SEMPRA ENERGY (Form: 10-Q, Received: 05/04/2016 14:28:30)

In October 2007, San Diego County experienced several catastrophic wildfires. Reports issued by the California Department of Forestry and Fire Protection (Cal Fire) concluded that two of these fires (the Witch and Rice fires) were SDG&E “power line caused” and that a third fire (the Guejito fire) occurred when a wire securing a Cox Communications’ (Cox) fiber optic cable came into contact with an SDG&E power line “causing an arc and starting the fire.” A September 2008 staff report issued by the CPUC’s Consumer Protection and Safety Division, now known as the Safety and Enforcement Division, reached substantially the same conclusions as the Cal Fire reports, but also contended that the power lines involved in the Witch and Rice fires and the lashing wire involved in the Guejito fire were not properly designed, constructed and maintained.

Numerous parties sued SDG&E and Sempra Energy in San Diego County Superior Court seeking recovery of unspecified amounts of damages, including punitive damages, from the three fires. They asserted various bases for recovery, including inverse condemnation based upon a California Court of Appeal decision finding that another California investor-owned utility was subject to strict liability, without regard to foreseeability or negligence, for property damages resulting from a wildfire ignited by power lines. SDG&E has resolved almost all of these lawsuits. One case remains subject to a damages-only trial, where the value of any compensatory damages resulting from the fires will be determined. Two appeals are pending after judgment in the trial court. SDG&E does not expect additional plaintiffs to file lawsuits given the applicable statutes of limitation, but could receive additional settlement demands and damage estimates from the remaining plaintiff until the case is resolved. SDG&E establishes reserves for the wildfire litigation as information becomes available and amounts are estimable.

SDG&E has concluded that it is probable that it will be permitted to recover in rates a substantial portion of the costs incurred to resolve wildfire claims in excess of its liability insurance coverage and the amounts recovered from third parties. Accordingly, at March 31, 2016, Sempra Energy and SDG&E have recorded assets of $363 million in Other Regulatory Assets (long-term) on their Condensed Consolidated Balance Sheets, including $360 million related to CPUC-regulated operations, which represents the amount substantially equal to the aggregate amount it has paid and reserved for payment for the resolution of wildfire claims and related costs in excess of its liability insurance coverage and amounts recovered from third parties. On September 25, 2015, SDG&E filed an application with the CPUC seeking authority to recover these costs, as we discuss in Note 10. Should SDG&E conclude that recovery in rates is no longer probable, SDG&E will record a charge against earnings at the time such conclusion is reached. If SDG&E had concluded that the recovery of regulatory assets related to CPUC-regulated operations was no longer probable or was less than currently estimated at March 31, 2016, the resulting after-tax charge against earnings would have been up to approximately $213 million. A failure to obtain substantial or full recovery of these costs from customers, or any negative assessment of the likelihood of recovery, would likely have a material adverse effect on Sempra Energy’s and SDG&E’s results of operations and cash flows.

We provide additional information about excess wildfire claims cost recovery and related CPUC actions in Note 14 of the Notes to Consolidated Financial Statements in the Annual Report and discuss how we assess the probability of recovery of our regulatory assets in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

Smart Meters Patent Infringement Lawsuit

In October 2011, SDG&E was sued by a Texas design and manufacturing company in Federal District Court, Southern District of California, and later transferred to the Federal District Court, Western District of Oklahoma as part of Multi-District Litigation (MDL) proceedings, alleging that SDG&E’s recently installed smart meters infringed certain patents. The meters were purchased from a third party vendor that has agreed to defend and indemnify SDG&E. The lawsuit seeks injunctive relief and recovery of unspecified amounts of damages. The MDL court has finished ruling on pre-trial matters, and SDG&E expects that it will return the case to the Southern District of California.

Lawsuit Against Mitsubishi Heavy Industries, Ltd.

On July 18, 2013, SDG&E filed a lawsuit in the Superior Court of California in the County of San Diego against Mitsubishi Heavy Industries, Ltd., Mitsubishi Nuclear Energy Systems, Inc., and Mitsubishi Heavy Industries America, Inc. (collectively MHI). The lawsuit seeks to recover damages SDG&E has incurred and will incur related to the design defects in the steam generators MHI provided to the SONGS nuclear power plant. The lawsuit asserts a number of causes of action, including fraud, based on the representations MHI made about its qualifications and ability to design generators free from defects of the kind that resulted in the permanent shutdown of the plant and further seeks to set aside the contractual limitation of damages that MHI has asserted. On July 24, 2013, MHI removed the lawsuit to the United States District Court for the Southern District of California and on August 8, 2013, MHI moved to stay the proceeding pending resolution of the dispute resolution process involving MHI and Edison arising from their contract for the purchase and sale of the steam generators. On October 16, 2013, Edison initiated an arbitration proceeding against MHI seeking damages stemming from the failure of the replacement steam generators. In late December 2013, MHI answered and filed a counterclaim against Edison. On March 14, 2014, MHI’s motion to stay the United States District Court proceeding was granted with instructions that require the parties to allow SDG&E to participate in the ongoing Edison/MHI arbitration. As a result, SDG&E participated in the arbitration as a claimant and respondent. The arbitration hearing concluded at the end of April 2016, and a decision could come as early as this year.

Investment in Wind Farm

In 2011, the CPUC and FERC approved SDG&E’s estimated $285 million tax equity investment in a wind farm project and its purchase of renewable energy credits from that project. SDG&E’s contractual obligations to both invest in the Rim Rock wind farm and to purchase renewable energy credits from the wind farm under the power purchase agreement are subject to the satisfaction of certain conditions which, if not achieved, would allow SDG&E to terminate the power purchase agreement and not make the investment. In December 2013, SDG&E received a closing notice from the project developer indicating that all such conditions had been met. SDG&E responded to the closing notice asserting that the contractual conditions had not been satisfied. On December 19, 2013, SDG&E filed a complaint against the project developer in San Diego Superior Court, asking that the court determine that SDG&E is entitled to terminate both the investment contract and the power purchase agreement due to the project developer’s failure to satisfy certain conditions. The project developer filed a separate complaint against SDG&E in Montana state court asking that court to determine that SDG&E breached the investment contract and the power purchase agreement, and asking for several categories of relief, including requiring SDG&E to invest in the project, requiring SDG&E to continue performing under the power purchase agreement, and payment of damages.

On January 27, 2014, the Montana court ordered SDG&E to continue making payments under the power purchase agreement pending a hearing on the project developer’s preliminary injunction motion. On March 14, 2014, SDG&E notified the project developer that the investment agreement expired by its own terms because a closing had not occurred by that date. The project developer disputed SDG&E’s position. On March 28, 2014, SDG&E filed an amended complaint against the project developer in San Diego seeking damages and declaratory relief that SDG&E was entitled to terminate the power purchase agreement and to permit the investment agreement to expire. On April 25, 2014, the Montana court granted the project developer’s preliminary injunction motion to prevent SDG&E from terminating the power purchase agreement on the grounds that the project developer would be irreparably harmed if the payments were not made while the parties’ respective rights were being determined in the litigation. The court did not rule on the merits of the parties’ claims. On July 18, 2014, the Montana Supreme Court determined that the parties’ contractual agreement to resolve any disputes in San Diego was mandatory, and ordered that the Montana action be dismissed. The San Diego court has scheduled a trial in May 2016. On February 11, 2016, SDG&E, the project developer and several of the project developer’s parent and affiliated entities entered into a conditional settlement agreement. Under the conditional settlement agreement, among other things, the parties agreed to terminate the tax equity investment arrangement, continue the power purchase agreement for the wind farm generation, and release all claims against each other. The conditional settlement agreement will not result in rate increases to SDG&E customers or a material impact on Sempra Energy’s or SDG&E’s financial condition, results of operations or cash flows. On February 16, 2016, SDG&E and the project developer filed a petition for approval of the settlement agreement with the CPUC. The conditional settlement agreement is not fully effective until approved by the CPUC; SDG&E expects a decision in 2016. The May 2016 trial date set in the San Diego court has been stayed until the settlement is addressed by the CPUC.

SoCalGas

Aliso Canyon Natural Gas Storage Facility Gas Leak

In October 2015, SoCalGas discovered a leak at one of its injection and withdrawal wells, SS25, at its Aliso Canyon natural gas storage facility, located in the northern part of the San Fernando Valley in Los Angeles County. The Aliso Canyon facility has been operated by SoCalGas since 1972. SS25 is more than one mile away from and 1,200 feet above the closest homes. It is one of more than 100 injection and withdrawal wells at the storage facility.

Stopping the Leak, and Local Community Mitigation Efforts . SoCalGas worked closely with several of the world’s leading experts to stop the leak, including planning and obtaining all necessary approvals for drilling relief wells. On February 18, 2016, the California Department of Conservation’s Division of Oil, Gas, and Geothermal Resources (DOGGR) confirmed that the well was permanently sealed.

On December 24, 2015, by stipulation and court order, SoCalGas agreed to implement a formal plan for assisting residents in the nearby community to temporarily relocate, as well as to pay for additional overtime and costs associated with extra Los Angeles Police Department security patrols, among other things. SoCalGas has been providing temporary relocation support to residents in the nearby community who requested it before the well was permanently sealed. In addition, SoCalGas provided air filtration and purification systems to those residents in the nearby community requesting them.

As a result of receiving the confirmation from DOGGR that SS25 was permanently sealed, SoCalGas started winding down its temporary relocation support in accordance with the terms of the formal relocation plan. Subject to certain exceptions, the period for temporary relocation support to residents who temporarily relocated to short-term housing, such as hotels, was scheduled to end on February 25, 2016. This deadline was challenged by the County of Los Angeles (County), who expressed concern about potential lingering health effects and stated that they intended to perform indoor air testing. The California Superior Court issued an order extending such period for an additional 22 days for certain residents. On March 18, 2016, the County sought a further extension through the end of the litigation, which was denied, but the Superior Court stayed its order pending a potential appeal to the California Court of Appeal. Following an appeal by the County, on April 13, 2016, the Court of Appeal remanded the matter back to the California Superior Court for further consideration of the record and extended the relocation support term to at least April 27, 2016. The Superior Court set the matter for hearing on April 27, 2016, and gave the parties an opportunity to file supplemental briefing and evidence. On April 27, 2016, the Superior Court heard oral argument on the matter and ultimately entered an order further extending the relocation support term pending the completion of the County’s indoor testing. The Superior Court set a case management conference on June 7, 2016, for further consideration of the relocation program, and instructed the County and SoCalGas to file a joint update with the Court on May 31, 2016 regarding the status of the relocation support.

To put the relocation dispute in perspective, on January 31, 2016, the Los Angeles County Department of Public Health (LA County DPH) stated, “The average levels of benzene and other trace chemicals that have been measured in the community are currently at or below levels seen elsewhere in the county, and do not pose an increase in the risk of short ‐ term or long ‐ term health effects.” Following the sealing of the well, included in its April 9, 2016 update to its Aliso Canyon webpage, the LA County DPH affirmed that “levels of chemicals of concern are now consistent with expected background levels for the Los Angeles air basin.”

In seeking the extension of the relocation support term, the County has contended that indoor testing is required in order to determine whether it is safe for residents to return home. On March 24, 2016, the County released its indoor sampling work plan to test approximately 100 houses for a broad range of chemicals, including volatile organic compounds, semi-volatile organic compounds, metals, and sulfur compounds in the air and on surfaces. These substances are commonly found in households at varying levels. We were informed that this testing was completed on April 8, 2016, and that the County is currently analyzing the results. The County has reported that it anticipates completing its analysis and releasing a final report by late May 2016. In mid-March 2016, a third party engaged by SoCalGas conducted screening of indoor air for methane and mercaptans (odorants added to natural gas) in 71 houses in the Porter Ranch community near the Aliso Canyon storage facility. Based on this screening, no mercaptans were detected, and concentrations of methane were well below levels of concern as established by the California Environmental Protection Agency’s Department of Toxic Substances Control.

The total costs incurred to remediate and stop the leak and to mitigate local community impacts will be significant, and to the extent not covered by insurance, or if there were to be significant delays in receiving insurance recoveries, such costs could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.

Cost Estimates and Accounting Impact. At March 31, 2016, SoCalGas recorded estimated costs of $665 million related to the leak. Of this amount, approximately 70 percent is for the temporary relocation program and approximately 15 percent is for attempts to control the well, stop the leak, stop or reduce the emissions, and the estimated cost of the root cause analysis being conducted to determine the cause of the leak. The remaining amount includes estimated legal costs necessary to defend litigation, the value of lost gas, the costs to mitigate the actual natural gas released, and other costs. SoCalGas made a commitment in December 2015 to mitigate the actual natural gas released and has been working on a plan to accomplish the mitigation. The $665 million represents management’s best estimate of these costs related to the leak. Of these costs, certain amounts have been paid and $302 million is recorded as Reserve for Aliso Canyon Costs at March 31, 2016 on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets for amounts expected to be paid after March 31, 2016. We will refine these estimates as further information becomes available. SoCalGas’ estimate of temporary relocation costs was primarily determined considering the current experience of temporary relocations through the hearing date of April 27, 2016 discussed above. The remainder of the reserve was estimated primarily based on work plans, the rate of cost accumulation and estimated duration of the various activities, or other estimates. Any differences in actual costs incurred will impact these estimates. Based on the order of the Superior Court on April 27, 2016, which scheduled the next hearing on June 7, 2016, for purposes of this estimate we assume the period for temporary relocation support to residents who temporarily relocated has been extended to June 7, 2016. While such support period could end before June 7, 2016, due to the fact that temporary relocation support has been extended several times, there can be no assurance that future extensions will not be granted. The cost of the temporary relocation support is significant, and the costs of any further extensions of the relocation support term, which are not included in our estimate, could result in a material increase in our cost estimate.

At March 31, 2016, we recorded the expected recovery of the costs described in the immediately preceding paragraph related to the leak (less insurance retentions) of $660 million as Insurance Receivable for Aliso Canyon Costs on SoCalGas’ and Sempra Energy’s Condensed Consolidated Balance Sheets. If we were to conclude that this receivable or a portion of it was no longer probable of recovery from insurers, some or all of this receivable would be charged against earnings.

The above amounts do not include any damage awards, restitution, or any civil or criminal fines, costs or other penalties that may be imposed, as it is not possible to predict the outcome of any criminal or civil proceeding or any administrative action in which such damage awards, restitution or civil or criminal fines, costs or other penalties could be imposed, and any such amounts, if awarded or imposed, cannot be estimated at this time. In addition, the above amounts do not include other potential costs that we currently do not anticipate incurring or we cannot reasonably estimate.

On March 17, 2016, the CPUC issued a decision directing SoCalGas to establish a memorandum account to prospectively track its authorized revenue requirement and all revenues that it receives for its normal, business-as-usual costs to own and operate the Aliso Canyon gas storage field. The CPUC will determine at a later time whether, and to what extent, the tracked revenues may be refunded to ratepayers. Pursuant to the CPUC’s decision, on March 24, 2016, SoCalGas filed an advice letter requesting to establish a memorandum account to track all business-as-usual costs to own and operate the Aliso Canyon storage field, which has been protested by TURN and SCGC. On April 22, 2016, the CPUC’s Energy Division issued a suspension notice for SoCalGas’ advice letter citing the need for additional time for staff review. This suspension period could last up to 120 days.

Insurance. We have at least four kinds of insurance policies that provide in excess of $1 billion in insurance coverage. We cannot predict all of the potential categories of costs or the total amount of costs that we may incur as a result of the leak. In reviewing each of our policies, and subject to various policy limits, exclusions and conditions, based upon what we know as of the filing date of this report, we believe that our insurance policies collectively should cover the following categories of costs: the costs incurred for temporary relocation, costs to address the leak and stop or reduce emissions, the root cause analysis being conducted to determine the cause of the leak, the value of lost natural gas and estimated costs to mitigate the actual natural gas released, the costs associated with litigation and claims by nearby residents and businesses, and, in some circumstances depending on their nature and manner of assessment, fines and penalties. We have been communicating with our insurance carriers and intend to pursue the full extent of our insurance coverage. There can be no assurance that we will be successful in obtaining insurance coverage for these costs under the applicable policies, and to the extent we are not successful, it could result in a material charge against the earnings of SoCalGas and Sempra Energy.

Our estimate at March 31, 2016 of $665 million of certain costs in connection with the Aliso Canyon storage facility leak may rise significantly as more information becomes available, and to the extent not covered by insurance, or if there were to be significant delays in receiving insurance recoveries, such costs could have a material adverse effect on Sempra Energy’s and SoCalGas’ cash flows, financial condition and results of operations. In addition, the costs not included in the $665 million estimate could be material, and to the extent not covered by insurance, could have a material adverse effect on Sempra Energy’s and SoCalGas’ cash flows, financial condition and results of operations.

Governmental Investigations and Civil and Criminal Litigation. Various governmental agencies, including the DOGGR, LA County DPH, South Coast Air Quality Management District (SCAQMD), California Air Resources Board (CARB), California Division of Occupational Safety and Health (DOSH), CPUC, Pipeline and Hazardous Materials Safety Administration (PHMSA), U.S. Environmental Protection Agency (EPA), Los Angeles District Attorney’s Office and California Attorney General’s Office, are investigating this incident. On January 25, 2016, the DOGGR and CPUC selected Blade Energy Partners to conduct an independent analysis under their supervision and to be funded by SoCalGas to investigate the technical root cause of the Aliso Canyon gas leak. We expect the root cause analysis to be completed in late 2016 or early 2017, but the timing is dependent on the DOGGR and the CPUC.

As of April 28, 2016, 138 lawsuits have been filed (134 in Los Angeles County Superior Court, 2 in San Diego County Superior Court, and 2 in the United States District Court for the Southern District of California) against SoCalGas, some of which have also named Sempra Energy, and, in derivative and securities law claims on behalf of Sempra Energy and/or SoCalGas, certain officers and directors of Sempra Energy and/or SoCalGas. These various lawsuits assert causes of action for negligence, strict liability, property damage, fraud, nuisance, trespass, breach of fiduciary duties, and violation of federal securities laws, among other things, and additional litigation may be filed against us in the future related to this incident. Many of these complaints seek class action status, compensatory and punitive damages, injunctive relief, and attorneys’ fees. The Los Angeles City Attorney and Los Angeles County Counsel have also filed a complaint on behalf of the people of the State of California against SoCalGas for public nuisance and violation of the California Unfair Competition Law. The California Attorney General, acting in her independent capacity and on behalf of the people of the State of California and the CARB, joined this lawsuit. The complaint, which as amended includes the California Attorney General, adds allegations of violations of California Health and Safety Code sections 41700, prohibiting discharge of air contaminants that cause annoyance to the public, and 25510, requiring reporting of the release of hazardous material, as well as California Government Code section 12607 for equitable relief for the protection of natural resources. The complaint seeks an order for injunctive relief, to abate the public nuisance, and to impose civil penalties. The SCAQMD also filed a complaint against SoCalGas seeking civil penalties for alleged violations of several nuisance-related statutory provisions arising from the leak and delays in stopping the leak. That suit seeks up to $250,000 in civil penalties for each day the violations occurred.

On February 2, 2016, the Los Angeles District Attorney’s Office filed a misdemeanor criminal complaint against SoCalGas seeking penalties and other remedies for alleged failure to provide timely notice of the leak pursuant to California Health and Safety Code section 25510(a), Los Angeles County Code section 12.56.030, and Title 19 California Code of Regulations section 2703(a), and for violating California Health and Safety Code section 41700 prohibiting discharge of air contaminants that cause annoyance to the public.

The costs of defending against these civil and criminal lawsuits and cooperating with these investigations, and any damages, restitution, and civil and criminal fines, costs and other penalties, if awarded or imposed, could be significant and to the extent not covered by insurance, or if there were to be significant delays in receiving insurance recoveries, could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.

Governmental Orders, Additional Regulation and Reliability . On January 6, 2016, the Governor of the State of California issued the Governor’s Order proclaiming a state of emergency to exist in Los Angeles County due to the natural gas leak at the Aliso Canyon facility. The Governor’s Order implemented orders to stop the leak and implements various other orders with respect to:

Protecting Public Health and Safety : State agencies will: continue the prohibition against SoCalGas injecting any gas into the Aliso Canyon storage facility until a comprehensive review, utilizing independent experts, of the safety of the storage wells and the air quality of the surrounding community is completed; expand real-time monitoring of emissions in the surrounding community; convene an independent panel of scientific and medical experts to review public health concerns stemming from the natural gas leak and evaluate whether additional measures are needed to protect public health; and take all actions necessary to ensure the continued reliability of natural gas and electricity supplies in the coming months during the moratorium on gas injections into the Aliso Canyon storage facility.

§	Ensuring Accountability : The CPUC will ensure that SoCalGas covers costs related to the natural gas leak and its response, while protecting ratepayers; and CARB will develop a program to fully mitigate the leak’s emissions of methane by March 31, 2016, with such program to be funded by SoCalGas.

Strengthening Oversight : The DOGGR will promulgate emergency regulations for gas storage facility operators throughout the state, requiring: at least daily inspection of gas storage well heads using gas leak detection technology such as infrared imaging; ongoing verification of the mechanical integrity of all gas storage wells; ongoing measurement of annular gas pressure or annular gas flow within wells; regular testing of all safety valves used in wells; minimum and maximum pressure limits for each gas storage facility in the state; and a comprehensive risk management plan for each facility that evaluates and prepares for risks, including corrosion potential of pipes and equipment. Additionally, the DOGGR, the CPUC, the CARB and the California Energy Commission will submit to the Governor’s Office a report that assesses the long-term viability of natural gas storage facilities in California.

SoCalGas made a commitment in December 2015 to mitigate the actual natural gas released and has been working on a plan to accomplish the mitigation. On March 31, 2016, pursuant to the Governor’s Order, the CARB issued its Aliso Canyon Methane Leak Climate Impacts Mitigation Program, which sets forth its recommended approach to achieve full mitigation of the emissions from the Aliso Canyon natural gas leak. The CARB program preliminarily assumes that the leak released approximately 100,000 metric tons of methane. It states that full mitigation requires that the program generate reductions in short-lived climate pollutants and other greenhouse gases at least equivalent to that amount and that the appropriate global warming potential to be used in deriving the amount of reductions required is a 20-year term rather than the 100-year term the CARB and other state and federal agencies use in regulating emissions, resulting in a target of approximately 8,000,000 metric tons of carbon dioxide equivalent. CARB’s program also requires all of the mitigation to occur in California over the next five to ten years without the use of allowances or offsets. We have not agreed to this proposed formulation and continue to work with CARB on the mitigation plan.

On January 23, 2016, the Hearing Board of the SCAQMD ordered SoCalGas to, among other things: stop all injections of natural gas except as directed by the CPUC, withdraw the maximum amount of natural gas feasible in a contained and safe manner, subject to orders of the CPUC, and permanently seal the well once the leak has ceased; continuously monitor the well site with infrared cameras until 30 days after the leak has ceased; provide the public with daily air monitoring data collected by SoCalGas; provide the SCAQMD with certain natural gas injection, withdrawal and emissions data from the Aliso Canyon facility; prepare and submit to the SCAQMD for its approval an enhanced leak detection and reporting well inspection program for the Aliso Canyon facility; provide the SCAQMD with funding to develop a continuous air monitoring plan for the Aliso Canyon facility and the nearby schools and community; prepare and submit to the SCAQMD for its approval an air quality notification plan to provide notice to SCAQMD, other public agencies and the nearby community in the event of a future reportable release; and provide the SCAQMD with funding to conduct an independent health study on the potential impacts of exposure on the constituents of the natural gas released from the facility, as well as any odor suppressants used to mitigate odors from the leaking well.

On April 1, 2016, the Secretary of the U.S. Department of Energy (DOE) and PHMSA jointly announced the formation of an Interagency Task Force on Natural Gas Storage Safety in response to the leak at Aliso Canyon to assess and make recommendations on best practices, response plans and safe operation of gas storage facilities. PHMSA has indicated plans to initiate additional regulatory actions on natural gas storage nationally. Each of the DOGGR, SCAQMD, EPA and CARB has commenced separate rulemaking proceedings to adopt further regulations covering natural gas storage facilities and injection wells. The U.S. Senate also passed two pieces of legislation, which include a provision requiring the establishment of an Aliso Canyon Task Force. This generally mirrors the focus and structure of the Task Force on Natural Gas Storage Safety. The legislation requires the Task Force to examine a specific set of issues related to the leak, including impacts on health and electricity prices.

Additional hearings in the state legislature as well as with various other federal and state regulatory agencies have been or are expected to be scheduled, additional legislation has been proposed in the state legislature, and additional laws, orders, rules and regulations may be adopted. Higher operating costs and additional capital expenditures incurred by SoCalGas as a result of new laws, orders, rules and regulations arising out of this incident could be significant and may not be recoverable in customer rates, and SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations may be materially adversely affected by any such new regulations.

On April 22, 2016, DOSH issued notices of intent to issue four “serious” citations to SoCalGas, alleging violations of Title 8 of the California Code of Regulations sections 5155(e)(1), 5192(q)(6)(E), 6845(a), and 6851(a). The notices allege (1) a failure to monitor concentrations of airborne contaminant exposure to employees, (2) an Incident Commander did not receive sufficient training, (3) insufficient testing and inspection of well casing and tubing and (4) insufficient inspection and maintenance to prevent leaks. The maximum penalty that DOSH could issue for these four alleged violations is a total of $280,000.

Natural Gas Storage Operations. SoCalGas estimates that approximately 57 billion cubic feet (Bcf) of natural gas has been delivered to customers or moved to other gas storage facilities from an initial starting point of approximately 77 Bcf of gas in storage on October 23, 2015 at the Aliso Canyon facility. The CPUC has directed SoCalGas to maintain a minimum of 15 Bcf of working natural gas to help ensure reliability of the system through the spring and summer months, and based on the CARB estimates of lost gas, the facility is approximately at this level. Effective February 5, 2016, the DOGGR amended the California Code of Regulations to require all underground natural gas storage facility operators, including SoCalGas, to take further steps to help ensure the safety of their gas storage operations. SoCalGas is in the process of conducting a measurement of natural gas lost from the leak and will provide that information to the relevant regulatory bodies.

Natural gas withdrawn from storage is important for service reliability during peak demand periods, including heating needs in the winter, as well as peak electric generation needs in the summer. Aliso Canyon, with a storage capacity of 86 Bcf, is the largest storage facility and an important element of SoCalGas’ delivery system. Aliso Canyon represents 63 percent of SoCalGas’ owned natural gas storage capacity. SoCalGas has not injected natural gas into Aliso Canyon since October 25, 2015, in accordance with the Governor’s Order and subject to contrary CPUC reliability-based direction. On March 4, 2016, the DOGGR issued Order 1109, Order to Take Specific Actions Regarding Aliso Canyon Gas Storage Facility (Safety Review Testing Regime) . On April 7, 2016, SoCalGas announced its safety framework to comply with the DOGGR Order 1109, which consists of phased testing for each of the active injection wells in the Aliso Canyon storage facility. SoCalGas will continue this moratorium on further injections until the completion of this review and any necessary approvals have been obtained.

On April 5, 2016, four energy agencies—the CPUC, the California Energy Commission, the California Independent System Operator, and the Los Angeles Department of Water and Power—issued an Aliso Canyon Action Plan to Preserve Gas and Electric Reliability for the Los Angeles Basin . In their Action Plan, the agencies recognized that: Aliso Canyon is critical to meeting peak demand in both winter and summer; the Greater Los Angeles region could face an estimated 16 days of gas curtailments this upcoming summer—assuming no withdrawals of any of the 15 Bcf held at Aliso Canyon; and unless gas is withdrawn from Aliso Canyon, 14 of these days are likely to be large enough to interrupt electric generators located in the LA Basin. To help mitigate concerns about natural gas service reliability to customers, including related impacts on natural gas-fueled power generation, SoCalGas, SDG&E and 24 customer organizations filed a settlement agreement with the CPUC on April 29, 2016 regarding procedures to help deal with service reliability issues this upcoming summer. The procedures, which would address supply shortages and surpluses using temporarily modified Operational Flow Order (OFO) tariff provisions, would be in place through no later than November 30, 2016. SoCalGas, SDG&E, and the other settlement parties have asked the CPUC to approve this package of reliability-related provisions by May 26, 2016. There can be no assurance that these measures, if approved, will prevent gas curtailments or power outages during the period Aliso Canyon remains offline.

If the Aliso Canyon facility were to be taken out of service for any meaningful period of time, it could result in an impairment of the facility, significantly higher than expected operating costs and/or additional capital expenditures, and natural gas reliability and electric generation could be jeopardized. At March 31, 2016, the Aliso Canyon facility has a net book value of $415 million, including $180 million of construction work in progress for the project to construct a new compression station. Any significant impairment of this asset could have a material adverse effect on SoCalGas’ and Sempra Energy’s results of operations for the period in which it is recorded. Higher operating costs and additional capital expenditures incurred by SoCalGas may not be recoverable in customer rates, and SoCalGas’ and Sempra Energy’s results of operations, cash flows and financial condition may be materially adversely affected.

Aliso Canyon Natural Gas Storage Facility Gas Leak

In October 2015, SoCalGas discovered a leak at one of its injection and withdrawal wells, SS25, at its Aliso Canyon natural gas storage facility, located in Los Angeles County, which has been operated by SoCalGas since 1972. SoCalGas worked closely with several of the world's leading experts to stop the leak, including planning and obtaining all necessary approvals for drilling relief wells. On February 18, 2016, the California Department of Conservation’s Division of Oil, Gas, and Geothermal Resources (DOGGR) confirmed that the well was permanently sealed.

Pursuant to a stipulation and court order and in response to claims made pursuant to lawsuits described below, SoCalGas provided temporary relocation support to residents in the nearby community who requested it before the well was permanently sealed. In connection with the temporary relocation support, on April 27, 2016, the California Superior Court (Superior Court) ordered an extension of the relocation support term pending the completion of the County of Los Angeles’ (County) indoor testing. The County has reported that it anticipates completing its analysis and releasing a final report by late May 2016. The next scheduled Superior Court hearing on this matter is June 7, 2016. While the temporary relocation support period could end before June 7, 2016, due to the fact that the temporary relocation support has been extended several times, there can be no assurance that future extensions will not be granted. The cost of the temporary relocation support is significant, and the costs of any further extensions of the relocation support term, which are not included in our estimate of costs related to the leak, could result in a material increase in our cost estimate.

Various governmental agencies including the DOGGR, Los Angeles County Department of Public Health, SCAQMD, CARB, California Division of Occupational Safety and Health (DOSH), CPUC, Pipeline and Hazardous Materials Safety Administration (PHMSA), U.S. Environmental Protection Agency (EPA), Los Angeles District Attorney’s Office, and California Attorney General’s Office, are investigating this incident.

As of April 28, 2016, 138 lawsuits have been filed (134 in Los Angeles County Superior Court, 2 in San Diego County Superior Court, and 2 in the United States District Court for the Southern District of California) against SoCalGas, some of which have also named Sempra Energy, and, in derivative and securities law claims on behalf of Sempra Energy and/or SoCalGas, certain officers and directors of Sempra Energy and/or SoCalGas. These various lawsuits assert causes of action for negligence, strict liability, property damage, fraud, nuisance, trespass, breach of fiduciary duties and violation of federal securities laws, among other things, and additional litigation may be filed against us in the future related to this incident. Many of these complaints seek class action status, compensatory and punitive damages, injunctive relief and attorneys’ fees. The Los Angeles City Attorney and Los Angeles County Counsel have also filed a complaint on behalf of the people of the State of California against SoCalGas for public nuisance and violation of the California Unfair Competition Law. The California Attorney General, acting in her independent capacity and on behalf of the people of the State of California and the CARB, joined this lawsuit. The complaint, which as amended includes the California Attorney General, adds allegations of violations of California Health and Safety Code sections 41700, prohibiting discharge of air contaminants that cause annoyance to the public, and 25510, requiring reporting of the release of hazardous material, as well as California Government Code section 12607 for equitable relief for the protection of natural resources. The complaint seeks an order for injunctive relief, to abate the public nuisance, and to impose civil penalties. The SCAQMD also filed a complaint against SoCalGas seeking civil penalties for alleged violations of several nuisance-related statutory provisions arising from the leak and delays in stopping the leak. That suit seeks up to $250,000 in civil penalties for each day the violations occurred.

On January 6, 2016, the Governor of the State of California issued the Governor’s Order proclaiming a state of emergency to exist in Los Angeles County due to the natural gas leak at the Aliso Canyon facility. The Governor’s Order implements various orders with respect to:

§	stopping the leak;

§	protecting public health and safety;

§	ensuring accountability; and

§	strengthening oversight.

We provide further detail regarding the Governor’s Order and CARB’s Aliso Canyon Methane Leak Climate Impacts Mitigation Program, issued pursuant to the Governor’s Order, in Note 11 of the Notes to Condensed Consolidated Financial Statements herein.

On January 23, 2016, the Hearing Board of the SCAQMD ordered SoCalGas to, among other things, stop the leak, control the release of natural gas into the air, and conduct air monitoring and public health studies. We provide further detail regarding the SCAQMD’s order in Note 11 of the Notes to Condensed Consolidated Financial Statements herein.

On January 25, 2016, the DOGGR and CPUC selected Blade Energy Partners to conduct an independent analysis under their supervision and to be funded by SoCalGas to investigate the technical root cause of the Aliso Canyon leak. We expect the root cause analysis to be completed in late 2016 or early 2017, but the timing is dependent on the DOGGR and the CPUC. In addition, effective February 5, 2016, the DOGGR amended the California Code of Regulations to require all underground natural gas storage facility operators, including SoCalGas, to take further steps to help ensure the safety of their gas storage operations.

Additional hearings in the state legislature, as well as with various other federal and state regulatory agencies, have been or are expected to be scheduled, additional legislation has been proposed in the state legislature, and additional laws, orders, rules and regulations may be adopted.

Higher operating costs and additional capital expenditures incurred by SoCalGas as a result of new laws, orders, rules and regulations arising out of this incident could be significant and to the extent not covered by insurance or in customer rates, such costs could have a material adverse effect on SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations.

Natural gas withdrawn from storage is important for ensuring service reliability during peak demand periods, including heating needs in the winter, as well as peak electric generation needs in the summer. Aliso Canyon, with a storage capacity of 86 billion cubic feet (Bcf), is the largest storage facility and an important element of SoCalGas’ delivery system. Aliso Canyon represents 63 percent of SoCalGas’ owned natural gas storage capacity. SoCalGas has not injected natural gas into Aliso Canyon since October 25, 2015, in accordance with the Governor’s Order and subject to contrary CPUC reliability-based direction. On March 4, 2016, the DOGGR issued Order 1109, Order to Take Specific Actions Regarding Aliso Canyon Gas Storage Facility (Safety Review Testing Regime) . On April 7, 2016, SoCalGas announced its safety framework to comply with the DOGGR Order 1109, which consists of phased testing for each of the active injection wells in the Aliso Canyon storage facility. SoCalGas will continue this moratorium on further injections until the completion of this review and any necessary approvals have been obtained.

We have at least four kinds of insurance policies that provide in excess of $1 billion in insurance coverage. We have been communicating with our insurance carriers and intend to pursue the full extent of our insurance coverage. These policies are subject to various policy limits, exclusions and conditions. There can be no assurance that we will be successful in obtaining insurance coverage for costs related to the leak under the applicable policies, and to the extent we are not successful, it could result in a material charge against the earnings of SoCalGas and Sempra Energy.

We discuss this matter further in Note 11 of the Notes to Condensed Consolidated Financial Statements herein and “Risk Factors” in the Annual Report.

SEMPRA ENERGY FORM 10-Q SAN DIEGO GAS & ELECTRIC COMPANY FORM 10-Q SOUTHERN CALIFORNIA GAS COMPANY FORM 10-Q TABLE OF CONTENTS
		Page
Information Regarding Forward-Looking Statements		4

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	74
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	109
Item 4.	Controls and Procedures	110

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	111
Item 1A.	Risk Factors	111
Item 6.	Exhibits	111

Signatures		113

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
	Three months ended March 31,
	2016		2015
	(unaudited)
REVENUES
Utilities	$	2,442	$	2,422
Energy-related businesses		180		260
Total revenues		2,622		2,682
EXPENSES AND OTHER INCOME
Utilities:
Cost of natural gas		(311)		(346)
Cost of electric fuel and purchased power		(515)		(481)
Energy-related businesses:
Cost of natural gas, electric fuel and purchased power		(56)		(98)
Other cost of sales		(35)		(35)
Operation and maintenance		(701)		(658)
Depreciation and amortization		(328)		(303)
Franchise fees and other taxes		(111)		(107)
Plant closure adjustment		―		21
Equity (losses) earnings, before income tax		(22)		19
Other income, net		49		39
Interest income		6		7
Interest expense		(143)		(134)
Income before income taxes and equity earnings
of certain unconsolidated subsidiaries		455		606
Income tax expense		(142)		(163)
Equity earnings, net of income tax		17		15
Net income		330		458
Earnings attributable to noncontrolling interests		(11)		(21)
Earnings	$	319	$	437

Basic earnings per common share	$	1.28	$	1.76

Weighted-average number of shares outstanding, basic (thousands)		249,734		247,722

Diluted earnings per common share	$	1.27	$	1.74

Weighted-average number of shares outstanding, diluted (thousands)		251,412		251,206

Dividends declared per share of common stock	$	0.76	$	0.70
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
	Three months ended March 31, 2016 and 2015
	(unaudited)
	Sempra Energy shareholders' equity
	Pretax		Income tax		Net-of-tax		Noncontrolling
	amount		(expense) benefit		amount		interests (after-tax)		Total
2016:
Net income	$	461	$	(142)	$	319	$	11	$	330
Other comprehensive income (loss):
Foreign currency translation adjustments		68		―		68		5		73
Financial instruments		(159)		75		(84)		(5)		(89)
Pension and other postretirement benefits		2		(1)		1		―		1
Total other comprehensive loss		(89)		74		(15)		―		(15)
Comprehensive income	$	372	$	(68)	$	304	$	11	$	315
2015:
Net income	$	600	$	(163)	$	437	$	21	$	458
Other comprehensive income (loss):
Foreign currency translation adjustments		(62)		―		(62)		(8)		(70)
Financial instruments		(89)		34		(55)		(5)		(60)
Pension and other postretirement benefits		2		(1)		1		―		1
Total other comprehensive loss		(149)		33		(116)		(13)		(129)
Comprehensive income	$	451	$	(130)	$	321	$	8	$	329
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
		March 31,		December 31,
		2016		2015(1)
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	376	$	403
Restricted cash			23		27
Accounts receivable – trade, net			1,100		1,283
Accounts receivable – other			177		190
Due from unconsolidated affiliates			7		6
Income taxes receivable			49		30
Inventories			231		298
Regulatory balancing accounts – undercollected			256		307
Fixed-price contracts and other derivatives			88		80
Assets held for sale, power plant			303		―
Other			273		267
Total current assets			2,883		2,891

Other assets:
Restricted cash			20		20
Due from unconsolidated affiliates			186		186
Regulatory assets			3,336		3,273
Nuclear decommissioning trusts			1,082		1,063
Investments			2,727		2,905
Goodwill			849		819
Other intangible assets			402		404
Dedicated assets in support of certain benefit plans			432		464
Insurance receivable for Aliso Canyon costs			660		325
Sundry			825		761
Total other assets			10,519		10,220

Property, plant and equipment:
Property, plant and equipment			38,541		38,200
Less accumulated depreciation and amortization			(10,108)		(10,161)
Property, plant and equipment, net ($376 and $383 at March 31, 2016 and December 31, 2015, respectively, related to VIE)			28,433		28,039
Total assets		$	41,835	$	41,150
(1)	Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
		March 31,		December 31,
		2016		2015(1)
		(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt		$	1,177	$	622
Accounts payable – trade			1,028		1,133
Accounts payable – other			129		142
Due to unconsolidated affiliates			13		14
Dividends and interest payable			360		303
Accrued compensation and benefits			259		423
Regulatory balancing accounts – overcollected			45		34
Current portion of long-term debt			1,066		907
Fixed-price contracts and other derivatives			57		56
Customer deposits			147		153
Reserve for Aliso Canyon costs			302		274
Other			549		551
Total current liabilities			5,132		4,612
Long-term debt ($300 and $303 at March 31, 2016 and December 31, 2015, respectively, related to VIE)			12,975		13,134

Deferred credits and other liabilities:
Customer advances for construction			148		149
Pension and other postretirement benefit plan obligations, net of plan assets			1,165		1,152
Deferred income taxes			3,222		3,157
Deferred investment tax credits			32		32
Regulatory liabilities arising from removal obligations			2,850		2,793
Asset retirement obligations			2,151		2,126
Fixed-price contracts and other derivatives			248		240
Deferred credits and other			1,188		1,176
Total deferred credits and other liabilities			11,004		10,825

Commitments and contingencies (Note 11)

Equity:
Preferred stock (50 million shares authorized; none issued)			―		―
Common stock (750 million shares authorized; 249 million and 248 million shares
outstanding at March 31, 2016 and December 31, 2015, respectively; no par value)			2,642		2,621
Retained earnings			10,125		9,994
Accumulated other comprehensive income (loss)			(821)		(806)
Total Sempra Energy shareholders’ equity			11,946		11,809
Preferred stock of subsidiary			20		20
Other noncontrolling interests			758		750
Total equity			12,724		12,579
Total liabilities and equity		$	41,835	$	41,150
(1)	Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Three months ended March 31,
	2016		2015
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	330	$	458
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		328		303
Deferred income taxes and investment tax credits		112		131
Plant closure adjustment		―		(21)
Equity losses (earnings)		5		(34)
Fixed-price contracts and other derivatives		4		11
Other		2		(27)
Net change in other working capital components		165		19
Insurance receivable for Aliso Canyon costs		(335)		―
Changes in other assets		(29)		(42)
Changes in other liabilities		10		13
Net cash provided by operating activities		592		811

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment		(971)		(780)
Expenditures for investments and acquisition of business		(30)		(34)
Distributions from investments		9		1
Purchases of nuclear decommissioning and other trust assets		(94)		(95)
Proceeds from sales by nuclear decommissioning and other trusts		93		94
Increases in restricted cash		(16)		(18)
Decreases in restricted cash		20		25
Advances to unconsolidated affiliates		(6)		(5)
Repayments of advances to unconsolidated affiliates		9		33
Other		(3)		9
Net cash used in investing activities		(989)		(770)

CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid		(161)		(149)
Issuances of common stock		15		17
Repurchases of common stock		(54)		(65)
Issuances of debt (maturities greater than 90 days)		55		938
Payments on debt (maturities greater than 90 days)		(54)		(654)
Increase (decrease) in short-term debt, net		531		(363)
Tax benefit related to share-based compensation		34		52
Other		(2)		(7)
Net cash provided by (used in) financing activities		364		(231)

Effect of exchange rate changes on cash and cash equivalents		6		(3)

Decrease in cash and cash equivalents		(27)		(193)
Cash and cash equivalents, January 1		403		570
Cash and cash equivalents, March 31	$	376	$	377
See Notes to Condensed Consolidated Financial Statements.

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended March 31,
	2016		2015
	(unaudited)
Operating revenues
Electric	$	843	$	805
Natural gas		148		161
Total operating revenues		991		966
Operating expenses
Cost of electric fuel and purchased power		248		228
Cost of natural gas		39		54
Operation and maintenance		246		217
Depreciation and amortization		159		145
Franchise fees and other taxes		63		61
Plant closure adjustment		―		(21)
Total operating expenses		755		684
Operating income		236		282
Other income, net		14		9
Interest expense		(48)		(52)
Income before income taxes		202		239
Income tax expense		(72)		(88)
Net income		130		151
Earnings attributable to noncontrolling interest		(1)		(4)
Earnings attributable to common shares	$	129	$	147
See Notes to Condensed Consolidated Financial Statements.

SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended March 31,
	2016		2015
	(unaudited)

Operating revenues	$	1,033	$	1,048
Operating expenses
Cost of natural gas		253		267
Operation and maintenance		327		314
Depreciation and amortization		122		113
Franchise fees and other taxes		37		34
Total operating expenses		739		728
Operating income		294		320
Other income, net		10		8
Interest expense		(22)		(19)
Income before income taxes		282		309
Income tax expense		(87)		(95)
Net income/Earnings attributable to common shares	$	195	$	214
See Notes to Condensed Consolidated Financial Statements.

ASSETS HELD FOR SALE, POWER PLANT
(Dollars in millions)
		March 31, 2016
Cash and cash equivalents		$	1
Inventories			8
Other current assets			29
Other assets			15
Property, plant and equipment, net			250
Total assets held for sale		$	303

Accounts payable		$	1
Other current liabilities			7
Deferred income taxes			16
Asset retirement obligations			4
Other liabilities			15
Total liabilities held for sale(1)		$	43
(1)	Included in Other Current Liabilities on the Sempra Energy Condensed Consolidated Balance Sheet.

INVENTORY BALANCES
(Dollars in millions)
		Natural gas				Liquefied natural gas				Materials and supplies				Total
		March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015
SDG&E		$	3	$	6	$	―	$	―	$	69	$	69	$	72	$	75
SoCalGas(1)			―		49		―		―		33		30		33		79
Sempra South American Utilities			―		―		―		―		37		30		37		30
Sempra Mexico			―		―		6		3		2		10		8		13
Sempra Renewables			―		―		―		―		3		3		3		3
Sempra Natural Gas			74		94		3		3		1		1		78		98

Sempra Energy Consolidated		$	77	$	149	$	9	$	6	$	145	$	143	$	231	$	298
(1)	At both March 31, 2016 and December 31, 2015, SoCalGas' natural gas inventory for core customers is net of the estimated inventory loss related to the Aliso Canyon natural gas leak, which we discuss in Note 11.

AMOUNTS ASSOCIATED WITH OTAY MESA VIE
(Dollars in millions)
	Three months ended March 31,
	2016		2015
Operating expenses
Cost of electric fuel and purchased power	$	(17)	$	(18)
Operation and maintenance		4		4
Depreciation and amortization		7		6
Total operating expenses		(6)		(8)
Operating income		6		8
Interest expense		(5)		(4)
Income before income taxes/Net income		1		4
Earnings attributable to noncontrolling interest		(1)		(4)
Earnings attributable to common shares	$	―	$	―

NET PERIODIC BENEFIT COST – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
	Pension benefits				Other postretirement benefits
	Three months ended March 31,
	2016		2015		2016		2015
Service cost	$	28	$	30	$	5	$	7
Interest cost		40		39		11		12
Expected return on assets		(42)		(44)		(17)		(17)
Amortization of:
Prior service cost (credit)		3		3		―		(1)
Actuarial loss		6		8		―		―
Regulatory adjustment		(28)		(29)		2		―
Total net periodic benefit cost	$	7	$	7	$	1	$	1

NET PERIODIC BENEFIT COST – SDG&E
(Dollars in millions)
	Pension benefits				Other postretirement benefits
	Three months ended March 31,
	2016		2015		2016		2015
Service cost	$	7	$	8	$	1	$	2
Interest cost		10		10		2		2
Expected return on assets		(12)		(14)		(3)		(3)
Amortization of:
Prior service cost		―		―		1		1
Actuarial loss		3		2		―		―
Regulatory adjustment		(7)		(5)		(1)		(2)
Total net periodic benefit cost	$	1	$	1	$	―	$	―

NET PERIODIC BENEFIT COST – SOCALGAS
(Dollars in millions)
	Pension benefits				Other postretirement benefits
	Three months ended March 31,
	2016		2015		2016		2015
Service cost	$	17	$	19	$	4	$	5
Interest cost		25		25		8		9
Expected return on assets		(25)		(27)		(14)		(14)
Amortization of:
Prior service cost (credit)		2		2		(1)		(2)
Actuarial loss		3		5		―		―
Regulatory adjustment		(21)		(24)		3		2
Total net periodic benefit cost	$	1	$	―	$	―	$	―

BENEFIT PLAN CONTRIBUTIONS
(Dollars in millions)
	Sempra Energy
	Consolidated		SDG&E		SoCalGas
Contributions through March 31, 2016:
Pension plans	$	15	$	2	$	―
Other postretirement benefit plans		1		―		―
Total expected contributions in 2016:
Pension plans	$	123	$	4	$	77
Other postretirement benefit plans		6		2		1

EARNINGS PER SHARE COMPUTATIONS
(Dollars in millions, except per share amounts; shares in thousands)
		Three months ended March 31,
		2016		2015
Numerator:
Earnings/Income attributable to common shares		$	319	$	437

Denominator:
Weighted-average common shares outstanding for basic EPS(1)			249,734		247,722
Dilutive effect of stock options, restricted stock awards and restricted stock units			1,678		3,484
Weighted-average common shares outstanding for diluted EPS			251,412		251,206

Earnings per share:
Basic		$	1.28	$	1.76
Diluted		$	1.27	$	1.74
(1)	Includes 555 and 452 average fully vested restricted stock units held in our Deferred Compensation Plan for the three months ended March 31, 2016 and 2015, respectively. These fully vested restricted stock units are included in weighted-average common shares outstanding for basic EPS because there are no conditions under which the corresponding shares will not be issued.

CAPITALIZED FINANCING COSTS
(Dollars in millions)
	Three months ended March 31,
	2016		2015
Sempra Energy Consolidated:
AFUDC related to debt	$	7	$	6
AFUDC related to equity		27		27
Other capitalized interest		18		17
Total Sempra Energy Consolidated	$	52	$	50
SDG&E:
AFUDC related to debt	$	4	$	3
AFUDC related to equity		11		8
Total SDG&E	$	15	$	11
SoCalGas:
AFUDC related to debt	$	3	$	3
AFUDC related to equity		10		9
Total SoCalGas	$	13	$	12

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1)
SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
		Three months ended March 31, 2016 and 2015
		Foreign						Total
		currency				Pension and other		accumulated other
		translation		Financial		postretirement		comprehensive
		adjustments		instruments		benefits		income (loss)
2016:
Balance as of December 31, 2015		$	(582)	$	(137)	$	(87)	$	(806)
Other comprehensive income (loss) before
reclassifications			68		(82)		―		(14)
Amounts reclassified from accumulated other
comprehensive income			―		(2)		1		(1)
Net other comprehensive income (loss)			68		(84)		1		(15)
Balance as of March 31, 2016		$	(514)	$	(221)	$	(86)	$	(821)
2015:
Balance as of December 31, 2014		$	(322)	$	(90)	$	(85)	$	(497)
Other comprehensive loss before
reclassifications			(62)		(54)		―		(116)
Amounts reclassified from accumulated other
comprehensive income			―		(1)		1		―
Net other comprehensive (loss) income			(62)		(55)		1		(116)
Balance as of March 31, 2015		$	(384)	$	(145)	$	(84)	$	(613)
(1)	All amounts are net of income tax, if subject to tax, and exclude noncontrolling interests.

RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
		Amounts reclassified
Details about accumulated		from accumulated other				Affected line item on Condensed
other comprehensive income (loss) components		comprehensive income (loss)				Consolidated Statements of Operations
		Three months ended March 31,
		2016		2015
Sempra Energy Consolidated:
Financial instruments:
Interest rate and foreign exchange instruments		$	4	$	6	Interest Expense
Interest rate instruments			3		3	Equity (Losses) Earnings, Before Income Tax
Interest rate and foreign exchange instruments			1		―	Equity Earnings, Net of Income Tax
Commodity contracts not subject to rate recovery			(7)		(7)	Revenues: Energy-Related Businesses
Total before income tax			1		2
			―		1	Income Tax Expense
Net of income tax			1		3
			(3)		(4)	Earnings Attributable to Noncontrolling Interests
		$	(2)	$	(1)

Pension and other postretirement benefits:
Amortization of actuarial loss		$	2	$	2	See note (1) below
			(1)		(1)	Income Tax Expense
Net of income tax		$	1	$	1

Total reclassifications for the period, net of tax		$	(1)	$	―
SDG&E:
Financial instruments:
Interest rate instruments		$	3	$	3	Interest Expense
			(3)		(3)	Earnings Attributable to Noncontrolling Interest
Total reclassifications for the period		$	―	$	―
(1)	Amounts are included in the computation of net periodic benefit cost (see "Pension and Other Postretirement Benefits" above).

SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
			Sempra Energy		Non-
			shareholders’		controlling		Total
			equity		interests(1)		equity
Balance at December 31, 2015		$	11,809	$	770	$	12,579
Comprehensive income			304		11		315
Share-based compensation expense			13		―		13
Common stock dividends declared			(188)		―		(188)
Issuances of common stock			28		―		28
Repurchases of common stock			(54)		―		(54)
Tax benefit related to share-based compensation			34		―		34
Distributions to noncontrolling interests			―		(3)		(3)
Balance at March 31, 2016		$	11,946	$	778	$	12,724
Balance at December 31, 2014		$	11,326	$	774	$	12,100
Comprehensive income			321		8		329
Share-based compensation expense			13		―		13
Common stock dividends declared			(173)		―		(173)
Issuances of common stock			30		―		30
Repurchases of common stock			(65)		―		(65)
Tax benefit related to share-based compensation			52		―		52
Distributions to noncontrolling interests			―		(5)		(5)
Balance at March 31, 2015		$	11,504	$	777	$	12,281
(1)	Noncontrolling interests include the preferred stock of SoCalGas and other noncontrolling interests as listed in the table below under "Other Noncontrolling Interests."

SHAREHOLDER'S EQUITY AND NONCONTROLLING INTEREST – SDG&E
(Dollars in millions)
		SDG&E		Non-
		shareholder’s		controlling		Total
		equity		interest		equity
Balance at December 31, 2015	$	5,223	$	53	$	5,276
Comprehensive income (loss)		129		(1)		128
Distributions to noncontrolling interest		―		(1)		(1)
Balance at March 31, 2016	$	5,352	$	51	$	5,403
Balance at December 31, 2014	$	4,932	$	60	$	4,992
Comprehensive income		147		2		149
Distributions to noncontrolling interest		―		(3)		(3)
Balance at March 31, 2015	$	5,079	$	59	$	5,138

OTHER NONCONTROLLING INTERESTS
(Dollars in millions)
		Percent ownership held by others
		March 31,		December 31,			March 31,		December 31,
		2016		2015			2016		2015
SDG&E:
Otay Mesa VIE		100	%	100	%	$	51	$	53
Sempra South American Utilities:
Chilquinta Energía subsidiaries(1)		23.5 – 43.4		23.5 – 43.4			22		21
Luz del Sur		16.4		16.4			171		164
Tecsur		9.8		9.8			4		4
Sempra Mexico:
IEnova		18.9		18.9			470		468
Sempra Natural Gas:
Bay Gas Storage Company, Ltd.		9.1		9.1			25		25
Liberty Gas Storage, LLC		23.2		23.2			14		14
Southern Gas Transmission Company		49.0		49.0			1		1
Total Sempra Energy						$	758	$	750
(1)	Chilquinta Energía has four subsidiaries with noncontrolling interests held by others. Percentage range reflects the highest and lowest ownership percentages among these subsidiaries.

AMOUNTS DUE FROM (TO) UNCONSOLIDATED AFFILIATES
(Dollars in millions)
		March 31, 2016		December 31, 2015
Sempra Energy Consolidated:
Total due from various unconsolidated affiliates - current		$	7	$	6

Sempra South American Utilities(1):
Eletrans S.A. and Eletrans II S.A.:
4% Note(2)		$	76	$	72
Other related party receivables			1		―
Sempra Mexico(1):
Affiliate of joint venture with PEMEX:
Note due November 13, 2017(3)			3		3
Note due November 14, 2018(3)			42		42
Note due November 14, 2018(3)			34		34
Note due November 14, 2018(3)			8		8
Energía Sierra Juárez:
Note due June 15, 2018(4)			17		24
Sempra Natural Gas:
Cameron LNG JV			5		3
Total due from unconsolidated affiliates - noncurrent		$	186	$	186

Total due to various unconsolidated affiliates - current		$	(13)	$	(14)
SDG&E:
Total due from various unconsolidated affiliates - current		$	1	$	1

Sempra Energy		$	(35)	$	(34)
SoCalGas			(8)		(13)
Affiliate			(6)		(8)
Total due to unconsolidated affiliates - current		$	(49)	$	(55)

Income taxes due (to) from Sempra Energy(5)		$	(32)	$	28
SoCalGas:
Sempra Energy(6)		$	―	$	35
SDG&E			8		13
Total due from unconsolidated affiliates - current		$	8	$	48

Sempra Energy		$	(34)	$	―
Total due to unconsolidated affiliate - current		$	(34)	$	―

Income taxes due (to) from Sempra Energy(5)		$	(23)	$	1
(1)	Amounts include principal balances plus accumulated interest outstanding.
(2)	U.S. dollar-denominated loan, at a fixed interest rate with no stated maturity date, to provide project financing for the construction of transmission lines at Eletrans S.A. and Eletrans II S.A., both of which are joint ventures at Chilquinta Energía.
(3)	U.S. dollar-denominated loan, at a variable interest rate based on a 30-day LIBOR plus 450 basis points (4.94 percent at March 31, 2016), to finance the Los Ramones Norte pipeline project.
(4)	U.S. dollar-denominated loan, at a variable interest rate based on a 30-day LIBOR plus 637.5 basis points (6.81 percent at March 31, 2016), to finance the first phase of the Energía Sierra Juárez wind project.
(5)	SDG&E and SoCalGas are included in the consolidated income tax return of Sempra Energy and are allocated income tax expense from Sempra Energy in an amount equal to that which would result from each company having always filed a separate return.
(6)	At December 31, 2015, net receivable included outstanding advances to Sempra Energy of $50 million at an interest rate of 0.11 percent.

REVENUES AND COST OF SALES FROM UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	Three months ended March 31,
	2016		2015
REVENUES
Sempra Energy Consolidated	$	5	$	8
SDG&E		3		3
SoCalGas		17		19
COST OF SALES
Sempra Energy Consolidated	$	30	$	19
SDG&E		14		5

INCOME TAX EXPENSE AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
			Effective				Effective
		Income tax	income			Income tax	income
		expense	tax rate			expense	tax rate
		Three months ended March 31,
		2016				2015
Sempra Energy Consolidated	$	142	31	%	$	163	27	%
SDG&E		72	36			88	37
SoCalGas		87	31			95	31

NET ENERGY DERIVATIVE VOLUMES
(Quantities in millions)
			March 31,	December 31,
Segment and Commodity		Unit of measure	2016	2015
California Utilities:
SDG&E:
Natural gas		MMBtu(1)	60	70
Electricity		MWh(2)	―	1
Congestion revenue rights		MWh	33	36
SoCalGas – natural gas		MMBtu	―	1

Energy-Related Businesses:
Sempra Natural Gas – natural gas		MMBtu	39	43
(1)	Million British thermal units
(2)	Megawatt hours

INTEREST RATE DERIVATIVES
(Dollars in millions)
		March 31, 2016			December 31, 2015
		Notional debt		Maturities	Notional debt		Maturities
Sempra Energy Consolidated:
Cash flow hedges(1)		$	381	2016-2028	$	384	2016-2028
Fair value hedges			300	2016		300	2016
SDG&E:
Cash flow hedge(1)			312	2016-2019		315	2016-2019
(1)	Includes Otay Mesa VIE. All of SDG&E’s interest rate derivatives relate to Otay Mesa VIE.

FOREIGN CURRENCY DERIVATIVES
(Dollars in millions)
	March 31, 2016			December 31, 2015
	Notional debt		Maturities	Notional debt		Maturities
Sempra Mexico:
Cross-currency swaps	$	408	2018-2023	$	408	2018-2023
Other foreign currency derivatives		550	2016		―	―

DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
		March 31, 2016
									Deferred
									credits
			Current				Current		and other
			assets:				liabilities:		liabilities:
			Fixed-price				Fixed-price		Fixed-price
			contracts		Other		contracts		contracts
			and other		assets:		and other		and other
			derivatives(1)		Sundry		derivatives(2)		derivatives
Sempra Energy Consolidated:
Derivatives designated as hedging instruments:
Interest rate and foreign exchange instruments(3)		$	5	$	―	$	(15)	$	(166)
Derivatives not designated as hedging instruments:
Interest rate and foreign exchange instruments			3		―		―		―
Commodity contracts not subject to rate recovery			144		20		(144)		(9)
Associated offsetting commodity contracts			(135)		(9)		135		9
Associated offsetting cash collateral			―		―		7		―
Commodity contracts subject to rate recovery			23		51		(68)		(61)
Associated offsetting commodity contracts			(4)		(1)		4		1
Associated offsetting cash collateral			―		―		31		24
Net amounts presented on the balance sheet			36		61		(50)		(202)
Additional cash collateral for commodity contracts
not subject to rate recovery			20		―		―		―
Additional cash collateral for commodity contracts
subject to rate recovery			32		―		―		―
Total(4)		$	88	$	61	$	(50)	$	(202)
SDG&E:
Derivatives designated as hedging instruments:
Interest rate instruments(3)		$	―	$	―	$	(14)	$	(25)
Derivatives not designated as hedging instruments:
Commodity contracts not subject to rate recovery			―		―		(1)		―
Associated offsetting cash collateral			―		―		1		―
Commodity contracts subject to rate recovery			20		51		(65)		(61)
Associated offsetting commodity contracts			(2)		(1)		2		1
Associated offsetting cash collateral			―		―		31		24
Net amounts presented on the balance sheet			18		50		(46)		(61)
Additional cash collateral for commodity contracts
not subject to rate recovery			2		―		―		―
Additional cash collateral for commodity contracts
subject to rate recovery			30		―		―		―
Total(4)		$	50	$	50	$	(46)	$	(61)
SoCalGas:
Derivatives not designated as hedging instruments:
Commodity contracts not subject to rate recovery		$	―	$	―	$	(1)	$	―
Associated offsetting cash collateral			―		―		1		―
Commodity contracts subject to rate recovery			3		―		(3)		―
Associated offsetting commodity contracts			(2)		―		2		―
Net amounts presented on the balance sheet			1		―		(1)		―
Additional cash collateral for commodity contracts
not subject to rate recovery			1		―		―		―
Additional cash collateral for commodity contracts
subject to rate recovery			2		―		―		―
Total		$	4	$	―	$	(1)	$	―
(1)	Included in Current Assets: Other for SoCalGas.
(2)	Included in Current Liabilities: Other for SoCalGas.
(3)	Includes Otay Mesa VIE. All of SDG&E’s amounts relate to Otay Mesa VIE.
(4)	Normal purchase contracts previously measured at fair value are excluded.

FAIR VALUE HEDGE IMPACTS
(Dollars in millions)
			Pretax gain on derivatives
			recognized in earnings
			Three months ended March 31,
		Location	2016		2015
Sempra Energy Consolidated:
Interest rate instruments		Interest Expense	$	2	$	2
Interest rate instruments		Other Income, Net		―		1
Total(1)			$	2	$	3
(1)	There was no hedge ineffectiveness in either the three months ended March 31, 2016 or 2015. All other changes in the fair values of the interest rate swap agreements are exactly offset by changes in the fair value of the underlying long-term debt and recorded in Other Income, Net.

CASH FLOW HEDGE IMPACTS
(Dollars in millions)
		Pretax (loss) gain					Pretax (loss) gain reclassified
		recognized in OCI					from AOCI into earnings
		(effective portion)					(effective portion)
		Three months ended March 31,					Three months ended March 31,
		2016		2015		Location	2016		2015
Sempra Energy Consolidated:
Interest rate and foreign
exchange instruments(1)		$	(11)	$	(18)	Interest Expense	$	(4)	$	(6)
						Equity (Losses) Earnings,
Interest rate instruments			(137)		(78)	Before Income Tax		(3)		(3)
Interest rate and foreign						Equity Earnings,
exchange instruments			(18)		―	Net of Income Tax		(1)		―
Commodity contracts not						Revenues: Energy-Related
subject to rate recovery			1		(1)	Businesses		7		7
Total(2)		$	(165)	$	(97)		$	(1)	$	(2)
SDG&E:
Interest rate instruments(1)(2)		$	(5)	$	(5)	Interest Expense	$	(3)	$	(3)
(1)	Amounts include Otay Mesa VIE. All of SDG&E’s interest rate derivative activity relates to Otay Mesa VIE.
(2)	Amounts include negligible hedge ineffectiveness in the three months ended March 31, 2016 and 2015.

UNDESIGNATED DERIVATIVE IMPACTS
(Dollars in millions)
		Pretax gain (loss) on derivatives
		recognized in earnings
		Three months ended March 31,
	Location	2016		2015
Sempra Energy Consolidated:
Foreign exchange instruments	Other Income, Net	$	3	$	―
Foreign exchange instruments	Equity Earnings,
	Net of Income Tax		2		(1)
Commodity contracts not subject	Revenues: Energy-Related
to rate recovery	Businesses		(1)		3
Commodity contracts subject	Cost of Electric Fuel
to rate recovery	and Purchased Power		(12)		(20)
Commodity contracts subject
to rate recovery	Cost of Natural Gas		(1)		1
Total		$	(9)	$	(17)
SDG&E:
Commodity contracts subject	Cost of Electric Fuel
to rate recovery	and Purchased Power	$	(12)	$	(20)
SoCalGas:
Commodity contracts subject
to rate recovery	Cost of Natural Gas	$	(1)	$	1

RECURRING FAIR VALUE MEASURES – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
		Fair value at March 31, 2016
			Level 1		Level 2		Level 3		Netting(1)		Total
Assets:
Nuclear decommissioning trusts:
Equity securities		$	623	$	―	$	―	$	―	$	623
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies			62		43		―		―		105
Municipal bonds			―		156		―		―		156
Other securities			―		190		―		―		190
Total debt securities			62		389		―		―		451
Total nuclear decommissioning trusts(2)			685		389		―		―		1,074
Interest rate and foreign exchange instruments			―		8		―		―		8
Commodity contracts not subject to rate recovery			1		19		―		20		40
Commodity contracts subject to rate recovery			―		1		68		32		101
Total		$	686	$	417	$	68	$	52	$	1,223

Liabilities:
Interest rate and foreign exchange instruments		$	―	$	181	$	―	$	―	$	181
Commodity contracts not subject to rate recovery			3		6		―		(7)		2
Commodity contracts subject to rate recovery			―		67		57		(55)		69
Total		$	3	$	254	$	57	$	(62)	$	252

		Fair value at December 31, 2015
			Level 1		Level 2		Level 3		Netting(1)		Total
Assets:
Nuclear decommissioning trusts:
Equity securities		$	619	$	―	$	―	$	―	$	619
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies			47		44		―		―		91
Municipal bonds			―		156		―		―		156
Other securities			―		182		―		―		182
Total debt securities			47		382		―		―		429
Total nuclear decommissioning trusts(2)			666		382		―		―		1,048
Interest rate and foreign exchange instruments			―		5		―		―		5
Commodity contracts not subject to rate recovery			22		16		―		(4)		34
Commodity contracts subject to rate recovery			―		1		72		28		101
Total		$	688	$	404	$	72	$	24	$	1,188

Liabilities:
Interest rate and foreign exchange instruments		$	―	$	171	$	―	$	―	$	171
Commodity contracts not subject to rate recovery			5		3		―		(4)		4
Commodity contracts subject to rate recovery			―		68		53		(54)		67
Total		$	5	$	242	$	53	$	(58)	$	242
(1)	Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.
(2)	Excludes cash balances and cash equivalents.

RECURRING FAIR VALUE MEASURES – SDG&E
(Dollars in millions)
		Fair value at March 31, 2016
			Level 1		Level 2		Level 3		Netting(1)		Total
Assets:
Nuclear decommissioning trusts:
Equity securities		$	623	$	―	$	―	$	―	$	623
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies			62		43		―		―		105
Municipal bonds			―		156		―		―		156
Other securities			―		190		―		―		190
Total debt securities			62		389		―		―		451
Total nuclear decommissioning trusts(2)			685		389		―		―		1,074
Commodity contracts not subject to rate recovery			―		―		―		2		2
Commodity contracts subject to rate recovery			―		―		68		30		98
Total		$	685	$	389	$	68	$	32	$	1,174

Liabilities:
Interest rate instruments		$	―	$	39	$	―	$	―	$	39
Commodity contracts not subject to rate recovery			1		―		―		(1)		―
Commodity contracts subject to rate recovery			―		66		57		(55)		68
Total		$	1	$	105	$	57	$	(56)	$	107

		Fair value at December 31, 2015
			Level 1		Level 2		Level 3		Netting(1)		Total
Assets:
Nuclear decommissioning trusts:
Equity securities		$	619	$	―	$	―	$	―	$	619
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies			47		44		―		―		91
Municipal bonds			―		156		―		―		156
Other securities			―		182		―		―		182
Total debt securities			47		382		―		―		429
Total nuclear decommissioning trusts(2)			666		382		―		―		1,048
Commodity contracts not subject to rate recovery			―		―		―		1		1
Commodity contracts subject to rate recovery			―		―		72		27		99
Total		$	666	$	382	$	72	$	28	$	1,148

Liabilities:
Interest rate instruments		$	―	$	37	$	―	$	―	$	37
Commodity contracts not subject to rate recovery			1		―		―		(1)		―
Commodity contracts subject to rate recovery			―		67		53		(54)		66
Total		$	1	$	104	$	53	$	(55)	$	103
(1)	Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.
(2)	Excludes cash balances and cash equivalents.

RECURRING FAIR VALUE MEASURES – SOCALGAS
(Dollars in millions)
		Fair value at March 31, 2016
			Level 1		Level 2		Level 3		Netting(1)		Total
Assets:
Commodity contracts not subject to rate recovery		$	―	$	―	$	―	$	1	$	1
Commodity contracts subject to rate recovery			―		1		―		2		3
Total		$	―	$	1	$	―	$	3	$	4

Liabilities:
Commodity contracts not subject to rate recovery		$	1	$	―	$	―	$	(1)	$	―
Commodity contracts subject to rate recovery			―		1		―		―		1
Total		$	1	$	1	$	―	$	(1)	$	1

		Fair value at December 31, 2015
			Level 1		Level 2		Level 3		Netting(1)		Total
Assets:
Commodity contracts subject to rate recovery		$	―	$	1	$	―	$	1	$	2
Total		$	―	$	1	$	―	$	1	$	2

Liabilities:
Commodity contracts not subject to rate recovery		$	1	$	―	$	―	$	(1)	$	―
Commodity contracts subject to rate recovery			―		1		―		―		1
Total		$	1	$	1	$	―	$	(1)	$	1
(1)	Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.