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GENERAL INFORMATION AND OTHER FINANCIAL DATA
 3 Months Ended
Mar. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
GENERAL INFORMATION AND OTHER FINANCIAL DATA GENERAL INFORMATION AND OTHER FINANCIAL DATA
PRINCIPLES OF CONSOLIDATION
Sempra Energy
Sempra Energy’s Condensed Consolidated Financial Statements include the accounts of Sempra Energy, a California-based holding company, and its consolidated subsidiaries and VIEs. Sempra Energy’s business activities are organized under five reportable segments, which we discuss in Note 12. All references in these Notes to our reportable segments are not intended to refer to any legal entity with the same or similar name.
We refer to SDG&E and SoCalGas collectively as the California Utilities. Sempra Global is the holding company for our subsidiaries that are not subject to California or Texas utility regulation.
SDG&E
SDG&E’s common stock is wholly owned by Enova Corporation, which is a wholly owned subsidiary of Sempra Energy.
SoCalGas
SoCalGas’ common stock is wholly owned by Pacific Enterprises, which is a wholly owned subsidiary of Sempra Energy.
BASIS OF PRESENTATION
This is a combined report of Sempra Energy, SDG&E and SoCalGas. We provide separate information for SDG&E and SoCalGas as required. References in this report to “we,” “our,” “us” and “Sempra Energy Consolidated” are to Sempra Energy and its consolidated entities, collectively, unless otherwise indicated by the context. We have eliminated intercompany accounts and transactions within the consolidated financial statements of each reporting entity.
Throughout these Notes, we refer to the following as Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements when discussed together or collectively:
▪the Condensed Consolidated Financial Statements and related Notes of Sempra Energy and its subsidiaries and VIEs;
▪the Condensed Financial Statements and related Notes of SDG&E; and
▪the Condensed Financial Statements and related Notes of SoCalGas.
We have prepared our Condensed Consolidated Financial Statements in conformity with U.S. GAAP and in accordance with the interim-period-reporting requirements of Form 10-Q and applicable rules of the SEC. The financial statements reflect all adjustments that are necessary for a fair presentation of the results for the interim periods. These adjustments are only of a normal, recurring nature. Results of operations for interim periods are not necessarily indicative of results for the entire year or for any other period. We evaluated events and transactions that occurred after March 31, 2021 through the date the financial statements were issued and, in the opinion of management, the accompanying statements reflect all adjustments necessary for a fair presentation.
All December 31, 2020 balance sheet information in the Condensed Consolidated Financial Statements has been derived from our audited 2020 Consolidated Financial Statements in the Annual Report. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the interim-period-reporting provisions of U.S. GAAP and the SEC.
We describe our significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report and the impact of the adoption of new accounting standards on those policies in Note 2 below. We follow the same accounting policies for interim period reporting purposes.
You should read the information in this report in conjunction with the Annual Report.
Discontinued Operations
In January 2019, our board of directors approved a plan to sell our South American businesses based on our strategic focus on North America. We determined that these businesses, which previously constituted the Sempra South American Utilities segment, and certain activities associated with these businesses, met the held-for-sale criteria. These businesses are presented as discontinued operations, which we discuss further in Note 5. We completed the sales of our South American businesses in the second quarter of 2020. Our discussions in the Notes below relate only to our continuing operations unless otherwise noted.
Regulated Operations
The California Utilities and Sempra Mexico’s natural gas distribution utility, Ecogas, prepare their financial statements in accordance with the provisions of U.S. GAAP governing rate-regulated operations. We discuss revenue recognition and the effects of regulation at our utilities in Notes 3 and 4 below and in Notes 1, 3 and 4 of the Notes to Consolidated Financial Statements in the Annual Report.
Our Sempra Texas Utilities segment is comprised of our equity method investments in holding companies that own interests in regulated electric transmission and distribution utilities in Texas.
Our Sempra Mexico segment includes the operating companies of our subsidiary, IEnova, as well as certain holding companies and risk management activity. Certain business activities at IEnova are regulated by the CRE and meet the regulatory accounting requirements of U.S. GAAP. Pipeline projects under construction at IEnova that meet the regulatory accounting requirements of U.S. GAAP record the impact of AFUDC related to equity. We discuss AFUDC below and in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on Sempra Energy’s Condensed Consolidated Balance Sheets to the sum of such amounts reported on Sempra Energy’s Condensed Consolidated Statements of Cash Flows. We provide information about the nature of restricted cash in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(Dollars in millions)
March 31,December 31,
 20212020
Cash and cash equivalents$725 $960 
Restricted cash, current38 22 
Restricted cash, noncurrent15 3 
Total cash, cash equivalents and restricted cash on the Condensed Consolidated Statements of Cash Flows$778 $985 
CREDIT LOSSES
We are exposed to credit losses from financial assets measured at amortized cost, including trade and other accounts receivable and amounts due from unconsolidated affiliates. We were also exposed to credit losses from off-balance sheet arrangements through our guarantees of Cameron LNG JV’s debt.
We regularly monitor and evaluate credit losses and record allowances for expected credit losses, if necessary, for trade and other accounts receivable using a combination of factors, including past-due status based on contractual terms, trends in write-offs, the age of the receivable, historical and industry trends, counterparty creditworthiness, economic conditions and specific events, such as bankruptcies. We write off financial assets measured at amortized cost in the period in which we determine they are not recoverable. We record recoveries of amounts previously written off when it is known that they will be recovered.
In connection with the COVID-19 pandemic, the California Utilities have implemented certain measures to assist customers, including suspending service disconnections due to nonpayment for residential, small business and medium-large commercial and industrial customers (which represent the entire customer population, except for SoCalGas’ noncore customers), waiving late payment fees, and offering flexible payment plans to customers experiencing difficulty paying their electric or gas bills. As we discuss in Note 4, the CPUC authorized each of the California Utilities to track and request recovery of incremental costs, including uncollectible expenses, associated with complying with customer protection measures implemented by the CPUC related to the COVID-19 pandemic.
In connection with a separate CPUC decision addressing service disconnections, the California Utilities each established a two-way balancing account to record the uncollectible expenses associated with customers’ inability to pay their electric or gas bills, including as a result of the relief from outstanding utility bill amounts provided under the AMP. We discuss the AMP in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.
The California Utilities have recorded increases in their allowances for expected credit losses primarily related to expected forgiveness of outstanding utility bill amounts, including increases due to the effect of the COVID-19 pandemic, for participating, income-qualified residential customers eligible under the AMP. Our businesses will continue to monitor macroeconomic factors and customer payment patterns when evaluating their allowances for credit losses, which may increase significantly due to the effects of the COVID-19 pandemic or other factors.
We provide below allowances and changes in allowances for credit losses for trade and other accounts receivable. The California Utilities record changes in the allowances for credit losses related to Accounts Receivable – Trade in regulatory accounts.
TRADE AND OTHER ACCOUNTS RECEIVABLE – ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
20212020
Sempra Energy Consolidated:
Allowances for credit losses at January 1$138 $29 
Incremental allowance upon adoption of ASU 2016-13— 1 
Provisions for expected credit losses43 6 
Write-offs (5)(4)
Recoveries— 1 
Allowances for credit losses at March 31(1)
$176 $33 
SDG&E:
Allowances for credit losses at January 1$69 $14 
Provisions for expected credit losses15 3 
Write-offs(3)(3)
Recoveries— 1 
Allowances for credit losses at March 31(2)
$81 $15 
SoCalGas:
Allowances for credit losses at January 1$68 $15 
Provisions for expected credit losses28 3 
Write-offs(2)(1)
Allowances for credit losses at March 31(3)
$94 $17 
(1)    At March 31, 2021, includes $146 million in Accounts Receivable – Trade, Net and $30 million in Accounts Receivable – Other, Net.
(2)    At March 31, 2021, includes $66 million in Accounts Receivable – Trade, Net and $15 million in Accounts Receivable – Other, Net.
(3)    At March 31, 2021, includes $79 million in Accounts Receivable – Trade, Net and $15 million in Accounts Receivable – Other, Net.

For amounts due from unconsolidated affiliates, on a quarterly basis, we evaluate credit losses and record allowances for expected credit losses, if necessary, based on credit quality indicators such as external credit ratings, published default rate studies, the maturity date of the instrument and past delinquencies. However, we do not record allowances for expected credit losses related to accrued interest receivable on loans due from unconsolidated affiliates because we write off such amounts, if any, through a reversal of interest income in the period we determine such amounts are uncollectible. In the absence of external credit ratings, we may utilize an internally developed credit rating based on our analysis of a counterparty’s financial statements to determine our expected credit losses.
As we discuss below in “Transactions with Affiliates,” Sempra Energy has loans due from unconsolidated affiliates with varying tenors, interest rates and currencies. We provide below the allowances and changes in allowances for credit losses for loans and other amounts due from unconsolidated affiliates.
AMOUNTS DUE FROM UNCONSOLIDATED AFFILIATES – ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
Sempra Energy Consolidated
20212020
Allowances for credit losses at January 1$3 $— 
Allowance established upon adoption of ASU 2016-13— 6 
Provisions for expected credit losses(2)1 
Allowances for credit losses at March 31(1)
$1 $7 
(1)    At March 31, 2021, $1 million is included in Due from Unconsolidated Affiliates – Noncurrent.

As we discuss in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report, Sempra Energy provided guarantees for the benefit of Cameron LNG JV related to its debt obligations for a maximum aggregate amount of $4.0 billion. In March 2021, Cameron LNG JV reached financial completion of the three-train liquefaction project, which terminated the guarantees. There are no longer any expected credit losses related to these terminated guarantees.
INVENTORIES
The components of inventories are as follows:
INVENTORY BALANCES
(Dollars in millions)
 Natural gasLNGMaterials and suppliesTotal
 March 31, 2021 December 31, 2020March 31, 2021 December 31, 2020March 31, 2021 December 31, 2020March 31, 2021 December 31, 2020
Sempra Energy Consolidated$73 $118 $8 $7 $193 $183 $274 $308 
SDG&E— — — — 122 104 122 104 
SoCalGas23 94 — — 58 59 81 153 
WILDFIRE FUND
In July 2019, the Wildfire Legislation was signed into law to address certain issues related to catastrophic wildfires in the State of California and their impact on electric IOUs. We discuss the Wildfire Legislation further in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
In a complaint filed in U.S. District Court for the Northern District of California in July 2019, plaintiffs seek to invalidate AB 1054 based on allegations that the legislation violates federal law. That court dismissed the complaint and the plaintiffs have petitioned the U.S. Court of Appeals for the Ninth Circuit to review the dismissal.
CAPITALIZED FINANCING COSTS
Capitalized financing costs include capitalized interest costs and AFUDC related to both debt and equity financing of construction projects. We capitalize interest costs incurred to finance capital projects and interest at equity method investments that have not commenced planned principal operations.
The table below summarizes capitalized interest and AFUDC.
CAPITALIZED FINANCING COSTS
(Dollars in millions)
Three months ended March 31,
 20212020
Sempra Energy Consolidated$59 $48 
SDG&E30 27 
SoCalGas16 11 
OTHER INTANGIBLE ASSETS
Other Intangible Assets included on the Sempra Energy Condensed Consolidated Balance Sheets are as follows:
OTHER INTANGIBLE ASSETS
(Dollars in millions)
Amortization period (years)March 31,
2021		December 31,
2020
Renewable energy transmission and consumption permits
15 to 19
$169 $169 
O&M agreement2366 66 
PPA14198 — 
Other
10 to indefinite
15 15 
448 250 
Less accumulated amortization:
Renewable energy transmission and consumption permits(34)(32)
O&M agreement(9)(9)
Other(8)(7)
(51)(48)
$397 $202 

Other Intangible Assets at March 31, 2021 primarily includes:
▪renewable energy transmission and consumption permits previously granted by the CRE at the Ventika wind power generation facilities, Don Diego Solar and Border Solar;
▪a favorable O&M agreement acquired in connection with the acquisition of Ductos y Energéticos del Norte, S. de R.L. de C.V.; and
▪an intangible asset of $198 million, representing the relative fair value of the PPA that was acquired in connection with the acquisition of ESJ in March 2021.
Intangible assets subject to amortization are amortized over their estimated useful lives. Amortization expense for intangible assets was $3 million in the three months ended March 31, 2021 and 2020. We estimate the remaining amortization expense in 2021 to be $20 million, including $11 million recorded against revenues, and amortization expense of $26 million per year for the next four years, including $14 million recorded against revenues.
VARIABLE INTEREST ENTITIES
We consolidate a VIE if we are the primary beneficiary of the VIE. Our determination of whether we are the primary beneficiary is based on qualitative and quantitative analyses, which assess:
▪the purpose and design of the VIE;
▪the nature of the VIE’s risks and the risks we absorb;
▪the power to direct activities that most significantly impact the economic performance of the VIE; and
▪the obligation to absorb losses or the right to receive benefits that could be significant to the VIE.
We will continue to evaluate our VIEs for any changes that may impact our determination of whether an entity is a VIE and if we are the primary beneficiary.
SDG&E
SDG&E’s power procurement is subject to reliability requirements that may require SDG&E to enter into various PPAs that include variable interests. SDG&E evaluates the respective entities to determine if variable interests exist and, based on the qualitative and quantitative analyses described above, if SDG&E, and indirectly Sempra Energy, is the primary beneficiary.
SDG&E has agreements under which it purchases power generated by facilities for which it supplies all of the natural gas to fuel the power plant (i.e., tolling agreements). SDG&E’s obligation to absorb natural gas costs may be a significant variable interest. In addition, SDG&E has the power to direct the dispatch of electricity generated by these facilities. Based on our analysis, the ability to direct the dispatch of electricity may have the most significant impact on the economic performance of the entity owning the generating facility because of the associated exposure to the cost of natural gas, which fuels the plants, and the value of electricity produced. To the extent that SDG&E (1) is obligated to purchase and provide fuel to operate the facility, (2) has the power to direct the dispatch, and (3) purchases all of the output from the facility for a substantial portion of the facility’s useful
life, SDG&E may be the primary beneficiary of the entity owning the generating facility. SDG&E determines if it is the primary beneficiary in these cases based on a qualitative approach in which it considers the operational characteristics of the facility, including its expected power generation output relative to its capacity to generate and the financial structure of the entity, among other factors. If SDG&E determines that it is the primary beneficiary, SDG&E and Sempra Energy consolidate the entity that owns the facility as a VIE.
In addition to tolling agreements, other variable interests involve various elements of fuel and power costs, and other components of cash flows expected to be paid to or received by our counterparties. In most of these cases, the expectation of variability is not substantial, and SDG&E generally does not have the power to direct activities, including the operation and maintenance activities of the generating facility, that most significantly impact the economic performance of the other VIEs. If our ongoing evaluation of these VIEs were to conclude that SDG&E becomes the primary beneficiary and consolidation by SDG&E becomes necessary, the effects could be significant to the financial position and liquidity of SDG&E and Sempra Energy.
SDG&E determined that none of its PPAs and tolling agreements resulted in SDG&E being the primary beneficiary of a VIE at March 31, 2021 and December 31, 2020. PPAs and tolling agreements that relate to SDG&E’s involvement with VIEs are primarily accounted for as finance leases. The carrying amounts of the assets and liabilities under these contracts are included in PP&E and finance lease liabilities with balances of $1,233 million and $1,237 million at March 31, 2021 and December 31, 2020, respectively. SDG&E recovers costs incurred on PPAs, tolling agreements and other variable interests through CPUC-approved long-term power procurement plans. SDG&E has no residual interest in the respective entities and has not provided or guaranteed any debt or equity support, liquidity arrangements, performance guarantees or other commitments associated with these contracts other than the purchase commitments described in Note 16 of the Notes to Consolidated Financial Statements in the Annual Report. As a result, SDG&E’s potential exposure to loss from its variable interest in these VIEs is not significant.
Sempra Texas Utilities
Our 100% interest in Oncor Holdings is a VIE that owns an 80.25% interest in Oncor. Sempra Energy is not the primary beneficiary of the VIE because of the structural and operational ring-fencing and governance measures in place that prevent us from having the power to direct the significant activities of Oncor Holdings. As a result, we do not consolidate Oncor Holdings and instead account for our ownership interest as an equity method investment. See Note 6 of the Notes to Consolidated Financial Statements in the Annual Report for additional information about our equity method investment in Oncor Holdings and restrictions on our ability to influence its activities. Our maximum exposure to loss, which fluctuates over time, from our interest in Oncor Holdings does not exceed the carrying value of our investment, which was $12,553 million at March 31, 2021 and $12,440 million at December 31, 2020.
Sempra LNG
Cameron LNG JV
Cameron LNG JV is a VIE principally due to contractual provisions that transfer certain risks to customers. Sempra Energy is not the primary beneficiary of the VIE because we do not have the power to direct the most significant activities of Cameron LNG JV, including LNG production and operation and maintenance activities at the liquefaction facility. Therefore, we account for our investment in Cameron LNG JV under the equity method. The carrying value of our investment, including amounts recognized in AOCI related to interest-rate cash flow hedges at Cameron LNG JV, was $513 million at March 31, 2021 and $433 million at December 31, 2020. Our maximum exposure to loss, which fluctuates over time, includes the carrying value of our investment.
CFIN
As we discuss in Note 6, in July 2020, Sempra Energy entered into a Support Agreement for the benefit of CFIN, which is a VIE. Since we do not have the power to direct the most significant activities of the VIE, we are not the primary beneficiary. The conditional obligations of the Support Agreement represent a variable interest that we measure at fair value on a recurring basis (see Note 9). Sempra Energy’s maximum exposure to loss under the terms of the Support Agreement is $979 million.
ECA LNG Phase 1
ECA LNG Phase 1 is a VIE because its total equity at risk is not sufficient to finance its activities without additional subordinated financial support. We expect that ECA LNG Phase 1 will require future capital contributions or other financial support to finance the construction of the facility. Sempra Energy is the primary beneficiary of the VIE because we have the power to direct the development activities related to the construction of the liquefaction facility, which we consider to be the most significant activities of ECA LNG Phase 1 during the construction phase of its natural gas liquefaction export project. As a result, we consolidate ECA LNG Phase 1. Sempra LNG consolidated $403 million and $207 million of assets at March 31, 2021 and
December 31, 2020, respectively, consisting primarily of PP&E and cash, attributable to ECA LNG Phase 1 that could be used only to settle obligations of the VIE and that are not available to settle obligations of Sempra Energy, and $234 million and $49 million of liabilities at March 31, 2021 and December 31, 2020, respectively, consisting primarily of long-term debt and accounts payable attributable to ECA LNG Phase 1 for which creditors do not have recourse to the general credit of Sempra Energy. Additionally, as we discuss in Note 7 of the Notes to Consolidated Financial Statements in the Annual Report, Sempra Energy, IEnova and TOTAL SE have provided guarantees for the loan facility supporting construction of the liquefaction facility based on their respective proportionate ownership interest in ECA LNG Phase 1.
PENSION AND OTHER POSTRETIREMENT BENEFITS
Settlement Accounting for Lump Sum Payments
In the three months ended March 31, 2021 and 2020, Sempra Energy recorded settlement charges of $7 million and $5 million, respectively, in net periodic benefit cost for lump sum payments from its nonqualified pension plan that were in excess of the plan’s service cost plus interest cost.
Net Periodic Benefit Cost
The following three tables provide the components of net periodic benefit cost.
NET PERIODIC BENEFIT COST – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
 Pension benefitsOther postretirement benefits
 Three months ended March 31,
 2021202020212020
Service cost$37 $33 $6 $5 
Interest cost28 32 7 8 
Expected return on assets(43)(42)(15)(13)
Amortization of:    
Prior service cost (credit)3 3 (1)(1)
Actuarial loss (gain)11 9 (2)(3)
Settlement charges7 5 — — 
Net periodic benefit cost (credit)43 40 (5)(4)
Regulatory adjustments(29)(28)5 4 
Total expense recognized$14 $12 $— $— 

NET PERIODIC BENEFIT COST – SDG&E
(Dollars in millions)
 Pension benefitsOther postretirement benefits
 Three months ended March 31,
 2021202020212020
Service cost$8 $8 $1 $1 
Interest cost6 7 1 2 
Expected return on assets(12)(13)(2)(3)
Amortization of:  
Prior service cost— 1 — — 
Actuarial loss (gain)— 1 — (1)
Net periodic benefit cost (credit)2 4 — (1)
Regulatory adjustments(2)(3)— 1 
Total expense recognized$— $1 $— $— 
NET PERIODIC BENEFIT COST – SOCALGAS
(Dollars in millions)
 Pension benefitsOther postretirement benefits
 Three months ended March 31,
 2021202020212020
Service cost$25 $22 $4 $3 
Interest cost20 22 5 6 
Expected return on assets(28)(27)(12)(10)
Amortization of:   
Prior service cost (credit)2 2 (1)— 
Actuarial loss (gain)9 6 (1)(2)
Net periodic benefit cost (credit)28 25 (5)(3)
Regulatory adjustments(27)(25)5 3 
Total expense recognized$1 $— $— $— 
RABBI TRUST
In support of its Supplemental Executive Retirement, Cash Balance Restoration and Deferred Compensation Plans, Sempra Energy maintains dedicated assets, including a Rabbi Trust and investments in life insurance contracts, which totaled $494 million and $512 million at March 31, 2021 and December 31, 2020, respectively.
SEMPRA ENERGY EARNINGS PER COMMON SHARE
Basic EPS is calculated by dividing earnings attributable to common shares (from both continuing and discontinued operations) by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.
EARNINGS PER COMMON SHARE COMPUTATIONS
(Dollars in millions, except per share amounts; shares in thousands)
 Three months ended March 31,
 20212020
Numerator for continuing operations:  
Income from continuing operations, net of income tax$928 $867 
Earnings attributable to noncontrolling interests(33)(143)
Preferred dividends(21)(36)
Earnings from continuing operations attributable to common shares for basic EPS
874 688 
Add back dividends for dilutive mandatory convertible preferred stock(1)
10 36 
Earnings from continuing operations attributable to common shares for diluted EPS
$884 $724 
Numerator for discontinued operations:
Income from discontinued operations, net of income tax$— $80 
Earnings attributable to noncontrolling interests— (8)
Earnings from discontinued operations attributable to common shares$— $72 
Numerator for earnings:
Earnings attributable to common shares for basic EPS
$874 $760 
Add back dividends for dilutive mandatory convertible preferred stock(1)
10 36 
Earnings attributable to common shares for diluted EPS$884 $796 
Denominator:  
Weighted-average common shares outstanding for basic EPS(2)
300,905 292,790 
Dilutive effect of stock options and RSUs(3)
887 1,304 
Dilutive effect of mandatory convertible preferred stock6,666 19,831 
Weighted-average common shares outstanding for diluted EPS308,458 313,925 
Basic EPS:
Earnings from continuing operations
$2.91 $2.35 
Earnings from discontinued operations$— $0.25 
Earnings$2.91 $2.60 
Diluted EPS:  
Earnings from continuing operations
$2.87 $2.30 
Earnings from discontinued operations$— $0.23 
Earnings$2.87 $2.53 
(1)    In the three months ended March 31, 2021 and 2020, due to the dilutive effect of mandatory convertible preferred stock, the numerator used to calculate diluted EPS includes an add-back of dividends declared on our mandatory convertible preferred stock in those quarters.
(2)    Includes 460 and 542 average fully vested RSUs held in our Deferred Compensation Plan for the three months ended March 31, 2021 and 2020, respectively. These fully vested RSUs 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.
(3)    Due to market fluctuations of both Sempra Energy common stock and the comparative indices used to determine the vesting percentage of our total shareholder return performance-based RSUs, which we discuss in Note 10 of the Notes to Consolidated Financial Statements in the Annual Report, dilutive RSUs may vary widely from period-to-period.

The potentially dilutive impact from stock options and RSUs is calculated under the treasury stock method. Under this method, proceeds based on the exercise price and unearned compensation are assumed to be used to repurchase shares on the open market at the average market price for the period, reducing the number of potential new shares to be issued and sometimes causing an antidilutive effect. The computation of diluted EPS for the three months ended March 31, 2021 and 2020 excludes 428,875 and 254,257 potentially dilutive shares, respectively, because to include them would be antidilutive for the period. However, these shares could potentially dilute basic EPS in the future.
The potentially dilutive impact from mandatory convertible preferred stock is calculated under the if-converted method until the mandatory conversion date. After the mandatory conversion date, the converted shares are included in weighted-average common shares outstanding for basic EPS. As we discuss below in “Shareholders’ Equity and Noncontrolling Interests,” we converted our series A preferred stock into common stock on January 15, 2021. There were no antidilutive shares to exclude from the computation of diluted EPS in the three months ended March 31, 2021 or 2020.
In January 2021, pursuant to our Sempra Energy share-based compensation plans, the Compensation and Talent Committee of Sempra Energy’s board of directors granted 222,620 nonqualified stock options that vest over a three-year period, 319,027 performance-based RSUs and 132,388 service-based RSUs.
We discuss share-based compensation plans and related awards and the terms and conditions of Sempra Energy’s equity securities further in Notes 10, 13 and 14 of the Notes to Consolidated Financial Statements in the Annual Report.
COMPREHENSIVE INCOME
The following tables present the changes in AOCI by component and amounts reclassified out of AOCI to net income, excluding amounts attributable to NCI.
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1)
(Dollars in millions)
 Foreign
currency
translation
adjustments		Financial
instruments		Pension
and other
postretirement
benefits		Total
accumulated other
comprehensive
income (loss)
 Three months ended March 31, 2021 and 2020
Sempra Energy Consolidated(2):
Balance at December 31, 2020$(64)$(331)$(105)$(500)
OCI before reclassifications(5)73 7 75 
Amounts reclassified from AOCI— 19 7 26 
Net OCI(5)92 14 101 
Balance at March 31, 2021$(69)$(239)$(91)$(399)
   
Balance at December 31, 2019$(607)$(215)$(117)$(939)
OCI before reclassifications(138)(154)16 (276)
Amounts reclassified from AOCI— 19 6 25 
Net OCI
(138)(135)22 (251)
Balance at March 31, 2020$(745)$(350)$(95)$(1,190)
SDG&E:
Balance at December 31, 2020 and March 31, 2021
$(10)$(10)
Balance at December 31, 2019 and March 31, 2020$(16)$(16)
SoCalGas:
Balance at December 31, 2020 and March 31, 2021
$(13)$(18)$(31)
Balance at December 31, 2019 and March 31, 2020$(13)$(10)$(23)
(1)    All amounts are net of income tax, if subject to tax, and exclude NCI.
(2)    Includes discontinued operations in 2020.
RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
Details about accumulated other
comprehensive income (loss) components		Amounts reclassified
from accumulated other
comprehensive income (loss)		 Affected line item on Condensed
Consolidated Statements of Operations
 Three months ended March 31,  
 20212020 
Sempra Energy Consolidated:   
Financial instruments:   
Interest rate instruments
$2 $2 Interest Expense
Interest rate instruments
19 2 Equity Earnings
Foreign exchange instruments1 (2)Revenues: Energy-Related Businesses
— (2)
Other Income (Expense), Net
Interest rate and foreign exchange instruments6 41 
Other Income (Expense), Net
Foreign exchange instruments1 (2)
Equity Earnings
Total before income tax29 39  
 (8)(12)Income Tax (Expense) Benefit
Net of income tax21 27  
 (2)(8)Earnings Attributable to Noncontrolling Interests
 $19 $19  
Pension and other postretirement benefits(1):
   
Amortization of actuarial loss$2 $2 Other Income (Expense), Net
Amortization of prior service cost1 1 Other Income (Expense), Net
Settlement charges7 5 Other Income (Expense), Net
Total before income tax10 8 
 (3)(2)Income Tax (Expense) Benefit
Net of income tax$7 $6  
Total reclassifications for the period, net of tax$26 $25  
(1)    Amounts are included in the computation of net periodic benefit cost (see “Pension and Other Postretirement Benefits” above).

For the three months ended March 31, 2021 and 2020, reclassifications out of AOCI to net income were negligible for SDG&E and SoCalGas.
SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS
Sempra Energy Series A Preferred Stock
On January 15, 2021, we converted 17,250,000 shares of series A preferred stock into 13,781,025 shares of our common stock based on a conversion rate of 0.7989 shares of our common stock for each issued and outstanding share of series A preferred stock. As a consequence, no shares of series A preferred stock were outstanding after January 15, 2021 and the 17,250,000 shares that were formerly series A preferred stock have returned to the status of authorized and unissued shares of preferred stock.
Other Noncontrolling Interests
Sempra Mexico
In April 2021, we launched an offer to acquire up to 100% of the publicly held shares of IEnova in exchange for shares of our common stock at an exchange ratio of 0.0323 shares of our common stock for each one IEnova ordinary share. We expect to complete this transaction in the second quarter of 2021, subject to customary closing conditions.
In the first quarter of 2020, IEnova purchased additional shares in ICM Ventures Holdings B.V. for $9 million, increasing its ownership from 53.7% to 82.5%. ICM Ventures Holdings B.V. owns certain permits and land where IEnova is building a terminal for the receipt, storage and delivery of liquid fuels. In March 2021, IEnova entered into an agreement to acquire the remaining 17.5% interest in ICM Ventures Holdings B.V. for $6 million, subject to adjustments. We expect to complete this transaction in the second half of 2021, subject to customary closing conditions.
Sempra LNG
In March 2020, Sempra LNG purchased for $7 million the 24.6% minority interest in Liberty Gas Storage LLC, which owns 100% of LA Storage, LLC, increasing Sempra LNG’s ownership in Liberty Gas Storage LLC to 100%. Prior to the purchase, the minority partner converted $22 million in notes payable due from Sempra LNG to equity. As a result of the purchase, we recorded an increase in Sempra Energy’s shareholders’ equity of $2 million for the difference between the carrying value and fair value related to the change in ownership.
The following table provides information about NCI held by others in subsidiaries or entities consolidated by us and recorded in Other Noncontrolling Interests in Total Equity on Sempra Energy’s Condensed Consolidated Balance Sheets.
OTHER NONCONTROLLING INTERESTS
(Dollars in millions) 
 Percent ownership held by noncontrolling interests Equity held by
noncontrolling interests
 March 31,
2021		December 31,
2020		March 31,
2021		December 31,
2020
Sempra Mexico:    
IEnova29.8 %29.8 %$1,534 $1,487 
ICM Ventures Holdings B.V.17.5 17.5 6 7 
Sempra LNG:
ECA LNG Phase 129.0 29.0 48 46 
Parent and other:
PXiSE Energy Solutions, LLC20.0 20.0 1 1 
Total Sempra Energy  $1,589 $1,541 
TRANSACTIONS WITH AFFILIATES
We summarize amounts due from and to unconsolidated affiliates at Sempra Energy Consolidated, SDG&E and SoCalGas in the following table.
AMOUNTS DUE FROM (TO) UNCONSOLIDATED AFFILIATES
(Dollars in millions)
 March 31,
2021		December 31,
2020
Sempra Energy Consolidated:  
Total due from various unconsolidated affiliates – current$26 $20 
Sempra Mexico(1):
ESJ – Note due December 31, 2022, net of negligible allowance for credit losses at December
31, 2020(2)
$— $85 
IMG JV – Note due March 15, 2022, net of allowance for credit losses of $1 and $3 at
March 31, 2021 and December 31, 2020, respectively(3)
674 695 
Total due from unconsolidated affiliates – noncurrent$674 $780 
Sempra Mexico – TAG Pipelines Norte, S. de. R.L. de C.V. – Note due December 20, 2021(1)(4)
$(41)$(41)
Various affiliates(1)(4)
Total due to various unconsolidated affiliates – current$(42)$(45)
Sempra Mexico(1)(5):
TAG Pipelines Norte, S. de. R.L. de C.V.:
5.5% Note due January 9, 2024
$(69)$(68)
5.5% Note due January 14, 2025
(20)— 
TAG JV – 5.74% Note due December 17, 2029
(169)(166)
Total due to unconsolidated affiliates – noncurrent$(258)$(234)
SDG&E:  
Sempra Energy$(44)$(38)
SoCalGas(24)(21)
Various affiliates(11)(5)
Total due to unconsolidated affiliates – current$(79)$(64)
Income taxes due to Sempra Energy(6)
$(18)$— 
SoCalGas:  
SDG&E$24 $21 
Various affiliates1 1 
Total due from unconsolidated affiliates – current$25 $22 
Sempra Energy$(41)$(31)
Pacific Enterprises(25)— 
Various affiliates(1)— 
Total due to unconsolidated affiliates – current$(67)$(31)
Income taxes due to Sempra Energy(6)
$(145)$(37)
(1)    Amounts include principal balances plus accumulated interest outstanding.
(2)    U.S. dollar-denominated loan at a variable interest rate based on 1-month LIBOR plus 196 bps (2.11% at December 31, 2020). At December 31, 2020, $1 million of accrued interest receivable is included in Due from Unconsolidated Affiliates – Current. In March 2021, IEnova acquired the 50% equity interest in ESJ that it did not already own and ESJ became a wholly owned, consolidated subsidiary, resulting in the elimination of this note receivable.
(3)    Mexican peso-denominated revolving line of credit for up to 14.2 billion Mexican pesos or approximately $693 million U.S. dollar-equivalent at March 31, 2021, at a variable interest rate based on the 91-day Interbank Equilibrium Interest Rate plus 220 bps (6.45% at March 31, 2021), to finance construction of a natural gas marine pipeline. At both March 31, 2021 and December 31, 2020, $2 million of accrued interest receivable is included in Due from Unconsolidated Affiliates – Current. At March 31, 2021, we classified this revolving line of credit as noncurrent because we expect to extend the maturity date on a long-term basis prior to its stated maturity date.
(4)    U.S. dollar-denominated loan at a variable interest rate based on 6-month LIBOR plus 290 bps (3.11% at March 31, 2021).
(5)     U.S. dollar-denominated loan at a fixed interest rate.
(6)    SDG&E and SoCalGas are included in the consolidated income tax return of Sempra Energy and their respective income tax expense is computed as an amount equal to that which would result from each company having always filed a separate return.
The following table summarizes income statement information from unconsolidated affiliates.
INCOME STATEMENT IMPACT FROM UNCONSOLIDATED AFFILIATES  
(Dollars in millions)  
 Three months ended March 31,
 20212020
Sempra Energy Consolidated  
Revenues$8 $12 
Cost of sales11 11 
Interest income15 17 
Interest expense4 3 
SDG&E  
Revenues$2 $1 
Cost of sales28 17 
SoCalGas
Revenues$25 $18 
Cost of sales3 — 
Guarantees
Sempra Energy provided guarantees related to Cameron LNG JV, which were terminated in March 2021, and CFIN, which remains outstanding, as we discuss in Note 6 below and in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.
OTHER INCOME (EXPENSE), NET
Other income (expense), net, consists of the following:
OTHER INCOME (EXPENSE), NET  
(Dollars in millions)  
 Three months ended March 31,
 20212020
Sempra Energy Consolidated:  
Allowance for equity funds used during construction$38 $31 
Investment gains (losses)(1)
9 (37)
Losses on interest rate and foreign exchange instruments, net(30)(153)
Foreign currency transaction losses, net(2)
(19)(123)
Non-service component of net periodic benefit credit29 26 
Interest on regulatory balancing accounts, net1 2 
Sundry, net7 — 
Total$35 $(254)
SDG&E:  
Allowance for equity funds used during construction$23 $21 
Non-service component of net periodic benefit credit
9 8 
Interest on regulatory balancing accounts, net1 2 
Sundry, net2 — 
Total$35 $31 
SoCalGas:  
Allowance for equity funds used during construction$12 $8 
Non-service component of net periodic benefit credit
28 25 
Sundry, net(1)(3)
Total$39 $30 
(1)    Represents investment gains (losses) on dedicated assets in support of our executive retirement and deferred compensation plans. These amounts are offset by corresponding changes in compensation expense related to the plans, recorded in O&M on the Condensed Consolidated Statements of Operations.
(2)    Includes losses of $23 million and $149 million in the three months ended March 31, 2021 and 2020, respectively, from translation to U.S. dollars of a Mexican peso-denominated loan to IMG JV, which are offset by corresponding amounts included in Equity Earnings on the Condensed Consolidated Statements of Operations.
INCOME TAXES
We provide our calculations of ETRs in the following table.
INCOME TAX EXPENSE (BENEFIT) AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
Three months ended March 31,
20212020
Sempra Energy Consolidated:
Income tax expense (benefit) from continuing operations$158 $(207)
Income from continuing operations before income taxes
and equity earnings
$768 $397 
Equity earnings (losses), before income tax(1)
135 (43)
Pretax income$903 $354 
Effective income tax rate18 %(58)%
SDG&E:
Income tax expense$45 $58 
Income before income taxes$257 $320 
Effective income tax rate18 %18 %
SoCalGas:
Income tax expense
$94 $52 
Income before income taxes
$501 $355 
Effective income tax rate19 %15 %
(1)    We discuss how we recognize equity earnings in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

Sempra Energy, SDG&E and SoCalGas record income taxes for interim periods utilizing a forecasted ETR anticipated for the full year. Unusual and infrequent items and items that cannot be reliably estimated are recorded in the interim period in which they occur, which can result in variability in the ETR.
For SDG&E and SoCalGas, the CPUC requires flow-through rate-making treatment for the current income tax benefit or expense arising from certain property-related and other temporary differences between the treatment for financial reporting and income tax, which will reverse over time. Under the regulatory accounting treatment required for these flow-through temporary differences, deferred income tax assets and liabilities are not recorded to deferred income tax expense, but rather to a regulatory asset or liability, which impacts the ETR. As a result, changes in the relative size of these items compared to pretax income, from period to period, can cause variations in the ETR. The following items are subject to flow-through treatment:
▪repairs expenditures related to a certain portion of utility plant fixed assets
▪the equity portion of AFUDC, which is non-taxable
▪a portion of the cost of removal of utility plant assets
▪utility self-developed software expenditures
▪depreciation on a certain portion of utility plant assets
▪state income taxes
The AFUDC related to equity recorded for regulated construction projects at Sempra Mexico has similar flow-through treatment.
We record income tax (expense) benefit from the transactional effects of foreign currency and inflation. Through the first quarter of 2021, such effects are offset by net gains (losses) from foreign currency derivatives that are hedging Sempra Mexico parent’s exposure to movements in the Mexico peso from its controlling interest in IEnova.
Discontinued Operations
In January 2019, our board of directors approved a plan to sell our South American businesses. We completed the sales in the second quarter of 2020, as we discuss in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report. Because of our decision to sell our South American businesses, we no longer asserted indefinite reinvestment of basis differences related to these businesses. Accordingly, in the three months ended March 31, 2020, we recorded a $7 million income tax benefit from changes in outside basis differences in our discontinued operations in South America.