SIGNIFICANT ACCOUNTING POLICIES AND OTHER FINANCIAL DATA

12 Months Ended

Dec. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Significant Accounting Policies And Other Financial Data

SIGNIFICANT ACCOUNTING POLICIES AND OTHER FINANCIAL DATA

PRINCIPLES OF CONSOLIDATION

Sempra

Effective May 12, 2023, our company changed its legal name from Sempra Energy to Sempra. Sempra’s Consolidated Financial Statements include the accounts of Sempra, a California-based holding company, and its consolidated entities, which invest in, develop and operate energy infrastructure in North America, and provide electric and gas services to customers.

Sempra has three separate reportable segments, which we describe in Note 17. In the fourth quarter of 2023, Sempra realigned its reportable segments to reflect changes in how the CODM oversees our three platforms: Sempra California, Sempra Texas Utilities and Sempra Infrastructure. Our former SDG&E and SoCalGas reportable segments were combined into one operating and reportable segment, Sempra California, which is consistent with how the CODM assesses performance due to the similarities of their operations, including geographic location and regulatory framework in California. Sempra’s historical segment disclosures have been restated to conform with the current presentation, so that all discussions reflect the revised segment information of its three reportable segments. All references in these Notes to our reportable segments are not intended to refer to any legal entity with the same or similar name.

SDG&E

SDG&E’s common stock is wholly owned by Enova, which is a wholly owned subsidiary of Sempra. SDG&E is a regulated public utility that provides electric service to San Diego and southern Orange counties and natural gas service to San Diego County. SDG&E has one reportable segment.

SoCalGas

SoCalGas’ common stock is wholly owned by PE, which is a wholly owned subsidiary of Sempra. SoCalGas is a regulated public natural gas distribution utility, serving customers throughout most of Southern California and part of central California. SoCalGas has one reportable segment.

BASIS OF PRESENTATION

This is a combined report of Sempra, SDG&E and SoCalGas. We provide separate information for SDG&E and SoCalGas as required. We have eliminated intercompany accounts and transactions within the consolidated financial statements of each Registrant.

Use of Estimates in the Preparation of the Financial Statements

We have prepared our Consolidated Financial Statements in conformity with U.S. GAAP. This requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, including the disclosure of contingent assets and liabilities at the date of the financial statements. Although we believe the estimates and assumptions are reasonable, actual amounts ultimately may differ significantly from those estimates.

Subsequent Events

We evaluated events and transactions that occurred after December 31, 2023 through the date the financial statements were issued, and in the opinion of management, the accompanying statements reflect all adjustments and disclosures necessary for a fair presentation.

REGULATED OPERATIONS

SDG&E’s and SoCalGas’ accounting policies and financial statements reflect the application of U.S. GAAP provisions governing rate-regulated operations and the policies of the CPUC and the FERC. Under these provisions, a regulated utility records regulatory assets, which are generally costs that would otherwise be charged to expense, if it is probable that, through the ratemaking process, the utility will recover those assets from customers. To the extent that recovery is no longer probable, the related regulatory assets are written off. Regulatory liabilities generally represent amounts collected from customers in advance of the actual expenditure by the utility. If the actual expenditures are less than amounts previously collected from customers, the excess would be refunded to customers, generally by reducing future rates. Regulatory liabilities may also arise from other transactions such as unrealized gains on fixed price contracts and other derivatives or certain deferred income tax benefits that are passed through to customers in future rates. In addition, SDG&E and SoCalGas record regulatory liabilities when the CPUC or, in the case of SDG&E, the FERC, requires a refund to be made to customers or has required that a gain or other transaction of net allowable costs be given to customers over future periods.

Determining probability of recovery of regulatory assets requires judgment by management and may include, but is not limited to, consideration of:

▪the nature of the event giving rise to the assessment

▪existing statutes and regulatory code

▪legal precedents

▪regulatory principles and analogous regulatory actions

▪testimony presented in regulatory hearings

▪regulatory orders

▪a commission-authorized mechanism established for the accumulation of costs

▪status of applications for rehearings or state court appeals

▪specific approval from a commission

▪historical experience

Sempra Infrastructure’s natural gas distribution utility, Ecogas, also applies U.S. GAAP provisions for rate-regulated operations, including the same evaluation of probability of recovery of regulatory assets described above.

Our Sempra Texas Utilities segment is comprised of our equity method investments in Oncor Holdings, which owns an 80.25% interest in Oncor, and Sharyland Holdings, which owns 100% of Sharyland Utilities. Oncor and Sharyland Utilities are regulated electric transmission and distribution utilities in Texas and their rates are regulated by the PUCT and, in the case of Oncor, certain cities and are subject to regulatory rate-setting processes and earnings oversight. Oncor and Sharyland Utilities prepare their financial statements in accordance with the provisions of U.S. GAAP governing rate-regulated operations.

Our Sempra Infrastructure segment includes the operating companies of our subsidiary, SI Partners, as well as certain holding companies and risk management activity. Certain business activities at Sempra Infrastructure are regulated by the CRE and the FERC and meet the regulatory accounting requirements of U.S. GAAP.

FAIR VALUE MEASUREMENTS

We measure certain assets and liabilities at fair value on a recurring basis, primarily NDT and benefit plan trust assets and derivatives. We also measure certain assets at fair value on a non-recurring basis in certain circumstances.

A fair value measurement reflects the assumptions market participants would use in pricing an asset or liability based on the best available information. These assumptions include the risk inherent in a particular valuation technique (such as a pricing model) and the risks inherent in the inputs to the model. Also, we consider an issuer’s credit standing when measuring its liabilities at fair value.

We establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:

Level 1 – Pricing inputs are unadjusted quoted prices available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Our Level 1 financial instruments primarily consist of listed equities, short-term

investments, and U.S. government treasury securities, primarily in the NDT and benefit plan trusts, and exchange-traded derivatives.

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including:

▪quoted forward prices for commodities

▪time value

▪current market and contractual prices for the underlying instruments

▪volatility factors

▪other relevant economic measures

Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument and can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Our financial instruments in this category include listed equities, domestic corporate bonds, municipal bonds and other foreign bonds, primarily in the NDT and benefit plan trusts, and non-exchange-traded derivatives such as interest rate instruments and over-the-counter forwards and options.

Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value from the perspective of a market participant. Our Level 3 financial instruments consist of CRRs and, until December 31, 2022, fixed-price electricity positions, at SDG&E and the Support Agreement at Sempra Infrastructure.

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, 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 December 31, 2023 and 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 $1,166 million and $1,194 million at December 31, 2023 and 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. As a result, SDG&E’s potential exposure to loss from its variable interest in these VIEs is not significant.

Other Sempra

Oncor Holdings

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 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 $14,266 million and $13,665 million at December 31, 2023 and 2022, respectively.

Cameron LNG JV

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 $1,008 million and $886 million at December 31, 2023 and 2022, respectively. 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 6.

CFIN

As we discuss in Note 6, 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 12). Sempra’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 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 $1,580 million and $1,099 million of assets at December 31, 2023 and 2022, respectively, consisting primarily of PP&E, net, 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 $1,029 million and $685 million of liabilities at December 31, 2023 and 2022, respectively, consisting primarily of long-term debt, accounts payable and short-term debt 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 7, 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

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 $3,927 million of assets at December 31, 2023 consisting primarily of PP&E, net, and other long-term assets 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 $600 million of liabilities at December 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.

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

Cash equivalents are highly liquid investments with original maturities of three months or less at the date of purchase.

Restricted cash includes:

▪certain funds at Port Arthur LNG for which withdrawals and usage are dictated by its debt agreements

▪funds held as collateral in lieu of a customer’s letters of credit associated with its LNG storage and regasification agreement

▪funds denominated in U.S. dollars and Mexican pesos to pay for rights-of-way and other costs pursuant to trust agreements related to pipeline projects

▪funds held in a delisting trust for the purpose of purchasing the remaining publicly owned IEnova shares

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on Sempra’s Consolidated Balance Sheets to the sum of such amounts reported on Sempra’s Consolidated Statements of Cash Flows.

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(Dollars in millions)
	December 31,
	2023		2022
Sempra:
Cash and cash equivalents	$	236	$	370
Restricted cash, current	49		40
Restricted cash, noncurrent	104		52
Total cash, cash equivalents and restricted cash on the Consolidated Statements of Cash Flows	$	389	$	462

CREDIT LOSSES

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 6.

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.

After considering the past-due status of receivables, payment history and other customer-specific information, in the fourth quarter of 2023, Sempra recorded a provision for expected credit losses of $52 million on a customer’s account balance.

In the first quarter of 2022, SDG&E and SoCalGas received $63 million and $79 million, respectively, on behalf of their customers from the California Department of Community Services and Development under the 2021 California Arrearage Payment Program 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.

The impact and duration of suspending collections processes during the COVID-19 pandemic, the implementation of customer assistance programs, and higher 2023 winter season customer billings, have resulted in certain SDG&E and SoCalGas customers exhibiting slower payment and higher levels of nonpayment than has been the case historically. This in turn has resulted in an increase in provisions for expected credit losses in the year ended December 31, 2023 for both companies, even as collections processes resume and past due payments potentially begin increasing. SDG&E and SoCalGas have regulatory mechanisms to recover credit losses and thus record changes in the allowances for credit losses related to Accounts Receivable – Trade that are probable of recovery in regulatory accounts. We discuss regulatory accounts in Note 4.

Changes in allowances for credit losses for trade receivables and other receivables are as follows:

CHANGES IN ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
	2023		2022		2021
Sempra:
Allowances for credit losses at January 1	$	181	$	136	$	138
Provisions for expected credit losses	468		123		45
Write-offs	(116)		(78)		(47)
Allowances for credit losses at December 31	$	533	$	181	$	136
SDG&E:
Allowances for credit losses at January 1	$	78	$	66	$	69
Provisions for expected credit losses	115		54		23
Write-offs	(49)		(42)		(26)
Allowances for credit losses at December 31	$	144	$	78	$	66
SoCalGas:
Allowances for credit losses at January 1	$	98	$	69	$	68
Provisions for expected credit losses	300		65		22
Write-offs	(67)		(36)		(21)
Allowances for credit losses at December 31	$	331	$	98	$	69

Allowances for credit losses related to trade receivables and other receivables are included in the Consolidated Balance Sheets as follows:

ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
	December 31,
	2023		2022
Sempra:
Accounts receivable – trade, net	$	480	$	140
Accounts receivable – other, net	52		40
Other long-term assets	1		1
Total allowances for credit losses	$	533	$	181
SDG&E:
Accounts receivable – trade, net	$	116	$	52
Accounts receivable – other, net	27		25
Other long-term assets	1		1
Total allowances for credit losses	$	144	$	78
SoCalGas:
Accounts receivable – trade, net	$	306	$	83
Accounts receivable – other, net	25		15
Total allowances for credit losses	$	331	$	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 December 31, 2023 and 2022, $6 million and $7 million, respectively, of expected credit losses is included in Other Long-Term Assets on Sempra’s Consolidated Balance Sheets.

As we discuss in Note 6, 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 December 31, 2023 and 2022, $5 million and $6 million, respectively, of expected credit losses are included in Deferred Credits and Other on Sempra’s Consolidated Balance Sheets.

CONCENTRATION OF CREDIT RISK

Credit risk is the risk of loss that would be incurred as a result of nonperformance by our counterparties on their contractual obligations. We have policies governing the management of credit risk that are administered by the respective credit departments at each of our Registrants and overseen by their separate risk management committees.

This oversight includes calculating current and potential credit risk on a regular basis and monitoring actual balances in comparison to approved limits. We establish credit limits based on risk and return considerations under terms customarily available in the industry. We avoid concentration of counterparties whenever possible, and we believe our credit policies significantly reduce overall credit risk. These policies include an evaluation of:

▪prospective counterparties’ financial condition (including credit ratings)

▪collateral requirements

▪the use of standardized agreements that allow for the netting of positive and negative exposures associated with a single counterparty

▪downgrade triggers

We believe that we have provided adequate reserves for counterparty nonperformance in our allowances for credit losses.

When our development projects become operational, we rely significantly on the ability of suppliers to perform under long-term agreements and on our ability to enforce contract terms in the event of nonperformance. Also, the factors that we consider in evaluating a development project include negotiating customer and supplier agreements and, therefore, we rely on these agreements for future performance. We also may condition our decision to go forward on development projects on first obtaining these customer and supplier agreements.

TRANSACTIONS WITH AFFILIATES

We summarize amounts due from and to unconsolidated affiliates at our Registrants in the following table.

AMOUNTS DUE FROM (TO) UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	December 31,
	2023		2022
Sempra:
Tax sharing arrangement with Oncor Holdings	$	25	$	41
Various affiliates	6		13
Total due from unconsolidated affiliates – current	$	31	$	54
TAG Pipelines – 5.5% Note due January 9, 2024(1)	$	(5)	$	—
Total due to unconsolidated affiliates – current	$	(5)	$	—
TAG Pipelines(1):
5.5% Note due January 9, 2024	$	—	$	(40)
5.5% Note due January 14, 2025	(24)		(23)
5.5% Note due July 16, 2025	(23)		(21)
5.5% Note due January 14, 2026	(20)		(19)
5.5% Note due July 14, 2026	(11)		(11)
5.5% Note due January 19, 2027	(14)		—
5.5% Note due July 21, 2027	(17)		—
TAG Norte – 5.74% Note due December 17, 2029	(198)		(187)
Total due to unconsolidated affiliates – noncurrent	$	(307)	$	(301)
SDG&E:
Sempra	$	(44)	$	(49)
SoCalGas	(21)		(72)
Various affiliates	(8)		(14)
Total due to unconsolidated affiliates – current	$	(73)	$	(135)
Income taxes due from Sempra(2)	$	246	$	10
SoCalGas:
SDG&E	$	21	$	72
Various affiliates	1		5
Total due from unconsolidated affiliates – current	$	22	$	77
Sempra	$	(38)	$	(36)
Total due to unconsolidated affiliates – current	$	(38)	$	(36)
Income taxes due from (to) Sempra(2)	$	6	$	(16)

(1)    U.S. dollar-denominated loans at fixed interest rates. Amounts include principal balances plus accumulated interest outstanding.

(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.

The following table summarizes income statement information from unconsolidated affiliates.

INCOME STATEMENT IMPACT FROM UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	Years ended December 31,
	2023		2022		2021
Sempra:
Revenues	$	44	$	41	$	31
Cost of sales	—		—		11
Interest income	—		16		50
Interest expense	15		15		15
SDG&E:
Revenues	$	21	$	16	$	11
Cost of sales	113		92		103
SoCalGas:
Revenues	$	124	$	100	$	98
Cost of sales(1)	35		(9)		1

(1)    Includes net commodity costs from natural gas transactions with unconsolidated affiliates.

Sempra, SDG&E and SoCalGas provide certain services to each other and are charged an allocable share of the cost of such services. Also, from time-to-time, SDG&E and SoCalGas may make short-term advances of surplus cash to Sempra at interest rates based on the federal funds effective rate plus a margin of 13 to 20 bps, depending on the loan balance.

SoCalGas provides natural gas transportation and storage services to SDG&E and charges SDG&E for such services monthly. SoCalGas records revenues and SDG&E records a corresponding amount to cost of sales.

SDG&E and SoCalGas charge one another, as well as other Sempra affiliates, for shared asset depreciation. SoCalGas and SDG&E record revenues and the affiliates record corresponding amounts to O&M.

The natural gas supply for SDG&E’s and SoCalGas’ core natural gas customers is purchased by SoCalGas as a combined procurement portfolio managed by SoCalGas. Core customers are primarily residential and small commercial and industrial customers. This core gas procurement function is considered a shared service; therefore, revenues and costs related to SDG&E are presented net in SoCalGas’ Statements of Operations.

SDG&E has a 20-year contract that commenced in June 2015 for up to 155 MW of renewable power supplied from the ESJ wind power generation facility, a consolidated subsidiary of Sempra. A second 20-year contract between SDG&E and ESJ for up to 108 MW of renewable power supplied from the same facility commenced in January 2022.

Sempra Infrastructure provides maintenance and administrative services to TAG Pipelines. Additionally, Sempra Infrastructure subleases office space for personnel to TAG Pipelines and TAG Norte.

Sempra Infrastructure has agreements with Cameron LNG JV to provide certain business services and project development services related to the Cameron LNG Phase 2 project.

Sempra provides guarantees related to Cameron LNG JV’s SDSRA and CFIN’s Support Agreement. We discuss these guarantees in Note 6.

INVENTORIES

SDG&E and SoCalGas value natural gas inventory using the last-in first-out method. As inventories are sold, differences between the last-in first-out valuation and the estimated replacement cost are reflected in customer rates. These differences are generally temporary, but may become permanent if the natural gas inventory withdrawn from storage during the year is not replaced by year end. SDG&E and SoCalGas generally value materials and supplies at the lower of average cost or net realizable value.

Sempra Infrastructure values natural gas inventory and materials and supplies at the lower of average cost or net realizable value, and LNG inventory using the first-in first-out method.

The components of inventories are as follows:

INVENTORY BALANCES AT DECEMBER 31
(Dollars in millions)
	Sempra				SDG&E				SoCalGas
	2023		2022		2023		2022		2023		2022
Natural gas	$	174	$	106	$	1	$	1	$	155	$	74
LNG	9		62		—		—		—		—
Materials and supplies	299		235		152		133		122		85
Total	$	482	$	403	$	153	$	134	$	277	$	159

GREENHOUSE GAS ALLOWANCES AND OBLIGATIONS

SDG&E, SoCalGas and Sempra Infrastructure are required by AB 32 to acquire GHG allowances for every metric ton of carbon dioxide equivalent emitted into the atmosphere during electric generation and natural gas consumption. SDG&E and SoCalGas receive allocations of GHG allowances on behalf of our customers at no cost and purchase any additional allowances required. We record purchased and allocated GHG allowances at the lower of weighted-average cost or market. We measure the compliance obligation, which is based on emissions, at the carrying value of allowances held plus the fair value of additional allowances necessary to satisfy the obligation. SDG&E and SoCalGas balance costs and revenues associated with the GHG program through regulatory balancing accounts. Sempra Infrastructure records the cost of GHG obligations in cost of sales. We remove the assets and liabilities from the balance sheets as the allowances are surrendered.

RENEWABLE ENERGY CERTIFICATES

RECs are energy rights established by governmental agencies for the environmental and social promotion of renewable electricity generation. A REC, and its associated attributes and benefits, can be sold separately from the underlying physical electricity associated with a renewable-based generation source in certain markets.

Retail sellers of electricity obtain RECs through renewable energy PPAs, internal generation or separate purchases in the market to comply with the RPS Program established by the governmental agencies. RECs provide documentation for the generation of a unit of renewable energy that is used to verify compliance with the RPS Program. The cost of RECs at SDG&E, which is recoverable in rates, is recorded in Cost of Electric Fuel and Purchased Power on the Statements of Operations.

WILDFIRE FUND

In July 2019, the Wildfire Legislation was signed into law to address certain issues related to catastrophic wildfires in California and their impact on electric IOUs. Investor-owned gas distribution utilities such as SoCalGas are not covered by this legislation. The issues addressed include wildfire mitigation, cost recovery standards and requirements, a wildfire fund, a cap on liability, and the establishment of a wildfire safety board.

The Wildfire Legislation established a revised legal standard for the recovery of wildfire costs (Revised Prudent Manager Standard) and established a fund (the Wildfire Fund) designed to provide liquidity to SDG&E, PG&E and Edison to pay IOU wildfire-related claims in the event that the governmental agency responsible for determining causation determines the applicable IOU’s equipment caused the ignition of a wildfire, primary insurance coverage is exceeded and certain other conditions are satisfied. A primary purpose of the Wildfire Fund is to pool resources provided by shareholders and ratepayers of the IOUs and make those resources available to reimburse the IOUs for third-party wildfire claims incurred after July 12, 2019, the effective date of the Wildfire Legislation, subject to certain limitations.

An IOU may seek payment from the Wildfire Fund for settled or adjudicated third-party damage claims arising from certain wildfires that exceed, in aggregate in a calendar year, the greater of $1.0 billion or the IOU’s required amount of insurance coverage as recommended by the Wildfire Fund’s administrator. Wildfire claims approved by the Wildfire Fund’s administrator will be paid by the Wildfire Fund to the IOU to the extent funds are available. These utilized funds will be subject to review by the CPUC, which will make a determination as to the degree an IOU’s conduct related to an ignition of a wildfire was prudent or imprudent. The Revised Prudent Manager Standard requires that the CPUC apply clear standards when reviewing wildfire liability losses paid when determining the reasonableness of an IOU’s conduct related to an ignition. Under this standard, the conduct under review related to the ignition may include factors within and beyond the IOU’s control, including humidity, temperature and winds. Costs and expenses may be allocated for cost recovery in full or in part. Also, under this standard, an IOU’s conduct will be deemed reasonable if a valid annual safety certification is in place at the time of the ignition, unless a

serious doubt is raised, in which case the burden shifts to the utility to dispel that doubt. The IOUs will receive an annual safety certification from OEIS if they meet various requirements.

If an IOU has maintained a valid annual safety certification, to the extent it is found to be imprudent, claims will be reimbursable by the IOU to the Wildfire Fund up to a cap based on the IOU’s rate base. The aggregate requirement to reimburse the Wildfire Fund over a trailing three calendar year period is capped at 20% of the equity portion of an IOU’s electric transmission and distribution rate base in the year of the prudency determination. Based on its 2023 rate base, the liability cap for SDG&E is approximately $1.3 billion, which is adjusted annually. The liability cap will apply on a rolling three-year basis so long as future annual safety certifications are received and the Wildfire Fund has not been terminated, which could occur if funds are exhausted. Amounts in excess of the liability cap and amounts that are determined to be prudently incurred do not need to be reimbursed by an IOU to the Wildfire Fund. The Wildfire Fund does not have a specified term and coverage will continue until the assets of the Wildfire Fund are exhausted and the Wildfire Fund is terminated, in which case, the remaining funds, if any, will be transferred to California’s general fund to be used for fire risk mitigation programs.

In October 2023, the OEIS approved SDG&E’s 2023-2025 wildfire mitigation plan, which is effective until the OEIS approves a new plan. SDG&E received its annual wildfire safety certification from the OEIS in December 2023.

The Wildfire Fund was initially funded up to $10.5 billion by a loan from the California Surplus Money Investment Fund. The loan is financed through a DWR bond, which was put in place in October 2020 and is securitized through a dedicated surcharge on ratepayers’ bills attributable to the DWR. In October 2019, the CPUC adopted a decision authorizing a non-bypassable charge to be collected by the IOUs to support the anticipated DWR bond issuance authorized by AB 1054. The CPUC decision also determined that ratepayers of non-participating electrical corporations shall not pay the non-bypassable charge.

The Wildfire Fund was also funded by initial shareholder contributions from the IOUs totaling $7.5 billion. SDG&E’s share was $322.5 million. The IOUs are also required to make annual shareholder contributions to the Wildfire Fund with an aggregate value of $3 billion over a 10-year period starting in 2019. SDG&E’s share is $129 million. The contributions are not subject to rate recovery.

Wildfire Fund Asset and Obligation

In 2019, SDG&E recorded both a Wildfire Fund asset and a related obligation for its commitment to make shareholder contributions of $451.5 million to the Wildfire Fund. SDG&E paid its initial shareholder contribution of $322.5 million to the Wildfire Fund in September 2019. SDG&E funded this contribution with proceeds from an equity contribution from Sempra. SDG&E expects to continue to make annual shareholder contributions of $12.9 million through December 31, 2028. SDG&E is accreting the present value of the Wildfire Fund obligation until the liability is settled.

SDG&E is amortizing the Wildfire Fund asset on a straight-line basis over the estimated period of benefit, as adjusted for utilization by the IOUs. The estimated period of benefit of the Wildfire Fund asset is 15 years and is based on several assumptions, including, but not limited to:

▪historical wildfire experience of each IOU in California, including frequency and severity of the wildfires

▪the value of property potentially damaged by wildfires

▪the effectiveness of wildfire risk mitigation efforts by each IOU

▪liability cap of each IOU

▪IOU prudency determination levels

▪FERC jurisdictional allocation levels

▪insurance coverage levels

The use of different assumptions, or changes to the assumptions used, could have a significant impact on the estimated period of benefit of the Wildfire Fund asset. SDG&E periodically evaluates the estimated period of benefit of the Wildfire Fund asset based on actual experience and changes in these assumptions. SDG&E recognizes a reduction of its Wildfire Fund asset and records a charge against earnings in the period when there is a reduction of the available coverage due to recoverable claims from any of the participating IOUs. Wildfire claims that are recoverable from the Wildfire Fund, net of anticipated or actual reimbursement to the Wildfire Fund by the responsible IOU, decrease the Wildfire Fund asset and remaining available coverage.

The following table summarizes the location of balances related to the Wildfire Fund on Sempra’s and SDG&E’s Consolidated Balance Sheets.

WILDFIRE FUND
(Dollars in millions)
		December 31,
	Location	2023		2022
Wildfire Fund asset:
Current	Prepaid Expenses	$	28	$	29
Noncurrent	Wildfire Fund	269		303
Wildfire Fund obligation:
Current	Other Current Liabilities	13		13
Noncurrent	Deferred Credits and Other	42		53

NOTE RECEIVABLE

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 December 31, 2023 and 2022, Other Long-Term Assets includes $332 million and $316 million, respectively, of outstanding principal, compounded interest and unamortized transaction costs, net of allowance for credit losses, on Sempra’s Consolidated Balance Sheets.

LONG-LIVED ASSETS

We test long-lived assets for recoverability whenever events or changes in circumstances have occurred that may affect the recoverability or the estimated useful lives of long-lived assets. Long-lived assets include intangible assets subject to amortization, but do not include investments in unconsolidated entities. A long-lived asset may be impaired when the estimated future undiscounted cash flows are less than the carrying amount of the asset. If that comparison indicates that the asset’s carrying value may not be recoverable, the impairment is measured based on the difference between the carrying amount and the fair value of the asset. This evaluation is performed at the lowest level for which separately identifiable cash flows exist.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Goodwill is the excess of the purchase price over the fair value of the identifiable net assets of acquired companies measured at the time of acquisition. Goodwill is not amortized, but we test it for impairment annually on October 1 or whenever events or changes in circumstances necessitate an evaluation. If the carrying value of the reporting unit, including goodwill, exceeds its fair value, we record a goodwill impairment loss as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill.

For our annual goodwill impairment testing, we have the option to first make a qualitative assessment of whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount before applying the quantitative goodwill impairment test. If we elect to perform the qualitative assessment, we evaluate relevant events and circumstances, including but not limited to, macroeconomic conditions, industry and market considerations, cost factors and the overall financial performance of the reporting unit. If, after assessing these qualitative factors, we determine that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then we perform the quantitative goodwill impairment test. If, after performing the quantitative goodwill impairment test, we determine that goodwill is impaired, we record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill.

Goodwill of $1,602 million at December 31, 2023 and 2022 relates to the 2016 acquisitions of IEnova Pipelines and the Ventika wind power generation facilities at Sempra Infrastructure.

Other Intangible Assets

Other Intangible Assets included on Sempra’s Consolidated Balance Sheets are as follows:

OTHER INTANGIBLE ASSETS
(Dollars in millions)
	Amortization period (years)	December 31,
		2023		2022
Sempra:
Renewable energy transmission and consumption permits	15 to 19	$	169	$	169
O&M agreement	23	66		66
ESJ PPA	14	190		190
Other	10 to indefinite	15		15
		440		440
Less accumulated amortization:
Renewable energy transmission and consumption permits		(59)		(50)
O&M agreement		(17)		(15)
ESJ PPA		(37)		(23)
Other		(9)		(8)
		(122)		(96)
		$	318	$	344

Other Intangible Assets at December 31, 2023 primarily include:

▪renewable energy transmission and consumption permits 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

▪the relative fair value of the PPA that was acquired in connection with the acquisition of ESJ.

Intangible assets subject to amortization are amortized over their estimated useful lives. Amortization expense for intangible assets was $26 million (including $13.5 million recorded against revenues) in 2023 and in 2022, and $22 million (including $10 million recorded against revenues) in 2021. We estimate amortization expense for each of the next five years to be $26 million per year (including $13.5 million per year recorded against revenues).

PROPERTY, PLANT AND EQUIPMENT

PP&E is recorded at cost and primarily represents the buildings, equipment and other facilities used by SDG&E and SoCalGas to provide natural gas and electric utility services, and by Other Sempra businesses in their operations, including construction work in progress, leasehold improvements and other equipment. Our plant costs include labor, materials and contract services and expenditures for replacement parts incurred during a major maintenance outage of a plant. In addition, the cost of utility plant at our rate-regulated businesses and PP&E under regulated projects that meet the regulatory accounting requirements of U.S. GAAP includes AFUDC. The cost of PP&E for our non-regulated projects includes capitalized interest. Maintenance costs are expensed as incurred. The cost of most retired depreciable utility plant assets less salvage value is charged to accumulated depreciation. We discuss assets collateralized as security for certain indebtedness in Note 7.

PROPERTY, PLANT AND EQUIPMENT BY MAJOR FUNCTIONAL CATEGORY
(Dollars in millions)
	December 31,				Depreciation rates for years ended December 31,
	2023		2022		2023		2022			2021
SDG&E:
Natural gas operations	$	4,175	$	3,707	2.60	%	2.57	%		2.55	%
Electric distribution	11,597		10,271		4.05		3.94			3.93
Electric transmission(1)	8,504		8,061		3.04		3.03			3.02
Electric generation	2,515		2,461		5.18		5.11			4.74
Other electric	2,507		2,211		7.05		7.03			7.23
Construction work in progress(1)	1,620		1,863		N/A		N/A			N/A
Total SDG&E	30,918		28,574
SoCalGas:
Natural gas operations	25,506		23,646		3.64		3.57			3.65
Other non-utility	50		50		1.03		1.54			2.23
Construction work in progress	1,469		1,362		N/A		N/A			N/A
Total SoCalGas	27,025		25,058
Other Sempra(2):					Estimated useful lives				Weighted-average useful life
Land and land rights	488		476		16 to 44 years(3)					37
Machinery and equipment:
Pipelines and storage	3,883		3,813		41 to 49 years					42
Generating plants	1,815		1,803		11 to 28 years					26
LNG terminal	1,139		1,138		43 years					43
Refined products terminals	656		643		38 years					38
Other	346		344		1 to 21 years					15
Construction work in progress	5,930		1,757		N/A					N/A
Other	295		287		2 to 34 years					15
	14,552		10,261
Total Sempra	$	72,495	$	63,893

(1)    At December 31, 2023, includes $554 in electric transmission assets and $7 in construction work in progress related to SDG&E’s 86% interest in the Southwest Powerlink transmission line, jointly owned by SDG&E with other utilities. SDG&E, and each of the other owners, holds its undivided interest as a tenant in common in the property. Each owner is responsible for its share of the project and participates in decisions concerning operations and capital expenditures. SDG&E’s share of operating expenses is included in Sempra’s and SDG&E’s Consolidated Statements of Operations.

(2)    Includes $310 and $246 at December 31, 2023 and 2022, respectively, of utility plant, primarily pipelines and other distribution assets at Ecogas.

(3)    Estimated useful lives are for land rights.

Sempra Infrastructure’s Sonora natural gas pipeline consists of two segments, the Sasabe-Puerto Libertad-Guaymas segment and the Guaymas-El Oro segment. Each segment has its own service agreement with the CFE. Following the start of commercial operations of the Guaymas-El Oro segment, Sempra Infrastructure reported damage to the pipeline in the Yaqui territory that has made that section inoperable since August 2017. Sempra Infrastructure and the CFE have agreed to an amendment to their transportation services agreement and to proceed with re-routing a portion of the pipeline, whereby the CFE would pay for the re-routing with a new tariff. This amendment will terminate if certain conditions are not met, and Sempra Infrastructure retains the right to terminate the transportation services agreement and seek to recover its reasonable and documented costs and lost profit. Sempra Infrastructure continues to acquire and pursue the necessary rights-of-way and permits for the re-routed portion of the pipeline. At December 31, 2023, Sempra Infrastructure had $411 million in PP&E, net, related to the Guaymas-El Oro segment of the Sonora pipeline, which could be subject to impairment if Sempra Infrastructure is unable to re-route a portion of the pipeline and resume operations or if Sempra Infrastructure terminates the contract and is unable to obtain recovery.

Depreciation expense is computed using the straight-line method over the asset’s estimated composite useful life, the CPUC-prescribed period for SDG&E and SoCalGas, or the remaining term of the site leases, whichever is shortest.

DEPRECIATION EXPENSE
(Dollars in millions)
	Years ended December 31,
	2023		2022		2021
Sempra	$	2,202	$	1,995	$	1,833
SDG&E	1,092		977		884
SoCalGas	833		755		711

ACCUMULATED DEPRECIATION AND AMORTIZATION
(Dollars in millions)
	December 31,
	2023		2022
SDG&E:
Accumulated depreciation:
Natural gas operations	$	1,048	$	979
Electric transmission, distribution and generation(1)	6,321		5,789
Total SDG&E	7,369		6,768
SoCalGas:
Accumulated depreciation:
Natural gas operations	7,835		7,291
Other non-utility	17		17
Total SoCalGas	7,852		7,308
Other Sempra:
Accumulated depreciation – other(2)	2,314		2,035
Total Sempra	$	17,535	$	16,111

(1)    Includes $323 at December 31, 2023 related to SDG&E’s 86% interest in the Southwest Powerlink transmission line, jointly owned by SDG&E and other utilities.

(2)    Includes $82 and $65 at December 31, 2023 and 2022, respectively, of accumulated depreciation for utility plant at Ecogas.

SDG&E and SoCalGas finance construction projects with debt and equity funds. The CPUC and the FERC allow the recovery of the cost of these funds by the capitalization of AFUDC, calculated using rates authorized by the CPUC and the FERC, as a cost component of PP&E. SDG&E and SoCalGas earn a return on the capitalized AFUDC after the utility property is placed in service and recover the AFUDC from their customers over the expected useful lives of the assets.

Pipeline projects under construction by Sempra Infrastructure that are both subject to certain regulation and meet U.S. GAAP regulatory accounting requirements record the impact of AFUDC.

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 financing costs, comprised of AFUDC and capitalized interest.

CAPITALIZED FINANCING COSTS
(Dollars in millions)
	Years ended December 31,
	2023		2022		2021
Sempra	$	448	$	255	$	217
SDG&E	116		116		106
SoCalGas	77		73		64

ASSET RETIREMENT OBLIGATIONS

For tangible long-lived assets, we record AROs for the present value of liabilities of future costs expected to be incurred when assets are retired from service if the retirement process is legally required and if a reasonable estimate of fair value can be made. We also record a liability if a legal obligation to perform an asset retirement exists and can be reasonably estimated but performance is conditional upon a future event. We record the estimated retirement cost using the present value of the obligation at the time the asset is placed into service, and recognize that cost over the life of the related asset by depreciating the asset retirement cost and accreting the obligation until the liability is settled. Our rate-regulated entities record regulatory assets or

liabilities as a result of the timing difference between the recognition of costs in accordance with U.S. GAAP and costs recovered through the rate-making process.

We have recorded AROs related to various assets, including:

SDG&E and SoCalGas

▪fuel and storage tanks

▪natural gas transmission and distribution systems

▪hazardous waste storage facilities

▪asbestos-containing construction materials

SDG&E

▪nuclear power facilities

▪electric transmission and distribution systems

▪energy storage systems

▪power generation plants

SoCalGas

▪underground natural gas storage facilities and wells

Other Sempra

▪LNG facility

▪natural gas transportation and distribution systems

▪LPG storage facilities

▪refined products terminals

▪power generation plants

The changes in AROs are as follows:

CHANGES IN ASSET RETIREMENT OBLIGATIONS
(Dollars in millions)
	Sempra						SDG&E						SoCalGas
	2023		2022		2021		2023		2022		2021		2023		2022		2021
Balance at January 1(1)	$	3,712	$	3,538	$	3,289	$	887	$	890	$	876	$	2,743	$	2,582	$	2,368
Accretion expense	148		141		133		37		37		38		106		101		92
Liabilities incurred and acquired	18		21		20		15		6		2		—		—		—
Payments	(62)		(57)		(63)		(59)		(54)		(60)		(3)		(3)		(3)
Revisions(2)	15		69		159		14		8		34		1		63		125
Balance at December 31(1)	$	3,831	$	3,712	$	3,538	$	894	$	887	$	890	$	2,847	$	2,743	$	2,582

(1)    Current portion of the ARO for Sempra is included in Other Current Liabilities on the Consolidated Balance Sheets.

(2)    SDG&E’s change in ARO in 2022 and 2021 includes $1 and $22, respectively, due to a revised estimate that is offset in noncurrent Regulatory Liabilities and Regulatory Assets, respectively, on the Consolidated Balance Sheets.

CONTINGENCIES

We accrue losses for the estimated impacts of various conditions, situations or circumstances involving uncertain outcomes. For loss contingencies, we accrue the loss if an event has occurred on or before the balance sheet date and if:

▪information available through the date we file our financial statements indicates it is probable that a loss has been incurred, given the likelihood of uncertain future events; and

▪the amount of the loss or a range of possible losses can be reasonably estimated.

We do not accrue contingencies that might result in gains. We assess contingencies for litigation claims, environmental remediation and other events.

COMPREHENSIVE INCOME

Comprehensive income includes all changes in the equity of a business enterprise (except those resulting from investments by

owners and distributions to owners), including:

▪foreign currency translation adjustments

▪certain hedging activities

▪changes in unamortized net actuarial gain or loss and prior service cost related to pension and PBOP plans

The Consolidated Statements of Comprehensive Income (Loss) show the changes in the components of OCI, including the amounts attributable to NCI. The following tables present the changes in AOCI by component and amounts reclassified out of AOCI to net income, after 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 PBOP		Total AOCI
Sempra:
Balance at December 31, 2020	$	(64)	$	(331)	$	(105)	$	(500)
OCI before reclassifications(2)	(34)		62		8		36
Amounts reclassified from AOCI(3)	19		113		14		146
Net OCI(2)(3)	(15)		175		22		182
Balance at December 31, 2021	(79)		(156)		(83)		(318)
OCI before reclassifications	10		147		(11)		146
Amounts reclassified from AOCI(4)	10		19		8		37
Net OCI(4)	20		166		(3)		183
Balance at December 31, 2022	(59)		10		(86)		(135)
OCI before reclassifications	23		59		(35)		47
Amounts reclassified from AOCI(5)	—		(66)		4		(62)
Net OCI(5)	23		(7)		(31)		(15)
Balance at December 31, 2023	$	(36)	$	3	$	(117)	$	(150)
SDG&E:
Balance at December 31, 2020					$	(10)	$	(10)
OCI before reclassifications					(1)		(1)
Amounts reclassified from AOCI					1		1
Net OCI					—		—
Balance at December 31, 2021					(10)		(10)
OCI before reclassifications					2		2
Amounts reclassified from AOCI					1		1
Net OCI					3		3
Balance at December 31, 2022					(7)		(7)
OCI before reclassifications					(2)		(2)
Amounts reclassified from AOCI					1		1
Net OCI					(1)		(1)
Balance at December 31, 2023					$	(8)	$	(8)
SoCalGas:
Balance at December 31, 2020			$	(13)	$	(18)	$	(31)
OCI before reclassifications			—		(2)		(2)
Amounts reclassified from AOCI			—		2		2
Net OCI			—		—		—
Balance at December 31, 2021			(13)		(18)		(31)
OCI before reclassifications			—		4		4
Amounts reclassified from AOCI			1		2		3
Net OCI			1		6		7
Balance at December 31, 2022			(12)		(12)		(24)
OCI before reclassifications			—		(1)		(1)
Amounts reclassified from AOCI			1		1		2
Net OCI			1		—		1
Balance at December 31, 2023			$	(11)	$	(12)	$	(23)

(1)    All amounts are net of income tax, if subject to tax, and after NCI.

(2)    Total AOCI includes $(28) of foreign currency translation adjustments and $(16) of financial instruments associated with the IEnova exchange and cash tender offers in 2021. We discuss these transactions in Note 14 in “Noncontrolling Interests – SI Partners Subsidiaries.” These transactions did not impact the Consolidated Statement of Comprehensive Income (Loss).

(3)    Total AOCI includes $19 of foreign currency translation adjustments and $47 of financial instruments associated with the sale of NCI to KKR Pinnacle in 2021. We discuss this transaction in Note 14 in “Noncontrolling Interests – SI Partners.” This transaction did not impact the Consolidated Statement of Comprehensive Income (Loss).

(4)    Total AOCI includes $9 of foreign currency translation adjustments associated with the sale of NCI to ADIA in 2022. We discuss this transaction in Note 14 in “Noncontrolling Interests – SI Partners.” This transaction did not impact the Consolidated Statement of Comprehensive Income (Loss).

(5)    Total AOCI includes $(46) of financial instruments associated with sale of NCI to KKR Denali in 2023, which we discuss in Note 14 in “Noncontrolling Interests – SI Partners Subsidiaries.” This transaction did not impact the Consolidated Statement of Comprehensive Income (Loss).

RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
Details about AOCI components	Amounts reclassified from AOCI						Affected line item on Consolidated Statements of Operations
	Years ended December 31,
	2023		2022		2021
Sempra:
Foreign currency translation adjustments	$	—	$	1	$	—	Operation and Maintenance
Financial instruments:
Interest rate instruments	$	1	$	1	$	11	Interest Expense
Interest rate instruments	(48)		29		73		Equity Earnings(1)
Foreign exchange instruments	1		(1)		1		Revenues: Energy-Related Businesses
	2		1		—		Other Income, Net
Foreign exchange instruments	2		—		—		Equity Earnings(1)
Interest rate and foreign exchange instruments	(1)		(2)		1		Interest Expense
	(6)		(12)		6		Other Income, Net
Total, before income tax	(49)		16		92
	6		(6)		(24)		Income Tax Expense
Total, net of income tax	(43)		10		68
	23		9		(2)		Earnings Attributable to Noncontrolling Interests
Total, net of income tax and after NCI	$	(20)	$	19	$	66
Pension and PBOP(2):
Amortization of actuarial loss	$	3	$	7	$	8	Other Income, Net
Amortization of prior service cost	2		4		4		Other Income, Net
Settlement charges	—		—		7		Other Income, Net
Total, before income tax	5		11		19
	(1)		(3)		(5)		Income Tax Expense
Total, net of income tax	$	4	$	8	$	14
Total reclassifications for the period, net of income tax and after NCI	$	(16)	$	28	$	80
SDG&E:
Pension and PBOP(2):
Amortization of actuarial loss	$	—	$	1	$	—	Other Income, Net
Amortization of prior service cost	1		—		1		Other Income, Net
Total reclassifications for the period, net of income tax	$	1	$	1	$	1
SoCalGas:
Financial instruments:
Interest rate instruments	$	1	$	1	$	—	Interest Expense
Pension and PBOP(2):
Amortization of actuarial loss	$	1	$	2	$	1	Other Expense, Net
Amortization of prior service cost	1		1		1		Other Expense, Net
Total, before income tax	2		3		2
	(1)		(1)		—		Income Tax Benefit (Expense)
Total, net of income tax	$	1	$	2	$	2
Total reclassifications for the period, net of income tax	$	2	$	3	$	2

(1)    Equity earnings at our foreign equity method investees are recognized after tax.

(2)    Amounts are included in the computation of net periodic benefit cost (see “Net Periodic Benefit Cost” in Note 9).

REVENUES

See Note 3 for a description of significant accounting policies for revenues.

OPERATION AND MAINTENANCE EXPENSES

Operation and Maintenance includes O&M and general and administrative costs, consisting primarily of personnel costs, purchased materials and services, insurance, rent, provisions for expected credit losses and litigation expense (except for litigation expense included in Aliso Canyon Litigation and Regulatory Matters).

LEGAL FEES

Legal fees that are associated with a past event for which a liability has been recorded are accrued when it is probable that fees also will be incurred and amounts are estimable.

FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

Our natural gas distribution utility in Mexico, Ecogas, uses its local currency as its functional currency. The assets and liabilities of its foreign operations are translated into U.S. dollars at current exchange rates at the end of the reporting period, and revenues and expenses are translated at average exchange rates for the year. The resulting noncash translation adjustments do not enter into the calculation of earnings or retained earnings but are reflected in OCI and AOCI.

Cash flows of this consolidated foreign subsidiary are translated into U.S. dollars using average exchange rates for the period. We report the effect of exchange rate changes on cash balances held in foreign currencies in Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash on Sempra’s Consolidated Statements of Cash Flows.

Foreign currency transaction gains (losses) in a currency other than Sempra Infrastructure’s functional currency were $2 million, $(24) million and $(18) million for the years ended December 31, 2023, 2022 and 2021, respectively, and are included in Other Income, Net, on Sempra’s Consolidated Statements of Operations.

OTHER INCOME, NET

Other Income, Net, on the Consolidated Statements of Operations consists of the following:

OTHER INCOME (EXPENSE), NET
(Dollars in millions)
	Years ended December 31,
	2023		2022		2021
Sempra:
Allowance for equity funds used during construction	$	140	$	143	$	133
Investment gains (losses), net(1)	28		(42)		50
Gains (losses) on interest rate and foreign exchange instruments, net	4		11		(28)
Foreign currency transaction gains (losses), net(2)	2		(24)		(18)
Non-service components of net periodic benefit cost	(106)		(59)		(67)
Interest on regulatory balancing accounts, net	79		26		6
Sundry, net	(16)		(31)		(18)
Total	$	131	$	24	$	58
SDG&E:
Allowance for equity funds used during construction	$	86	$	88	$	81
Non-service components of net periodic benefit cost	(19)		(11)		(13)
Interest on regulatory balancing accounts, net	42		18		6
Sundry, net	(12)		(3)		(10)
Total	$	97	$	92	$	64
SoCalGas:
Allowance for equity funds used during construction	$	54	$	55	$	48
Non-service components of net periodic benefit cost	(80)		(42)		(40)
Interest on regulatory balancing accounts, net	37		8		—
Sundry, net	(15)		(29)		(22)
Total	$	(4)	$	(8)	$	(14)

(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 Consolidated Statements of Operations.

(2)    Includes losses of $11 and $23 in 2022 and 2021, respectively, from translation to U.S. dollars of a Mexican peso-denominated loan to IMG, which are offset by corresponding amounts included in Equity Earnings on the Consolidated Statements of Operations.

INCOME TAXES

Income tax expense includes current and deferred income taxes. We record deferred income taxes for temporary differences between the book and the tax basis of assets and liabilities. Investment tax credits from prior years are generally amortized to income by SDG&E and SoCalGas over the estimated service lives of the properties as required by the CPUC. However, in 2023, the scope of projects eligible for investment tax credits was expanded to include standalone energy storage projects, which are transferable under the IRA. The IRA also provided an election that 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 records a regulatory liability to offset these investment tax credits, which reduces both SDG&E’s and Sempra’s ETR.

Under the regulatory accounting treatment required for flow-through temporary differences, the Registrants recognize:

▪regulatory assets to offset deferred income tax liabilities if it is probable that the amounts will be recovered from customers; and

▪regulatory liabilities to offset deferred income tax assets if it is probable that the amounts will be returned to customers.

When there are uncertainties related to potential income tax benefits, the position we take must have at least a more-likely-than-not chance of being sustained (based on the position’s technical merits) upon challenge by the respective authorities in order to qualify for recognition. The term “more-likely-than-not” means a likelihood of more than 50%. Otherwise, we may not recognize any of the potential tax benefit associated with the position. We recognize a benefit for a tax position that meets the more-likely-than-not criterion at the largest amount of tax benefit that is greater than 50% likely of being realized upon its effective resolution.

Unrecognized income tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect our ETR.

We accrue income tax to the extent we intend to repatriate cash to the U.S. from our continuing international operations. We currently do not record deferred income taxes for other basis differences between financial statement and income tax investment amounts in non-U.S. subsidiaries because they are indefinitely reinvested. We recognize income tax expense for basis differences related to global intangible low-taxed income as a period cost if and when incurred.

We recognize interest and penalties related to income taxes in income tax expense.

We provide additional information about income taxes in Note 8.

RESTRICTED NET ASSETS

Sempra

As we discuss below, SDG&E, SoCalGas and certain Other Sempra entities have restrictions on the amount of funds that can be transferred to Sempra by dividend, advance or loan as a result of conditions imposed by various regulators. Additionally, certain Other Sempra entities are subject to various financial and other covenants and other restrictions contained in debt and credit agreements (described in Note 7) and in other agreements that limit the amount of funds that can be transferred to Sempra. At December 31, 2023, Sempra was in compliance with all covenants related to its debt agreements.

At December 31, 2023, the amount of restricted net assets of consolidated entities of Sempra that may not be distributed to Sempra in the form of a loan or dividend is $17.1 billion. Additionally, the amount of restricted net assets of our unconsolidated entities is $15.0 billion. Although the restrictions cap the amount of funding that the various operating subsidiaries can provide to Sempra, we do not believe these restrictions will have a significant impact on our ability to access cash to pay dividends and fund operating needs.

As we discuss in Note 6, $2.5 billion of Sempra’s retained earnings represents undistributed earnings of equity method investments at December 31, 2023.

SDG&E and SoCalGas

The CPUC’s regulation of SDG&E’s and SoCalGas’ capital structures limits the amounts available for dividends and loans to Sempra. At December 31, 2023, Sempra could have received combined loans and dividends of approximately $442 million from SDG&E and approximately $330 million from SoCalGas.

The payment and amount of future dividends by SDG&E and SoCalGas are at the discretion of their respective boards of directors. The following restrictions limit the amount of retained earnings that may be paid as common stock dividends or loaned to Sempra from either utility:

▪The CPUC requires that SDG&E’s and SoCalGas’ common equity ratios be no lower than one percentage point below the CPUC-authorized percentage of each entity’s authorized capital structure. The authorized percentage at December 31, 2023 is 52% at both SDG&E and SoCalGas.

▪SDG&E and SoCalGas each have a revolving credit line that requires it to maintain a ratio of consolidated indebtedness to consolidated capitalization (as defined in the agreements) of no more than 65%, as we discuss in Note 7.

Based on these restrictions, at December 31, 2023, SDG&E’s restricted net assets were $9.6 billion and SoCalGas’ restricted net assets were $7.1 billion, which could not be transferred to Sempra.

Other Sempra

Sempra owns an indirect 100% interest in Oncor Holdings, which owns an 80.25% interest in Oncor. As we discuss in Note 6, we account for our investment in Oncor Holdings under the equity method. Significant restrictions at Oncor that limit the amount that may be paid as dividends to Sempra include:

▪In connection with ring-fencing measures, governance mechanisms and commitments, Oncor may not pay any dividends or make any other distributions (except for contractual tax payments) if a majority of its independent directors or a minority member director determines that it is in the best interests of Oncor to retain such amounts to meet expected future requirements.

▪Oncor must remain in compliance with its debt-to-equity ratio established by the PUCT for ratemaking purposes and may not pay dividends or other distributions (except for contractual tax payments) if that payment would cause it to exceed its PUCT authorized debt-to-equity ratio. Oncor’s authorized regulatory capital structure is 57.5% debt to 42.5% equity at December 31, 2023.

▪If the credit rating on Oncor’s senior secured debt by any of the Rating Agencies falls below BBB (or the equivalent), Oncor will suspend dividends and other distributions (except for contractual tax payments), unless otherwise allowed by the PUCT. At December 31, 2023, all of Oncor’s senior secured ratings were above BBB.

▪Oncor’s revolving credit line and certain of its other debt agreements require it to maintain a consolidated senior debt-to-capitalization ratio of no more than 65% and observe certain affirmative covenants. At December 31, 2023, Oncor was in compliance with these covenants.

Based on these restrictions, at December 31, 2023, Oncor’s restricted net assets were $14.2 billion, which could not be transferred to its owners.

Sempra owns an indirect 50% interest in Sharyland Holdings, which owns a 100% interest in Sharyland Utilities. Significant restrictions related to this equity method investment include:

▪Sharyland Utilities may not pay dividends or make other distributions (except for contractual payments) without the consent of the JV partner.

▪Sharyland Utilities must remain in compliance with the capital structure established by the PUCT for ratemaking purposes and may not pay dividends or other distributions (except for contractual tax payments) if that payment would cause its debt to exceed 60% of its capital structure.

▪Sharyland Utilities has a revolving credit line and two senior notes that require it to maintain a consolidated debt-to-capitalization ratio of no more than 70% and observe certain customary reporting requirements and other affirmative covenants. At December 31, 2023, Sharyland Utilities was in compliance with these and all other covenants.

Based on these restrictions, at December 31, 2023, Sharyland Utilities’ restricted net assets were $123 million, which could not be transferred to its owners.

Significant restrictions at Sempra Infrastructure include:

▪Partnerships and JVs at Sempra Infrastructure may not pay dividends or make other distributions (except for contractual payments) without the consent of the partners.

▪Sempra Infrastructure has an equity method investment in Cameron LNG JV, which has debt agreements that require the establishment and funding of project accounts to which the proceeds of loans, project revenues and other amounts are deposited and applied in accordance with the debt agreements. The debt agreements require the JV to maintain reserve accounts in order to pay the project debt service, and also contain restrictions related to the payment of dividends and other distributions to the members of the JV.

Pursuant to the transfer restriction agreement under the debt agreements, Sempra must retain at least 10% of the indirect fully diluted economic and beneficial ownership interest in Cameron LNG JV. In addition, at all times, a Sempra controlled (but not necessarily wholly owned) subsidiary must directly own 50.2% of the membership interests of Cameron LNG JV.

To support Cameron LNG JV’s obligations under its debt agreements, Cameron LNG JV has granted security over all of its assets, subject to customary exceptions, and all equity interests in Cameron LNG JV were pledged to HSBC Bank USA, National Association, as security trustee for the benefit of all of Cameron LNG JV’s creditors. As a result, an enforcement

action by the lenders taken in accordance with the finance documents could result in the exercise of such security interests by the lenders and the loss of ownership interests in Cameron LNG JV by Sempra and the other project partners.

Under these restrictions, net assets of Cameron LNG JV of approximately $453 million were restricted at December 31, 2023.

▪Mexico requires domestic corporations to maintain minimum legal reserves as a percentage of capital stock, resulting in restricted net assets of $292 million at Sempra Infrastructure’s consolidated Mexican subsidiaries at December 31, 2023.

▪IEnova has restrictions under trust agreements related to pipeline projects to pay for rights-of-way and other costs. Under these restrictions, net assets totaling $2 million were restricted at December 31, 2023.

▪TAG Norte, a 50% owned and unconsolidated JV of Sempra Infrastructure, has a long-term debt agreement that requires it to maintain a reserve account to pay the projects’ debt. Under these restrictions, net assets totaling $215 million were restricted at December 31, 2023.

▪Port Arthur LNG has a seven-year term loan facility agreement and working capital credit facility agreement that require consent of a trustee for the withdrawal or transfer of cash. Under these restrictions, net assets totaling $47 million were restricted at December 31, 2023.

▪Sempra Infrastructure has restricted cash for funds held as collateral in lieu of a customer’s letters of credit. Under this restriction, net assets totaling $102 million were restricted at December 31, 2023.