Sempra Energy/SDG&E/SoCalGas June 30, 2014 10-Q


  
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 10-Q
 
(Mark One)
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended
June 30, 2014
   
 
or
   
[   ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from
   
to
 
     
 
Commission File No.
Exact Name of Registrants as Specified in their Charters, Address and Telephone Number
States of Incorporation
I.R.S. Employer
Identification Nos.
Former name, former address and former fiscal year, if changed since last report
1-14201
SEMPRA ENERGY
California
33-0732627
No change
 
101 Ash Street
     
 
San Diego, California 92101
     
 
(619)696-2000
     
         
1-03779
SAN DIEGO GAS & ELECTRIC COMPANY
California
95-1184800
No change
 
8326 Century Park Court
     
 
San Diego, California 92123
     
 
(619)696-2000
     
         
1-01402
SOUTHERN CALIFORNIA GAS COMPANY
California
95-1240705
No change
 
555 West Fifth Street
     
 
Los Angeles, California 90013
     
 
(213)244-1200
     
         
 
 
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
           
 
Yes
X
 
No
 

 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
           
Sempra Energy
Yes
X
 
No
 
San Diego Gas & Electric Company
Yes
X
 
No
 
Southern California Gas Company
Yes
X
 
No
 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
 
Large
accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Sempra Energy
[  X  ]
[      ]
[       ]
[      ]
San Diego Gas & Electric Company
[       ]
[      ]
[  X  ]
[      ]
Southern California Gas Company
[       ]
[      ]
[  X  ]
[      ]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
           
Sempra Energy
Yes
   
No
X
San Diego Gas & Electric Company
Yes
   
No
X
Southern California Gas Company
Yes
   
No
X
           
Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date.
           
Common stock outstanding on August 4, 2014:
         
           
Sempra Energy
245,893,714 shares
San Diego Gas & Electric Company
Wholly owned by Enova Corporation, which is wholly owned by Sempra Energy
Southern California Gas Company
Wholly owned by Pacific Enterprises, which is wholly owned by Sempra Energy
 
 
 
 
 

 
SEMPRA ENERGY FORM 10-Q
SAN DIEGO GAS & ELECTRIC COMPANY FORM 10-Q
SOUTHERN CALIFORNIA GAS COMPANY FORM 10-Q
TABLE OF CONTENTS
 
 
Page
Information Regarding Forward-Looking Statements
4
   
PART I – FINANCIAL INFORMATION
 
Item 1.
Financial Statements
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
78
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
117
Item 4.
Controls and Procedures
118
     
PART II – OTHER INFORMATION
 
Item 1.
Legal Proceedings
119
Item 1A.
Risk Factors
119
Item 6.
Exhibits
119
     
Signatures
121
     

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

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


 
 
 
 
 

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
 

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

SEMPRA ENERGY
 
 
 
 
 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
 
 
 
 
 
(Dollars in millions, except per share amounts)
 
 
 
 
 
 
 
 
 
 
Three months ended June 30, 
Six months ended June 30, 
 
 
2014 
2013 
2014 
2013 
 
 
(unaudited) 
REVENUES
 
 
 
 
 
 
 
 
Utilities
 2,370 
 2,332 
 4,855 
 4,666 
Energy-related businesses
 
 308 
 
 319 
 
 618 
 
 635 
    Total revenues
 
 2,678 
 
 2,651 
 
 5,473 
 
 5,301 
EXPENSES AND OTHER INCOME
 
 
 
 
 
 
 
 
Utilities:
 
 
 
 
 
 
 
 
    Cost of natural gas
 
 (395)
 
 (365)
 
 (1,015)
 
 (921)
    Cost of electric fuel and purchased power
 
 (571)
 
 (477)
 
 (1,081)
 
 (924)
Energy-related businesses:
 
 
 
 
 
 
 
 
    Cost of natural gas, electric fuel and purchased power
 
 (126)
 
 (94)
 
 (264)
 
 (205)
    Other cost of sales
 
 (42)
 
 (49)
 
 (80)
 
 (97)
Operation and maintenance
 
 (729)
 
 (740)
 
 (1,405)
 
 (1,464)
Depreciation and amortization
 
 (288)
 
 (247)
 
 (574)
 
 (542)
Franchise fees and other taxes
 
 (92)
 
 (81)
 
 (197)
 
 (187)
Plant closure (loss) adjustment
 
 ― 
 
 (200)
 
 13 
 
 (200)
Gain on sale of equity interest and assets
 
 2 
 
 ― 
 
 29 
 
 74 
Equity earnings, before income tax
 
 23 
 
 8 
 
 40 
 
 18 
Other income, net
 
 49 
 
 26 
 
 89 
 
 63 
Interest income
 
 5 
 
 4 
 
 9 
 
 10 
Interest expense
 
 (138)
 
 (138)
 
 (274)
 
 (276)
Income before income taxes and equity earnings
 
 
 
 
 
 
 
 
    of certain unconsolidated subsidiaries
 
 376 
 
 298 
 
 763 
 
 650 
Income tax expense
 
 (93)
 
 (32)
 
 (220)
 
 (210)
Equity earnings, net of income tax
 
 9 
 
 1 
 
 15 
 
 5 
Net income
 
 292 
 
 267 
 
 558 
 
 445 
Earnings attributable to noncontrolling interests
 
 (22)
 
 (21)
 
 (41)
 
 (19)
Preferred dividends of subsidiaries
 
 (1)
 
 (1)
 
 (1)
 
 (3)
Earnings
 269 
 245 
 516 
 423 
 
 
 
 
 
 
 
 
 
 
Basic earnings per common share
 1.10 
 1.00 
 2.10 
 1.74 
Weighted-average number of shares outstanding, basic (thousands)
 
 245,688 
 
 243,603 
 
 245,484 
 
 243,449 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per common share
 1.08 
 0.98 
 2.07 
 1.70 
Weighted-average number of shares outstanding, diluted (thousands)
 
 250,061 
 
 248,515 
 
 249,816 
 
 248,279 
Dividends declared per share of common stock 
 0.66 
 0.63 
 1.32 
 1.26 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 

 

 
SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions)
 
 
Three months ended June 30, 2014 and 2013 
 
 
(unaudited)
 
 
Sempra Energy Shareholders' Equity
 
 
 
 
 
 
Pretax 
Income Tax 
Net-of-Tax 
Noncontrolling 
 
 
 
Amount 
(Expense) Benefit 
Amount 
Interests (After-Tax) 
Total 
2014:
 
 
 
 
 
 
 
 
 
 
Net income
 363 
 (93)
 270 
 22 
 292 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
    Foreign currency translation adjustments
 
 2 
 
 ― 
 
 2 
 
 1 
 
 3 
    Pension and other postretirement benefits
 
 8 
 
 (3)
 
 5 
 
 ― 
 
 5 
    Financial instruments
 
 (12)
 
 5 
 
 (7)
 
 (1)
 
 (8)
    Total other comprehensive income (loss)
 
 (2)
 
 2 
 
 ― 
 
 ― 
 
 ― 
Comprehensive income
 
 361 
 
 (91)
 
 270 
 
 22 
 
 292 
Preferred dividends of subsidiary
 
 (1)
 
 ― 
 
 (1)
 
 ― 
 
 (1)
Comprehensive income, after preferred
 
 
 
 
 
 
 
 
 
 
    dividends of subsidiary
 360 
 (91)
 269 
 22 
 291 
2013:
 
 
 
 
 
 
 
 
 
 
Net income
 278 
 (32)
 246 
 21 
 267 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
    Foreign currency translation adjustments
 
 134 
 
 ― 
 
 134 
 
 (20)
 
 114 
    Pension and other postretirement benefits
 
 2 
 
 (1)
 
 1 
 
 ― 
 
 1 
    Financial instruments
 
 33 
 
 (10)
 
 23 
 
 15 
 
 38 
    Total other comprehensive income (loss)
 
 169 
 
 (11)
 
 158 
 
 (5)
 
 153 
Comprehensive income
 
 447 
 
 (43)
 
 404 
 
 16 
 
 420 
Preferred dividends of subsidiaries
 
 (1)
 
 ― 
 
 (1)
 
 ― 
 
 (1)
Comprehensive income, after preferred
 
 
 
 
 
 
 
 
 
 
    dividends of subsidiaries
 446 
 (43)
 403 
 16 
 419 
See Notes to Condensed Consolidated Financial Statements.
 

 

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED)
(Dollars in millions)
 
 
Six months ended June 30, 2014 and 2013 
 
 
(unaudited)
 
 
Sempra Energy Shareholders' Equity
 
 
 
 
 
 
Pretax 
Income Tax 
Net-of-Tax 
Noncontrolling 
 
 
 
Amount 
(Expense) Benefit 
Amount 
Interests (After-Tax) 
Total 
2014:
 
 
 
 
 
 
 
 
 
 
Net income
 737 
 (220)
 517 
 41 
 558 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
    Foreign currency translation adjustments
 
 (41)
 
 ― 
 
 (41)
 
 (1)
 
 (42)
    Pension and other postretirement benefits
 
 13 
 
 (5)
 
 8 
 
 ― 
 
 8 
    Financial instruments
 
 (20)
 
 8 
 
 (12)
 
 (1)
 
 (13)
    Total other comprehensive income (loss)
 
 (48)
 
 3 
 
 (45)
 
 (2)
 
 (47)
Comprehensive income
 
 689 
 
 (217)
 
 472 
 
 39 
 
 511 
Preferred dividends of subsidiary
 
 (1)
 
 ― 
 
 (1)
 
 ― 
 
 (1)
Comprehensive income, after preferred
 
 
 
 
 
 
 
 
 
 
    dividends of subsidiary
 688 
 (217)
 471 
 39 
 510 
2013:
 
 
 
 
 
 
 
 
 
 
Net income
 636 
 (210)
 426 
 19 
 445 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
    Foreign currency translation adjustments
 
 144 
 
 ― 
 
 144 
 
 (24)
 
 120 
    Pension and other postretirement benefits
 
 7 
 
 (3)
 
 4 
 
 ― 
 
 4 
    Financial instruments
 
 13 
 
 (4)
 
 9 
 
 18 
 
 27 
    Total other comprehensive income (loss)
 
 164 
 
 (7)
 
 157 
 
 (6)
 
 151 
Comprehensive income
 
 800 
 
 (217)
 
 583 
 
 13 
 
 596 
Preferred dividends of subsidiaries
 
 (3)
 
 ― 
 
 (3)
 
 ― 
 
 (3)
Comprehensive income, after preferred
 
 
 
 
 
 
 
 
 
 
    dividends of subsidiaries
 797 
 (217)
 580 
 13 
 593 
See Notes to Condensed Consolidated Financial Statements.
 
 

 
SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
 
 
June 30, 
December 31, 
 
2014 
2013(1)
 
 
(unaudited) 
 
 
ASSETS
 
 
 
 
Current assets:
 
 
 
 
    Cash and cash equivalents
 789 
 904 
    Restricted cash
 
 20 
 
 24 
    Trade accounts receivable, net
 
 1,051 
 
 1,308 
    Other accounts and notes receivable, net
 
 188 
 
 214 
    Due from unconsolidated affiliates
 
 4 
 
 4 
    Income taxes receivable
 
 122 
 
 85 
    Deferred income taxes
 
 390 
 
 301 
    Inventories
 
 267 
 
 287 
    Regulatory balancing accounts – undercollected
 
 780 
 
 556 
    Other regulatory assets
 
 40 
 
 38 
    Fixed-price contracts and other derivatives
 
 101 
 
 106 
    Asset held for sale, power plant
 
 293 
 
 ― 
    Other
 
 150 
 
 170 
        Total current assets
 
 4,195 
 
 3,997 
 
 
 
 
 
 
Investments and other assets:
 
 
 
 
    Restricted cash
 
 29 
 
 25 
    Due from unconsolidated affiliate
 
 38 
 
 14 
    Regulatory assets arising from pension and other postretirement
 
 
 
 
        benefit obligations
 
 449 
 
 435 
    Other regulatory assets
 
 2,101 
 
 2,113 
    Nuclear decommissioning trusts
 
 1,096 
 
 1,034 
    Investments
 
 1,769 
 
 1,575 
    Goodwill
 
 1,000 
 
 1,024 
    Other intangible assets
 
 421 
 
 426 
    Sundry
 
 1,197 
 
 1,141 
        Total investments and other assets
 
 8,100 
 
 7,787 
 
 
 
 
 
 
Property, plant and equipment:
 
 
 
 
    Property, plant and equipment
 
 35,226 
 
 34,407 
    Less accumulated depreciation and amortization
 
 (9,214)
 
 (8,947)
        Property, plant and equipment, net ($424 and $438 at June 30, 2014 and
            December 31, 2013, respectively, related to VIE)
 
 26,012 
 
 25,460 
Total assets
 38,307 
 37,244 
(1)
Derived from audited financial statements.
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 

 
SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
 
 
June 30, 
December 31, 
 
2014 
2013(1)
 
 
(unaudited) 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
    Short-term debt
 1,238 
 545 
    Accounts payable – trade
 
 1,032 
 
 1,088 
    Accounts payable – other
 
 122 
 
 127 
    Dividends and interest payable
 
 277 
 
 271 
    Accrued compensation and benefits
 
 271 
 
 376 
    Regulatory balancing accounts – overcollected
 
 ― 
 
 91 
    Current portion of long-term debt
 
 195 
 
 1,147 
    Fixed-price contracts and other derivatives
 
 50 
 
 55 
    Customer deposits
 
 149 
 
 154 
    Other
 
 548 
 
 515 
        Total current liabilities
 
 3,882 
 
 4,369 
Long-term debt ($320 and $325 at June 30, 2014 and December 31, 2013, respectively,
     related to VIE)
 
 12,323 
 
 11,253 
 
 
 
 
 
 
Deferred credits and other liabilities:
 
 
 
 
    Customer advances for construction
 
 150 
 
 155 
    Pension and other postretirement benefit obligations, net of plan assets
 
 675 
 
 667 
    Deferred income taxes
 
 3,010 
 
 2,804 
    Deferred investment tax credits
 
 40 
 
 42 
    Regulatory liabilities arising from removal obligations
 
 2,746 
 
 2,623 
    Asset retirement obligations
 
 2,018 
 
 2,084 
    Fixed-price contracts and other derivatives
 
 223 
 
 228 
    Deferred credits and other
 
 1,189 
 
 1,169 
        Total deferred credits and other liabilities
 
 10,051 
 
 9,772 
 
 
 
 
 
 
Commitments and contingencies (Note 11)
 
 
 
 
 
 
 
 
 
 
Equity:
 
 
 
 
    Preferred stock (50 million shares authorized; none issued)
 
 ― 
 
 ― 
    Common stock (750 million shares authorized; 246 million and 244 million shares
 
 
 
 
        outstanding at June 30, 2014 and December 31, 2013, respectively; no par value)
 
 2,448 
 
 2,409 
    Retained earnings
 
 9,019 
 
 8,827 
    Accumulated other comprehensive income (loss)
 
 (273)
 
 (228)
        Total Sempra Energy shareholders’ equity
 
 11,194 
 
 11,008 
    Preferred stock of subsidiary
 
 20 
 
 20 
    Other noncontrolling interests
 
 837 
 
 822 
        Total equity
 
 12,051 
 
 11,850 
Total liabilities and equity
 38,307 
 37,244 
(1)
Derived from audited financial statements.
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 

 
SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 
 
Six months ended June 30, 
 
 
2014 
2013 
 
 
(unaudited) 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
    Net income
 558 
 445 
    Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
        Depreciation and amortization
 
 574 
 
 542 
        Deferred income taxes and investment tax credits
 
 105 
 
 251 
        Gain on sale of equity interest and assets
 
 (29)
 
 (74)
        Plant closure (adjustment) loss
 
 (13)
 
 200 
        Equity earnings
 
 (55)
 
 (23)
        Fixed-price contracts and other derivatives
 
 (17)
 
 (28)
        Other
 
 (6)
 
 1 
    Net change in other working capital components
 
 (125)
 
 20 
    Changes in other assets
 
 21 
 
 (237)
    Changes in other liabilities
 
 21 
 
 8 
        Net cash provided by operating activities
 
 1,034 
 
 1,105 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
    Expenditures for property, plant and equipment
 
 (1,513)
 
 (1,130)
    Expenditures for investments
 
 (160)
 
 (5)
    Proceeds from sale of equity interest and assets, net of cash sold
 
 66 
 
 384 
    Proceeds from U.S. Treasury grants
 
 ― 
 
 74 
    Distributions from investments
 
 6 
 
 95 
    Purchases of nuclear decommissioning and other trust assets
 
 (356)
 
 (330)
    Proceeds from sales by nuclear decommissioning and other trusts
 
 350 
 
 326 
    Decrease in restricted cash
 
 87 
 
 143 
    Increase in restricted cash
 
 (87)
 
 (186)
    Advances to unconsolidated affiliates
 
 (24)
 
 ― 
    Other
 
 10 
 
 2 
        Net cash used in investing activities
 
 (1,621)
 
 (627)
 
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
    Common dividends paid
 
 (301)
 
 (299)
    Preferred dividends paid by subsidiaries
 
 (1)
 
 (3)
    Issuances of common stock
 
 28 
 
 22 
    Repurchases of common stock
 
 (37)
 
 (45)
    Issuances of debt (maturities greater than 90 days)
 
 2,345 
 
 894 
    Payments on debt (maturities greater than 90 days)
 
 (1,475)
 
 (1,134)
    Proceeds from sale of noncontrolling interests, net of $25 in offering costs
 
 ― 
 
 574 
    Decrease in short-term debt, net
 
 (54)
 
 (10)
    Distributions to noncontrolling interests
 
 (23)
 
 (13)
    Other
 
 (10)
 
 18 
        Net cash provided by financing activities
 
 472 
 
 4 
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
 
 ― 
 
 (3)
 
 
 
 
 
 
(Decrease) increase in cash and cash equivalents
 
 (115)
 
 479 
Cash and cash equivalents, January 1
 
 904 
 
 475 
Cash and cash equivalents, June 30
 789 
 954 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 

 
SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in millions)
 
 
Six months ended June 30, 
 
2014 
2013 
 
(unaudited) 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
 
 
 
 
    Interest payments, net of amounts capitalized
 269 
 269 
    Income tax payments, net of refunds
 
 148 
 
 78 
 
 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
 
 
 
 
    Nuclear facility plant reclassified to regulatory asset, net of depreciation and amortization
 ― 
 512 
    Accrued capital expenditures
 
 287 
 
 214 
    Increase in capital lease obligations for investment in property, plant and equipment
 
 60 
 
 ― 
    Capital expenditures recoverable by U.S. Treasury grants receivable
 
 ― 
 
 3 
    Sequestration of U.S. Treasury grants receivable
 
 ― 
 
 (23)
    Dividends declared but not paid
 
 165 
 
 158 
    Financing of build-to-suit property
 
 32 
 
 ― 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
(Dollars in millions)
 
 
Three months ended June 30, 
Six months ended June 30, 
 
2014 
2013 
2014 
2013 
 
(unaudited) 
Operating revenues
 
 
 
 
 
 
 
 
    Electric
$
 948 
$
 943 
$
 1,759 
$
 1,715 
    Natural gas
 
 115 
 
 121 
 
 291 
 
 288 
        Total operating revenues
 
 1,063 
 
 1,064 
 
 2,050 
 
 2,003 
Operating expenses
 
 
 
 
 
 
 
 
    Cost of electric fuel and purchased power
 
 329 
 
 252 
 
 595 
 
 461 
    Cost of natural gas
 
 51 
 
 45 
 
 126 
 
 121 
    Operation and maintenance
 
 256 
 
 289 
 
 508 
 
 586 
    Depreciation and amortization
 
 131 
 
 107 
 
 261 
 
 241 
    Franchise fees and other taxes
 
 54 
 
 46 
 
 110 
 
 101 
    Plant closure loss (adjustment)
 
 ― 
 
 200 
 
 (13)
 
 200 
        Total operating expenses
 
 821 
 
 939 
 
 1,587 
 
 1,710 
Operating income
 
 242 
 
 125 
 
 463 
 
 293 
Other income, net
 
 7 
 
 9 
 
 20 
 
 20 
Interest income
 
 ― 
 
 ― 
 
 ― 
 
 1 
Interest expense
 
 (51)
 
 (49)
 
 (101)
 
 (97)
Income before income taxes
 
 198 
 
 85 
 
 382 
 
 217 
Income tax expense
 
 (69)
 
 (12)
 
 (152)
 
 (63)
Net income
 
 129 
 
 73 
 
 230 
 
 154 
(Earnings) losses attributable to noncontrolling interest
 
 (6)
 
 (7)
 
 (8)
 
 4 
Earnings
 
 123 
 
 66 
 
 222 
 
 158 
Preferred dividend requirements
 
 ― 
 
 (1)
 
 ― 
 
 (2)
Earnings attributable to common shares
$
 123 
$
 65 
$
 222 
$
 156 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 

 
 

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions)
 
SDG&E Shareholder's Equity 
 
 
 
Pretax 
Income Tax 
Net-of-Tax 
Noncontrolling 
 
 
Amount 
(Expense) Benefit 
Amount 
Interest (After-Tax) 
Total 
 
Three months ended June 30, 2014 and 2013 
 
(unaudited)
2014:
 
 
 
 
 
 
 
 
 
 
Net income
 192 
 (69)
 123 
 6 
 129 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
    Pension and other postretirement benefits
 
 2 
 
 (1)
 
 1 
 
 ― 
 
 1 
    Financial instruments
 
 ― 
 
 ― 
 
 ― 
 
 (1)
 
 (1)
    Total other comprehensive income (loss)
 
 2 
 
 (1)
 
 1 
 
 (1)
 
 ― 
Comprehensive income
 194 
 (70)
 124 
 5 
 129 
2013:
 
 
 
 
 
 
 
 
 
 
Net income
 78 
 (12)
 66 
 7 
 73 
Other comprehensive income:
 
 
 
 
 
 
 
 
 
 
    Pension and other postretirement benefits
 
 1 
 
 ― 
 
 1 
 
 ― 
 
 1 
    Financial instruments
 
 ― 
 
 ― 
 
 ― 
 
 12 
 
 12 
    Total other comprehensive income
 
 1 
 
 ― 
 
 1 
 
 12 
 
 13 
Comprehensive income
 79 
 (12)
 67 
 19 
 86 

 
Six months ended June 30, 2014 and 2013 
 
(unaudited) 
2014:
 
 
 
 
 
 
 
 
 
 
Net income
 374 
 (152)
 222 
 8 
 230 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
    Pension and other postretirement benefits
 
 2 
 
 (1)
 
 1 
 
 ― 
 
 1 
    Financial instruments
 
 ― 
 
 ― 
 
 ― 
 
 (1)
 
 (1)
    Total other comprehensive income (loss)
 
 2 
 
 (1)
 
 1 
 
 (1)
 
 ― 
Comprehensive income
 376 
 (153)
 223 
 7 
 230 
2013:
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 221 
 (63)
 158 
 (4)
 154 
Other comprehensive income:
 
 
 
 
 
 
 
 
 
 
    Pension and other postretirement benefits
 
 1 
 
 ― 
 
 1 
 
 ― 
 
 1 
    Financial instruments
 
 ― 
 
 ― 
 
 ― 
 
 15 
 
 15 
    Total other comprehensive income
 
 1 
 
 ― 
 
 1 
 
 15 
 
 16 
Comprehensive income
 222 
 (63)
 159 
 11 
 170 
See Notes to Condensed Consolidated Financial Statements.
 
 

 
SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
 
 
June 30, 
December 31, 
 
 
2014 
2013(1)
 
 
(unaudited) 
 
 
ASSETS
 
 
 
 
Current assets:
 
 
 
 
    Cash and cash equivalents
 21 
 27 
    Restricted cash
 
 4 
 
 6 
    Accounts receivable – trade, net
 
 300 
 
 266 
    Accounts receivable – other, net
 
 16 
 
 28 
    Due from unconsolidated affiliates
 
 1 
 
 1 
    Income taxes receivable
 
 12 
 
 32 
    Deferred income taxes
 
 ― 
 
 103 
    Inventories
 
 74 
 
 86 
    Regulatory balancing accounts, net
 
 776 
 
 556 
    Other regulatory assets
 
 34 
 
 29 
    Fixed-price contracts and other derivatives
 
 53 
 
 61 
    Other
 
 47 
 
 75 
        Total current assets
 
 1,338 
 
 1,270 
 
 
 
 
 
 
Other assets:
 
 
 
 
    Restricted cash
 
 29 
 
 25 
    Deferred taxes recoverable in rates
 
 764 
 
 788 
    Regulatory assets arising from fixed-price contracts and other derivatives
 
 52 
 
 63 
    Regulatory assets arising from pension and other postretirement
 
 
 
 
        benefit obligations
 
 105 
 
 106 
    Other regulatory assets
 
 935 
 
 991 
    Nuclear decommissioning trusts
 
 1,096 
 
 1,034 
    Sundry
 
 278 
 
 254 
        Total other assets
 
 3,259 
 
 3,261 
 
 
 
 
 
 
Property, plant and equipment:
 
 
 
 
    Property, plant and equipment
 
 14,845 
 
 14,346 
    Less accumulated depreciation and amortization
 
 (3,675)
 
 (3,500)
        Property, plant and equipment, net ($424 and $438 at June 30, 2014 and
            December 31, 2013, respectively, related to VIE)
 
 11,170 
 
 10,846 
Total assets
 15,767 
 15,377 
(1)
Derived from audited financial statements.
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 

 
SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
 
 
June 30, 
December 31, 
 
 
2014 
2013(1)
 
 
(unaudited) 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
    Short-term debt
$
 127 
$
 59 
    Accounts payable
 
 374 
 
 420 
    Due to unconsolidated affiliates
 
 29 
 
 39 
    Deferred income taxes
 
 108 
 
 ― 
    Dividends and interest payable
 
 40 
 
 39 
    Accrued compensation and benefits
 
 76 
 
 113 
    Current portion of long-term debt
 
 115 
 
 29 
    Fixed-price contracts and other derivatives
 
 38 
 
 38 
    Customer deposits
 
 68 
 
 71 
    Other
 
 299 
 
 271 
        Total current liabilities
 
 1,274 
 
 1,079 
Long-term debt ($320 and $325 at June 30, 2014 and December 31, 2013,
    respectively, related to VIE)
 
 4,577 
 
 4,525 
 
 
 
 
 
 
Deferred credits and other liabilities:
 
 
 
 
    Customer advances for construction
 
 39 
 
 34 
    Pension and other postretirement benefit obligations, net of plan assets
 
 134 
 
 132 
    Deferred income taxes
 
 1,902 
 
 2,021 
    Deferred investment tax credits
 
 23 
 
 24 
    Regulatory liabilities arising from removal obligations
 
 1,551 
 
 1,403 
    Asset retirement obligations
 
 751 
 
 861 
    Fixed-price contracts and other derivatives
 
 166 
 
 175 
    Deferred credits and other
 
 414 
 
 404 
        Total deferred credits and other liabilities
 
 4,980 
 
 5,054 
 
 
 
 
 
 
Commitments and contingencies (Note 11)
 
 
 
 
 
 
 
 
 
 
Equity:
 
 
 
 
    Common stock (255 million shares authorized; 117 million shares outstanding;
 
 
 
 
        no par value)
 
 1,338 
 
 1,338 
    Retained earnings
 
 3,521 
 
 3,299 
    Accumulated other comprehensive income (loss)
 
 (8)
 
 (9)
        Total SDG&E shareholder's equity
 
 4,851 
 
 4,628 
    Noncontrolling interest
 
 85 
 
 91 
        Total equity
 
 4,936 
 
 4,719 
Total liabilities and equity
 15,767 
 15,377 
(1)
Derived from audited financial statements.
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 

 
SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 
Six months ended
June 30, 
 
2014 
2013
 
(unaudited) 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
    Net income
 230 
 154 
    Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
        Depreciation and amortization
 
 261 
 
 241 
        Deferred income taxes and investment tax credits
 
 132 
 
 34 
        Plant closure (adjustment) loss
 
 (13)
 
 200 
        Fixed-price contracts and other derivatives
 
 (3)
 
 (5)
        Other
 
 (24)
 
 (9)
    Net change in other working capital components
 
 (231)
 
 (115)
    Changes in other assets
 
 37 
 
 (177)
    Changes in other liabilities
 
 19 
 
 6 
        Net cash provided by operating activities
 
 408 
 
 329 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
    Expenditures for property, plant and equipment
 
 (543)
 
 (446)
    Purchases of nuclear decommissioning trust assets
 
 (354)
 
 (327)
    Proceeds from sales by nuclear decommissioning trusts
 
 350 
 
 326 
    Decrease in restricted cash
 
 62 
 
 40 
    Increase in restricted cash
 
 (64)
 
 (38)
        Net cash used in investing activities
 
 (549)
 
 (445)
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
    Preferred dividends paid
 
 ― 
 
 (2)
    Issuances of long-term debt
 
 100 
 
 ― 
    Payments on long-term debt
 
 (20)
 
 (5)
    Increase in short-term debt, net
 
 68 
 
 53 
    Capital distribution made by Otay Mesa VIE
 
 (13)
 
 ― 
    Other
 
 ― 
 
 (4)
        Net cash provided by financing activities
 
 135 
 
 42 
 
 
 
 
 
Decrease in cash and cash equivalents
 
 (6)
 
 (74)
Cash and cash equivalents, January 1
 
 27 
 
 87 
Cash and cash equivalents, June 30
 21 
 13 
 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
 
 
 
 
    Interest payments, net of amounts capitalized
 98 
 94 
    Income tax payments, net of refunds
 
 12 
 
 19 
 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
 
 
 
 
    Nuclear facility plant reclassified to regulatory asset, net of depreciation and amortization
 ― 
 512 
    Accrued capital expenditures
 
 103 
 
 68 
    Increase in capital lease obligations for investment in property, plant and equipment
 
 60 
 
 ― 
    Dividends declared but not paid
 
 ― 
 
 1 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
SOUTHERN CALIFORNIA GAS COMPANY
 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
 
(Dollars in millions)
 
 
 
 
 
Three months ended June 30, 
Six months ended June 30, 
 
2014 
2013 
2014 
2013 
 
(unaudited) 
 
 
 
 
 
 
 
 
 
Operating revenues
$
 917 
$
 904 
$
 2,002 
$
 1,887 
Operating expenses
 
 
 
 
 
 
 
 
    Cost of natural gas
 
 321 
 
 303 
 
 829 
 
 757 
    Operation and maintenance
 
 337 
 
 316 
 
 642 
 
 622 
    Depreciation and amortization
 
 107 
 
 80 
 
 212 
 
 180 
    Franchise fees and other taxes
 
 30 
 
 26 
 
 68 
 
 66 
        Total operating expenses
 
 795 
 
 725 
 
 1,751 
 
 1,625 
Operating income
 
 122 
 
 179 
 
 251 
 
 262 
Other income, net
 
 3 
 
 3 
 
 7 
 
 7 
Interest expense
 
 (16)
 
 (18)
 
 (33)
 
 (35)
Income before income taxes
 
 109 
 
 164 
 
 225 
 
 234 
Income tax expense
 
 (28)
 
 (45)
 
 (66)
 
 (69)
Net income
 
 81 
 
 119 
 
 159 
 
 165 
Preferred dividend requirements
 
 (1)
 
 (1)
 
 (1)
 
 (1)
Earnings attributable to common shares
 80 
 118 
 158 
 164 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 

 
SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions)
 
Pretax 
Income Tax 
Net-of-Tax 
 
Amount
(Expense) Benefit
Amount
 
Three months ended June 30, 2014 and 2013 
 
(unaudited)
2014:
 
 
 
 
 
 
Net income/Comprehensive income
 109 
 (28)
 81 
2013:
 
 
 
 
 
 
Net income
 164 
 (45)
 119 
Other comprehensive income:
 
 
 
 
 
 
   Financial instruments
 
 1 
 
 ― 
 
 1 
   Total other comprehensive income
 
 1 
 
 ― 
 
 1 
Comprehensive income
 165 
 (45)
 120 

 
Six months ended June 30, 2014 and 2013 
 
(unaudited)
2014:
 
 
 
 
 
 
Net income/Comprehensive income
 225 
 (66)
 159 
2013:
 
 
 
 
 
 
Net income
 234 
 (69)
 165 
Other comprehensive income:
 
 
 
 
 
 
   Financial instruments
 
 1 
 
 ― 
 
 1 
   Total other comprehensive income
 
 1 
 
 ― 
 
 1 
Comprehensive income
 235 
 (69)
 166 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 

 
SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
 
 
June 30, 
December 31, 
 
 
2014 
2013(1)
 
 
(unaudited)
 
 
ASSETS