The information presented below covers the employee benefit plans of Sempra Energy and its principal subsidiaries, as detailed following.

Sempra Energy has funded and unfunded noncontributory defined benefit plans, including separate plans for SDG&E and SoCalGas, which collectively cover all domestic and certain foreign employees, and Sempra Energy's board of directors. The plans generally provide defined benefits based on years of service and either final average or career salary.

Chilquinta Energía, which was acquired by Sempra Energy in 2011, has an unfunded contributory defined benefit plan covering all employees hired before October 1, 1981 and an unfunded noncontributory termination indemnity obligation covering all employees. The plans generally provide defined benefits to retirees based on date of hire, years of service and final average salary.

Sempra Energy also has other postretirement benefit plans (PBOP), including separate plans for SDG&E and SoCalGas, which collectively cover all domestic and certain foreign employees, and Sempra Energy's board of directors. The life insurance plans are both contributory and noncontributory, and the health care plans are contributory. Participants' contributions are adjusted annually. Other postretirement benefits include medical benefits for retirees' spouses.

Chilquinta Energía also has two noncontributory postretirement benefit plans which cover substantially all employees – a health care plan and an energy subsidy plan that provides for reduced energy rates. The health care plan includes benefits for retirees' spouses and dependents.

Pension and other postretirement benefits costs and obligations are dependent on assumptions used in calculating such amounts. These assumptions include

We review these assumptions on an annual basis prior to the beginning of each year and update them as appropriate. We consider current market conditions, including interest rates, in making these assumptions. We use a December 31 measurement date for all of our plans.

In support of its Supplemental Executive Retirement, Cash Balance Restoration and Deferred Compensation Plans, Sempra Energy maintains dedicated assets, including investments in life insurance contracts, which totaled $478 million and $442 million at December 31, 2011 and 2010, respectively.

Effective January 1, 2011, for certain postretirement health plans, the employer contribution was increased to maintain the grandfathered retiree plan status under the Patient Protection and Affordable Care Act (PPACA) discussed below. This increased the benefit obligation by approximately $4 million for Sempra Energy Consolidated, $2 million for SDG&E, and $1 million for SoCalGas.

The following three tables provide a reconciliation of the changes in the plans' projected benefit obligations and the fair value of assets during 2011 and 2010, and a statement of the funded status at December 31, 2011 and 2010:

PROJECTED BENEFIT OBLIGATION, FAIR VALUE OF ASSETS AND FUNDED STATUS
(Dollars in millions)
	Pension Benefits				Other Postretirement Benefits
Sempra Energy Consolidated	2011		2010		2011		2010
CHANGE IN PROJECTED BENEFIT OBLIGATION:
Net obligation at January 1	$	3,124	$	3,083	$	1,139	$	985
Service cost		83		83		31		26
Interest cost		168		167		65		57
Plan amendments		―		1		4		―
Impact of PPACA excise tax		―		―		―		31
Actuarial loss (gain)		224		―		(42)		81
Contributions from plan participants		―		―		15		13
Benefit payments		(177)		(210)		(59)		(56)
Acquisitions		20		―		5		―
Foreign currency adjustments		(2)		―		―		―
Settlements		(34)		―		―		―
Federal subsidy (Medicare Part D)		―		―		2		2
Net obligation at December 31		3,406		3,124		1,160		1,139

CHANGE IN PLAN ASSETS:
Fair value of plan assets at January 1		2,354		2,130		746		658
Actual return on plan assets		(23)		275		4		79
Employer contributions		212		159		72		52
Contributions from plan participants		―		―		15		13
Benefit payments		(177)		(210)		(59)		(56)
Settlements		(34)		―		―		―
Fair value of plan assets at December 31		2,332		2,354		778		746
Funded status at December 31	$	(1,074)	$	(770)	$	(382)	$	(393)
Net recorded liability at December 31	$	(1,074)	$	(770)	$	(382)	$	(393)

PROJECTED BENEFIT OBLIGATION, FAIR VALUE OF ASSETS AND FUNDED STATUS
(Dollars in millions)
	Pension Benefits				Other Postretirement Benefits
SDG&E	2011		2010		2011		2010
CHANGE IN PROJECTED BENEFIT OBLIGATION:
Net obligation at January 1	$	949	$	908	$	175	$	160
Service cost		28		27		7		6
Interest cost		49		47		10		9
Plan amendments		―		―		2		―
Actuarial loss (gain)		27		1		(5)		3
Settlements		(1)		―		―		―
Transfer of liability (to) from other plans		(19)		17		(2)		2
Contributions from plan participants		―		―		7		6
Benefit payments		(52)		(51)		(12)		(11)
Net obligation at December 31		981		949		182		175

CHANGE IN PLAN ASSETS:
Fair value of plan assets at January 1		713		615		99		81
Actual return on plan assets		(7)		79		(1)		7
Employer contributions		69		61		15		15
Transfer of assets (to) from other plans		(10)		9		(2)		1
Settlements		(1)		―		―		―
Contributions from plan participants		―		―		7		6
Benefit payments		(52)		(51)		(12)		(11)
Fair value of plan assets at December 31		712		713		106		99
Funded status at December 31	$	(269)	$	(236)	$	(76)	$	(76)
Net recorded liability at December 31	$	(269)	$	(236)	$	(76)	$	(76)

PROJECTED BENEFIT OBLIGATION, FAIR VALUE OF ASSETS AND FUNDED STATUS
(Dollars in millions)
	Pension Benefits				Other Postretirement Benefits
SoCalGas	2011		2010		2011		2010
CHANGE IN PROJECTED BENEFIT OBLIGATION:
Net obligation at January 1	$	1,786	$	1,764	$	920	$	780
Service cost		46		46		22		18
Interest cost		99		98		53		46
Plan amendments		―		―		1		―
Impact of PPACA excise tax		―		―		―		31
Actuarial loss (gain)		171		(3)		(46)		77
Contributions from plan participants		―		―		9		8
Benefit payments		(107)		(126)		(45)		(43)
Settlements		(4)		―		―		―
Transfer of liability from other plans		26		7		5		1
Federal subsidy (Medicare Part D)		―		―		2		2
Net obligation at December 31		2,017		1,786		921		920

CHANGE IN PLAN ASSETS:
Fair value of plan assets at January 1		1,456		1,332		632		562
Actual return on plan assets		(12)		171		4		70
Employer contributions		95		71		55		35
Transfer of assets from other plans		15		7		3		―
Settlements		(4)		―		―		―
Contributions from plan participants		―		―		9		8
Benefit payments		(107)		(125)		(45)		(43)
Fair value of plan assets at December 31		1,443		1,456		658		632
Funded status at December 31	$	(574)	$	(330)	$	(263)	$	(288)
Net recorded liability at December 31	$	(574)	$	(330)	$	(263)	$	(288)

The actuarial losses for pension plans in 2011 were primarily due to a decrease in the weighted average discount rate and the rate used to convert monthly annuity-type benefits to a lump sum benefit payment.

The actuarial gains for other postretirement plans in 2011 resulted from a decrease in assumed participation rates and claims costs and the impact of the adoption of the Employer Group Waiver Plan, partially offset by actuarial losses from a decrease in the weighted average discount rate. The Employer Group Waiver Plan is an alternative means of providing the existing pharmacy benefit.

The actuarial losses in 2010 for other postretirement plans were primarily due to higher medical premiums and higher health care trend rates for the SoCalGas other postretirement benefit plans.

The assets and liabilities of the pension and other postretirement benefit plans are affected by changing market conditions as well as when actual plan experience is different than assumed. Such events result in investment gains and losses, which we defer and recognize in pension and other postretirement benefit costs over a period of years. Sempra Energy uses the asset smoothing method for its pension and other postretirement plans, except for the SDG&E plans. This method develops an asset value that recognizes realized and unrealized investment gains and losses over a three-year period. This adjusted asset value, known as the market-related value of assets, is used in conjunction with an expected long-term rate of return to determine the expected return-on-assets component of net periodic cost. SoCalGas also uses the asset smoothing method.

The 10-percent corridor accounting method is used at Sempra Energy, SDG&E and SoCalGas. Under the corridor accounting method, if as of the beginning of a year, unrecognized net gain or loss exceeds 10 percent of the greater of the projected benefit obligation or the market-related value of plan assets, the excess is amortized over the average remaining service period of active participants. The asset smoothing and 10-percent corridor accounting methods help mitigate volatility of net periodic costs from year to year.

We recognize the overfunded or underfunded status of defined benefit pension and other postretirement plans as assets or liabilities, respectively; unrecognized changes in these assets and/or liabilities are normally recorded to other comprehensive income (loss) on the balance sheet. The California Utilities and Mobile Gas record regulatory assets and liabilities that offset the funded pension and other postretirement plans' assets or liabilities, as these costs are expected to be recovered in future utility rates based on agreements with regulatory agencies.

The California Utilities record annual pension and other postretirement net periodic benefit costs equal to the contributions to their plans as authorized by the CPUC. The annual contributions to the pension plans are limited to a minimum required funding amount as determined by the Internal Revenue Service. The annual contributions to the other postretirement plans are equal to the lesser of the maximum tax deductible amount or the net periodic cost calculated in accordance with GAAP for pension and other postretirement benefit plans. Mobile Gas records annual pension and other postretirement net periodic benefit costs based on an estimate of the net periodic cost at the beginning of the year calculated in accordance with GAAP for pension and other postretirement benefit plans, as authorized by the Alabama Public Service Commission. Any differences between booked net periodic benefit cost and amounts contributed to the pension and other postretirement plans for the California Utilities are disclosed as regulatory adjustments in accordance with GAAP for regulated entities.

The net liability is included in the following captions on the Consolidated Balance Sheets at December 31:

	Pension Benefits				Other Postretirement Benefits
(Dollars in millions)	2011		2010		2011		2010
Sempra Energy Consolidated
Current liabilities	$	(31)	$	(57)	$	(2)	$	(1)
Noncurrent liabilities		(1,043)		(713)		(380)		(392)
Net recorded liability	$	(1,074)	$	(770)	$	(382)	$	(393)
SDG&E
Current liabilities	$	(3)	$	(3)	$	―	$	―
Noncurrent liabilities		(266)		(233)		(76)		(76)
Net recorded liability	$	(269)	$	(236)	$	(76)	$	(76)
SoCalGas
Current liabilities	$	(4)	$	(5)	$	―	$	―
Noncurrent liabilities		(570)		(325)		(263)		(288)
Net recorded liability	$	(574)	$	(330)	$	(263)	$	(288)

Amounts recorded in Accumulated Other Comprehensive Income (Loss) as of December 31, 2011 and 2010, net of income tax effects and amounts recorded as regulatory assets, are as follows:

The accumulated benefit obligation for defined benefit pension plans at December 31, 2011 and 2010 was as follows:

Sempra Energy has unfunded and funded pension plans. SDG&E and SoCalGas each have an unfunded and a funded pension plan. The following table shows the obligations of funded pension plans with benefit obligations in excess of plan assets as of December 31:

The following three tables provide the components of net periodic benefit cost and amounts recognized in other comprehensive income for the years ended December 31:

NET PERIODIC BENEFIT COST AND AMOUNTS RECOGNIZED IN OTHER COMPREHENSIVE INCOME
(Dollars in millions)
	Pension Benefits						Other Postretirement Benefits
Sempra Energy Consolidated	2011		2010		2009		2011		2010		2009
Net Periodic Benefit Cost
Service cost	$	83	$	83	$	74	$	31	$	26	$	26
Interest cost		168		167		170		65		57		56
Expected return on assets		(144)		(143)		(139)		(48)		(46)		(45)
Amortization of:
Prior service cost (credit)		4		4		7		―		(1)		(1)
Actuarial loss		34		30		23		17		8		3
Regulatory adjustment		43		19		28		7		7		7
Settlement charge		13		―		14		―		―		―
Total net periodic benefit cost		201		160		177		72		51		46

Other Changes in Plan Assets and Benefit Obligations
Recognized in Other Comprehensive Income
Net loss (gain)		23		(12)		9		7		(1)		3
Amortization of prior service credit		―		―		―		―		1		1
Amortization of actuarial loss		(10)		(10)		(8)		―		―		―
Total recognized in other comprehensive income		13		(22)		1		7		―		4
Total recognized in net periodic benefit cost and other comprehensive income	$	214	$	138	$	178	$	79	$	51	$	50

NET PERIODIC BENEFIT COST AND AMOUNTS RECOGNIZED IN OTHER COMPREHENSIVE INCOME
(Dollars in millions)
	Pension Benefits						Other Postretirement Benefits
SDG&E	2011		2010		2009		2011		2010		2009
Net Periodic Benefit Cost
Service cost	$	28	$	27	$	23	$	7	$	6	$	5
Interest cost		49		47		48		10		9		9
Expected return on assets		(46)		(40)		(32)		(8)		(5)		(3)
Amortization of:
Prior service cost		1		1		4		4		4		4
Actuarial loss		9		12		16		―		―		―
Regulatory adjustment		31		13		2		2		2		2
Settlement charge		1		―		2		―		―		―
Total net periodic benefit cost		73		60		63		15		16		17

Other Changes in Plan Assets and Benefit Obligations
Recognized in Other Comprehensive Income
Net loss (gain)		1		2		(1)		―		―		―
Amortization of actuarial loss		(1)		(1)		(2)		―		―		―
Total recognized in other comprehensive income		―		1		(3)		―		―		―
Total recognized in net periodic benefit cost and other comprehensive income	$	73	$	61	$	60	$	15	$	16	$	17

NET PERIODIC BENEFIT COST AND AMOUNTS RECOGNIZED IN OTHER COMPREHENSIVE INCOME
(Dollars in millions)
	Pension Benefits						Other Postretirement Benefits
SoCalGas	2011		2010		2009		2011		2010		2009
Net Periodic Benefit Cost
Service cost	$	46	$	46	$	42	$	22	$	18	$	18
Interest cost		99		98		98		53		46		45
Expected return on assets		(85)		(90)		(94)		(40)		(40)		(41)
Amortization of:
Prior service cost (credit)		2		2		2		(4)		(4)		(4)
Actuarial loss		17		10		1		17		7		3
Settlement charge		1		―		1		―		―		―
Regulatory adjustment		12		6		28		5		5		6
Total net periodic benefit cost		92		72		78		53		32		27

Other Changes in Plan Assets and Benefit Obligations
Recognized in Other Comprehensive Income
Net loss		2		―		1		―		―		―
Amortization of actuarial loss		(1)		(1)		(1)		―		―		―
Total recognized in other comprehensive income		1		(1)		―		―		―		―
Total recognized in net periodic benefit cost and other comprehensive income	$	93	$	71	$	78	$	53	$	32	$	27

The estimated net loss for the pension plans that will be amortized from Accumulated Other Comprehensive Income (Loss) into net periodic benefit cost in 2012 is $10 million for Sempra Energy Consolidated and $1 million at both SDG&E and SoCalGas. Negligible amounts of prior service credit for the pension plans will be similarly amortized in 2012.

The estimated net loss for the PBOP plans that will be amortized from Accumulated Other Comprehensive Income (Loss) into net periodic cost benefit in 2012 is $1 million for Sempra Energy Consolidated.

Negligible amounts of estimated prior service credit for the other postretirement benefit plans will be amortized from Accumulated Other Comprehensive Income (Loss) into net periodic benefit cost in 2012 at Sempra Energy Consolidated.

The PPACA was enacted in March 2010. The key aspects of this legislation affecting Sempra Energy's cost of providing retiree medical benefits are

In determining the projected benefit obligation for our other postretirement benefit plans, we took mandatory coverage for adult children, changes to the Prescription Drug Plan and Medicare Advantage programs, and availability of health care exchanges into consideration in the development of future claims costs and health care trend rates as of December 31, 2011 and 2010. Subsidies received through the ERRP will be reflected when received. We measured loss of the tax free status of RDS separately as described in the following section. We determined the impact of the excise tax provision separately for each of Sempra Energy's plans, as explained below.

With the exception of SoCalGas' represented employees and Mobile Gas, we provide most of our employer subsidy in the form of a defined dollar benefit. Once the premium exceeds our stated benefit level, the retirees pay the difference between the premium amount and the subsidy. Under this arrangement, our obligation doesn't change with the excise tax, since by 2018 the premium both before and after inclusion of the excise tax will exceed our defined dollar benefit.

SoCalGas' union retirees are provided a subsidy as a percentage of the premium. For those retirees, we estimated an increase in SoCalGas' and Sempra Energy's obligations as of December 31, 2010 for the excise tax. However, it is likely that some retirees will move to less expensive plans as a result of the excise tax and lower Sempra Energy's composite plan cost. The net effect of the increase in obligation from the excise tax, partially offset by the lower composite plan cost, was estimated to be $31 million.

Mobile Gas offers only a pre-age 65 plan. As such, future retirees will only have a limited period when the excise tax may apply. All current retirees will no longer be eligible for benefits once the excise tax is effective in 2018.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 establishes a prescription drug benefit under Medicare (Medicare Part D) and a tax-exempt federal subsidy to sponsors of retiree health-care benefit plans that provide a benefit that actuarially is at least equivalent to Medicare Part D. We have determined that benefits provided to certain participants actuarially will be at least equivalent to Medicare Part D. Thus, we are entitled to a tax-exempt subsidy that reduced our accumulated postretirement benefit obligation under our plans at January 1, 2011 and reduced the net periodic cost for 2011 by the following amounts:

Except for the Chilquinta Energía plans, we develop the discount rate assumptions based on the results of a third party modeling tool that develops the discount rate by matching each plan's expected cash flows to interest rates and expected maturity values of individually selected bonds in a hypothetical portfolio. The model controls the level of accumulated surplus that may result from the selection of bonds based solely on their premium yields by limiting the number of years to look back for selection to 3 years for pre-30-year and 6 years for post-30-year benefit payments. Additionally, the model ensures that an adequate number of bonds are selected in the portfolio by limiting the amount of the plan's benefit payments that can be met by a single bond to 7.5 percent.

This selection methodology also mitigates the impact of market volatility on the portfolio by excluding bonds with the following characteristics:

We believe that this bond selection approach provides the best estimate of discount rates to estimate settlement values for our plans' benefit obligations as required by the applicable GAAP.

We develop the discount rate assumptions for the plans at Chilquinta Energía based on 10-year Chilean government bond yields and the expected local long-term rate of inflation. This method for developing the discount rate is required when there is no deep market for high quality corporate bonds.

Long-term return on assets is based on the weighted-average of the plans' investment allocation as of the measurement date and the expected returns for those asset types.

The significant assumptions affecting benefit obligation and net periodic benefit cost are as follows:

WEIGHTED-AVERAGE ASSUMPTIONS

		Pension Benefits				Other Postretirement Benefits
		2011		2010		2011		2010
WEIGHTED-AVERAGE ASSUMPTIONS USED TO DETERMINE
BENEFIT OBLIGATION AS OF DECEMBER 31:
Discount rate		4.95	%	5.61	%	5.11	%	5.77	%
Rate of compensation increase		4.50	%	4.50	%	(1)		(1)

WEIGHTED-AVERAGE ASSUMPTIONS USED TO DETERMINE NET
PERIODIC BENEFIT COST FOR YEARS ENDED DECEMBER 31:
Sempra Energy Consolidated
Discount rate		(2)		(3)		(4)		(5)
Expected return on plan assets		7.00	%	7.00	%	6.25	%	6.22	%
Rate of compensation increase		(6)		(6)		(1)		(1)
SDG&E
Discount rate		(7)		5.40	%	5.05	%	5.75	%
Expected return on plan assets		7.00	%	7.00	%	6.69	%	6.49	%
Rate of compensation increase		(8)		(8)		N/A		N/A
SoCalGas
Discount rate		(9)		5.75	%	5.15	%	5.90	%
Expected return on plan assets		7.00	%	7.00	%	7.00	%	7.00	%
Rate of compensation increase		(6)		(6)		(1)		(1)
(1)	4.50% and 4.00% as of December 31, 2011 and 2010, respectively, for the life insurance and Health Reimbursement Arrangement benefits for SoCalGas’ represented employees. No other PBOP benefits are compensation-based.
(2)	In addition to rates for SDG&E and SoCalGas plans, 5.14% for Mobile Gas pension plan, 4.40% for Directors’ plan, 4.70% for other unfunded plans, and 4.90% for Sempra Energy funded plan.
(3)	In addition to rates for SDG&E and SoCalGas plans, 5.95% for Mobile Gas pension plans, 4.85% for Directors’ plan, 5.45% for other unfunded plans, and 5.55% for Sempra Energy funded plan.
(4)	In addition to rates for SDG&E and SoCalGas plans, 4.10% for the Executive Life Plan, 4.80% for Mobile Gas, and 4.65% for Sempra Energy.
(5)	In addition to rates for SDG&E and SoCalGas plans, 4.60% for the Executive Life Plan, 5.70% for Mobile Gas, and 5.40% for Sempra Energy.
(6)	4.50% for the unfunded pension plans. 3.50% to 5.00% for the funded pension plan for SoCalGas’ represented participants and 3.50% to 8.50% for all the other funded pension plans’ participants using an age-based formula.
(7)	4.70% for the unfunded pension plan. 4.80% for the funded pension plan.
(8)	4.50% for the unfunded pension plan. 3.50% to 8.50% for the funded pension plan using an age-based formula.
(9)	4.70% for the unfunded pension plan. 5.05% for the funded pension plan.

Assumed health-care cost trend rates have a significant effect on the amounts that we report for the health care plan costs. Following are the health-care cost trend rates applicable to our postretirement benefit plans:

A one-percent change in assumed health care cost trend rates would have the following effects:

Sempra Energy's pension master trust holds the investments for the pension and other postretirement benefit plans. We maintain additional trusts as we discuss below for certain of the California Utilities' other postretirement plans. Other than index weight, the trusts do not invest in securities of Sempra Energy.

The current asset allocation objective for the pension master trust is to protect the funded status of the plans while generating sufficient returns to cover future benefit payments and accruals. We assess the portfolio performance by comparing actual returns with relevant benchmarks, such as the Morgan Stanley Capital International (MSCI) US Investable Index, the MSCI Pacific Rim and Europe Indices, the MSCI Emerging Markets Index, and the Barclays Aggregate and Long Government Credit Indices.

Primarily passive investment strategies were used for both the equity and fixed income portions of the asset allocation in 2010, and active management was added in 2011 to achieve risk and return exposures consistent with these indices. The fixed income asset allocation consists of some longer-duration fixed income securities in order to reduce plan exposure to interest rate variation. The foreign equity components provide a growth element, diversification and exposure to different currencies and economies.

The asset allocation of the plans is reviewed by our Pension and Benefits Investment Committee (the Committee) on a regular basis. When evaluating its strategic asset allocation, the Committee considers many variables, including:

We maintain allocations at strategic levels with reasonable bands of variance. When asset class exposure reaches a minimum or maximum level, we generally rebalance the portfolio back to target allocations, unless the Committee determines otherwise.

For all plans except the SDG&E postretirement health plans, we base the long-term rate of return assumption on the asset-weighted-average of the expected return for each asset class. We develop the expected returns from examining periods of historical returns and expectations for future returns from several investment and actuarial consultants. Specifically, we reached a 7.0 percent return expectation by assuming a 4.5 percent yield/return on a risk-free bond portfolio (treasury securities), adding a 50 basis point risk premium for our investment grade bond portfolio and another 300 basis point risk premium for equity securities. A 65 percent equity/35 percent fixed income mix results in a total portfolio return expectation of approximately 7.0 percent.

The expected rate of return for the SDG&E postretirement health plan assets is the weighted average of the assumed rate of return for those plan assets in the pension master trust and the Voluntary Employee Beneficiary Association (VEBA) trust for the collectively bargained plan developed using the methodology described above, and the rate of return for the assets of the non-collectively bargained plans described below. The rate of return for the assets of the non-collectively bargained plan is based on the weighted average after-tax expected return of the portfolio's target asset allocation of 35 percent equity/65 percent fixed income. The fixed-income portfolio is invested in tax-exempt municipal bond securities, while the equity portfolio is invested 25 percent Standard & Poor's (S&P) 500 index/5 percent MSCI Index for equity market performance in Europe, Australasia and Far East (MSCI EAFE index).

Plan assets are fully diversified across global equity and bond markets, and other than what is indicated by the target asset allocations, contain no concentration of risk in any one economic, industry, maturity, or geographic sector.

SoCalGas' other postretirement benefit plans are funded by cash contributions from SoCalGas and current retirees. The assets of these plans are placed in the pension master trust and other VEBA trusts, as we detail below. The assets in the VEBA trusts are invested at identical allocations to the pension master trust, 65 percent equities/35 percent fixed income, using primarily index funds. This allocation has been formulated to best suit the long-term nature of the obligations.

SDG&E's postretirement health plans are funded by cash contributions from SDG&E and current retirees. The assets are placed in the pension master trust and a VEBA trust, as we detail below. Assets in the pension master trust are invested at the 70 percent equity/30 percent fixed income mix using index funds. Assets in the VEBA trust for non-collectively bargained post retirement health and welfare benefit plans are taxable and therefore have a different asset allocation strategy. These assets are invested with a target asset allocation of 30 percent equity/70 percent fixed income, with a large portion of the bond portfolio placed in actively managed tax-exempt municipal bonds. The equity portfolio is indexed.

We classify the investments in Sempra Energy's pension master trust and the trusts for the California Utilities' other postretirement benefit plans into:

We provide more discussion of fair value measurements in Notes 1, 2 and 11. The following tables set forth by level within the fair value hierarchy a summary of the investments in our pension and other postretirement benefit plan trusts measured at fair value on a recurring basis.

FAIR VALUE MEASUREMENTS — SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
		At fair value as of December 31, 2011
PENSION PLANS - INVESTMENT ASSETS			Level 1		Level 2		Level 3		Total
SDG&E (see table below)		$	466	$	244	$	7	$	717
SoCalGas (see table below)			919		484		15		1,418
Other Sempra Energy
Equity securities:
Domestic large-cap(1)			50		―		―		50
Domestic mid-cap(1)			10		―		―		10
Domestic small-cap(1)			12		―		―		12
Foreign large-cap			32		―		―		32
Foreign mid-cap			7		―		―		7
Foreign small-cap			6		―		―		6
Foreign preferred small-cap			1		―		―		1
Registered investment companies			1		―		―		1
Fixed income securities:
Domestic municipal bonds			―		2		―		2
Foreign government bonds			―		5		―		5
Domestic corporate bonds(2)			―		36		―		36
Foreign corporate bonds			―		12		―		12
Common/collective trusts(3)			―		6		―		6
Other types of investments:
Private equity funds(4) (stated at net asset value)			1		―		2		3
Total other Sempra Energy(5)			120		61		2		183
Total Sempra Energy Consolidated(6)		$	1,505	$	789	$	24	$	2,318

		At fair value as of December 31, 2010
PENSION PLANS - INVESTMENT ASSETS			Level 1		Level 2		Level 3		Total
SDG&E (see table below)		$	450	$	245	$	8	$	703
SoCalGas (see table below)			924		501		17		1,442
Other Sempra Energy
Equity securities:
Domestic large-cap(1)			54		―		―		54
Domestic mid-cap(1)			11		―		―		11
Domestic small-cap(1)			12		―		―		12
Foreign emerging market funds			―		13		―		13
Foreign large-cap			31		―		―		31
Foreign mid-cap			8		―		―		8
Foreign small-cap			5		―		―		5
Fixed income securities:
U.S. Treasury securities			5		―		―		5
Other U.S. government securities			―		9		―		9
Domestic municipal bonds			―		2		―		2
Foreign government bonds			―		2		―		2
Domestic corporate bonds(2)			―		31		―		31
Foreign corporate bonds			―		9		―		9
Common/collective trusts(3)			―		3		―		3
Other types of investments:
Private equity funds(4) (stated at net asset value)			―		―		2		2
Total other Sempra Energy(7)			126		69		2		197
Total Sempra Energy Consolidated(6)		$	1,500	$	815	$	27	$	2,342
(1)	Investments in common stock of domestic corporations stratified according to the MSCI 2500 index.
(2)	Investment-grade bonds of U.S. issuers from diverse industries.
(3)	Investments in common/collective trusts held in Sempra Energy’s Pension Master Trust.
(4)	Investments in venture capital and real estate funds.
(5)	Excludes cash and cash equivalents of $1 million and transfers payable to other plans of $7 million.
(6)	Excludes cash and cash equivalents of $14 million and $12 million at December 31, 2011 and 2010, respectively.
(7)	Excludes transfers payable to other plans of $12 million.

FAIR VALUE MEASUREMENTS — SDG&E
(Dollars in millions)
		At fair value as of December 31, 2011
PENSION PLANS - INVESTMENT ASSETS			Level 1		Level 2		Level 3		Total
Equity securities:
Domestic large-cap(1)		$	199	$	―	$	―	$	199
Domestic mid-cap(1)			39		―		―		39
Domestic small-cap(1)			45		―		―		45
Foreign large-cap			125		―		―		125
Foreign mid-cap			31		―		―		31
Foreign small-cap			22		―		―		22
Foreign preferred large-cap			1		―		―		1
Registered investment companies			4		―		―		4
Fixed income securities:
Domestic municipal bonds			―		9		―		9
Foreign government bonds			―		25		―		25
Domestic corporate bonds(2)			―		139		―		139
Foreign corporate bonds			―		48		―		48
Common/collective trusts(3)			―		23		―		23
Other types of investments:
Private equity funds(4) (stated at net asset value)			―		―		7		7
Total investment assets(5)		$	466	$	244	$	7	$	717

		At fair value as of December 31, 2010
PENSION PLANS - INVESTMENT ASSETS			Level 1		Level 2		Level 3		Total
Equity securities:
Domestic large-cap(1)		$	198	$	―	$	―	$	198
Domestic mid-cap(1)			39		―		―		39
Domestic small-cap(1)			42		―		―		42
Foreign emerging market funds			―		46		―		46
Foreign large-cap			108		―		―		108
Foreign mid-cap			25		―		―		25
Foreign small-cap			19		―		―		19
Foreign preferred large-cap			1		―		―		1
Fixed income securities:
U.S. Treasury securities			18		―		―		18
Other U.S. government securities			―		32		―		32
Domestic municipal bonds			―		8		―		8
Foreign government bonds			―		9		―		9
Domestic corporate bonds(2)			―		111		―		111
Foreign corporate bonds			―		33		―		33
Common/collective trusts(3)			―		6		―		6
Other types of investments:
Private equity funds(4) (stated at net asset value)			―		―		8		8
Total investment assets(6)		$	450	$	245	$	8	$	703
(1)	Investments in common stock of domestic corporations stratified according to the MSCI 2500 index.
(2)	Investment-grade bonds of U.S. issuers from diverse industries.
(3)	Investments in common/collective trusts held in Sempra Energy’s Pension Master Trust.
(4)	Investments in venture capital and real estate funds.
(5)	Excludes cash and cash equivalents of $4 million and $9 million of transfers payable to other plans.
(6)	Excludes cash and cash equivalents of $4 million and transfers receivable from other plans of $6 million.

FAIR VALUE MEASUREMENTS — SOCALGAS
(Dollars in millions)
		At fair value as of December 31, 2011
PENSION PLANS - INVESTMENT ASSETS			Level 1		Level 2		Level 3		Total
Equity securities:
Domestic large-cap(1)		$	393	$	―	$	―	$	393
Domestic mid-cap(1)			76		―		―		76
Domestic small-cap(1)			89		―		―		89
Foreign large-cap			247		―		―		247
Foreign mid-cap			61		―		―		61
Foreign small-cap			43		―		―		43
Foreign preferred large-cap			1		―		―		1
Registered investment companies			8		―		―		8
Fixed income securities:
Domestic municipal bonds			―		18		―		18
Foreign government bonds			―		49		―		49
Domestic corporate bonds(2)			―		275		―		275
Foreign corporate bonds			―		96		―		96
Common/collective trusts(3)			―		46		―		46
Other types of investments:
Private equity funds(4) (stated at net asset value)			1		―		15		16
Total investment assets(5)		$	919	$	484	$	15	$	1,418

		At fair value as of December 31, 2010
PENSION PLANS - INVESTMENT ASSETS			Level 1		Level 2		Level 3		Total
Equity securities:
Domestic large-cap(1)		$	409	$	―	$	―	$	409
Domestic mid-cap(1)			80		―		―		80
Domestic small-cap(1)			86		―		―		86
Foreign emerging market funds			―		95		―		95
Foreign large-cap			221		―		―		221
Foreign mid-cap			52		―		―		52
Foreign small-cap			39		―		―		39
Foreign preferred large-cap			1		―		―		1
Fixed income securities:
U.S. Treasury securities			36		―		―		36
Other U.S. government securities			―		65		―		65
Domestic municipal bonds			―		16		―		16
Foreign government bonds			―		18		―		18
Domestic corporate bonds(2)			―		227		―		227
Foreign corporate bonds			―		67		―		67
Common/collective trusts(3)			―		13		―		13
Other types of investments:
Private equity funds(4) (stated at net asset value)			―		―		17		17
Total investment assets(6)		$	924	$	501	$	17	$	1,442
(1)	Investments in common stock of domestic corporations stratified according to the MSCI 2500 index.
(2)	Investment-grade bonds of U.S. issuers from diverse industries.
(3)	Investments in common/collective trusts held in Sempra Energy’s Pension Master Trust.
(4)	Investments in venture capital and real estate funds.
(5)	Excludes cash and cash equivalents of $9 million and transfers receivable from other plans of $16 million.
(6)	Excludes cash and cash equivalents of $8 million and transfers receivable from other plans of $6 million.

The fair values by asset category of the postretirement benefit plan assets held in the pension master trust and in the additional trusts for SoCalGas' postretirement benefit plans and SDG&E's postretirement benefit plans (PBOP plan trusts) are as follows:

FAIR VALUE MEASUREMENTS — SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
		At fair value as of December 31, 2011
OTHER POSTRETIREMENT BENEFIT PLANS - INVESTMENT ASSETS			Level 1		Level 2		Level 3		Total
SDG&E (see table below)		$	47	$	24	$	1	$	72
SoCalGas (see table below)			176		390		3		569
Other Sempra Energy
Equity securities:
Domestic large-cap(1)			4		―		―		4
Domestic mid-cap(1)			1		―		―		1
Domestic small-cap(1)			1		―		―		1
Foreign large-cap			2		―		―		2
Foreign small-cap			1		―		―		1
Fixed income securities:
Domestic corporate bonds(2)			―		4		―		4
Foreign government bonds			―		1		―		1
Foreign corporate bonds			―		1		―		1
Total other Sempra Energy(3)			9		6		―		15
Total Sempra Energy Consolidated(4)		$	232	$	420	$	4	$	656

		At fair value as of December 31, 2010
OTHER POSTRETIREMENT BENEFIT PLANS - INVESTMENT ASSETS			Level 1		Level 2		Level 3		Total
SDG&E (see table below)		$	45	$	24	$	1	$	70
SoCalGas (see table below)			184		395		3		582
Other Sempra Energy
Equity securities:
Domestic large-cap(1)			3		―		―		3
Domestic mid-cap(1)			1		―		―		1
Domestic small-cap(1)			1		―		―		1
Foreign large-cap			2		―		―		2
Foreign mid-cap			1		―		―		1
Foreign small-cap			1		―		―		1
Fixed income securities:
U.S. Treasury securities			1		―		―		1
Domestic corporate bonds(2)			―		3		―		3
Total other Sempra Energy(5)			10		3		―		13
Total Sempra Energy Consolidated(6)		$	239	$	422	$	4	$	665
(1)	Investments in common stock of domestic corporations stratified according to the MSCI 2500 index.
(2)	Investment-grade bonds of U.S. issuers from diverse industries.
(3)	Excludes transfers payable to other plans of $1 million.
(4)	Excludes cash and cash equivalents of $122 million, $86 million and $36 million of which is held in SoCalGas and SDG&E
	PBOP plan trusts, respectively.
(5)	Excludes cash and cash equivalents of $2 million.
(6)	Excludes cash and cash equivalents of $81 million, $50 million and $29 million of which is held in SoCalGas and SDG&E
	PBOP plan trusts, respectively.

FAIR VALUE MEASUREMENTS — SDG&E
(Dollars in millions)
		At fair value as of December 31, 2011
OTHER POSTRETIREMENT BENEFIT PLANS - INVESTMENT ASSETS			Level 1		Level 2		Level 3		Total
Equity securities:
Domestic large-cap(1)		$	17	$	―	$	―	$	17
Domestic mid-cap(1)			3		―		―		3
Domestic small-cap(1)			4		―		―		4
Foreign large-cap			11		―		―		11
Foreign mid-cap			3		―		―		3
Foreign small-cap			2		―		―		2
Registered investment company			7		―		―		7
Fixed income securities:
Domestic municipal bonds(2)			―		4		―		4
Domestic corporate bonds(3)			―		12		―		12
Foreign government bonds			―		2		―		2
Foreign corporate bonds			―		4		―		4
Common/collective trusts(4)			―		2		―		2
Other types of investments:
Private equity funds(5) (stated at net asset value)			―		―		1		1
Total investment assets(6)		$	47	$	24	$	1	$	72

		At fair value as of December 31, 2010
OTHER POSTRETIREMENT BENEFIT PLANS - INVESTMENT ASSETS			Level 1		Level 2		Level 3		Total
Equity securities:
Domestic large-cap(1)		$	16	$	―	$	―	$	16
Domestic mid-cap(1)			3		―		―		3
Domestic small-cap(1)			3		―		―		3
Foreign emerging market funds			―		4		―		4
Foreign large-cap			8		―		―		8
Foreign mid-cap			2		―		―		2
Foreign small-cap			1		―		―		1
Registered investment company			11		―		―		11
Fixed income securities:
U.S. Treasury securities			1		―		―		1
Other U.S. government securities			―		2		―		2
Foreign government bonds			―		1		―		1
Domestic municipal bonds(2)			―		6		―		6
Domestic corporate bonds(3)			―		9		―		9
Foreign corporate bonds			―		2		―		2
Other types of investments:
Private equity funds(5) (stated at net asset value)			―		―		1		1
Total investment assets(7)		$	45	$	24	$	1	$	70
(1)	Investments in common stock of domestic corporations stratified according to the MSCI 2500 index.
(2)	Bonds of California municipalities held in SDG&E PBOP plan trusts.
(3)	Investment-grade bonds of U.S. issuers from diverse industries.
(4)	Investment in common/collective trusts held in PBOP plan VEBA trusts.
(5)	Investments in venture capital and real estate funds.
(6)	Excludes cash and cash equivalents of $36 million, all of which is held in SDG&E PBOP plan trusts, and transfers payable to other plans of $2 million.
(7)	Excludes cash and cash equivalents of $29 million, all of which is held in SDG&E PBOP plan trusts.

FAIR VALUE MEASUREMENTS — SOCALGAS
(Dollars in millions)
		At fair value as of December 31, 2011
OTHER POSTRETIREMENT BENEFIT PLANS - INVESTMENT ASSETS			Level 1		Level 2		Level 3		Total
Equity securities:
Domestic large-cap(1)		$	75	$	―	$	―	$	75
Domestic mid-cap(1)			15		―		―		15
Domestic small-cap(1)			17		―		―		17
Foreign large-cap			47		―		―		47
Foreign mid-cap			12		―		―		12
Foreign small-cap			8		―		―		8
Registered investment company			2		―		―		2
Fixed income securities:
Domestic municipal bonds			―		3		―		3
Foreign government bonds			―		9		―		9
Domestic corporate bonds(2)			―		52		―		52
Foreign corporate bonds			―		18		―		18
Common/collective trusts(3)			―		308		―		308
Other types of investments:
Private equity funds(4) (stated at net asset value)			―		―		3		3
Total investment assets(5)		$	176	$	390	$	3	$	569

		At fair value as of December 31, 2010
OTHER POSTRETIREMENT BENEFIT PLANS - INVESTMENT ASSETS			Level 1		Level 2		Level 3		Total
Equity securities:
Domestic large-cap(1)		$	82	$	―	$	―	$	82
Domestic mid-cap(1)			16		―		―		16
Domestic small-cap(1)			17		―		―		17
Foreign emerging market funds			―		19		―		19
Broad market fund(6)			―		220		―		220
Foreign large-cap			44		―		―		44
Foreign mid-cap			10		―		―		10
Foreign small-cap			8		―		―		8
Fixed income securities:
U.S. Treasury securities			7		―		―		7
Other U.S. government securities			―		14		―		14
Domestic municipal bonds			―		3		―		3
Foreign government bonds			―		3		―		3
Domestic corporate bonds(2)			―		45		―		45
Foreign corporate bonds			―		14		―		14
Common/collective trusts(3)			―		77		―		77
Other types of investments:
Private equity funds(4) (stated at net asset value)			―		―		3		3
Total investment assets(7)		$	184	$	395	$	3	$	582
(1)	Investments in common stock of domestic corporations stratified according to the MSCI 2500 index.
(2)	Investment-grade bonds of U.S. issuers from diverse industries.
(3)	Investments in common/collective trusts held in PBOP plan VEBA trusts.
(4)	Investments in venture capital and real estate funds.
(5)	Excludes cash and cash equivalents of $86 million, all of which is held in SoCalGas PBOP plan trusts, and transfers receivable from other plans of $3 million.
(6)	A passively managed broad market fund held in SoCalGas PBOP plan trusts.
(7)	Excludes cash and cash equivalents of $50 million, all of which is held in SoCalGas PBOP plan trusts.

The investments of the pension master trust allocated to the pension and postretirement benefit plans classified as Level 3 are private equity funds and represent a percentage of each plan's total allocated assets as follows at December 31:

The following table provides a reconciliation of changes in the fair value of investments classified as Level 3:

LEVEL 3 RECONCILIATIONS
(Dollars in millions)
	Private Equity Funds
		SDG&E		SoCalGas		All Other		Sempra Energy Consolidated
PENSION PLANS
Balance as of January 1, 2010	$	9	$	19	$	2	$	30
Actual returns on plan assets		―		1		―		1
Purchases		―		1		―		1
Sales		(1)		(4)		―		(5)
Balance as of December 31, 2010		8		17		2		27
Realized gains		1		1		―		2
Purchases		―		1		―		1
Sales		(2)		(4)		―		(6)
Balance as of December 31, 2011	$	7	$	15	$	2	$	24
OTHER POSTRETIREMENT BENEFIT PLANS
Balance as of January 1, 2010	$	1	$	4	$	―	$	5
Sales		―		(1)		―		(1)
Balance as of December 31, 2010 and 2011	$	1	$	3	$	―	$	4

The following descriptions of the valuation methods and assumptions used to estimate the fair values of investments apply to investments held directly by the plans and those held as underlying investments of the master trust:

Equity Securities — Equity securities are valued using quoted prices listed on nationally recognized securities exchanges.

Fixed Income Securities — Certain fixed income securities are valued at the closing price reported in the active market in which the security is traded. Other fixed income securities are valued based on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for identical or similar securities, the security is valued under a discounted cash flows approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable, such as credit and liquidity risks.

Common/Collective Trusts — Investments in common/collective trust funds are valued based on the redemption price of units owned, which is based on the current fair value of the fund's underlying assets.

Private Equity Funds — Investments in private equity funds do not trade in active markets. Fair value is determined by the fund managers, based upon their review of the underlying investments as well as their utilization of discounted cash flows and other valuation models.

Real Estate — Real estate investments are valued on the basis of a discounted cash flow approach, which includes the future rental receipts, expenses, and residual values for the highest and best use of the real estate from a market participant view as rental property.

The methods described are intended to produce a fair value calculation that is indicative of net realizable value or reflective of future fair values. However, while management believes the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

In accordance with the Sempra Energy pension investment guidelines, derivative financial instruments are used by the pension master trust's equity and fixed income portfolio investment managers. Futures and foreign currency exchange contracts are used primarily to rebalance the fixed income/equity allocation of the pension master trust's portfolio and to hedge all or a portion of the currency risk component of the foreign equity investments. Currency hedge positions are not permitted to exceed the level of underlying foreign security exposure in the pension master trust's related assets. Some of the fixed income investment managers are permitted to use certain specified types of derivative instruments as part of their respective strategies. These strategies include the use of futures and options as substitutes for certain types of fixed income securities. During 2011 and 2010, the pension master trust owned shares in funds that held futures contracts and foreign currency forward contracts. In 2011 and 2010, such funds in which the pension master trust owned shares were the S&P 1500 Index and the Foreign Equity Index managed by Barclay's Global Investors. As these futures contracts are not held directly by the pension master trust, they are not included in the following discussion.

At December 31, 2011 and 2010, the pension master trust did not directly hold any futures or currency forward contracts. As we discuss above, interest rate swaps are used indirectly through an index fund in the pension master trust.

We expect to contribute the following amounts to our pension and other postretirement benefit plans in 2012:

The following table shows the total benefits we expect to pay for the next 10 years to current employees and retirees from the plans or from company assets.

Under Chilean law, Chilquinta Energía is required to pay all employees either (1) 30 percent of Chilquinta Energía's taxable income after deducting a 10 percent return on equity, allocated in proportion to the annual salary of each employee or (2) 25 percent of each employee's annual salary, with a maximum mandatory profit sharing of 4.75 months of Chile's legal minimum salary. Chilquinta Energía has elected the second option but calculates the profit sharing amounts with actual employee salaries instead of the legal minimum salary, resulting in a higher cost. The amounts are paid out each pay period. Chilquinta Energía recorded annual profit sharing expense of $5 million for 2011 related to this plan.

Under Peruvian law, Luz del Sur is required to pay their employees 5 percent of Luz del Sur's taxable income, paid once a year and allocated as follows: 50 percent based on each employee's annual hours worked and 50 percent based on each employee's annual salary. Luz del Sur recorded annual profit sharing expense of $9 million for 2011 related to this plan.

Sempra Energy offers trusteed savings plans to all domestic employees. Participation in the plans is immediate for salary deferrals for all employees except for the represented employees at SoCalGas, who are eligible upon completion of one year of service. Subject to plan provisions, employees may contribute from one percent to 25 percent of their regular earnings when they begin employment. After one year of the employee's completed service, Sempra Energy makes matching contributions. Employer contribution amounts and methodology vary by plan, but generally the contributions are equal to 50 percent of the first 6 percent of eligible base salary contributed by employees and, if certain company goals are met, an additional amount related to incentive compensation payments.

Employer contributions are initially invested in Sempra Energy common stock, but the employee may transfer the contribution to other investments. Employee contributions are invested in Sempra Energy common stock, mutual funds or institutional trusts (the same investments to which employees may direct the employer contributions), which the employee selects. In Sempra Energy plans, employee contributions may also be invested in guaranteed investment contracts. Employer contributions for substantially all plans are partially funded by the ESOP referred to below.

The market value of Sempra Energy common stock held by the savings plans was $883 million and $847 million at December 31, 2011 and 2010, respectively.

All contributions to the ESOP Trust (described in Note 5) are made by Sempra Energy; there are no contributions made by the participants. As Sempra Energy makes contributions, the ESOP debt service is paid and shares are released in proportion to the total expected debt service. We charge compensation expense and credit equity for the market value of the released shares. Dividends on unallocated shares are used to pay debt service and are applied against the liability. The shares held by the Trust are unallocated and consist of 0.2 million shares of Sempra Energy common stock with a fair value of $8 million at December 31, 2011, and 0.5 million shares of Sempra Energy common stock with a fair value of $27 million at December 31, 2010.