SCHEDULE 14C INFORMATION

Information Statement Pursuant to Section 14(c)

of the Securities Exchange Act of 1934 (Amendment No.)

Check the appropriate box:

Preliminary Information Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2)) 
Definitive Information Statement

Southern California Gas Company

(Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check all boxes that apply):

No fee required
Fee paid previously with preliminary materials
Fee computed on table in exhibit required by Item 25(b) of Schedule 14A (17 CFR 240.14a-101) per Item 1 of this Schedule and Exchange Act Rules 14c-5(g) and 0-11

 

Southern California Gas Company

 

NOTICE OF

ANNUAL SHAREHOLDERS MEETING

 

The Southern California Gas Company (SoCalGas or the company) 2023 annual meeting of shareholders (Annual Shareholders Meeting) will be held on May 31, 2023, at 10 a.m., local time, at 488 8th Avenue, San Diego, California. SoCalGas is an indirect subsidiary of Sempra Energy, doing business as Sempra.

The Annual Shareholders Meeting will be held for the following purposes:

(1) To elect the four director nominees named in the accompanying Information Statement.
(2) To obtain advisory approval of our executive compensation.
(3) To obtain advisory approval of how often shareholders will vote on an advisory basis on our executive compensation.
(4) To transact any other business that may properly come before the meeting.

The Annual Shareholders Meeting will be a business-only meeting. It will not include any presentations by management and the company does not encourage shareholder attendance. Additional information about the company is included in the 2022 Annual Report to Shareholders, which is being mailed to shareholders together with this Notice of Annual Shareholders Meeting and the accompanying Information Statement.

Shareholders of record at the close of business on April 3, 2023, are entitled to notice of, to vote at and to attend the Annual Shareholders Meeting and any adjournment or postponement thereof. Shareholders who decide to attend the meeting and own shares registered in their names will be admitted upon verification of record share ownership. Shareholders who decide to attend the meeting and own shares through banks, brokers or other nominees must present proof of beneficial share ownership (such as the most recent account statement prior to April 3, 2023) to be admitted.

Jennifer A. DeMarco
Corporate Secretary

Important Notice Regarding the Availability of Information Statement Materials for the
Annual Shareholders Meeting to be Held on May 31, 2023.

The Information Statement
and the Annual Report to Shareholders are available on the Internet at
http://www.astproxyportal.com/ast/25974.

 

 

Information Statement

 

WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY

Southern California Gas Company is providing this Information Statement in connection with the 2023 annual meeting of its shareholders (Annual Shareholders Meeting) to be held on May 31, 2023, at 10 a.m., local time, at 488 8th Avenue, San Diego, California. The Notice of Annual Shareholders Meeting, this Information Statement and the 2022 Annual Report to Shareholders are being mailed to shareholders beginning on or about April 25, 2023.

The Company

Southern California Gas Company, which we refer to as SoCalGas, the company, we, us or our, is an indirect subsidiary of Sempra Energy, doing business and referred to as Sempra. SoCalGas’ principal executive offices are located at 555 West 5th Street, Los Angeles, California 90013. Its telephone number is (213) 244-1200.

Additional information about the company is included in the 2022 Annual Report to Shareholders (2022 Annual Report) jointly produced by Sempra, SoCalGas and Sempra’s other indirect subsidiary with U.S. publicly traded securities, San Diego Gas & Electric Company (SDG&E), which is being mailed to shareholders together with this Information Statement. The 2022 Annual Report includes the company’s Annual Report on Form 10-K for the year ended December 31, 2022 (2022 Form 10-K), which has been filed with the U.S. Securities and Exchange Commission (SEC) jointly by Sempra, SoCalGas and SDG&E. These documents, as well as other documents SoCalGas files with the SEC, can be viewed on the Internet on the SEC’s website at www.sec.gov and are available on the Sempra website at www.sempra.com under the “Investors” and “SEC Filings” tabs. The company also will furnish a copy of its 2022 Form 10-K (excluding exhibits, except those that are specifically requested) without charge to any shareholder who so requests by writing to the company’s Corporate Secretary at 488 8th Avenue, San Diego, California 92101.

All website references in this Information Statement are inactive textual references, and the information on, or that can be accessed through, such websites does not constitute a part of this Information Statement.

OUTSTANDING SHARES AND VOTING RIGHTS

The SoCalGas Board of Directors has fixed April 3, 2023, as the record date for determining the shareholders of SoCalGas entitled to notice of and to vote at the Annual Shareholders Meeting and any adjournment or postponement thereof. On that date, SoCalGas’ outstanding shares consisted of 91,300,000 shares of common stock and 862,043 shares of preferred stock. All SoCalGas common stock and 50,970 shares of SoCalGas preferred stock are owned by Pacific Enterprises (PE), a wholly owned direct subsidiary of Sempra.

In electing directors, each share is entitled to one vote on each of the four director positions. Shareholders will be entitled to cumulate votes for the election of directors if any shareholder gives notice of an intention to do so at the meeting and prior to the voting. If that notice is given, all shareholders may cast all of their votes for any one director candidate whose name has been placed in nomination prior to the voting or may distribute their votes among two or more such candidates in such proportions as they may determine. In voting on any other matters that may be considered at the Annual Shareholders Meeting and any adjournment or postponement thereof, each share is entitled to one vote. The company does not expect there to be any broker non-votes at the Annual Shareholders Meeting. However, if there are any broker non-votes, each will be counted for purposes of determining the presence or absence of a quorum for the transaction of business at the Annual Shareholders Meeting and any adjournment or postponement thereof, but will not be considered a vote cast with respect to the election of directors or any other proposal for which it occurs.

The shares of SoCalGas owned by PE and indirectly owned by Sempra represent over 99% of SoCalGas’ outstanding shares and the number of votes entitled to be cast on the matters to be considered at the Annual Shareholders Meeting and any adjournment or postponement thereof. PE has advised SoCalGas that it intends to vote “FOR” each of the four nominees named in this Information Statement for election to the SoCalGas Board of Directors, “FOR” the advisory approval of our executive compensation, and for “THREE YEARS” on the advisory approval of how often our shareholders will vote on an advisory basis on our executive compensation.

1

 

GOVERNANCE OF THE COMPANY

Generally, the business and affairs of SoCalGas are managed and all corporate powers are exercised by or under the direction of its Board of Directors in accordance with California General Corporation Law and SoCalGas’ Restated Articles of Incorporation and Bylaws, as amended.

Board of Directors

Board Meetings; Annual Shareholders Meeting

During 2022, the Board of Directors of SoCalGas held 18 meetings and each director attended at least 75% of such meetings that occurred when he or she was a director, except that Lisa Alexander did not attend seven special meetings of the board because the sole topic of such meetings was a litigation matter in which she served as a witness, resulting in Ms. Alexander’s attendance at 61% of the board’s total number of meetings in 2022.

The Annual Shareholders Meeting will be a business-only meeting without presentations by management. The company does not encourage attendance at the meeting by public shareholders. The Board of Directors encourages all nominees standing for election as directors to attend the Annual Shareholders Meeting. All directors in office as of the SoCalGas 2022 annual shareholders meeting attended that meeting. You may request directions to the location of the Annual Shareholders Meeting if you choose to attend in person by contacting the company’s Corporate Secretary at 488 8th Avenue, San Diego, California 92101.

Leadership Structure

Kevin C. Sagara, Sempra’s Executive Vice President and Group President responsible for overseeing Sempra’s California utility businesses, serves as non-executive Chairman of our board. The board does not have an independent lead director. As a subsidiary of Sempra with none of its classes of stock listed on a national securities exchange, SoCalGas is not subject to stock exchange listing standards requiring independent directors and various board committees and, accordingly, has not established independence standards for its directors. All of the directors of the company are also officers of the company or of Sempra and, as a result, none qualifies as an independent director under the standards established by the New York Stock Exchange (NYSE) or any other national securities exchange for boards of directors or committees thereof. The SoCalGas Board of Directors does not maintain an audit, compensation or nominating committee.

Nominees for election as directors are determined by the SoCalGas Board of Directors, and the board will not consider director candidates recommended by shareholders other than its direct and indirect parent companies. The board currently consists of Scott D. Drury, Chief Executive Officer (CEO) of SoCalGas, and three officers of Sempra with broad professional and business expertise. The board has nominated the four current directors for reelection to the board at the Annual Shareholders Meeting. Although Sempra and SoCalGas promote diversity in hiring employees and in the appointment of their officers, diversity is not further considered in selecting the individuals who serve as directors of SoCalGas.

All but one of the members of Sempra’s Board of Directors is an independent director under NYSE independence standards, and the Audit, Compensation and Talent Development, Corporate Governance and Safety, Sustainability and Technology Committees of Sempra’s Board of Directors are all entirely composed of independent directors. The Sempra Board of Directors also has adopted a Code of Business Conduct and Ethics for Directors and Principal and Executive Officers that applies to some of the current directors and certain of the executive officers of SoCalGas, and all directors and officers of SoCalGas also are subject to a Code of Business Conduct that applies to all employees of SoCalGas and Sempra. If either (i) a provision of such Code of Business Conduct and Ethics for Directors and Principal and Executive Officers is amended and the amendment relates to any element of the code of ethics definition set forth in Item 406(b) of SEC Regulation S-K or (ii) a waiver, including an implicit waiver, from a provision of such Code of Business Conduct and Ethics for Directors and Principal and Executive Officers is granted to our principal executive officer, principal financial officer or principal accounting officer or controller and the waiver relates to one or more of the elements of the code of ethics definition set forth in Item 406(b) of SEC Regulation S-K, then we intend to describe on our website under the “About Us” and “Management Team” tabs the date and nature of any such amendment or waiver and, if applicable, the name of the person to whom the waiver was granted, or if we do not make such disclosure on our website, we will include it in a current report on Form 8-K filed with the SEC.

Board Role in Risk Oversight

Assessing and monitoring risks and risk management are among the functions of the SoCalGas Board of Directors. SoCalGas’ management, including the company’s Vice President–Risk Management and Chief Risk Officer, is responsible for identifying and assessing risk, and monitoring and reporting to the SoCalGas Board of Directors on the company’s plans to manage risk. Risk oversight at the management level is governed by the Enterprise Risk Management Committee, which is composed of senior management and chaired by the Chief Risk Officer and is responsible for establishing, overseeing, periodically reviewing and working to improve upon enterprise risk management policies and practices across SoCalGas. Other management-level governing bodies also are tasked with reviewing, monitoring and mitigating risk, including SoCalGas’ Energy Procurement Risk Management Committee, which is composed of members of senior management and

2

 

chaired by the Chief Financial Officer and is responsible for the adoption, oversight, periodic review and enforcement of a comprehensive risk management framework governing activities conducted by the company’s gas acquisition department. The board fulfills its risk oversight function by, among other things, reviewing and overseeing the company’s strategic, financial and operating plans; receiving and reviewing other direct reports from management and discussing major risk categories with management on at least an annual basis or as needed due to changes in risk profiles; receiving periodic updates from the Chief Risk Officer; and staying informed about developments in our industry and other current events that may impact the company. The board believes that its leadership structure, with Sempra’s Executive Vice President and Group President responsible for overseeing Sempra’s California utility businesses serving as Chairman of our Board of Directors, supports the board’s risk oversight function by facilitating the allocation of risk-related functions between the board and management, with management having responsibility for implementing and supervising risk management processes and the board having responsibility for overseeing these matters.

Related Person Transactions

SEC rules require that SoCalGas describe any transaction since the beginning of 2022 or any currently proposed transaction, in each case involving more than $120,000, in which the company was or will be a participant and any of its directors, director nominees, executive officers, persons or entities known by the company to be a beneficial owner of more than 5% of the company’s common stock, or any member of their respective immediate families, had or will have a direct or indirect material interest. The SoCalGas Board of Directors has adopted a written policy that requires the board to review, and approve, as appropriate, any such “related person transaction” that may require reporting. When evaluating any such transaction, the board focuses on a variety of factors on a case-by-case basis, including, among other things, the identity of the related person, the nature and terms of the transaction, the interest of the related person in the transaction and the dollar amount involved. There have been no transactions requiring such review since the beginning of 2022.

Communications with the Board

Shareholders and other interested parties who wish to communicate with the SoCalGas Board of Directors or any individual director may do so by writing to the company’s Corporate Secretary at 488 8th Avenue, San Diego, California 92101 and addressing the communication to the SoCalGas Board of Directors or the individual director.

Compensation of Directors

All of our directors are employees of SoCalGas or Sempra and are not otherwise compensated for their service on the SoCalGas Board of Directors.

3

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Representatives of Deloitte & Touche LLP, the independent registered public accounting firm for SoCalGas, are expected to attend the Annual Shareholders Meeting. They will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions from shareholders. Deloitte & Touche LLP or its predecessors have served as the independent registered public accounting firm for SoCalGas or its parent company continuously since 1937. Deloitte & Touche LLP also serves as the independent registered public accounting firm for Sempra and SDG&E.

The following table shows fees paid to Deloitte & Touche LLP for services provided to SoCalGas in 2022 and 2021:

    2022   2021  
(Dollars in Thousands)   Fees   % of Total   Fees % of Total  
Audit fees                        
Financial statements and internal controls audit     $3,549           $3,486      
Regulatory filings and related services     130                
Total audit fees     3,679   92 %     3,486 91 %  
Audit-related fees                        
Employee benefit plan audits     287           309      
Total audit-related fees     287   7 %     309 8 %  
Tax fees(A)     17   1 %     33 1 %  
All other fees(B)             8    
Total fees     $3,983   100 %     $3,836 100 %  
(A) Tax fees relate to tax consulting and compliance services.
(B) All other fees relate to training and conferences.

The Audit Committee of Sempra’s Board of Directors is directly responsible for the appointment, compensation, retention and oversight, including the oversight of the audit fee negotiations, of the independent registered public accounting firm for Sempra and its subsidiaries, including SoCalGas. As a matter of good corporate governance, the SoCalGas Board of Directors also reviewed the performance of Deloitte & Touche LLP and concurred with the determination by Sempra’s Audit Committee to retain the firm as its independent registered public accounting firm for 2023. Sempra’s Board of Directors has determined that each member of its Audit Committee is an independent director and is financially literate, and that Jack T. Taylor, who chairs the committee, and Cynthia L. Walker, who is a member of the committee, are audit committee financial experts as defined by the rules of the SEC.

Except where pre-approval is not required by SEC rules, Sempra’s Audit Committee pre-approves all audit, audit-related and permissible non-audit services provided by Deloitte & Touche LLP for Sempra and its subsidiaries, including SoCalGas, which includes all services provided by Deloitte & Touche LLP for SoCalGas in 2022 and 2021. The committee’s pre-approval policies and procedures provide for the general pre-approval of specific types of services and give detailed guidance to management as to the services that are eligible for general pre-approval, and they require specific pre-approval of all other permitted services. For both types of pre-approval, the committee considers whether the services to be provided are consistent with maintaining the firm’s independence. The committee’s policies and procedures also delegate authority to the Chair of the committee to address any requests for pre-approval of services between committee meetings, with any pre-approval decisions to be reported to the committee at its next scheduled meeting.

4

 

AUDIT REPORT

The Board of Directors of SoCalGas has reviewed and discussed with the company’s management the audited financial statements of the company for the year ended December 31, 2022.

Sempra’s Audit Committee has discussed with Deloitte & Touche LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the U.S. Securities and Exchange Commission. Sempra’s Audit Committee also has received from Deloitte & Touche LLP the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding its communications with Sempra’s Audit Committee concerning Deloitte & Touche LLP’s independence, and Sempra’s Audit Committee has discussed Deloitte & Touche LLP’s independence with the firm.

Based on these considerations, the Board of Directors of SoCalGas directed that the audited financial statements of SoCalGas be included in its Annual Report on Form 10-K for the year ended December 31, 2022, for filing with the U.S. Securities and Exchange Commission.

 

BOARD OF DIRECTORS

Kevin C. Sagara, Chair

Diana L. Day

Scott D. Drury

Lisa Larroque Alexander

5

 

Share Ownership

All of the outstanding shares of SoCalGas’ common stock are owned by PE and all of the outstanding shares of PE’s common stock are owned by Sempra. None of the directors or officers of SoCalGas owns any shares of SoCalGas’ preferred stock, and SoCalGas is unaware of any person, other than PE, who beneficially owns more than 5% of its outstanding shares of preferred stock.

The following table shows the number of shares of Sempra common stock beneficially owned as of April 3, 2023, by each director of SoCalGas, by each executive officer of SoCalGas named in the executive compensation tables in this Information Statement (named executive officers), and by all directors and executive officers of SoCalGas as of the date of this Information Statement as a group. The shares of common stock beneficially owned by each of our directors and named executive officers and by our directors and executive officers as a group in each case total less than 1% of Sempra’s outstanding shares of common stock. In calculating these percentages, shares under the heading “Phantom Shares” are not included because these phantom shares (i) cannot be voted and (ii) may only be settled for cash or cannot be settled for shares of Sempra common stock within 60 days after April 3, 2023. In addition, in calculating these percentages we used the 314,650,353 shares of Sempra common stock that were outstanding as of April 3, 2023.

Name   Beneficial
Holdings(A)
  Shares Subject
to Exercisable
Options(B)
  Total Without
Phantom
Shares
  Phantom
Shares(C)
  Total Including
Phantom Shares
 
David J. Barrett   1,638     1,638   158   1,796  
Maryam S. Brown   4,557     4,557   2,103   6,660  
Jimmie I. Cho   4,296     4,296   4,948   9,244  
Diana L. Day   4,147     4,147   335   4,482  
Mia L. DeMontigny   2,955     2,955     2,955  
Scott D. Drury   3,688     3,688   1,254   4,942  
Lisa Larroque Alexander   1,752     1,752     1,752  
Kevin C. Sagara   14,120   34,484   48,604   14,212   62,816  
Directors and Executive Officers as a Group
(8 persons)
  37,153   34,484   71,637   23,010   94,647  
(A) None of our directors or executive officers beneficially owned any shares of Sempra’s 4.875% Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock, Series C, as of April 3, 2023; therefore, no such shares are shown in this table.
(B) Shares that may be acquired through the exercise of stock options that currently are exercisable or will become exercisable within 60 days after April 3, 2023.
(C) Phantom shares represent deferred compensation deemed invested in shares of Sempra common stock. These phantom shares track the performance of Sempra common stock but cannot be voted and may only be settled for cash, except for 4,948.10 phantom shares deferred by Mr. Cho and 239.92 phantom shares deferred by Ms. Day in connection with the vesting of certain performance-based restricted stock units, which also cannot be voted but may only be settled for shares of our common stock following separation of service from the company. All phantom shares are either fully vested or will vest within 60 days after April 3, 2023.

6

 

Based on a review of filings made under Section 13(g) of the Securities Exchange Act of 1934, as amended (Exchange Act), as of December 31, 2022, the following table shows each person or entity known by us to be a beneficial owner of more than 5% of Sempra common stock:

Name and Address of Beneficial Owner   Shares of Sempra
Common Stock
  Percent of Class(E)  
BlackRock, Inc.(A)
55 East 52nd Street
New York, NY 10055
  29,730,837   9.4%  
The Vanguard Group(B)
100 Vanguard Blvd.
Malvern, PA 19355
  28,388,731   9.0%  
Capital International Investors, division of
Capital Research and Management Company(C)
333 South Hope Street, 55th Floor
Los Angeles, CA 90071
  23,557,402   7.5%  
State Street Corporation(D)
State Street Financial Center
1 Lincoln Street
Boston, MA 02111
  18,020,979   5.7%  
(A) The information regarding BlackRock, Inc. is based solely on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on January 24, 2023 reflecting shares of our common stock beneficially owned as of December 31, 2022 (the BlackRock 13G/A). According to the BlackRock 13G/A, includes sole voting power with respect to 26,947,409 shares and sole dispositive power with respect to 29,730,837 shares.
(B) The information regarding The Vanguard Group is based solely on a Schedule 13G/A filed by The Vanguard Group with the SEC on February 9, 2023 reflecting shares of our common stock beneficially owned as of December 30, 2022 (the Vanguard 13G/A). According to the Vanguard 13G/A, includes shared voting power with respect to 573,466 shares, sole dispositive power with respect to 26,952,457 shares and shared dispositive power with respect to 1,436,274 shares.
(C) The information regarding Capital International Investors, a division of Capital Research and Management Company, as well as certain of its investment management subsidiaries and affiliates (Capital), is based solely on a Schedule 13G/A filed by Capital with the SEC on February 13, 2023 reflecting shares of our common stock beneficially owned as of December 30, 2022 (the Capital 13G/A). According to the Capital 13G/A, includes sole voting power with respect to 23,469,861 shares of our common stock and sole dispositive power with respect to 23,557,402 shares.
(D) The information regarding State Street Corporation is based solely on a Schedule 13G/A filed by State Street Corporation with the SEC on February 7, 2023 reflecting shares of our common stock beneficially owned as of December 31, 2022 (the State Street 13G/A). According to the State Street 13G/A, includes shared voting power with respect to 14,927,600 shares and shared dispositive power with respect to 18,006,339 shares.
(E) The percentages are calculated based on (i) the number of shares of our common stock reflected as being beneficially owned by each beneficial owner in its filing made under Section 13(g) of the Exchange Act as described in the other footnotes to this table, and (ii) 314,650,353 shares of our common stock outstanding as of April 3, 2023.

7

 

PROPOSAL 1: ELECTION OF THE FOUR DIRECTOR NOMINEES NAMED IN THIS
INFORMATION STATEMENT

At the Annual Shareholders Meeting, four directors will be elected to serve in office until the next annual shareholders meeting and until their respective successors have been elected and qualified or until their earlier resignation or removal. The four director candidates receiving the highest number of affirmative votes will be elected as directors of the company. Abstentions and votes against any director, if any, will have no effect on the outcome of the election of directors (but if you indicate “ABSTAIN” on any or all nominees, your vote will be counted for purposes of determining the presence or absence of a quorum for the transaction of business at the Annual Shareholders Meeting and any adjournment or postponement thereof).

The following sets forth information, as of the mailing date of this Information Statement, regarding the four director nominees named in this Information Statement for election at the Annual Shareholders Meeting. This information includes biographical information, business experience and service on other public company boards. In addition, we discuss below the specific experience, qualifications, attributes and skills that make each director candidate a well-qualified and valuable board member.

 

Diana L. Day, 58, became a director of SoCalGas in October 2022. She has been a Deputy General Counsel of Sempra since October 2022. She served as Senior Vice President and General Counsel of SDG&E from August 2020 to October 2022, Vice President and General Counsel of SDG&E from January 2019 to August 2020, and Chief Risk Officer of SDG&E from August 2019 to October 2022. Prior to that, she was Acting General Counsel of SDG&E from September 2017 to January 2019, and Vice President – Enterprise Risk Management and Compliance for SDG&E and SoCalGas from 2014 to January 2019. Ms. Day has held various other leadership positions since she joined the Sempra family of companies in 1997.

Ms. Day’s extensive expertise in governance matters and other aspects of business and corporate law makes her a valuable addition to our board.

     
 

Scott D. Drury, 58, became CEO and a director of SoCalGas in August 2020. From January 2017 to July 2020, he served as President of SDG&E. Mr. Drury was SDG&E’s Chief Energy Supply Officer from 2015 to 2016 and was SDG&E’s Vice President, Diversity and Inclusion from 2011 to 2015. Prior to that, he held several other senior-level positions during his more than 35-year tenure with the Sempra family of companies.

Mr. Drury has served our company and its affiliates in a broad range of management roles. His extensive and comprehensive management experience makes him a valuable member of our board.

     
 

Lisa Larroque Alexander, 49, became a director of SoCalGas in March 2019. She has been Senior Vice President, Corporate Affairs and Chief Sustainability Officer of Sempra since April 2020. Before that, Ms. Larroque Alexander served as Vice President–Corporate Communications and Sustainability of Sempra from May 2018 to April 2020, Vice President–Customer Solutions, Communications and Environmental Strategy of SoCalGas from April 2018 to May 2018, Vice President–Customer Solutions and Communications of SoCalGas from May 2016 to April 2018, and in several other positions since joining SoCalGas in 2011. Previously, Ms. Larroque Alexander was a management consultant to the energy and utilities sector, and prior to that, held leadership positions in strategy, marketing and consulting.

Ms. Larroque Alexander has served our company and its affiliates in a broad range of roles and her extensive experience and in-depth understanding of the company’s business make her a valuable member of our board.

     
 

Kevin C. Sagara, 62, became a director and non-executive Chairman of SoCalGas in June 2020. He has been Executive Vice President and Group President of Sempra since June 2020. Prior to that, he was executive Chairman and CEO of SDG&E from September 2018 to June 2020. Mr. Sagara served as President and manager of Sempra Renewables, LLC from October 2013 to September 2018, and has held other senior-level positions with the Sempra family of companies over the last 25 years. Mr. Sagara has served as a director of SDG&E since September 2018 and as non-executive Chairman of SDG&E since June 2020.

Mr. Sagara has served our company and its affiliates in a broad range of management roles. His extensive and comprehensive management and transactional experience makes him a valuable member of our board.

8

 

PROPOSAL 2: ADVISORY APPROVAL OF OUR EXECUTIVE COMPENSATION

Pursuant to Section 14A of the Exchange Act, we are asking our shareholders to approve, on an advisory basis, a resolution on the compensation of the named executive officers as reported in this Information Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to express their views on our 2022 executive compensation program. We currently provide our shareholders the opportunity to vote on a say-on-pay proposal every three years, and as a result, the next vote on a say-on-pay proposal following the Annual Shareholders Meeting is expected to occur at our 2026 Annual Shareholders Meeting, subject to the voting results on Proposal 3 described below and, ultimately, our Board of Directors’ determination of the frequency of future advisory votes on our executive compensation.

We are asking our shareholders to indicate their support for the compensation of our named executive officers as described in this Information Statement by voting in favor of the following resolution:

“RESOLVED, that, as an advisory matter, the shareholders of Southern California Gas Company approve the compensation paid to the company’s named executive officers as disclosed in the company’s 2023 Information Statement pursuant to Item 402 of Regulation S-K promulgated by the U.S. Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.”

Approval requires the receipt of “FOR” votes constituting a majority of the shares represented and voting at the Annual Shareholders Meeting at which a quorum is present, and the approving majority also must represent more than 25% of our outstanding shares of voting stock. If you indicate “ABSTAIN,” your vote will be counted for purposes of determining the presence or absence of a quorum for the transaction of business at the Annual Shareholders Meeting and any adjournment or postponement thereof, but will not be considered a vote cast with respect to this proposal. As a result, abstentions should have no effect on the outcome of the vote on this proposal, unless they result in a failure to obtain affirmative votes representing more than 25% of our outstanding shares of voting stock.

This say-on-pay vote is advisory only and will not be binding on the company.

9

 

PROPOSAL 3: ADVISORY APPROVAL OF HOW OFTEN SHAREHOLDERS WILL VOTE
ON AN ADVISORY BASIS ON OUR EXECUTIVE COMPENSATION

Pursuant to Section 14A of the Exchange Act, we are asking shareholders to vote, on an advisory basis, on whether future advisory votes on executive compensation of the nature reflected in Proposal 2 above should occur every year, every two years or every three years. This proposal, commonly known as a “say-when-on-pay” proposal, gives our shareholders the opportunity to express their views on how often shareholders will vote on our executive compensation. We currently provide our shareholders the opportunity to vote on a say-on-pay proposal every three years.

Shareholders will be able to select one of four choices when voting on this proposal: “ONE YEAR,” “TWO YEARS,” “THREE YEARS” or “ABSTAIN.” If you indicate “ABSTAIN,” your vote will be counted for purposes of determining the presence or absence of a quorum for the transaction of business at the Annual Shareholders Meeting, but will not be considered a vote cast with respect to this proposal. The option of “ONE YEAR,” “TWO YEARS” or “THREE YEARS” that receives the greatest number of affirmative votes will be the shareholders’ advisory recommendation of the frequency of future advisory votes on executive compensation. As a result, abstentions should have no effect on the outcome of the vote on this proposal.

This say-when-on-pay proposal is advisory only and will not be binding on the company.

10

 

COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE SUMMARY

What information is provided in this section of the Information Statement?

In this Compensation Discussion and Analysis, we:

  Outline our compensation philosophy and program goals
Discuss how the SoCalGas Board of Directors determines executive pay
  Describe each element of executive pay, including base salaries, short-term and long-term incentives and executive benefits
  Describe the rationale for each element of executive pay in the context of our compensation philosophy and program goals

Who are the named executive officers?

This Compensation Discussion and Analysis focuses on the compensation of the following individuals, who we collectively refer to as our named executive officers:

Named Executive Officer Title
Scott D. Drury Chief Executive Officer
Maryam S. Brown President
Jimmie I. Cho Chief Operating Officer
David J. Barrett Senior Vice President and General Counsel
Mia L. DeMontigny Senior Vice President, Chief Financial Officer, Chief Accounting Officer and Treasurer

Table 1

What is our executive compensation philosophy and what are the goals of our executive compensation program?

Our Board of Directors sets the company’s executive pay philosophy, which emphasizes:

  Performance-based incentives aligned with shareholder value creation
  Alignment of pay with short-term and long-term company performance
  Balance between short-term and long-term incentives
  More pay tied to performance at higher levels of responsibility

Our executive compensation program goals include:

  Aligning executive compensation with the interests of shareholders and other stakeholders
  Linking executive compensation to both annual and long-term business and individual performance
  Motivating executives to achieve superior performance
  Attracting and retaining executives with outstanding ability and experience who demonstrate high standards of integrity and ethics

Elements of our 2022 executive pay program that exemplify our pay-for-performance philosophy and goals include:

  More than 70% of our CEO’s target total direct pay is in “at-risk” compensation in the form of a performance-based annual bonus and long-term equity-based incentives
  Performance measures for the performance-based annual bonus are directly linked to the financial and operational performance of SoCalGas and Sempra
  Long-term incentive compensation is primarily delivered through performance-based restricted stock units. The performance measures for the annual performance-based restricted stock unit awards are based on Sempra’s relative total shareholder return (TSR) and earnings per common share (EPS) growth

We believe this compensation philosophy helps us to attract, motivate and retain key executive talent and promote strong, sustainable long-term performance.

What compensation governance measures are in place?

We believe our compensation practices, which are highlighted below, reflect our pay-for-performance philosophy and program goals and our commitment to sound corporate governance.

11

 

What We Do:

  We use multiple performance measures in our annual and long-term incentive plans to link pay to performance and shareholder interests
    Our performance-based annual bonuses are based on performance measures related to safety and safety management systems, customer service and other stakeholder goals, as well as Sempra’s and SoCalGas’ earnings (as adjusted for annual bonus purposes, which is referred to as EICP Earnings, a non-GAAP financial measure) (see “Compensation Components—Performance-Based Annual Bonuses” below for additional information)
    We use Sempra’s relative TSR and Sempra’s EPS growth as the primary performance measures for long-term equity-based incentives
We review external market data when making compensation decisions
An independent advisor has conducted a risk assessment of our executive compensation program
  Our clawback policy requires the forfeiture, recovery or reimbursement of incentive plan awards or compensation as required by applicable law or any policy implemented or maintained by the company pursuant to NYSE rules (or any applicable rules or requirements of a national securities exchange or national securities association on which any securities of the company are listed), and compensation may be recouped if the company determines that the results on which the compensation was paid were not actually achieved, or if an employee’s fraudulent or intentional misconduct materially affects the operations or financial results of the company
  Officers are subject to share ownership guidelines ranging from three times base pay for SoCalGas’ CEO, President, and Chief Operating Officer to one times base pay for SoCalGas’ vice presidents (see “Share Ownership Guidelines” below for additional information)
Executive perquisites constitute a small portion of our total executive rewards program
  The Sempra Energy 2019 Long-Term Incentive Plan (2019 LTIP), in which SoCalGas employees participate, includes “double-trigger” equity vesting upon a change in control of Sempra (see “Severance and Change in Control Arrangements” below for additional information)

What We Don’t Do:

  Long-term incentive plan awards are granted from a Sempra shareholder-approved plan that prohibits stock option repricing and cash buyouts without shareholder approval
  All employees and directors are prohibited from engaging in any hedging transaction with respect to any Sempra or SoCalGas equity securities, and all officers and directors are prohibited from pledging any Sempra or SoCalGas securities
  No excise tax gross-ups are provided for in our named executive officers’ severance or equity award agreements, and no named executive officers received any excise tax gross-ups in 2022
  No “single-trigger” cash severance benefits are provided upon a change in control (see “Severance and Change in Control Arrangements” below for additional information)
  None of the named executive officers has an employment contract
  None of the named executive officers receives uncapped incentives
  No executive officer, including SoCalGas’ CEO, participates in decisions regarding his or her own compensation

Determining Executive Pay

How is external market data used in determining pay?

External pay data is used to help align executive compensation levels with the labor market. The SoCalGas Board of Directors views the labor market for our most senior positions as a nationwide, broad cross-section of companies in various industries, and recognizes that this labor market varies by position. The board reviews general industry and utility industry market pay data from multiple surveys. Information about specific surveys or specific companies in the survey data is not provided to the board.

What is the role of internal equity in determining pay?

Internal pay equity principles are used to determine the compensation for positions that are unique or difficult to compare to market data. Internal equity is also considered in establishing compensation for positions considered to be equivalent in responsibilities and importance, especially where precise external data is not available.

What is SoCalGas management’s role in determining pay?

SoCalGas’ CEO is a member of the Board of Directors and, as such, he attends each SoCalGas board meeting. Our human resources department assists the board by preparing compensation information and analyses for its consideration. Our accounting, finance and law departments also support the board with respect to compensation-related matters as needed. The board members generally receive presentation materials in advance of board meetings.

12

 

Our executive officers do not determine or approve any element or component of their own compensation, nor are they present during the board’s deliberations regarding their own compensation. This includes base salary, performance-based annual bonus, long-term equity-based incentives and all other aspects of compensation. The board seeks our CEO’s views on the performance of our other executive officers, and he makes pay recommendations for these officers.

Are the results of the most recent shareholder advisory vote on executive compensation considered in determining executive pay?

Our shareholders presently have the opportunity to cast an advisory vote on our executive compensation, or a “say-on-pay” vote, once every three years at our annual shareholders meetings. At the 2020 annual meeting of our shareholders, which was the last time a say-on-pay vote occurred prior to the Annual Shareholders Meeting, the say-on-pay proposal received approval from every share that was voted on the proposal at the meeting, which were all voted by our controlling shareholder PE. The Board of Directors believes this high level of approval affirms our controlling shareholder’s support for our approach to executive compensation, and therefore has not significantly altered our compensation policies or practices since 2020.

MANAGING RISK IN COMPENSATION PLANS

How does the SoCalGas Board of Directors seek to mitigate risk in the company’s executive compensation program?

The SoCalGas Board of Directors seeks to mitigate risk in our executive compensation program by balancing short-term and long-term incentives and linking a higher proportion of total compensation to long-term incentives. Risk is also managed through incentive plan design and the selection of performance measures.

Our compensation risk management is further strengthened by our clawback policy, which applies to short-term and long-term incentive plans and is included in executive and non-executive award agreements, our anti-hedging and pledging policies and our executive share ownership guidelines, each of which is discussed in further detail elsewhere in this Compensation Discussion and Analysis.

An independent consultant, Exequity, conducted a risk assessment of our 2022 compensation programs. Exequity’s findings concluded that our compensation programs do not create risks that are likely to have a material adverse impact on the company.

What are some of the risk mitigation features in the company’s executive compensation programs?

Specific examples of safeguards and risk mitigation features found in our executive compensation programs are listed below.

Our 2022 performance-based annual bonuses include the following risk mitigation features:

  Limiting the payout at the maximum performance level to 200% of target
  Using company financial performance measures that are based on the earnings reported in our financial statements, with certain adjustments that are limited and predefined and the potential for others related to unplanned or unforeseen items, all of which are made only after thoughtful consideration
  Incorporating performance measures important to our business operations, including safety and safety management systems and customer service and other stakeholder goals, in addition to the company financial performance measures
  Providing the SoCalGas Board of Directors with discretion over certain incentive plan payouts

Our 2022 long-term equity-based incentives include the following risk mitigation features:

  Using a balanced mix of multiple types of awards and performance measures, consisting of a market-based performance measure (Sempra’s relative TSR), a financial performance measure (Sempra’s long-term EPS growth) and a service-based measure (service-based restricted stock units)
  Measuring Sempra’s TSR against the S&P 500 Index and the S&P 500 Utilities Index(1) rather than against peer groups selected by Sempra, which reduces subjectivity in the determination of peer groups
  Using multi-year performance periods to promote a longer-term performance horizon
  Providing zero payouts for performance-based awards if performance is below the 25th percentile threshold level
  Limiting the maximum payout level for performance-based restricted stock unit awards to 200% of the target number of units (including reinvested dividend equivalents)

 
(1) For purposes of long-term equity-based incentive awards, all references to the S&P 500 Utilities Index refer to the companies constituting the S&P 500 Utilities Index, excluding water companies.

13

 

Pay Mix

What is “pay mix”?

Pay mix is the relative value of a named executive officer’s total direct pay opportunity for each of the three components of total direct compensation at target company performance. Figure 1 shows the 2022 pay mix for our CEO.

   
CEO Target Total Direct Compensation
   

Figure 1

Note: Based on the CEO’s annual base salary as of December 31, 2022, 2022 target performance-based annual bonus and the target grant date value of 2022 long-term equity-based incentives.

Why is pay mix important?

Our pay mix is designed to align the interests of executives with the interests of shareholders and other stakeholders by providing a greater proportion of target annual compensation through performance-based annual bonuses and long-term equity-based incentives rather than base salary. This means that most pay is intended to be variable and increase or decrease based on company performance. As shown in Figure 1, more than half of Mr. Drury’s target total direct pay opportunity in 2022 was in the form of long-term equity-based incentives and more than 70% was in the form of at-risk variable incentive pay.

Actual pay mix may vary substantially from target pay mix. This may occur as a result of company performance, which greatly affects annual bonuses and payout percentages for EPS growth-based long-term incentive plan (LTIP) awards, and Sempra common stock performance, which significantly impacts payout percentages for TSR-based LTIP awards and the ultimate value realized for all equity awards.

Figure 2 shows the percentage of each component of the total 2022 direct pay opportunity as of December 31, 2022 at target company performance for each of our named executive officers.

   
   

Figure 2

Note: Based on annual base salary and target performance-based annual bonus as of December 31, 2022 and the target grant date value of 2022 long-term equity-based incentives (excluding any special awards) for each named executive officer.

14

 

Compensation Components

What are the primary components of SoCalGas’ executive compensation program?

The primary components of our executive compensation program, which also comprise the three components of each named executive officer’s total direct compensation, are:

  Base salaries
  Performance-based annual bonuses
  Long-term equity-based incentive awards granted by Sempra

Additional benefits include participation in health and welfare programs and retirement and savings plans, as well as personal benefits and severance pay agreements.

All of our named executive officers generally participate in the same compensation program. However, compensation levels for named executive officers vary substantially based on the roles and responsibilities of the individual officers.

1.     Base Salaries

What is the role of base salaries in SoCalGas’ executive compensation program, and how are base salaries determined and reviewed?

Our executive compensation program emphasizes performance-based pay. This includes annual cash bonuses and long-term equity-based incentives. However, base salaries remain a common and necessary element of compensation for attracting and retaining outstanding employees at all levels.

The SoCalGas Board of Directors annually reviews base salaries for executive officers. The board considers the following factors, among others, in its review:

  Market salary data from multiple surveys Retention needs
  Individual contributions and performance Reporting relationships
  Labor market conditions Internal pay equity
  Complexity of roles and responsibilities Experience
  Succession planning    

Base salaries also may be reviewed and adjusted during the year (between annual reviews) for various reasons, including in the event of promotions or other job title changes, modifications to reporting relationships or job functions, or changes to any of the other factors described above or other circumstances considered relevant.

What base salary adjustments were made in 2022?

In January 2022, Mr. Drury received a salary increase of 5.0%, Mss. Brown and DeMontigny received salary increases of 4.5% and Messrs. Cho and Barrett received salary increases of 4.0%. Mr. Barrett and Ms. DeMontigny received additional promotional increases of 4.2% and 4.3%, respectively, in connection with their July 2022 promotions to senior vice president.

2.      Performance-Based Annual Bonuses

How are potential bonus opportunities determined?

Each year the SoCalGas Board of Directors establishes performance measures and dollar guidelines for performance-based cash bonus payments under the SoCalGas Executive Incentive Compensation Plan (the EICP). Consistent with our pay-for-performance philosophy, the performance measures do not provide for any bonus payment unless the company surpasses the threshold (minimum) performance level for the year. Bonus opportunities increase from zero for performance at the threshold level to 200% of target for performance at the maximum level.

The board may apply discretion in determining awards, including determining the results of performance measures and taking into consideration the contributions of each named executive officer or other factors it deems relevant.

15

 

What were the potential bonus opportunities for each named executive officer for 2022 performance?

Potential bonus opportunities at threshold, target and maximum company performance as of December 31, 2022 are expressed as a percentage of each named executive officer’s base salary as of December 31, 2022 below.

Named Executive Officer Threshold Target Maximum  
Scott D. Drury 0%   70%   140%  
Maryam S. Brown 0%   60%   120%  
Jimmie I. Cho 0%   60%   120%  
David J. Barrett(1) 0%   50%   100%  
Mia L. DeMontigny 0%   50%   100%  

Table 2

(1) Mr. Barrett’s payout was prorated to reflect the July 23, 2022 increase to his target from 45% to 50% of base salary. See Table 6 below.

What were the 2022 annual bonus performance goals for the named executive officers?

The 2022 performance measures for the SoCalGas EICP consisted of (i) safety measures and measures related to safety management systems, (ii) customer service and other stakeholder-focused measures, and (iii) SoCalGas and Sempra earnings adjusted for EICP purposes (EICP Earnings). The relative weights of these measures as a percentage of the overall target were 60%, 13% and 27%, respectively.

How were the 2022 EICP Earnings goals determined?

The SoCalGas EICP Earnings target of $745 million was based on SoCalGas’ financial plan with certain adjustments for incentive plan purposes. Targets for the operational measures were based on safety and safety management systems, and customer service and other stakeholder-focused goals.

EICP Earnings for SoCalGas and Sempra may be higher or lower than earnings reported in the companies’ financial statements due to certain predefined adjustments.

Consistent with the approach taken in prior years, it was determined at the beginning of the year that the calculation of SoCalGas earnings and Sempra earnings for EICP purposes would be adjusted as shown below. In addition, the SoCalGas Board of Directors has, but did not use, discretion to adjust earnings for other unplanned or unforeseen items that may occur during the course of the year.

  Exclude the impact of any unplanned changes in tax laws or regulations and accounting rule changes
  Exclude certain nonrecurring items at the discretion of the Compensation and Talent Development Committee of the Sempra Board of Directors, provided that such items do not have a material adverse impact on Sempra’s common stock price, also as determined by the Compensation and Talent Development Committee. Such items would include but not be limited to:
  the pro forma earnings impact of any acquisition or divestiture to the extent the earnings impact of such acquisition or divestiture or related transaction and integration cost is not included in the EICP Earnings target
  nonrecurring gains or losses related to RBS Sempra Commodities, which was sold in four separate transactions completed in 2010 and 2011 (does not apply directly to SoCalGas)
  Exclude the variance from plan of the foreign exchange gains or losses, net of inflation, including any associated cost of hedging (does not apply directly to SoCalGas)
  Exclude mark-to-market gains or losses
  Exclude gains or losses related to legacy litigation matters
  Exclude the variance from plan of impacts associated with the non-controlling interest sale of Sempra Infrastructure Partners, including timing variances (does not apply directly to SoCalGas)
  Exclude 90% of any gains or losses related to asset sales and impairments in connection with a sale to the extent the earnings impact of such item is not included in the EICP Earnings target
  Exclude items that are required to be excluded from annual bonus compensation under the SDG&E and/or SoCalGas General Rate Case decisions
  Exclude any earnings impact associated with the decommissioning of the San Onofre Nuclear Generating Station (does not apply directly to SoCalGas)
  Exclude the variance from plan of the liability insurance expense not recoverable through balancing accounts
  Exclude the variance from plan of any impairments of the California Assembly Bill 1054 Wildfire Fund (does not apply directly to SoCalGas)
  Exclude the variance from plan of the impact of material, pending regulatory matters, such as the California Cost of Capital and U.S. Federal Energy Regulatory Commission Independent System Operator adder
  Exclude one-time nonqualified pension settlement charges and LTIP tax windfall or shortfall to the extent such items are not included in the EICP Earnings target
  Limit impact of rabbi trust results (net of deferred compensation) to +/-5% (percentage points) of the EICP Earnings result as calculated without such gains or losses (does not apply directly to SoCalGas)

16

 

  Exclude the impact of authorized decisions of the SoCalGas Board of Directors that could impact earnings including, but not limited to, issuing debt or preferred stock securities exceeding planned amounts to fund dividends, legal settlements or other strategic expenses approved by the board (does not apply to Sempra)
  At the discretion of the SoCalGas Board of Directors, exclude the after-tax effect of the difference between the actual and planned intercompany allocations from Sempra and SDG&E for shared services charges, including performance-based annual bonus allocations (does not apply to Sempra)

What were the performance results for the 2022 Executive Incentive Compensation Plan?

Overall company performance on the 2022 SoCalGas EICP performance measures was at 187.74% of target performance. Details of the plan metrics and results are provided below.

  2022 SoCalGas Executive Incentive
Compensation Plan Performance Measures
    Performance Goals(1)       % of
Target
Achieved
Weight   Threshold   Target   Maximum   Actual  
  Safety and Safety Management Systems                      
  Employee Safety—Lost Time Incident Rate 6%   0.86   0.76   0.66   0.60   200%
  Employee Safety—Environmental and Safety Compliance Management Program Corrective Action Completion Percentage 4%   95%   99%   100%   100%   200%
  Employee Safety—Defensive Driving Training Completion Rate 3%   95%   98%   100%   99.97%   199%
  Driving Observation Rate 3%   90%   95%   100%   100%   200%
  Customer, Public & System Safety A1 Gas Leak Order Response Time 6%   92.4%   92.8%   93.3%   93.21%   182%
  Customer, Public & System Safety—Damage Prevention: Damages per USA Ticket Rate 6%   2.61   2.37   2.25   2.30   158%
  Customer, Public & System Safety—Gas System Methane Emissions Reductions–Percent of Planned High-Pressure Blow-down Events Releasing Less Than or Equal to 1.5 Million Cubic Feet and Achieve at least 85% Emissions Reduction per Event 6%   75%   80%   85%   93%   200%
  Customer, Public & System Safety—Pipeline Safety Enhancement Program Pipeline Miles Remediated 6%   11   44   68   90   200%
  Customer, Public & System Safety—Distribution Integrity Management Program–Miles of Vintage Mains and Services Replaced 6%   130   144   151   156   200%
  Customer, Public & System Safety—Age of Code Three Steel Leak Inventory 6%   18 Months   15 Months   14 Months   13 Months   200%
  Cybersecurity-Annual Average Phishing Report Rate 2%   65%   70%   75%   71%   120%
  Safety Culture Enhancements – Implement Actions Supportive of Enhanced Safety Culture 6%   4 Action
Items
  5 Action
Items
  6 Action
Items
 

6 Action

Items

  200%
  Subtotal: Safety and Safety Management Systems 60%                   191%
  Customer Service & Other Stakeholders                      
  Execute Clean Energy Transition Plan 3%   3 Projects   4 Projects   5 Projects   5 Projects   200%
  Progress toward 2022 Renewable Natural Gas Goal of 5% 2%   4.2%   5.0%   5.2%   4.9%   88%
  Customer Insight Study (Public Opinion) 2%   82.4%   84.3%   86.2%   79.7%   0%
  Purchasing-Supplier Diversity 2%   38%   40%   43%   42.9%   197%
  Execute Diversity, Equity & Inclusion Action Plan 2%   4 Action
Items
  5 Action
Items
  6 Action
Items
  8 Action
Items
  200%
  New Business Customer Experience: Payout % based on average of (1) and (2) below: 2%                   164%
  (1) Gas Distribution On-Time Performance     82%   87%   92%   96%    
  (2) Customer Contact Center Set Desk Level of Service     63%   68%   74%   70%    
  Subtotal: Customer Service & Other Stakeholders 13%                   146%
  Financial                      
  SoCalGas EICP Earnings 20%   $   715   $   745   $   770   $   795   200%
  Sempra EICP Earnings 7%   $2,498   $2,657   $2,816   $2,947   200%
  Subtotal: Financial 27%                   200%
  Total 100%                   187.74%

Table 3

(1) At threshold performance, there is no payout. The scale for total payout and for all performance measures ranges from 0% for threshold performance to 200% for maximum performance, with target performance paying out at 100%.

17

 

What adjustments were applied to GAAP earnings to determine EICP Earnings?

Reconciliations of 2022 SoCalGas and Sempra losses or earnings, as applicable, computed in accordance with generally accepted accounting principles in the United States of America (GAAP), to EICP Earnings are provided below.

SoCalGas Earnings (Dollars in Millions) Reconciliation    
  GAAP Earnings $  599  
  Predefined Adjustments:      
  Exclude gains or losses related to legacy litigation matters   199  
  Exclude differences between actual and planned intercompany allocations for shared services charges from
Sempra and SDG&E
  (3 )
  EICP Earnings $  795  

Table 4

Sempra Earnings (Dollars in Millions) Reconciliation    
  GAAP Earnings $2,094  
  Predefined Adjustments:      
  Exclude variance from plan of foreign exchange gains or losses, unrealized mark-to-market gains/losses on certain derivatives at Sempra Infrastructure, and unplanned rabbi trust investment returns (related to nonqualified pension and deferred compensation) in excess of specified limits   532  
  Exclude gains or losses related to legacy litigation matters   199  
  Exclude variance from plan of the Sempra Infrastructure Partners transactions and corporate reorganization efforts   122  
  EICP Earnings $2,947  

Table 5

What were the Executive Incentive Compensation Plan payouts to the named executive officers for 2022 performance?

As shown above, the overall performance results on the 2022 SoCalGas EICP performance measures was at 187.74% of target performance. Based on this performance and its consideration of the contributions of each named executive officer in 2022, the SoCalGas Board of Directors approved the payment of the annual bonuses shown in Table 6.

Named Executive Officer   Bonus  
Scott D. Drury $ 869,400  
Maryam S. Brown $ 522,500  
Jimmie I. Cho $ 520,000  
David J. Barrett(1) $ 332,500  
Mia L. DeMontigny $ 342,700  

Table 6

(1) Reflects the proration of Mr. Barrett’s award between his pre-promotion target of 45% and his post-promotion target of 50%.

3.     Long-Term Equity-Based Incentives

How much of each named executive officer’s target total direct compensation package is from long-term equity-based incentives, and who grants these incentives?

Long-term equity-based incentives are a large component of each named executive officer’s target total direct compensation package. See Figure 2 for these percentages. Long-term equity-based incentives are granted to our executives by the Compensation and Talent Development Committee of the Sempra Board of Directors based on the recommendations of the SoCalGas Board of Directors.

What type of equity is granted?

In accordance with our pay-for-performance philosophy, two-thirds of the 2022 annual LTIP award for each of our named executive officers was in the form of performance-based restricted stock units. The remaining one-third was in the form of service-based restricted stock units. The

18

 

2022 performance-based restricted stock units are subject to vesting at the end of three years and the service-based restricted stock units vest ratably over three years.

Why is this type of equity used?

This equity award structure was approved after considering many variables, including alignment with shareholder interests, retention, plan expense, share usage, market trends and feedback from Sempra’s shareholder engagement.

What are the general practices with respect to equity award grants?

Typically, each named executive officer receives one LTIP award annually, divided into three components as described below. In granting the 2022 annual LTIP awards:

  A target dollar value (based on a percentage of base salary) and other terms were specified for each named executive officer’s award; and
  The number of shares underlying the award was calculated based on the specified target dollar value, as opposed to a fixed number of shares.
  This approach allows maintenance of a pay mix the board believes to be optimal, as described above.

On the grant date, we calculated the precise number of shares underlying the award to be granted to each named executive officer by dividing the target dollar value of each named executive officer’s award by the grant date closing price of Sempra common stock. These target grant values are presented in Table 7 below and differ from the values reported in “Compensation Tables—Summary Compensation Table” and “Compensation Tables—Grants of Plan-Based Awards” with respect to awards based on relative TSR, which are reported in those compensation tables based on a Monte Carlo valuation that is used to calculate the grant date fair value.

Are other equity awards granted in addition to the annual LTIP awards?

In addition to the annual LTIP awards, special equity awards also may be granted with the approval of the Compensation and Talent Development Committee of the Sempra Board of Directors based on the recommendation of the SoCalGas Board of Directors. Special equity awards may be granted upon the hiring or promotion of named executive officers or, in limited circumstances, to reward extraordinary performance or promote retention. In January 2022, Ms. Brown and Mr. Barrett each received a special award of service-based restricted stock units, valued at $200,000 and $100,000, respectively, to recognize exemplary performance and promote retention.

What were the target values for the 2022 annual LTIP awards?

Table 7 illustrates the target values for the 2022 annual LTIP awards.

Named Executive Officer   Target Value of 2022
Annual LTIP Award
 
Scott D. Drury   $1,256,850  
Maryam S. Brown   $   742,080  
Jimmie I. Cho   $   738,560  
David J. Barrett   $    287,840  
Mia L. DeMontigny   $   315,090  

Table 7

The actual amounts realized by equity award recipients will depend on future stock price performance, common stock dividend payouts and EPS performance and the degree to which the established performance measures are achieved. The amounts ultimately realized will not necessarily align with the target values at grant.

What were the performance goals for the 2022 performance-based restricted stock units?

The 2022 annual LTIP awards included two Sempra performance measures—relative TSR and EPS growth, each weighted at one-third of the total target award value. The portion of the award linked to Sempra’s relative TSR is equally weighted between Sempra’s TSR relative to the S&P 500 Utilities Index and Sempra’s TSR relative to the S&P 500 Index.

1.     Relative TSR

Each TSR-based performance-based restricted stock unit represents the right to receive between zero and two shares of Sempra common stock based on Sempra’s three-year cumulative TSR compared to the S&P 500 Utilities Index or the S&P 500 Index, as applicable.

If Sempra’s performance is at the target performance level (the 50th percentile of the applicable index), participants will earn one share for each restricted stock unit. Participants have the opportunity to earn up to two shares for each restricted stock unit if performance exceeds

19

 

the target performance level. Participants earn a partial share for performance between the threshold and target and target and maximum performance levels, as shown below. No shares are earned for performance below the 25th percentile of the applicable index.

Cumulative TSR Percentile Rank vs.
S&P 500 Utilities Index or S&P 500 Index
(Measured Independently in Separate Award Components)
Sempra Common Stock
Shares Received for Each
Restricted Stock Unit(1)
90th Percentile or higher (Maximum) 2.0
70th Percentile 1.5
50th Percentile (Target) 1.0
40th Percentile 0.7
30th Percentile 0.4
25th Percentile (Threshold)   0.25
Below 25th Percentile 0.0

Table 8

(1) Participants also receive additional shares for dividend equivalents, which are reinvested to purchase additional units that become subject to the same vesting conditions as the restricted stock units to which the dividends relate.

Note: If performance falls between the tiers shown in Table 8, the payout is calculated using linear interpolation.

2.     EPS Growth

The 2022 annual LTIP awards also included a performance-based restricted stock unit award linked to relative EPS growth. The award measures the compound annual growth rate (CAGR) of Sempra’s EPS for the three-year period ending on December 31, 2024. The payout scale is based on the December 31, 2021 analyst consensus three-year EPS growth estimates for S&P 500 Utilities Index companies. The target payout level is based on the 50th percentile of the analyst consensus estimates and the threshold and maximum payout levels are based on the 25th and 90th percentiles, respectively. The awards include a provision that excludes the impact of share buybacks not contemplated in the financial plans publicly communicated prior to the grant date of the awards.

If Sempra’s EPS CAGR is at the 50th percentile of the analyst consensus estimates for the S&P 500 Utilities Index, participants will earn one share for each restricted stock unit. Participants have the opportunity to earn up to two shares for each restricted stock unit if performance exceeds the 50th percentile. Participants earn a partial share for performance between the 25th and 50th percentiles and the 50th and 90th percentiles of the analyst consensus estimates, as shown below. No shares are earned for performance below the 25th percentile of the analyst consensus estimates.

Percentile of Analyst Consensus Estimates for
S&P 500 Utilities Index EPS CAGR
Sempra Common Stock
Shares Received for Each
Restricted Stock Unit(1)
90th Percentile or higher (8.6% or higher) 2.0
75th Percentile (7.6%) 1.5
50th Percentile (6.3%) 1.0
25th Percentile (5.0%)   0.25
Below 25th Percentile (Below 5.0%) 0.0

Table 9

(1) Participants also receive additional shares for dividend equivalents, which are reinvested to purchase additional units that become subject to the same vesting conditions as the restricted stock units to which the dividends relate.

Note: If performance falls between the tiers shown in Table 9, the payout is calculated using linear interpolation.

For purposes of the 2022 annual LTIP awards, the calculation of EPS may, at the discretion of the Compensation and Talent Development Committee of the Sempra Board of Directors, include the same types of adjustments made to EICP Earnings, as described above under “How were the 2022 EICP Earnings goals determined?”, as well as adjustments related to, among other things, other unusual or non-operating items.

What were the results for the 2020-2022 performance-based restricted stock unit award cycle?

The performance period of the 2020-2022 award cycle concluded on January 3, 2023 (for the TSR-based awards, which collectively were weighted at 50% of the award value) and December 31, 2022 (for the EPS growth-based awards, which were weighted at 20% of the award value).

Sempra’s 2020-2022 relative TSR was at the 62.2nd percentile of the S&P 500 Utilities Index, resulting in vesting at 130.5% of target for the S&P 500 Utilities Index-based award component. Sempra’s relative TSR was at the 43.6th percentile of the S&P 500 Index, resulting in vesting at 80.8% of target for the S&P 500 Index-based award component.

The 2020-2022 awards based on Sempra’s EPS growth vested at 200% of target based on an EPS CAGR (as adjusted for LTIP purposes) of 16.4%. The table below shows the predefined adjustments to GAAP EPS used to calculate EPS growth for purposes of the 2020 annual LTIP

20

 

award, as well as an additional adjustment to exclude the impact of a $500 million share buyback in the summer of 2020, an additional $300 million share buyback in 2021 and additional $450 million of share buybacks in the first and second quarters of 2022. For additional information, see “Compensation Tables—Outstanding Equity Awards at Year-End” and “Compensation Tables—Option Exercises and Stock Vested” below.

  Sempra EPS Growth (Diluted) for 2020-2022 Award Cycle 2019 2022  
  GAAP EPS   $ 7.29   $ 6.62  
  Excluding $500 million share buyback in 2020, $300 million share buyback in 2021, $450 million of share buybacks in 2022 and IEnova tender offers impact(1)           0.07  
  Predefined Adjustments:              
  Acquisitions and divestitures (other than Oncor): gains and losses on sales, related impairments and costs, and related earnings impacts     (1.44)     (0.31)  
  Exclusion of legacy litigation matters         0.64  
  Costs related to the Sempra Infrastructure Partners transactions and corporate reorganization efforts     0.02     0.39  
  Foreign exchange gains or losses, unrealized mark-to-market gains/losses on certain derivatives at Sempra Infrastructure, certain unplanned items related to unplanned rabbi trust investment returns (related to nonqualified pension and deferred compensation) in excess of specified limits, nonqualified pension settlement costs and LTIP tax windfalls     (0.10)     1.69  
  EPS for 2020-2022 LTIP Award Cycle Purposes   $ 5.77   $ 9.10  
  EPS CAGR for 2020-2022 LTIP Award Cycle Purposes           16.4%  

Table 10

(1) The impact of the share buybacks, which were not contemplated in our financial plans publicly communicated prior to the grant date of the award, is  excluded pursuant to the terms of the award. The impact of the 2022 share buybacks is weighted for the portion of the year that the shares were not  outstanding. The impact of the IEnova tender offers also is excluded.

4.     Benefit Plans

Are the named executive officers eligible to participate in other benefit plans?

Our named executive officers also participate in certain benefit plans including: (1) health, life insurance and disability plans and other executive benefits; and (2) savings and retirement plans.

21

 

What are the details of the health, life insurance and disability plans and other executive benefits the named executive officers are eligible to receive?

Plan Type Plan Description
Health & Welfare Basic Group
Plans
Our named executive officers participate in life, disability, medical, dental and vision insurance group plans that are generally available to all employees. These are common benefits that we believe are essential to attracting a high-quality workforce.
Other Health & Welfare Benefits Messrs. Drury and Cho participate in a long-term disability plan providing additional protection upon disability (60% of base salary and average bonus) and restoring benefits otherwise capped under the company’s basic long-term disability plan.
Other Executive Benefits

We provide certain other benefits to our named executive officers. The level and types of these executive benefits are reviewed each year. We believe that these benefits are important in attracting and retaining executive talent. These executive benefits include financial and estate planning services, excess personal liability insurance, and programs that match charitable contributions by each named executive officer, including contributions up to a maximum amount specified for each named executive officer and certain additional programs in which all Sempra and SoCalGas employees are eligible to participate, such as special charitable giving campaigns that provide additional charitable matching contributions not subject to the limits set forth above.

Messrs. Drury and Cho receive an annual executive benefit program allowance of $30,000 for Mr. Drury and $20,000 for Mr. Cho that may be used to cover out-of-pocket costs for health and welfare benefits as well as the cost of the financial and estate planning services and excess personal liability insurance discussed above. Any unused allowance is paid out at year-end.

None of the benefits described above includes a tax gross-up provision.

In addition, in 2022 Mr. Drury received certain relocation benefits in connection with his 2020 transfer. See “Compensation Tables—Summary Compensation Table” below for additional information.

Table 11

What are the details of the savings and retirement plan benefits the named executive officers are eligible to receive?

All of our named executive officers may elect to participate in our savings plans, consisting of a broad-based, tax-qualified 401(k) savings plan generally available to all employees and a deferred compensation plan available to officers and certain other key management employees. Our named executive officers also participate in our pension plans, consisting of the SoCalGas Cash Balance Plan in which all named executive officers participate, the Sempra Energy Supplemental Executive Retirement Plan in which Messrs. Drury and Cho participate, and the Sempra Energy Cash Balance Restoration Plan in which Mss. Brown and DeMontigny and Mr. Barrett participate. These plans are described in Tables 12 and 13 below.

22

 

Plan Type Plan Description
Savings Plans Southern
California Gas Company
Retirement
Savings Plan
(401(k) Savings
Plan)

Employees may contribute a portion of their eligible pay to a tax-qualified 401(k) savings plan, the Southern California Gas Company Retirement Savings Plan. Contributions to the plan may be invested on a tax-deferred or after-tax basis (including a Roth option). The Internal Revenue Code limits the amount of compensation eligible for deferral under tax-qualified plans.

Employees may receive company contributions of up to 4% of eligible pay. Eligible pay generally includes base salary and performance-based annual bonus, net of any amounts contributed under the deferred compensation plan. The basic company matching contribution is equal to one-half of the first 6% of the employee’s contributions. In addition, employees receive a “stretch match” equal to one-fifth of the next 5% of the employee’s contributions.

All employee contributions and related investment earnings in the 401(k) savings plan vest immediately. Employees are eligible to participate in the plan and receive company matching contributions upon hire. Company matching contributions (including related earnings) vest after one year of service.

Sempra Energy Employee and Director Savings Plan (Deferred Compensation Plan)

Our executive officers and other key management employees also may defer up to 85% of their base salary and performance-based annual bonus under a nonqualified deferred compensation plan, the Sempra Energy Employee and Director Savings Plan. Executive officers also may defer all or a portion of certain performance-based restricted stock unit awards upon vesting.

Participants can direct these deferrals into:

       Funds that mirror the investments available under our 401(k) savings plan, including a Sempra phantom stock account

       A fund providing interest at the greater of 110% of the Moody’s Corporate Bond Yield or the Moody’s Corporate Bond Yield plus 1%

Deferrals of performance-based restricted stock unit awards must be directed into the Sempra phantom stock account and cannot be transferred into other investments and are paid out in shares of common stock at some time after separation of employment in accordance with the participant’s payout elections.

The Internal Revenue Code places annual limits on the amounts that employees and employers can defer into a 401(k) savings plan. Because of these limits, the company makes matching contributions for deferred compensation plan participants through the deferred compensation plan. The deferred compensation matching contribution is equal to one-half of the first 6% of the employee’s contributions plus one-fifth of the next 5% of the employee’s contributions less an offset for 401(k) savings plan matching contributions. There are no company matching contributions on deferrals of performance-based restricted stock unit awards.

All employee contributions and related earnings in the deferred compensation plan vest immediately. New participants are immediately eligible for company matching contributions and company matching contributions (including related earnings) vest after one year of service.

Table 12

23

 

Plan Type Plan Description
Pension Southern California Gas Company Cash Balance Plan The Southern California Gas Company Cash Balance Plan is a tax-qualified pension plan generally available to all U.S.-based company employees.
Sempra Energy Cash Balance Restoration Plan The Sempra Energy Cash Balance Restoration Plan restores the benefits that would otherwise be provided under the Cash Balance Plan but for Internal Revenue Service limits applicable to tax-qualified pension plans.
Sempra Energy Supplemental Executive Retirement Plan

Our Board of Directors and the Compensation and Talent Development Committee of the Sempra Board of Directors believe that retirement, savings and deferred compensation plans, in general, and the Supplemental Executive Retirement Plan, in particular, are important elements of an overall compensation package. This package is designed to recruit and retain executive talent, especially mid-career executives, and to retain longer-term executive participants.

The Sempra Energy Supplemental Executive Retirement Plan, or SERP, provides a participating named executive officer with retirement benefits based on the executive’s:

     Final average pay(1)

     Actual years of service

     Age at retirement

SERP benefits are reduced by benefits payable under the broad-based Cash Balance Plan.

The Cash Balance Plan, the Cash Balance Restoration Plan and the SERP use only base salary and performance-based annual bonuses in calculating benefits. The value of long-term incentive plan awards is not included.

Table 13

(1) Final average pay is the average base salary for the two consecutive years of highest base salary prior to retirement plus the average of the three highest annual bonuses during the 10 years prior to retirement.

5. Severance and Change in Control Arrangements

Are the named executive officers eligible to receive severance benefits?

None of our executive officers has an employment agreement, but our named executive officers have severance pay agreements that include change-in-control features.

Why does the company provide severance pay agreements?

The Board of Directors believes severance pay agreements, which are a prevalent market practice, are effective in:

Attracting executives who are leaving an existing employer
Mitigating legal issues upon an employment separation
Retaining talent during uncertain times

By mitigating the risks associated with potential job loss, severance pay agreements can reinforce management continuity, objectivity and focus on shareholder value. This is particularly critical in actual or potential change in control situations.

What benefits do severance pay agreements provide?

The severance pay agreements provide for cash payments and the continuation of certain other benefits for a limited period when:

The company terminates an executive’s employment for reasons other than cause, or
The executive resigns for “good reason.”

Payments are not required under the terms of the severance pay agreements when:

A termination is for cause; or
The executive voluntarily resigns other than for “good reason.”

A termination other than for cause generally excludes terminations based on willful and continued failure by the executive to perform his or her duties for the company. These provisions are intended to provide for benefits upon the company’s unilateral decision to terminate employment for reasons unrelated to the executive’s performance of his or her job functions.

24

 

A resignation for “good reason” may occur if there is an adverse change in scope of duties or in compensation and benefit opportunities and, following a change in control of Sempra, changes in employment location. These provisions are intended to provide safeguards against arbitrary actions that may effectively force an executive to resign.

The agreements provide for additional benefits if the termination of employment were to occur within two years following (or such termination was deemed to have occurred, in cases of certain involuntary terminations, in connection with or in anticipation of) a change in control of Sempra.

In order to receive some of the benefits provided for in the agreement, the executive must, upon termination, enter into a general release in favor of the company and Sempra, provide consulting services for two years following the date of termination if requested, and agree to abide by certain contractual confidentiality and non-solicitation obligations. See “Compensation Tables—Severance and Change in Control Benefits” below for additional information about the terms of each named executive officer’s severance pay agreement.

Do the severance pay agreements provide for an excise tax gross-up to offset any taxes incurred by the executive as a result of any severance payment?

The severance pay agreements do not contain any excise tax gross-up provisions.

What happens to outstanding equity awards upon certain terminations or a change in control?

Since 2014, all long-term incentive awards have been subject to double-trigger change in control vesting provisions. This means that awards do not automatically vest upon a change in control. Rather, except under limited circumstances, vesting is only accelerated upon a termination of employment that meets certain conditions following a change in control of Sempra. In the event of a termination of employment other than in connection with a change in control, equity awards are generally forfeited to the extent they are not vested at the time of termination, subject to accelerated vesting or non-forfeiture upon termination in certain specific circumstances. See “Compensation Tables—Severance and Change in Control Benefits” below for additional information.

SHARE OWNERSHIP GUIDELINES

Are there share ownership guidelines for officers, and what are they?

Share ownership guidelines for officers have been established to further strengthen the link between executive and shareholder interests. The guidelines set minimum levels of Sempra share ownership that our officers must achieve and maintain. For officers, the guidelines are:

  Officer Level Share Ownership Guideline  
  CEO, President and Chief Operating Officer 3 x base salary  
  Senior Vice Presidents 2 x base salary  
  Vice Presidents 1 x base salary  

Table 14

For purposes of the guidelines, we include shares owned directly and through our 401(k) savings plan. We also include phantom shares of Sempra common stock into which compensation has been deferred, deferred restricted stock units that have vested, unvested service-based restricted stock units, and the in-the-money value of service-based stock options.

We expect officers to meet these guidelines within five years after hire or promotion to an officer-level position or promotion to a role with a higher share ownership guideline.

All named executive officers are in compliance with these guidelines or have additional time within which to comply with any higher level applicable to them as a result of a promotion.

ANTI-HEDGING AND PLEDGING POLICIES

What are the company’s policies with respect to hedging and pledging Sempra securities?

Pursuant to the Sempra Insider Trading and Information Confidentiality Policy, all employees, including all officers and directors of SoCalGas, are prohibited from purchasing financial instruments or otherwise engaging in transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of any equity security of Sempra, SoCalGas or any other subsidiary or entity as to which Sempra has majority ownership and control, and are also prohibited from selling “short” any securities of those companies. These prohibitions also apply to family members living in the same household as any such employee, officer or director, as well as entities directly or indirectly controlled by the employee, officer or director.

Officers and directors also are prohibited from pledging any securities of Sempra, SoCalGas or any other entity as to which Sempra has majority ownership and control.

25

 

IMPACT OF REGULATORY REQUIREMENTS

What is the role of regulatory requirements, such as tax deductibility and accounting rules, on compensation decisions?

Many Internal Revenue Code provisions, SEC regulations and accounting rules affect the design of executive pay. They are taken into consideration to create and maintain plans that are intended to comply with these requirements and that our Board of Directors and the Compensation and Talent Development Committee of Sempra’s Board of Directors believe are effective and in the best interests of our company and our shareholders.

Section 162(m) of the Internal Revenue Code places a limit of $1 million on the annual amount of compensation that publicly held companies may deduct for federal income tax purposes for “covered employees.” The SoCalGas Board of Directors believes that tax deductibility is one important factor in designing and evaluating our executive compensation program. In light of the elimination of the exception for performance-based compensation under Section 162(m), providing compensation that is not fully tax deductible generally is required by competitive and other circumstances and we believe that when required is in the best interests of our company and our shareholders. Accordingly, since the elimination of the exception for performance-based compensation, the Board of Directors has determined it to be in the best interest of our company and our shareholders to provide compensation that may not be fully tax deductible by the company.

26

 

COMPENSATION REPORT OF THE BOARD OF DIRECTORS

The Board of Directors of SoCalGas has reviewed and discussed with management of the company the Compensation Discussion and Analysis included in this Information Statement and, based on that review and discussion, authorized that it be so included.

BOARD OF DIRECTORS

Kevin C. Sagara, Chair

Diana L. Day

Scott D. Drury

Lisa Larroque Alexander

27

 

COMPENSATION TABLES

Summary Compensation Table

In the table below, we summarize the compensation for the past three years for each of our named executive officers, which compensation is in part subject to performance and vesting requirements.

2022 SUMMARY COMPENSATION TABLE

        Stock
Awards(D)
  Non-Equity
Incentive Plan
Compensation
  Change in
Pension Value
and
Non-Qualified
Deferred
Compensation
Earnings(E)
   
  Year Salary Bonus(C) Restricted
Stock
Units
  Performance-
Based Annual
Cash Bonus
  Pension
Accruals and
Above-Market
Interest on
Non-qualified
Deferred
Compensation
All Other
Compensation(F)
Total
Scott D. Drury
Chief Executive Officer
2022 $661,500 $1,348,006   $869,400   $     15,845 $165,332 $3,060,083
2021 $630,000 $1,255,825   $878,000   $1,571,600 $136,987 $4,472,412
2020 $562,064 $100,000 $1,800,889   $809,300   $2,995,901 $101,425 $6,369,579
Maryam S. Brown
President
2022 $463,800 $   996,229   $522,500   $     25,228 $  63,046 $2,070,803
2021 $443,800 $   744,918   $530,200   $     60,700 $  50,403 $1,830,021
2020 $428,700 $1,012,126   $496,000   $     78,270 $  47,857 $2,062,953
Jimmie I. Cho
Chief Operating Officer
2022 $461,600 $   792,150   $520,000   $     28,452 $  61,506 $1,863,708
2021 $443,800 $100,000 $   744,918   $530,200   $    724,696 $  55,155 $2,598,769
2020 $428,700 $1,212,078   $496,000   $6,571,307 $  64,171 $8,772,256

David J. Barrett(A)

Senior Vice President and General Counsel

2022 $366,546 $   408,834   $332,500   $     18,227 $  56,383 $1,182,490
2021 $345,900 $   290,643   $309,900   $     52,888 $  32,965 $1,032,296
2020 $335,800 $   279,262   $291,400   $     91,820 $  36,682 $1,034,964

Mia L. DeMontigny(B)

Senior Vice President and Chief Financial Officer

2022 $356,713 $   337,917   $342,700   $     20,575 $  19,975 $1,077,880
2021 $328,898 $   273,253   $312,300   $     39,668 $  28,862 $   982,981
2020 $309,900 $   482,600   $268,900   $     49,413 $116,569 $1,227,382
(A) Mr. Barrett was promoted from Vice President and General Counsel to Senior Vice President and General Counsel effective July 23, 2022. He was a named executive officer in 2020 and 2022, but not a named executive officer in 2021.
(B) Ms. DeMontigny was promoted from Chief Financial Officer, Chief Accounting Officer, Controller and Treasurer to Senior Vice President, Chief Financial Officer, Chief Accounting Officer and Treasurer effective July 23, 2022.
(C) Represents a cash transition bonus paid to Mr. Drury and a cash employee recognition award paid to Mr. Cho.
(D) Represents the grant date fair value of stock awards granted during the year. These amounts reflect our grant date estimate of the aggregate compensation expense that we will recognize over the service period of the awards. They are calculated in accordance with GAAP for financial reporting purposes based on the assumptions described in Note 10 of the Notes to Consolidated Financial Statements included in the 2022 Annual Report but disregarding estimates of forfeitures related to service-based vesting conditions.

Stock awards consist of performance-based and service-based restricted stock units. For the performance-based restricted stock units with a performance measure based on Sempra’s TSR, a Monte Carlo valuation model is used to calculate grant date fair value. For the performance-based restricted stock units with a performance measure based on Sempra’s EPS growth (as adjusted for LTIP purposes), the amounts included in this table assume the target level of performance conditions were achieved. The maximum values for these EPS growth-based awards granted in 2022, assuming the highest level of performance conditions were achieved, would be $838,137 for Mr. Drury; $494,963 for Ms. Brown; $492,587 for Mr. Cho; $191,913 for Mr. Barrett; and $210,128 for Ms. DeMontigny. For the service-based restricted stock units, the awards were valued at the fair market value of Sempra shares of common stock at the crediting date without reduction for non-transferability, and the amounts included in this table are equal to the number of shares subject to such awards multiplied by the grant date closing price of Sempra’s common stock. All performance-based and service-based restricted stock units will be settled in shares of Sempra common stock upon vesting, unless deferred in accordance with the terms of the Employee and Director Savings Plan in the case of performance-based restricted stock units, in which case they will be settled in shares of Sempra common stock following separation of service from the company.

The value actually realized by executives from stock awards will depend upon the extent to which performance and service-based vesting conditions are satisfied and the market value of the shares of Sempra common stock subject to the award upon vesting and sale.

For additional information regarding equity awards, see “Grants of Plan-Based Awards” and “Outstanding Equity Awards at Year-End” below.

28

 

(E) Represents (i) the aggregate change in the actuarial present value of accumulated benefits under pension plans at year-end over the prior year-end and (ii) above-market interest (interest in excess of 120% of the federal long-term rate) on compensation deferred on a basis that is not tax-qualified. The 2022 amounts are:
    Change in Accumulated Benefits(1)   Above- Market Interest   Total  
  Scott D. Drury $ (3,032,902 )   $ 15,845   $ (3,017,057 )  
  Maryam S. Brown $ 24,891     $ 337   $ 25,228    
  Jimmie I. Cho $ (1,866,299 )   $ 28,452   $ (1,837,847 )  
  David J. Barrett $ 16,328     $ 1,899   $ 18,227    
  Mia L. DeMontigny $ 20,575         $ 20,575    

(1) The changes in the actuarial value of pension benefits are due to changes in pay, EICP performance (which impacts the calculation of final average earnings under the SERP as described in “Pension Benefits” below), the accrual of additional age and service and changes in actuarial assumptions such as mortality and interest rates. Changes in 2022 pension values for Messrs. Drury and Cho were ($3,032,902) and ($1,866,299), respectively. These negative values are displayed in the table above in this footnote (E), but are not reflected in the Change in Pension Value and Nonqualified Deferred Compensation Earnings or Total columns for Messrs. Drury and Cho in the 2022 Summary Compensation Table. Under the defined benefit formula, final average pay is the average base salary for the two consecutive years of highest base salary prior to retirement plus the average of the three highest annual bonuses during the 10 years prior to retirement. For additional information regarding pension benefits and deferred compensation, see “Pension Benefits” and “Nonqualified Deferred Compensation” below.
(F) All Other Compensation amounts for 2022 are:
    Company 401(k) and
Deferred Compensation
Plan Contributions
  Insurance
Premiums(1)
  Other(2)   Total  
  Scott D. Drury $12,200   $10,451   $142,681   $165,332  
  Maryam S. Brown $35,516   $2,530   $25,000   $ 63,046  
  Jimmie I. Cho $28,413   $11,093   $22,000   $ 61,506  
  David J. Barrett $23,853   $ 2,530   $30,000   $ 56,383  
  Mia L. DeMontigny $14,635   $ 2,530   $ 2,810   $ 19,975  

  (1) Amounts include premiums for supplemental disability benefits for Messrs. Drury and Cho and excess personal liability insurance benefits for Mss. Brown and DeMontigny and Mr. Barrett. Information on these programs is provided under “Compensation Discussion and Analysis—Compensation Components—Benefit Plans.”
  (2) Amounts consist of our contributions to charitable, educational and other non-profit organizations to match the personal contributions of each named executive officer on a dollar-for-dollar basis up to an annual maximum match for such named executive officer ranging from $10,000 to $25,000, plus, for certain named executive officers, amounts in contributions under Sempra’s Four Days of Gratitude holiday double-match program in which all employees were eligible to participate; financial and estate planning services; an executive benefit program allowance of $30,000 for Mr. Drury and $20,000 for Mr. Cho; and for Mr. Drury, (i) the incremental cost to the company of commuting and other personal use of company cars and drivers in the amount of $32,756 (with the incremental cost calculated based on the hourly rate of drivers, plus fuel, vehicle maintenance and depreciation expense) and (ii) relocation-related tax gross-ups of $56,275 provided in connection with a work location transfer (these relocation benefits were consistent with the relocation benefits provided to salaried employees who relocate at the company’s request). Amounts shown do not include parking at company offices and the occasional personal use by executive officers of company property and services (including entertainment events which would not otherwise be used for the business purposes for which they were obtained) for which we incur no more than nominal incremental cost or for which we are reimbursed by the executive for the incremental cost of personal use.

Grants of Plan-Based Awards

Our named executive officers participated in incentive compensation plans that are designed to encourage high levels of performance on both a short-term and a long-term basis. Performance-based annual cash bonuses were provided under the EICP. Long-term equity-based incentives, consisting of performance-based and service-based restricted stock unit awards with respect to Sempra common stock, were provided under Sempra’s 2019 LTIP.

We summarize below our 2022 grants of plan-based awards for each of our executive officers named in the 2022 Summary Compensation Table.

29

 

2022 GRANTS OF PLAN-BASED AWARDS

  Grant
Date(A)
Authori-
zation
Date(A)
  Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards
(Performance-Based Annual Bonus)(B)
   Estimated Future Payouts
Under Equity Incentive Plan
Awards (Number of Shares)(C)(E)
  All Other
Stock
Awards
Number of
Shares(D)(E)
  Grant Date
Fair Value
of Stock
Awards(F)
 
    Threshold   Target   Maximum   Threshold   Target   Maximum      
Scott D. Drury                                      
Performance-based Restricted Stock Units (PBRSU) based on TSR vs. S&P 500 Utilities Index 1/03/22 12/20/21                 1,588   3,176       $243,191  
PBRSU based on TSR vs. S&P 500 Index 1/03/22 12/20/21                 1,588   3,176       $266,679  
PBRSU based on EPS growth 1/03/22 12/20/21                 3,175   6,350       $419,068  
Service-based Restricted Stock Units 1/03/22 12/20/21                           3,175   $419,068  
Performance-Based Annual Bonus         $463,100   $926,200                      
Maryam S. Brown                                      
PBRSU based on TSR vs. S&P 500 Utilities Index 1/03/22 12/20/21                 938   1,876       $143,648  
PBRSU based on TSR vs. S&P 500 Index 1/03/22 12/20/21                 938   1,876       $157,522  
PBRSU based on EPS growth 1/03/22 12/20/21                 1,875   3,750       $247,481  
Service-based Restricted Stock Units 1/03/22 12/20/21                           1,875   $247,481  
Service-based Restricted Stock Units - Special 1/03/22 12/20/21                           1,516   $200,097  
Performance-Based Annual Bonus         $278,300   $556,600                      
Jimmie I. Cho                                      
PBRSU based on TSR vs. S&P 500 Utilities Index 1/03/22 12/20/21                 933   1,866       $142,882  
PBRSU based on TSR vs. S&P 500 Index 1/03/22 12/20/21                 933   1,866       $156,682  
PBRSU based on EPS growth 1/03/22 12/20/21                 1,866   3,732       $246,293  
Service-based Restricted Stock Units 1/03/22 12/20/21                           1,866   $246,293  
Performance-Based Annual Bonus         $277,000   $554,000                      
David J. Barrett                                      
PBRSU based on TSR vs. S&P 500 Utilities Index 1/03/22 12/20/21                 364   728       $  55,744  
PBRSU based on TSR vs. S&P 500 Index 1/03/22 12/20/21                 364   728       $  61,128  
PBRSU based on EPS growth 1/03/22 12/20/21                 727   1,454       $  95,957  
Service-based Restricted Stock Units 1/03/22 12/20/21                           727   $  95,957  
Service-based Restricted Stock Units - Special                               758   $100,048  
Performance-Based Annual Bonus         $177,100   $354,200                      

30

 

  Grant
Date(A)
Authori-
zation
Date(A)
  Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards
(Performance-Based Annual Bonus)(B)
   Estimated Future Payouts
Under Equity Incentive Plan
Awards (Number of Shares)(C)(E)
  All Other
Stock
Awards
Number of
Shares(D)(E)
  Grant Date
Fair Value
of Stock
Awards(F)
 
  Threshold   Target   Maximum   Threshold   Target   Maximum      
Mia L. DeMontigny                                      
PBRSU based on TSR vs. S&P 500 Utilities Index 1/03/22 12/20/21                 398   796       $  60,951  
PBRSU based on TSR vs. S&P 500 Index 1/03/22 12/20/21                 398   796       $  66,838  
PBRSU based on EPS growth 1/03/22 12/20/21                 796   1,592       $105,064  
Service-based Restricted Stock Units 1/03/22 12/20/21                           796   $105,064  
Performance-Based Annual Bonus         $182,500   $365,000                      

(A) Grant and authorization dates are applicable to equity incentive awards, which consist of performance-based and service-based restricted stock units. Awards are authorized as part of annual compensation planning that is typically completed in December, at which time a dollar value and the other award terms are approved, with salary adjustments becoming effective on January 1 and awards granted on the first trading day of January. Special equity awards also may be granted at other times, including upon the hiring or promotion of executive officers, to reward extraordinary performance, or to promote retention. In accordance with the terms approved by the Compensation and Talent Development Committee of the Sempra Board of Directors, on the grant date of each award, the precise number of shares to be granted to each named executive officer was calculated using the closing price for shares of Sempra common stock on that date.
(B) Non-equity incentive plan awards consisted of performance-based annual bonuses payable under the EICP. Amounts reported in the table represent estimates at the beginning of 2022 of bonuses expected to be paid under financial and operational performance measures established by our Board of Directors. Outstanding company or individual performance may result in the payment of bonuses that exceed the target amounts. In no event will actual payouts exceed the maximum bonuses established under the plan for each executive.

The performance measures for 2022 were satisfied at levels resulting in above-target bonus payouts. These amounts are reported in the 2022 Summary Compensation Table as non-equity incentive plan compensation earned in 2022. See “Compensation Discussion and Analysis—Compensation Components—Performance-Based Annual Bonuses” for additional information.

(C) Equity incentive plan awards consisted of performance-based restricted stock units. Shares subject to the performance-based restricted stock units generally will vest, in whole or in part, or be forfeited in early 2025 based on Sempra’s TSR compared to market and peer group indices and EPS growth (as adjusted for LTIP purposes), in each case from 2022-2024. For information about the treatment of performance-based restricted stock units in the event of a termination of employment before the end of the performance period or a change in control, see “Severance and Change in Control Benefits” below.

For the two components of performance-based restricted stock units with a TSR performance measure, the target number of shares will vest if Sempra has achieved a cumulative three-year TSR that places it among the top 50% of the companies in the S&P 500 Utilities Index or S&P 500 Index, as applicable, with additional shares vesting ratably for performance above the 50th percentile of the applicable index to the maximum number (200% of the target number) of shares for performance at or above the 90th percentile of that index. If Sempra’s performance does not place Sempra among the top 50%, but is at or above the 25th percentile of the companies in the applicable index, the number of shares that will vest declines from the target number of shares at the 50th percentile to 25% of the target number of shares at the 25th percentile and zero shares below the 25th percentile.

For the performance-based restricted stock units with an EPS growth performance measure, the target number of shares will vest, subject to the discretion (to make adjustments to earnings) of the Compensation and Talent Development Committee of the Sempra Board of Directors, if Sempra has achieved a three-year EPS CAGR of 6.3%. If performance is at 7.6%, 150% of the target number of shares will vest, and if performance is at 8.6% or higher, the maximum number (200% of the target number) of shares will vest. If Sempra’s three-year EPS CAGR is less than 6.3%, the number of shares that will vest declines from the target number of shares at 6.3% to 25% of the target number of shares at 5.0% and zero shares below 5.0%.

(D) These awards represent service-based restricted stock units that vest ratably over three years. For information about the treatment of service-based restricted stock units in the event of a termination of employment before the end of the service period or a change in control, see “Severance and Change in Control Benefits” below.
(E) During the performance or service periods, dividends paid or that would have been paid on the shares subject to the award are deemed reinvested to purchase additional shares, at their fair market value, which become subject to the same forfeiture and vesting conditions (including performance criteria, if applicable) as the shares to which the dividends relate. Due to the inability to forecast stock prices at which future dividends would be reinvested, the amounts shown in the table do not include such dividends.

Unless the named executive officer instructs otherwise, Sempra will withhold a sufficient number of shares to which the participant would otherwise be entitled to pay the minimum amount of withholding taxes that become payable.

(F) These amounts reflect our grant date estimate of the aggregate compensation expense that we will recognize over the service period of the award. They are calculated in accordance with GAAP based on the assumptions described in Note 10 of the Notes to Consolidated Financial Statements included in the 2022 Annual Report but disregarding estimates of forfeitures related to service-based vesting conditions. The value actually realized by executives from stock awards will depend upon the extent to which performance and service-based vesting conditions are satisfied and the market value of the shares of Sempra common stock subject to the award upon vesting and sale.

31

 

Outstanding Equity Awards at Year-End

We summarize below the grants of Sempra equity awards that were outstanding at December 31, 2022, for each of our executive officers named in the 2022 Summary Compensation Table. These awards consist solely of performance-based and service-based restricted stock units under Sempra’s 2019 LTIP. The named executive officers held no stock options at December 31, 2022.

2022 OUTSTANDING EQUITY AWARDS AT YEAR-END 

      Stock Awards  
      Equity Incentive Plan Awards
(Performance-Based
Restricted Stock Units)(A)
  Other Stock Awards
(Service-Based
Restricted Stock Units)(B)
 
        Number of
Unearned/
Unvested
Shares(C)
  Market Value
of Unearned/
Unvested
Shares
  Number of
Unearned/
Unvested
Shares(C)
  Market Value
of Unearned/
Unvested
Shares
   
    Grant
Date
           
Scott D. Drury   01/03/22   3,247   $ 501,758                
    01/03/22   3,247     501,758                
    01/03/22   3,246     501,600                
    01/03/22               3,246   $   501,600 (F)   
    01/04/21   3,065     473,698                
    01/04/21   2,644     408,565                
    01/04/21   3,405     526,168                
    01/04/21               2,269     350,670 (G)   
    08/03/20               2,597     401,309    
    01/02/20   3,419     528,381 (D)               
    01/02/20   905     139,869 (D)               
    01/02/20   2,966     458,437 (E)               
    01/02/20               741     114,440 (H)   
    01/02/20               366     56,545 (H)   
        26,144   $ 4,040,234     9,219   $ 1,424,564    
Maryam S. Brown   01/03/22   1,918   $ 296,378                
    01/03/22   1,918     296,378                
    01/03/22   1,917     296,220                
    01/03/22               1,917   $   296,220 (F)   
    01/03/22               1,550     239,504    
    01/04/21   1,818     280,928                
    01/04/21   1,568     242,300                
    01/04/21   2,020     312,142                
    01/04/21               1,346     207,986 (G)   
    08/03/20               866     133,770    
    01/02/20   2,317     358,036 (D)               
    01/02/20   613     94,803 (D)               
    01/02/20   2010     310,576 (E)               
    01/02/20               502     77,644 (H)   
        16,099   $ 2,487,761     6,181   $   955,124    

32

 

      Stock Awards  
      Equity Incentive Plan Awards
(Performance-Based
Restricted Stock Units)(A)
  Other Stock Awards
(Service-Based
Restricted Stock Units)(B)
 
        Number of
Unearned/
Unvested
Shares(C)
  Market Value
of Unearned/
Unvested
Shares
  Number of
Unearned/
Unvested
Shares(C)
  Market Value
of Unearned/
Unvested
Shares
   
    Grant
Date
           
Jimmie I. Cho   01/03/22   1,908   $ 294,798                
    01/03/22   1,908     294,798                
    01/03/22   1,908     294,798                
    01/03/22               1,908      $   294,798 (F)   
    01/04/21   1,818     280,928                
    01/04/21   1,568     242,300                
    01/04/21   2,020     312,142                
    01/04/21               1,346     207,986 (G)   
    08/03/20               2,164     334,425    
    01/02/20   2,317     358,036 (D)               
    01/02/20   613     94,803 (D)               
    01/02/20   2,010     310,576 (E)               
    01/02/20               502     77,644 (H)   
        16,070   $ 2,483,179     5,920   $   914,853    
David J. Barrett   01/03/22   744   $ 115,012                
    01/03/22   744     115,012                
    01/03/22   743     114,854                
    01/03/22               743   $   114,854 (F)   
    01/03/22               775     119,752 (F)   
    01/04/21   709     109,609                
    01/04/21   612     94,538                
    01/04/21   788     121,788                
    01/04/21               525     81,137 (G)   
    01/02/20   908     140,323 (D)               
    01/02/20   241     37,234 (D)               
    01/02/20   789     121,867 (E)               
    01/02/20               197     30,382 (H)   
        6,278   $ 970,237     2,240   $   346,125    
Mia L. DeMontigny   01/03/22   814   $ 125,755                
    01/03/22   814     125,755                
    01/03/22   814     125,755                
    01/03/22               814   $   125,755 (F)   
    01/04/21   667     103,144                
    01/04/21   576     88,962                
    01/04/21   741     114,441                
    01/04/21               493     76,240 (G)   
    08/03/20               649     100,244    
    01/02/20   837     129,427 (D)               
    01/02/20   222     34,349 (D)               
    01/02/20   727     112,415 (E)               
    01/02/20               181     28,019 (H)   
        6,212   $ 960,003     2,137   $   330,258    
  (A) Performance-based restricted stock units generally will vest, in whole or in part, or be forfeited at the end of a three-year performance period based on Sempra’s TSR compared to market and peer group indices and Sempra’s EPS growth (as adjusted for LTIP purposes). For information about the treatment of performance-based restricted stock units in the event of a termination of employment before the end of the performance period or a change in control, see “Severance and Change in Control Benefits” below.

33

 

For TSR-based awards, we have reported the number and market value of shares subject to the awards (together with reinvested dividends and dividend equivalents) that would have vested at December 31, 2022 had the applicable performance and service periods ended at that date. As of December 31, 2022, the performance for these awards as a percentage of target was:

TSR-Based Awards Performance as of
December 31, 2022
2022 Award (TSR vs. S&P 500 Utilities Index) 200.00%
2022 Award (TSR vs. S&P 500 Index) 200.00%
2021 Award (TSR vs. S&P 500 Utilities Index) 180.00%
2021 Award (TSR vs. S&P 500 Index) 155.25%
2020 Award (TSR vs. S&P 500 Utilities Index) 131.75%
2020 Award (TSR vs. S&P 500 Index) 81.40%

On January 26, 2023, the January 2, 2020 awards based on total shareholder return compared to the S&P 500 Utilities Index vested at 130.5% of target and the January 2, 2020 awards based on total shareholder return compared to the S&P 500 Index vested at 80.8% of target.

The EPS growth-based awards granted on January 4, 2021 and January 3, 2022 (together with related reinvested dividend equivalents) are reported based on target performance, as the applicable performance period has not yet ended and the EPS (as adjusted for LTIP purposes) for the final year(s) of the performance period has not yet been determined. The number of shares that ultimately vest will depend upon the extent to which the performance measures have been satisfied at the actual end of the applicable performance period and may be fewer or greater than the number reported in the table.

On February 21, 2023, the January 2, 2020 awards based on EPS growth (as adjusted for LTIP purposes) with a performance period that ended on December 31, 2022 vested at 200% of target, or maximum performance. These awards are reported based on the final performance result of 200% of target. For additional detail, see Note B to the 2022 Option Exercises and Stock Vested table below.

(B) Awards granted on January 3, 2022, January 4, 2021 and January 2, 2020 represent service-based restricted stock units that vest ratably over the three years following the grant date of the applicable award on the first NYSE trading day of each year. Service-based restricted stock unit awards granted to Messrs. Drury and Cho on August 3, 2020 vest ratably over the four years following the grant date on each anniversary of the grant date. Service-based restricted stock unit awards granted to Mss. Brown and DeMontigny on August 3, 2020 vest ratably over the three years following the grant date on each anniversary of the grant date. For information about the treatment of service-based restricted stock units in the event of a termination of employment before the end of the service period or a change in control, see “Severance and Change in Control Benefits” below.
(C) Includes shares deemed purchased with reinvested dividends and dividend equivalents that become subject to the same forfeiture conditions as the shares to which the dividends relate. Does not include reinvested dividends and dividend equivalents with a record date of December 22, 2022, which were paid on January 15, 2023.
(D) These awards vested on January 26, 2023, immediately following the determination and certification by the Compensation and Talent Development Committee of the Sempra Board of Directors of the total shareholder return results. The value realized upon the vesting of these shares is set forth in Note B to the 2022 Option Exercises and Stock Vested table below.
(E) These awards vested on February 21, 2023, immediately following the determination and certification by the Compensation and Talent Development Committee of the Sempra Board of Directors of the EPS growth (as adjusted for LTIP purposes) results. The value realized upon the vesting of these shares is set forth in Note B to the 2022 Option Exercises and Stock Vested table below.
(F) The first of three annual installments of these awards vested on January 3, 2023.
(G) The second of three annual installments of these awards vested on January 3, 2023.
(H) The third of three annual installments of these awards vested on January 3, 2023.

Option Exercises and Stock Vested

We summarize below the restricted stock units that vested during 2022 for each of our executive officers named in the 2022 Summary Compensation Table. No named executive officers exercised stock options in 2022.

2022 OPTION EXERCISES AND STOCK VESTED

  Stock Awards  
  Number of Shares
Acquired on Vesting
  Value Realized
on Vesting(A)(B)
 
Scott D. Drury 13,935   $1,486,695  
Maryam S. Brown 6,802   $   939,446  
Jimmie I. Cho 7,112   $   987,619  
David J. Barrett 2,357   $   316,581  
Mia L. DeMontigny 1,957   $   281,875  
(A) Market value of vesting Sempra common stock (including reinvested dividends) at the vesting date, determined by multiplying the number of shares vested by the closing price of Sempra common stock on the vesting date. Also includes the dividend equivalent with a record date of December 23, 2021, that was paid on January 15, 2022.

34

 

(B) The performance-based restricted stock unit awards granted on January 2, 2019 to Messrs. Drury, Cho and Barrett and Mss. Brown and DeMontigny, on January 17, 2019 to Messrs. Cho and Barrett and on April 1, 2019 to Ms. Brown that measured TSR performance against the S&P 500 Utilities Index companies and the S&P 500 Index companies vested on January 20, 2022 at 64.0% of target performance and 1.6% of target performance, respectively. The performance-based restricted stock unit awards granted on January 2, 2019 to Messrs. Drury, Cho and Barrett and Mss. Brown and DeMontigny, on January 17, 2019 to Messrs. Cho and Barrett and on April 1, 2019 to Ms. Brown based on EPS growth (as adjusted for LTIP purposes) vested on February 22, 2022 at 200% of target performance. Service-based restricted stock unit awards that vested on January 3, 2022 consisted of the third of three annual installments of the annual awards granted to Messrs. Drury, Cho and Barrett and Mss. Brown and DeMontigny on January 2, 2019, to Messrs. Cho and Barrett on January 17, 2019 and to Ms. Brown on April 1, 2019; the second of three annual installments of the annual awards granted to Messrs. Drury, Cho and Barrett and Mss. Brown and DeMontigny on January 2, 2020; the second of three annual installments of the special award granted to Mr. Drury on January 2, 2020; and the first of three annual installments of the annual awards granted to Messrs. Drury, Cho and Barrett and Mss. Brown and DeMontigny on January 4, 2021. Service-based restricted stock unit awards that vested on August 3, 2022 consisted of the second of four annual installments of the special awards granted to Messrs. Drury and Cho on August 3, 2020; and the second of three annual installments of the special awards granted to Mss. Brown and DeMontigny on August 3, 2020.

The performance-based restricted stock unit awards granted in January 2020 that measured TSR performance against the S&P 500 Utilities Index companies and the S&P 500 Index companies vested on January 26, 2023 at 130.5% of target performance and 80.8% of target performance, respectively. The performance-based restricted stock unit awards granted in January 2020 based on EPS growth (as adjusted for LTIP purposes) vested on February 21, 2023 at 200% of target performance. Service-based restricted stock unit awards that vested on January 3, 2023 consisted of the third of three annual installments of the annual awards granted to Messrs. Drury, Cho and Barrett and Mss. Brown and DeMontigny on January 2, 2020; the third of three annual installments of the special award granted to Mr. Drury on January 2, 2020; the second of three annual installments of the annual awards granted to Messrs. Drury, Cho and Barrett and Mss. Brown and DeMontigny on January 4, 2021; the first of three annual installments of the annual awards granted to Messrs. Drury, Cho and Barrett and Mss. Brown and DeMontigny on January 3, 2022; and the first of three annual installments of the special awards granted to Ms. Brown and Mr. Barrett on January 3, 2022. The number of shares acquired upon the vesting of these awards and their market value (including the units and the value of the dividend equivalent with a record date of December 22, 2022, which was paid on January 15, 2023), none of which are reflected in this table due to the vesting of the applicable awards after December 31, 2022, were: 10,650 shares of Sempra common stock and $1,671,574 for Mr. Drury; 7,296 shares of Sempra common stock and $1,144,940 for Ms. Brown; 6,772 shares of Sempra common stock and $1,064,362 for Mr. Cho; 2,914 shares of Sempra common stock and $457,151 for Mr. Barrett; and 2,496 shares of Sempra common stock and $392,062 for Ms. DeMontigny.

Pension Benefits

Our named executive officers participate in the Sempra Energy Cash Balance Plan, a broad-based tax-qualified retirement plan that is subject to certain limits under the Internal Revenue Code. Under the plan, a notional account is credited annually for each participant in an amount equal to 7.5% of the participant’s salary and performance-based annual bonus. Account balances earn interest and are fully vested after three years of service.

In addition to the Cash Balance Plan, Messrs. Drury and Cho participate in the Sempra Energy Supplemental Executive Retirement Plan, a nonqualified pension plan designed to recruit and retain executive talent. Under the plan, benefits are calculated using a defined benefit formula based on final average earnings (average base salary for the two consecutive years of highest base salary prior to retirement plus the average of the three highest annual bonuses during the 10 years prior to retirement), years of service and age at retirement of the executive officer. Benefits payable under the Supplemental Executive Retirement Plan are reduced by benefits payable under the Cash Balance Plan.

Benefits under the defined benefit formula begin to vest after five years of service and attainment of age 55, with full vesting when age plus years of service total 70 or the executive attains age 60. Benefits for Mr. Cho, who became a participant in the plan on January 1, 2020, will not begin vesting in the defined benefit until he has participated in the plan for five years, after which prior service will be considered. Upon normal retirement at age 62, the annual benefit (as a percentage of final average earnings) in the form of a 50% joint and survivor annuity is 20% after five years of service, 40% after 10 years of service, 50% after 15 years of service, 60% after 20 years of service, 62.5% after 30 years of service, and 65% after 40 years of service. Reduced benefits based on age and years of service are provided for retirement as early as age 55 and the completion of five years of service.

Supplemental Executive Retirement Plan participants who have at least three years of service and do not meet the minimum vesting criteria under the defined benefit formula, which includes Messrs. Drury and Cho, and Sempra Energy Cash Balance Restoration Plan participants, which include Mss. Brown and DeMontigny and Mr. Barrett, are entitled to a benefit equal to the benefit that would have been received under the tax-qualified Cash Balance Plan but for Internal Revenue Code limitations on pay and benefits under tax-qualified plans. Account balances in the Cash Balance Restoration Plan earn interest and are fully vested after three years of service.

Retiring employees may elect to receive the retirement date present value of their vested accumulated retirement benefits in a single lump sum payment. Alternatively, they may elect an annuity that provides the actuarial equivalent of the lump sum benefit.

We summarize below the present value of accumulated benefits under the various retirement plans at December 31, 2022, for each of our executive officers named in the 2022 Summary Compensation Table.

35

 

PENSION BENEFITS AT YEAR-END

  Plan Years of
Credited
Service
Present
Value of
Accumulated
Benefit(A)
 
Scott D. Drury(B) Cash Balance Plan 37 $ 743,473  
  Supplemental Executive Retirement Plan 37 $ 8,879,270  
  Total   $ 9,622,743  
Maryam S. Brown(C) Cash Balance Plan 6 $ 111,446  
  Cash Balance Restoration Plan 6 $ 174,203  
  Total   $ 285,649  
Jimmie I. Cho(B) Cash Balance Plan 31 $ 573,023  
  Supplemental Executive Retirement Plan 31 $ 5,464,926  
  Total   $ 6,037,949  
David J. Barrett(C) Cash Balance Plan 20 $ 468,540  
  Cash Balance Restoration Plan 20 $ 344,087  
  Total   $ 812,627  
Mia L. DeMontigny(C) Cash Balance Plan 7 $ 133,933  
  Cash Balance Restoration Plan 7 $ 84,879  
  Total   $ 218,812  
(A) Amounts are based on the assumptions used for financial reporting purposes set forth in Note 9 of the Notes to Consolidated Financial Statements contained in the 2022 Annual Report, except that retirement age has been assumed to be the earliest time at which the executive could retire under each of the plans without any benefit reduction due to age.

Amounts shown for the Cash Balance Plan are based on the greater of the amounts payable under the plan or the sum of the present value of the accumulated benefit payable under a frozen predecessor plan plus future cash balance accruals. The amounts shown for the Supplemental Executive Retirement Plan and the Cash Balance Restoration Plan are the present value of the incremental benefit over that provided by the Cash Balance Plan.

(B) Messrs. Drury and Cho are not yet vested in a benefit under the defined benefit formula of the Supplemental Executive Retirement Plan. However, Messrs. Drury and Cho would have been entitled to the benefit that would have been received under the tax-qualified Cash Balance Plan but for Internal Revenue Code limitations on pay and benefits under tax-qualified plans. At December 31, 2022, Mr. Drury was age 57 and Mr. Cho was age 58. Had they retired at December 31, 2022 and received their benefits under the plans as a lump sum, their early retirement benefits would have been $1,382,668 for Mr. Drury and $990,477 for Mr. Cho.
(C) Mss. Brown and DeMontigny and Mr. Barrett, who are not participants in the Supplemental Executive Retirement Plan, are vested in benefits under the Cash Balance Plan and nonqualified Cash Balance Restoration Plan. Had their respective employment terminated on December 31, 2022, their benefits would have been $393,659 for Ms. Brown, $920,960 for Mr. Barrett, and $286,095 for Ms. DeMontigny.

Nonqualified Deferred Compensation

Sempra’s nonqualified Employee and Director Savings Plan permits executives to elect on a year-by-year basis to defer the receipt of up to 85% of their annual salary and performance-based annual bonus for payment in installments or in a lump sum at a future date in connection with an executive’s separation of service from the company or on a fixed in-service distribution date. Executive officers also may defer all or a portion of certain performance-based restricted stock unit awards upon vesting.

The timing and form of distribution are selected by the executive at the time of the deferral election, and subsequent changes are limited. In the event of a change in control of Sempra, participant accounts are distributed in a lump sum immediately prior to the date of the change in control. Deferred amounts are fully vested and earn interest at a rate reset annually to the higher of 110% of the Moody’s Corporate Bond Yield Average Rate or the Moody’s Corporate Bond Yield Average Rate plus 1% (4.06% for 2022) or, at the election of the executive, are deemed invested in investment accounts that mirror the investment accounts available under the tax-qualified 401(k) savings plans in which all employees may participate. Deferrals of performance-based restricted stock unit awards cannot be transferred into other investments and are paid out in shares of common stock in accordance with the officer’s payout elections following separation of service from the company.

36

 

The Internal Revenue Code places annual limits on the amounts that employees and employers can defer into a 401(k) savings plan. Because of these limits, matching contributions for deferred compensation plan participants are made through the deferred compensation plan. The deferred compensation matching contribution is equal to one-half of the first 6% of the employee’s contributions plus one-fifth of the next 5% of the employee’s contributions less an offset for 401(k) savings plan matching contributions. There are no company matching contributions on deferrals of performance-based restricted stock unit awards.

All employee contributions and related investment earnings in the deferred compensation plan vest immediately. New participants are immediately eligible for company matching contributions and company matching contributions (including related earnings) vest after one year of service.

We summarize below information regarding the participation by each of our named executive officers in Sempra’s nonqualified deferred compensation plans.

2022 NONQUALIFIED DEFERRED COMPENSATION

  Executive
Contributions
in 2022(A)
  Company
Contributions
in 2022(B)
  Aggregate
Earnings
in 2022(C)
Aggregate
Distributions
in 2022(D)
Aggregate
Balance at
12/31/22(E)
Scott D. Drury             $ 72,626     $ 1,199,678  
Maryam S. Brown        $ 86,127                  $ 25,833           $ 34,541     $ 418,879  
Jimmie I. Cho $ 276,754     $ 17,320         $ (587,265 ) $(32,136 )   $ 5,111,510  
David J. Barrett             $ (3,414 )   $ 187,746  
Mia L. DeMontigny $ 34,353     $ 3,441     $ (22,501 )   $ 124,240  
(A) Executive contributions consist of deferrals of salary and performance-based annual bonus that also are reported as compensation in the 2022 Summary Compensation Table. Timing differences between reporting bonus compensation in the 2022 Summary Compensation Table (which reports bonus amounts in the year for which they were earned) and related deferral dates (the date on which the bonuses would have been paid to the executive) may in any year result in lesser or greater amounts reported as executive contributions in this table than the amounts that have been reported as compensation for the same year in the 2022 Summary Compensation Table. Executive contributions in 2022 that are also included as 2022 salary reported in the 2022 Summary Compensation Table total $0 for Mr. Drury; $27,805 for Ms. Brown; $276,754 for Mr. Cho; $40,256 for Mr. Barrett; and $0 for Ms. DeMontigny. Deferrals of the 2022 performance-based annual bonus that was paid in March 2023 are not included in this table.
(B) Company contributions are equal to one-half of the first 6% of the employee’s contributions plus one-fifth of the next 5% of the employee’s contributions less an offset for 401(k) savings plan matching contributions.
(C) Earnings are measured as the difference in deferred account balances between the beginning and the end of the year plus nonqualified deferred compensation distributions (if applicable) and minus executive and company contributions made during the year. Earnings consisting of above-market interest also are reported in the 2022 Summary Compensation Table. Excluding above-market interest, earnings for 2022 were $56,781 for Mr. Drury; $34,204 for Ms. Brown; ($615,717) for Mr. Cho; ($5,313) for Mr. Barrett; and ($22,501) for Ms. DeMontigny. These earnings are not reported in the 2022 Summary Compensation Table.
(D) Mr. Cho received an in-service payment of nonqualified deferred compensation in the amount of $32,136 during the year ended December 31, 2022.
(E) Year-end balances consist of executive and company contributions and earnings on contributed amounts, less any distributions. All contributions and all earnings that consist of above-market interest have been included in the 2022 Summary Compensation Table for 2022 or prior years. Such aggregate amounts (other than the 2019 bonus paid in 2020) reported in the 2022 Summary Compensation Table for fiscal years 2020, 2021 and 2022 are $431,595 for Mr. Drury; $307,879 for Ms. Brown; $1,260,106 for Mr. Cho; $59,021 for Mr. Barrett; and $95,453 for Ms. DeMontigny. These amounts do not include deferrals of the 2022 performance-based annual bonus paid in March 2023 but do include deferrals of the 2019 performance-based annual bonus paid in March 2020.

Severance and Change in Control Benefits

Each of our named executive officers has a severance pay agreement. Each agreement is for a three-year term and is automatically extended for an additional year upon each agreement’s anniversary unless we or the executive elect not to extend the term.

The severance pay agreements provide executives with severance benefits in the event that we were to terminate the executive’s employment during the agreement’s term for reasons other than “cause” or as a result of death or disability, or the executive were to resign for “good reason.” The nature and amount of the severance benefits vary depending on the executive’s position, and increased benefits are provided if, upon termination, the executive enters into an agreement to provide consulting services for two years and agrees to abide by certain covenants regarding non-solicitation of employees and information confidentiality. Additional benefits also are provided if the termination of employment were to occur within two years following a “change in control” of Sempra.

The definitions of “cause” and “good reason” vary depending on whether the termination of employment occurs following a change in control of Sempra. However, “cause” is generally defined to include a willful and continued failure by the executive to perform his or her duties for the company, and “good reason” is generally defined to include adverse changes in the executive’s responsibilities, compensation and benefit opportunities and, following a change in control, certain changes in employment location. A “change in control” is defined in the agreements to generally include events resulting in a change in the effective control of Sempra or a change in the ownership of a substantial portion of Sempra’s assets.

37

 

Awards granted under the Sempra Energy 2019 LTIP, which constitute all outstanding awards that have not fully vested, include a “double-trigger” provision for vesting of equity in connection with a change in control. Restricted stock unit awards issued to date under the plan provide for continuation following a change in control through the new company’s assumption of the awards or the issuance of replacement awards. Replacement awards must meet certain criteria, which are described in Article 14 of the Sempra Energy 2019 LTIP. If awards are not assumed or replaced, or if an employee is eligible for retirement (age 55 or older with five or more years of service) as of the date of the change in control, awards would vest upon the change in control. If such awards are subject to performance-based vesting, such awards would vest at the greater of the target performance level or the actual performance level had the performance period ended on the last day of the calendar year immediately preceding the date of the change in control (or, for awards based on TSR, had the performance period ended on the date of the change in control). Messrs. Drury, Cho and Barrett have reached age 55 and completed at least five years of service and thus are eligible for retirement. In addition, any outstanding awards would immediately vest upon an executive’s involuntary termination other than for cause, resignation for “good reason,” death, disability or retirement, in each case during the three-year period following a change in control. Service-based awards also vest upon an executive’s death.

With respect to performance-based awards, if an executive’s employment is terminated after the executive has reached age 55 and completed five years of service (and the termination is other than for cause), and the termination occurs after completion of one year of the applicable performance or service period (or after November 30th of the year in which the grant was made if the executive has attained age 62), the executive’s award is not forfeited as a result of the termination of employment. Performance-based awards continue to be subject to forfeiture based on the extent to which the related performance goals have been satisfied at the end of the applicable performance period. If an executive’s employment is terminated and the executive has not met the retirement eligibility criteria specified in the award agreement or the termination is for cause, performance-based awards are forfeited.

With respect to service-based awards, if an executive’s employment is terminated during the service period, the award is forfeited, subject to earlier vesting upon a change in control of Sempra, the death of the executive, at the discretion of the Compensation and Talent Development Committee of the Sempra Board of Directors or as otherwise provided in connection with the grant of the award.

We summarize below the benefits each of our executive officers named in the 2022 Summary Compensation Table would have been entitled to receive had we terminated his or her employment (other than for cause) at December 31, 2022, or had the executive resigned for “good reason” on that date, and the benefits each executive would have been entitled to receive had such termination occurred (or such termination was deemed to have occurred in cases of certain involuntary terminations in connection with or in anticipation of a change in control) within two years following a change in control of Sempra (or within three years for purposes of certain equity award acceleration, and assuming such awards were assumed or replaced in such change in control). These amounts assume the executive had entered into a two-year consulting, non-solicitation and confidentiality agreement providing for enhanced severance. We also show the benefits that each executive would have been entitled to receive in the event of his or her death on December 31, 2022. In addition, we show the benefits that each executive would have been entitled to receive (accelerated vesting of restricted stock units) had a change in control of Sempra occurred on December 31, 2022, whether or not accompanied or followed by a termination of the executive’s employment.

38

 

SEVERANCE AND CHANGE IN CONTROL BENEFITS

    Termination of Employment by the Company Without Cause
or by the Executive Officer for Good Reason or Death
  Change in
Control Only
 
    Unrelated to a
Change in
Control
  Related to a
Change in
Control
  Resulting from
Death
  (Without
Termination of
Employment)
 
Scott D. Drury                                
Lump Sum Cash Payment(A)        $ 2,184,850              $ 2,913,133                      
Acceleration of Existing Equity Awards(B)             5,496,757          $ 1,424,564              $ 5,496,757  
Enhanced Retirement Benefits(C)             12,906,640       12,906,640          
Health & Welfare Benefits(D)     30,760       64,459                  
Financial Planning(E)     37,500       50,000                  
Outplacement     50,000       50,000                  
Total   $ 2,303,110     $ 21,480,989     $ 14,331,204     $ 5,496,757  
Maryam S. Brown                                
Lump Sum Cash Payment(A)   $ 1,433,650     $ 1,911,533                  
Acceleration of Existing Equity Awards(B)             3,464,547     $ 955,124        
Enhanced Retirement Benefits(C)                                
Health & Welfare Benefits(D)     41,054       58,837                  
Financial Planning(E)     37,500       50,000                  
Outplacement     50,000       50,000                  
Total   $ 1,562,204     $ 5,534,917     $ 955,124        
Total After Severance Reduction(F)   $ 1,562,204     $ 4,945,634     $ 955,124        
Jimmie I. Cho                                
Lump Sum Cash Payment(A)   $ 1,423,400     $ 1,897,867                  
Acceleration of Existing Equity Awards(B)             3,419,695     $ 914,853     $ 3,419,695  
Enhanced Retirement Benefits(C)             7,964,483       7,964,483          
Health & Welfare Benefits(D)     24,332       58,353                  
Financial Planning(E)     37,500       50,000                  
Outplacement     50,000       50,000                  
Total   $ 1,535,232     $ 13,440,398     $ 8,879,336     $ 3,419,695  
David J. Barrett                                
Lump Sum Cash Payment(A)   $ 991,150     $ 1,486,725                  
Acceleration of Existing Equity Awards(B)             1,324,872     $ 346,125     $ 1,324,872  
Enhanced Retirement Benefits(C)                                
Health & Welfare Benefits(D)     43,344       60,478