FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Jun. 30, 2018

For the CRRs settling from January 1 to December 31, the auction price inputs, at a given location, are in the following ranges for the years indicated below:



CONGESTION REVENUE RIGHTS AUCTION PRICE INPUTS

Settlement year	Price per MWh
2018	$	(7.25	)	to	$	11.99
2017	(11.88		)	to	6.93

Recurring Fair Value Measures Table



RECURRING FAIR VALUE MEASURES – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
	Fair value at June 30, 2018
	Level 1			Level 2		Level 3		Total
Assets:
Nuclear decommissioning trusts:
Equity securities	$	455		$	4	$	—	$	459
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies	47			10		—		57
Municipal bonds	—			263		—		263
Other securities	—			229		—		229
Total debt securities	47			502		—		549
Total nuclear decommissioning trusts⁽¹⁾	502			506		—		1,008
Interest rate and foreign exchange instruments⁽²⁾	—			18		—		18
Commodity contracts not subject to rate recovery	1			9		—		10
Effect of netting and allocation of collateral⁽³⁾	14			—		—		14
Commodity contracts subject to rate recovery	—			3		109		112
Effect of netting and allocation of collateral⁽³⁾	13			—		6		19
Total	$	530		$	536	$	115	$	1,181

Liabilities:
Interest rate and foreign exchange instruments	$	—		$	146	$	—	$	146
Commodity contracts not subject to rate recovery	1			7		—		8
Commodity contracts subject to rate recovery	13			16		140		169
Effect of netting and allocation of collateral⁽³⁾	(13		)	—		—		(13		)
Total	$	1		$	169	$	140	$	310

	Fair value at December 31, 2017
	Level 1			Level 2		Level 3		Total
Assets:
Nuclear decommissioning trusts:
Equity securities	$	491		$	5	$	—	$	496
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies	45			9		—		54
Municipal bonds	—			250		—		250
Other securities	—			217		—		217
Total debt securities	45			476		—		521
Total nuclear decommissioning trusts⁽¹⁾	536			481		—		1,017
Interest rate and foreign exchange instruments	—			7		—		7
Commodity contracts not subject to rate recovery	5			12		—		17
Effect of netting and allocation of collateral⁽³⁾	2			—		—		2
Commodity contracts subject to rate recovery	—			2		126		128
Effect of netting and allocation of collateral⁽³⁾	12			—		5		17
Total	$	555		$	502	$	131	$	1,188

Liabilities:
Interest rate and foreign exchange instruments	$	—		$	217	$	—	$	217
Commodity contracts not subject to rate recovery	—			6		—		6
Commodity contracts subject to rate recovery	23			7		154		184
Effect of netting and allocation of collateral⁽³⁾	(23		)	—		—		(23		)
Total	$	—		$	230	$	154	$	384


⁽¹⁾	Excludes cash balances and cash equivalents.


⁽²⁾	Includes $3 million of interest rate instruments classified as Assets Held for Sale, as we discuss in Note 5.


⁽³⁾	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.



RECURRING FAIR VALUE MEASURES – SDG&E
(Dollars in millions)
	Fair value at June 30, 2018
	Level 1			Level 2		Level 3		Total
Assets:
Nuclear decommissioning trusts:
Equity securities	$	455		$	4	$	—	$	459
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies	47			10		—		57
Municipal bonds	—			263		—		263
Other securities	—			229		—		229
Total debt securities	47			502		—		549
Total nuclear decommissioning trusts⁽¹⁾	502			506		—		1,008
Commodity contracts subject to rate recovery	—			—		109		109
Effect of netting and allocation of collateral⁽²⁾	12			—		6		18
Total	$	514		$	506	$	115	$	1,135

Liabilities:
Interest rate instruments	$	—		$	7	$	—	$	7
Commodity contracts subject to rate recovery	13			13		140		166
Effect of netting and allocation of collateral⁽²⁾	(13		)	—		—		(13		)
Total	$	—		$	20	$	140	$	160

	Fair value at December 31, 2017
	Level 1			Level 2		Level 3		Total
Assets:
Nuclear decommissioning trusts:
Equity securities	$	491		$	5	$	—	$	496
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies	45			9		—		54
Municipal bonds	—			250		—		250
Other securities	—			217		—		217
Total debt securities	45			476		—		521
Total nuclear decommissioning trusts⁽¹⁾	536			481		—		1,017
Commodity contracts subject to rate recovery	—			—		126		126
Effect of netting and allocation of collateral⁽²⁾	11			—		5		16
Total	$	547		$	481	$	131	$	1,159

Liabilities:
Interest rate instruments	$	—		$	13	$	—	$	13
Commodity contracts subject to rate recovery	23			5		154		182
Effect of netting and allocation of collateral⁽²⁾	(23		)	—		—		(23		)
Total	$	—		$	18	$	154	$	172


⁽¹⁾	Excludes cash balances and cash equivalents.


⁽²⁾	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.



RECURRING FAIR VALUE MEASURES – SOCALGAS
(Dollars in millions)
	Fair value at June 30, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Commodity contracts subject to rate recovery	$	—	$	3	$	—	$	3
Effect of netting and allocation of collateral⁽¹⁾	1		—		—		1
Total	$	1	$	3	$	—	$	4

Liabilities:
Commodity contracts subject to rate recovery	$	—	$	3	$	—	$	3
Total	$	—	$	3	$	—	$	3

	Fair value at December 31, 2017
	Level 1		Level 2		Level 3		Total
Assets:
Commodity contracts subject to rate recovery	$	—	$	2	$	—	$	2
Effect of netting and allocation of collateral⁽¹⁾	1		—		—		1
Total	$	1	$	2	$	—	$	3

Liabilities:
Commodity contracts subject to rate recovery	$	—	$	2	$	—	$	2
Total	$	—	$	2	$	—	$	2

⁽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.

Recurring Fair Value Measures Level 3 Rollforward Table

The following table sets forth reconciliations of changes in the fair value of CRRs and long-term, fixed-price electricity positions classified as Level 3 in the fair value hierarchy for Sempra Energy Consolidated and SDG&E:



LEVEL 3 RECONCILIATIONS⁽¹⁾
(Dollars in millions)
	Three months ended June 30,
	2018			2017
Balance at April 1	$	(40	)	$	(96	)
Realized and unrealized gains (losses)	11			(3		)
Settlements	(2		)	9
Balance at June 30	$	(31	)	$	(90	)
Change in unrealized gains (losses) relating to instruments still held at June 30	$	3		$	2
	Six months ended June 30,
	2018			2017
Balance at January 1	$	(28	)	$	(74	)
Realized and unrealized gains (losses)	15			(16		)
Allocated transmission instruments	3			—
Settlements	(21		)	—
Balance at June 30	$	(31	)	$	(90	)
Change in unrealized gains (losses) relating to instruments still held at June 30	$	(4	)	$	(14	)

⁽¹⁾ Excludes the effect of contractual ability to settle contracts under master netting agreements.

Fair Value of Financial Instruments Table

The following table provides the carrying amounts and fair values of certain other financial instruments that are not recorded at fair value on the Condensed Consolidated Balance Sheets at June 30, 2018 and December 31, 2017:



FAIR VALUE OF FINANCIAL INSTRUMENTS
(Dollars in millions)
	June 30, 2018
	Carrying amount		Fair value
	Carrying amount		Level 1		Level 2		Level 3		Total
Sempra Energy Consolidated:
Long-term amounts due from unconsolidated affiliates⁽¹⁾	$	626	$	—	$	600	$	41	$	641
Long-term amounts due to unconsolidated affiliates⁽²⁾	35		—		32		—		32
Total long-term debt^(3)(4)(5)	21,791		731		20,605		436		21,772
SDG&E:
Total long-term debt⁽⁵⁾⁽⁶⁾	$	5,245	$	—	$	5,194	$	290	$	5,484
SoCalGas:
Total long-term debt⁽⁷⁾	$	2,909	$	—	$	2,946	$	—	$	2,946

	December 31, 2017
	Carrying amount		Fair value
	Carrying amount		Level 1		Level 2		Level 3		Total
Sempra Energy Consolidated:
Long-term amounts due from unconsolidated affiliates⁽¹⁾	$	604	$	—	$	528	$	96	$	624
Long-term amounts due to unconsolidated affiliates⁽²⁾	35		—		32		—		32
Total long-term debt⁽⁴⁾⁽⁵⁾	17,138		817		17,134		458		18,409
SDG&E:
Total long-term debt⁽⁵⁾⁽⁶⁾	$	4,868	$	—	$	5,073	$	295	$	5,368
SoCalGas:
Total long-term debt⁽⁷⁾	$	3,009	$	—	$	3,192	$	—	$	3,192


⁽¹⁾	Excluding accumulated interest outstanding of $51 million and $29 million at June 30, 2018 and December 31, 2017, respectively, and excluding foreign currency translation of $43 million and $35 million on a Mexican peso-denominated loan at June 30, 2018 and December 31, 2017, respectively.


⁽²⁾	Excluding accumulated interest of $1 million outstanding at June 30, 2018 and negligible interest outstanding at December 31, 2017.


⁽³⁾	Includes $70 million of long-term debt classified as Liabilities Held for Sale, as we discuss in Notes 5 and 7.

⁽⁴⁾

Before reductions for unamortized discount (net of premium) and debt issuance costs of $210 million and $143 million at June 30, 2018 and December 31, 2017, respectively, and excluding build-to-suit and capital lease obligations of $875 million and $877 million at June 30, 2018 and December 31, 2017, respectively. We discuss our long-term debt in Note 7 above and in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report.


⁽⁵⁾	Level 3 instruments include $290 million and $295 million at June 30, 2018 and December 31, 2017, respectively, related to Otay Mesa VIE.


⁽⁶⁾	Before reductions for unamortized discount and debt issuance costs of $49 million and $45 million at June 30, 2018 and December 31, 2017, respectively, and excluding capital lease obligations of $727 million and $732 million at June 30, 2018 and December 31, 2017, respectively.


⁽⁷⁾	Before reductions for unamortized discount and debt issuance costs of $27 million and $24 million at June 30, 2018 and December 31, 2017, respectively, and excluding capital lease obligations of $5 million and $1 million at June 30, 2018 and December 31, 2017, respectively.

Nonrecurring Fair Value Measurements

The following table summarizes significant inputs impacting our non-recurring fair value measures:

NON-RECURRING FAIR VALUE MEASURES – SEMPRA ENERGY CONSOLIDATED

Estimated

fair

value (in millions)

Valuation technique

Fair

value

hierarchy

% of

fair value

measurement

Inputs used to
develop
measurement

Range of
inputs

Certain of our U.S. wind equity method investments

145

⁽¹⁾

Discounted cash flows

Level 3

100%

Contracted and observable merchant prices per MWh

$29 - $92

⁽²⁾

Discount rate

8% - 10%

⁽³⁾

Non-utility natural gas storage assets

190

⁽⁴⁾

Discounted cash flows

Level 3

100%

Storage rates
per Dth/month

$0.06 - $0.22

⁽²⁾

Discount rate

10%

⁽³⁾


⁽¹⁾	At measurement date of June 25, 2018. At June 30, 2018, these U.S. wind equity method investments have a carrying value of $141 million, reflecting subsequent business activity.


⁽²⁾	Generally, significant increases (decreases) in this input in isolation would result in a significantly higher (lower) fair value measurement.


⁽³⁾	An increase in the discount rate would result in a decrease in fair value.

⁽⁴⁾

At measurement date of June 25, 2018. At June 30, 2018, Mississippi Hub and Bay Gas are classified as held for sale and have a net carrying value of $138 million, reflecting subsequent business activity and estimated costs to sell, as we discuss in Note 5. Our other U.S. midstream assets that were measured at fair value, including LA Storage, continue to be classified as property, plant and equipment and have a carrying value of $37 million at June 30, 2018.