Edgar Filing: PACIFIC ENTERPRISES INC

Sempra Energy / PE / SOCAL / SDGE 9/30/09 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

September 30, 2009

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File No.

Exact Name of Registrants as Specified in their Charters, Address and Telephone Number

States of Incorporation

I.R.S. Employer
Identification Nos.

Former name, former address and former fiscal year, if changed since last report

1-14201

SEMPRA ENERGY

California

33-0732627

No change

101 Ash Street

San Diego, California 92101

(619)696-2034

1-3779

SAN DIEGO GAS & ELECTRIC COMPANY

California

95-1184800

No change

8326 Century Park Court

San Diego, California 92123

(619)696-2000

1-40

PACIFIC ENTERPRISES

California

94-0743670

No change

101 Ash Street

San Diego, California 92101

(619)696-2020

1-1402

SOUTHERN CALIFORNIA GAS COMPANY

California

95-1240705

No change

555 West Fifth Street

Los Angeles, California 90013

(213)244-1200

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

Yes

Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files).

Sempra Energy

Yes

San Diego Gas & Electric Company

Yes

Pacific Enterprises

Yes

Southern California Gas Company

Yes

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large
accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Sempra Energy

[ X ]

[ ]

San Diego Gas & Electric Company

[ ]

[ X ]

[ ]

Pacific Enterprises

[ ]

[ X ]

[ ]

Southern California Gas Company

[ ]

[ X ]

[ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Sempra Energy

Yes

San Diego Gas & Electric Company

Yes

Pacific Enterprises

Yes

Southern California Gas Company

Yes

Indicate the number of shares outstanding of each of the issuers' classes of common stock, as of the latest practicable date.

Common stock outstanding on November 5, 2009:

Sempra Energy

246,442,856 shares

San Diego Gas & Electric Company

Wholly owned by Enova Corporation, which is wholly owned by Sempra Energy

Pacific Enterprises

Wholly owned by Sempra Energy

Southern California Gas Company

Wholly owned by Pacific Enterprises, which is wholly owned by Sempra Energy


SEMPRA ENERGY FORM 10-Q TABLE OF CONTENTS
		Page
Information Regarding Forward-Looking Statements		4

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	71
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	97
Item 4.	Controls and Procedures	98

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	99
Item 1A.	Risk Factors	99
Item 6.	Exhibits	100

Signatures		102

This combined Form 10-Q is separately filed by Sempra Energy, San Diego Gas & Electric Company, Pacific Enterprises and Southern California Gas Company. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company provides information only as to itself and its consolidated entities and not as to any other company.

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

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

We make statements in this report that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are necessarily based upon assumptions with respect to the future, involve risks and uncertainties, and are not guarantees of performance. These forward-looking statements represent our estimates and assumptions only as of the date of this report.

In this report, when we use words such as "believes," "expects," "anticipates," "plans," "estimates," "projects," "contemplates," "intends," "depends," "should," "could," "would," "may," "potential," "target," "goals," or similar expressions, or when we discuss our strategy, plans or intentions, we are making forward-looking statements.

Factors, among others, that could cause our actual results and future actions to differ materially from those described in forward-looking statements include

local, regional, national and international economic, competitive, political, legislative and regulatory conditions and developments;

actions by the California Public Utilities Commission, the California State Legislature, the California Department of Water Resources, the Federal Energy Regulatory Commission, the Federal Reserve Board, and other regulatory and governmental bodies in the United States, the United Kingdom and other countries;

capital markets conditions and inflation, interest and exchange rates;

energy and trading markets, including the timing and extent of changes and volatility in commodity prices;

the availability of electric power, natural gas and liquefied natural gas;

weather conditions and conservation efforts;

war and terrorist attacks;

business, regulatory, environmental and legal decisions and requirements;

the status of deregulation of retail natural gas and electricity delivery;

the timing and success of business development efforts;

the resolution of litigation; and

other uncertainties, all of which are difficult to predict and many of which are beyond our control.

We caution you not to rely unduly on any forward-looking statements. You should review and consider carefully the risks, uncertainties and other factors that affect our business as described in this report and other reports that we file with the Securities and Exchange Commission.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
	Three months ended September 30,				Nine months ended September 30,
	2009		2008*		2009		2008*
	(unaudited)
REVENUES
Sempra Utilities	$	1,424	$	2,013	$	4,382	$	6,190
Sempra Global and parent		429		679		1,268		2,275
Total revenues		1,853		2,692		5,650		8,465
EXPENSES AND OTHER INCOME
Sempra Utilities:
Cost of natural gas		(208)		(689)		(997)		(2,708)
Cost of electric fuel and purchased power		(208)		(311)		(508)		(694)
Sempra Global and parent:
Cost of natural gas, electric fuel and purchased power		(220)		(431)		(675)		(1,353)
Other cost of sales		(19)		(15)		(52)		(168)
Operation and maintenance		(571)		(564)		(1,676)		(1,816)
Depreciation and amortization		(196)		(162)		(568)		(508)
Franchise fees and other taxes		(77)		(76)		(228)		(230)
Gains on sale of assets		-		-		3		114
Write-off of long-lived assets		-		-		(132)		-
Equity earnings (losses):
RBS Sempra Commodities LLP		105		(4)		384		142
Other		18		14		27		29
Other income (expense), net		24		(21)		97		30
Interest income		5		12		16		36
Interest expense		(96)		(67)		(257)		(165)
Income before income taxes and equity earnings
of certain unconsolidated subsidiaries		410		378		1,084		1,174
Income tax expense		(128)		(94)		(327)		(423)
Equity earnings, net of income tax		20		18		59		57
Net income		302		302		816		808
(Earnings) losses attributable to noncontrolling interests		17		8		22		(7)
Preferred dividends of subsidiaries		(2)		(2)		(7)		(7)
Earnings	$	317	$	308	$	831	$	794

Basic earnings per common share	$	1.30	$	1.26	$	3.42	$	3.18
Weighted-average number of shares outstanding, basic (thousands)		243,925		243,793		242,806		249,311

Diluted earnings per common share	$	1.27	$	1.24	$	3.37	$	3.13
Weighted-average number of shares outstanding, diluted (thousands)		248,461		247,904		246,875		253,407
Dividends declared per share of common stock	$	0.39	$	0.35	$	1.17	$	1.02
* As adjusted for the retrospective adoption of ASC 810 (SFAS 160).
See Notes to Condensed Consolidated Financial Statements.


SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2009		2008
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	756	$	331
Short-term investments		-		176
Restricted cash		27		27
Trade accounts receivable, net		618		903
Other accounts and notes receivable, net		126		78
Due from unconsolidated affiliates		19		4
Income taxes receivable		139		195
Deferred income taxes		117		31
Inventories		296		320
Regulatory assets		48		121
Fixed-price contracts and other derivatives		111		160
Insurance receivable related to wildfire litigation (Note 10)		266		-
Other		173		130
Total current assets		2,696		2,476

Investments and other assets:
Regulatory assets arising from fixed-price contracts and other derivatives		232		264
Regulatory assets arising from pension and other postretirement
benefit obligations		1,218		1,188
Other regulatory assets		568		534
Nuclear decommissioning trusts		664		577
Investment in RBS Sempra Commodities LLP		2,094		2,082
Other investments		2,019		1,166
Goodwill and other intangible assets		527		539
Sundry		605		709
Total investments and other assets		7,927		7,059

Property, plant and equipment:
Property, plant and equipment		24,379		23,153
Less accumulated depreciation and amortization		(6,607)		(6,288)
Property, plant and equipment, net		17,772		16,865
Total assets	$	28,395	$	26,400
See Notes to Condensed Consolidated Financial Statements.


SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2009		2008*
	(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	851	$	503
Accounts payable - trade		436		606
Accounts payable - other		145		250
Due to unconsolidated affiliates		16		38
Dividends and interest payable		209		156
Accrued compensation and benefits		221		280
Regulatory balancing accounts, net		605		335
Current portion of long-term debt		622		410
Fixed-price contracts and other derivatives		99		180
Customer deposits		145		170
Reserve for wildfire litigation (Note 10)		289		-
Other		672		684
Total current liabilities		4,310		3,612
Long-term debt		6,845		6,544

Deferred credits and other liabilities:
Due to unconsolidated affiliate		102		102
Customer advances for construction		144		155
Pension and other postretirement benefit obligations, net of plan assets		1,518		1,487
Deferred income taxes		1,278		946
Deferred investment tax credits		54		57
Regulatory liabilities arising from removal obligations		2,546		2,430
Asset retirement obligations		1,212		1,159
Other regulatory liabilities		202		219
Fixed-price contracts and other derivatives		348		392
Deferred credits and other		774		909
Total deferred credits and other liabilities		8,178		7,856
Preferred stock of subsidiary		79		79

Commitments and contingencies (Note 10)

Equity:
Preferred stock (50 million shares authorized; none issued)		-		-
Common stock (750 million shares authorized; 246 million and 243 million
shares outstanding at September 30, 2009 and December 31, 2008, respectively;
no par value)		2,381		2,265
Retained earnings		6,779		6,235
Deferred compensation		(14)		(18)
Accumulated other comprehensive income (loss)		(401)		(513)
Total Sempra Energy shareholders' equity		8,745		7,969
Preferred stock of subsidiaries		100		100
Other noncontrolling interests		138		240
Total equity		8,983		8,309
Total liabilities and equity	$	28,395	$	26,400
* As adjusted for the retrospective adoption of ASC 810 (SFAS 160).
See Notes to Condensed Consolidated Financial Statements.


SEMPRA ENERGY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
	Nine months ended September 30,
	2009		2008*
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	816	$	808
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization		568		508
Deferred income taxes and investment tax credits		181		165
Equity earnings		(470)		(228)
Gains on sale of assets		(3)		(114)
Write-off of long-lived assets		132		-
Fixed-price contracts and other derivatives		(27)		-
Other		45		76
Net change in other working capital components		220		(408)
Distributions from RBS Sempra Commodities LLP		407		56
Changes in other assets		81		(3)
Changes in other liabilities		(66)		(55)
Net cash provided by operating activities		1,884		805

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment		(1,371)		(1,541)
Proceeds from sale of assets, net of cash sold		179		2,071
Expenditures for investments		(762)		(2,180)
Distributions from investments		16		23
Purchases of nuclear decommissioning and other trust assets		(167)		(361)
Proceeds from sales by nuclear decommissioning and other trusts		155		350
Decrease in notes receivable from unconsolidated affiliate		-		60
Other		(20)		(18)
Net cash used in investing activities		(1,970)		(1,596)

CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid		(255)		(252)
Preferred dividends paid by subsidiaries		(7)		(7)
Issuances of common stock		52		17
Repurchases of common stock		-		(1,002)
(Decrease) increase in short-term debt, net		(52)		985
Issuances of long-term debt		1,181		650
Payments on long-term debt		(325)		(75)
Purchase of noncontrolling interest		(94)		-
Other		11		5
Net cash provided by financing activities		511		321

Increase (decrease) in cash and cash equivalents		425		(470)
Cash and cash equivalents, January 1		331		668
Cash and cash equivalents, September 30	$	756	$	198
* As adjusted for the retrospective adoption of ASC 810 (SFAS 160).
See Notes to Condensed Consolidated Financial Statements.


SEMPRA ENERGY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
	Nine months ended September 30,
	2009		2008
	(unaudited)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	201	$	142

Income tax payments, net	$	98	$	120

SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
Decrease in accounts payable from investments in property, plant and equipment	$	(114)	$	(41)

Dividends declared but not paid	$	99	$	89
See Notes to Condensed Consolidated Financial Statements.


SAN DIEGO GAS & ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2009		2008*		2009		2008*
	(unaudited)
Operating revenues
Electric	$	695	$	817	$	1,783	$	1,901
Natural gas		78		132		353		548
Total operating revenues		773		949		2,136		2,449
Operating expenses
Cost of electric fuel and purchased power		208		311		508		694
Cost of natural gas		30		84		154		349
Operation and maintenance		234		222		655		595
Depreciation and amortization		81		68		239		223
Franchise fees and other taxes		46		43		126		117
Litigation expense		2		29		(6)		38
Total operating expenses		601		757		1,676		2,016
Operating income		172		192		460		433
Other income, net		1		3		45		26
Interest income		1		1		1		5
Interest expense		(29)		(24)		(75)		(73)
Income before income taxes		145		172		431		391
Income tax expense		(53)		(54)		(141)		(121)
Net income		92		118		290		270
(Earnings) losses attributable to noncontrolling interests		18		7		(9)		(8)
Earnings		110		125		281		262
Preferred dividend requirements		(2)		(2)		(4)		(4)
Earnings attributable to common shares	$	108	$	123	$	277	$	258
* As adjusted for the retrospective adoption of ASC 810 (SFAS 160).
See Notes to Condensed Consolidated Financial Statements.


SAN DIEGO GAS & ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2009		2008
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	291	$	19
Short-term investments		-		24
Accounts receivable - trade		275		225
Accounts receivable - other		66		30
Due from unconsolidated affiliates		5		29
Income taxes receivable		51		22
Deferred income taxes		42		17
Inventories		67		62
Regulatory assets arising from fixed-price contracts and other derivatives		32		94
Other regulatory assets		5		8
Fixed-price contracts and other derivatives		61		39
Insurance receivable related to wildfire litigation (Note 10)		266		-
Other		49		15
Total current assets		1,210		584

Other assets:
Due from unconsolidated affiliate		3		4
Deferred taxes recoverable in rates		399		369
Regulatory assets arising from fixed-price contracts and other derivatives		232		264
Regulatory assets arising from pension and other postretirement
benefit obligations		393		393
Other regulatory assets		55		59
Nuclear decommissioning trusts		664		577
Sundry		56		154
Total other assets		1,802		1,820

Property, plant and equipment:
Property, plant and equipment		9,797		9,095
Less accumulated depreciation and amortization		(2,535)		(2,420)
Property, plant and equipment, net		7,262		6,675
Total assets	$	10,274	$	9,079
See Notes to Condensed Consolidated Financial Statements.


SAN DIEGO GAS & ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2009		2008*
	(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	250	$	261
Due to unconsolidated affiliates		9		1
Regulatory balancing accounts, net		321		114
Customer deposits		54		53
Fixed-price contracts and other derivatives		53		77
Accrued compensation and benefits		84		105
Current portion of long-term debt		10		2
Reserve for wildfire litigation (Note 10)		289		-
Other		201		163
Total current liabilities		1,271		776
Long-term debt		2,587		2,142

Deferred credits and other liabilities:
Customer advances for construction		21		26
Pension and other postretirement benefit obligations, net of plan assets		419		419
Deferred income taxes		721		628
Deferred investment tax credits		25		26
Regulatory liabilities arising from removal obligations		1,308		1,212
Asset retirement obligations		575		550
Fixed-price contracts and other derivatives		287		347
Deferred credits and other		168		204
Total deferred credits and other liabilities		3,524		3,412
Contingently redeemable preferred stock		79		79

Commitments and contingencies (Note 10)

Equity:
Common stock (255 million shares authorized; 117 million shares outstanding;
no par value)		1,138		1,138
Retained earnings		1,544		1,417
Accumulated other comprehensive income (loss)		(10)		(13)
Total SDG&E shareholders' equity		2,672		2,542
Noncontrolling interests		141		128
Total equity		2,813		2,670
Total liabilities and equity	$	10,274	$	9,079
* As adjusted for the retrospective adoption of ASC 810 (SFAS 160).
See Notes to Condensed Consolidated Financial Statements.


SAN DIEGO GAS & ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
	Nine months ended
	September 30,
	2009		2008*
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	290	$	270
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization		239		223
Deferred income taxes and investment tax credits		35		77
Fixed-price contracts and other derivatives		(28)		(7)
Other		(14)		(4)
Net change in other working capital components		115		(41)
Changes in other assets		20		(7)
Changes in other liabilities		(38)		3
Net cash provided by operating activities		619		514

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment		(633)		(638)
Expenditures for short-term investments		(152)		(304)
Proceeds from sale of short-term investments		176		236
Purchases of nuclear decommissioning trust assets		(161)		(347)
Proceeds from sales by nuclear decommissioning trusts		155		348
Decrease (increase) in loans to affiliates, net		33		(6)
Other		2		1
Net cash used in investing activities		(580)		(710)

CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid		(150)		-
Capital contribution received by Otay Mesa VIE		4		9
Preferred dividends paid		(4)		(4)
Redemptions of preferred stock		-		(14)
Issuances of long-term debt		386		138
Other		(3)		(1)
Net cash provided by financing activities		233		128

Increase (decrease) in cash and cash equivalents		272		(68)
Cash and cash equivalents, January 1		19		158
Cash and cash equivalents, September 30	$	291	$	90

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	51	$	59

Income tax payments (refunds), net	$	144	$	(54)

SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
Decrease in accounts payable from investments in property, plant and equipment	$	(58)	$	(11)

Dividends declared but not paid	$	1	$	1
* As adjusted for the retrospective adoption of ASC 810 (SFAS 160).
See Notes to Condensed Consolidated Financial Statements.


PACIFIC ENTERPRISES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2009		2008*		2009		2008*
	(unaudited)

Operating revenues	$	662	$	1,077	$	2,276	$	3,776
Operating expenses
Cost of natural gas		180		609		849		2,369
Operation and maintenance		249		241		766		756
Depreciation		73		67		220		209
Franchise fees and other taxes		25		29		81		100
Total operating expenses		527		946		1,916		3,434
Operating income		135		131		360		342
Other income (expense), net		(4)		1		1		2
Interest income		-		5		3		18
Interest expense		(17)		(15)		(52)		(47)
Income before income taxes		114		122		312		315
Income tax expense		(41)		(42)		(117)		(119)
Net income		73		80		195		196
Preferred dividends of subsidiary		-		-		(1)		(1)
Earnings		73		80		194		195
Preferred dividend requirements		(1)		(1)		(3)		(3)
Earnings attributable to common shares	$	72	$	79	$	191	$	192
* As adjusted for the retrospective adoption of ASC 810 (SFAS 160).
See Notes to Condensed Consolidated Financial Statements.


PACIFIC ENTERPRISES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2009		2008
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	418	$	206
Accounts receivable - trade		252		572
Accounts receivable - other		29		20
Due from unconsolidated affiliates		5		5
Income taxes receivable		-		108
Deferred income taxes		9		-
Inventories		189		167
Other regulatory assets		11		18
Other		39		37
Total current assets		952		1,133

Other assets:
Due from unconsolidated affiliate		514		457
Regulatory assets arising from pension and other postretirement
benefit obligations		825		795
Other regulatory assets		114		105
Sundry		42		49
Total other assets		1,495		1,406

Property, plant and equipment:
Property, plant and equipment		9,083		8,816
Less accumulated depreciation and amortization		(3,557)		(3,448)
Property, plant and equipment, net		5,526		5,368
Total assets	$	7,973	$	7,907
See Notes to Condensed Consolidated Financial Statements.


PACIFIC ENTERPRISES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2009		2008*
	(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable - trade	$	121	$	257
Accounts payable - other		105		163
Due to unconsolidated affiliates		100		106
Income taxes payable		2		-
Deferred income taxes		-		6
Regulatory balancing accounts, net		284		221
Customer deposits		89		114
Accrued compensation and benefits		81		92
Current portion of long-term debt		101		100
Other		175		213
Total current liabilities		1,058		1,272
Long-term debt		1,269		1,270
Deferred credits and other liabilities:
Customer advances for construction		123		131
Pension and other postretirement benefit obligations, net of plan assets		850		823
Deferred income taxes		218		157
Deferred investment tax credits		28		30
Regulatory liabilities arising from removal obligations		1,238		1,218
Asset retirement obligations		607		581
Deferred taxes refundable in rates		196		214
Deferred credits and other		233		251
Total deferred credits and other liabilities		3,493		3,405

Commitments and contingencies (Note 10)

Equity:
Preferred stock		80		80
Common stock (600 million shares authorized; 84 million shares outstanding;
no par value)		1,462		1,462
Retained earnings		617		426
Accumulated other comprehensive income (loss)		(26)		(28)
Total Pacific Enterprises shareholders' equity		2,133		1,940
Preferred stock of subsidiary		20		20
Total equity		2,153		1,960
Total liabilities and equity	$	7,973	$	7,907
* As adjusted for the retrospective adoption of ASC 810 (SFAS 160).
See Notes to Condensed Consolidated Financial Statements.


PACIFIC ENTERPRISES AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
	Nine months ended September 30,
	2009		2008*
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	195	$	196
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation		220		209
Deferred income taxes and investment tax credits		24		74
Other		2		(2)
Net change in other working capital components		129		(134)
Changes in other assets		8		25
Changes in other liabilities		(33)		(63)
Net cash provided by operating activities		545		305

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment		(336)		(350)
Decrease in loans to affiliates, net		8		132
Other		(1)		-
Net cash used in investing activities		(329)		(218)

CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid		-		(200)
Preferred dividends paid		(3)		(3)
Preferred dividends paid by subsidiary		(1)		(1)
Increase in short-term debt, net		-		96
Net cash used in financing activities		(4)		(108)

Increase (decrease) in cash and cash equivalents		212		(21)
Cash and cash equivalents, January 1		206		59
Cash and cash equivalents, September 30	$	418	$	38

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	40	$	37

Income tax payments, net	$	54	$	113

SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
Decrease in accounts payable from investments in property, plant and equipment	$	(10)	$	(30)

Dividends declared but not paid	$	1	$	1
* As adjusted for the retrospective adoption of ASC 810 (SFAS 160).
See Notes to Condensed Consolidated Financial Statements.


SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2009		2008		2009		2008
	(unaudited)

Operating revenues	$	662	$	1,077	$	2,276	$	3,776
Operating expenses
Cost of natural gas		180		609		849		2,369
Operation and maintenance		252		241		768		756
Depreciation		73		67		220		209
Franchise fees and other taxes		25		29		81		100
Total operating expenses		530		946		1,918		3,434
Operating income		132		131		358		342
Other income (expense), net		(1)		(1)		4		1
Interest income		1		2		3		9
Interest expense		(16)		(14)		(51)		(44)
Income before income taxes		116		118		314		308
Income tax expense		(42)		(41)		(115)		(117)
Net income		74		77		199		191
Preferred dividend requirements		-		-		(1)		(1)
Earnings attributable to common shares	$	74	$	77	$	198	$	190
See Notes to Condensed Consolidated Financial Statements.


SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2009		2008
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	418	$	206
Accounts receivable - trade		252		572
Accounts receivable - other		27		20
Income taxes receivable		-		41
Deferred income taxes		9		-
Inventories		189		167
Other regulatory assets		11		18
Other		39		37
Total current assets		945		1,061

Other assets:
Regulatory assets arising from pension and other postretirement
benefit obligations		825		795
Other regulatory assets		114		105
Sundry		15		24
Total other assets		954		924

Property, plant and equipment:
Property, plant and equipment		9,081		8,814
Less accumulated depreciation and amortization		(3,557)		(3,448)
Property, plant and equipment, net		5,524		5,366
Total assets	$	7,423	$	7,351
See Notes to Condensed Consolidated Financial Statements.


SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2009		2008
	(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade	$	121	$	257
Accounts payable - other		102		163
Due to unconsolidated affiliates		13		23
Income taxes payable		4		-
Deferred income taxes		-		6
Regulatory balancing accounts, net		284		221
Customer deposits		89		114
Accrued compensation and benefits		81		92
Current portion of long-term debt		101		100
Other		175		211
Total current liabilities		970		1,187
Long-term debt		1,269		1,270
Deferred credits and other liabilities:
Customer advances for construction		123		131
Pension and other postretirement benefit obligations, net of plan assets		850		823
Deferred income taxes		226		167
Deferred investment tax credits		28		30
Regulatory liabilities arising from removal obligations		1,238		1,218
Asset retirement obligations		607		581
Deferred taxes refundable in rates		196		214
Deferred credits and other		226		240
Total deferred credits and other liabilities		3,494		3,404

Commitments and contingencies (Note 10)

Shareholders' equity:
Preferred stock		22		22
Common stock (100 million shares authorized; 91 million shares outstanding;
no par value)		866		866
Retained earnings		828		630
Accumulated other comprehensive income (loss)		(26)		(28)
Total shareholders' equity		1,690		1,490
Total liabilities and shareholders' equity	$	7,423	$	7,351
See Notes to Condensed Consolidated Financial Statements.


SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
	Nine months ended September 30,
	2009		2008
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	199	$	191
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation		220		209
Deferred income taxes and investment tax credits		22		71
Other		6		1
Net change in other working capital components		125		(135)
Changes in other assets		4		21
Changes in other liabilities		(27)		(60)
Net cash provided by operating activities		549		298

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment		(336)		(350)
Decrease in loans to affiliates, net		-		136
Net cash used in investing activities		(336)		(214)

CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid		-		(200)
Preferred dividends paid		(1)		(1)
Increase in short-term debt, net		-		96
Net cash used in financing activities		(1)		(105)

Increase (decrease) in cash and cash equivalents		212		(21)
Cash and cash equivalents, January 1		206		59
Cash and cash equivalents, September 30	$	418	$	38

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	40	$	35

Income tax payments, net	$	54	$	113

SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
Decrease in accounts payable from investments in property, plant and equipment	$	(10)	$	(30)
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. GENERAL

PRINCIPLES OF CONSOLIDATION

Sempra Energy

Sempra Energy's Condensed Consolidated Financial Statements include the accounts of Sempra Energy, a California-based Fortune 500 holding company, its consolidated subsidiaries, and variable interest entities. Sempra Energy’s principal subsidiaries are:

San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas), which we collectively refer to as the Sempra Utilities; and

Sempra Global, which is the holding company for Sempra Commodities, Sempra Generation, Sempra Pipelines & Storage, Sempra LNG and other, smaller businesses.

Sempra Energy uses the equity method to account for investments in affiliated companies over which we have the ability to exercise significant influence, but not control.

SDG&E

SDG&E's Condensed Consolidated Financial Statements include its accounts, the accounts of its sole subsidiary, SDG&E Funding LLC, and the accounts of Otay Mesa Energy Center LLC (Otay Mesa VIE) and Orange Grove L.P., which are variable interest entities of which SDG&E is the primary beneficiary, as discussed in Note 5 under "Variable Interest Entities." SDG&E’s common stock is wholly owned by Enova Corporation, which is a wholly owned subsidiary of Sempra Energy. The activities of SDG&E Funding LLC were substantially complete in 2007, and the entity was dissolved in 2008.

Pacific Enterprises and SoCalGas

The Condensed Consolidated Financial Statements of Pacific Enterprises include the accounts of Pacific Enterprises (PE) and its subsidiary, SoCalGas. Sempra Energy owns all of PE’s common stock and PE owns all of SoCalGas’ common stock. SoCalGas’ Condensed Consolidated Financial Statements include its subsidiaries, which comprise less than one percent of its consolidated financial position and results of operations.

PE's operations consist solely of those of SoCalGas and additional items (e.g., cash, intercompany accounts and equity) attributable to being a holding company for SoCalGas.

BASIS OF PRESENTATION

This is a combined report of Sempra Energy, SDG&E, PE and SoCalGas. We provide separate information for SDG&E, PE and SoCalGas as required. When only information for SoCalGas is provided, it is the same for PE. References in this report to "we," "our" and "Sempra Energy Consolidated" are to Sempra Energy and its consolidated entities, unless otherwise indicated by the context. We have eliminated intercompany accounts and transactions within each set of consolidated financial statements.

We have prepared the Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (GAAP) and in accordance with the interim-period-reporting requirements of Form 10-Q. Results of operations for interim periods are not necessarily indicative of results for the entire year. We evaluated events and transactions that occurred after September 30, 2009 but before the issuance of these financial statements on November 9, 2009, and in the opinion of management, the accompanying statements

reflect all adjustments necessary for a fair presentation. These adjustments are only of a normal, recurring nature, except as we discuss below in "Presentation of Preferred Securities" and in Note 2.

You should read the information in this Quarterly Report in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2008 (the Annual Report) and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2009 and June 30, 2009, which are combined reports for Sempra Energy, SDG&E, PE and SoCalGas.

Our significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report. We follow the same accounting policies for interim reporting purposes, except for the adoption of new accounting standards as we discuss in Note 2.

The Sempra Utilities account for the economic effects of regulation on utility operations in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 980, Regulated Operations (formerly Statement of Financial Accounting Standards (SFAS) 71, Accounting for the Effects of Certain Types of Regulation).

Presentation of Preferred Securities

In connection with the adoption of SFAS 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51 (ASC 810), as we discuss in Note 2, we evaluated the requirements of Emerging Issues Task Force (EITF) Topic No. 98, Classification and Measurement of Redeemable Securities (Topic D-98) (ASC 480), with respect to the presentation of preferred securities. In previously issued financial statements, SDG&E classified certain preferred securities within the shareholders' equity section of the balance sheet. These preferred securities contain a contingent redemption feature that allows the holder to elect a majority of SDG&E's board of directors if dividends are not paid for eight consecutive quarters. Because such a redemption triggering event is not solely within the control of SDG&E, SDG&E has concluded that these preferred securities should have been presented separate from and outside of shareholders' equity in a manner consistent with temporary equity defined in Topic D-98. Although SDG&E believes that the effects are not material to the previously issued balance sheets, SDG&E has corrected the classification of these amounts as of December 31, 2008 for comparability purposes. This change, which affects preferred securities totaling $79 million at both December 31, 2008 and September 30, 2009, affects only the balance sheet presentation of equity accounts and has no impact on earnings or on cash flows for any period presented.

NOTE 2. NEW ACCOUNTING STANDARDS

We describe below recent pronouncements that have had or may have a significant effect on our financial statements. We do not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to our financial condition, results of operations, or disclosures.

SEMPRA ENERGY, SDG&E, PE AND SOCALGAS

SFAS 168, "The FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162" (SFAS 168): The FASB Accounting Standards Codification (the Codification) became the official source of GAAP on July 1, 2009 and for convenience, we have provided the prior GAAP source references in addition to the Codification reference throughout this Form 10-Q. In addition, the Codification changed the referencing system used to identify new accounting guidance. As a result, we refer to an accounting update issued after July 1, 2009 as an Accounting Standards Update (ASU). We refer to new pronouncements issued before July 1, 2009 by their original title.

ASU 2009-05, “Measuring Liabilities at Fair Value” (ASU 2009-05): ASU 2009-05 addresses practical difficulties that arise when calculating the fair value of a liability, or the price at which the liability may be transferred to a market participant. Generally, a quoted price for an identical liability is not available because few liabilities are transferred to another party.

In the absence of a quoted price in an active market for an identical liability, ASU 2009-05 allows the following valuation techniques:

a quoted price of an identical or similar liability traded as an asset

a valuation technique consistent with ASC 820, Fair Value Measurements and Disclosures

ASU 2009-05 applies to us prospectively beginning October 1, 2009. We are in the process of evaluating the effects of this statement on our financial position and results of operations.

SFAS 167, "Amendments to FASB Interpretation No. 46(R)" (SFAS 167): SFAS 167 amends FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities – an interpretation of ARB No. 51 (FIN 46(R)), which provides consolidation guidance related to variable interest entities.

SFAS 167 requires

a qualitative approach for identifying the primary beneficiary of a variable interest entity based on 1) the power to direct activities that most significantly impact the economic performance of the entity, and 2) the obligation to absorb losses or right to receive benefits that could be significant to the entity;

ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity; and

separate disclosure by the primary beneficiary on the face of the balance sheet to identify 1) assets that can only be used to settle obligations of the variable interest entity, and 2) liabilities for which creditors do not have recourse to the primary beneficiary.

SFAS 167 applies to us beginning with the first quarter of 2010. We are in the process of evaluating the effects of this statement on our financial position and results of operations.

SFAS 165, "Subsequent Events" (SFAS 165): SFAS 165 (ASC 855) requires management to evaluate events that occur after the balance sheet through the date that the financial statements are issued. The guidance is similar to current audit guidance and does not change the way we assess subsequent events. The statement requires that we disclose the date through which we evaluated subsequent events.

We adopted SFAS 165 on April 1, 2009 and provide the required disclosure in Note 1.

SFAS 160, "Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51" (SFAS 160): SFAS 160 (ASC 810) amends Accounting Research Bulletin (ARB) No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent.

SFAS 160 provides guidance on the following:

how to report noncontrolling interests in a subsidiary in consolidated financial statements;

the amount of consolidated net income attributable to the parent and to the noncontrolling interest; and

changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated.

We adopted SFAS 160 on January 1, 2009, and the presentation and disclosure requirements must be applied retrospectively. Accordingly, Sempra Energy’s, SDG&E’s and PE's Condensed Consolidated Financial Statements at December 31, 2008 and for the three and nine months ended September 30, 2008 have been reclassified to conform to the new presentation. The adoption of SFAS 160 had no impact on SoCalGas’ financial statements. The pronouncement also requires disclosures that clearly identify and distinguish between the interest of the parent and the interests of the noncontrolling owners. We provide the required disclosure in Note 5.

SFAS 161, "Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133" (SFAS 161): SFAS 161 (ASC 815) expands the disclosure requirements in SFAS 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133).

SFAS 161 requires disclosures about the following:

qualitative objectives and strategies for using derivatives;

quantitative disclosures of fair value amounts, and gains and losses on derivative instruments and related hedged items; and

credit-risk-related contingent features in derivative agreements.

We adopted SFAS 161 prospectively on January 1, 2009. We provide the required disclosure in Note 7.

FASB Staff Position (FSP) FAS 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That are Not Orderly" (FSP FAS 157-4): FSP FAS 157-4 (ASC 820) concerns the determination of fair values for assets and liabilities when there is no active market or where the prices used might represent distressed sales. Specifically, it reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive. The FSP also outlines factors to be used to determine whether there has been a significant decrease in the volume and level of activity for the assets and liabilities when compared with normal market activity. We adopted FSP FAS 157-4 on April 1, 2009, and it did not affect our financial position or results of operations.

FSP FAS 107-1 and APB 28-1, "Interim Disclosures About Fair Value of Financial Instruments" (FSP FAS 107-1 and APB 28-1): FSP FAS 107-1 and APB 28-1 (ASC 820) requires disclosure about the carrying amount and fair value of financial instruments for interim periods. Prior to the issuance of this FSP, this disclosure was required only for annual periods. We adopted FSP FAS 107-1 and APB 28-1 on April 1, 2009 and provide the required disclosure in Note 8.

FSP FAS 115-2 and FAS 124-2, "Recognition and Presentation of Other-Than-Temporary Impairments" (FSP FAS 115-2 and FAS 124-2): FSP FAS 115-2 and FAS 124-2 (ASC 320) establishes a new model for determining and recording other-than-temporary impairment for debt securities. The pronouncement also requires disclosure about the fair value of investments for interim periods. Prior to the issuance of this FSP, this disclosure was required only for annual periods. We adopted FSP FAS 115-2 and FAS 124-2 on April 1, 2009, and it did not affect our financial position or results of operations. We provide the required disclosure in Note 8.

FSP FAS 132(R)-1, "Employers’ Disclosures about Postretirement Benefit Plan Assets" (FSP FAS 132(R)-1): FSP FAS 132(R)-1 (ASC 715) requires annual disclosure about the assets held in postretirement benefit plans, including a breakdown by the level of the assets and a reconciliation of any change in Level 3 assets during the year. It requires disclosures about the following:

valuation inputs, with detailed disclosure required about Level 3 assets

asset categories, broken down to relevant detail

concentration of risk in plan assets

FSP FAS 132(R)-1 applies to us prospectively for fiscal years ending after December 15, 2009. Early application is permitted. We are in the process of evaluating the effect of this statement on our financial statement disclosures and will include the additional disclosure in our 2009 annual financial statements.

SEMPRA ENERGY

FSP EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities" (FSP EITF 03-6-1): FSP EITF 03-6-1 (ASC 260) states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities. As such, they are required to be included when computing earnings per share (EPS) under the two-class method described in SFAS 128, Earnings per Share. All prior-period EPS data are to be adjusted retrospectively to conform with the provisions of this FSP. We adopted FSP EITF 03-6-1 on January 1, 2009, and it did not have a material effect on our EPS.

EITF Issue No. 08-6, "Equity Method Investment Accounting Considerations" (EITF 08-6): EITF 08-6 (ASC 323) clarifies accounting and impairment considerations involving equity method investments. We adopted EITF 08-6 on January 1, 2009, and it did not have a material effect on our financial position or results of operations.

EITF Issue No. 08-5, "Issuer’s Accounting for Liabilities Measured at Fair Value with a Third-Party Credit Enhancement" (EITF 08-5): EITF 08-5 (ASC 820) provides that an issuer of a liability with a third-party credit enhancement that is inseparable from the liability may not include the effect of the credit enhancement in the fair value measurement of the liability. We adopted EITF 08-5 on January 1, 2009, and it did not affect our financial position or results of operations.

NOTE 3. RECENT EQUITY TRANSACTION

SEMPRA PIPELINES & STORAGE

Sempra Midstream, owned by Sempra Pipelines & Storage, owned 60 percent of Mississippi Hub, LLC (Mississippi Hub) at December 31, 2008. On January 16, 2009, Sempra Midstream purchased the remaining 40-percent ownership interest of Mississippi Hub for $94 million in cash.

NOTE 4. INVESTMENTS IN UNCONSOLIDATED ENTITIES

SEMPRA ENERGY AND SDG&E

Available-for-Sale Securities

During the nine months ended September 30, 2008, Sempra Energy and SDG&E purchased $345 million and $68 million, respectively, of SDG&E's industrial development bonds, net of purchases and sales between Sempra Energy and SDG&E as the cash flow needs of each entity changed. After the remarketing of $237 million of these bonds in the fourth quarter of 2008, the remaining $176 million, $24 million of which were held by SDG&E, were classified as available-for-sale securities and included in Short-Term Investments on the Condensed Consolidated Balance Sheets. In June 2009, SDG&E remarketed the remaining $176 million of these bonds at a fixed rate of 5.875 percent, maturing in 2034. Prior to SDG&E's remarketing of the remaining bonds in 2009, SDG&E purchased $152 million of the bonds from Sempra Energy. We discuss these bonds further in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

SEMPRA COMMODITIES

On April 1, 2008, Sempra Energy and The Royal Bank of Scotland (RBS) completed the formation of RBS Sempra Commodities LLP (RBS Sempra Commodities), a limited liability partnership formed in the United Kingdom to own and operate the commodities-marketing businesses previously operated through wholly owned subsidiaries of Sempra Energy. We account for our investment in RBS Sempra Commodities under the equity method, and our share of partnership earnings is reported in the Sempra Commodities segment.

For the three months and nine months ended September 30, 2009, we had $105 million and $384 million, respectively, of pretax equity earnings from RBS Sempra Commodities. For the three months and nine months ended September 30, 2008, pretax equity earnings (losses) from RBS Sempra Commodities were $(4) million and $142 million, respectively. The partnership income that is distributable to us on an annual basis is computed on the partnership's basis of accounting, International Financial Reporting Standards (IFRS) as adopted by the European Union. For the three months and nine months ended September 30, 2009, this distributable income, on an IFRS basis, was $60 million and $276 million, respectively. In the three months ended September 30, 2008, the distributable income, on an IFRS basis, decreased by $29 million. For the nine months ended September 30, 2008, the distributable income was $136 million. In the first quarter of 2009, we received the remaining distribution of 2008 partnership income of $305 million, and through the nine months ended September 30, 2009, we received $102 million to fund estimated tax payments as provided in the partnership agreement.

We have indemnified the partnership for certain litigation and tax liabilities related to the businesses purchased by the partnership. We recorded these obligations at a fair value of $5 million on April 1, 2008, the date we formed the partnership, and they are being amortized over 4 years.

We provide information regarding the Sempra Commodities segment in Note 11.

The following table shows summarized financial information for RBS Sempra Commodities (on a GAAP basis):


	Three months ended September 30,				Nine months ended September 30,
(Dollars in millions)	2009		2008		2009		2008
Gross revenues and fee income	$	291	$	48	$	1,167	$	586
Gross profit		268		23		1,096		540
Income (loss) from continuing operations		115		(56)		504		198
Partnership net income (loss)		115		(56)		504		198

SEMPRA GENERATION

In September 2009, Sempra Generation contributed $182 million to become an equal partner with BP Wind Energy, a wholly owned subsidiary of BP p.l.c., in the development of the 200-megawatt (MW) Fowler Ridge II Wind Farm (Fowler Ridge) which is under construction near Indianapolis, Indiana. We expect it to be operational in late 2009. The project will use 133 wind turbines, each with the ability to generate 1.5 MW. The project's entire power output has been sold under four long-term contracts, each for 50 MW and 20-year terms. Our investment in Fowler Ridge will be accounted for as an equity method investment.

SEMPRA PIPELINES & STORAGE

In the three months and nine months ended September 30, 2009, Sempra Pipelines & Storage contributed $315 million and $527 million, respectively, to Rockies Express, a joint venture for the development of the Rockies Express Pipeline. Sempra Pipelines & Storage contributed $150 million in the first quarter of 2008. We discuss this investment in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.

Sempra Pipelines & Storage owns 43 percent of two Argentine natural gas utility holding companies, Sodigas Pampeana and Sodigas Sur. The Argentine economic decline and government responses (including Argentina’s unilateral, retroactive abrogation of utility agreements early in 2002) continue to adversely affect the operations of these Argentine utilities. In 2002, Sempra Pipelines & Storage initiated arbitration proceedings at the International Center for the Settlement of Investment Disputes (ICSID) under the 1994 Bilateral Investment Treaty between the United States and Argentina for recovery of the diminution of the value of its investments that has resulted from Argentine governmental actions. In September 2007, the tribunal officially closed the arbitration proceedings and awarded us compensation of $172 million, which includes interest up to the award date. In January 2008, Argentina filed an action at the ICSID seeking to annul the award. The Annulment Committee lifted the stay of enforcement so that we may now attach and sell any non-sovereign assets of the Argentine government. The annulment hearing was held in early September 2009 and we anticipate a decision by year end. We will not recognize the ICSID award until collectibility is assured.

NOTE 5. OTHER FINANCIAL DATA

VARIABLE INTEREST ENTITIES

ASC 810, Consolidation (ASC 810) (FIN 46(R)), requires an enterprise to consolidate a variable interest entity (VIE), as defined in ASC 810, if the company is the primary beneficiary of the VIE’s activities. Our determination of whether we are the primary beneficiary is based upon qualitative and quantitative analyses, which assess

the purpose and design of the VIE;

the nature of the VIE's risks and the risks we absorb; and

whether the variable interest holders will absorb a majority of the VIE's expected losses or receive a majority of its expected residual returns (or both).

SDG&E has a 10-year agreement to purchase power to be generated at the Otay Mesa Energy Center (OMEC), a 573-MW generating facility. The facility began commercial operations in October 2009.

As defined in ASC 810, the facility owner, Otay Mesa Energy Center LLC (OMEC LLC), is a VIE (Otay Mesa VIE), of which SDG&E is the primary beneficiary. Accordingly, Sempra Energy and SDG&E have consolidated Otay Mesa VIE. SDG&E has no OMEC LLC voting rights and does not operate OMEC.

Otay Mesa VIE's equity of $141 million at September 30, 2009 and $128 million at December 31, 2008 is included on the Condensed Consolidated Balance Sheets in Other Noncontrolling Interests for Sempra Energy and in Noncontrolling Interests for SDG&E. We provide additional information about Otay Mesa VIE in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

OMEC LLC has a project finance credit facility with third party lenders, secured by its assets, that provides for up to $377 million for the construction of OMEC. SDG&E is not a party to the credit agreement and does not have any additional implicit or explicit financial responsibility to Otay Mesa VIE. The loan matures in April 2019. Borrowings under the facility bear interest at rates varying with market rates. OMEC LLC had $344 million of outstanding borrowings under this facility at September 30, 2009. In addition, OMEC LLC has entered into interest-rate swap agreements to moderate its exposure to interest-rate changes on this facility. We provide additional information concerning the interest-rate swaps in Note 7.

SDG&E has a 25-year agreement to purchase power to be generated by Orange Grove Energy L.P. (Orange Grove), at its 94-MW generating facility located in San Diego County, California. The facility is currently under construction, and we expect it to be available for commercial operation during the second quarter of 2010. As defined in ASC 810, Orange Grove is a VIE of which SDG&E is the primary beneficiary. During the third quarter of 2009, all of the conditions precedent in the purchased-power agreement were satisfied, therefore, effective on September 30, 2009, Sempra Energy and SDG&E have consolidated Orange Grove.

Orange Grove has credit facilities that provide for a total of $100 million for construction of the generating facility. These credit agreements are with a third party lender and are secured by Orange Grove's assets. SDG&E is not a party to the credit agreements and does not have any additional implicit or explicit financial responsibility to Orange Grove. When Orange Grove completes construction of the generating facility, or on June 30, 2010 if construction is not completed by that date, the credit facilities will convert to a term loan that matures in June 2035. Borrowings under the credit facilities bear interest at rates varying with market rates. At September 30, 2009, Orange Grove had $66 million of outstanding borrowings under the credit facilities and $3 million of letters of credit supported by the facilities.

Contracts under which SDG&E acquires power from generation facilities otherwise unrelated to SDG&E could also result in a requirement for SDG&E to consolidate the entity that owns the facility. In accordance with ASC 810, SDG&E continues the process of determining if it has any such situations and, if so, gathering the information that would be needed to perform the consolidation. However, such information has not been made available to us and an evaluation of variable interests has not been completed for these entities that are grandfathered pursuant to ASC 810.

The effects of any required consolidation are not expected to significantly affect the financial position, results of operations or liquidity of SDG&E.

PENSION AND OTHER POSTRETIREMENT BENEFITS

Net Periodic Benefit Cost

The following three tables provide the components of net periodic benefit cost:


NET PERIODIC BENEFIT COST -- SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
	Pension Benefits				Other Postretirement Benefits
	Three months ended September 30,				Three months ended September 30,
	2009		2008		2009		2008
Service cost	$	17	$	17	$	7	$	5
Interest cost		42		41		14		13
Expected return on assets		(34)		(40)		(11)		(12)
Amortization of:
Prior service cost		1		1		-		-
Actuarial loss		6		2		1		-
Curtailment		-		-		-		(1)
Regulatory adjustment		(14)		15		1		(5)
Total net periodic benefit cost	$	18	$	36	$	12	$	-
	Nine months ended September 30,				Nine months ended September 30,
	2009		2008		2009		2008
Service cost	$	56	$	53	$	21	$	18
Interest cost		127		124		43		40
Expected return on assets		(104)		(120)		(35)		(36)
Amortization of:
Prior service cost (credit)		3		3		(1)		(1)
Actuarial loss		18		6		3		-
Curtailment		-		-		-		(3)
Regulatory adjustment		(53)		(7)		5		(4)
Total net periodic benefit cost	$	47	$	59	$	36	$	14


NET PERIODIC BENEFIT COST -- SDG&E
(Dollars in millions)
	Pension Benefits				Other Postretirement Benefits
	Three months ended September 30,				Three months ended September 30,
	2009		2008		2009		2008
Service cost	$	5	$	6	$	2	$	1
Interest cost		12		12		3		3
Expected return on assets		(8)		(11)		(1)		(1)
Amortization of:
Prior service cost		-		-		1		1
Actuarial loss		4		-		-		-
Regulatory adjustment		(2)		23		-		(3)
Total net periodic benefit cost	$	11	$	30	$	5	$	1
	Nine months ended September 30,				Nine months ended September 30,
	2009		2008		2009		2008
Service cost	$	17	$	17	$	5	$	4
Interest cost		36		36		7		7
Expected return on assets		(24)		(34)		(3)		(3)
Amortization of:
Prior service cost		1		1		3		3
Actuarial loss		12		1		-		-
Regulatory adjustment		(16)		19		1		(5)
Total net periodic benefit cost	$	26	$	40	$	13	$	6


NET PERIODIC BENEFIT COST -- SOCALGAS
(Dollars in millions)
	Pension Benefits				Other Postretirement Benefits
	Three months ended September 30,				Three months ended September 30,
	2009		2008		2009		2008
Service cost	$	9	$	10	$	6	$	3
Interest cost		25		24		11		10
Expected return on assets		(24)		(26)		(10)		(10)
Amortization of:
Prior service cost (credit)		1		1		(1)		(1)
Actuarial loss		-		-		1		-
Regulatory adjustment		(10)		(8)		1		(2)
Total net periodic benefit cost	$	1	$	1	$	8	$	-
	Nine months ended September 30,				Nine months ended September 30,
	2009		2008		2009		2008
Service cost	$	31	$	30	$	15	$	12
Interest cost		74		73		34		31
Expected return on assets		(70)		(77)		(31)		(32)
Amortization of:
Prior service cost (credit)		2		2		(3)		(3)
Actuarial loss		-		-		3		-
Regulatory adjustment		(35)		(26)		4		1
Total net periodic benefit cost	$	2	$	2	$	22	$	9

Future Payments

The following table shows our year-to-date contributions to our pension and other postretirement benefit plans and the amounts we expect to contribute in 2009:


	Sempra Energy
(Dollars in millions)	Consolidated		SDG&E		SoCalGas
Contributions through September 30, 2009:
Pension plans	$	42	$	23	$	1
Other postretirement benefit plans		37		13		23
Total expected contributions in 2009:
Pension plans	$	194	$	59	$	77
Other postretirement benefit plans		48		17		29

EARNINGS PER SHARE

The following table provides the per share computations for our earnings for the three months and nine months ended September 30, 2009 and 2008. Basic EPS is calculated by dividing earnings attributable to common stock by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution of common stock equivalent shares that would occur if securities or other contracts to issue common stock were exercised or converted into common stock.


EARNINGS PER SHARE COMPUTATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Three months ended September 30,				Nine months ended September 30,
	2009		2008		2009		2008
Numerator:
Earnings	$	317	$	308	$	831	$	794

Denominator:
Weighted-average common shares
outstanding for basic EPS		243,925		243,793		242,806		249,311
Dilutive effect of stock options, restricted
stock awards and restricted stock units		4,536		4,111		4,069		4,096
Weighted-average common shares
outstanding for diluted EPS		248,461		247,904		246,875		253,407

Earnings per share:
Basic	$	1.30	$	1.26	$	3.42	$	3.18
Diluted	$	1.27	$	1.24	$	3.37	$	3.13

The dilution from common stock options is based on the treasury stock method. Under this method, proceeds based on the exercise price plus unearned compensation and windfall tax benefits or tax shortfalls, as defined by ASC 718, Compensation – Stock Compensation (ASC 718) (SFAS 123(R)), are assumed to be used to repurchase shares on the open market at the average market price for the period. The windfall tax benefits are tax deductions we would receive upon the assumed exercise of stock options in excess of the deferred income taxes we recorded related to the compensation expense on the stock options. Tax shortfalls occur when the assumed tax deductions are less than recorded deferred income taxes. The calculation excludes stock options for which the exercise price for common stock was greater than the average market price during the period. We had 1,505,096 and 1,513,721 of such stock options outstanding during the three months ended September 30, 2009 and 2008, respectively, and 1,507,361 and

1,494,935 of such stock options outstanding during the nine months ended September 30, 2009 and 2008, respectively.

We had 890,781 stock options outstanding during the nine months ended September 30, 2009, that were antidilutive because of the unearned compensation and windfall tax benefits included in the assumed proceeds under the treasury stock method. We had no such antidilutive stock options outstanding during the three months ended September 30, 2009, nor the three months and nine months ended September 30, 2008.

The dilution from unvested restricted stock awards and units is also based on the treasury stock method. Assumed proceeds equal to the unearned compensation and windfall tax benefits or tax shortfalls related to the awards, as defined by ASC 718, are assumed to be used to repurchase shares on the open market at the average market price for the period. The windfall tax benefits or tax shortfalls are the difference between tax deductions we would receive upon the assumed vesting of restricted stock awards and units and the deferred income taxes we recorded related to the compensation expense on the restricted stock awards and units. We had no antidilutive restricted stock awards or units outstanding during the three months and nine months ended September 30, 2009, nor the three months ended September 30, 2008. We had 431,401 restricted stock units and no restricted stock awards outstanding that were antidilutive during the nine months ended September 30, 2008.

SHARE-BASED COMPENSATION

We discuss our share-based compensation plans in Note 10 of the Notes to Consolidated Financial Statements in the Annual Report. We recorded share-based compensation expense, net of income taxes, of $15 million and $22 million for the nine months ended September 30, 2009 and 2008, respectively. Pursuant to our share-based compensation plans, we granted 918,200 non-qualified stock options, 37,200 restricted stock awards and 907,700 restricted stock units during the nine months ended September 30, 2009, primarily in January 2009.

CAPITALIZED FINANCING COSTS

Capitalized financing costs include capitalized interest costs and, at the Sempra Utilities, an allowance for funds used during construction (AFUDC) related to both debt and equity financing of construction projects. The following table shows capitalized financing costs for the three months and nine months ended September 30, 2009 and 2008.


CAPITALIZED FINANCING COSTS
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2009		2008		2009		2008
SDG&E:
AFUDC related to debt	$	3	$	3	$	7	$	7
AFUDC related to equity		8		7		21		19
Other capitalized financing costs		2		4		4		8
Total SDG&E		13		14		32		34

SoCalGas:
AFUDC related to debt		1		-		4		2
AFUDC related to equity		2		2		7		6
Other capitalized financing costs		1		-		1		-
Total SoCalGas		4		2		12		8

Sempra Global:
Capitalized financing costs		12		19		57		67
Total Sempra Energy Consolidated	$	29	$	35	$	101	$	109

COMPREHENSIVE INCOME

The following tables provide a reconciliation of net income to comprehensive income.


COMPREHENSIVE INCOME
(Dollars in millions)
	Three months ended September 30,
	2009						2008
	Share-		Non-				Share-		Non-
	holders'		controlling		Total		holders'		controlling		Total
	Equity*		Interests		Equity		Equity*		Interests		Equity
Sempra Energy Consolidated:
Net income (loss)**	$	319	$	(17)	$	302	$	310	$	(8)	$	302
Foreign currency translation
adjustments		(11)		-		(11)		(30)		-		(30)
Financial instruments		(5)		-		(5)		(2)		1		(1)
Available-for-sale securities		8		-		8		-		-		-
Net actuarial gain		2		-		2		1		-		1
Prior service cost		-		-		-		(1)		-		(1)
Comprehensive income	$	313	$	(17)	$	296	$	278	$	(7)	$	271
SDG&E:
Net income (loss)	$	110	$	(18)	$	92	$	125	$	(7)	$	118
Financial instruments		-		-		-		2		1		3
Comprehensive income	$	110	$	(18)	$	92	$	127	$	(6)	$	121
PE:
Net income**	$	73	$	-	$	73	$	80	$	-	$	80
Financial instruments		-		-		-		(6)		-		(6)
Comprehensive income	$	73	$	-	$	73	$	74	$	-	$	74
SoCalGas:
Net income	$	74	$	-	$	74	$	77	$	-	$	77
Financial instruments		-		-		-		(6)		-		(6)
Comprehensive income	$	74	$	-	$	74	$	71	$	-	$	71
* Shareholders' equity of Sempra Energy Consolidated, SDG&E, PE or SoCalGas as indicated in left margin.
**Before preferred dividends of subsidiaries.


COMPREHENSIVE INCOME (Continued)
(Dollars in millions)
	Nine months ended September 30,
	2009						2008
	Share-		Non-				Share-		Non-
	holders'		controlling		Total		holders'		controlling		Total
	Equity*		Interests		Equity		Equity*		Interests		Equity
Sempra Energy Consolidated:
Net income (loss)**	$	838	$	(22)	$	816	$	801	$	7	$	808
Foreign currency translation
adjustments		69		-		69		(45)		-		(45)
Financial instruments		18		(3)		15		5		(16)		(11)
Available-for-sale securities		21		-		21		(12)		-		(12)
Net actuarial gain		4		-		4		5		-		5
Prior service cost		-		-		-		(1)		-		(1)
Comprehensive income	$	950	$	(25)	$	925	$	753	$	(9)	$	744
SDG&E:
Net income	$	281	$	9	$	290	$	262	$	8	$	270
Financial instruments		2		(3)		(1)		1		(16)		(15)
Net actuarial gain		1		-		1		1		-		1
Comprehensive income	$	284	$	6	$	290	$	264	$	(8)	$	256
PE:
Net income**	$	195	$	-	$	195	$	196	$	-	$	196
Financial instruments		2		-		2		(6)		-		(6)
Comprehensive income	$	197	$	-	$	197	$	190	$	-	$	190
SoCalGas:
Net income	$	199	$	-	$	199	$	191	$	-	$	191
Financial instruments		2		-		2		(6)		-		(6)
Comprehensive income	$	201	$	-	$	201	$	185	$	-	$	185
* Shareholders' equity of Sempra Energy Consolidated, SDG&E, PE or SoCalGas as indicated in left margin.
**Before preferred dividends of subsidiaries.

The amounts for comprehensive income in the tables above are net of income tax expense (benefit) as follows:


INCOME TAX EXPENSE (BENEFIT) ASSOCIATED WITH OTHER COMPREHENSIVE INCOME
(Dollars in millions)
	Three months ended September 30,
	2009						2008
	Share-		Non-				Share-		Non-
	holders'		controlling		Total		holders'		controlling		Total
	Equity*		Interests		Equity		Equity*		Interests		Equity
Sempra Energy Consolidated:
Financial instruments	$	(2)	$	-	$	(2)	$	(3)	$	-	$	(3)
Available-for-sale securities		6		-		6		-		-		-
Net actuarial gain		-		-		-		1		-		1
SDG&E:
Financial instruments	$	-	$	-	$	-	$	1	$	-	$	1
PE:
Financial instruments	$	-	$	-	$	-	$	(4)	$	-	$	(4)
SoCalGas:
Financial instruments	$	-	$	-	$	-	$	(4)	$	-	$	(4)
	Nine months ended September 30,
	2009						2008
	Share-		Non-				Share-		Non-
	holders'		controlling		Total		holders'		controlling		Total
	Equity*		Interests		Equity		Equity*		Interests		Equity
Sempra Energy Consolidated:
Financial instruments	$	12	$	-	$	12	$	2	$	-	$	2
Available-for-sale securities		10		-		10		(10)		-		(10)
Net actuarial gain		2		-		2		3		-		3
SDG&E:
Financial instruments	$	1	$	-	$	1	$	1	$	-	$	1
PE:
Financial instruments	$	1	$	-	$	1	$	(4)	$	-	$	(4)
SoCalGas:
Financial instruments	$	1	$	-	$	1	$	(4)	$	-	$	(4)
* Shareholders' equity of Sempra Energy Consolidated, SDG&E, PE or SoCalGas as indicated in left margin.

SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS

Sempra Energy, SDG&E and PE account for noncontrolling interests in their Condensed Consolidated Financial Statements under ASC 810 (SFAS 160), as discussed in Note 2. The following two tables provide a reconciliation of Sempra Energy and SDG&E shareholders’ equity and noncontrolling interests for the nine months ended September 30, 2009 and 2008. There were no changes in the equity of PE's noncontrolling interests in the three- or nine-month periods of 2009 or 2008.


SHAREHOLDERS' EQUITY AND NONCONTROLLING INTERESTS
(Dollars in millions)
		Sempra
		Energy		Non-
		Shareholders'		controlling		Total
		Equity		Interests		Equity
Balance at December 31, 2008	$	7,969	$	340	$	8,309
Comprehensive income		950		(25)		925
Purchase of noncontrolling interest in subsidiary		(10)		(84)		(94)
Share-based compensation expense		28		-		28
Common stock dividends declared		(287)		-		(287)
Preferred dividends of subsidiaries		(7)		-		(7)
Issuance of common stock		81		-		81
Tax benefit related to share-based compensation		10		-		10
Common stock released from ESOP		11		-		11
Equity contributed by noncontrolling interests		-		7		7
Balance at September 30, 2009	$	8,745	$	238	$	8,983
Balance at December 31, 2007	$	8,339	$	248	$	8,587
Comprehensive income		753		(9)		744
Share-based compensation expense		39		-		39
Common stock dividends declared		(256)		-		(256)
Preferred dividends of subsidiaries		(7)				(7)
Issuance of common stock		17		-		17
Tax benefit related to share-based compensation		3		-		3
Repurchase of common stock		(1,002)		-		(1,002)
Common stock released from ESOP		12		-		12
Equity contributed by noncontrolling interests		-		65		65
Balance at September 30, 2008	$	7,898	$