Sempra’s Condensed Consolidated Financial Statements include the accounts of Sempra Energy, a California-based holding company doing business as Sempra, and its consolidated entities. We have four separate reportable segments, which we discuss in Note 11. 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 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, 2023 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, 2022 balance sheet information in the Condensed Consolidated Financial Statements has been derived from our audited 2022 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.

SDG&E, SoCalGas and Sempra Infrastructure’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.

▪for Sempra Infrastructure, funds fully drawn against SEFE’s letters of credit, including draws associated with its LNG storage and regasification agreement; funds denominated in Mexican pesos to pay for rights-of-way, license fees, permits, topographic surveys and other costs pursuant to trust and debt agreements related to pipeline projects; and certain funds at Port Arthur LNG for which withdrawals and usage are dictated by its debt agreements


RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(Dollars in millions)
	March 31, 2023		December 31, 2022
Cash and cash equivalents	$	534	$	370
Restricted cash, current	85		40
Restricted cash, noncurrent	84		52
Total cash, cash equivalents and restricted cash on the Condensed Consolidated Statements of Cash Flows	$	703	$	462

We are exposed to credit losses from financial assets measured at amortized cost, including trade and other accounts receivable, amounts due from unconsolidated affiliates, our net investment in sales-type leases and a note receivable. We are also exposed to credit losses from off-balance sheet arrangements through Sempra’s guarantee related to Cameron LNG JV’s SDSRA, which we discuss in Note 5.

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 receivables and customer payment patterns, historical and industry trends, counterparty creditworthiness, economic conditions and specific events, such as bankruptcies, pandemics and other factors. 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 2021, SDG&E and SoCalGas applied, on behalf of their customers, for financial assistance from the California Department of Community Services and Development under the 2021 California Arrearage Payment Program, which provided funds of $63 million and $79 million for SDG&E and SoCalGas, respectively. In the first quarter of 2022, SDG&E and SoCalGas received and applied the amounts directly to eligible customer accounts to reduce past due balances. In June 2022, AB 205 was approved establishing, among other things, the 2022 California Arrearage Payment Program. In December 2022, SDG&E and SoCalGas received funding of $51 million and $59 million, respectively, related to this program and, in January 2023, applied the amounts directly to eligible customer accounts to reduce past due balances.


CHANGES IN ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
	2023		2022
Sempra:
Allowances for credit losses at January 1	$	181	$	136
Provisions for expected credit losses	117		48
Write-offs	(20)		(19)
Allowances for credit losses at March 31	$	278	$	165
SDG&E:
Allowances for credit losses at January 1	$	78	$	66
Provisions for expected credit losses	38		21
Write-offs	(11)		(9)
Allowances for credit losses at March 31	$	105	$	78
SoCalGas:
Allowances for credit losses at January 1	$	98	$	69
Provisions for expected credit losses	77		26
Write-offs	(9)		(10)
Allowances for credit losses at March 31	$	166	$	85


ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
	March 31,		December 31,
	2023		2022
Sempra:
Accounts receivable – trade, net	$	238	$	140
Accounts receivable – other, net	40		40
Other long-term assets	—		1
Total allowances for credit losses	$	278	$	181
SDG&E:
Accounts receivable – trade, net	$	80	$	52
Accounts receivable – other, net	25		25
Other long-term assets	—		1
Total allowances for credit losses	$	105	$	78
SoCalGas:
Accounts receivable – trade, net	$	151	$	83
Accounts receivable – other, net	15		15
Total allowances for credit losses	$	166	$	98

As we discuss below in “Note Receivable,” we have an interest-bearing promissory note due from KKR Pinnacle. On a quarterly basis, we evaluate credit losses and record allowances for expected credit losses on this note receivable, including compounded interest and unamortized transaction costs, based on published default rate studies, the maturity date of the instrument and an internally developed credit rating. At March 31, 2023 and December 31, 2022, $6 million and $7 million, respectively, of expected credit losses are included in Other Long-Term Assets on Sempra’s Condensed Consolidated Balance Sheets.

As we discuss in Note 5, Sempra provided a guarantee for the benefit of Cameron LNG JV related to amounts withdrawn by Sempra Infrastructure from the SDSRA. On a quarterly basis, we evaluate credit losses and record liabilities for expected credit losses on this off-balance sheet arrangement based on external credit ratings, published default rate studies and the maturity date of the arrangement. At both March 31, 2023 and December 31, 2022, $6 million of expected credit losses are included in Deferred Credits and Other on Sempra’s Condensed Consolidated Balance Sheets.


INVENTORY BALANCES
(Dollars in millions)
	Sempra				SDG&E				SoCalGas
	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Natural gas	$	41	$	106	$	1	$	1	$	24	$	74
LNG	7		62		—		—		—		—
Materials and supplies	267		235		142		133		106		85
Total	$	315	$	403	$	143	$	134	$	130	$	159

In November 2021, Sempra loaned $300 million to KKR Pinnacle in exchange for an interest-bearing promissory note that is due in full no later than October 2029 and bears compound interest at 5% per annum, which may be paid quarterly or added to the outstanding principal at the election of KKR Pinnacle. At March 31, 2023 and December 31, 2022, Other Long-Term Assets includes $320 million and $316 million, respectively, of outstanding principal, compounded interest and unamortized transaction costs, net of allowance for credit losses, on Sempra’s Condensed Consolidated Balance Sheets.

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.

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, 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 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.

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, 2023 and December 31, 2022. 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, net, and finance lease liabilities with balances of $1,188 million and $1,194 million at March 31, 2023 and December 31, 2022, 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.

Oncor Holdings is a VIE. Sempra is not the primary beneficiary of this 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 $13,735 million and $13,665 million at March 31, 2023 and December 31, 2022, respectively.

Cameron LNG JV is a VIE principally due to contractual provisions that transfer certain risks to customers. Sempra is not the primary beneficiary of this 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 $880 million at March 31, 2023 and $886 million at December 31, 2022. Our maximum exposure to loss, which fluctuates over time, includes the carrying value of our investment and our obligation under the SDSRA, which we discuss in Note 5.

As we discuss in Note 5, in July 2020, Sempra entered into a Support Agreement for the benefit of CFIN, which is a VIE. Sempra is not the primary beneficiary of this VIE because we do not have the power to direct the most significant activities of CFIN, including modification, prepayment, and refinance decisions related to the financing arrangement with external lenders and Cameron LNG JV’s four project owners as well as the ability to determine and enforce remedies in the event of default. The conditional obligations of the Support Agreement represent a variable interest that we measure at fair value on a recurring basis (see Note 8). Sempra’s maximum exposure to loss under the terms of the Support Agreement is $979 million.

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 is the primary beneficiary of this VIE because we have the power to direct the activities related to the construction and future operation and maintenance of the liquefaction facility. As a result, we consolidate ECA LNG Phase 1. Sempra consolidated $1,199 million and $1,099 million of assets at March 31, 2023 and December 31, 2022, respectively, consisting primarily of PP&E, net, and Accounts Receivable – Other attributable to ECA LNG Phase 1 that could be used only to settle obligations of this VIE and that are not available to settle obligations of Sempra, and $778 million and $685 million of liabilities at March 31, 2023 and December 31, 2022, respectively, consisting primarily of long-term debt, short-term debt and accounts payable attributable to ECA LNG Phase 1 for which creditors do not have recourse to the general credit of Sempra. Additionally, as we discuss in Note 6, IEnova and TotalEnergies SE have provided guarantees for 83.4% and 16.6%, respectively, of the loan facility supporting construction of the liquefaction facility.

Port Arthur LNG is a VIE because its total equity at risk is not sufficient to finance its activities without additional subordinated financial support. We expect that Port Arthur LNG will require future capital contributions or other financial support to finance the construction of the PA LNG Phase 1 project. Sempra is the primary beneficiary of this VIE because we have the power to direct the activities related to the construction and future operation and maintenance of the liquefaction facility. As a result, we consolidate Port Arthur LNG. Sempra consolidated $1,901 million of assets at March 31, 2023 consisting primarily of PP&E, net, attributable to Port Arthur LNG that could be used only to settle obligations of this VIE and that are not available to settle obligations of Sempra, and $913 million of liabilities at March 31, 2023 consisting primarily of accounts payable and long-term debt attributable to Port Arthur LNG for which creditors do not have recourse to the general credit of Sempra.


NET PERIODIC BENEFIT COST – SEMPRA
(Dollars in millions)
	Pension				PBOP
	Three months ended March 31,
	2023		2022		2023		2022












Service cost	$	28	$	41	$	4	$	7
Interest cost	40		30		9		7
Expected return on assets	(43)		(46)		(17)		(16)
Amortization of:
Prior service cost (credit)	1		3		(1)		(1)
Actuarial loss (gain)	2		6		(6)		(4)
Net periodic benefit cost (credit)	28		34		(11)		(7)
Regulatory adjustments	29		(27)		11		7
Total expense recognized	$	57	$	7	$	—	$	—


NET PERIODIC BENEFIT COST – SDG&E
(Dollars in millions)
	Pension				PBOP
	Three months ended March 31,
	2023		2022		2023		2022











Service cost	$	8	$	10	$	1	$	2
Interest cost	10		7		2		1
Expected return on assets	(10)		(11)		(2)		(2)
Amortization of:
Actuarial loss (gain)	1		—		(1)		(1)
Net periodic benefit cost	9		6		—		—
Regulatory adjustments	4		(5)		—		—
Total expense recognized	$	13	$	1	$	—	$	—


NET PERIODIC BENEFIT COST – SOCALGAS
(Dollars in millions)
	Pension				PBOP
	Three months ended March 31,
	2023		2022		2023		2022












Service cost	$	17	$	28	$	3	$	5
Interest cost	25		20		7		5
Expected return on assets	(29)		(31)		(15)		(13)
Amortization of:
Prior service cost (credit)	1		2		(1)		(1)
Actuarial loss (gain)	—		4		(5)		(3)
Net periodic benefit cost (credit)	14		23		(11)		(7)
Regulatory adjustments	25		(22)		11		7
Total expense recognized	$	39	$	1	$	—	$	—

In support of its Supplemental Executive Retirement, Cash Balance Restoration and Deferred Compensation Plans, Sempra maintains dedicated assets, including a Rabbi Trust and investments in life insurance contracts, which totaled $511 million and $505 million at March 31, 2023 and December 31, 2022, respectively.

Basic EPS is calculated by dividing earnings attributable to common shares 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,
		2023		2022
Numerator:
Earnings attributable to common shares		$	969	$	612

Denominator:
Weighted-average common shares outstanding for basic EPS(1)		314,919		316,353
Dilutive effect of stock options and RSUs(2)		1,205		1,081
Weighted-average common shares outstanding for diluted EPS		316,124		317,434

EPS:
Basic		$	3.08	$	1.93
Diluted		$	3.07	$	1.93

(1) Includes 360 and 407 fully vested RSUs held in our Deferred Compensation Plan for the three months ended March 31, 2023 and 2022, 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.

(2) Due to market fluctuations of both Sempra 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, 2023 and 2022 excludes 180,015 and 337,239 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.


CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1)
(Dollars in millions)
	Foreign currency translation adjustments		Financial instruments		Pension and PBOP		Total accumulated other comprehensive income (loss)
	Three months ended March 31, 2023 and 2022
Sempra:
Balance at December 31, 2022	$	(59)	$	10	$	(86)	$	(135)
OCI before reclassifications	10		(40)		(13)		(43)
Amounts reclassified from AOCI	—		(5)		1		(4)
Net OCI	10		(45)		(12)		(47)
Balance at March 31, 2023	$	(49)	$	(35)	$	(98)	$	(182)

Balance at December 31, 2021	$	(79)	$	(156)	$	(83)	$	(318)
OCI before reclassifications	3		74		6		83
Amounts reclassified from AOCI	—		4		2		6
Net OCI	3		78		8		89
Balance at March 31, 2022	$	(76)	$	(78)	$	(75)	$	(229)
SDG&E:




Balance at December 31, 2022 and March 31, 2023					$	(7)	$	(7)









Balance at December 31, 2021 and March 31, 2022					$	(10)	$	(10)
SoCalGas:
Balance at December 31, 2022			$	(12)	$	(12)	$	(24)

Amounts reclassified from AOCI			—		1		1
Net OCI			—		1		1
Balance at March 31, 2023			$	(12)	$	(11)	$	(23)

Balance at December 31, 2021			$	(13)	$	(18)	$	(31)
Amounts reclassified from AOCI			—		1		1
Net OCI			—		1		1
Balance at March 31, 2022			$	(13)	$	(17)	$	(30)


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,
	2023		2022
Sempra:
Financial instruments:
Interest rate instruments	$	—	$	(1)	Interest Expense
Interest rate instruments	(7)		14		Equity Earnings(1)
Foreign exchange instruments	—		(1)		Revenues: Energy-Related Businesses
	1		—		Other Income, Net
Foreign exchange instruments	1		(1)		Equity Earnings(1)

Interest rate and foreign exchange instruments	(6)		(6)		Other Income, Net
Total, before income tax	(11)		5
	3		(1)		Income Tax Expense
Total, net of income tax	(8)		4
	3		—		Earnings Attributable to Noncontrolling Interests
	$	(5)	$	4
Pension and PBOP(2):
Amortization of actuarial loss	$	—	$	2	Other Income, Net
Amortization of prior service cost	1		1		Other Income, Net

Total, before income tax	1		3
	—		(1)		Income Tax Expense
Total, net of income tax	$	1	$	2

Total reclassifications for the period, net of income tax and after NCI	$	(4)	$	6









SoCalGas:


Pension and PBOP(2):
Amortization of actuarial loss	$	—	$	1	Other (Expense) Income, Net
Amortization of prior service cost	1		—		Other (Expense) Income, Net




Total reclassifications for the period, net of income tax	$	1	$	1

On January 11, 2022, we entered into an ASR program under which we prepaid $200 million to repurchase shares of our common stock in a share forward transaction. A total of 1,472,756 shares were purchased under this program at an average price of $135.80 per share. The total number of shares purchased was determined by dividing the $200 million purchase price by the arithmetic average of the volume-weighted average trading prices of shares of our common stock during the valuation period of January 12, 2022 through February 11, 2022, minus a fixed discount. The ASR program was completed on February 11, 2022.


OTHER NONCONTROLLING INTERESTS
(Dollars in millions)
	Percent ownership held by noncontrolling interests				Equity held by noncontrolling interests
	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Sempra Infrastructure:
SI Partners	30.0	%	30.0	%	$	2,198	$	2,060
SI Partners subsidiaries(1)	0.1 - 30.0		0.1 - 16.6		360		61
Total Sempra					$	2,558	$	2,121

Sale of NCI to ConocoPhillips Affiliate. On March 20, 2023, an indirect subsidiary of SI Partners completed the sale of an indirect 30% NCI in the PA LNG Phase 1 project to an affiliate of ConocoPhillips for aggregate cash consideration of approximately $265 million, subject to customary post-closing adjustments. As a result of this sale, we recorded a $237 million increase in equity held by NCI and an increase in Sempra’s shareholders’ equity of $18 million, net of $3 million in transaction costs and $7 million in tax impacts.

At the closing of the sale of NCI to the ConocoPhillips affiliate, the associated limited liability company agreement was amended and restated to include the ConocoPhillips affiliate as a member of such company and to set forth certain governance and other agreements with respect to the funding of the PA LNG Phase 1 project. Pursuant to the limited liability company agreement, such company will generally be managed by a board of managers, initially constituting three representatives appointed by the indirect subsidiary of SI Partners and two representatives appointed by the ConocoPhillips affiliate.

The indirect subsidiary of SI Partners and the ConocoPhillips affiliate have made certain customary capital contribution commitments to fund their respective pro rata equity share of the total anticipated capital calls for the equity portion of the anticipated development costs of the PA LNG Phase 1 project. In addition, both SI Partners and ConocoPhillips provided guarantees relating to their respective affiliate’s commitment to make its pro rata equity share of capital contributions to fund 110% of the development budget of the PA LNG Phase 1 project, in an aggregate amount of up to $9.0 billion. SI Partners’ guarantee covers 70% of this amount plus enforcement costs of its guarantee.

Sale of NCI to KKR Denali. On March 20, 2023, an indirect subsidiary of SI Partners entered into an agreement for the sale to KKR Denali of an indirect interest of a minimum of 25% and up to 48.65% in the PA LNG Phase 1 project for aggregate cash consideration of a minimum of $64 million for a 25% indirect interest and up to $125 million for the full 48.65% indirect interest, plus KKR Denali’s pro rata equity share of development costs incurred prior to the closing that exceed $439 million, subject to customary post-closing adjustments. We are targeting the closing of the sale of NCI to KKR Denali in the summer of 2023, subject to regulatory approvals and other customary closing conditions. If the closing conditions are satisfied and KKR Denali fails to complete the closing, then KKR Denali must pay a termination fee of $130 million.

In connection with the closing of the sale of NCI to KKR Denali, the associated limited liability company agreement will be amended and restated to include KKR Denali as a member of such company and to set forth certain governance and other agreements with respect to the funding of the PA LNG Phase 1 project. Pursuant to the limited liability company agreement, (i) the indirect subsidiary of SI Partners (a) will be the managing member; (b) will exclusively hold the right to make decisions with respect to certain expansions, such as the potential PA LNG Phase 2 project; (c) will have certain rights to preferential distributions from specified revenues and expansion true-up payments; and, (d) through a parent entity that is a subsidiary of Sempra, will bear a disproportionately higher allocation of certain capital contribution commitments in certain budgetary overrun scenarios, and (ii) KKR Denali will receive certain investor protection voting rights. The indirect subsidiary of SI Partners and KKR Denali will also make capital contribution commitments to fund their respective equity share of the equity funding amount of anticipated development costs of the PA LNG Phase 1 project, except in those certain budget overrun scenarios discussed above.

Following completion of the sale of NCI to the ConocoPhillips affiliate and subject to closing the sale of NCI to KKR Denali, Sempra would hold an indirect interest in the PA LNG Phase 1 project of between 14.9% and 31.5%, depending on the amount of KKR Denali’s investment at closing.


AMOUNTS DUE FROM (TO) UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	March 31, 2023		December 31, 2022
Sempra:
Tax sharing arrangement with Oncor Holdings	$	57	$	41
Various affiliates	17		13
Total due from unconsolidated affiliates – current	$	74	$	54

Sempra Infrastructure(1):
TAG Pipelines Norte, S. de R.L. de C.V. – 5.5% Note due January 9, 2024	$	(41)	$	—
Total due to unconsolidated affiliates – current	$	(41)	$	—

Sempra Infrastructure(1):
TAG Pipelines Norte, S. de R.L. de C.V.:
5.5% Note due January 9, 2024	$	—	$	(40)
5.5% Note due January 14, 2025	(23)		(23)
5.5% Note due July 16, 2025	(21)		(21)
5.5% Note due January 14, 2026	(19)		(19)
5.5% Note due July 14, 2026	(11)		(11)
5.5% Note due January 19, 2027	(14)		—
TAG – 5.74% Note due December 17, 2029	(190)		(187)
Total due to unconsolidated affiliates – noncurrent	$	(278)	$	(301)
SDG&E:



Sempra	$	(52)	$	(49)
SoCalGas	(75)		(72)
Various affiliates	(16)		(14)
Total due to unconsolidated affiliates – current	$	(143)	$	(135)

Income taxes due (to) from Sempra(2)	$	(8)	$	10
SoCalGas:
SDG&E	$	75	$	72
Various affiliates	1		5
Total due from unconsolidated affiliates – current	$	76	$	77

Sempra	$	(36)	$	(36)
Total due to unconsolidated affiliates – current	$	(36)	$	(36)

Income taxes due to Sempra(2)	$	(25)	$	(16)

(2) SDG&E and SoCalGas are included in the consolidated income tax return of Sempra, 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. Amounts include current and noncurrent income taxes due to/from Sempra.


INCOME STATEMENT IMPACT FROM UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	Three months ended March 31,
		2023		2022
Sempra:
Revenues		$	13	$	7

Interest income		—		10
Interest expense		4		4
SDG&E:
Revenues		$	4	$	4
Cost of sales		30		24
SoCalGas:
Revenues		$	34	$	26
Cost of sales(1)		31		—


OTHER INCOME (EXPENSE), NET
(Dollars in millions)
	Three months ended March 31,
		2023		2022
Sempra:
Allowance for equity funds used during construction		$	33	$	35
Investment gains (losses), net(1)		12		(13)
Gains on interest rate and foreign exchange instruments, net		5		6
Foreign currency transaction gains (losses), net(2)		1		(19)
Non-service components of net periodic benefit cost		(25)		41
Interest on regulatory balancing accounts, net		18		1
Sundry, net		(3)		(13)
Total		$	41	$	38
SDG&E:
Allowance for equity funds used during construction		$	23	$	21
Non-service components of net periodic benefit cost		(4)		11
Interest on regulatory balancing accounts, net		10		1
Sundry, net		(1)		1
Total		$	28	$	34
SoCalGas:
Allowance for equity funds used during construction		$	10	$	13
Non-service components of net periodic benefit cost		(19)		32
Interest on regulatory balancing accounts, net		8		—
Sundry, net		(7)		(11)
Total		$	(8)	$	34

(1) Represents net 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.


INCOME TAX EXPENSE AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
	Three months ended March 31,
		2023			2022
Sempra:
Income tax expense		$	376		$	334

Income before income taxes and equity earnings		$	1,329		$	665
Equity earnings, before income tax(1)		132			143
Pretax income		$	1,461		$	808

Effective income tax rate		26		%	41		%
SDG&E:
Income tax expense		$	7		$	64
Income before income taxes		$	265		$	298
Effective income tax rate		3		%	21		%
SoCalGas:
Income tax expense		$	94		$	84
Income before income taxes		$	454		$	418
Effective income tax rate		21		%	20		%

Sempra, 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:

Under the IRA, beginning in 2023, the scope of projects eligible for investment tax credits was expanded to include standalone energy storage projects. The IRA also provided an election that prospectively permits investment tax credits related to standalone energy storage projects to be returned to utility customers over a period that is shorter than the life of the applicable asset. Under this election, SDG&E recorded a regulatory liability to offset these investment tax credits, which reduced SDG&E’s and Sempra’s ETR in 2023.

On April 14, 2023, the IRS issued Revenue Procedure 2023-15, which provides a safe harbor method of accounting for gas repairs expenditures. We are assessing the potential impacts of this Revenue Procedure and do not expect it to have a material impact on Sempra’s, SDG&E’s or SoCalGas’ results of operations, financial condition and/or cash flows.