R. Wahler, as Trustee of the Wahler Family Trust; John H. McDonald; and
Westfore, a California limited partnership; agreed, subject to certain 
exceptions, to indemnify Pacific Diversified and its subsidiaries in 
connection with the American Trails litigation. Under a settlement agreement 
entered into on November 26, 1995, Wahlco agreed to continue to pay all 
attorneys' fees and costs incurred in the pending  
 
                                      27 

<PAGE> 
 
American Trails appeal on behalf of all defendants, provided that all of the 
above parties are represented by the same counsel throughout. Costs at 
subsequent retrial, appeal and judgment, if any, would be borne by Wahlco 
subject to reimbursement by Wahler, McDonald and Westfore, under certain 
circumstances. 
 
On June 6, 1995 Pacific Diversified sold its interest in Wahlco and, 
therefore, no longer retains any ownership or interest in Wahlco. 
 
Public Service Company of New Mexico 
 
On October 27, 1993 SDG&E filed a complaint with the FERC against Public 
Service Company of New Mexico, alleging that charges under a 1985 power-
purchase agreement are unjust, unreasonable and discriminatory. SDG&E 
requested that the FERC investigate the rates charged under the agreement and 
establish December 26, 1993 as the effective refund date. The relief, if 
granted, would reduce annual demand charges paid by SDG&E to PNM by up to $11 
million per year through April 2001. If approved, the proceeds would be 
refunded principally to SDG&E customers.  
 
On December 8, 1993 PNM answered the complaint and moved that it be dismissed. 
PNM denied that the rates are unjust, unreasonable or discriminatory and 
asserted that SDG&E's claims were barred by certain orders issued by the FERC 
in 1988.  
 
There have been no further developments in this case. SDG&E is unable to 
predict the ultimate outcome of this litigation. 
 
Canadian Natural Gas  
 
During early 1991 SDG&E signed four long-term natural-gas-supply contracts 
with Husky Oil Ltd., Canadian Hunter Ltd. and Noranda Inc., Bow Valley Energy 
Inc., and Summit Resources Ltd. Canadian-sourced natural gas began flowing to 
SDG&E under these contracts in 1993. Disputes have arisen with each of these 
producers with respect to events which are alleged by the producers to have 
occurred and to have justified a revision to the pricing terms of each 
contract, and possibly their termination. Consequently, during December 1993 
SDG&E filed complaints in the United States Federal District Court, Southern 
District of California, seeking a declaration of SDG&E's contract rights. 
Specifically, SDG&E states that neither price revision nor contract 
termination is warranted. 
 
In 1994 SDG&E voluntarily dismissed its complaint against Bow Valley without 
prejudice. In addition, the court denied the other defendants' motions to 
dismiss SDG&E's complaints. These motions were based on jurisdictional 
grounds. Two of the defendants, Bow Valley and Husky Oil, filed claims against
SDG&E with the Queens Bench in Alberta, Canada, seeking a declaration that 
they are entitled to damages or, in the alternative, that they may terminate 
their respective natural-gas shipments to SDG&E. SDG&E has answered these 
claims. In March 1995 SDG&E and Husky Oil reached an agreement dismissing all 
of their respective claims with prejudice.  
 
Bow Valley and Summit Resources gave SDG&E notice that their natural-gas-
supply contracts with SDG&E were terminated pursuant to provisions in the 
contract that purportedly give them the right to do so. SDG&E has responded 
that the notices were inappropriate and that it will seek both contract and 
tort damages.  
 
                                      28 

<PAGE> 
 
In July 1995 the United States Federal District Court, Southern District of 
California, dismissed SDG&E's lawsuit against Summit Resources. SDG&E's 
lawsuit in Federal District Court against Canadian Hunter is still proceeding. 
 
SDG&E is unable to predict the ultimate outcome of this litigation.  
 
Electric and Magnetic Fields  
 
Covalt: On December 16, 1993 Martin and Joyce Covalt filed a complaint against 
SDG&E in Orange County Superior Court. The Covalt lawsuit involves the same 
lawyers and issues as the lawsuits brought by McCartin and Zuidema, in which 
SDG&E prevailed and which were reported in previous Annual Reports on Form 10-
K. On April 13, 1994 SDG&E filed a demurrer to the Covalts' claims. On June 
22, 1994 an Orange County Superior Court judge, different from the judge who 
presided over the McCartin case, denied SDG&E's demurrer. On July 15, 1994 
SDG&E petitioned the California Court of Appeal to review the trial judge's 
decision on the grounds that the California Public Utilities Commission, not 
the courts, has exclusive jurisdiction over power-line health and safety 
issues. On February 28, 1995 the California Court of Appeal granted SDG&E's 
petition, completely dismissing the plaintiffs' lawsuit, ruling that the CPUC 
has exclusive jurisdiction over these claims. On March 30, 1995 the Court of 
Appeal denied the plaintiffs' petition for rehearing. On May 11, 1995 the 
California Supreme Court granted plaintiffs' request for review of the 
California Court of Appeal decision to dismiss the case. A decision is not 
expected before late 1996.  
 
SDG&E is unable to predict the ultimate outcome of this litigation. 
 
North City West: On June 14, 1993 the Peninsula at Del Mar Highlands 
Homeowners Association filed a complaint with the Superior Court of San Diego 
County against the City of San Diego and SDG&E to prevent SDG&E from 
constructing and operating an electric substation in an area which is known as 
North City West. In the complaint, plaintiffs sought to have the city either 
revoke previously issued permits or reopen the hearing process to address 
alleged EMF concerns. In 1993 the court denied the plaintiffs' motion for a 
temporary restraining order and motion for a preliminary injunction. 
Subsequently, the plaintiffs withdrew their complaint and the court dismissed 
it without prejudice. 
 
On August 18, 1993 the plaintiffs filed a complaint with the CPUC, requesting 
that the CPUC conduct an environmental assessment. This complaint is still 
pending. 
 
SDG&E is unable to predict the ultimate outcome of this litigation.  
 
SONGS Personal Injury Litigation 
 
James v. Southern California Edison Company, San Diego Gas & Electric Company 
and Combustion Engineering was tried and successfully defended in Federal 
District Court, Southern District of California. Mr. James, an employee of a 
SONGS contractor, was diagnosed with chronic myelogenous leukemia. He alleged 
his leukemia was caused by radiation exposure and from "fuel fleas" 
(radioactive fuel particles) from failed fuel rods. Plaintiffs sought $25 
million in compensatory damages and $100 million in punitive damages. On 
October 12, 1995 the jury  
 
                                 29 

<PAGE> 
 
determined there was no scientific link between the plaintiff's illness and 
the amount of radiation he was exposed to while at SONGS. The case is 
currently on appeal to the Ninth Circuit Court of Appeal. 
 
Three wrongful death lawsuits have been filed against Southern California 
Edison, San Diego Gas & Electric Company, Combustion Engineering, and the 
Institute of Nuclear Power Operations in Federal District Court, Southern 
District of California, by the heirs of former SONGS employees: McLandrich 
filed February 6, 1995, Mettler filed July 5, 1995, and Knapp filed August 31, 
1995. In McLandrich, the former employee allegedly developed leimyosarcoma, a 
rare form of cancer. In Mettler and Knapp, the former employees allegedly 
developed acute myelogenous leukemia. All plaintiffs attribute the illnesses 
to radiation exposure and "fuel fleas". Southern California Edison, co-owner 
and operator of SONGS, was dismissed from McLandrich based on the workers' 
compensation exclusive-remedy rule. SDG&E's motion on the same theory was 
denied. SDG&E has been granted permission to file a motion for summary 
judgment. The heirs of the plaintiffs in each case seek unspecified amounts in
compensatory and punitive damages. SDG&E is defending the lawsuits on the 
basis that the workers' compensation exclusive-remedy rule should apply for 
SDG&E as co-owner of the plant and that there is no scientific link between 
the illnesses and the alleged radiation exposure. All the SONGS personal 
injury lawsuits, including the two listed below, have involved the same 
lawyers for the plaintiffs. 
 
Two additional lawsuits have been filed wherein SDG&E was not named as a 
defendant. Kennedy v. Southern California Edison and Combustion Engineering, 
Inc., was filed in Federal District Court, Southern District of California on 
November 17, 1995. In this case, the wife of a current SONGS worker was 
diagnosed with chronic myelogenous leukemia (CML). She and her husband allege 
the CML was caused by exposure to radioactive particles that were transported 
home on the employee's clothing. In Rock v. Southern California Edison and 
Combustion Engineering, Inc. (filed November 28, 1995 in Federal District 
Court, Southern District of California), plaintiffs allege that the 18-year-
old son of a former temporary SONGS employee developed acute myelogenous 
leukemia from exposure to radioactive material that was transported home on 
the worker's clothing. Plaintiffs seek unspecified amounts in compensatory and 
punitive damages in both cases. 
 
SDG&E is unable to predict the ultimate outcome of this litigation. 
 
Environmental and Regulatory Issues 
 
Other legal matters related to environmental and regulatory issues are 
described under "Environmental Matters" and "Regulatory Matters" herein. 
 
 
                                    30 

<PAGE> 
 

Item 4.   Submission of Matter to a Vote of Security Holders 
          NONE. 
Item 4.   Executive Officers of the Registrant 

<TABLE>
<CAPTION>
Name                 Age  Positions* (1991 - Current) 
- -----------------    ---  ------------------------------------------------------
<S>                  <C>  <C>
Thomas A. Page       62   Chairman (Enova) since December 1994. Chairman since January 1983.
                          President and Chief Executive Officer (Enova) from December 1994
                          through December 1995. 
                          Chief Executive Officer from January 1983 through December 1995.
                          President from 1983 through 1991 and from January 1994
                          through December 1995. 
                          
Stephen L. Baum      55   President and Chief Executive Officer (Enova) since January 1996.
                          Executive Vice President (Enova) from December 1994 through
                          December 1995. 
                          Executive Vice President from January 1993 through December 1995.
                          Senior Vice President - Law and Corporate Affairs and General
                          Counsel from January 1992 through December 1992.
                          Senior Vice President and General Counsel from 1987 through 1991.
                          
Donald E. Felsinger  48   President and Chief Executive Officer since January 1996.
                          Executive Vice President (Enova) from December 1994 through
                          December 1995.
                          Executive Vice President from January 1993 through December 1995.
                          Senior Vice President - Marketing and Resource Development
                          from January 1992 through December 1992.  
                          Vice President - Marketing and Resource Development from
                          February 1989 through December 1991. 
                            
Gary D. Cotton       55   Senior Vice President - Customer Operations since January 1993.
                          Senior Vice President - Customer Services from January 1992
                          through December 1992.   
                          Senior Vice President - Engineering and Operations from 1986
                          through 1991. 
                          
Edwin A. Guiles      46   Senior Vice President - Energy Supply since January 1993.
                          Vice President - Engineering and Operations from January 1992
                          through December 1992. 
                          Vice President - Corporate Planning from 1990 through 1991.
                          
David R. Kuzma       50   Senior Vice President, Chief Financial Officer and Treasurer
                          (Enova) since November 1995. 
                          Senior Vice President, Chief Financial Officer and Treasurer
                          since June 1995. 
                          Chief Financial Officer, Senior Vice President and Treasurer of
                          Florida Progress Corporation from 1991 to 1995. 
                           
Frank H. Ault        51   Vice President and Controller (Enova) since December 1994.
                          Vice President and Controller since January 1993. 
                          Controller from May 1986 through December 1992. 
                          
Kathleen A. Flanagan 45   Vice President - Corporate Communications since July 1994.
                          Manager - Corporate Communications at Southern California Edison
                          from 1991 to 1994. 
                          Director - Government Relations and Public Affairs at Luz
                          International from 1989 to 1991. 
 
Ronald K. Fuller     58   Vice President - Governmental and Regulatory Services from April
                          1984 until his retirement in December 1995. 
 
Margot A. Kyd        42   Vice President - Human Resources (Enova) since January 1996.
                          Vice President - Human Resources since January 1993. 
                          Vice President - Administrative Services from 1988 through 1992.
 
John L. Laun, III    48   Vice President - Customer and Marketing Services since July 1994.
                          Division Manager - Corporate Communications from June 1993 to July
                          1994. 
                          Manager - Special Projects from January 1992 to June 1993.
                          Director - Utility Consulting at Xenergy Inc. from 1991 through
                          1992. 
                          Senior Vice President - Utility Consulting at Palmer Bellevue
                          Corporation from 1989 through 1991. 
 
William L. Reed      44   Vice President - Regulatory Affairs since January 1996.
                          Vice President - Strategic Planning from August 1995 through
                          December 1995. 
                          Division Manager - Strategic Plans & Projects from August 1994
                          through July 1995. 
                          Director - Energy Management from April 1993 through July 1994.
                          Director - Regulatory Affairs from 1990 through March 1993.
</TABLE>
 
*All positions are at SDG&E unless otherwise noted. 
 
                                     31 

<PAGE> 
 

PART II - Enova Corporation: 
 
Part II - San Diego Gas & Electric Company beginning on page 32 of this Annual 
Report on Form 10-K is incorporated herein by reference. 
 
PART II - San Diego Gas & Electric Company: 
 

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
 
Common stock is traded on the New York and Pacific stock exchanges. At 
December 31, 1995 there were 84,158 holders of common stock. The quarterly 
common stock information required by Item 5 is incorporated by reference from 
page 43 of the 1995 Annual Report to Shareholders. 
 

Item 6. Selected Financial Data 

<TABLE> 
In millions of dollars except per share amounts 
<CAPTION> 
                                    1995     1994     1993     1992     1991 
                                  -------- -------- -------- -------- --------
<S>                               <C>      <C>      <C>      <C>      <C> 
For the years ended December 31 
Operating revenues                $1,870.7 $1,912.2 $1,897.5 $1,789.0 $1,700.2
Operating income                    $345.7   $332.2   $303.9   $308.9   $304.9
Income from continuing operations   $233.3   $206.9   $227.5   $221.1   $198.7 
Net income (before preferred 
  dividend requirements)            $233.5   $143.5   $218.7   $210.7   $208.1
Earnings per common share from  
  continuing operations              $1.94    $1.71    $1.89    $1.86    $1.68 
Earnings per common share            $1.94    $1.17    $1.81    $1.77    $1.76
Dividends declared per common share  $1.56    $1.52    $1.48    $1.44  $1.3875
 
At December 31 
Total assets                      $4,670.4 $4,598.4 $4,642.9 $4,429.3 $3,978.4
Long-term debt and preferred stock  
  subject to mandatory redemption 
  (excludes current portion)*     $1,490.1 $1,479.2 $1,523.6 $1,647.3 $1,323.2
</TABLE>
 
 
*Includes long-term debt redeemable within one year. 
 
This summary should be read in conjunction with the consolidated financial 
statements and notes to consolidated financial statements contained in the 
1995 Annual Report to Shareholders. Prior periods have been restated to 
reflect discontinued operations, as described in note 3 
 

Item 7. Management's Discussion and Analysis of Financial Condition and 
Results of Operations 
 
The information required by Item 7 is incorporated by reference from pages 18 
through 26 of the 1995 Annual Report to Shareholders. 
 

Item 8. Financial Statements and Supplementary Data 
 
The information required by Item 8 is incorporated by reference from pages 28 
through 43 of the 1995 Annual Report to Shareholders. See Item 14 herein for a 
listing of financial statements included in the 1995 Annual Report to 
Shareholders. 
 

Item 9. Changes in and Disagreements with Accountants on Accounting and 
Financial Disclosure 
None. 
 
                                     32 

<PAGE> 
 

PART III - Enova Corporation: 
 
Part III - San Diego Gas & Electric Company beginning on page 33 of this 
Annual Report on Form 10-K is incorporated herein by reference. 
 
PART III - San Diego Gas & Electric Company: 
 

Item 10. Directors and Executive Officers of the Registrant 
 
The information required on Identification of Directors is incorporated by 
reference from "Election of Directors" in the March 1996 Proxy Statement. The 
information required on executive officers is incorporated by reference from 

Item 4 herein. 
 

Item 11. Executive Compensation 
 
The information required by Item 11 is incorporated by reference  from 
"Executive Compensation and Transactions with Management and  Others" in the 
March 1996 Proxy Statement.     
 

Item 12. Security Ownership of Certain Beneficial Owners and Management 
 
The information required by Item 12 is incorporated by reference from 
"Security Ownership of Management and Certain Beneficial  Holders" in the 
March 1996 Proxy Statement.     
 

Item 13. Certain Relationships and Related Transactions 
None. 
 
 
                                        33 

<PAGE> 
 

PART IV - Enova Corporation: 
 
Part IV - San Diego Gas & Electric Company beginning on page 34 of this Annual 
Report on Form 10-K is incorporated herein by reference. 
 
PART IV - San Diego Gas & Electric Company: 
 

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 
 
(a) The following documents are filed as part of this report: 
 
1. Financial statements 
                                                              Page in 
                                                           Annual Report* 
 
Responsibility Report for the Consolidated Financial  
 Statements. . . . . . . . . . . . . . . . . . . . . . . . . .   27 
 
Independent Auditors' Report . . . . . . . . . . . . . . . . .   27 
 
Statements of Consolidated Income for the years ended 
 December 31, 1995, 1994 and 1993  . . . . . . . . . . . . . .   28 
 
Consolidated Balance Sheets at December 31, 1995 and 1994  . .   29 
 
Statements of Consolidated Cash Flows for the years 
 ended December 31, 1995, 1994 and 1993  . . . . . . . . . . .   30 
 
Statements of Consolidated Changes in Capital Stock and  
 Retained Earnings for the years ended  
 December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . .  31 
 
Statements of Consolidated Capital Stock at  
 December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . .  32 
 
Statements of Consolidated Long-Term Debt at  
 December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . .  33 
 
Statements of Consolidated Financial Information by  
 Segments of Business for the years ended  
 December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . .  34 
 
Notes to Consolidated Financial Statements  . . . . . . . . . .  35 
 
Quarterly Financial Data (Unaudited)  . . . . . . . . . . . . .  43 
 
*Incorporated by reference from the indicated pages of the 1995 
Annual Report to Shareholders. 
 
 
2. Financial statement schedules 
 
   None 
 
 
                                       34 

<PAGE> 
 
 
3. Exhibits 
 
The Forms 8, 8-B/A, 8-K, S-4, 10-K and 10-Q referred to herein were  
filed under Commission File Number 1-3779 (SDG&E) or Commission File  
Number 1-11439 (Enova Corporation). 
 

Exhibit 3 -- Bylaws and Articles of Incorporation 
 
Bylaws 
 
3.1    Restated Bylaws (Incorporated by reference from the Registration 
       Statement on Form 8-B/A of Enova Corporation (Exhibit 3.2)). 
 
Articles of Incorporation 
 
3.2    Restated Articles of Incorporation of Enova Corporation  
       (Incorporated by reference from the Registration 
       Statement on Form 8-B/A of Enova Corporation (Exhibit 3.1)). 
 

Exhibit 4 -- Instruments Defining the Rights of Security Holders, 
             Including Indentures 
 
4.1    Mortgage and Deed of Trust dated July 1, 1940. (Incorporated 
       by reference from SDG&E Registration No. 2-49810, Exhibit 2A.) 
 
4.2    Second Supplemental Indenture dated as of March 1, 1948. 
       (Incorporated by reference from SDG&E Registration No. 2-49810, 
       Exhibit 2C.) 
 
4.3    Ninth Supplemental Indenture dated as of August 1, 1968. 
       (Incorporated by reference from SDG&E Registration No. 2-68420, 
       Exhibit 2D.) 
 
4.4    Tenth Supplemental Indenture dated as of December 1, 1968. 
       (Incorporated by reference from SDG&E Registration No. 2-36042, 
       Exhibit 2K.) 
 
4.5    Sixteenth Supplemental Indenture dated August 28, 1975. 
       (Incorporated by reference from SDG&E Registration No. 2-68420, 
       Exhibit 2E.) 
 
4.6    Thirtieth Supplemental Indenture dated September 28, 1983. 
       (Incorporated by reference from SDG&E Registration No. 33-34017, 
       Exhibit 4.3.) 
 
Exhibit 10 -- Material Contracts (Previously filed exhibits are 
              incorporated by reference from Forms S-4, 10-K or 
              10-Q as referenced below).  
 
Compensation 
 
10.1   Form of San Diego Gas & Electric Company Deferred 
       Compensation Agreement for Officers #1 (1996 compensation, 
       1997 bonus). 
 
10.2   Form of San Diego Gas & Electric Company Deferred 
       Compensation Agreement for Officers #1 (1995 compensation, 
       1996 bonus)(1994 SDG&E Form 10-K Exhibit 10.2). 
 
10.3   Form of San Diego Gas & Electric Company Deferred 
       Compensation Agreement for Officers #3 (1996 compensation, 
       1997 bonus). 
 
10.4   Form of San Diego Gas & Electric Company Deferred 
       Compensation Agreement for Officers #3 (1995 compensation, 
       1996 bonus)(1994 SDG&E Form 10-K Exhibit 10.1). 
 
                                  35 

<PAGE> 
 
10.5   Form of San Diego Gas & Electric Company Deferred 
       Compensation Agreement for Nonemployee Directors (1996 
       compensation). 
 
10.6   Form of San Diego Gas & Electric Company Deferred 
       Compensation Agreement for Nonemployee Directors (1995 
       compensation)(1994 SDG&E Form 10-K Exhibit 10.3). 
 
10.7   Form of San Diego Gas & Electric Company 1986 Long-Term 
       Incentive Plan 1995 restricted stock award agreement. 
 
10.8   Form of San Diego Gas & Electric Company 1986 Long-Term 
       Incentive Plan Special 1995 restricted stock award 
       agreement. 
 
10.9   Form of San Diego Gas & Electric Company 1986 Long-Term 
       Incentive Plan 1994 restricted stock award agreement two- 
       year vesting. 
 
10.10  Form of San Diego Gas & Electric Company 1986 Long-Term 
       Incentive Plan 1994 restricted stock award agreement 
       (1994 SDG&E Form 10-K Exhibit 10.4). 
 
10.11  Form of San Diego Gas & Electric Company 1986 Long-Term 
       Incentive Plan 1993 restricted stock award agreement 
       (1993 SDG&E Form 10-K Exhibit 10.4). 
 
10.12  Form of San Diego Gas & Electric Company 1986 Long-Term 
       Incentive Plan 1992 restricted stock award agreement 
       (1992 SDG&E Form 10-K Exhibit 10.4). 
 
10.13  Amended 1986 Long-Term Incentive Plan, amended and restated 
       effective April 25, 1995 (SDG&E's Amendment No. 2 to  
       Form S-4 filed February 28, 1995). 
 
10.14  Amended 1986 Long-Term Incentive Plan, Restatement as of 
       October 25, 1993 (1993 SDG&E Form 10-K Exhibit 10.6). 
 
10.15  San Diego Gas & Electric Company Retirement Plan for 
       Directors, restated as of October 24, 1994 (1994 SDG&E  
       Form 10-K Exhibit 10.5). 
 
10.16  Executive Incentive Plan dated April 23, 1985 (1991 SDG&E 
       Form 10-K Exhibit 10.39). 
 
10.17  Employment agreement between San Diego Gas & Electric 
       Company and Thomas A. Page, dated June 15, 1988 (1988 SDG&E  
       Form 10-K Exhibit 10E). 
 
10.18  Supplemental Pension Agreement with Thomas A. Page, dated as 
       of April 3, 1978 (1988 SDG&E Form 10-K Exhibit 10V). 
 
10.19  Supplemental Executive Retirement Plan restated as of  
       July 1, 1994 (1994 SDG&E Form 10-K Exhibit 10.14).  
 
Financing 
 
10.20  Loan agreement with the City of San Diego in connection with  
       the issuance of $16.7 million of Industrial Development  
       Bonds, dated as of June 1, 1995 (June 30, 1995 SDG&E  
       Form 10-Q Exhibit 10.2). 
 
10.21  Loan agreement with the City of San Diego in connection with  
       the issuance of $57.7 million of Industrial Development 
       Bonds, dated as of June 1, 1995 (June 30, 1995 SDG&E  
       Form 10-Q Exhibit 10.3). 
 
                                       36 

<PAGE> 
 
10.22  Loan agreement with the City of San Diego in connection with 
       the issuance of $92.9 million of Industrial Development 
       Bonds 1993 Series C dated as of July 1, 1993 (June 30, 1993 
       SDG&E Form 10-Q Exhibit 10.2). 
 
10.23  Loan agreement with the City of San Diego in connection with 
       the issuance of $70.8 million of Industrial Development Bonds 
       1993 Series A dated as of April 1, 1993 (March 31, 1993 SDG&E  
       Form 10-Q Exhibit 10.3). 
 
10.24  Loan agreement with the City of San Diego in connection with 
       the issuance of $14.9 million of Industrial Development Bonds  
       1993 Series B dated as of April 1, 1993 (March 31, 1993 SDG&E  
       Form 10-Q Exhibit 10.4). 
 
10.25  Loan agreement with the City of San Diego in connection with 
       the issuance of $118.6 million of Industrial Development 
       Bonds dated as of September 1, 1992 (Sept. 30, 1992 SDG&E  
       Form 10-Q Exhibit 10.1). 
 
10.26  Loan agreement with the City of Chula Vista in connection 
       with the issuance of $250 million of Industrial Development 
       Bonds, dated as of December 1, 1992 (1992 SDG&E Form 10-K  
       Exhibit 10.5). 
 
10.27  Loan agreement with the City of San Diego in connection with 
       the issuance of $25 million of Industrial Development 
       Bonds, dated as of September 1, 1987 (1992 SDG&E Form 10-K  
       Exhibit 10.6). 
 
10.28  Loan agreement with the City of San Diego in connection with 
       the issuance of $44.25 million of Industrial Development 
       Bonds, dated as of July 1, 1986 (1991 SDG&E Form 10-K 
       Exhibit 10.36). 
 
10.29  Loan agreement with the City of San Diego in connection with 
       the issuance of $81.35 million of Industrial Development 
       Bonds, dated as of December 1, 1986 (1991 SDG&E Form 10-K  
       Exhibit 10.37). 
 
10.30  Loan agreement with the California Pollution Control 
       Financing Authority in connection with the issuance of $60 
       million of Pollution Control Bonds dated as of June 1, 1993 
       (June 30, 1993 SDG&E Form 10-Q Exhibit 10.1). 
 
10.31  Loan agreement with the California Pollution Control Financing 
       Authority, dated as of December 1, 1991, in connection with 
       the issuance of $14.4 million of Pollution Control Bonds 
       (1991 SDG&E Form 10-K Exhibit 10.11). 
 
10.32  Loan agreement with the California Pollution Control Financing 
       Authority, dated as of December 1, 1985, in connection with 
       the issuance of $35 million of Pollution Control Bonds (1991 
       SDG&E Form 10-K Exhibit 10.10). 
 
10.33  Loan agreement with the California Pollution Control Financing 
       Authority dated as of December 1, 1984, in connection with 
       the issuance of $27 million of Pollution Control Bonds (1991 
       SDG&E Form 10-K Exhibit 10.40). 
 
10.34  Loan agreement with the California Pollution Control Financing 
       Authority dated as of May 1, 1984, in connection with the 
       issuance of $53 million of Pollution Control Bonds (1991 
       SDG&E Form 10-K Exhibit 10.41). 
 
                                     37 

<PAGE> 
 
Natural Gas Commodity, Transportation and Storage 
 
10.35  Long-Term Natural Gas Storage Service Agreement dated 
       January 12, 1994 between Southern California Gas Company and 
       SDG&E (1994 SDG&E Form 10-K Exhibit 10.42). 
 
10.36  Amendment to San Diego Gas & Electric Company and Southern 
       California Gas Company Restated Long-Term Wholesale Natural 
       Gas Service Contract dated March 26, 1993 (1993 SDG&E  
       Form 10-K Exhibit 10.53). 
 
10.37  San Diego Gas & Electric Company and Southern California Gas 
       Company Restated Long-Term Wholesale Natural Gas Service 
       Contract, dated September 1, 1990 (1990 SDG&E Form 10-K  
       Exhibit 10.9). 
 
10.38  Gas Purchase Agreement, dated March 12, 1991 between Husky 
       Oil Operations Limited and San Diego Gas & Electric Company 
       (1991 SDG&E Form 10-K Exhibit 10.1). 
 
10.39  Gas Purchase Agreement, dated March 12, 1991 between 
       Canadian Hunter Marketing Limited and San Diego Gas & 
       Electric Company (1991 SDG&E Form 10-K Exhibit 10.2). 
 
10.40  Gas Purchase Agreement, dated March 12, 1991 between Bow 
       Valley Industries Limited and San Diego Gas & Electric 
       Company (1991 SDG&E Form 10-K Exhibit 10.3). 
 
10.41  Gas Purchase Agreement, dated March 12, 1991 between Summit 
       Resources Limited and San Diego Gas & Electric Company (1991 
       SDG&E Form 10-K Exhibit 10.4). 
 
10.42  Service Agreement Applicable to Firm Transportation Service 
       under Rate Schedule FS-1, dated May 31, 1991 between Alberta 
       Natural Gas Company Ltd. and San Diego Gas & Electric 
       Company (1991 SDG&E Form 10-K Exhibit 10.5). 
 
10.43  Firm Transportation Service Agreement, dated December 31, 
       1991 between Pacific Gas and Electric Company and San Diego 
       Gas & Electric Company (1991 SDG&E Form 10-K Exhibit 10.7). 
 
10.44  Firm Transportation Service Agreement, dated April 25, 1991 
       between Pacific Gas Transmission Company and San Diego Gas 
       & Electric Company (March 31, 1991 SDG&E Form 10-Q  
       Exhibit 28.2). 
 
Nuclear   
 
10.45  Uranium enrichment services contract between the U.S. 
       Department of Energy (DOE assigned its rights to the U.S. 
       Enrichment Corporation, a U.S. government-owned corporation, 
       on July 1, 1993) and Southern California Edison Company, as 
       agent for SDG&E and others; Contract DE-SC05-84UEO7541, 
       dated November 5, 1984, effective June 1, 1984, as amended 
       (1991 SDG&E Form 10-K Exhibit 10.9). 
 
10.46  Fuel Lease dated as of September 8, 1983 between SONGS Fuel 
       Company, as Lessor and San Diego Gas & Electric Company, as 
       Lessee, and Amendment No. 1 to Fuel Lease, dated September 
       14, 1984 and Amendment No. 2 to Fuel Lease, dated March 2, 
       1987 (1992 SDG&E Form 10-K Exhibit 10.11). 
 
10.47  Nuclear Facilities Qualified CPUC Decommissioning Master 
       Trust Agreement for San Onofre Nuclear Generating Station, 
       approved November 25, 1987 (1992 SDG&E Form 10-K Exhibit 10.7). 
 
10.48  Amendment No. 1 to the Qualified CPUC Decommissioning Master 
 
                                     38 

<PAGE> 
 
       Trust Agreement dated September 22, 1994 (see Exhibit 10.47 
       herein). 
 
10.49  Second Amendment to the San Diego Gas & Electric Company 
       Nuclear Facilities Qualified CPUC Decommissioning Master 
       Trust Agreement for San Onofre Nuclear Generating Station 
       (see Exhibit 10.47 herein). 
 
10.50  Nuclear Facilities Non-Qualified CPUC Decommissioning Master 
       Trust Agreement for San Onofre Nuclear Generating Station, 
       approved November 25, 1987 (1992 SDG&E Form 10-K Exhibit 10.8). 
 
10.51  Second Amended San Onofre Agreement among Southern 
       California Edison Company, SDG&E, the City of Anaheim and 
       the City of Riverside, dated February 26, 1987 (1990 SDG&E  
       Form 10-K Exhibit 10.6). 
 
10.52  U. S. Department of Energy contract for disposal of spent 
       nuclear fuel and/or high-level radioactive waste, entered 
       into between the DOE and Southern California Edison Company, 
       as agent for SDG&E and others; Contract DE-CR01-83NE44418, 
       dated June 10, 1983 (1988 SDG&E Form 10-K Exhibit 10N). 
 
Purchased Power 
 
10.53  Public Service Company of New Mexico and San Diego Gas & 
       Electric Company 1988-2001 100 mw System Power Agreement 
       dated November 4, 1985 and Letter of Agreement dated April 
       28, 1986, June 4, 1986 and June 18, 1986 (1988 SDG&E  
       Form 10-K Exhibit 10H). 
 
10.54  San Diego Gas & Electric Company and Portland General 
       Electric Company Long-Term Power Sale and Transmission 
       Service agreements dated November 5, 1985 (1988 SDG&E Form 
       10-K Exhibit 10I). 
 
10.55  Comision Federal de Electricidad and San Diego Gas & 
       Electric Company Contract for the Purchase and Sale of 
       Electric Capacity and Energy dated November 20, 1980 and 
       additional Agreement to the contract dated March 22, 1985 
       (1988 SDG&E Form 10-K Exhibit 10J). 
 
10.56  Agreement with Arizona Public Service Company for Arizona 
       transmission system participation agreement - contract 
       790116 (1988 SDG&E Form 10-K Exhibit 10P). 
 
Other 
 
10.57  U. S. Navy contract for electric service, Contract 
       N62474-70-C-1200-P00414, dated September 29, 1988 (1988 SDG&E  
       Form 10-K Exhibit 10C). 
 
10.58  City of San Diego Electric Franchise (Ordinance No. 10466) 
       (1988 SDG&E Form 10-K Exhibit 10Q). 
 
10.59  City of San Diego Gas Franchise (Ordinance No. 10465) (1988 
       SDG&E Form 10-K Exhibit 10R). 
 
10.60  County of San Diego Electric Franchise (Ordinance No. 3207) 
       (1988 SDG&E Form 10-K Exhibit 10S). 
 
10.61  County of San Diego Gas Franchise (Ordinance No. 5669) (1988 
       SDG&E Form 10-K Exhibit 10T). 
 
10.62  Lease agreement dated as of March 25, 1992 with American 
       National Insurance Company as lessor of an office complex at 
       Century Park (1994 SDG&E Form 10-K Exhibit 10.70). 
 
                                      39 

<PAGE> 
 
10.63  Lease agreement dated as of June 15, 1978 with Lloyds Bank 
       California, as owner-trustee and lessor - Exhibit B to 
       financing agreement of SDG&E's Encina Unit 5 equipment trust 
       (1988 SDG&E Form 10-K Exhibit 10W). 
 
10.64  Amendment to Lease agreement dated as of July 1, 1993 with 
       Sanwa Bank California, as owner-trustee and lessor - Exhibit 
       B to secured loan agreement of SDG&E's Encina Unit 5 
       equipment trust (See Exhibit 10.63 herein). 
 
10.65  Lease agreement dated as of July 14, 1975 with New England 
       Mutual Life Insurance Company, as lessor (1991 SDG&E Form 10-K 
       Exhibit 10.42).  
 
10.66  Assignment of Lease agreement dated as of November 19, 1993 
       to Shapery Developers as lessor by New England Mutual 
       Life Insurance Company (See Exhibit 10.65 herein). 
 
Exhibit 12 -- Statement re: computation of ratios 
 
12.1   Computation of Ratio of Earnings to Combined Fixed Charges 
       and Preferred Stock Dividends for the years ended December 
       31, 1995, 1994, 1993, 1992 and 1991. 
 
Exhibit 13 -- The financial statements and other documents listed 
under Part IV Item 14(a)1. and Management's Discussion and Analysis 
of Financial Condition and Results of Operations listed under Part 
II Item 7 of this Form 10-K are incorporated by reference from the 
1995 Annual Report to Shareholders.  
 
Exhibit 22 - Subsidiaries - See "Part I, Item 1. Description of 
Business." 
 
Exhibit 24 - Independent Auditors' Consent, page 41. 
 
Exhibit 27 - Financial Data Schedules 
 
27.1   Financial Data Schedule for the year ended December 31, 
       1995. 
 
(b) Reports on Form 8-K: 
 
A Current Report on Form 8-K was filed on December 7, 1995 
announcing the CPUC's approval of SDG&E's application to form a  
holding company, the January 1, 1996 effective date of the 
new parent company, and associated changes in officers' 
responsibilities. 
 
A Current Report on Form 8-K was filed on February 2, 1996 to 
report that on January 31, 1996 SDG&E's ownership interests  
in its subsidiaries were transferred to Enova Corporation at  
book value, completing the organizational restructuring into  
the new parent company framework. 
 
 
                                     40 

<PAGE> 
 
INDEPENDENT AUDITORS' CONSENT 
 
 
We consent to the incorporation by reference of our report dated February 16,
1996 on San Diego Gas & Electric Company, appearing on page 27 of the 1995 
Annual Report to Shareholders of Enova Corporation and San Diego Gas & 
Electric Company incorporated by reference in this Annual Report on Form 10-K 
for the year ended December 31, 1995. 
 
We also consent to the incorporation by reference of the above-mentioned 
report in the Enova Corporation Post-Effective Amendment No. 1 to Registration 
Statement No. 33-59681 on Form S-3, Post-Effective Amendment No. 1 to 
Registration Statement No. 33-59683 on Form S-8 and Post-Effective Amendment 
No. 1 to Registration Statement No. 33-7108 on Form 8; and in the San Diego 
Gas & Electric Company Registration Statement No. 33-45599 on Form S-3, 
Registration Statement No. 33-52834 on Form S-3 and Registration Statement No. 
33-49837 on Form S-3. 
 
 
 
 
 
DELOITTE & TOUCHE LLP 
 
San Diego, California 
February 28, 1996 
 
 
 
                                     41 

<PAGE> 
 

SIGNATURES 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934,  the Registrant has duly caused this report to be signed on its 
behalf by the undersigned, hereunto duly authorized. The signatures of the 
undersigned companies relate only to matters having reference to such 
companies and their respective subsidiaries. 
 
      ENOVA CORPORATION.               SAN DIEGO GAS & ELECTRIC COMPANY 
 
By:   /s/ Stephen L. Baum              By:   /s/ Donald E. Felsinger 
     _____________________                   ________________________ 
      Stephen L. Baum                         Donald E. Felsinger 
      President and Chief                     President and Chief 
      Executive Officer                       Executive Officer 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report is signed below by the following persons on behalf of the Registrant in 
the capacities and on the dates indicated. The signatures of the undersigned 
companies relate only to matters having reference to such companies and their 
respective subsidiaries. 
 
Signature                   Title                          Date 
 
Principal Executive Officers: 
 
/s/ Stephen L.  Baum 
_________________________________________________________________________ 
Stephen L.  Baum            President and Chief Executive  February 26, 1996 
                            Officer (Enova) and a Director 
                            (Enova and SDG&E) 
/s/ Donald E. Felsinger 
__________________________________________________________________________ 
Donald E. Felsinger         President and Chief Executive  February 26, 1996 
                            Officer and a Director (SDG&E)  
Principal Financial Officer: 
 
/s/ David R. Kuzma 
__________________________________________________________________________ 
David R. Kuzma         Senior Vice President Chief Financial February 26, 1996 
                       Officer and Treasurer (Enova and SDG&E) 
Principal Accounting Officer: 
 
/s/  Frank H. Ault 
__________________________________________________________________________ 
Frank H. Ault Vice President and Controller (Enova and SDG&E)February 26, 1996
 
Directors (Enova and SDG&E): 
 
/s/ Thomas A. Page 
__________________________________________________________________________ 
Thomas A. Page              Chairman                        February 26, 1996 
 
/s/  Ann L. Burr 
___________________________________________________________________________ 
Ann L. Burr                 Director                         February 26, 1996 
 
/s/  Richard A. Collato 
___________________________________________________________________________ 
Richard A. Collato          Director                         February 26, 1996 
 
/s/  Daniel W. Derbes 
____________________________________________________________________________ 
Daniel W. Derbes            Director                         February 26, 1996 
 
/s/  Catherine T. Fitzgerald 
____________________________________________________________________________ 
Catherine T. Fitzgerald     Director                         February 26, 1996 
 
/s/  Robert H. Goldsmith 
____________________________________________________________________________ 
Robert H. Goldsmith         Director                         February 26, 1996 
 
/s/  William D. Jones 
____________________________________________________________________________ 
William D. Jones            Director                         February 26, 1996 
 
/s/  Ralph R. Ocampo 
____________________________________________________________________________ 
Ralph R. Ocampo             Director                         February 26, 1996
 
/s/  Thomas C. Stickel 
_____________________________________________________________________________ 
Thomas C. Stickel           Director                         February 26, 1996 
 
                                     42 

<PAGE> 
 
GLOSSARY 
 
APCD                 Air Pollution Control District 
 
BCAP                 Biennial Cost Allocation Proceeding 
 
BPA                  Bonneville Power Administration  
 
BRPU                 Biennial Resource Plan Update 
 
CEC                  California Energy Commission 
 
CFE                  Comision Federal de Electricidad 
 
CPUC                 California Public Utilities Commission 
 
DOE                  Department of Energy 
 
EC                   Electric Clearinghouse 
 
ECAC                 Energy Cost Adjustment Clause 
 
Edison               Southern California Edison Company and/or its parent,  
                     SCEcorp 
 
EMF                  Electric and magnetic fields 
 
Enron                Enron Power Marketing 
 
ERAM                 Electric Revenue Adjustment Mechanism 
 
EV                   Electric vehicle 
 
FERC                 Federal Energy Regulatory Commission 
 
G&D                  Electric Generation and Dispatch Mechanism 
 
GFCA                 Gas Fixed Cost Account 
 
Goal Line            Goal Line Limited Partnership 
 
IID                  Imperial Irrigation District 
 
Illinova             Illinova Power Marketing 
 
ISO                  Independent System Operator 
 
kv                   Kilovolt 
 
kwhr                 Kilowatt hour 
 
mw                   Megawatt 
 
NGV                  Natural-Gas Vehicle 
 
NOx                  Nitrogen Dioxide 
 
NRC                  Nuclear Regulatory Commission 
 
Pacific Intertie     A transmission line connecting San Diego to the Pacific  
                     Northwest 
 
PBR                  Performance-Based Ratemaking 
 
PCB                  Polychlorinated Biphenyl 
 
PG&E                 Pacific Gas and Electric Company 
 
                                         43 

<PAGE> 
 
PGE                  Portland General Electric Company 
 
PNM                  Public Service Company of New Mexico 
 
PSP&L                Puget Sound Power & Light 
 
RECLAIM              Regional Clean Air Incentive Market 
 
SDG&E                San Diego Gas & Electric Company 
 
SoCal Gas            Southern California Gas Company 
 
SONGS/San Onofre     San Onofre Nuclear Generating Station 
 
SRP                  Salt River Project 
 
Southwest Powerlink  A transmission line connecting San Diego to Phoenix and 
                     intermediate points 
 
TCF                  Target Capacity Factor 
 
 
 
 
 
                                     44






             SAN DIEGO GAS & ELECTRIC COMPANY  
            1996 DEFERRED COMPENSATION AGREEMENT  
                     FOR OFFICERS #1  
  
                (1996 BASE COMPENSATION)  
                      (1997 BONUS)  
  
  
     THIS AGREEMENT, made and entered into this _____ day of  
December, 1995, by and between San Diego Gas & Electric  
Company, (hereinafter "Company") and  
_____________________________________ (hereinafter  
"Officer"), an elected Officer of Company.  
  
     WITNESSETH:  
  
     WHEREAS, in addition to 1996 base compensation,  
incentive compensation payable in the form of a single sum  
cash bonus may be paid to Officer in 1997 for outstanding  
performance in 1996 ("1997 Bonus"); and  
  
     WHEREAS, Officer and Company desire that the payment of  
said 1996 base compensation and/or 1997 bonus to Officer be  
deferred, pursuant to the terms and provisions of this  
Agreement;  
  
     NOW, THEREFORE, the parties hereto hereby agree as  
follows:  
  
     1.  This Agreement shall be effective on the first date  
after its execution upon which Officer's bonus would  
otherwise be payable to Officer for outstanding performance  
and shall continue in effect until this Agreement is  
terminated as provided herein.  
  
     2.  Company shall credit to an account on Company's  
books, in Officer's name, that portion of such Officer's  
bonus otherwise payable to Officer as may be specified by  
Officer on an Election Form submitted to
 Company  
simultaneously with the execution of this Agreement.  If an  
Officer has elected to defer 100% of such Officer's bonus  
(pursuant to Deferred Compensation Agreements for Officers  
#1 and #3) and the Officer is also participating in the  
Savings Plan of San Diego Gas & Electric to the maximum  
extent permissible, such Officer may also elect to defer,  
and Company shall credit to the Officer's account, a portion  
of such Officer's base compensation (in equal monthly  
installments of whole dollar amounts).  
  
     3.  There shall be credited to Officer's account an  
additional amount equal to seven and four-tenths percent  
(7.4%) per annum computed on the balance in Officer's  
account as of the end of each month; provided, however, that  
Company reserves the right to increase or decrease from time  
to time such amounts to be credited to the account after the  
date of such increase or decrease, provided that upon a  
"change-in-control" (as defined in the SDG&E Amended 1986  
Long-Term Incentive Plan) the percentage used shall not  
decrease to less than the last published  
 

<PAGE> 
 
percentage shown in Moody's Average of Yields on Public  
Utility Bonds for a utility having a rating equivalent to  
SDG&E.  
  
     4.  All amounts credited to Officer's account pursuant  
to paragraphs 2 and 3 hereof shall be paid to Officer on the  
date(s) specified by Officer on this Agreement's Election  
Form.  In the event of Officer's death after installment  
payments to Officer have commenced hereunder, installment  
payments shall continue to be paid to the person(s)  
specified by Officer on the Election Form for the remainder  
of the period selected by Officer on this Agreement's  
Election Form.  In the event of Officer's death before any  
payment has been made under this Agreement, Officer's  
account shall be distributed or commence to be distributed,  
as soon as administratively practicable after Officer's  
death, to the person(s) specified by Officer on this  
Agreement's Election Form in the form and over the period  
selected on such Election Form.  The Company's Executive  
Compensation Committee may, in its sole discretion, provide  
instead for payment of the amount in Officer's account to  
Officer's beneficiary in a form and over a period determined  
by the Committee except that the Committee's authority and  
discretion to change the form or period of distribution  
shall terminate upon such a "change-in-control."  If  
Officer's spouse is the beneficiary, the annual amount of  
any installment payments under this paragraph 4 shall at  
least equal the entire annual income earned by the account  
and if the spouse dies prior to distribution of all amounts  
in Officer's account, all undistributed income on such  
account shall be distributed to the spouse's estate.  Upon  
the death of Officer's beneficiary, the balance in Officer's  
account (after the application of the previous sentence, if  
the spouse is the beneficiary)  shall be distributed to the  
person(s) designated by the beneficiary on a form provided  
by Company or, if no designation is made, to the  
beneficiary's estate.  
  
     5.  No amounts credited to Officer's account may be  
assigned, transferred, encumbered, or made subject to any  
legal process for the payment of any claim against Officer,  
Officer's spouse or beneficiary.  In no event shall Officer,  
Officer's spouse or beneficiary have the right to recover  
any amounts credited to Officer's account other than in  
accordance with this Agreement.  
  
     6.  Nothing contained in this Agreement and no action  
taken pursuant to the provisions of this Agreement shall  
create or be construed to create a trust of any kind, or a  
fiduciary relationship between Company and the Officer or  
any other person.   To the extent that any person acquires a  
right to receive payments from Company under this Agreement,  
such right shall be no greater than the right of any  
unsecured general creditor of Company.  Title to and  
beneficial ownership of any assets, whether cash or  
investments which Company may earmark to pay the deferred  
compensation hereunder, shall at all times remain assets of  
Company and neither the Officer nor any other person shall,  
under this Agreement, have any property interest whatsoever  
in any specific assets of Company.  
  
     7.  The existence of this Agreement shall not confer  
upon any Officer any right to continue to serve as an  
Officer for any period of time.  
  
     8.  This Agreement  may be terminated by Company upon  
30 days written notice to the Officer.  Such termination  
shall be applicable only with respect to bonuses and/or base  
 
                              2 

<PAGE> 
 
compensation payable to Officer on and after the first day  
of the calendar year following the date of termination.   
Funds previously deferred and credited (and income earned on  
such funds) will continue to be governed by the applicable  
year's Officer's Deferred Compensation Agreement Election  
Form and Section 3 of this Agreement.  
  
     9.  Officer acknowledges that Officer has been advised  
that Officer may confer with and seek advice from a tax or  
financial advisor of Officer's choice concerning this  
deferral.  Officer further acknowledges that Officer has not  
received tax advice from SDG&E nor has Officer relied upon  
information provided by SDG&E in electing to make this  
deferral.  
  
     IN WITNESS WHEREOF, this Agreement has been executed on  
the day and year written above.  
  
OFFICER                  SAN DIEGO GAS & ELECTRIC COMPANY  
  
  
________________________ By______________________________  
Signature of Officer  
 
 
 
 
 
 
                            3 




           SAN DIEGO GAS & ELECTRIC COMPANY 
         1996 DEFERRED COMPENSATION AGREEMENT 
                 FOR OFFICERS #3 
 
 
     THIS AGREEMENT is made and entered into this _____ day 
of December, 1995, by and between San Diego Gas & Electric 
Company (hereinafter "SDG&E") and 
_____________________________________ (hereinafter 
"Officer"), an elected officer of SDG&E. 
 
                      WITNESSETH: 
 
     WHEREAS, SDG&E desires to provide Officer with the 
opportunity to defer base compensation and bonus that is 
payable for services to be rendered after the date of this 
Agreement and which, as a result of amendments to the 
Internal Revenue Code ("Code") made by the Tax Reform Act of 
1986 ("1986 Tax Act"), cannot be contributed on Officer's 
behalf as Pretax Contributions to the SDG&E Savings Plan 
("Savings Plan"); and 
 
     WHEREAS, SDG&E desires to match, as an additional SDG&E 
contribution, a percentage of the Officer's base 
compensation and bonus deferred pursuant to this Agreement; 
and 
 
     WHEREAS, Officer and SDG&E desire that the payment of a 
portion of Officer's base compensation and bonus and the 
additional matching contribution be deferred pursuant to the 
terms and provisions of this Agreement. 
 
     NOW, THEREFORE, THE PARTIES HERETO HEREBY AGREE AS 
FOLLOWS: 
 
     1.  This Agreement shall be effective upon its 
execution by SDG&E and Officer with respect to base 
compensation and bonus which would otherwise be payable to 
Officer for services rendered after such execution and shall 
continue in effect until this Agreement is terminated as 
provided herein.  Officer shall be eligible to enter into 
this Agreement only if Officer has elected the maximum Basic 
Contribution under the Savings Plan for which Officer is 
eligible. 
 
     2.  SDG&E shall credit to an account on SDG&E's books, 
in Officer's name, that percentage of Officer's 1996 base 
compensation (in equal biweekly installments of whole dollar 
amounts) and 1997 bonus otherwise payable to Officer as may 
be specified by Officer in this Agreement's Election Form.  
The amount credited under this paragraph 2 may not exceed 
the percentage of Officer's 1996 base compensation and 1997 
bonus that may be contributed as Pretax Contributions or 
After-tax Contributions under the terms of the Savings Plan 
(determined prior to any reduction of such percentage 
required under applicable law), reduced by any amount 
contributed by Officer as After-tax Contributions or on 
Officer's behalf as Pretax Contributions to the Savings 
Plan.  Further, the amount credited under this paragraph 2 
shall be limited to an amount which, when added to SDG&E's 
matching contribution under paragraph 3 of this Agreement 
and all allocations to his or her accounts under the Savings 
Plan, does not exceed the 


<PAGE>

maximum amount that could have been allocated to Officer's 
Savings Plan accounts pursuant to Section 415 of the Code, 
as in effect prior to the enactment of the 1986 Tax Act.  
For purposes of this paragraph 2, "base compensation and 
bonus" shall include Officer's Pretax Contributions to the 
Savings Plan.  SDG&E shall have the sole and complete 
authority to determine the maximum amount that may be 
credited under this paragraph 2. 
 
     3.  In addition, as amounts are credited to Officer's 
account under paragraph 2, SDG&E shall also credit to 
Officer's account, as a matching contribution, an amount 
equal to the SDG&E Matching Contributions that would have 
been contributed on Officer's behalf to the Savings Plan 
(reduced by Matching Contributions actually made to the 
Savings Plan for Officer) under the provisions of the Code 
prior to enactment of the 1986 Tax Act, if the amount 
deferred under paragraph 2 had been contributed to the 
Savings Plan as Pretax Contributions or After-tax 
Contributions. 
 
     4.  There shall be credited to Officer's account an 
additional amount equal to seven and four-tenths percent 
(7.4%) per annum computed on the balance in Officer's 
account as of the end of each month.  SDG&E reserves the 
right to increase or decrease from time to time such 
percentage credited with respect to amounts to be credited 
under paragraphs 2 and 3 to the account after the date of 
such increase or decrease, provided that upon a "change-in-
control" (as defined in the SDG&E Amended 1986 Long-Term 
Incentive Plan) no decrease will result in a percentage 
credited under the previous sentence of less than the last 
published interest rate shown in Moody's Average of Yields 
on Public Utility Bonds for a utility having a rating 
equivalent to SDG&E. 
 
     5.  All amounts credited to Officer's account pursuant 
to paragraphs 2, 3, and 4 hereof shall be paid to Officer 
upon his or her termination of services as an Officer in the 
form and over the period specified by Officer on this 
Agreement's Election Form; provided, however, the SDG&E 
Compensation Committee ("Committee") may, in its sole 
discretion, provide instead for payment of the amount in 
Officer's account in a form and over a period determined by 
such Committee except that the Committee's authority and 
discretion to change the form or period of distribution 
shall terminate upon such a "change-in-control." 
 
     6.  In the event of Officer's death after installment 
payments to Officer have commenced hereunder, installment 
payments shall continue to be paid to the person(s) 
specified by Officer on the Election Form for the remainder 
of the period selected by Officer on the Election Form.  In 
the event of Officer's death before any payment has been 
made under this Agreement, Officer's account shall be 
distributed or commence to be distributed, as soon as 
administratively practicable after Officer's death, to the 
person(s) specified by Officer on this Agreement's Election 
Form in the form and over the period selected on such 
Election Form.  The Committee may, in its sole discretion, 
provide instead for payment of the amount in Officer's 
account to Officer's beneficiary in a form and over a period 
determined by the Committee except that the Committee's 
authority and discretion to change the form or period of 
distribution shall terminate upon such a "change-in-
control." 

                             2

<PAGE>
 
     If Officer's spouse is the beneficiary, the annual 
amount of any installment payments under this paragraph 6 
shall at least equal the entire annual income earned by the 
account and if the spouse dies prior to distribution of all 
amounts in Officer's account, all undistributed income on 
such account shall be distributed to the spouse's estate.  
Upon the death of Officer's beneficiary, the balance in 
Officer's account (after the application of the previous 
sentence, if the spouse is the beneficiary) shall be 
distributed to the person(s) designated by the beneficiary 
on a form provided by SDG&E or, if no designation is made, 
to the beneficiary's estate. 
 
     7.  No amounts credited to Officer's account may be 
assigned, transferred, encumbered, or made subject to any 
legal process for the payment of any claim against Officer, 
Officer's spouse or other beneficiary.  In no event shall 
Officer, Officer's spouse, or other beneficiary have the 
right to recover any amount credited to Officer's account 
other than in accordance with this Agreement. 
 
     8.  Nothing contained in this Agreement and no action 
taken pursuant to the provisions of this Agreement shall 
create or be construed to create a trust of any kind, or a 
fiduciary relationship between SDG&E and Officer or any 
other person.  To the extent that any person acquires a 
right to receive payments from SDG&E under this Agreement, 
such right shall be no greater than the right of any 
unsecured general creditor of SDG&E.  Title to and 
beneficial ownership of any assets, whether cash or 
investments, which SDG&E may earmark to pay the deferred 
compensation hereunder, shall at all times remain assets of 
SDG&E and neither Officer nor any other person shall, under 
this Agreement, have any property interest whatsoever in any 
specific assets of SDG&E. 
 
     9.  The existence of this Agreement shall not confer 
upon Officer the right to continue to serve as an Officer 
for any period of time. 
 
     10.  This Agreement shall be deemed to modify any 
provisions in an employment agreement between Officer and 
SDG&E pertaining to the timing of payment of base 
compensation and bonus and, in the event of any conflict 
between this Agreement and such provisions of the employment 
agreement, this Agreement shall control. 
 
     11.  This Agreement may be terminated by SDG&E upon 
thirty days' written notice to Officer.  This Agreement will 
also terminate upon Officer's filing of an election of a 
Basic Contribution percentage which is less than the maximum 
for which he or she is eligible under the Savings Plan.  
Termination of the Agreement shall be applicable only with 
respect to base compensation and bonus payable to Officer on 
and after the first day of the calendar year following the 
date of termination.  Funds previously deferred and credited 
(and income earned on such funds)  will continue to be 
governed by the applicable year's Officer's Deferred 
Compensation Agreement Election Form and Section 4 of this 
Agreement. 
 
     12.  Officer acknowledges that Officer has been advised 
that Officer may confer with and seek advice from a tax or 
financial advisor of Officer's choice concerning this 
deferral.  Officer further acknowledges that Officer has not 
received tax advice from SDG&E nor has Officer relied upon 
information provided by SDG&E in electing to make this 
deferral. 

                              3

<PAGE>
 
     IN WITNESS WHEREOF,  this Agreement has been executed 
on the day and year written above. 
 
OFFICER                     SAN DIEGO GAS & ELECTRIC COMPANY 
 
 
 
__________________________  By: __________________________ 
Signature of Officer 





                             4






           SAN DIEGO GAS & ELECTRIC COMPANY 
         1996 DEFERRED COMPENSATION AGREEMENT 
              FOR NONEMPLOYEE DIRECTORS 
 
 
     THIS AGREEMENT, made and entered into this _____ day of 
December, 1995, by and between San Diego Gas & Electric 
Company, (hereinafter "SDG&E") and 
______________________________________ (hereinafter 
"Director"), a member of the Board of Directors of SDG&E 
(hereinafter the "Board"), 
 
                     WITNESSETH: 
 
     WHEREAS, fees are paid to Directors as a retainer; and  
 
     WHEREAS, Director and SDG&E desire that the payment of 
said fees to Director be deferred, pursuant to the terms and 
provisions of this Agreement; 
 
     NOW, THEREFORE, the parties hereto hereby agree as 
follows: 
 
     1.  This Agreement shall be effective on the first date 
subsequent to its execution upon which Director's fees would 
otherwise be payable to Director for service as a member of 
the Board and shall continue in effect until this Agreement 
is terminated as provided herein. 
 
     2.  SDG&E shall credit to an account on SDG&E's books, 
in Director's name, that portion of such Director's fees 
otherwise payable to Director as may be specified by 
Director on an election form submitted to SDG&E 
simultaneously with the execution of this Agreement. 
 
     3.  There shall be credited to Director's account an 
additional amount equal to seven and four-tenths percent 
(7.4%) per annum computed on the balance in Director's 
account as of the end of each month; provided, however, that 
SDG&E reserves the right to increase or decrease from time 
to time such amount with respect to amounts to be credited 
to the account subsequent to the date of such increase or 
decrease, provided that upon a "change-in-control" (as 
defined in the SDG&E Amended 1986 Long-Term Incentive Plan) 
the percentage used shall not decrease to less than the last 
published rate shown in Moody's Average of Yields on Public 
Utility Bonds for a utility having a rating equivalent to 
SDG&E. 
 
     4.  All amounts credited to Director's account pursuant 
to paragraphs 2 and 3 hereof shall be paid to Director in a 
lump sum on the date specified by Director on the Director's 
election form.  In the event of Director's death before any 
payment due under this paragraph 4 has been paid, such 
payment due shall be paid in a lump sum to the person 
specified by the Director on the election form as soon as 
administratively practicable. 
 
     5.  No amounts credited to Director's account may be 
assigned, transferred, encumbered, or made subject to any 
legal process for the payment of any claim against Director, 
Director's spouse or beneficiary.  In no event shall 
Director, Director's spouse or beneficiary have the right to 
recover any fees credited to Director's account other than 
in accordance with this Agreement. 


<PAGE>
 
     6.  Nothing contained in this Agreement and no action 
taken pursuant to the provisions of this Agreement shall 
create or be construed to create a trust of any kind, or a 
fiduciary relationship between SDG&E and the Director or any 
other person.  To the extent that any person acquires a 
right to receive payments from SDG&E under this Agreement, 
such right shall be no greater than the right of any 
unsecured general creditor of SDG&E.  Title to and 
beneficial ownership of any assets, whether cash or 
investments which SDG&E may earmark to pay the deferred 
compensation hereunder, shall at all times remain assets of 
SDG&E and neither the Director nor any other person shall, 
under this Agreement, have any property interest whatsoever 
in any specific assets of SDG&E. 
 
     7.  The existence of this Agreement shall not confer 
upon any Director any right to continue to serve as a 
Director for any period of time. 
 
     8.  This Agreement may be terminated by SDG&E upon 30 
days written notice to the Director.  Such termination shall 
be applicable only with respect to fees payable to Director 
on and after the first day of the calendar year following 
the date of termination.  Funds previously deferred and 
credited (and income earned on such funds) will continue to 
be governed by the applicable year's director election form 
and Section 3 of this Agreement. 
 
     9.  Director acknowledges that Director has been 
advised that Director may confer with and seek advice from a 
tax or financial advisor of Director's choice concerning 
this deferral.  Director further acknowledges that Director 
has not received tax advice from SDG&E nor has Director 
relied upon information provided by SDG&E in electing to 
make this deferral. 
 
     IN WITNESS WHEREOF, this Agreement has been executed on 
the day and year written above. 
 
DIRECTOR                   SAN DIEGO GAS & ELECTRIC COMPANY 
 
 
 
__________________________  By: ___________________________ 
 




                             2






              SAN DIEGO GAS & ELECTRIC COMPANY 
               1986 LONG-TERM INCENTIVE PLAN 
           1995 RESTRICTED STOCK AWARD AGREEMENT 
 
       _______________________________________________ 
 
 
     THIS RESTRICTED STOCK AWARD AGREEMENT (the "Agreement") 
is entered into this _____ day of _________________, 1995, 
by and between SAN DIEGO GAS & ELECTRIC COMPANY, a 
California corporation ("SDG&E") and _______________________ 
("Participant"). 
 
     WHEREAS, the Board of Directors of SDG&E ("the Board") 
has adopted the 1986 Long-Term Incentive Plan (the "Plan"), 
which provides for the granting to selected employees of 
SDG&E and its subsidiaries of awards of Common Stock of 
SDG&E ("Restricted Stock Awards"); 
 
     WHEREAS, the grant of Restricted Stock Awards is 
intended as an incentive which will attract and retain 
highly competent persons as officers and key employees of 
SDG&E and its subsidiaries; 
 
     WHEREAS, Participant is a selected employee of SDG&E; 
and 
 
     WHEREAS, the Executive Compensation Committee of the 
Board (the "Committee") has authorized, and the Board has 
approved, the grant of a Restricted Stock Award to 
Participant pursuant to the terms of the Plan. 
 
     NOW, THEREFORE, in consideration of the foregoing and 
of the mutual covenants hereinafter set forth and other good 
and valuable consideration, the receipt of which is hereby 
acknowledged, the parties hereto hereby agree as follows: 
 
1.   Grant of Restricted Stock Award 
 
     SDG&E hereby grants to Participant, on the terms, 
conditions and restrictions hereinafter set forth, and in 
accordance with the Plan which is incorporated herein, as a 
matter of separate inducement to achieve a certain goal set 
by the Board and not in lieu of any salary or other 
compensation for Participant's services, a Restricted Stock 
Award consisting of_____________________________ 
_____________________________________________ 
(_____________) shares of the authorized but unissued shares 
of SDG&E Common Stock, (the "Shares"). 
 
2.   Purchase and Sale of Shares 
 
     Participant hereby purchases and acquires the Shares, 
and SDG&E hereby sells and transfers the Shares to 
Participant.  Concurrently with the execution hereof, SDG&E 
has delivered to Participant, and Participant acknowledges 
receipt into escrow of, a certificate or certificates 
evidencing the Shares, duly issued to Participant by SDG&E.  
Concurrently with the execution hereof, Participant 
acknowledges that the Secretary or Assistant Secretary of 
SDG&E, holds on behalf of Participant all 

                             1

<PAGE>

certificates evidencing the Shares. Participant also 
acknowledges prior receipt of a prospectus for the Plan, a 
copy of the Plan, and the most recent Annual Report of 
SDG&E.  Participant shall execute all such stock powers and 
other instruments of transfer in favor of SDG&E as are 
necessary at any time in the future to perform this 
contract. 
 
3.   Purchase Price; Payment 
 
     The purchase price for the Shares shall be Two Dollars 
and Fifty Cents ($2.50) per share.  In payment thereof, 
Participant has delivered to SDG&E, on the date first 
written above, and SDG&E acknowledges receipt of, a check 
payable to SDG&E in the amount of  _________________________ 
_______________________Dollars ($_____________).  SDG&E 
agrees that Participant shall be deemed a shareholder of 
record with respect to the Shares on the date first written 
above. 
 
4.   Restricted Term 
 
     The Restricted Term with respect to the Shares shall 
commence on the date first above written.  The restrictions 
will be removed from and the restricted term will expire on 
one quarter of the restricted shares after the end of each 
of the years 1996, 1997, 1998 and 1999: 
 
     (1)  If, at the end of each of such year the 
Corporation's earnings per share meet or exceed the target 
earnings per share as set by the Executive Compensation 
Committee. 
 
     (2)  If, beginning in 1997, at the end of any quarter, 
the published quarterly earnings meet or exceed the previous 
year's target earnings plus 25% of the annual target 
increase per quarter. 
 
     (3)  At the end of 1999, the remaining restricted 
shares not released previously may be released in the 
discretion of the Board dependent upon the impact on 1996 
through 1999 earnings of industry and corporate 
restructuring during such period. 
 
     (4)  The Board, in response to industry or corporate 
restructuring, may elect to change the Plan design and 
performance goals to align the Plan with a new long term 
direction. 
 
5.   Voting and Other Rights 
 
     During the Restricted Term, Participant shall, except 
as otherwise provided herein, have all of the rights of a 
stockholder with respect to all of the Shares subject to the 
Restricted Term, including without limitation the right to 
vote such Shares and the right to receive all dividends or 
other distributions with respect to such Shares.  In 
connection with the payment of such dividends or other 
distributions, there shall be deducted any taxes or other 
amounts required by any governmental authority to be 
withheld and paid over to such authority for the account of 
Participant. 

                               2

<PAGE>
 
6.   Restrictions On Inter Vivos Transfer 
 
     During the Restricted Term, the Shares subject to the 
Restricted Term shall not be sold, assigned, transferred, 
hypothecated or otherwise alienated, disposed of or 
encumbered except as provided in the Plan.  The certificate 
for such Shares shall bear the following legend, or any 
other similar legend as may be required by SDG&E: 
 
     "THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE 
MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, 
HYPOTHECATED OR OTHERWISE ENCUMBERED OR DISPOSED OF EXCEPT 
AS PERMITTED BY SAN DIEGO GAS & ELECTRIC COMPANY'S 1986 
LONG-TERM INCENTIVE PLAN OR THE COMMITTEE WHICH ADMINISTERS 
THAT PLAN." 
 
7.   Termination of Participant's 	Employment 
 
     In the event Participant ceases to be employed by SDG&E 
at any time before the end of the Restricted Term for any 
reason, Participant shall sell, and SDG&E shall purchase all 
Shares subject to the Restricted Term for a price of Two 
Dollars and Fifty Cents ($2.50) per share.  Upon the 
delivery by SDG&E to its Secretary or Assistant Secretary of 
(i) notice that Participant has ceased to be so employed, 
and (ii) its check, payable to the order of Participant, in 
the amount of such purchase price, said Secretary or 
Assistant Secretary shall deliver to SDG&E all certificates 
evidencing the Shares subject to the Restricted Term, 
accompanied by stock powers and other instruments of 
transfer duly executed by Participant, and shall deliver to 
Participant the check in the amount of the purchase price 
for such Shares. 
 
8.   Election to Recognize Income 
 
     Check one: 
 
     a.  ___  Participant elects, pursuant to the Internal 
Revenue Code as amended, and the comparable provisions of 
state tax law, to include in gross income in connection with 
the grant of this Restricted Stock Award, all amounts now 
recognizable. 
 
     b.  ___  Participant shall not elect, pursuant to the 
Internal Revenue Code as amended, or comparable provisions 
of any state tax law, to include any amount in gross income 
in connection with the grant of this Restricted Stock Award. 
 
9.   Withholding and Registration 
 
     a.  Upon recognition of income as elected in paragraph 
8 above, Participant shall, with respect to such Shares, 
make payment, in the form of cash or a cashier's check or in 
the manner stated in paragraph 9(b) below, to SDG&E in an 
amount sufficient to satisfy any taxes or other amounts 
SDG&E determines is required by any governmental authority 
to be withheld and paid over by SDG&E or any of its 
subsidiaries to such authority for the account of 
Participant (collectively, "Withholding Taxes"), or shall 
otherwise make arrangements satisfactory to SDG&E for the 
payment

                              3

<PAGE>

 of such amounts through withholding or otherwise.  For 
purposes of paragraph 8(a), such payment or arrangements 
shall be made by December 8, 1995.  For purposes of 
paragraph 8(b), the date shall be 30 days after the 
restrictions are removed.  Participant shall, if requested 
by SDG&E, make appropriate representations in a form 
satisfactory to SDG&E that such Shares will not be sold 
other than pursuant to an effective registration statement 
under the Securities Act of 1933, as amended, or an 
applicable exemption from the registration requirements of 
such Act. 
 
     b.  Subject to the restrictions set forth in paragraph 
9(c) and such rules as the Committee may from time to time 
adopt and upon approval by the Committee in its sole 
discretion, Participant may elect to satisfy all or any 
portion of such Participant's tax withholding obligations 
set forth in paragraph 9(a) by electing (i) to have SDG&E 
withhold from delivery of any Shares otherwise deliverable 
to Participant in the manner set forth in paragraph 10 
hereof, a portion of such Shares to satisfy Withholding 
Taxes or (ii) to deliver to SDG&E shares of Common Stock, no 
par value, of SDG&E, other than those delivered to 
Participant in the manner set forth in paragraph 10 hereof, 
to satisfy all or any portion of such Participant's 
Withholding Taxes.  The number of Shares withheld from 
delivery or such other shares delivered shall equal the 
number of shares the Committee, in its sole discretion, 
determines to have a fair market value equal to the amount 
of such Participant's Withholding Taxes required to be 
withheld or paid over by SDG&E or any of its subsidiaries 
and which Participant elected to be satisfied by withholding 
or delivery of shares. 
 
     c.  Participant's election to satisfy all or any 
portion of Participants Withholding Taxes under paragraph 
9(b) is subject to the following restrictions: 
 
         (i)  such election must be made in writing on or 
before the date when the amount of Withholding Taxes is 
required to be determined (the "Tax Date"); 
 
         (ii)  such election shall be irrevocable; 
 
         (iii)  such election shall be subject to the 
approval or disapproval
 of the Committee, in its sole 
discretion; 
 
         (iv)  the fair market value of the Shares to be 
withheld or other shares of Common Stock to be delivered to 
SDG&E for the purposes of satisfying all or any portion of 
such Participant's Withholding Taxes shall be deemed to be 
the average of the highest and lowest selling prices of such 
stock as reported on the New York Stock Exchange Composite 
Transactions Tape on the Tax Date, or if such stock is not 
traded that day, then on the next preceding day on which 
such stock was traded; and 
 
          (v)  if Participant is or becomes subject to 
Section 16(b) of the Securities Exchange Act of 1934, as 
amended (the "1934 Act"), such election must be made either 
six months or more prior to the Tax Date or within a ten-day 
period beginning on the third and ending on the twelfth 
business day following release for publication of SDG&E's 
quarterly or annual summary statement of earnings in 
accordance with Rule 16b-3(e)(3)(iii) under the 1934 Act; 
provided that no such 

                             4

<PAGE>

election may be made within six months of the grant of such 
Restricted Stock award, except in the case of death or 
disability of Participant." 
 
10.  Delivery of Shares 
 
     Upon expiration of the Restricted Term applicable to 
any shares as provided in the manner stated in paragraph 4 
above and payment by the Participant as required in 
paragraph 9 above, the Secretary or Assistant Secretary of 
SDG&E shall deliver to Participant all certificates 
evidencing the Shares free of legend and no longer subject 
to the Restricted Term and all restrictions set forth herein 
with respect to such Shares shall terminate. 
 
     If at the end of 1999 the restrictions have not been 
removed from and the Restricted Term has not expired on any 
of the shares purchased by Participant under this Agreement, 
Participant shall sell and SDG&E shall purchase all such 
shares for a price of Two Dollars and Fifty Cents ($2.50) 
per share no later than February 1, 2000.  The Secretary or 
Assistant Secretary shall deliver to SDG&E all certificates 
evidencing such shares accompanied by stock powers and other 
instruments of transfer duly executed by Participant and 
shall deliver to Participant a check in the amount of the 
purchase price for such shares. 
 
11.  Effects On Participant's Continued Employment 
 
     Participant's right, if any, to continue to serve SDG&E 
and its subsidiaries as an officer or employee shall not be 
enlarged or otherwise affected by the grant to him or her of 
this Restricted Stock Award, nor shall such grant in any way 
restrict the right of SDG&E or any of its subsidiaries to 
terminate Participant's employment at any time. 
 
12.  Further Action 
 
     Each party hereto agrees to perform any further acts 
and to execute and deliver any documents which may be 
reasonably necessary to carry out the provisions hereof. 
 
13.  Parties in Interest and Governing Law 
 
     This Agreement shall be binding upon and inure to the 
benefit of the parties hereto and their respective assigns 
and successors-in-interest, and shall be governed by and 
interpreted in accordance with the laws of the State of 
California. 
 
14.  Entire Agreement 
 
     This Agreement contains the entire agreement and 
understanding between the parties as to the subject matter 
hereof. 
 
                             5

<PAGE>
 
15.  Invalid Provisions 
 
     The invalidity or unenforceability of any particular 
provision hereto shall not affect the other provisions 
hereof, and this Agreement shall be construed in all 
respects as if such invalid or unenforceable provisions were 
omitted. 
 
16.  Amendment 
 
     No amendment or modification hereof shall be valid 
unless it shall be in writing and signed by both parties 
hereto. 
 
17.  Counterparts 
 
     This Agreement may be executed in counterparts, each of 
which shall be deemed to be an original, and taken together 
shall constitute one and the same document. 
 
18.  Notices 
 
     All notices or other communications required or 
permitted hereunder shall be in writing, and shall be 
sufficient in all respects only if delivered in person or 
sent via certified mail, postage prepaid, addressed as 
follows: 
 
     If to SDG&E:   San Diego Gas & Electric Company 
                    P.O. Box 1831 
                    San Diego, CA 92112 
 
                    Attention:  Corporate Secretary 
 
     If to Participant:_____________________________________ 
 
                       _____________________________________ 
 
                       _____________________________________ 
 
or such other address as shall be furnished in writing by 
any such party.  Any such notice or communication shall be 
deemed to have been delivered when delivered in person or 48 
hours after the date it has been mailed in the manner 
described above. 


                            6

<PAGE>
 
     IN WITNESS WHEREOF, the parties hereto have executed 
this Restricted Stock Award Agreement on the day and year 
first above written. 
 
 
                        PARTICIPANT 
 
 
                        __________________________________ 
                        Signature of Participant 
 
 
                        SAN DIEGO GAS & ELECTRIC COMPANY 
 
 
                        By:________________________________ 
 
                        Title:_____________________________ 



                             7




           SAN DIEGO GAS & ELECTRIC COMPANY 
            1986 LONG-TERM INCENTIVE PLAN 
      SPECIAL 1995 RESTRICTED STOCK AWARD AGREEMENT 
 
     _______________________________________________ 
 
 
     THIS SPECIAL RESTRICTED STOCK AWARD AGREEMENT (the 
"Agreement") is entered into this _____ day of 
_________________, 1995, by and between SAN DIEGO GAS & 
ELECTRIC COMPANY, a California corporation ("SDG&E") and 
________________________ ("Participant"). 
 
     WHEREAS, the Board of Directors of SDG&E ("the Board") 
has adopted the 1986 Long-Term Incentive Plan (the "Plan"), 
which provides for the granting to selected employees of 
SDG&E and its subsidiaries of awards of Common Stock of 
SDG&E ("Restricted Stock Awards"); 
 
     WHEREAS, the grant of Restricted Stock Awards is 
intended as an incentive which will attract and retain 
highly competent persons as officers and key employees of 
SDG&E and its subsidiaries; 
 
     WHEREAS, Participant is a selected employee of SDG&E; 
and 
 
     WHEREAS, the Executive Compensation Committee of the 
Board (the "Committee") has authorized, and the Board has 
approved, the grant of a Restricted Stock Award to 
Participant pursuant to the terms of the Plan. 
 
     NOW, THEREFORE, in consideration of the foregoing and 
of the mutual covenants hereinafter set forth and other good 
and valuable consideration, the receipt of which is hereby 
acknowledged, the parties hereto hereby agree as follows: 
 
1.   Grant of Restricted Stock Award 
 
     SDG&E hereby grants to Participant, on the terms, 
conditions and restrictions hereinafter set forth, and in 
accordance with the Plan which is incorporated herein, as a 
matter of separate inducement to achieve a certain goal set 
by the Board and not in lieu of any salary or other 
compensation for Participant's services, a Restricted Stock 
Award consisting 
of__________________________________________________________
___________________________________________ (_____________) 
shares of the authorized but unissued shares of SDG&E Common 
Stock, (the "Shares"). 
 
2.   Purchase and Sale of Shares 
 
     Participant hereby purchases and acquires the Shares, 
and SDG&E hereby sells and transfers the Shares to 
Participant.  Concurrently with the execution hereof, SDG&E 
has delivered to Participant, and Participant acknowledges 
receipt into escrow of, a certificate or certificates 
evidencing

                            1

<PAGE>

the Shares, duly issued to Participant by SDG&E.  
Concurrently with the execution hereof, Participant 
acknowledges that the Secretary or Assistant Secretary of 
SDG&E, holds on behalf of Participant all certificates 
evidencing the Shares. Participant also acknowledges prior 
receipt of a prospectus for the Plan, a copy of the Plan, 
and the most recent Annual Report of SDG&E.  Participant 
shall execute all such stock powers and other instruments of 
transfer in favor of SDG&E as are necessary at any time in 
the future to perform this contract. 
 
3.   Purchase Price; Payment 
 
     The purchase price for the Shares shall be Two Dollars 
and Fifty Cents ($2.50) per share.  In payment thereof, 
Participant has delivered to SDG&E, on the date first 
written above, and SDG&E acknowledges receipt of, a check 
payable to SDG&E in the amount of  _________________________ 
_________________________Dollars ($_______________).  SDG&E 
agrees that Participant shall be deemed a shareholder of 
record with respect to the Shares on the date first written 
above. 
 
4.   Restricted Term 
 
     The Restricted Term with respect to the Shares shall 
commence on the date first above written.  The restrictions 
will be removed from and the restricted term will expire on 
all of such restricted shares after the end of the year 
1997; 
 
     (1)  If, at the end of the year 1997, the Corporation's 
earnings per share meet or exceed the
 target earnings per 
share for the year 1997 as set by the Executive Compensation 
Committee. 
 
     (2)  After the end of 1997, any remaining restricted 
shares may be released in the discretion of the Board 
dependent upon the impact on 1997 earnings of industry and 
corporate restructuring. 
 
     (3)  The Board, in response to industry or corporate 
restructuring, may elect to change the Plan design and 
performance goals to align the Plan with a new long term 
direction. 
 
5.   Voting and Other Rights 
 
     During the Restricted Term, Participant shall, except 
as otherwise provided herein, have all of the rights of a 
stockholder with respect to all of the Shares subject to the 
Restricted Term, including without limitation the right to 
vote such Shares and the right to receive all dividends or 
other distributions with respect to such Shares.  In 
connection with the payment of such dividends or other 
distributions, there shall be deducted any taxes or other 
amounts required by any governmental authority to be 
withheld and paid over to such authority for the account of 
Participant. 
 
6.   Restrictions On Inter Vivos Transfer 

                              2

<PAGE>
 
     During the Restricted Term, the Shares subject to the 
Restricted Term shall not be sold, assigned, transferred, 
hypothecated or otherwise alienated, disposed of or 
encumbered except as provided in the Plan.  The certificate 
for such Shares shall bear the following legend, or any 
other similar legend as may be required by SDG&E: 
 
     "THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE 
MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, 
HYPOTHECATED OR OTHERWISE ENCUMBERED OR DISPOSED OF EXCEPT 
AS PERMITTED BY SAN DIEGO GAS & ELECTRIC COMPANY'S 1986 
LONG-TERM INCENTIVE PLAN OR THE COMMITTEE WHICH ADMINISTERS 
THAT PLAN." 
 
7.   Termination of Participant's Employment 
 
     In the event Participant ceases to be employed by SDG&E 
at any time before the end of the Restricted Term for any 
reason, Participant shall sell, and SDG&E shall purchase all 
Shares subject to the Restricted Term for a price of Two 
Dollars and Fifty Cents ($2.50) per share.  Upon the 
delivery by SDG&E to its Secretary or Assistant Secretary of 
(i) notice that Participant has ceased to be so employed, 
and (ii) its check, payable to the order of Participant, in 
the amount of such purchase price, said Secretary or 
Assistant Secretary shall deliver to SDG&E all certificates 
evidencing the Shares subject to the Restricted Term, 
accompanied by stock powers and other instruments of 
transfer duly executed by Participant, and shall deliver to 
Participant the check in the amount of the purchase price 
for such Shares. 
 
8.   Election to Recognize Income 
 
     Check one: 
 
     a.  ___    Participant elects, pursuant to the Internal 
Revenue Code as amended, and the comparable provisions of 
state tax law, to include in gross income in connection with 
the grant of this Restricted Stock Award, all amounts now 
recognizable. 
 
     b.  ___   Participant shall not elect, pursuant to the 
Internal Revenue Code as amended, or comparable provisions 
of any state tax law, to include any amount in gross income 
in connection with the grant of this Restricted Stock Award. 
 
9.   Withholding and Registration 
 
     a.  Upon recognition of income as elected in paragraph 
8 above, Participant shall, with respect to such Shares, 
make payment, in the form of cash or a cashier's check or in 
the manner stated in paragraph 9(b) below, to SDG&E in an 
amount sufficient to satisfy any taxes or other amounts 
SDG&E determines is required by any governmental authority 
to be withheld and paid over by SDG&E or any of its 
subsidiaries to such authority for the account of 
Participant (collectively, "Withholding Taxes"), or shall 
otherwise make arrangements satisfactory to SDG&E for the 
payment of such amounts through withholding or otherwise.  
For purposes of paragraph 8(a), such payment or arrangements 
shall be made by December 8, 1995.  For purposes of 
paragraph 8(b), the date shall be

                             3

<PAGE>

30 days after the restrictions are removed.  Participant 
shall, if requested by SDG&E, make appropriate 
representations in a form satisfactory to SDG&E that such 
Shares will not be sold other than pursuant to an effective 
registration statement under the Securities Act of 1933, as 
amended, or an applicable exemption from the registration 
requirements of such Act. 
 
     b.  Subject to the restrictions set forth in paragraph 
9(c) and such rules as the Committee may from time to time 
adopt and upon approval by the Committee in its sole 
discretion, Participant may elect to satisfy all or any 
portion of such Participant's tax withholding obligations 
set forth in paragraph 9(a) by electing (i) to have SDG&E 
withhold from delivery of any Shares otherwise deliverable 
to Participant in the manner set forth in paragraph 10 
hereof, a portion of such Shares to satisfy Withholding 
Taxes or (ii) to deliver to SDG&E shares of Common Stock, no 
par value, of SDG&E, other than those delivered to 
Participant in the manner set forth in paragraph 10 hereof, 
to satisfy all or any portion of such Participant's 
Withholding Taxes.  The number of Shares withheld from 
delivery or such other shares delivered shall equal the 
number of shares the Committee, in its sole discretion, 
determines to have a fair market value equal to the amount 
of such Participant's Withholding Taxes required to be 
withheld or paid over by SDG&E or any of its subsidiaries 
and which Participant elected to be satisfied by withholding 
or delivery of shares. 
 
     c.  Participant's election to satisfy all or any 
portion of Participants Withholding Taxes under paragraph 
9(b) is subject to the following restrictions: 
 
          (i)  such election must be made in writing on or 
before the date when the amount of Withholding Taxes is 
required to be determined (the "Tax Date"); 
 
          (ii)  such election shall be irrevocable; 
 
          (iii)  such election shall be subject to the 
approval or disapproval of the Committee, in its sole 
discretion; 
 
          (iv)  the fair market value of the Shares to be 
withheld or other shares of Common Stock to be delivered to 
SDG&E for the purposes of satisfying all or any portion of 
such Participant's Withholding Taxes shall be deemed to be 
the average of the highest and lowest selling prices of such 
stock as reported on the New York Stock Exchange Composite 
Transactions Tape on the Tax Date, or if such stock is not 
traded that day, then on the next preceding day on which 
such stock was traded; and 
 
          (v)  if Participant is or becomes subject to 
Section 16(b) of the Securities Exchange Act of 1934, as 
amended (the "1934 Act"), such election must be made either 
six months or more prior to the Tax Date or within a ten-day 
period beginning on the third and ending on the twelfth 
business day following release for publication of SDG&E's 
quarterly or annual summary statement of earnings in 
accordance with Rule 16b-3(e)(3)(iii) under the 1934 Act; 
provided that no such election may be made within six months 
of the grant of such Restricted Stock award, except in the 
case of death or disability of Participant." 

                                4

<PAGE>
 
10.  Delivery of Shares 
 
     Upon expiration of the Restricted Term applicable to 
any shares as provided in the manner stated in paragraph 4 
above and payment by the Participant as required in 
paragraph 9 above, the Secretary or Assistant Secretary of 
SDG&E shall deliver to Participant all certificates 
evidencing the Shares free of legend and no longer subject 
to the Restricted Term and all restrictions set forth herein 
with respect to such Shares shall terminate. 
 
     If at the end of 1999 the restrictions have not been 
removed from and the Restricted Term has not expired on any 
of the shares purchased by Participant under this Agreement, 
Participant shall sell and SDG&E shall purchase all such 
shares for a price of Two Dollars and Fifty Cents ($2.50) 
per share no later than February 1, 2000.  The Secretary or 
Assistant Secretary shall deliver to SDG&E all certificates 
evidencing such shares accompanied by stock powers and other 
instruments of transfer duly executed by Participant and 
shall deliver to Participant a check in the amount of the 
purchase price for such shares. 
 
11.  Effects On Participant's Continued Employment 
 
     Participant's right, if any, to continue to serve SDG&E 
and its subsidiaries as an officer or employee shall not be 
enlarged or otherwise affected by the grant to him or her of 
this Restricted Stock Award, nor shall such grant in any way 
restrict the right of SDG&E or any of its subsidiaries to 
terminate Participant's employment at any time. 
 
12.  Further Action 
 
     Each party hereto agrees to perform any further acts 
and to execute and deliver any documents which may be 
reasonably necessary to carry out the provisions hereof. 
 
13.  Parties in Interest and Governing Law 
 
     This Agreement shall be binding upon and inure to the 
benefit of the parties hereto and their respective assigns 
and successors-in-interest, and shall be governed by and 
interpreted in accordance with the laws of the State of 
California. 
 
14.  Entire Agreement 
 
     This Agreement contains the entire agreement and 
understanding between the parties as to the subject matter 
hereof. 
 
15.  Invalid Provisions 
 
     The invalidity or unenforceability of any particular 
provision hereto shall not affect the other provisions 
hereof, and this Agreement shall be construed in all 
respects as if such invalid or unenforceable provisions were 
omitted. 

                               5

<PAGE>
 
16.  Amendment 
 
     No amendment or modification hereof shall be valid 
unless it shall be in writing and signed by both parties 
hereto. 
 
17.  Counterparts 
 
     This Agreement may be executed in counterparts, each of 
which shall be deemed to be an original, and taken together 
shall constitute one and the same document.
 
18.  Notices 
 
     All notices or other communications required or 
permitted hereunder shall be in writing, and shall be 
sufficient in all respects only if delivered in person or 
sent via certified mail, postage prepaid, addressed as 
follows: 
 
     If to SDG&E:   San Diego Gas & Electric Company 
                    P.O. Box 1831 
                    San Diego, CA 92112 
 
                    Attention:  Corporate Secretary 
 
     If to Participant:_____________________________________ 
 
                       _____________________________________ 
 
                       _____________________________________ 
 
or such other address as shall be furnished in writing by 
any such party.  Any such notice or communication shall be 
deemed to have been delivered when delivered in person or 48 
hours after the date it has been mailed in the manner 
described above. 
 
 
                              6

<PAGE>
 
     IN WITNESS WHEREOF, the parties hereto have executed 
this Restricted Stock Award Agreement on the day and year 
first above written. 
 
 
                            PARTICIPANT 
 
 
                            _______________________________ 
                            Signature of Participant 
 
 
 
                            SAN DIEGO GAS & ELECTRIC COMPANY 
 
 
 
                            By:_____________________________ 
                            Title:__________________________ 



                                7




               SAN DIEGO GAS & ELECTRIC COMPANY 
                1986 LONG-TERM INCENTIVE PLAN 
             1994 RESTRICTED STOCK AWARD AGREEMENT 
                      TWO-YEAR VESTING 
 
       _______________________________________________ 
 
 
     THIS RESTRICTED STOCK AWARD AGREEMENT (the "Agreement") 
is entered into this ______ day of ______________, 1994, by 
and between SAN DIEGO GAS & ELECTRIC COMPANY, a California 
corporation ("SDG&E") and ________________________ 
("Participant"). 
 
     WHEREAS, the Board of Directors of SDG&E ("the Board") 
has adopted the 1986 Long-Term Incentive Plan (the "Plan"), 
which provides for the granting to selected employees of 
SDG&E and its subsidiaries of awards of Common Stock of 
SDG&E ("Restricted Stock Awards"); 
 
     WHEREAS, the grant of Restricted Stock Awards is 
intended as an incentive which will attract and retain 
highly competent persons as officers and key employees of 
SDG&E and its subsidiaries; 
 
     WHEREAS, Participant is a selected employee of SDG&E; 
and 
 
     WHEREAS, the Executive Compensation Committee of the 
Board (the "Committee") has authorized, and the Board has 
approved, the grant of a Restricted Stock Award to 
Participant pursuant to the terms of the Plan. 
 
     NOW, THEREFORE, in consideration of the foregoing and 
of the mutual covenants hereinafter set forth and other good 
and valuable consideration, the receipt of which is hereby 
acknowledged, the parties hereto hereby agree as follows: 
 
1.   Grant of Restricted Stock Award 
 
     SDG&E hereby grants to Participant, on the terms, 
conditions and restrictions hereinafter set forth, and in 
accordance with the Plan which is incorporated herein, as a 
matter of separate inducement to achieve a certain goal set 
by the Board and not in lieu of any salary or other 
compensation for Participant's services, a Restricted Stock 
Award consisting of Two Thousand Five Hundred (2,500) shares 
of the authorized but unissued shares of SDG&E Common Stock, 
(the "Shares"). 
 
2.   Purchase and Sale of Shares 
 
     Participant hereby purchases and acquires the Shares, 
and SDG&E hereby sells and transfers the Shares to 
Participant.  Concurrently with the execution hereof, SDG&E 
has delivered to 

                             1

<PAGE>

Participant, and Participant acknowledges receipt into 
escrow of, a certificate or certificates evidencing the 
Shares, duly issued to Participant by SDG&E.  Concurrently 
with the execution hereof, Participant acknowledges that the 
Secretary or Assistant Secretary of SDG&E, holds on behalf 
of Participant all certificates evidencing the Shares. 
Participant also acknowledges prior receipt of a prospectus 
for the Plan, a copy of the Plan, and an Annual Report of 
SDG&E for the year 1993.  Participant shall execute all such 
stock powers and other instruments of transfer in favor of 
SDG&E as are necessary at any time in the future to perform 
this contract. 
 
3.   Purchase Price; Payment 
 
     The purchase price for the Shares shall be Two Dollars 
and Fifty Cents ($2.50) per share.  In payment thereof, 
Participant has delivered to SDG&E, on the date first 
written above, and SDG&E acknowledges receipt of, a check 
payable to SDG&E in the amount of  Six Thousand Two Hundred 
and Fifty Dollars ($6,250.00).  SDG&E agrees that 
Participant shall be deemed a shareholder of record with 
respect to the Shares on the date first written above. 
 
4.   Restricted Term 
 
     (a)  The Restricted Term with respect to the Shares 
shall commence on the date first above written.  The 
restrictions will be removed from and the restricted term 
will expire on the Shares if: 
 
          (1)  After the end of the year 1996 if at the end 
of the year 1996 the Corporation's earnings per share meets 
or exceeds the target earnings per share for the year 1996 
as set by the Committee. 
 
          (2)  After the end of 1996, any remaining 
restricted shares may be released in the discretion of the 
Board dependent upon the impact on 1996 earnings of industry 
and corporate restructuring. 
 
5.   Voting and Other Rights 
 
     During the Restricted Term, Participant shall, except 
as otherwise provided herein, have all of the rights of a 
stockholder with respect to all of the Shares subject to the 
Restricted Term, including without limitation the right to 
vote such Shares and the right to receive all dividends or 
other distributions with respect to such Shares.  In 
connection with the payment of such dividends or other 
distributions, there shall be deducted any taxes or other 
amounts required by any governmental authority to be 
withheld and paid over to such authority for the account of 
Participant. 

                             2

<PAGE>
 
6.   Restrictions On Inter Vivos Transfer 
 
     During the Restricted Term, the Shares subject to the 
Restricted Term shall not be sold, assigned, transferred, 
hypothecated or otherwise alienated, disposed of or 
encumbered except as provided in the Plan.  The certificate 
for such Shares shall bear the following legend, or any 
other similar legend as may be required by SDG&E: 
 
     "THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE 
MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, 
HYPOTHECATED OR OTHERWISE ENCUMBERED OR DISPOSED OF EXCEPT 
AS PERMITTED BY SAN DIEGO GAS & ELECTRIC COMPANY'S 1986 
LONG-TERM INCENTIVE PLAN OR THE COMMITTEE WHICH ADMINISTERS 
THAT PLAN." 
 
7.   Termination of Participant's  
     Employment 
 
     In the event Participant ceases to be employed by SDG&E 
at any time before the end of the Restricted Term for any 
reason, Participant shall sell, and SDG&E shall purchase all 
Shares subject to the Restricted Term for a price of Two 
Dollars and Fifty Cents ($2.50) per share.  Upon the 
delivery by SDG&E to its Secretary or Assistant Secretary of 
(i) notice that Participant has ceased to be so employed, 
and (ii) its check, payable to the order of Participant, in 
the amount of such purchase price, said Secretary or 
Assistant Secretary shall deliver to SDG&E all certificates 
evidencing the Shares subject to the Restricted Term, 
accompanied by stock powers and other instruments of 
transfer duly executed by Participant, and shall deliver to 
Participant the check in the amount of the purchase price 
for such Shares. 
 
8.   Election to Recognize Income 
 
     Check one: 
 
     a.  ___    Participant elects, pursuant to the Internal 
Revenue Code as amended, and the comparable provisions of 
state tax law, to include in gross income in connection with 
the grant of this Restricted Stock Award, all amounts now 
recognizable. 
 
     b.  ___    Participant shall not elect, pursuant to the 
Internal Revenue Code as amended, or comparable provisions 
of any state tax law, to include any amount in gross income 
in connection with the grant of this Restricted Stock Award. 
 
9.   Withholding and Registration 
 
     (a)  Upon recognition of income as elected in paragraph 
8 above, Participant shall, with respect to such Shares, 
make payment, in the form of cash or a cashier's check or in 
the manner stated

                          3

<PAGE>

 in paragraph 9(b) below, to SDG&E in an amount sufficient 
to satisfy any taxes or other amounts SDG&E determines is 
required by any governmental authority to be withheld and 
paid over by SDG&E or any of its subsidiaries to such 
authority for the account of Participant (collectively, 
"Withholding Taxes"), or shall otherwise make arrangements 
satisfactory to SDG&E for the payment of such amounts 
through withholding or otherwise.  For purposes of paragraph 
8(a), such payment or arrangements shall be made by December 
9, 1994.  For purposes of paragraph 8(b), the date shall be 
30 days after the restrictions are removed.  Participant 
shall, if requested by SDG&E, make appropriate 
representations in a form satisfactory to SDG&E that such 
Shares will not be sold other than pursuant to an effective 
registration statement under the Securities Act of 1933, as 
amended, or an applicable exemption from the registration 
requirements of such Act. 
 
     (b)  Subject to the restrictions set forth in paragraph 
9(c) and such rules as the Committee may from time to time 
adopt and upon approval by the Committee in its sole 
discretion, Participant may elect to satisfy all or any 
portion of such Participant's tax withholding obligations 
set forth in paragraph 9(a) by electing (i) to have SDG&E 
withhold from delivery of any Shares otherwise deliverable 
to Participant in the manner set forth in paragraph 10 
hereof, a portion of such Shares to satisfy Withholding 
Taxes or (ii) to deliver to SDG&E shares of Common Stock, no 
par value, of SDG&E, other than those delivered to 
Participant in the manner set forth in paragraph 10 hereof, 
to satisfy all or any portion of such Participant's 
Withholding Taxes.  The number of Shares withheld from 
delivery or such other shares delivered shall equal the 
number of shares the Committee, in its sole discretion, 
determines to have a fair market value equal to the amount 
of such Participant's Withholding Taxes required to be 
withheld or paid over by SDG&E or any of its subsidiaries 
and which Participant elected to be satisfied by withholding 
or delivery of shares. 
 
     (c)  Participant's election to satisfy all or any 
portion of Participants Withholding Taxes under paragraph 
9(b) is subject to the following restrictions: 
 
          (i)  such election must be made in writing on or 
before the date when the amount of Withholding Taxes is 
required to be determined (the "Tax Date"); 
 
          (ii)  such election shall be irrevocable; 
 
          (iii)  such election shall be subject to the 
approval
 or disapproval of the Committee, in its sole 
discretion; 
 
          (iv)  the fair market value of the Shares to be 
withheld or other shares of Common Stock to be delivered to 
SDG&E for the purposes of satisfying all or any portion of 
such Participant's Withholding Taxes shall be deemed to be 
the average of the highest and lowest selling prices of such 
stock as reported on the New York Stock Exchange Composite 
Transactions Tape on the Tax Date, or if such stock is not 
traded that day, then on the next preceding day on which 
such stock was traded; and 

                             4

<PAGE>
 
          (v)  if Participant is or becomes subject to 
Section 16(b) of the Securities Exchange Act of 1934, as 
amended (the "1934 Act"), such election must be made either 
six months or more prior to the Tax Date or within a ten-day 
period beginning on the third and ending on the twelfth 
business day following release for publication of SDG&E's 
quarterly or annual summary statement of earnings in 
accordance with Rule 16b-3(e)(3)(iii) under the 1934 Act; 
provided that no such election may be made within six months 
of the grant of such Restricted Stock award, except in the 
case of death or disability of Participant." 
 
10.  Delivery of Shares 
 
     Upon expiration of the Restricted Term applicable to 
any shares as provided in the manner stated in paragraph 4 
above and payment by the Participant as required in 
paragraph 9 above, the Secretary or Assistant Secretary of 
SDG&E shall deliver to Participant all certificates 
evidencing the Shares free of legend and no longer subject 
to the Restricted Term and all restrictions set forth herein 
with respect to such Shares shall terminate. 
 
     If at the end of 1997 the restrictions have not been 
removed from and the Restricted Term has not expired on any 
of the shares purchased by Participant under this Agreement, 
Participant shall sell and SDG&E shall purchase all such 
shares for a price of Two Dollars and Fifty Cents ($2.50) 
per share no later than February 1, 1998.  The Secretary or 
Assistant Secretary shall deliver to SDG&E all certificates 
evidencing such shares accompanied by stock powers and other 
instruments of transfer duly executed by Participant and 
shall deliver to Participant a check in the amount of the 
purchase price for such shares. 
 
11.  Effects On Participant's Continued Employment 
 
     Participant's right, if any, to continue to serve SDG&E 
and its subsidiaries as an officer or employee shall not be 
enlarged or otherwise affected by the grant to him or her of 
this Restricted Stock Award, nor shall such grant in any way 
restrict the right of SDG&E or any of its subsidiaries to 
terminate Participant's employment at any time. 
 
12.  Further Action 
 
     Each party hereto agrees to perform any further acts 
and to execute and deliver any documents which may be 
reasonably necessary to carry out the provisions hereof. 
 
                             5

<PAGE>
 
13.  Parties in Interest and Governing Law 
 
     This Agreement shall be binding upon and inure to the 
benefit of the parties hereto and their respective assigns 
and successors-in-interest, and shall be governed by and 
interpreted in accordance with the laws of the State of 
California. 
 
14.  Entire Agreement 
 
     This Agreement contains the entire agreement and 
understanding between the parties as to the subject matter 
hereof. 
 
15.  Invalid Provisions 
 
     The invalidity or unenforceability of any particular 
provision hereto shall not affect the other provisions 
hereof, and this Agreement shall be construed in all 
respects as if such invalid or unenforceable provisions were 
omitted. 
 
16.  Amendment 
 
     No amendment or modification hereof shall be valid 
unless it shall be in writing and signed by both parties 
hereto. 
 
17.  Counterparts 
 
     This Agreement may be executed in counterparts, each of 
which shall be deemed to be an original, and taken together 
shall constitute one and the same document. 
 
18.  Notices 
 
     All notices or other communications required or 
permitted hereunder shall be in writing, and shall be 
sufficient in all respects only if delivered in person or 
sent via certified mail, postage prepaid, addressed as 
follows: 
 
     If to SDG&E:   San Diego Gas & Electric Company 
                    P.O. Box 1831 
                    San Diego, CA 92112 
                    Attention:  Corporate Secretary 
 
                              6

<PAGE>
 
     If to Participant:_____________________________________ 
 
                       _____________________________________ 
 
                       _____________________________________ 
 
or such other address as shall be furnished in writing by 
any such party.  Any such notice or communication shall be 
deemed to have been delivered when delivered in person or 48 
hours after the date it has been mailed in the manner 
described above. 
 
 
     IN WITNESS WHEREOF, the parties hereto have executed 
this Restricted Stock Award Agreement on the day and year 
first above written. 
 
 
                         PARTICIPANT 
 
 
 
                         __________________________________ 
                         Signature of Participant 
 
 
                         SAN DIEGO GAS & ELECTRIC COMPANY 
 
 
 
                         By:_______________________________ 
                         Title:____________________________ 

                               7





<PAGE>  
                                  EXHIBIT 12.1 
                          SAN DIEGO GAS & ELECTRIC COMPANY 
            COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES 
                           AND PREFERRED STOCK DIVIDENDS 

<TABLE> 
<CAPTION>                                                                                  
                  
                                                                                           
      
                                                                                         
                                                                                        
                                    1991        1992        1993         1994     1995  
                                ----------  ----------  ----------  ---------- ----------
<S>                  <C>        <C>         <C>         <C>        <C>         <C> 
 
Fixed Charges: 
 
Interest:
  Long-Term Debt                $ 98,000     $99,900    $ 92,596     $ 92,770   $ 95,523
  Short-Term Debt                  7,429       5,319       7,173       10,015     15,345
Amortization of Debt
 Discount and Expense,
 Less Premium                      2,471       2,881       4,162        4,604      4,870
Interest Portion of 
 Annual Rentals                   18,067      14,563      19,081       21,838     19,371
                                ----------  ----------- --------- ----------- ----------
   Total Fixed  
    Charges                      125,967     122,663     123,012      129,227    135,109
                                ----------  ----------- --------- ----------- ----------
Preferred Dividends    
 Requirements                     10,535       9,600       8,565        7,663      7,663
Ratio of Income Before 
 Tax to Net Income               1.61473     1.74291     1.70580      1.94788    1.57657
                               -----------  ----------- ---------- ---------- ----------
Preferred Dividends 
 for Purpose of Ratio             17,011      16,732      14,610       14,927     12,081
                               -----------  ----------- ---------- ---------- ----------
 Total Fixed Charges
  and Preferred 
  Dividends for
  Purpose of Ratio              $142,978    $139,395    $137,622     $144,154   $147,190
                               =========== ==========  ==========  ========== ==========
Earnings:

Net Income (before
 preferred dividend 
 requirements)                  $208,060    $210,657    $218,715     $143,477   $233,457
Add: 
 Fixed Charges 
  (from above)                   125,967     122,663     123,012      129,227    135,109
 Less: Fixed Charges 
  Capitalized                      2,907       2,407       2,596        2,472      2,785
Taxes on Income                  127,900     156,500     154,369      135,999    134,605
                              ----------  ----------  ----------  -----------  ---------
 Total Earnings for 
  Purpose of Ratio              $459,020    $487,413    $493,500     $406,231   $500,386 
                              ==========  ==========  ==========  =========== ========== 
Ratio of Earnings 
 to Combined Fixed 
 Charges and
 Preferred 
 Dividends                          3.21        3.50        3.59         2.82       3.40
                              ==========  ==========  ==========  ===========  =========

</TABLE>






<PAGE> 
 
ENOVA CORPORATION PARENT COMPANY OF SDG&E 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS 
 
RESULTS OF OPERATIONS 
On December 6, 1995, San Diego Gas & Electric Company announced the 
formation of Enova Corporation as the parent company for SDG&E, an  
operating public utility, and unregulated subsidiaries. On January 1, 
1996, Enova Corporation became the parent of SDG&E. SDG&E's  
outstanding common stock was converted on a share-for-share basis  
into Enova Corporation common stock. SDG&E's debt securities, 
preferred stock and preference stock were unaffected and remain with 
SDG&E. On January  31, 1996, SDG&E's ownership interests in its  
subsidiaries were transferred to Enova Corporation at book value, 
completing the parent company structure. The consolidated financial 
statements include SDG&E and its subsidiaries and, therefore, also  
reflect what is now Enova and its subsidiaries. Beginning on January 1, 
1996, SDG&E's financial statements for periods prior to 1996 will be 
restated  to reflect the net results of non-utility subsidiaries as 
discontinued operations in accordance with Accounting Principles Board 
Opinion No. 30 "Reporting the Effects of a Disposal of a Segment of  
Business." 
 
     SDG&E is engaged in electric and gas businesses. It generates and 
purchases electric energy and distributes it to 1.2 million customers  
in San Diego County and an adjacent portion of Orange County,  
California. It also purchases and distributes natural gas to 700,000  
customers in San Diego County and transports gas for others. SDG&E has 
diversified into other businesses.  Enova  Financial, Inc., invests in 
limited partnerships representing approximately 800 affordable-housing 
projects located throughout the United States. Califia Company leases  
computer equipment. The investments in Enova Financial and Califia are 
expected to provide income tax benefits over the next several years. 
Enova Energy, Inc., is an energy management consulting firm offering 
services to utilities and large consumers. Pacific Diversified Capital 
Company is the parent company for non-utility subsidiaries, Phase  One 
Development,  Inc., which is engaged in real estate  development,  and 
Enova  Technologies,  Inc.  Enova Technologies,  whose  ownership  was 
transferred directly to Enova Corporation after December 31, 1995,  is 
in  the  business of developing new technologies generally related  to 
utilities and energy, including certain research transferred from  the 
utility.  Enova International was formed after December 31,  1995,  to 
develop and operate natural gas and power projects outside the  United 
States.  Additional  information  regarding  SDG&E's  subsidiaries  is 
described  in  Notes  1  and 3 of the notes to consolidated  financial 
statements. 
      
OPERATING REVENUES Electric revenues did not change  significantly  in 
1995  or  in  1994, decreasing less than one percent  each  year.  Gas 
revenues  decreased 10 percent in 1995, reflecting lower purchased-gas 
prices and lower sales volume due to warmer weather and an increase in 
customers'  purchases of gas directly from other suppliers  (for  whom 
SDG&E provides transportation). 
 
     Revenues from diversified operations increased in 1994, primarily 
due to Califia's leasing activities. 
      
OPERATING EXPENSES Electric fuel expense decreased 30 percent in  1995 
and  18  percent  in 1994. The decrease in 1995 was primarily  due  to 
lower prices for natural gas and the shifting of energy supply sources 
from  generation to purchased power as a result of nuclear  refuelings 
during  the  year.  The decrease in 1994 was due to lower  prices  for 
natural gas and the replacement of fossil fuel generation with  lower- 
cost nuclear generation. 
 
     Purchased-power expenses decreased in 1995, reflecting a decrease 
in  purchased-power prices, offset by higher volumes.  The  5  percent 
increase in 1994 was primarily due to increased purchases from higher- 
cost, independent power producers. 
 
     Gas  purchased  for resale decreased 23 percent in  1995  and  12 
percent  in  1994.  The decrease in 1995 was primarily  due  to  lower 
prices  for natural gas and lower sales volumes due to warmer  weather 
and  an  increase in customers' purchases of gas directly  from  other 
suppliers  (for whom SDG&E provides transportation). The  decrease  in 
1994  was due to lower natural gas prices and lower sales volumes  due 
to customers' purchases of gas directly from others. 
 
     The changes in maintenance expenses reflect unusually low charges 
in 1994, a year which included no nuclear plant refuelings. 
      
OTHER  INCOME AND DEDUCTIONS Other income and deductions increased  in 
1995  and  decreased in 1994. These changes, including the  change  in 
"Other-net,"  were primarily due to the 1994 writedowns  described  in 
Note 2 of the notes to consolidated financial statements. 
 
EARNINGS 1995 earnings per common share were $1.94, compared to  $1.17 
in  1994  and $1.81 in 1993. Earnings per common share from continuing 
operations were $1.94 in 1995, compared with $1.71 in 1994  and  $1.89 
in 1993. Excluding the impact of writedowns of utility and non-utility 
real  property and other assets ($0.20 per share), 1994  earnings  per 
share  from continuing operations were $1.91. The increase in earnings 
in 1995 is due to numerous offsetting factors, including the increased 
utility authorized rate of return and changes in incentive awards  for 
performance-based ratemaking and demand-side management programs.  The 
increase  in  earnings  in 1994 was the result of  several  offsetting 
factors,   including   lower   operating  and   maintenance   expense, 
performance-based  ratemaking  awards  and  lower  utility  authorized 
return. 
 
                                     18 

<PAGE> 
 
 
     Earnings per share for the quarter ended December 31, 1995,  were 
$0.50  compared  to  $0.47 for the same period in 1994.  Earnings  per 
share  from continuing operations for the quarter were $0.45  in  1995 
and  $0.49  in 1994. The latter decrease is due to numerous offsetting 
factors,  including changes in incentive awards for  performance-based 
ratemaking  and  demand-side management programs,  and  the  increased 
authorized rate of return. 
 
     Califia  and Enova Financial's contributions to earnings for  the 
year  were $0.17 in 1995, $0.15 in 1994 and $0.09 in 1993. The  impact 
of  the  remaining subsidiaries on earnings from continuing operations 
was not material. 
      
LIQUIDITY AND CAPITAL RESOURCES 
Utility  operations  continue to be a major source  of  liquidity.  In 
addition, financing needs are met primarily through issuances of short- 
term  and  long-term  debt, and of common and preferred  stock.  These 
capital  resources are expected to remain available. Cash requirements 
include   plant   construction   and   other   capital   expenditures; 
subsidiaries'  affordable-housing, leasing and other investments;  and 
repayments  and retirements of long-term debt. In addition to  changes 
described elsewhere, major changes in cash flows are described below. 
      
CASH  FLOWS  FROM OPERATING ACTIVITIES The major changes in cash flows 
from  operations  among  the  three  years  result  from  changes   in 
regulatory balancing accounts, income taxes, and accounts payable  and 
other current liabilities. The changes related to regulatory balancing 
accounts were due primarily to changes in prices for natural gas.  The 
changes  related  to income taxes (and other current assets) were  due 
primarily to the differences in timing of income tax payments  related 
to  regulatory balancing account activity in 1994. The changes related 
to  accounts payable and other current liabilities were due  primarily 
to  greater  demand-side management activity in December  1995,  lower 
employee  incentive  compensation and lower construction  activity  in 
December 1994. 
 
     Quarterly  cash dividends of $0.39 per share have  been  declared 
for each quarter during the year ended December 31, 1995. The dividend 
payout  ratio for the years ended December
 31, 1995, 1994, 1993,  1992 
and  1991 were 80 percent, 130 percent, 82 percent, 81 percent and  79 
percent,  respectively. The increase in the payout ratio for the  year 
ended  December  31, 1994, was due to the writedowns  recorded  during 
1994.  Additional information regarding the writedowns is provided  in 
Notes  2 and 3 of the notes to consolidated financial statements.  The 
payment  of future dividends is within the discretion of the directors 
and  is dependent upon future business conditions, earnings and  other 
factors. Net cash flows provided by operating activities currently are 
sufficient to maintain the payment of dividends at the present level. 
      
CASH FLOWS FROM FINANCING ACTIVITIES SDG&E  had  only  short-   and 
intermediate-term financing needs during 1995 and does not  expect  to 
issue  any  intermediate-term debt in 1996. The utility did not  issue 
stock or long-term debt in 1995, except for refinancings, and does not 
plan  any  issuances  in  1996, other than refinancings.  Subsidiaries 
Enova  Financial, Califia, Pacific Diversified Capital and  Phase  One 
Development  repaid $40 million in long-term debt in 1995  during  the 
ordinary  course  of  business. To date, it has  not  been  determined 
whether the nonutility subsidiaries will issue debt in 1996. 
 
     SDG&E's  utility capital structure is one factor that has enabled 
it  to  obtain long-term financing at attractive rates. The  following 
table  shows  the percentages of capital represented  by  the  various 
components.  The capital structures are net of the construction  funds 
held by a trustee in 1992 and 1993. 
      
                  1991   1992   1993   1994   1995    Goal 
- ----------------------------------------------------------- 
Common equity      47%    47%    47%    48%    49%   45-48% 
Preferred stock     5      5      4      4      4      5-7 
Debt and leases    48     48     49     48     47    46-49 
- ----------------------------------------------------------- 
   Total          100%   100%   100%   100%   100%     100% 
___________________________________________________________ 
      
     In December 1995, Standard & Poor's and Moody's Investors Service 
affirmed  the  ratings  of  SDG&E following  the  CPUC's  decision  on 
restructuring California's electric utility industry. Moody's affirmed 
its  long-term bond rating of A1 and stable outlook. Standard & Poor's 
affirmed  its  long-term  bond  rating of  A+  and  negative  outlook. 
Standard  &  Poor's  said  the outlook would remain  negative  pending 
further  study  of  the  financial implications of  the  restructuring 
decision, as well as the potential for modification or approval by the 
governor and the California Legislature. 
 
     On  December  19,  1995, the Securities and  Exchange  Commission 
approved  SDG&E's application to delist its preferred  and  preference 
stock  from  the  Pacific  Stock Exchange.  All  SDG&E  preferred  and 
preference stock is now listed on the American Exchange only. 
 
     On  January  15, 1996, SDG&E redeemed its $7.20 series preference 
stock.   The  entire  $15  million  issue  was  called  for  mandatory 
redemption at $101 per share. 
      
DERIVATIVES SDG&E's policy is to use derivative financial  instruments 
to  reduce its exposure to fluctuations in interest rates and  foreign 
currency  exchange rates. These financial instruments are  with  major 
investment  firms  and,  along  with cash  and  cash  equivalents  and 
accounts  receivable, expose SDG&E to market and credit  risks.  These 
risks  may at times be concentrated with certain counterparties. SDG&E 
presently  contemplates  use  of similar  instruments  to  reduce  its 
exposure  to  fluctuations in natural gas prices. SDG&E does  not  use 
derivatives for trading or speculative purposes. 
 
                                      19 

<PAGE> 
 
 
     SDG&E  periodically  enters  into  interest  rate  swap  and  cap 
agreements  to moderate its exposure to interest rate changes  and  to 
lower  its  overall cost of borrowing. These swap and  cap  agreements 
generally remain off the balance sheet as they involve the exchange of 
fixed- and variable-rate interest payments without the exchange of the 
underlying  principal  amounts.  The  related  gains  or  losses   are 
reflected  in the income statement as part of interest expense.  SDG&E 
would be exposed to interest-rate fluctuations on the underlying  debt 
should  other  parties  to  the  agreement  not  perform.  Such   non- 
performance  is not anticipated. At December 31, 1995, SDG&E  had  two 
such  agreements, including an index cap agreement on $75  million  of 
bonds  maturing in 1996, and a floating-to-fixed-rate swap  associated 
with $45 million of variable-rate bonds maturing in 2002. 
 
     SDG&E's  pension fund periodically uses foreign currency  forward 
contracts  to  reduce  its  exposure from  exchange-rate  fluctuations 
associated  with  certain  investments in foreign  equity  securities. 
These  contracts generally have maturities ranging from three  to  six 
months.  At December 31, 1995, the pension fund held forward  Yen-U.S. 
Dollar contracts totaling $20 million. SDG&E's pension fund is exposed 
to  credit  loss  if  the counterparties fail to  perform.  Such  non- 
performance is not anticipated. 
 
     Additional  information  on derivative financial  instruments  is 
provided in Note 9 of the notes to consolidated financial statements. 
      
CASH FLOWS FROM INVESTING ACTIVITIES Cash used in investing activities 
in 1995 included utility construction expenditures and payments to its 
nuclear  decommissioning  trust. Construction expenditures,  excluding 
nuclear   fuel  and  the  allowance  for  equity  funds  used   during 
construction, were $221 million in 1995 and are estimated to  be  $220 
million  in  1996. The company continuously reviews its  construction, 
investment  and  financing programs and revises them  in  response  to 
changes  in  competition, customer growth, inflation, customer  rates, 
the  cost  of  capital, and environmental and regulatory requirements. 
Among  other things, the level of expenditures in the next  few  years 
will depend heavily on the impact of the CPUC's industry restructuring 
decision,  on  the timing of expenditures to comply with air  emission 
reduction  and other environmental requirements, on the company's plan 
to   transport  natural  gas  to  Mexico  and, on the scope  of  Enova 
Technologies'  investment  in  new  technologies.  These  matters  are 
discussed below. 
 
     Payments  to  the nuclear decommissioning trust are  expected  to 
continue until SONGS is decommissioned, which is not expected to occur 
before 2013. Although Unit 1 was permanently shut down in 1992, it  is 
expected to be decommissioned concurrently with Units 2 and 3. 
      
REGULATORY MATTERS 
ELECTRIC RATES In April 1995, the CPUC issued its decision on  SDG&E's 
May  1995 Energy Cost Adjustment Clause Application, approving an  $81 
million decrease in electric rates effective May 1, 1995. The decrease 
reflects, among other things, lower fuel and purchased-power costs and 
the return of previous overcollections from customers. The $81 million 
ECAC decrease was combined with previously approved increases for cost 
of capital ($31 million) and base rates ($41 million), resulting in an 
authorized system average electric rate of $0.0987. 
 
     In  October 1995, SDG&E filed its 1996 ECAC rate request with the 
CPUC for an $18 million decrease in electric rates which, if approved, 
would result in an authorized system average electric rate of $0.0967  
on June 1, 1996. The request reflects lower forecasted prices for fuel 
and purchased power, lower cost of capital, balancing account activity, 
and  inflation  and customer growth based on SDG&E's performance-based 
ratemaking  Base Rates  Mechanism formula. Settlement discussions are  
currently ongoing among SDG&E, the CPUC's Division of Ratepayer  
Advocates and  other parties. 
 
     In   December  1995,  the  CPUC  found  SDG&E  operations  to  be 
reasonable  for  the record period August 1, 1992,  through  July  31, 
1993, except for $1.8 million associated with a wholesale transaction. 
This   is   the   last  comprehensive  reasonableness  review,   since 
performance-based ratemaking (see below) limits such reviews to  those 
issues causing expenses to fall outside certain parameters. 
      
GAS RATES In  July 1995, the CPUC issued its decision on SDG&E's  June 
1995  application  to lower core gas rates by $16  million,  effective 
August 1, 1995. The decrease was based on the decline in gas prices to 
levels  below the Biennial Cost Allocation Proceeding's price forecast 
that became effective January 1, 1995, and lowered the gas portion  of 
a typical residential SDG&E natural gas bill by $1.60 per month or 6.5 
percent. 
 
     In  December 1995, the CPUC authorized SDG&E to implement  a  $21 
million   natural  gas  refund  as  a  result  of  balancing   account 
overcollections from lower-than-expected natural gas commodity  costs. 
The  typical customer's refund, distributed in February 1996, averaged 
$22.  In December 1995, the CPUC also authorized a $25 million natural 
gas  rate  increase for residential and small-business  customers.  In 
January  1996, the typical customer's gas bill increased approximately 
$1.78  per  month,  primarily  due  to  an  increase  in  natural  gas 
transportation prices from Southern California Gas and  an  update  of 
balancing account activity. 
 
                                        20 

<PAGE> 
 
 
PERFORMANCE-BASED RATEMAKING In December 1995,  the  CPUC  issued  its 
decision, authorizing rewards of $3.7 million for electric generation 
and dispatch (G&D) and $3.8 million for gas procurement based on first- 
year  (August  1993  through July 1994) results  of  performance-based 
ratemaking  (PBR). The CPUC also found SDG&E's nuclear and gas-storage 
operations reasonable for the same period. 
 
     In October 1995, SDG&E filed reports with the CPUC on the results 
of its electric generation and dispatch and gas procurement mechanisms 
for  the  year  ended July 31, 1995. SDG&E's fuel and  purchased-power 
expenses fell below the benchmarks for these mechanisms by a total  of 
$27.9 million ($2.8 million for G&D and $25.1 million for gas). In its 
filing for a rate adjustment effective June 1, 1996, SDG&E requested a 
total  shareholder reward of $3.4 million ($0.8 million  for  G&D  and 
$2.6 million for gas) and that the remainder of these savings be given 
to customers through lower rates. 
 
     In  July  1995,  the  CPUC authorized $7 million  in  rewards  to 
shareholders  as  a  result  of SDG&E's exceeding  CPUC-approved  1994 
benchmarks under the base-rates PBR mechanism. Performance measures in 
the  base-rates  mechanism  measures  include  customer  satisfaction, 
national rates comparison, system reliability and employee safety. 
 
     These  PBR  rewards are recorded in advance of receipt only  when 
the  entire reward will be collected in rates within 24 months of  the 
CPUC's approval. 
 
     The  gas  procurement and G&D mechanisms are  effective  under  a 
previously  authorized two-year experiment that began in August  1993. 
Both have been extended until the Division of Ratepayer Advocates  and 
the  Commission  Advisory  and Compliance Division  file  their  final 
reports  for the year ended July 31, 1995 (expected during  the  first 
quarter  of 1996). Thereafter, SDG&E will be applying for an extension 
and modification in conjunction with the restructuring of California's 
electric  utility industry (see "Competition" below), and the existing 
mechanisms are expected to remain in place until the CPUC acts on  the 
application.  The  base-rates mechanism was established  as  a  5-year 
experimental  mechanism  that is intended to  run  from  January  1994 
through December 1998. 
      
COST OF CAPITAL In  November  1995,  the  CPUC  issued  its  decision 
authorizing  SDG&E,  Pacific  Gas and  Electric,  Southern  California 
Edison, Southern California Gas and Sierra Pacific Power 11.60 percent 
returns  on  common  equity for 1996. (SDG&E's was  12.05  percent  in 
1995.)  SDG&E's resulting rate of return on ratebase is 9.37  percent, 
compared to 9.76 percent in 1995. 
 
     In  October  1995,  SDG&E  filed a  proposal  with  the  CPUC  to 
implement  a  mechanism to establish its cost of capital beginning  in 
January 1997. Each October, SDG&E's authorized rate of return would be 
adjusted  if single A bond rates change by 1 percent or more from  the 
prior  year's  benchmark. A 100-basis-point change in  single  A  bond 
rates  would result in a one-half percent change in SDG&E's return-on- 
equity.  In  addition, SDG&E's embedded costs of  debt  and  preferred 
stock would be adjusted to reflect SDG&E's outstanding long-term  debt 
and  preferred  stock  at  each September 30 if  the  return-on-equity 
adjustment  described  above is triggered. The  adjustments  would  be 
effective on January 1 of the following year. The proposal suggests  a 
3-year  trial period during which SDG&E's authorized capital structure 
would not change. 
      
SAN ONOFRE NUCLEAR GENERATING STATION SDG&E is currently recovering its 
existing  capital investment in San Onofre Nuclear Generating  Station 
Unit 1 over a 4-year period that began in November 1992, when the CPUC 
issued  a  decision  to permanently shut down the unit.  The  decision 
authorized Southern California Edison (majority owner and operator  of 
SONGS)  and  SDG&E to recover their investments in Unit  1,  of  which 
SDG&E's  share  was $111 million. SDG&E is recovering its  investment, 
earning  a  return of 9.1 percent. At December 31, 1995,  $18  million 
remained to be recovered. 
 
     In  January  1996, the CPUC approved the accelerated recovery  of 
SONGS  Units 2 and 3 existing capital costs. The decision allows SDG&E 
to recover its investment of approximately $750 million over an 8-year 
period beginning in 1996, rather than over the anticipated operational 
life of the units, which is expected to extend to 2013. During the  8- 
year  period, the authorized rate of return on the equity  portion  of 
the investment will be 90 percent of SDG&E's embedded cost of debt and 
the  return  on  the debt-financed component will be at  7.52  percent 
(SDG&E's  1995  authorized  cost of debt).  The  decision  includes  a 
performance  incentive  plan  that  encourages  continued,   efficient 
operation  of the plant during the 8-year period. During this  period, 
customers  will  pay  about  $0.04  per  kilowatt-hour.  This  pricing 
structure  replaces  the traditional method of recovering  the  units' 
operating expenses and capital improvements. This is intended to  make 
the units more competitive with other sources. 
      
COMPETITION 
ELECTRIC - CALIFORNIA In December 1995, the CPUC issued its policy 
decision on the restructuring of California's electric utility 
industry to stimulate competition and reduce rates. Beginning in 
January 1998, customers can buy their electricity through a power 
exchange that will obtain power from the lowest-bidding suppliers.  
The exchange is a spot market with visible pricing. Consumers also 
may choose to continue 
 
                                      21 

<PAGE> 
 
 
to purchase from their local utility under  
regulated tariffs. As a third option, a cross section of all customer 
groups (residential, industrial, commercial and agricultural) will be 
able to go directly to any energy supplier and enter into private   
contracts with generators, brokers or others (direct access). 
As the direct access mechanism has many technical issues to be 
resolved, a five-year phase-in is planned. All California electricity 
customers of investor-owned utilities will have the option to purchase 
generation services directly by 2003. Key points of the CPUC decision 
as it relates to SDG&E include: 
 
   -   An  independent  system  operator  (ISO)  will  schedule  power 
transactions  and  access to the state transmission  system,  enabling 
competing  power producers to have equal opportunity to deliver  their 
supplies.   Participation  in  the  power  exchange  or   "pool-based" 
wholesale electricity market will be voluntary for buyers and sellers, 
except  for  the  investor-owned utilities.  The  ISO  and  the  power 
exchange  will be separate, independent entities under Federal  Energy 
Regulatory Commission jurisdiction. 
 
   -  Utilities  will  be  allowed to fully recover  their  "stranded" 
costs  incurred  for facilities approved by the CPUC,  purchased-power 
and  other  contracts, and regulatory assets through the establishment 
of  a  non-bypassable competition transition charge  (CTC)  which  all 
customers will be assessed. 
 
   -  Utilities  will  continue  to have  the  obligation  to  provide 
distribution   service  to  all  customers  and   provide   least-cost 
generation  service to those customers who do not choose  the  direct- 
access  option.  Performance-based  regulation  rather  than  cost-of- 
service  regulation  will  be  used  to  encourage  efficient  utility 
operation. 
 
   -  Utilities will continue to have direct control and operation  of 
the  distribution business and procurement of generation services  for 
customers  who  continue  to purchase from  the  utility,  which  will 
continue to be regulated by the CPUC. Transmission facilities will  be 
owned by the utilities and operated by the ISO. 
 
   -  For  purposes of transition cost recovery, rates  for  customers 
taking  bundled utility service (energy, transmission and distribution 
included  into  one  rate) will be capped at  levels  consistent  with 
January 1, 1996, revenue requirements. Including the CTC, rates cannot 
exceed  the cap and, therefore, recovery of the CTC is limited by  the 
cap.  If  rates  not including the CTC meet or exceed the  cap  for  a 
particular  period,  no  CTC  can be  recouped,  but  rather  will  be 
accumulated in a balancing account for future recovery (see below). 
 
   -  The  CPUC  supports a non-bypassable surcharge  to  fund  public 
policy programs. 
 
     The  decision  identifies  three primary  sources  of  transition 
costs:  uneconomic utility-owned generating assets  (that  portion  of 
fossil units not recoverable in the energy price), existing purchased- 
power  obligations (including qualifying facilities),  and  regulatory 
assets  and  obligations  (including  deferred  operating  costs   and 
deferred  taxes). By September 1996, the utilities must  identify  and 
value  investments for inclusion in a transitional balancing  account, 
subject  to CPUC review and approval. The transition-balancing account 
can  be  adjusted through 2003 for errors or omissions. Collection  of 
any  investment-related transition costs must be  completed  by  2005. 
Thereafter,  participation  in the power  exchange  by  investor-owned 
utilities will be voluntary. 
 
     The  decision  allows  for recovery of all  remaining  generation 
investment  costs,  with a reduced rate of return on  any  investment- 
related  transition costs. The rate of return for the  debt  component 
would be equal to the utility's embedded cost of debt and the rate  of 
return  on  the equity component would be equal to 90 percent  of  the 
embedded cost of debt. SDG&E's authorized cost of debt is 7.52 percent 
for  1995.  The  CPUC  reduced  the rate  of  return  to  reflect  the 
perception   of  lower  risk,  due  to  the  non-bypassable   CTC   on 
distribution customers, and the reduced risk that the plants  will  be 
found no longer used and useful and removed from rate base. 
 
     The  CPUC's  concerns  over  market-power  problems  may  require 
investor-owned utilities to divest themselves of a substantial portion 
of their generating assets. PG&E and Edison are required to file plans 
to  voluntarily  divest themselves of at least  50  percent  of  their 
fossil-fueled generating assets through a spin-off or sale to  a  non- 
affiliated entity. SDG&E is not included in this requirement,  as  the 
CPUC  does  not perceive these market-power problems in San Diego.  In 
order  to  encourage  the  voluntary  divestiture  or  spin-off  of  a 
utility's  fossil generation, the decision provides for a 0.1  percent 
increase  in  equity  return  for each 10  percent  of  fossil  plants 
disposed of in excess of the mandatory percentage. 
 
     In  addition, the utilities are required to file plans  with  the 
CPUC  to  implement  direct access and new or revised  PBR  proposals. 
Plans to establish the power exchange and ISO are also required to  be 
filed  by  the utilities with both the CPUC and the FERC, as the  FERC 
has   jurisdiction   over  the  exchange,  the  ISO   and   interstate 
transmission. 
 
     The  California  Legislature has passed a resolution  forming  an 
oversight  committee to ensure the legislature's  involvement  in  the 
policies  presented  by the CPUC, and that the  policies  comply  with 
federal and state laws, and achieve the objectives both of competition 
and  the  various  social programs that are currently  funded  through 
utility rates. 
 
     The  CPUC is currently working on building a consensus on the new 
market  structure  with  the  California  Legislature,  the  governor, 
utilities and customers. 
      
ELECTRIC-FEDERAL In March 1995, the FERC issued a proposed rule that, 
if  adopted,  would  require all public utilities to  offer  wholesale 
"open-access"  transmission service on a nondiscriminatory  basis.  In 
addition,  public  utilities would be 
 
                                   22 

<PAGE> 
 
 
 required to  functionally  price 
their  generation and transmission services separately. The FERC  also 
stated  its  belief that utilities should be allowed  to  recover  the 
costs  of  assets  and  obligations made  uneconomic  by  the  changed 
regulatory environment. Although SDG&E's cost-recovery mechanisms  are 
not  currently under the jurisdiction of the FERC, the recognition  by 
the  FERC  of the propriety of such cost recovery supports the  CPUC's 
similar position. 
 
     In  October  1995,  SDG&E filed for approval of  its  open-access 
tariffs  for  its service territory with the FERC in conjunction  with 
its  request  for  a marketing license for Enova Energy.  In  December 
1995,  the  FERC  issued a draft order approving  SDG&E's  open-access 
tariff, but rejecting Enova Energy's filing. This limits Enova  Energy 
to  cost-based rates. All non-rate terms and conditions were  accepted 
subject to the outcome of the FERC's restructuring rulemaking. 
 
     Final  approval  of  the  FERC's rule and  the  CPUC's  industry- 
restructuring  plan  would  result in  the  creation  of  a  bid-based 
wholesale  electricity spot market with open-access transmission.  The 
FERC is expected to issue a final rule during the first half of 1996. 
      
GAS The  ongoing restructuring of the gas utility industry has  allowed 
customers to bypass utilities as suppliers and, to a lesser extent, as 
transporters  of  natural  gas.  Currently,  non-utility   electricity 
producers and other large customers may use a utility's facilities  to 
transport  gas  purchased  from non-utility suppliers.  Also,  smaller 
customers  may  form  groups to buy gas from another  supplier.  SDG&E 
would face significant competition if a major pipeline were to operate 
in or near SDG&E's service territory. 
 
     In  September  1995,  SDG&E  signed  an  agreement  with  Pacific 
Enterprises  International, an affiliate of Southern  California  Gas, 
and  Proxima,  a Mexican company, to develop and operate  natural  gas 
distribution  networks in Baja California, Mexico. Representing  SDG&E 
will be an Enova Corporation subsidiary, Enova International. 
 
     In  November  1995,  Mexico  issued  new  regulations   allowing 
privately owned companies, including companies with foreign ownership, 
to  participate  in  infrastructure  projects  involving  natural  gas 
transportation, storage and distribution. Previously, these activities 
were conducted by the government-owned oil company, Pemex. 
 
     In  November  1995,  the  three-company  consortium  submitted  a 
Statement of Interest to the Mexican government requesting a permit to 
distribute natural gas in the city of Mexicali and surrounding  areas. 
Other  companies have also expressed an interest in the project. Under 
the  new  regulations, the government will conduct a  bidding  process 
before a permit is issued. If the consortium is awarded the permit, it 
will  have an exclusive right to distribute natural gas in that region 
for 12 years. 
 
     The  proposed project would deliver gas to Mexicali  through  the 
pipeline network of Southern California Gas in the Imperial Valley. The 
initial capital will be $10 million to $15 million, and the initial 
load will be about 10 million cubic feet per day, serving mostly  
industrial customers.  The proposed pipeline network would be  
continuously expanded to serve residential and commercial customers. 
      
EFFECTS OF REGULATION SDG&E currently accounts for the economic effects 
of  regulation  in  accordance with Statement of Financial  Accounting 
Standards  No.  71, "Accounting for the Effects of  Certain  Types  of 
Regulation,"  under which a regulated utility may record a  regulatory 
asset  if  it  is probable that, through the rate-making process,  the 
utility will recover that asset from its customers. In the event  that 
recovery   of  specific  costs  through  rates  becomes  unlikely   or 
uncertain,  whether  resulting  from the  effects  of  competition  or 
regulatory  actions, it could result in the writeoff  of  portions  of 
these   regulatory   assets.  In  addition,  once  the   restructuring 
transition  is final, SDG&E may not continue to meet the criteria  for 
applying  SFAS  71  to  all of its operations in  the  new  regulatory 
framework. 
 
     As  the  restructuring of the industry evolves, SDG&E will become 
more   vulnerable  to  competition.  However,  based  on  recent  CPUC 
decisions,  recovery  of  stranded costs is  provided  for,  including 
recovery  of  investment in SONGS Units 2 and 3, and  SDG&E  does  not 
anticipate  incurring  a  material charge  against  earnings  for  its 
generating  facilities, the related regulatory assets and other  long- 
term  commitments. In addition, although California  utilities'  rates 
are  significantly higher than the national average, SDG&E has a lower 
concentration  of industrial customers and for 7 years  has  been  the 
lowest-cost provider among the investor-owned utilities in California, 
which make its customers a less likely target for outside competitors. 
      
RESOURCE PLANNING 
BIENNIAL  RESOURCE PLAN UPDATE PROCEEDING In December 1994,  the  CPUC 
issued  a  decision  ordering  SDG&E, Pacific  Gas  and  Electric  and 
Southern California Edison to proceed with the BRPU auction. SDG&E was 
ordered  to begin negotiating contracts (ranging from 17 to 30  years) 
to purchase 500 mw of power from qualifying facilities at an estimated 
cost  of  $4.8 billion beginning in 1997. In February 1995,  the  FERC 
issued  an order declaring the BRPU auction procedures unlawful  under 
federal law. In July 1995, the CPUC issued a ruling encouraging SDG&E, 
PG&E  and  Edison  to  reach  settlements with  the  auction  winners. 
Settlement   discussions  are  ongoing.  Additional   information   on 
potential  stranded costs and SDG&E's purchased-power  commitments  is 
described  in  Notes 10 and 11 of the notes to consolidated  financial 
statements. 
 
                                       23 

<PAGE> 
 
 
SOURCES OF  FUEL  AND  ENERGY SDG&E's  primary  sources  of  fuel  and 
purchased  power  include natural gas from Canada and  the  Southwest, 
surplus power from other utilities in the Southwest and the Northwest, 
and  uranium  from Canada. SDG&E expects its fuel and  purchased-power 
costs  to  remain  relatively low in the next few  years  due  to  the 
continued  availability  of surplus power in  the  Southwest  and  the 
continued availability of natural gas. Although short-term natural-gas 
supplies  are  volatile  due to weather and  other  conditions,  these 
sources  should  provide  SDG&E with an adequate  supply  of  low-cost 
natural gas. SDG&E is currently involved in litigation concerning  its 
long-term  contracts for natural gas with certain Canadian  suppliers. 
SDG&E  has settled with one supplier. SDG&E cannot predict the outcome 
of  the litigation with the other suppliers, but does not expect  that 
an  unfavorable outcome would have a material effect on its  financial 
condition or results of operations. 
      
ENVIRONMENTAL MATTERS 
SDG&E's operations are conducted in accordance with federal, state and 
local  environmental laws and regulations governing hazardous  wastes, 
air and water quality, land use and solid-waste disposal. SDG&E incurs 
significant costs to operate its facilities in compliance  with  these 
laws  and regulations, and to clean up the environment as a result  of 
prior  operations of SDG&E or of others. The costs of compliance  with 
environmental laws and regulations are normally recovered in  customer 
rates.  However, the CPUC's decision for restructuring the  California 
electric  utility  industry (see above) will change  the  way  utility 
rates  are set and costs are recovered. Depending on the final outcome 
of  industry restructuring and the impact of competition, the costs of 
compliance  with  future environmental regulations may  not  be  fully 
recoverable. 
 
     Capital  expenditures  to  comply  with  environmental  laws  and 
regulations were $4 million in 1995, $5 million in 1994 and $8 million 
in  1993,  and are expected to aggregate $38 million over the  next  5 
years.  These  expenditures primarily include the  estimated  cost  of 
retrofitting SDG&E's power plants to reduce air emissions. They do not 
include   potential   expenditures  to  comply  with   water-discharge 
requirements  for the Encina, South Bay and SONGS power plants,  which 
are discussed below. 
      
HAZARDOUS WASTES In  May  1994,  the CPUC  approved  a  mechanism  for 
utilities  to  recover  their  costs  to  clean  up  hazardous   waste 
contamination at sites at which the utility may have responsibility or 
liability  under  the law to conduct or participate  in  any  required 
cleanup.  Basically,  the  mechanism allows utilities  to  recover  90 
percent  of  their cleanup costs and any related costs  of  litigation 
with  responsible  parties, and 70 percent of their costs  related  to 
obtaining  recovery  of  such cleanup costs  from  insurance  carriers 
providing coverage for such costs. 
 
     SDG&E  disposes of its hazardous wastes at facilities  owned  and 
operated by other entities. Operations at these facilities may  result 
in  actual  or  threatened risks to the environment or public  health. 
Where  the owner or operator of such a facility fails to complete  any 
corrective action required by regulatory agencies to abate such risks, 
applicable  environmental laws may impose an obligation on  SDG&E  and 
others  who disposed of hazardous wastes at the facility to  undertake 
corrective actions. 
 
     This  type of obligation has been imposed upon SDG&E with respect 
to  the  Rosen's Electrical Equipment Supply Company site  located  in 
Pico Rivera, California. In December 1993, SDG&E received notification 
that  the  California  Department of Toxic Substances  Control  (DTSC) 
considered   SDG&E  and  eight  other  entities  to   be   potentially 
responsible  parties (PRPs) liable for any required corrective  action 
regarding polychlorinated biphenyls contamination at the Rosen's site. 
The  site was operated between approximately 1948 and 1984. As a  part 
of  its  operations,  Rosen's acquired and  scrapped  used  electrical 
transformers.  SDG&E sold some of its used electrical transformers  to 
Rosen's.  The  DTSC  considers SDG&E to be  responsible  for  about  7 
percent of the transformer-related contamination at the site. SDG&E is 
continuing  to  investigate this matter. In December  1995,  the  DTSC 
issued  an  Imminent  and Substantial Endangerment  Determination  and 
Remedial  Action  Order to SDG&E and 10 other PRPs requiring  them  to 
assess  and remove the risks of contamination from the site.  However, 
SDG&E  and the other PRPs have been negotiating with Rosen's  and  the 
DTSC  to  effect, before April 20, 1996, an alternative consent  order 
which  would  separate the development of the cleanup  plan  from  the 
actual  cleanup. This would provide the PRPs with greater  flexibility 
to  manage  and  implement the required actions.  Based  on  available 
information,  SDG&E is unable to estimate the range of  liability,  if 
any, it may have for the necessary corrective action at this site. 
 
     During  the  early 1900s SDG&E and its predecessors  manufactured 
gas  from  oil  at  its  Station A facility and  at  two  other  small 
facilities  in  Escondido and Oceanside. In 1995, SDG&E  commenced  an 
environmental  assessment of Station A. Some  significant  amounts  of 
residual  by-products  from the gas-manufacturing  process  have  been 
discovered on portions of the facility during the assessment. However, 
the  magnitude  of  such contamination has yet to be  determined.  The 
assessment will be completed in 1996, at which time the extent of  any 
required  remediation  activities  and  a  range  of  costs  will   be 
determined.  Sufficient  information is  not  currently  available  to 
estimate cleanup costs. The Escondido facility has been remediated  at 
a  cost  of approximately $3 million during the period of 1990 through 
1993.  A site closure letter for this  
 
                                     24 

<PAGE> 
 
 
facility has been obtained  from 
the  San  Diego  County Department of Environmental  Health  Services. 
However, contaminants similar to the ones found on the Escondido  site 
have  been observed on adjacent parcels of property. SDG&E will assess 
these contaminants in 1996. 
 
     SDG&E  has identified various other sites for which it  may  bear 
some responsibility or liability for any corrective action that may be 
required  under federal, state or local environmental laws. SDG&E  may 
be held partially or indirectly responsible for remediation of some of 
these  sites. However, SDG&E is unable to estimate the extent  of  its 
responsibility, if any, for remediation. Furthermore, the  timing  for 
assessing  the costs of remediation at these sites and the number  and 
identities  of other parties that may also be responsible  (and  their 
respective responsibilities and abilities to share in the cost of  the 
remediation) are also unknown. 
      
ELECTRIC  AND  MAGNETIC  FIELDS (EMF) SDG&E and  other  utilities  are 
involved  in  litigation concerning electric and magnetic  fields.  An 
unfavorable outcome of this litigation could have a significant impact 
on  the future operations of the electric utility industry, especially 
if relocation of existing power lines is ultimately required. To date, 
science  has  demonstrated  no cause-and-effect  relationship  between 
cancer  and  exposure  to  the  type of  EMFs  emitted  by  utilities' 
transmission  lines and generating facilities. To  respond  to  public 
concerns,  the CPUC has directed the California utilities to  adopt  a 
low-cost EMF-reduction policy that requires reasonable design  changes 
to  achieve  noticeable reduction of EMF levels that  are  anticipated 
from  new  projects.  However, consistent with  the  major  scientific 
reviews of available research literature, the CPUC has indicated  that 
no health risk has been identified with exposure to EMFs. 
      
AIR QUALITY In 1996, SDG&E must begin to comply with nitrogen  dioxide 
emission  limits  that  the San Diego Air Pollution  Control  District 
imposed on electric generating boilers through its Rule 69. Under  the 
initial rule, SDG&E would have been required to retrofit each  of  its 
nine  boilers  with  expensive pollution-control equipment  to  reduce 
nitrogen  dioxide emissions and to maintain the total  nitrogen  oxide 
emissions  from  the  entire system below a prescribed  emissions  cap 
(having  graduated emission reductions to be achieved  through  2001). 
The capital costs of compliance with the initial rule were expected to 
be approximately $110 million. However, in December 1995, the district 
amended   the   rule   to  remove  the  individual   boiler   retrofit 
requirements, but retained the system-wide emissions cap with  further 
system-wide emission reductions to be achieved by 2005. The  estimated 
capital  costs  for compliance with the amended rule are approximately 
$60  million.  The  California  Air Resources  Board  (ARB)  expressed 
concern  that  the amendments to Rule 69 did not meet the requirements 
of  the California Clean Air Act. However, the ARB withheld any formal 
objections pending its review of SDG&E's Rule 69 compliance plan to be 
submitted  in 1996. The ARB may seek to overturn some or  all  of  the 
Rule  69  amendments or to otherwise impose more restrictive emissions 
limitations,  which  would cause SDG&E's Rule 69 compliance  costs  to 
increase. 
 
     In  1990  the South Coast Air Quality Management District  (AQMD) 
passed  a rule which will require SDG&E's older natural gas compressor 
engines  at its Moreno facility to either meet new stringent  nitrogen 
oxide  emission levels or be converted to electric drive.  In  October 
1993,  the  AQMD adopted a new program called RECLAIM, which  replaced 
existing rules and requires SDG&E's natural-gas compressor engines  at 
its Moreno facility to reduce their nitrogen oxide emission levels  by 
about  10  percent  a  year through 2003. This  will  be  accomplished 
through   the  installation  of  new  emission-monitoring   equipment, 
operational  changes  to  take advantage of low-emission  engines  and 
engine retrofits. SDG&E has concluded negotiations with the AQMD  that 
resulted  in  the  reclassification of  three  of  these  engines  and 
eliminated  the  need for certain expensive monitoring  equipment  for 
those engines. The cost of complying with RECLAIM may be as much as $3 
million. 
      
WATER QUALITY In 1989, SDG&E submitted applications to the  San  Diego 
Regional  Water  Quality Control Board to renew the discharge  permits 
for  its  South Bay and Encina power plants. Supplemental applications 
were submitted in 1993. These discharge permits are required to enable 
SDG&E  to  discharge its cooling water and certain other  treated  and 
nontreated  nonhazardous wastewaters into the Pacific Ocean  and  into 
San  Diego  Bay.  The  permits are, therefore,  prerequisites  to  the 
continued  operation of its power plants as they are  now  configured. 
Increasingly   stringent   cooling-water  and   wastewater   discharge 
limitations may be imposed in the future, and SDG&E may be required to 
build  additional  facilities to comply with these requirements.  Such 
facilities  could  include  wastewater treatment  facilities,  cooling 
towers or offshore- discharge pipelines. 
 
     SDG&E anticipates that the regional board will issue a new permit 
for  SDG&E's  South  Bay  power plant in 1996.  Pending  the  regional 
board's action, the previous permit remains effective. 
 
     The  regional board issued SDG&E a new discharge permit  for  its 
Encina power plant in November 1994. However, SDG&E's application  for 
an  exception  to  certain  thermal-discharge  requirements  is  still 
pending  until  the completion of thermal studies to be  conducted  in 
1996.  If  SDG&E's  exception application is denied,  SDG&E  could  be 
required to construct offshore-discharge facilities at a cost of up to 
$75 million. 
 
                                     25 

<PAGE> 
 
 
     The  California  Coastal  Commission  required  a  study  of  the 
offshore  impact  on  the  marine environment from  the  cooling-water 
discharge  by  SONGS  Units  2 and 3. The study  concluded  that  some 
environmental  damage  is  caused by the discharge.  To  mitigate  the 
environmental damage, the California Coastal Commission ordered Edison 
and  SDG&E to improve the plant's fish-protection system, build a 300- 
acre  artificial reef to help restore kelp beds and restore 150  acres 
of  coastal wetlands. SDG&E may be required to incur capital costs  of 
up to $30 million to comply with this order. The new pricing structure 
contained  in  the CPUC's decision regarding accelerated  recovery  of 
SONGS  Units  2  and  3  (see "San Onofre Nuclear Generating  Station" 
above)  accommodates these added mitigation costs. In addition,  SDG&E 
and  Edison have asked the California Coastal Commission to reconsider 
and  modify  this mitigation plan to reduce the size of the artificial 
reef and shorten the monitoring period. Negotiations are ongoing. 
      
WOOD-POLE PRESERVATIVES The Pacific Justice Center (Pacific),  a  for- 
profit  law  firm,  and  the Mateel Environmental  Justice  Foundation 
(Mateel),  a  nonprofit  corporation,  claim  that  SDG&E  and   other 
utilities  and parties have violated California's Safe Drinking  Water 
and  Toxic Enforcement Act (Proposition 65) by failing to warn persons 
who  may come into contact with the preservatives used in treated wood 
utility  poles and by allowing such preservatives to be released  into 
sources  of drinking water. Some preservatives used in woodpoles  are 
included  on California's list of chemicals known to cause  cancer  or 
reproductive harm. Proposition 65 requires that prior warning be given 
to  individuals  who  may  be  exposed to such  chemicals  unless  the 
exposure  will  not pose a significant risk and that these  substances 
not  be  released  into  sources  of  drinking  water  in  significant 
quantities  or  otherwise in violation of the law. Violations  of  the 
Proposition 65 warning requirement can result in penalties  of  up  to 
$2,500  per  violation. SDG&E believes, on the basis  of  studies  and 
other  information,  that  exposure to  wood  poles  containing  these 
preservatives does not give rise to a significant risk and, therefore, 
no  warning  is  required  and that significant  quantities  of  these 
preservatives are not released to any source of drinking water.  SDG&E 
and  the  other utilities and parties have responded to the claims  by 
denying  their validity.  In  June  1995,  Mateel,  represented  by 
Pacific,  filed  a complaint in San Francisco Superior  Court  against 
Pacific  Bell,  PG&E  and  two  wood-pole manufacturers  alleging  the 
violations noted above. Although SDG&E was not named in this  lawsuit, 
it  is  anticipated  that Mateel may file a separate  lawsuit  against 
SDG&E  and  other utilities on the same grounds. SDG&E is  cooperating 
with  PG&E,  Pacific  Bell  and others to  achieve  an  effective  and 
favorable resolution of this matter. 
      
NEW ACCOUNTING STANDARDS 
In  March  1995,  the  Financial  Accounting  Standards  Board  issued 
Statement  of Financial Accounting Standards No. 121, "Accounting  for 
the  Impairment of Long-Lived Assets and for Long-Lived Assets  to  Be 
Disposed  Of."  This statement, which is effective for 1996  financial 
statements,  requires that long-lived assets and certain  identifiable 
intangibles be reviewed for impairment whenever events or  changes  in 
circumstances indicate that the carrying amount of an asset may not be 
recoverable.  In performing the review of recoverability,  the  entity 
should estimate the future cash flows expected to result from the  use 
of  the asset and its eventual disposition. As discussed above and  in 
Note  11  of the notes to consolidated financial statements, the  CPUC 
has  issued  a  decision  for restructuring  the  California  electric 
utility  industry to stimulate competition and has indicated that  the 
California utilities will, within certain limits, be allowed  recovery 
of  regulatory assets, the excess carrying amount of existing  utility 
plant  and obligations under long-term purchased-power contracts  over 
fair-market  value over a transition period that ends in  2005.  As  a 
result  of this and preliminary indications from the FERC on  recovery 
of  transition costs arising from industry restructuring, SFAS 121  is 
not  currently expected to have an adverse impact on SDG&E's financial 
condition  or results of operations. However, this may change  in  the 
future  as  restructuring, deregulation and competitive  factors  take 
effect in the electric utility industry. 
 
     In  October 1995, the Financial Accounting Standards Board issued 
Statement  of Financial Accounting Standards No. 123, "Accounting  for 
Stock-Based  Compensation." SFAS 123 is effective for  1996  financial 
statements and establishes a fair-value-based method of accounting for 
stock-based   compensation  plans.  SFAS  123  provides  a   voluntary 
alternative  to the provisions of Accounting Principles Board  Opinion 
25,  "Accounting for Stock Issued to Employees." However, it  requires 
pro  forma  disclosure  of the stock-based compensation  arrangement's 
impact on net income and earnings per share as though SFAS 123's fair- 
value  provisions had been adopted. SDG&E currently issues restricted- 
stock  awards under its Long-Term Incentive Plan and expects to  adopt 
the disclosure-only requirement of SFAS 123. Additional information on 
SDG&E's  stock-based compensation plans is provided in Note 7  of  the 
notes to consolidated financial statements. 
 
                                      26 
 

<PAGE> 
 
Responsibility Report for the Consolidated Financial Statements 
 
SDG&E  and Enova (collectively referred to as "SDG&E") are responsible 
for  the  consolidated financial statements and  other  data  in  this 
annual  report. To meet its responsibility for the reliability of  the 
consolidated  financial statements, SDG&E has developed  a  system  of 
internal  accounting  controls  and  engages  a  firm  of  independent 
auditors.   The   board  of  directors  of  SDG&E  carries   out   its 
responsibility for the consolidated financial statements  through  its 
audit  committee,  composed  of directors  who  are  not  officers  or 
employees of SDG&E. 
 
     Management maintains the system of internal accounting  controls, 
which it believes is adequate to provide reasonable, but not absolute, 
assurance  that  its  assets are safeguarded,  that  transactions  are 
executed  in  accordance with its objectives, and that  the  financial 
records  and  reports  are  reliable for  preparing  the  consolidated 
financial  statements in accordance with generally accepted accounting 
principles. 
 
     The concept of reasonable assurance recognizes that the cost of a 
system  of internal accounting controls should not exceed the benefits 
derived  and  that management makes estimates and judgments  of  these 
cost/benefit  factors. The system of internal accounting  controls  is 
supported  by  an extensive program of internal audits, selection  and 
training of qualified personnel, and written policies and procedures. 
 
     SDG&E's  independent auditors, Deloitte & Touche LLP, are engaged 
to  audit SDG&E's consolidated financial statements in accordance with 
generally  accepted auditing standards for the purpose  of  expressing 
their  opinion as to whether SDG&E's consolidated financial statements 
are  presented  fairly, in all material respects, in  accordance  with 
generally accepted accounting principles. 
 
     The  audit committee discusses with SDG&E's internal auditors and 
the  independent  auditors the overall scope and  specific  plans  for 
their   respective  audits.  The  committee  also  discusses   SDG&E's 
consolidated financial statements and the adequacy of SDG&E's internal 
controls.  The  committee met twice during the fiscal  year  with  the 
internal auditors, the independent auditors and management to  discuss 
the  results  of  their  examinations, their  evaluations  of  SDG&E's 
internal  controls,  and  the  overall quality  of  SDG&E's  financial 
reporting.  The  internal auditors and the independent  auditors  have 
full and free access to the committee throughout the year. 
 
     SDG&E's   management  has  prepared  the  consolidated  financial 
statements  and  other data in this annual report. In the  opinion  of 
SDG&E,  the  consolidated financial statements, which include  amounts 
based on estimates and judgments of management, have been prepared  in 
conformity with generally accepted accounting principles. 
      
DAVID R. KUZMA 
Senior Vice President, Chief Financial Officer and Treasurer 
      
 
      

Independent Auditors' Report 
      
To  the  Shareholders and Board of Directors of Enova Corporation  and 
San Diego Gas & Electric Company: 
 
We  have audited the accompanying consolidated balance sheets and  the 
statements of consolidated capital stock and of long-term debt of  San 
Diego Gas & Electric Company and subsidiaries as of December 31,  1995 
and  1994, and the related statements of consolidated income,  changes 
in  capital  stock  and retained earnings, cash flows,  and  financial 
information by segments of business for each of the three years in the 
period   ended   December  31,  1995.  These  consolidated   financial 
statements  are  the responsibility of the Company's  management.  Our 
responsibility is to express an opinion on these financial  statements 
based on our audits. 
 
     We  conducted  our  audits in accordance with generally  accepted 
auditing  standards. Those standards require that we plan and  perform 
the  audit  to obtain reasonable assurance about whether the financial 
statements  are  free  of  material misstatement.  An  audit  includes 
examining,  on  a  test  basis, evidence supporting  the  amounts  and 
disclosures  in  the  financial statements.  An  audit  also  includes 
assessing  the  accounting principles used and  significant  estimates 
made  by  management,  as  well as evaluating  the  overall  financial 
statement   presentation.  We  believe  that  our  audits  provide   a 
reasonable basis for our opinion. 
 
     In  our  opinion, such consolidated financial statements  present 
fairly, in all material respects, the financial position of San  Diego 
Gas  &  Electric Company and subsidiaries as of December 31, 1995  and 
1994,  and  the results of their operations and their cash  flows  for 
each  of  the  three years in the period ended December  31,  1995  in 
conformity with generally accepted accounting principles. 
      
      
DELOITTE & TOUCHE LLP 
San Diego, California 
February 16, 1996 

 
                                     27 
 

<PAGE> 
 

<TABLE> 
STATEMENTS OF CONSOLIDATED INCOME 
In thousands except per share amounts 
<CAPTION> 
                                                      
For the years ended December 31                        1995          1994          1993 
                                                   ------------  ------------  ------------ 
<S>                                                 <C>          <C>           <C> 
Operating Revenues   
  Electric                                          $1,503,926    $1,510,320    $1,514,608 
  Gas                                                  310,142       346,183       346,658 
  Diversified operations                                56,608        55,742        36,223 
                                                   ------------  ------------  ------------ 
Total operating revenues                             1,870,676     1,912,245     1,897,489 
                                                   ------------  ------------  ------------ 
Operating Expenses   
  Electric fuel                                        100,256       143,339       174,444 
  Purchased power                                      341,727       342,612       325,966 
  Gas purchased for resale                             113,355       146,579       165,876 
  Maintenance                                           91,740        70,776        81,788 
  Depreciation and decommissioning                     278,239       262,238       245,144 
  Property and other taxes                              45,566        44,746        44,902 
  General and administrative                           210,207       207,908       204,290 
  Other                                                209,358       208,533       196,564 
  Income taxes                                         134,578       153,298       154,571 
                                                   ------------  ------------  ------------ 
Total operating expenses                             1,525,026     1,580,029     1,593,545 
                                                   ------------  ------------  ------------ 
Operating Income                                       345,650       332,216       303,944 
                                                   ------------  ------------  ------------ 
Other Income and (Deductions) 
  Writedown of real estate                                --         (25,000)        --     
  Allow for equity funds used 
   during construction                                   6,435         6,274        17,909 
  Taxes on nonoperating income                             (27)       17,299           202 
  Other - net                                           (5,876)      (19,117)        5,160 
                                                   ------------  ------------  ------------ 
    Total other income and (deductions)                    532       (20,544)       23,271 
                                                   ------------  ------------  ------------ 
Income Before Interest Charges                         346,182       311,672       327,215 
                                                   ------------  ------------  ------------ 
Interest Charges                                                                           
  Long-term debt                                        95,523        92,770        92,596 
  Short-term debt and other                             20,215        14,619        11,335 
  Allowance for borrowed funds                                                         
   used during construction                             (2,865)       (2,658)       (4,245) 
                                                   ------------  ------------  ------------ 
    Net interest charges                               112,873       104,731        99,686 
                                                   ------------  ------------  ------------ 
Income From Continuing Operations                      233,309       206,941       227,529 
Discontinued Operations, Net Of Income Taxes               148       (63,464)       (8,814) 
                                                   ------------  ------------  ------------ 
Net Income (before preferred                                                             
  dividend requirements)                               233,457       143,477       218,715 
Preferred Dividend Requirements                          7,663         7,663         8,565 
                                                   ------------  ------------  ------------ 
Earnings Applicable to Common Shares                $  225,794    $  135,814    $  210,150 
                                                   ============  ============  ============ 
Average Common Shares Outstanding                      116,535       116,484       116,049 
                                                   ============  ============  ============ 
Earnings Per Common Share from  
Continuing operations                               $     1.94    $     1.71    $     1.89 
                                                   ============  ============  ============ 
Earnings Per Common Share                           $     1.94    $     1.17    $     1.81 
                                                   ============  ============  ============ 
Dividends Declared Per Common Share                 $     1.56    $     1.52    $     1.48 
                                                   ============  ============  ============ 
 
See notes to consolidated financial statements 
  
                                                  28                                     
</TABLE>
 

<PAGE> 

<TABLE> 
 
CONSOLIDATED BALANCE SHEETS                                                           
In thousands of dollars                                      
<CAPTION> 
Balance at December 31                                        1995            1994 
                                                         --------------  -------------- 
<S>                                                      <C>             <C> 
ASSETS 
Utility plant - at original cost                           $5,533,554      $5,329,179 
Accumulated depreciation and decommissioning               (2,433,397)     (2,180,087) 
                                                         --------------  -------------- 
   Utility plant-net                                        3,100,157       3,149,092 
                                                         --------------  -------------- 
Investments and other property                                532,289         465,918 
                                                         --------------  -------------- 
Current assets                                             
   Cash and temporary investments                              96,429          25,405 
   Accounts receivable                                        178,155         187,988 
   Notes receivable                                            34,498          31,806 
   Inventories                                                 67,959          75,607 
   Other                                                       41,012          34,022 
                                                         --------------  -------------- 
     Total current assets                                     418,053         354,828 
                                                         --------------  -------------- 
Deferred taxes recoverable in rates                           298,748         305,717 
                                                         --------------  -------------- 
Deferred charges and other assets                             321,193         322,881 
                                                         --------------  -------------- 
     Total                                                 $4,670,440      $4,598,436 
                                                         ==============  ============== 
CAPITALIZATION AND LIABILITIES 
Capitalization (see Statements of Consolidated  
Capital Stock and of Long-Term Debt) 
   Common equity                                           $1,520,070      $1,474,430 
   Preferred stock not subject to mandatory redemption         93,475          93,493 
   Preferred stock subject to mandatory redemption             25,000          25,000 
   Long-term debt                                           1,350,094       1,339,201 
                                                         --------------  -------------- 
     Total capitalization                                   2,988,639       2,932,124 
                                                         --------------  -------------- 
Current liabilities 
   Short-term borrowings                                         --            89,325 
   Long-term debt redeemable within one year                  115,000         115,000 
   Current portion of long-term debt                           36,316          35,031 
   Accounts payable                                           145,517         130,157 
   Dividends payable                                           47,383          46,200 
   Taxes accrued                                                 --             5,519 
   Interest accrued                                            22,537          23,372 
   Regulatory balancing accounts overcollected-net            170,761         111,731 
   Other                                                      125,438         113,815 
                                                         --------------  -------------- 
     Total current liabilities                                662,952         670,150 
                                                         --------------  -------------- 
Customer advances for construction                             34,698          36,250 
Accumulated deferred income taxes-net                         523,335         513,592 
Accumulated deferred investment tax credits                   104,226         109,161 
Deferred credits and other liabilities                        356,590         337,159 
Contingencies and commitments (Notes 10 and 11)                  --              --    
                                                         --------------  -------------- 
     Total                                                 $4,670,440      $4,598,436 
                                                         ==============  ============== 
 
                      See notes to consolidated financial statements 
 
                                           29 
</TABLE>
 

<PAGE> 

<TABLE> 
STATEMENTS OF CONSOLIDATED CASH FLOWS 
<CAPTION> 
 
In thousands of dollars 
For the years ended December 31                                 1995          1994          1993 
                                                            ------------  ------------  ------------ 
<S>                                                         <C>           <C>           <C> 
Cash Flows from Operating Activities                                                                 
  Income from continuing operations                         $  233,309    $  206,941    $  227,529   
  Adjustments to reconcile income from continuing                                                    
    operations to net cash provided by operating activities                                           
      Writedown of real property and other assests                --          37,000          --     
      Depreciation and decommissioning                         278,239       262,238       245,144   
      Amortization of deferred charges and other assets         12,068        12,944        12,309   
      Amortization of deferred credits and other                                                     
        liabilities                                            (32,975)      (30,370)      (18,616)  
      Allowance for equity funds used during construction       (6,435)       (6,274)      (17,909)  
      Deferred income taxes and investment tax credits         (30,748)      (55,069)       49,511   
      Other-net                                                 57,475        57,734         8,764   
  Changes in working capital components                                                              
      Accounts and notes receivable                              7,141        (9,110)       (5,916)  
      Regulatory balancing accounts                             59,030        78,552       (13,245)  
      Inventories                                                7,648           506           113   
      Other current assets                                      (5,609)       (1,518)          869   
      Interest and taxes accrued                                11,642        18,284       (19,141)  
      Accounts payable and other current liabilities            26,983        (9,271)       19,999   
  Cash flows provided(used) by discontinued operations           6,148         3,790        (1,979)  
                                                            -----------  -------------  ------------ 
        Net cash provided by operating activities              623,916       566,377       487,432   
                                                            -----------  -------------  ------------ 
Cash Flows from Financing Activities                                                                 
  Dividends paid                                              (188,288)     (183,492)     (178,708)  
  Short-term borrowings-net                                    (89,325)      (27,872)       48,397   
  Issuance of long-term debt                                   124,641          --         369,893   
  Repayment of long-term debt                                 (165,871)      (90,255)     (522,983)  
  Sale (redemption) of common stock                               (241)         (558)       38,850   
  Issuance of preferred stock                                     --            --          50,636   
  Redemption of preferred stock                                    (18)         --         (65,228)  
                                                            ------------  ------------  ------------ 
        Net cash used by financing activities                 (319,102)     (302,177)     (259,143) 
                                                            ------------  ------------  ------------ 
Cash Flows from Investing Activities                                                                 
  Utility construction expenditures                           (220,748)     (263,709)     (354,391)  
  Withdrawals from construction trust funds - net                 --          58,042       190,225   
  Contributions to decommissioning funds                       (22,038)      (22,038)      (22,038)  
  Leasing investments                                             --            --         (19,729)  
  Other-net                                                      3,874        (6,463)       (9,898)  
  Discontinued operations                                        5,122       (17,338)       (9,708)  
                                                            ------------  ------------  ------------ 
        Net cash used by investing activities                 (233,790)     (251,506)     (225,539)  
                                                            ------------  ------------  ------------ 
Net increase                                                    71,024        12,694         2,750   
Cash and temporary investments, beginning of year               25,405        12,711         9,961   
                                                            ------------  ------------  ------------ 
Cash and temporary investments, end of year                 $   96,429    $   25,405    $   12,711   
                                                            ============  ============  ============ 
Supplemental Schedule of Noncash Investing                                                           
  and Financing Activities                                                                           
    Leasing investments                                     $    --       $    --       $  150,880   
    Real estate investments                                     50,496        28,311        84,278   
                                                            ------------  ------------  ------------ 
        Total assets acquired                                   50,496        28,311       235,158   
    Cash paid                                                   (2,550)         (452)      (28,209)  
                                                            ------------  ------------  ------------ 
    Liabilities assumed                                     $   47,946    $   27,859    $  206,949   
                                                            ============  ============  ============ 
 
See notes to consolidated financial statements 
 
                                                           30 
</TABLE>
 
 

<PAGE> 

<TABLE> 
STATEMENTS OF CONSOLIDATED CHANGES IN 
 CAPITAL STOCK AND RETAINED EARNINGS 
 
In thousands of dollars 
For the years ended December 31, 1993, 1994, 1995 
 
<CAPTION> 
                                                Preferred  Stock 
                                          ----------------------------- 
                                            Not Subject    Subject to             Premium on 
                                            to Mandatory   Mandatory    Common     Capital     Retained 
                                             Redemption    Redemption   Stock       Stock      Earnings 
                                             ---------     ---------   ---------   ---------   --------- 
<S>                                          <C>           <C>         <C>         <C>         <C> 
                                                                                                         
Balance, December 31, 1992                   $ 62,493      $ 68,200    $287,585    $529,486    $624,368 
  Net income                                                                                    218,715 
  Common stock sold (1,457,756 shares)                                    3,644      33,612               
  Long-term incentive plan activity-net                                      59       1,535                
  Preferred stock sold (2,040,000 shares)      51,000                                  (364)               
  Preferred stock retired (633,700 shares)    (20,000)      (43,200)                    850      (2,878) 
  Dividends declared                                                                                     
    Preferred stock                                                                              (8,526) 
    Common stock                                                                               (171,846) 
- --------------------------                   ---------     ---------   ---------   ---------   --------- 
Balance, December 31, 1993                     93,493        25,000     291,288     565,119     659,833 
  Net income                                                                                    143,477 
  Long-term incentive plan activity-net                                      53        (611)              
  Dividends declared                                                                                     
    Preferred stock                                                                              (7,663) 
    Common stock                                                                               (177,066) 
- --------------------------                   ---------     ---------   ---------   ---------   --------- 
Balance, December 31, 1994                     93,493        25,000     291,341     564,508     618,581 
  Net income                                                                                    233,457 
  Long-term incentive plan activity-net                                     117       1,530                 
  Preferred stock retired (880 shares)            (18)                                    8            
  Dividends declared                                                                                            
    Preferred stock                                                                              (7,663)    
    Common stock                                                                               (181,809) 
- --------------------------                   ---------     ---------   ---------   ---------   --------- 
Balance, December 31, 1995                   $ 93,475      $ 25,000    $291,458    $566,046    $662,566 
==========================                   =========     =========   =========   =========   =========  
 
                             See notes to consolidated financial statements. 
                                                  31 
</TABLE>
 

<TABLE> 
STATEMENTS OF CONSOLIDATED CAPITAL STOCK 
In thousands of dollars except call price                                                         
 
 
Balance at December 31                                                       1995         1994 
                                                                          -----------  ----------  
<S>                                               <C>          <C>        <C>           <C> 
 
COMMON EQUITY                                                                          
Common stock, without par value, authorized 
  255,000,000 shares, outstanding: 1995, 
  116,583,358 shares; 1994, 116,536,535 shares                              $291,458     $291,341 
Premium on capital stock                                                     566,046      564,508 
Retained earnings                                                            662,566      618,581 
                                                                          -----------  ---------- 
      Total common equity                                                 $1,520,070   $1,474,430 
                                                                          ===========  ========== 
 
PREFERRED STOCK (A)                                  Trading       Call 
Not subject to mandatory redemption                  Symbol(B)     Price 
  $20 par value, authorized 1,375,000 shares         ---------  -------- 
   5% Series, 375,000 shares outstanding             SDOPrA      $24.00       $7,500       $7,500 
   4.50% Series, 300,000 shares outstanding          SDOPrB      $21.20        6,000        6,000 
   4.40% Series, 325,000 shares outstanding          SDOPrC      $21.00        6,500        6,500 
   4.60% Series, 1995, 373,770 shares; 
    1994, 374,650 shares outstanding                 --          $20.25        7,475        7,493 
Without par value (C)                                                                          
   $7.20 Series, 150,000 shares outstanding (D)      SDOPrG     $101.00       15,000       15,000 
   $1.70 Series, 1,400,000 shares outstanding        --         $25.85(E)     35,000       35,000 
   $1.82 Series, 640,000 shares outstanding          SDOPrH     $26.00(E)     16,000       16,000 
                                                                          -----------  ---------- 
   Total not subject to mandatory redemption                                 $93,475      $93,493 
                                                                          ===========  ========== 
Subject to mandatory redemption                                                                   
  Without par value (C)                                                                           
   $1.7625 Series, 1,000,000 shares outstanding(F)   --         $25.00(E)    $25,000      $25,000 
                                                                          -----------  ---------- 
     Total subject to mandatory redemption                                   $25,000      $25,000 
                                                                          =========== =========== 

 
 
(A) All series of preferred stock have cumulative preferences as to dividends. 
    The $20 par value preferred stock has two votes per share, whereas the no 
    par value preferred stock is nonvoting. The $20 par value preferred stock 
    has a liquidation value at par. The no par value preferred stock has a 
    liquidation value of $25 per share, except for the $7.20 series, which had 
    a liquidation value of $100 per share (see Note D). 
 
(B) All listed shares are traded on the American Stock Exchange. 
 
(C) Authorized 10,000,000 shares total (both subject to and not subject to 
    mandatory redemption). 
 
(D) The $7.20 series was fully redeemed on January 15, 1996. 
 
(E) The $1.70 and $1.7625 series are not callable until 2003; the $1.82 series 
    is not callable until 1998. 
 
(F) The $1.7625 series has a sinking fund requirement to redeem 50,000 shares 
    per year from 2003 to 2007. The remaining 750,000 shares must be redeemed 
    in 2008. 
                      See notes to consolidated financial statements. 
                                               32 
</TABLE>
 

<PAGE> 

<TABLE> 
 
STATEMENTS OF CONSOLIDATED LONG-TERM DEBT 
In thousands of dollars 
<Captions> 
                                                   First Call                
Balance at December 31                                Date            1995        1994 
                                                -----------------  ----------  ---------- 
<S>                                             <C>                <C>         <C> 
                                                                                          
First mortgage bonds                                                                      
  5.5% Series I, due March 1, 1997                 4/15/67         $   25,000  $   25,000 
  4.00% Series CC, due May 1, 2008(A)               9/1/96             53,000      53,000 
  4.00% Series DD, due December 1, 2008(A)          9/1/96             27,000      27,000 
  9.25% Series EE, due September 1, 2020(B)         9/1/95               --        74,350 
  3.95% Series FF, due December 1, 2007(A)          8/1/96             35,000      35,000 
  7.625% Series GG, due July 1, 2021(B)             7/1/96             44,250      44,250 
  7.375% Series HH, due December 1, 2021(B)        12/1/96             81,350      81,350 
  8.75% Series II, due March 1, 2023(B)             9/1/97             25,000      25,000 
  9.625% Series JJ, due April 15, 2020             4/15/00            100,000     100,000 
  6.8% Series KK, due June 1, 2015(A)         Non-callable             14,400      14,400 
  8.5% Series LL, due April 1, 2022                 4/1/02             60,000      60,000 
  7.625% Series MM, due June 15, 2002         Non-callable             80,000      80,000 
  6.1% and 6.4% Series NN, due September 1, 2018 
    and 2019(B)                                     9/1/02            118,615     118,615 
  Various % Series OO, due December 1, 2027(C)        (C)             250,000     250,000 
  5.9% Series PP, due June 1, 2018(B)               6/1/03             70,795      70,795 
  Variable % Series QQ, due June 1, 2018(B)           (D)              14,915      14,915 
  5.85% Series RR, due June 1, 2021(A)              6/1/03             60,000      60,000 
  5.9% Series SS, due September 1, 2018(B)          9/1/03             92,945      92,945 
  Variable % Series TT, due September 1, 2020(B)      (D)              57,650        --   
  Variable % Series UU, due September 1, 2020(B)      (D)              16,700        --   
                                                --------------     ----------  ---------- 
       Total                                                        1,226,620   1,226,620 
                                                                   ----------  ---------- 
Capitalized leases                                                    105,365     103,575 
Debt incurred to acquire limited partnerships, 
  various rates, payable annually through 2005                        142,198     109,473 
Bank loans, various rates                                                --        17,298 
Other long-term debt                                                   33,558      40,177 
Unamortized discount on long-term debt                                 (6,331)     (7,911) 
Long-term debt redeemable within one year                            (115,000)   (115,000) 
Current portion of long-term debt                                     (36,316)    (35,031) 
                                                                   ----------  ---------- 
Total                                                              $1,350,094  $1,339,201 
                                                                   ==========  ========== 
 
(A)  Issued to secure the company's obligation under a series of loan agreements with the 
     California Pollution Control Financing Authority under which the Authority loaned  
     proceeds from the sale of $115 million of variable-rate/demand (series CC, DD and FF) and 
     $74 million in fixed-rate (series KK and RR) tax-exempt pollution control revenue bonds to the 
     company to finance certain qualifying facilities associated with the company's 20 percent  
     interest in San Onofre Units 2 and 3. 
 
(B)  Issued to secure the company's obligation under a series of loan agreements with the City 
     of San Diego under which the city loaned the proceeds from the sale of $522 million in  
     industrial development revenue bonds to the company to finance certain qualifying facilities. 
     All series are tax-exempt except QQ and UU. 
 
(C)  Issued to secure the company's obligation under a loan agreement with the City of Chula  
     Vista under which the city loaned the proceeds from the sale of $250 million in tax-exempt  
     industrial development revenue bonds to the company to finance certain qualified facilities. 
     The first call date for $75 million is December 1, 2002.  The remaining $175 million of the bonds  
     is currently variable rate and is callable at various dates within 1 year. Of this, $45 million is  
     subject to a floating-to-fixed rate swap, which expires December 15, 2002 (See Note 9). 
 
(D)  Callable at various dates within 1 year. 
  
                           See notes to consolidated financial statements. 
                                                 33 
</TABLE>
 
 

<PAGE> 

<TABLE> 
STATEMENTS OF CONSOLIDATED FINANCIAL 
INFORMATION BY SEGMENTS OF BUSINESS 
 
In thousands of dollars 
At December 31 or for the                   
years then ended                               1995         1994         1993 
- ----------------------------------          -----------  -----------  -----------   
<S>                                        <C>           <C>          <C>
Operating Revenues (A), (B)                 $1,870,676   $1,912,245   $1,897,489 
                                            ===========  ===========  =========== 
Operating Income 
  Electric operations                       $  263,346   $  255,768   $  242,143 
  Gas operations                                51,654       50,375       46,071 
  Diversified operations (B)                    30,650       26,073       15,730 
                                            -----------  -----------  ----------- 
       Total                                $  345,650   $  332,216   $  303,944 
                                            ===========  ===========  =========== 
Depreciation and Decommissioning 
  Electric operations                       $  227,616   $  220,811   $  210,890 
  Gas operations                                33,225       31,009       28,215 
  Diversified operations (B)                    17,398       10,418        6,039 
                                            -----------  -----------  ----------- 
       Total                                $  278,239   $  262,238   $  245,144 
                                            ===========  ===========  =========== 
Utility Plant Additions (C) 
  Electric operations                       $  171,151   $  203,887   $  291,456 
  Gas operations                                49,597       59,822       62,935 
                                            -----------  -----------  ----------- 
       Total                                $  220,748   $  263,709   $  354,391 
                                            ===========  ===========  =========== 
Identifiable Assets 
  Utility plant-net 
    Electric operations                     $2,659,017   $2,725,624   $2,724,139 
    Gas operations                             441,140      423,468      393,494 
                                            -----------  -----------  ----------- 
       Total                                 3,100,157    3,149,092    3,117,633 
                                            -----------  -----------  ----------- 
  Inventories 
    Electric operations                         53,828       56,209       57,410 
    Gas operations                              14,131       19,398       18,703 
                                            -----------  -----------  ----------- 
       Total                                    67,959       75,607       76,113 
                                            -----------  -----------  ----------- 
  Other identifiable assets 
    Electric operations                        802,172      732,941      744,335 
    Gas operations                             148,714      149,199      139,631 
    Diversified operations (B)                 434,940      373,076      467,691 
                                            -----------  -----------  ----------- 
       Total                                 1,385,826    1,255,216    1,351,657 
                                            -----------  -----------  ----------- 
Other Assets                                   116,498      118,521       97,481 
                                            -----------  -----------  ----------- 
Total Assets                                $4,670,440   $4,598,436   $4,642,884 
                                            ===========  ===========  =========== 
 
(A) The detail to operating revenues is provided in the Statements of 
    Consolidated Income.  The gas operating revenues shown therein include  
    $9 million in 1995, $18 million in 1994 and $16 million in 1993, 
    representing the gross margin on sales to the electric segment.  These  
    margins arose from interdepartmental transfers of $85 million in 1995, 
    $119 million in 1994 and $141 million in 1993, based on transfer pricing  
    approved by the California Public Utilities Commission in tariff rates. 
 
(B) As discussed in Note 3, during 1995 SDG&E sold its investment in Wahlco 
    Environmental Systems, Inc.  The sale of Wahlco is being accounted for  
    as a disposal of a segment of business and SDG&E's prior periods' financial 
    statements have been restated to reflect Wahlco as a discontinued operation. 
 
(C) Excluding allowance for equity funds used during construction. 
 
Utility income taxes and corporate expenses are allocated between electric and gas  
operations in accordance with regulatory accounting requirements. 
 
              See notes to consolidated financial statements. 
                                     34 
</TABLE>
 
 
 
 
 

<PAGE> 
 
 
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES 
 
NATURE OF OPERATIONS On December 6, 1995, San Diego Gas and Electric 
Company announced the formation of Enova Corporation (Enova) as the 
parent company for SDG&E, an operating public utility, and its  
unregulated subsidiaries. On January 1, 1996, Enova became the parent 
of SDG&E. SDG&E's outstanding common stock was converted on a  
share-for-share basis into Enova common stock. SDG&E's debt securities, 
preferred and preference stock were unaffected and remain with SDG&E.  
On January 31, 1996, SDG&E's ownership interest in its non-utility 
subsidiaries was transferred to Enova at book value, completing the  
parent company structure. 
      
The consolidated financial statements include SDG&E and its  
subsidiaries and, therefore, also reflect what  is  now Enova 
and   its  subsidiaries.  The  subsidiaries  include   Pacific 
Diversified  Capital,  Enova  Financial,  Enova  Energy  and   Califia 
Company. The principal market for SDG&E's electric and gas business is 
in  San  Diego  County  and  an adjacent  portion  of  Orange  County, 
California.  SDG&E  is subject to regulation by the California  Public 
Utilities  Commission  and the Federal Energy  Regulatory  Commission. 
Califia  and  Enova  Financial are engaged in  non-utility  investment 
activities  throughout the United States. Enova Energy is  an  energy- 
management  consulting firm offering services to utilities  and  large 
consumers. Pacific Diversified Capital is the parent company for  non- 
utility subsidiaries, Phase One Development, which is engaged in  real 
estate  development, and Enova Technologies, which is in the  business 
of  developing  new technologies generally related  to  utilities  and 
energy.   In   1995,   non-utility  subsidiaries,   excluding   Wahlco 
Environmental  Systems, contributed 9 percent to operating  income  (8 
percent  in  1994). In June 1995, SDG&E sold its interest  in  Wahlco. 
Prior  periods  have been restated to account for the net  results  of 
Wahlco  as  discontinued  operations  in  accordance  with  Accounting 
Principles  Board Opinion No. 30 "Reporting the Effects of a  Disposal 
of a Segment of Business." Additional information concerning Wahlco is 
described in Note 3. 
      
PRINCIPLES OF CONSOLIDATION The accompanying  consolidated  financial 
statements  include the accounts of San Diego Gas &  Electric  Company 
and   its  wholly-owned  subsidiaries.  All  significant  intercompany 
accounts and transactions have been eliminated in consolidation. 
 
UTILITY PLANT AND DEPRECIATION Utility plant represents the buildings, 
equipment  and  other  facilities used to  provide  electric  and  gas 
service.  The cost of utility plant includes labor, material, contract 
services  and  other related items, and an allowance  for  funds  used 
during  construction. The cost of retired depreciable  utility  plant, 
plus  removal  costs  minus salvage value, is charged  to  accumulated 
depreciation.  Information regarding industry  restructuring  and  its 
effect  on  utility  plant is included in Note 11.  Utility  plant  in 
service  by  major functional categories at December  31,  1995,  are: 
electric generation $1.8 billion ($1.7 billion at December 31,  1994), 
electric  distribution  $2.1 billion ($2.0  billion  at  December  31, 
1994),  electric transmission $0.7 billion ($0.7 billion  at  December 
31,  1994), other electric $0.2 billion ($0.2 billion at December  31, 
1994)  and  gas  $0.7  billion ($0.7 billion at  December  31,  1994). 
Accumulated  depreciation  and decommissioning  of  electric  and  gas 
utility  plant in service at December 31, 1995, are $2.1  billion  and 
$0.3  billion, respectively ($1.9 billion and $0.3 billion at December 
31, 1994). 
 
     Depreciation expense reflects the straight-line, remaining-useful- 
life  method.  The  provisions for depreciation  as  a  percentage  of 
average  depreciable  utility plant (by major  functional  categories) 
are:  electric generation 4.04 in 1995 (4.04 in 1994, 4.03  in  1993), 
electric  distribution  4.36 in 1995 (4.35 in  1994,  4.35  in  1993), 
electric transmission 3.21 in 1995 (3.24 in 1994, 3.26 in 1993), other 
electric  5.89 in 1995 (5.88 in 1994, 5.80 in 1993) and  gas  4.06  in 
1995 (4.11 in 1994, 4.16 in 1993). 
      
INVENTORIES Included in inventories at December 31, 1995,  are SDG&E's 
$42  million of materials and supplies ($44 million in 1994), and  $26 
million  of fuel oil and natural gas ($32 million in 1994).  Materials 
and  supplies are valued at average cost; fuel oil and natural gas are 
valued by the last-in, first-out (LIFO) method. 
      
OTHER CURRENT ASSETS Included in other current assets at December  31, 
1995,  is SDG&E's $18 million of investment in SONGS 1, which will  be 
recovered in 1996. At December 31, 1994, $28 million of SDG&E's  SONGS 
1  investment is included in other current assets and the $17  million 
noncurrent portion of the investment is included in "Deferred  Charges 
and Other Assets" on the Consolidated Balance Sheets. 
      
OTHER  CURRENT LIABILITIES Included in other  current  liabilities  at 
December  31,  1995,  is  Califia's $34  million  current  portion  of 
deferred  lease  revenue  ($32  million  in  1994).  The  $54  million 
noncurrent  portion  ($88 million in 1994) is  included  in  "Deferred 
Credits and Other Charges." Deferred lease revenues are amortized over 
the lease terms, which expire in 1998. 
      
ALLOWANCE  FOR  FUNDS  USED DURING CONSTRUCTION  (AFUDC) The allowance 
represents  the  cost  of funds used to finance  the  construction  of 
utility  plant and is added to the cost of utility plant.  AFUDC  also 
increases income, partly as an offset to interest charges shown in the 
Statements of Consolidated Income, although it is not a current source 
of  cash.  The average rate used to compute AFUDC was 9.74 percent  in 
1995, 8.80 percent in 1994 and 9.57 percent in 1993. 
      
EFFECTS OF   REGULATION SDG&E's  accounting  policies  conform   with 
generally accepted accounting principles for regulated enterprises and 
reflect the policies of the California Public Utilities Commission and 
the Federal Energy Regulatory Commission. SDG&E prepares its financial 
statements in accordance with the provisions of Statement of Financial 
Accounting  Standards No. 71 "Accounting for the  Effects  of 
 
                                      35 

<PAGE> 
 
 
Certain Types  of  Regulation," under which a regulated utility may   
record  a regulatory  asset  if  it  is probable that, through  the   
rate-making process,   the  utility  will  recover  that  asset  from 
customers. Regulatory  liabilities represent future reductions  in   
revenues  for amounts  due  customers.  Additional  information   
concerning  SDG&E's regulatory assets and liabilities is described  
below in "Revenues  and Regulatory  Balancing Accounts" and in Note 11. 
To the extent  that  a portion  of SDG&E's operations are no longer subject to
 SFAS  71,  and recovery  is  no longer probable as a result  
of changes in  regulation and/or SDG&E's competitive position, the  
related regulatory assets and liabilities  would  be  written  off.  In 
addition,  a  new  standard effective for 1996 financial statements,  
SFAS No. 121, "Accounting for the  Impairment of Long-Lived Assets and 
for Long-Lived Assets  to  Be Disposed Of," affects utility plant and  
regulatory assets such that  a loss  must be recognized whenever a  
regulator excludes all or part  of an  asset's cost from rate base. As  
discussed in Note 11, the CPUC has issued  a  decision for  
restructuring the California electric  utility industry  to  stimulate  
competition. The CPUC has indicated  that  the California  utilities   
will  be allowed  recovery  of  their  existing utility plant and  
regulatory assets over a transition period that ends in  2005. SDG&E  
continues to evaluate the applicability of SFAS 71  as the electric  
industry restructuring progresses. 
      
REVENUES  AND  REGULATORY  BALANCING ACCOUNTS Revenues  from   utility 
customers  consist  of  deliveries to customers  and  the  changes  in 
regulatory  balancing accounts. Earnings fluctuations from changes  in 
the  costs  of  fuel  oil,  purchased  energy  and  natural  gas,  and 
consumption levels for electricity and the majority of natural gas are 
eliminated by balancing accounts authorized by the CPUC. The  balances 
of  these  accounts represent amounts that will be recovered from,  or 
repaid to, customers by adjustments to future prices, generally over a 
one-year  cycle.  It is uncertain whether the CPUC  will  continue  to 
allow these or some other form of balancing accounts once its electric 
industry restructuring decision takes effect in 1998. 
      
DEFERRED  CHARGES  AND OTHER ASSETS Deferred charges  include  SDG&E's 
unrecovered  premium on early retirement of debt and other regulatory- 
related  expenditures that SDG&E expects to recover in  future  rates. 
These   items   are  amortized  as  recovered  in  rates.   Additional 
information is included in Note 11. 
      
USE  OF  ESTIMATES  IN  THE  PREPARATION OF  FINANCIAL  STATEMENTS The 
preparation  of  financial  statements in  conformity  with  generally 
accepted  accounting principles requires management to make  estimates 
and  assumptions  that  affect  the reported  amounts  of  assets  and 
liabilities and disclosure of contingent assets and liabilities at the 
date  of the financial statements and the reported amounts of revenues 
and  expenses during the reporting period. Actual results could differ 
from those estimates. 
      
STATEMENTS OF CONSOLIDATED CASH FLOWS Temporary investments are  highly 
liquid investments with original maturities of 3 months or less. 
      
BASIS OF PRESENTATION Certain-prior year amounts have been reclassified 
to conform to the current year's format. 
      
NOTE 2: WRITEDOWNS 
 
In June 1994, SDG&E recorded writedowns related to the utility and its 
subsidiaries.  SDG&E  recorded  a $25  million  writedown  of  various 
commercial  properties, including $19 million of subsidiary properties 
in  Colorado Springs and in San Diego, to reflect continuing  declines 
in  commercial real estate values. SDG&E also recorded a  $12  million 
writedown  of various non-earning utility assets, including the  South 
Bay  Repower  project. Other writedowns, associated with  discontinued 
operations, are described in Note 3. 
      
NOTE 3: DISCONTINUED OPERATIONS - 
WAHLCO ENVIRONMENTAL SYSTEMS, INC. 
 
On  June  6,  1995, SDG&E sold its investment in Wahlco  Environmental 
Systems,  Inc., for $5 million. The sale of Wahlco has been  accounted 
for  as a disposal of a segment of business and SDG&E's prior periods' 
financial  statements  have  been restated  to  reflect  Wahlco  as  a 
discontinued  operation.  Discontinued  operations   consist  of   the 
following: 
      
Year Ended December 31           1995       1994       1993 
- ----------------------------------------------------------- 
in millions of dollars 
Revenues                         $24        $70        $82 
Loss from operations before 
  income taxes                    -         (70)       (14) 
Loss on disposal before 
  income taxes                   (12)        -          - 
Income tax benefits               12          7          5 
____________________________________________________________ 
 
The  loss on disposal of Wahlco was recorded in 1995 and reflects  the 
sale  of Wahlco and Wahlco's net operating losses after 1994. The loss 
from  discontinued operations for 1994 was primarily due  to  the  $59 
million writedown of Wahlco's goodwill and other intangible assets  as 
a  result of the depressed air pollution-control market and increasing 
competition. The 1995 income tax benefit includes the effects  of  the 
1994 writedown to the extent recognizable thus far. 
 
     Wahlco's net assets (included in "Investments and Other Property" 
on  the  Consolidated  Balance  Sheets)  at  December  31,  1994,  are 
summarized as follows: 
      
Current assets                                        $ 40.2 
Non-current assets                                      18.9 
Current liabilities                                    (27.1) 
Long-term debt and other liabilities                   (24.2) 
- ------------------------------------------------------------- 
    Net assets                                        $  7.8 
_____________________________________________________________ 
 
NOTE 4: LONG-TERM DEBT 
 
Amounts and due dates of long-term debt are shown on the Statements of 
Consolidated  Long-Term  Debt. Excluding  capital  leases,  which  are 
described  in Note 10, combined aggregate maturities and sinking  fund 
requirements of long-term debt are $28 million for 1996,  $55  million 
for  1997, $31 million for 1998, $27 million for 1999 and $17  million 
for  2000.  SDG&E  has CPUC authorization to issue an additional  $138 
million in long-term debt. 
 
                                    36 

<PAGE> 
 
FIRST MORTGAGE BONDS First mortgage bonds are secured  by  a  lien  on 
substantially all of SDG&E's utility plant. Additional first  mortgage 
bonds  may be issued upon compliance with the provisions of  the  bond 
indenture, which provides for, among other things, the issuance of  an 
additional $1.2 billion of first mortgage bonds at December 31,  1995. 
Certain of the first mortgage bonds may be called at SDG&E's option. 
 
     First mortgage bonds totaling $379 million have variable interest 
rate  provisions.  On $115 million, bondholders may  elect  to  redeem 
their  bonds at the annual interest-adjustment dates. For purposes  of 
determining the aggregate maturities listed above, it is assumed  that 
these issues will not be redeemed before their scheduled maturity. 
 
     During 1995, SDG&E issued $74 million of first mortgage bonds and 
retired  $74  million  of  first mortgage  bonds  prior  to  scheduled 
maturity. 
      
OTHER DEBT At December 31, 1995, SDG&E had $280 million of bank  lines 
providing a committed source of long-term borrowings, of which no debt 
was  outstanding. Bank lines, unless renewed by SDG&E, expire in 2000. 
Commitment fees are paid on the unused portion of the lines and  there 
are no requirements for compensating balances. 
 
     Loans of $161 million and $151 million at December 31, 1995,  and 
1994,  respectively,  are  secured by subsidiary  equipment  and  real 
estate. 
 
     Interest  payments,  including  those  applicable  to  short-term 
borrowings, amounted to $114 million in 1995, $102 million in 1994 and 
$104 million in 1993. 
 
     SDG&E  periodically  enters  into  interest-rate  swap-and-cap 
agreements  to moderate its exposure to interest-rate changes  and  to 
lower its overall cost of borrowings. At December 31, 1995, SDG&E  had 
such  agreements,  maturing  in 1996 and 2002,  with  underlying  debt 
aggregating $120 million. See additional information in Note 9. 
      
NOTE 5: SHORT-TERM BORROWINGS 
 
At  December  31, 1995, and 1994, short-term borrowings  and  weighted 
average interest rates thereon were: 
 
in millions of dollars         1995                  1994 
- ---------------------------------------------------------------------- 
                        Balance  Interest Rate  Balance  Interest Rate 
- ---------------------------------------------------------------------- 
Bank loans                $--         --          $58         6.4% 
Subsidiaries' bank 
  credit lines             --         --           31         7.1% 
- ---------------------------------------------------------------------- 
     Total                $--                     $89 
______________________________________________________________________ 
 
In  addition  to the $280 million of long-term bank lines (see  "Other 
Debt" in Note 4), at December 31, 1995, SDG&E had $30 million of  bank 
lines available to support commercial paper. Commitment fees are  paid 
on  the unused portion of the lines and there are no requirements  for 
compensating balances. 
      
NOTE 6: FACILITIES UNDER JOINT OWNERSHIP 
 
The  San Onofre nuclear generating station and the Southwest Powerlink 
transmission  line  are  jointly owned with other  utilities.  SDG&E's 
interests at December 31, 1995, were: 
      
in millions of dollars 
- ------------------------------------------------------ 
                                 San         Southwest 
Project                        Onofre        Powerlink 
- ------------------------------------------------------ 
Percentage ownership               20             89 
Utility plant in service       $1,127       $    216 
Accumulated depreciation       $  397       $     81 
Construction work in progress  $    9       $      - 
- ------------------------------------------------------ 
 
Each  participant in the projects must provide its own financing.  The 
amounts  specified  above for San Onofre include  nuclear  production, 
transmission and other facilities. 
 
     SDG&E's share of operating expenses is included in its Statements 
of Consolidated Income. 
 
     SDG&E's share of future dismantling and decontamination costs for 
the  San  Onofre  units  is estimated to be $343  million  in  current 
dollars  and  is  based  on studies performed by outside  consultants, 
updated  triennially.  The most recent study was  performed  in  1993. 
These costs are included in setting rates and are expected to be fully 
recovered by 2013, the estimated last year of service. 
 
     The  amount  accrued each year is based on the amount allowed  by 
regulators and is currently being collected in rates. This amount  and 
the  expected earnings of the trust fund are considered sufficient  to 
cover  SDG&E's share of future decommissioning costs. The depreciation 
and   decommissioning   expense  reflected  on   the   Statements   of 
Consolidated  Income  includes $22 million of decommissioning  expense 
for each of the years 1995, 1994 and 1993. 
 
     Decontamination objectives, work scope and procedures  must  meet 
the   requirements   of   the  Nuclear  Regulatory   Commission,   the 
Environmental Protection Agency, the California Public Utilities  Code 
and the requirements of other regulatory bodies. 
 
     The amounts collected in rates are invested in externally managed 
trust  funds.  In  accordance with SFAS 115,  Accounting  for  Certain 
Investments in Debt and Equity Securities, the securities held by  the 
trust  are  considered held for sale and are adjusted to market  value 
($270  million at December 31, 1995, which is included in "Investments 
and  Other  Property"  on the Consolidated Balance  Sheets  and  which 
includes a $25 million unrealized gain). The corresponding accumulated 
accrual is included in accumulated depreciation and decommissioning on 
the Consolidated Balance Sheets. 
 
     The  Financial Accounting Standards Board is currently  reviewing 
accounting  for  liabilities related to closure and removal  of  long- 
lived assets, such as nuclear power plants, including the recognition, 
measurement and classification of such costs. The Board could require, 
among  other  things,  that SDG&E's future balance  sheets  include  a 
liability  for  the  estimated decommissioning costs,  and  a  related 
regulatory  asset  reflecting  anticipated  rate  recovery   of   this 
liability to the extent not already collected from customers. This  is 
not expected to have an adverse effect on results of operations. 
 
                                       37 

<PAGE> 
 
 
     Additional information regarding San Onofre is included in  Notes 
10 and 11. 
      
NOTE 7: EMPLOYEE BENEFIT PLANS 
 
SDG&E  has  a defined-benefit pension plan, which covers substantially 
all   utility  employees.  Benefits  are  related  to  the  employees' 
compensation.  Plan  assets consist primarily  of  common  stocks  and 
bonds.  SDG&E  funds  the  plan based on  the  projected  unit  credit 
actuarial cost method. Net pension cost consisted of the following for 
the year ended December 31: 
      
in thousands of dollars              1995       1994       1993 
- ----------------------------------------------------------------- 
Cost related to current service    $ 14,598   $ 18,733   $ 18,233 
Interest on projected 
  benefit obligation                 30,760     33,254     29,745 
Return on plan assets              (132,674)    (1,319)   (39,351) 
Net amortization and deferral        93,708    (34,253)    5,342 
- ----------------------------------------------------------------- 
Cost pursuant to accounting 
  standards                           6,392     16,415    13,969 
Regulatory adjustment                   608    (16,415)  (13,969) 
- ----------------------------------------------------------------- 
    Net cost                         $7,000   $    -    $    - 
_________________________________________________________________ 
      
The plan's status was as follows at December 31: 
      
in thousands of dollars                    1995        1994 
- ------------------------------------------------------------- 
Accumulated benefit obligation 
Vested                                   $357,089    $308,672 
  Nonvested                                 8,880      10,480 
- ------------------------------------------------------------- 
    Total                                $365,969    $319,152 
- ------------------------------------------------------------- 
Plan assets at fair value                $542,336    $424,455 
Projected benefit obligation              481,450     417,625 
- ------------------------------------------------------------- 
Plan assets less projected benefit 
  obligation                               60,886       6,830 
Unrecognized effect of accounting 
  change                                   (1,139)     (1,328) 
Unrecognized prior service cost            11,869      12,956 
Unrecognized actuarial gains             (130,828)    (71,278) 
- -------------------------------------------------------------- 
    Net liability                        $(59,212)   $(52,820) 
______________________________________________________________ 
 
The  projected  benefit  obligation assumes a 7.25  percent  actuarial 
discount rate in 1995 (8.25 percent in 1994) and a 5.0 percent average 
annual compensation increase. The expected long-term rate of return on 
plan  assets  is  8.5 percent. The increase in the  total  accumulated 
benefit  obligation and projected benefit obligation is due  primarily 
to the decrease in the actuarial discount rate. 
 
     Eligible  employees may make a contribution of 1  percent  to  15 
percent  of  their compensation to SDG&E's savings plan for investment 
in  mutual  funds or in SDG&E common stock. SDG&E contributes  amounts 
equal  to up to 3 percent of participants' compensation for investment 
in SDG&E common stock. SDG&E's expense for the pension and the savings 
plans  and a supplemental retirement plan for a limited number of  key 
employees  was approximately $13 million in 1995, $6 million  in  1994 
and $6 million in 1993. 
 
     SDG&E  has  a  long-term incentive stock compensation  plan  that 
provides  for  aggregate awards of up to 2,700,000  shares  of  common 
stock.  The  plan terminates in  April 2005. In each of  the  last  10 
years,  SDG&E issued approximately 45,000 shares to 65,000  shares  of 
stock  to  officers and key employees for $2.50 per share, subject  to 
buy back over 4 years if certain corporate goals are not met. 
 
     SDG&E  provides  certain health and life  insurance  benefits  to 
retired  utility  employees.  Prior  to  1993,  SDG&E  expensed  these 
benefits when paid and such amounts were normally recovered in  rates. 
Effective   January  1,  1993,  SDG&E  adopted  SFAS  106,  Employers' 
Accounting  for  Postretirement Benefits Other  Than  Pensions,  which 
requires that these benefits be accrued during the employee's years of 
service,  up  to   the  year of benefit eligibility.  The  unamortized 
transition obligation of approximately $35 million is being  amortized 
through  2012.  SDG&E is recovering the cost of these  benefits  based 
upon  actuarial  calculations  and funding  limitations.  The  amounts 
expensed  for these benefits were $5 million in 1995, in 1994  and  in 
1993. 
      
NOTE 8: INCOME TAXES 
 
SFAS 109, Accounting for Income Taxes, requires the use of the balance 
sheet  method  of accounting for income taxes. Under  this  method,  a 
deferred tax asset or liability represents the tax effect of temporary 
differences  between the financial statement and tax bases  of  assets 
and liabilities and is measured using the latest enacted tax rates. 
 
     As  a  result  of  adopting SFAS 109, SDG&E  recorded  additional 
deferred  income taxes related to the allowance for funds used  during 
construction and other temporary differences for which deferred income 
taxes  had  not  been provided. Existing deferred  income  taxes  were 
reduced  due to intervening income tax rate reductions, and a deferred 
income  tax  asset related to unamortized investment tax  credits  was 
recorded. 
 
     The  net effect of these changes is almost entirely offset  by  a 
regulatory asset of $299 million at December 31, 1995 ($306 million at 
December  31, 1994). This regulatory asset is expected to be recovered 
in  future  rates and will be adjusted as it is recovered through  the 
ratemaking  process and as tax rates and laws change.  See  additional 
discussion regarding regulatory assets in Note 11. 
 
     Income tax payments totaled $148 million in 1995, $167 million in 
1994 and $116 million in 1993. 
      
Components of Accumulated Deferred Income Taxes 
      
in thousands of dollars                        1995         1994 
- ------------------------------------------------------------------ 
Deferred tax liabilities 
  Differences in financial and 
    tax bases of utility plant               $619,062     $626,957 
  Loss on reacquired debt                      26,829       27,576 
  Other                                        66,411       60,056 
- ------------------------------------------------------------------ 
    Total deferred tax liabilities            712,302      714,589 
- ------------------------------------------------------------------ 
Deferred tax assets 
  Unamortized investment tax credits           71,451       74,563 
  Equipment leasing activities                 36,493       49,547 
  Regulatory balancing accounts                34,061       10,596 
  Other                                       143,892      133,748 
- ------------------------------------------------------------------ 
    Total deferred tax assets                 285,897      268,454 
- ------------------------------------------------------------------ 
Net deferred income tax liability             426,405      446,135 
Current portion (net asset)                    96,930       67,457 
- ------------------------------------------------------------------ 
Non-current portion (net liability)          $523,335     $513,592 
__________________________________________________________________ 
 
                                     38 

<PAGE> 
 
 
Components of Income Tax Expense 
      
in thousands of dollars          1995       1994        1993 
- --------------------------------------------------------------- 
Current 
  Federal                      $134,212    $149,361   $ 84,555 
  State                          42,630      41,288     24,208 
- -------------------------------------------------------------- 
    Total current taxes         176,842     190,649    108,763 
- -------------------------------------------------------------- 
Deferred 
  Federal                       (23,914)    (37,605)    43,365 
  State                         (13,464)    (12,897)     7,001 
- -------------------------------------------------------------- 
    Total deferred taxes        (37,378)    (50,502)    50,366 
- -------------------------------------------------------------- 
Deferred investment 
  tax credits - net              (4,859)     (4,148)    (4,760) 
- -------------------------------------------------------------- 
    Total income tax 
      expense                  $134,605    $135,999   $154,369 
______________________________________________________________ 
 
Federal and state income taxes are allocated between operating  income 
and other income. 
 
RECONCILIATION OF STATUTORY FEDERAL INCOME TAX RATE TO EFFECTIVE 
INCOME TAX RATE 
      
                                     1995     1994     1993 
- ------------------------------------------------------------- 
Statutory federal income tax rate    35.0%    35.0%    35.0% 
Depreciation                          5.4      6.6      4.8 
State income taxes - net of 
  federal income tax benefit          5.5      5.5      5.3 
Tax credits                          (7.4)    (5.4)    (3.7) 
Equipment leasing activities         (3.3)    (3.2)    (1.7) 
Repair allowance                     (3.0)    (2.8)    (2.0) 
Allowance for funds used 
  during construction                (0.7)    (0.7)    (1.9) 
Other - net                           5.1      4.7      4.6 
- ------------------------------------------------------------- 
    Effective income tax rate        36.6%    39.7%    40.4% 
_____________________________________________________________ 
 
NOTE 9: FINANCIAL INSTRUMENTS 
 
The  carrying  amounts and related estimated fair  values  of  SDG&E's 
financial instruments are as follows: 
      
in millions of dollars              1995              1994 
- ----------------------------------------------------------------- 
                              Carrying  Fair    Carrying   Fair 
                               Amount   Value     Amount   Value 
- ----------------------------------------------------------------- 
Assets 
  Cash and temporary 
   investments                 $ 96.4   $ 96.4   $ 25.4   $ 25.4 
  Funds held in trust           270.2    270.2    201.9    201.9 
  Notes receivable              103.7    107.3    121.5    121.1 
  Investments in limited 
   partnerships and 
   other assets                 206.0    220.7    170.2    182.5 
- ----------------------------------------------------------------- 
Liabilities 
  Dividends payable              47.4     47.4     46.2     46.2 
  Short-term debt and 
    current portion 
    of long-term debt           142.8    142.8    231.0    230.1 
  Deposits from customers        55.8     51.5     56.2     50.2 
  Long-term debt              1,253.2  1,307.9  1,244.0  1,210.1 
  Preferred stock subject to 
    mandatory redemption         25.0     26.7     25.0     23.8 
__________________________________________________________________ 
 
The  estimated fair values may not be representative of actual amounts 
that  could have been realized as of year end or that will be realized 
in the future. 
 
     The  following methods and assumptions were used to estimate  the 
fair value of each class of financial instruments. 
      
CASH  AND  TEMPORARY  INVESTMENTS AND  DIVIDENDS  PAYABLE The carrying 
amount  approximates  fair value due to the short  maturity  of  these 
items. 
      
NOTES RECEIVABLE The  fair  values  of  noncurrent  notes  receivable 
(included  in  "Deferred Charges and Other Assets" on the Consolidated 
Balance Sheets) are based on the present value of the estimated future 
cash  flows  discounted at current rates available for similar  notes. 
The  carrying amount of short-term notes receivable approximates  fair 
value due to the short maturities. 
      
FUNDS   HELD  IN TRUST Funds  held  in  trust  consist  of  the  SONGS 
decommissioning trust (included in "Investments and Other Property" on 
the Consolidated Balance Sheets). The fair values of the funds' assets 
are based on quoted market values. 
      
INVESTMENTS IN LIMITED PARTNERSHIPS AND OTHER ASSETS The fair values of 
Enova  Financial's investments in limited partnerships for  affordable 
housing  projects,  Califia's  leasing investments  and  other  assets 
(included  in  "Investments and Other Property"  on  the  Consolidated 
Balance  Sheets)  acquired  after 1993 are  estimated  to  approximate 
carrying value due to the relatively short periods of time between the 
purchase  dates  and  the  valuation date,  and  the  relative  market 
stability  during  those periods. Fair values of investments  acquired 
prior  to  1993  are  estimated based on  the  present  value  of  the 
estimated  future cash flows, discounted at yields currently available 
for similar investments. 
      
DEPOSITS FROM CUSTOMERS Deposits from customers include deposits  from 
residential  and  commercial  customers (included  in  "Other  Current 
Liabilities" on the Consolidated Balance Sheets) and customer advances 
for  construction. The carrying amounts of deposits  from  residential 
and  commercial  customers approximate fair value  due  to  the  short 
maturity   periods.   The  fair  values  of  customer   advances   for 
construction  are based on the present values of the estimated  future 
cash flows discounted at current rates of return. 
      
DEBT  AND  PREFERRED  STOCK  SUBJECT TO MANDATORY  REDEMPTION The fair 
values of SDG&E's first mortgage bonds and preferred stock issues  are 
estimated  based  on  quoted market prices for  them  or  for  similar 
issues, or on the current rates offered to SDG&E for debt and stock of 
the  same maturities. The fair values of long-term notes payable   are 
based  on  the present values of the future cash flows, discounted  at 
current  rates available for similar notes with comparable maturities. 
The carrying amounts of short-term loans and notes payable approximate 
fair value due to the short maturities. 
 
                                     39 

<PAGE> 
 
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS   SDG&E's policy is to use 
derivative  financial instruments to reduce its exposure to  interest- 
rate and foreign-currency fluctuations. SDG&E does not use derivatives 
for  trading or speculative purposes. These financial instruments  are 
with  major investment firms and, along with cash and cash equivalents 
and  accounts receivable, expose SDG&E to market and credit risks  and 
may  at  times  be  concentrated  with certain  counterparties.  SDG&E 
presently  contemplates  use  of similar  instruments  to  reduce  its 
exposure to fluctuations in natural gas prices. 
      
INTEREST RATE SWAP AND CAP AGREEMENTS   SDG&E periodically enters into 
interest  rate  swap and cap agreements to moderate  its  exposure  to 
interest  rate  changes and to lower its overall  cost  of  borrowing. 
These  swap and cap agreements generally remain off the balance  sheet 
as  they  involve  the  exchange of fixed- and variable-rate  interest 
payments  without   the exchange of the underlying principal  amounts. 
The  related gains or losses are reflected in the income statement  as 
part  of  the  expense item applicable to what is being hedged  (e.g., 
interest   expense).  At  December  31,  1995,  SDG&E  had  two   such 
agreements, including an index cap agreement on $75 million  of  bonds 
maturing  in  1996, and a floating-to-fixed-rate swap associated  with 
another  $45  million of variable-rate bonds maturing in  2002.  SDG&E 
expects  to  hold  these  derivative financial  instruments  to  their 
maturity.  These  cap  and  swap  agreements  have  effectively  fixed 
interest rates on the underlying variable-rate debt at 6.1 percent and 
5.4  percent,  respectively. SDG&E would be exposed  to  interest-rate 
fluctuations  on  the  underlying debt should  counterparties  to  the 
agreement  not  perform. Such nonperformance is not  anticipated.  The 
fair  value of these derivative financial instruments is the estimated 
amount  that  would  be  realized or paid  upon  termination  of   the 
agreements  based  on  quotes  from  dealers.  These  agreements,   if 
terminated,  would result in an obligation of $3 million  at  December 
31, 1995, compared to net proceeds to SDG&E of $2 million at  December 
31, 1994. 
      
FOREIGN CURRENCY FORWARD EXCHANGE CONTRACTS   SDG&E's pension fund 
periodically  uses foreign currency forward contracts  to  reduce  its 
exposure   to  exchange-rate  fluctuations  associated  with   certain 
investments  in  foreign equity securities. These contracts  generally 
have  maturities  ranging from three to six months.  At  December  31, 
1995,  the  pension  fund  held forward Yen -  U.S.  Dollar  contracts 
totaling  $20  million ($27million in 1994). SDG&E's pension  fund  is 
exposed  to  credit loss if the counterparties fail to  perform.  Such 
nonperformance is not anticipated. The fair value of these  derivative 
financial  instruments is the estimated amount that would be  realized 
or  paid  upon  termination of the agreements  based  on  quotes  from 
dealers. These agreements, if terminated, would result in net proceeds 
to  the pension fund of $2.7 million at December 31, 1995, compared to 
a net obligation of $0.2 million at December 31, 1994. 
      
NOTE 10: CONTINGENCIES AND COMMITMENTS 
 
PURCHASED POWER CONTRACTS   SDG&E buys electric power under several 
short-term and long-term contracts. Purchases are for 2 percent to 10 
percent of plant output under contracts with other utilities,  and  up 
to  100 percent of plant output under contracts with independent power 
producers  and  other non-utility suppliers. No one supplier  provides 
more  than  4  percent  of  SDG&E's  total  system  requirements.  The 
contracts expire on various dates between 1996 and 2024. 
 
     At December 31, 1995, the estimated future minimum payments under 
the contracts were: 
      
in millions of dollars 
- ------------------------------------------- 
1996                               $  265 
1997                                  172 
1998                                  176 
1999                                  175 
2000                                  156 
Thereafter                          2,502 
- ------------------------------------------- 
    Total minimum payments         $3,446 
___________________________________________ 
      
These   payments   represent  capacity  charges  and  minimum   energy 
purchases.  SDG&E  is required to pay additional  amounts  for  actual 
purchases  of  energy  under the contracts. Total payments,  including 
energy payments, under the contracts were $329 million in 1995,   $325 
million in 1994 and $305 million in 1993. See discussion of the CPUC's 
decision on the Biennial Resource Plan Update proceeding in Note 11. 
      
NATURAL GAS CONTRACTS   SDG&E has a contract with Southern California  
Gas Company that provides SDG&E with intrastate transportation capacity 
on SoCal's gas pipelines through August 1997. If a new agreement is not 
reached by then, SoCal has a continuing obligation to deliver  gas  to 
SDG&E  under a CPUC-approved tariff. SDG&E's long-term contracts  with 
interstate  pipelines for transportation capacity  expire  on  various 
dates between 2007 and 2023. SDG&E's contract with SoCal for 8 billion 
cubic feet of natural gas storage capacity expires in 1998. SDG&E also 
has  four long-term gas supply contracts that expire between 2001  and 
2004. 
 
     At  December 31, 1995, the future minimum payments under  natural 
gas contracts were: 
      
in millions of dollars 
___________________________________________________ 
                        Transportation    Natural 
                          and Storage        Gas 
- --------------------------------------------------- 
1996                         $ 80          $ 20 
1997                           58            21 
1998                           18            21 
1999                           17            26 
2000                           17            27 
Thereafter                    289            82 
- --------------------------------------------------- 
    Total minimum payments   $479          $197 
___________________________________________________ 
 
Total  payments  under the contracts were $95 million  in  1995,  $125 
million in 1994 and $86 million in 1993. 
 
                                       40 

<PAGE> 
 
 
LEASES Nuclear fuel, office buildings, a generating facility and other 
properties  are  financed by long-term capital leases.  Utility  plant 
included  $189  million  at December 31, 1995,  and  $173  million  at 
December 31, 1994, related to these leases. The associated accumulated 
amortization was $86 million and $73 million, respectively. SDG&E also 
leases  office  facilities,  computer  equipment  and  vehicles  under 
operating   leases.  Certain  leases  on  office  facilities   contain 
escalation clauses requiring annual increases in rent ranging  from  2 
percent to 7 percent. 
 
     The  minimum rental commitments payable in future years under all 
noncancellable leases were: 
      
in millions of dollars 
- --------------------------------------------------------- 
                                Operating     Capitalized 
                                  Leases         Leases 
- --------------------------------------------------------- 
1996                               $ 55           $ 26 
1997                                 49             27 
1998                                 33             12 
1999                                  9             12 
2000                                  7             12 
Thereafter                           44             45 
- --------------------------------------------------------- 
Total future rental commitments    $197            134 
- --------------------------------------------------------- 
Imputed interest (6% to 9%)                        (29) 
- --------------------------------------------------------- 
Net commitment                                    $105 
_________________________________________________________ 
      
Rental  payments totaled $85 million in 1995, $91 million in 1994  and 
$89 million in 1993. 
      
ENVIRONMENTAL ISSUES   SDG&E's operations are conducted in accordance 
with  federal,  state  and local environmental  laws  and  regulations 
governing hazardous wastes, air and water quality, land use and  solid 
waste  disposal.  SDG&E  incurs  significant  costs  to  operate   its 
facilities in compliance with these laws and regulations. The costs of 
compliance  with  environmental  laws  and  regulations  are  normally 
recovered  in  customer  rates. Capital expenditures  to  comply  with 
environmental  laws and regulations were $4 million  in  1995  and  $5 
million  in 1994, and are expected to be $38 million over the  next  5 
years.  These  expenditures primarily include the  estimated  cost  of 
retrofitting SDG&E's power plants to reduce air emissions. 
 
     SDG&E  has identified, or has been associated with, various sites 
which   may  require  remediation  under  federal,  state   or   local 
environmental  laws. SDG&E may be partially or indirectly  responsible 
for  cleaning up these sites. SDG&E is unable to determine the  extent 
of  its  and/or others' responsibility for remediation of these  sites 
until  assessments are completed. Environmental liabilities  that  may 
arise   from   these  assessments  are  recorded  when   environmental 
assessments and/or remedial efforts are probable, and when the minimum 
costs  can  be  estimated.  In 1994, the  CPUC  approved  a  mechanism 
allowing  utilities to recover their hazardous waste costs,  including 
those  related to Superfund sites or similar sites requiring  cleanup. 
The  decision  allows  recovery of 90 percent  of  cleanup  costs  and 
related  third-party litigation costs and 70 percent  of  the  related 
insurance litigation expenses. As discussed in Note 11, the California 
Public   Utilities  Commission  has  issued  a  policy  decision   for 
restructuring  the California electric utility industry  to  stimulate 
competition. The CPUC has indicated that the California utilities will 
be  allowed  recovery of existing utility plant and regulatory  assets 
over  a  transition period that ends in 2005. Depending on  the  final 
outcome of industry restructuring and the impact of competition, SDG&E 
is  uncertain  whether  the  costs of  compliance  with  environmental 
regulations will continue to be recoverable in rates. 
      
NUCLEAR INSURANCE   SDG&E and the co-owners of the San Onofre units have
 purchased primary insurance of $200 million,  the maximum amount 
available, for public liability claims. An additional $8.7 billion  of 
coverage is provided by secondary financial protection required by the 
Nuclear  Regulatory  Commission and provides for  loss  sharing  among 
utilities  owning nuclear reactors if a costly accident occurs.  SDG&E 
could  be  assessed retrospective premium adjustments  of  up  to  $32 
million  in  the  event  of a nuclear incident involving  any  of  the 
licensed,  commercial reactors in the United States, if the amount  of 
the loss exceeds $200 million. In the event the public liability limit 
stated  above  is  insufficient, the Price-Anderson Act  provides  for 
Congress  to  enact further revenue-raising measures  to  pay  claims, 
which  could include an additional assessment on all licensed  reactor 
operators. 
 
     Insurance coverage is provided for up to $2.8 billion of property 
damage  and  decontamination liability. Coverage is also provided  for 
the  cost of replacement power, which includes indemnity payments  for 
up  to  2  years,  after  a waiting period of 21  weeks.  Coverage  is 
provided  primarily  through  mutual  insurance  companies  owned   by 
utilities  with  nuclear facilities. If losses at any of  the  nuclear 
facilities covered by the risk-sharing arrangements were to exceed the 
accumulated funds available from these insurance programs, SDG&E could 
be assessed retrospective premium adjustments of up to $9 million. 
      
DEPARTMENT  OF ENERGY DECOMMISSIONING The Energy Policy  Act  of  1992 
established a fund for the decontamination and decommissioning of  the 
Department  of  Energy  nuclear fuel enrichment facilities.  Utilities 
using  the  DOE  services are contributing a total  of  $2.3  billion, 
subject  to adjustment for inflation, over a 15-year period ending  in 
2006.  Each  utility's  share  is based on  its  share  of  enrichment 
services purchased from the DOE. SDG&E's share of the contribution  is 
$1 million per year. 
      
LITIGATION   SDG&E is involved in various legal matters arising out of 
the  ordinary  course  of  business. Management  believes  that  these 
matters will not have a material adverse effect on SDG&E's results  of 
operations, financial condition or liquidity. 
      
DISTRIBUTION  SYSTEM  CONVERSION Under a  CPUC-mandated  program   and 
through  franchise agreements with various cities, SDG&E is committed, 
in  varying  amounts, to convert overhead distribution  facilities  to 
underground. As of December 31, 1995, the aggregate unexpended  amount 
of this commitment was approximately $85 million. Capital expenditures 
for  underground conversions were $12 million in 1995, $11 million  in 
1994 and $22 million in 1993. 
 
                                      41 

<PAGE> 
 
 
CONCENTRATION OF CREDIT RISK   SDG&E grants credit to its utility 
customers,  substantially  all of whom  are  located  in  its  service 
territory,  which  covers  all of San Diego County  and  the  southern 
portion of Orange County. 
 
NOTE 11: INDUSTRY RESTRUCTURING 
 
In  December  1995,  the  CPUC  issued  its  policy  decision  on  the 
restructuring of California's electric utility industry  to  stimulate 
competition and reduce rates. The decision provides that beginning  in 
January  1998, customers will be able to buy their electricity through 
a  power  exchange  that  will obtain power  from  the  lowest-bidding 
suppliers.  The exchange is a spot market with published  pricing.  An 
independent system operator (ISO) will schedule power transactions and 
access  to  the  transmission system. Consumers  also  may  choose  to 
continue to purchase their local utility under regulated tariffs. As a 
third option,  a  cross  section  of  all customer groups (residential, 
industrial, commercial and agricultural) will be  able  to go directly 
to any energy supplier and enter into private contracts with  
generators, brokers or others (direct access).As  the  direct-access   
mechanism has  many  technical  issues  to  be resolved,  a  5-year   
phase-in is planned. All California  electricity consumers  will  have 
the  option  to  purchase  generation  services directly  by 2003. The 
utilities will continue to provide transmission and  distribution  
services to customers who choose to  purchase  their energy from other 
providers. 
 
     Utilities  will be allowed to recover their "stranded" investment 
costs  incurred for CPUC-approved facilities through the establishment 
of  a  non-bypassable competition transition charge (CTC). In addition 
to  $299  million  of deferred taxes recoverable in rates,  SDG&E  has 
approximately $215 million of other regulatory assets at December  31, 
1995  (included  in  "Deferred  Charges  and  Other  Assets"  on   the 
Consolidated   Balance  Sheets).  Included  in   these   amounts   are 
approximately $112 million related to generation operations, of  which 
$52  million  is  related  to  nuclear  operations.  Recovery  periods 
currently range from one to 30 years. It is estimated that at December 
31, 1995, SDG&E had approximately $950 million of net generating plant 
(including approximately $750 million of nuclear facilities) currently 
being  recovered  in  rates over various periods of  time.  Under  the 
CPUC's   industry   restructuring  decision,  to  the   extent   these 
investments exceed their market values, they must be recouped by  2005 
via the CTC mechanism. 
 
     In  addition,  as  described in Note 10, SDG&E has  entered  into 
significant   long-term  purchased-power  commitments   with   various 
utilities  and other providers totaling $3.4 billion. Also, under  the 
CPUC's  Biennial Resource Plan Update decision, SDG&E may be  required 
to  contract  for  an additional 500 megawatts of power  over  17-year 
terms  at an estimated cost of $4.8 billion beginning in 1997.  Prices 
under  these  contracts could significantly exceed the  future  market 
price. SDG&E is challenging the decision and the FERC has declared the 
BRPU  auction  procedures unlawful under federal  law.  The  CPUC  has 
issued  a  ruling  encouraging  SDG&E and  other  utilities  to  reach 
settlements  with  the  auction winners.  Settlement  discussions  are 
ongoing.  However,  under the CPUC's industry restructuring  decision, 
existing purchased-power obligations (including qualifying facilities) 
would  be recovered via the CTC mechanism. For purposes of CTC,  rates 
for  customers choosing traditional utility service (instead of  power 
exchange or direct access) will be capped at January 1, 1996,  levels. 
Including  the  CTC,  rates  cannot exceed  the  cap  and,  therefore, 
recovery of the CTC is limited by the cap. 
 
     Performance-based   regulation   will   replace   cost-of-service 
regulation.  SDG&E  is currently participating in a  performance-based 
ratemaking  process on an experimental basis which commenced  in  1993 
and runs through 1998. 
 
     The  utilities  are  required to file  plans  with  the  CPUC  to 
implement  direct  access and new or revised PBR proposals.  Plans  to 
establish the power exchange and ISO are also required to be filed  by 
the  utilities  with  both the CPUC and the  FERC,  as  the  FERC  has 
jurisdiction over the exchange, the ISO and interstate transmission. 
 
     The  CPUC is currently working on building a consensus on the new 
market  structure  with  the  California  Legislature,  the  governor, 
utilities  and  customers.  The California Legislature  has  passed  a 
resolution  forming an oversight committee to ensure the legislature's 
involvement  in  the  policies presented by the  CPUC,  and  that  the 
policies comply with federal and state laws and achieve the objectives 
both  of  competition  and  of the various social  programs  that  are 
currently funded through utility rates. 
 
     As  the  restructuring of the industry evolves, SDG&E will become 
more   vulnerable  to  competition.  However,  based  on  recent  CPUC 
decisions,  recovery  of  stranded costs is  provided  for,  including 
recovery  of  investment in SONGS Units 2 and 3.  Due  to  the  recent 
decisions,  SDG&E  does  not anticipate incurring  a  material  charge 
against earnings for its generating facilities, the related regulatory 
assets   and  other  long-term  commitments.  In  addition,   although 
California utilities' rates are significantly higher than the national 
average,  SDG&E has a lower concentration of industrial customers  and 
for 7 years has been the lowest-cost provider among the investor-owned 
utilities in California, which make its customers a less-likely target 
for outside competitors. 
 
     As described in Note 1, SDG&E currently accounts for the economic 
effects  of  regulation  in  accordance with  Statement  of  Financial 
Accounting  Standards No. 71, "Accounting for the Effects  of  Certain 
Types  of  Regulation." Once the restructuring  transition  is  final, 
SDG&E  may not continue to meet the criteria for applying SFAS  71  to 
all  of  its operations in the new regulatory framework. In a non-SFAS 
71  environment, additions to plant, among other things, would need to 
be recovered through market prices. 
 
                                      42 
 

<PAGE> 

<TABLE>  
QUARTERLY FINANCIAL DATA (UNAUDITED)  
In thousands except per share amounts  
- ----------------------------------------------------       ---------    ---------   ------------  -----------  
Quarter ended                                               March 31     June 30    September 30  December 31  
- ----------------------------------------------------       ---------    ---------   ------------  -----------  
<S>                                                        <C>          <C>         <C>           <C>  
1995                                                                                                
Operating revenues                                          $477,955     $445,239     $478,689     $468,793  
Operating expenses                                           384,300      365,751      388,387      386,588  
- ----------------------------------------------------       ---------    ---------   ------------  -----------  
Operating income                                              93,655       79,488       90,302       82,205  
Other income and (deductions)                                  1,744         (499)      (1,102)         389  
Net interest charges                                          28,059       29,095       27,380       28,339  
- ----------------------------------------------------       ---------    ---------   ------------  -----------  
Income from continuing operations                             67,340       49,894       61,820       54,255  
Discontinued operations, net of income taxes                  (5,490)        (678)          --        6,316  
- ----------------------------------------------------       ---------    ---------   ------------  -----------  
Net income (before preferred dividend requirements)           61,850       49,216       61,820       60,571  
Preferred dividend requirements                                1,916        1,915        1,916        1,916  
- ----------------------------------------------------       ---------    ---------   ------------  -----------  
Earnings applicable to common shares                        $ 59,934     $ 47,301     $ 59,904     $ 58,655  
- ----------------------------------------------------       ---------    ---------   ------------  -----------  
Average common shares outstanding                            116,533      116,534      116,538      116,545  
- ----------------------------------------------------       ---------    ---------   ------------  -----------  
Earnings per common share from continuing operations        $   0.56     $   0.41     $   0.51     $   0.45  
- ----------------------------------------------------       ---------    ---------   ------------  ------------  
Earnings per common share                                   $   0.51     $   0.41     $   0.51     $   0.50  
____________________________________________________       _________    _________   ____________  ____________  
1994                                                                                                
Operating revenues                                          $487,979     $444,050     $476,675     $503,541  
Operating expenses                                           403,897      380,241      392,361      403,530  
- ----------------------------------------------------       ---------    ---------   ------------  ------------  
Operating income                                              84,082       63,809       84,314      100,011  
Other income and (deductions)                                  2,880      (13,879)       2,935      (12,480)  
Net interest charges                                          24,180       25,124       27,075       28,352  
- ----------------------------------------------------       ---------    ---------   ------------  ------------  
Income from continuing operations                             62,782       24,806       60,174       59,179  
Discontinued operations, net of income taxes                  (2,986)     (58,025)        (385)      (2,068)  
- ----------------------------------------------------        --------     --------   ------------  -------------  
Net income (loss) (before preferred dividend requirements)    59,796      (33,219)      59,789       57,111  
Preferred dividend requirements                                1,916        1,915        1,916        1,916  
- ----------------------------------------------------       ---------     --------   ------------  -------------  
Earnings (loss) applicable to common shares                 $ 57,880     $(35,134)    $ 57,873     $ 55,195  
- ----------------------------------------------------       ---------     --------   ------------  -------------  
Average common shares outstanding                            116,492      116,473      116,475      116,496  
- ----------------------------------------------------       ---------     --------   ------------  -------------  
Earnings per common share from continuing operations        $   0.52     $   0.20     $   0.50     $   0.49  
- ----------------------------------------------------       ---------     --------   ------------  -------------  
Earnings (loss) per common share                            $   0.50     $  (0.30)    $   0.50     $   0.47  
____________________________________________________       _________     ________   ____________  _____________  
  
These amounts are unaudited, but in the opinion of SDG&E reflect all adjustments necessary for a fair   
presentation. Previously reported amounts have been restated to reflect discontinued operations.  
  
</TABLE>
  
  
  
Information for Item 5.  

<TABLE>  
                                Quarterly Common Stock Data (Unaudited)  
<CAPTION>  
                                      1995                                   1994  
                 -------   -------   -------   -------      -------   -------   -------   -------  
                  First    Second     Third    Fourth        First    Second     Third    Fourth  
                 Quarter   Quarter   Quarter   Quarter      Quarter   Quarter   Quarter   Quarter  
- ------------     -------   -------   -------   -------      -------   -------   -------   -------  
<S>              <C>       <C>       <C>       <C>          <C>       <C>       <C>       <C>    
Market price                                                                                  
   High          21 5/8    22 7/8    23 1/4    23 7/8       25        23 1/4    20 7/8    20 1/8  
   Low           19 1/8    20 1/8    20 3/4    21 7/8       21 1/2    17 1/2    18        18 5/8  
Dividends  
 declared        $0.39     $0.39     $0.39     $0.39        $0.38     $0.38     $0.38     $0.38  
  
</TABLE>
  
  
                                                        43  
  
  
 
 



WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.


<TABLE> <S> <C>

<ARTICLE> UT
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1995
<PERIOD-END>                               DEC-31-1995
<BOOK-VALUE>                                  PER-BOOK
<TOTAL-NET-UTILITY-PLANT>                    3,100,157
<OTHER-PROPERTY-AND-INVEST>                    532,289
<TOTAL-CURRENT-ASSETS>                         418,053
<TOTAL-DEFERRED-CHARGES>                       251,456
<OTHER-ASSETS>                                 368,485
<TOTAL-ASSETS>                               4,670,440
<COMMON>                                       291,458
<CAPITAL-SURPLUS-PAID-IN>                      566,046
<RETAINED-EARNINGS>                            662,566
<TOTAL-COMMON-STOCKHOLDERS-EQ>               1,520,070
<PREFERRED-MANDATORY>                           25,000
<PREFERRED>                                     93,475
<LONG-TERM-DEBT-NET>                         1,120,159
<SHORT-TERM-NOTES>                                   0
<LONG-TERM-NOTES-PAYABLE>                      133,068
<COMMERCIAL-PAPER-OBLIGATIONS>                       0
<LONG-TERM-DEBT-CURRENT-PORT>                  142,818
<PREFERRED-STOCK-CURRENT>                            0
<CAPITAL-LEASE-OBLIGATIONS>                     96,867
<LEASES-CURRENT>                                 8,498
<OTHER-ITEMS-CAPITAL-AND-LIAB>               1,530,485
<TOT-CAPITALIZATION-AND-LIAB>                4,670,440
<GROSS-OPERATING-REVENUE>                    1,870,676
<INCOME-TAX-EXPENSE>                           134,578
<OTHER-OPERATING-EXPENSES>                   1,390,448
<TOTAL-OPERATING-EXPENSES>                   1,525,026
<OPERATING-INCOME-LOSS>                        345,650
<OTHER-INCOME-NET>                                 532
<INCOME-BEFORE-INTEREST-EXPEN>                 346,182
<TOTAL-INTEREST-EXPENSE>                       112,873
<NET-INCOME>                                   233,457
<PREFERRED-STOCK-DIVIDENDS>                      7,663
<EARNINGS-AVAILABLE-FOR-COMM>                  225,794
<COMMON-STOCK-DIVIDENDS>                       181,809
<TOTAL-INTEREST-ON-BONDS>
                       84,414
<CASH-FLOW-OPERATIONS>                         623,916
<EPS-PRIMARY>                                     1.94
<EPS-DILUTED>                                     1.94
        



</TABLE>