GENERAL INFORMATION AND OTHER FINANCIAL DATA

9 Months Ended

Sep. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

GENERAL INFORMATION AND OTHER FINANCIAL DATA

GENERAL INFORMATION AND OTHER FINANCIAL DATA

PRINCIPLES OF CONSOLIDATION

Sempra Energy

Sempra Energy’s Condensed Consolidated Financial Statements include the accounts of Sempra Energy, a California-based energy-services holding company, and its consolidated subsidiaries and VIEs. Sempra Global is the holding company for most of our subsidiaries that are not subject to California or Texas utility regulation. Sempra Energy’s businesses were managed within six separate reportable segments until April 2019 and five separate reportable segments thereafter, which we discuss in Note 12. All references in these Notes to our reportable segments are not intended to refer to any legal entity with the same or similar name.

SDG&E

SDG&E’s Condensed Consolidated Financial Statements include its accounts and the accounts of a VIE of which SDG&E was the primary beneficiary until August 23, 2019, at which time SDG&E deconsolidated the VIE. SDG&E’s common stock is wholly owned by Enova Corporation, which is a wholly owned subsidiary of Sempra Energy.

SoCalGas

SoCalGas’ common stock is wholly owned by Pacific Enterprises, which is a wholly owned subsidiary of Sempra Energy.

In this report, we refer to SDG&E and SoCalGas collectively as the California Utilities.

BASIS OF PRESENTATION

This is a combined report of Sempra Energy, SDG&E and SoCalGas. We provide separate information for SDG&E and SoCalGas as required. References in this report to “we,” “us,” “our” and “Sempra Energy Consolidated” are to Sempra Energy and its consolidated entities, unless otherwise indicated by the context. We have eliminated intercompany accounts and transactions within the consolidated financial statements of each reporting entity.

Throughout this report, we refer to the following as Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements when discussed together or collectively:

▪the Condensed Consolidated Financial Statements and related Notes of Sempra Energy and its subsidiaries and VIEs;

▪the Condensed Consolidated Financial Statements and related Notes of SDG&E and its VIE (until deconsolidation of Otay Mesa VIE in August 2019); and

▪the Condensed Financial Statements and related Notes of SoCalGas.

We have prepared the 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. 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 September 30, 2020 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. These adjustments are only of a normal, recurring nature.

All December 31, 2019 balance sheet information in the Condensed Consolidated Financial Statements has been derived from our audited 2019 Consolidated Financial Statements in the Annual Report. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the interim-period-reporting provisions of U.S. GAAP and the SEC.

We describe our significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report and the impact of the adoption of new accounting standards on those policies in Note 2 below. We follow the same accounting policies for interim period reporting purposes.

You should read the information in this report in conjunction with the Annual Report.

Discontinued Operations

In January 2019, our board of directors approved a plan to sell our South American businesses based on our strategic focus on North America. We determined that these businesses, which previously constituted the Sempra South American Utilities segment, and certain activities associated with these businesses, met the held-for-sale criteria. These businesses are presented as discontinued operations, which we discuss further in Note 5, as the sales represent a strategic shift that will have a major effect on our operations and financial results. We completed the sales in the second quarter of 2020. Our discussions in the Notes below relate only to our continuing operations unless otherwise noted.

Regulated Operations

The California Utilities and Sempra Mexico’s natural gas distribution utility, Ecogas, prepare their financial statements in accordance with the provisions of U.S. GAAP governing rate-regulated operations. We discuss revenue recognition and the effects of regulation at our utilities in Notes 3 and 4 below and in Notes 1, 3 and 4 of the Notes to Consolidated Financial Statements in the Annual Report.

Our Sempra Texas Utilities segment is comprised of our equity method investments in holding companies that own interests in regulated electric transmission and distribution utilities in Texas.

Our Sempra Mexico segment includes the operating companies of our subsidiary, IEnova, as well as certain holding companies and risk management activity. Certain business activities at IEnova are regulated by the CRE and meet the regulatory accounting requirements of U.S. GAAP. Pipeline projects under construction at IEnova that meet the regulatory accounting requirements of U.S. GAAP record the impact of AFUDC related to equity. We discuss AFUDC below and in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on Sempra Energy’s Condensed Consolidated Balance Sheets to the sum of such amounts reported on Sempra Energy’s Condensed Consolidated Statements of Cash Flows. We provide information about the nature of restricted cash in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(Dollars in millions)
	September 30,		December 31,
	2020		2019
Sempra Energy Consolidated:
Cash and cash equivalents	$	3,515	$	108
Restricted cash, current	28		31
Restricted cash, noncurrent	3		3
Cash, cash equivalents and restricted cash in discontinued operations	—		75
Total cash, cash equivalents and restricted cash on the Condensed Consolidated Statements of Cash Flows	$	3,546	$	217

In the Sempra Energy Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2020, the ending cash, cash equivalents and restricted cash balance in discontinued operations of $4.6 billion is considered to be cash, cash equivalents and restricted cash for continuing operations following the sales of the South American businesses.

CREDIT LOSSES

We are exposed to credit losses from financial assets measured at amortized cost, including trade and other accounts receivable and amounts due from unconsolidated affiliates. We are also exposed to credit losses from off-balance sheet arrangements through our guarantees of Cameron LNG JV’s debt.

We regularly monitor and evaluate credit losses and record allowances for expected credit losses, if necessary, for trade and other accounts receivable using a combination of factors, including past-due status based on contractual terms, trends in write-offs, the age of the receivable, historical and industry trends, counterparty creditworthiness, economic conditions and specific events, such as bankruptcies. We write off financial assets measured at amortized cost in the period in which we determine they are not recoverable. We record recoveries of amounts previously written off when it is known that they will be recovered.

In connection with the COVID-19 pandemic, the California Utilities have implemented certain measures to assist customers, including suspending service disconnections due to nonpayment for residential and small business customers, waiving late payment fees for business customers, and offering flexible payment plans for customers experiencing difficulty paying their electric or gas bills. As we discuss in Note 4, the CPUC authorized each of the California Utilities to establish a CPPMA to track and request recovery of incremental costs, including uncollectible expenses, associated with complying with residential and small business customer protection measures implemented by the CPUC related to the COVID-19 pandemic.

In June 2020, the CPUC issued a decision in a separate proceeding addressing service disconnections that, among other things, allows each of the California Utilities to establish a two-way balancing account to record the uncollectible expenses associated with residential customers’ inability to pay their electric or gas bills. This decision also directs the California Utilities to establish an AMP that provides successfully participating, income-qualified residential customers with relief from outstanding utility bill amounts. Refer to Note 4 for further discussion.

The California Utilities have recorded increases in their allowances for expected credit losses as of September 30, 2020 primarily related to expected forgiveness of outstanding utility bill amounts for residential customers eligible under the AMP. Our businesses will continue to monitor macroeconomic factors and customer payment patterns when evaluating their allowances for credit losses in future reporting periods, which may increase significantly due to the effects of the COVID-19 pandemic or other factors.

We provide below allowances and changes in allowances for credit losses for trade and other accounts receivable, excluding allowances related to amounts due from unconsolidated affiliates and off-balance sheet arrangements, which we discuss separately below the table.

TRADE AND OTHER ACCOUNTS RECEIVABLE – ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
	Sempra Energy Consolidated(1)		SDG&E(2)		SoCalGas(3)
Allowances for credit losses at December 31, 2019	$	29	$	14	$	15
Incremental allowance upon adoption of ASU 2016-13	1		—		—
Provisions for expected credit losses	84		44		40
Write-offs	(11)		(6)		(5)
Allowances for credit losses at September 30, 2020	$	103	$	52	$	50

(1)     Balance at September 30, 2020 includes $75 million and $28 million in Accounts Receivable – Trade, Net and Accounts Receivable – Other, Net, respectively.

(2)    Balance at September 30, 2020 includes $37 million and $15 million in Accounts Receivable – Trade, Net and Accounts Receivable – Other, Net, respectively.

(3)    Balance at September 30, 2020 includes $37 million and $13 million in Accounts Receivable – Trade, Net and Accounts Receivable – Other, Net, respectively.

For amounts due from unconsolidated affiliates and off-balance sheet arrangements, on a quarterly basis, we evaluate credit losses and record allowances for expected credit losses, if necessary, based on credit quality indicators such as external credit ratings, published default rate studies, the maturity date of the instrument and past delinquencies. However, we do not record allowances for expected credit losses related to accrued interest receivable on loans due from unconsolidated affiliates because we write off such amounts, if any, through a reversal of interest income in the period we determine such amounts are uncollectible. In the absence of external credit ratings, we may utilize an internally developed credit rating based on our analysis of a counterparty’s financial statements to determine our expected credit losses.

As we discuss below in “Transactions with Affiliates,” we have loans due from unconsolidated affiliates with varying tenors, interest rates and currencies. We provide below the changes in allowances for credit losses for loans and other amounts due from unconsolidated affiliates.

AMOUNTS DUE FROM UNCONSOLIDATED AFFILIATES – ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
	Sempra Energy Consolidated(1)
Allowances for credit losses at December 31, 2019	$	—
Allowance established upon adoption of ASU 2016-13	6
Reduction to expected credit losses	(3)
Allowances for credit losses at September 30, 2020	$	3

(1)    Balance at September 30, 2020 includes negligible amounts and $3 million in Due from Unconsolidated Affiliates – Current and Due from Unconsolidated Affiliates – Noncurrent, respectively.

As we discuss in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report, Sempra Energy has provided guarantees for a maximum aggregate amount of $4.0 billion associated with Cameron LNG JV’s debt obligations. We established a liability for credit losses of $6 million for this off-balance sheet arrangement upon adoption of ASU 2016-13 on January 1, 2020 and we subsequently reduced this liability by $3 million in the nine months ended September 30, 2020 through a reduction to credit loss expense, which is included in O&M on the Sempra Energy Condensed Consolidated Statement of Operations. At September 30, 2020, expected credit losses of $3 million are included in Other Current Liabilities on the Sempra Energy Condensed Consolidated Balance Sheet.

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 segments 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.

In the nine months ended September 30, 2020, four customers each represented 10% or more of Sempra Mexico’s revenues (including intercompany transactions with affiliates consolidated by Sempra Energy). Additionally, for the same period, certain of our unconsolidated equity method investees (Oncor Holdings, Cameron LNG JV and IMG JV) had customers that each represented 10% or more of their respective revenues.

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.

INVENTORIES

The components of inventories are as follows:

INVENTORY BALANCES
(Dollars in millions)
	Natural gas				LNG				Materials and supplies				Total
	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Sempra Energy Consolidated	$	127	$	110	$	2	$	9	$	180	$	158	$	309	$	277
SDG&E	—		1		—		—		105		93		105		94
SoCalGas	104		90		—		—		56		46		160		136

WILDFIRE FUND

On July 12, 2019, the Wildfire Legislation was signed into law to address certain issues related to catastrophic wildfires in the State of California and their impact on electric IOUs. We discuss the Wildfire Legislation further in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

In a complaint filed in U.S. District Court for the Northern District of California in July 2019, plaintiffs seek to invalidate AB 1054, which established the Wildfire Fund, based on allegations that the legislation violates federal law. That court dismissed the complaint and the plaintiffs have petitioned the U.S. Court of Appeals for the Ninth Circuit to review the dismissal.

In June 2020, the CPUC approved SDG&E’s 2020 wildfire mitigation plan, which will be effective until the CPUC approves a new plan. In addition, on September 14, 2020, SDG&E received its 2020 safety certification from the Wildfire Safety Division of the CPUC. The certificate is valid for 12 months from the issue date.

In July 2020, PG&E received bankruptcy court approval to participate in the Wildfire Fund and has made its required contributions to the Wildfire Fund. As a result of PG&E’s participation, the Wildfire Fund will be funded up to $21 billion.

Wildfire Fund Asset and Obligation

In the third quarter of 2019, SDG&E recorded both a Wildfire Fund asset and a related obligation of $451.5 million for its commitment to make shareholder contributions to the Wildfire Fund, measured at present value as of July 25, 2019 (the date by which both Edison and SDG&E opted to contribute to the Wildfire Fund). 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 participating IOUs. The estimated period of benefit of the Wildfire Fund asset is 15 years. SDG&E expects to make annual shareholder contributions of $12.9 million through December 31, 2028. SDG&E accretes the present value of the Wildfire Fund obligation until the liability is settled.

SDG&E periodically evaluates the estimated period of benefit of the Wildfire Fund asset based on actual experience and changes in assumptions. SDG&E may recognize a reduction of its Wildfire Fund asset and record 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, would decrease the Wildfire Fund asset and remaining available coverage. Although California has experienced some of the largest wildfires in its history in 2020 (measured by acres burned), including fires in each participating IOU’s service territory, SDG&E is not aware of any claims made by any participating IOU requiring a reduction of the Wildfire Fund asset.

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

WILDFIRE FUND
(Dollars in millions)
	Location					September 30, 2020		December 31, 2019
Wildfire Fund asset:
Current	Other Current Assets(1)					$	29	$	29
Noncurrent	Wildfire Fund					371		392
Wildfire Fund obligation:
Current	Other Current Liabilities					$	13	$	13
Noncurrent	Deferred Credits and Other					87		86
		Three months ended September 30,				Nine months ended September 30,
		2020		2019		2020		2019
Amortization of Wildfire Fund asset	Operation and Maintenance	$	7	$	8	$	21	$	8
Accretion of Wildfire Fund obligation	Operation and Maintenance	—		—		1		—

(1)    Included in Prepaid Expenses for SDG&E.

CAPITALIZED FINANCING COSTS

Capitalized financing costs include capitalized interest costs and AFUDC related to both debt and equity financing of construction projects. We capitalize interest costs incurred to finance capital projects and interest at equity method investments that have not commenced planned principal operations.

The table below summarizes capitalized interest and AFUDC.

CAPITALIZED FINANCING COSTS
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Sempra Energy Consolidated	$	51	$	46	$	149	$	144
SDG&E	26		19		79		56
SoCalGas	14		13		39		35

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 thereby Sempra Energy, is the primary beneficiary.

SDG&E has agreements under which it purchases power generated by facilities for which it supplies all of the natural gas to fuel the power plant (i.e., tolling agreements). SDG&E’s obligation to absorb natural gas costs may be a significant variable interest. In addition, SDG&E has the power to direct the dispatch of electricity generated by these facilities. Based on our analysis, the ability to direct the dispatch of electricity may have the most significant impact on the economic performance of the entity owning the generating facility because of the associated exposure to the cost of natural gas, which fuels the plants, and the value of electricity produced. To the extent that SDG&E (1) is obligated to purchase and provide fuel to operate the facility, (2) has the power to direct the dispatch, and (3) purchases all of the output from the facility for a substantial portion of the facility’s useful

life, SDG&E may be the primary beneficiary of the entity owning the generating facility. SDG&E determines if it is the primary beneficiary in these cases based on a qualitative approach in which it considers the operational characteristics of the facility, including its expected power generation output relative to its capacity to generate and the financial structure of the entity, among other factors. If SDG&E determines that it is the primary beneficiary, SDG&E and Sempra Energy consolidate the entity that owns the facility as a VIE.

In addition to tolling agreements, other variable interests involve various elements of fuel and power costs, and other components of cash flows expected to be paid to or received by our counterparties. In most of these cases, the expectation of variability is not substantial, and SDG&E generally does not have the power to direct activities, including the operation and maintenance activities of the generating facility, that most significantly impact the economic performance of the other VIEs. If our ongoing evaluation of these VIEs were to conclude that SDG&E becomes the primary beneficiary and consolidation by SDG&E becomes necessary, the effects could be significant to the financial position and liquidity of SDG&E and Sempra Energy.

SDG&E determined that none of its contracts resulted in SDG&E being the primary beneficiary of a VIE at September 30, 2020 and December 31, 2019. The carrying amounts of the assets and liabilities that relate to SDG&E’s involvement with VIEs where SDG&E is not the primary beneficiary are included in PP&E and finance lease liabilities with balances of $1,242 million and $1,255 million at September 30, 2020 and December 31, 2019, respectively. SDG&E recovers costs incurred on PPAs, tolling agreements and other variable interests through CPUC-approved long-term power procurement plans. SDG&E has no residual interest in the respective entities and has not provided or guaranteed any debt or equity support, liquidity arrangements, performance guarantees or other commitments associated with these contracts other than the purchase commitments described in Note 16 of the Notes to Consolidated Financial Statements in the Annual Report. As a result, SDG&E’s potential exposure to loss from its variable interest in these VIEs is not significant.

Sempra Texas Utilities

Our 100% interest in Oncor Holdings is a VIE that owns an 80.25% interest in Oncor. Sempra Energy is not the primary beneficiary of the VIE because of the structural and operational ring-fencing and governance measures in place that prevent us from having the power to direct the significant activities of Oncor Holdings. As a result, we do not consolidate Oncor Holdings and instead account for our ownership interest as an equity method investment. See Note 6 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 $11,962 million at September 30, 2020 and $11,519 million at December 31, 2019.

Sempra Mexico

Sempra Mexico’s businesses also enter into arrangements that could include variable interests. We evaluate these arrangements and applicable entities based on the qualitative and quantitative analyses described above. Certain of these entities are service or project companies that are VIEs because the total equity at risk is not sufficient for the entities to finance their activities without additional subordinated financial support. If we are the primary beneficiary of these companies, we consolidate them. At December 31, 2019, Sempra Mexico consolidated a VIE with assets totaling approximately $126 million, which consisted primarily of PP&E and other long-term assets.

Sempra LNG

Cameron LNG JV is a VIE principally due to contractual provisions that transfer certain risks to customers. Sempra Energy is not the primary beneficiary of the VIE because we do not have the power to direct the most significant activities of Cameron LNG JV, and 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 $433 million at September 30, 2020 and $1,256 million at December 31, 2019. Our maximum exposure to loss, which fluctuates over time, includes the carrying value of our investment and guarantees that we discuss in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

As we discuss in Note 6, in July 2020, Sempra Energy entered into a Support Agreement for the benefit of CFIN that is a VIE. Since we do not have the power to direct the most significant activities of the VIE, we are not the primary beneficiary. The conditional obligations of the Support Agreement represent a variable interest that we measure at fair value on a recurring basis (see Note 9). Sempra Energy’s maximum exposure to loss under the terms of the Support Agreement is $979 million.

PENSION AND OTHER POSTRETIREMENT BENEFITS

Settlement Accounting for Lump Sum Payments

Sempra Energy recorded settlement charges of $13 million and $22 million in the three months and nine months ended September 30, 2020, respectively, in net periodic benefit cost for lump sum payments from its nonqualified pension plan that were in excess of the plan’s service cost plus interest cost.

In the nine months ended September 30, 2019, Sempra Energy recorded settlement charges of $22 million in net periodic benefit cost for lump sum payments from its nonqualified pension plan that were in excess of the plan’s service cost plus interest cost.

Net Periodic Benefit Cost

The following three tables provide the components of net periodic benefit cost.

NET PERIODIC BENEFIT COST – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
	Pension benefits				Other postretirement benefits
	Three months ended September 30,
	2020		2019		2020		2019
Service cost	$	31	$	27	$	5	$	4
Interest cost	32		34		8		9
Expected return on assets	(41)		(36)		(14)		(17)
Amortization of:
Prior service cost (credit)	3		3		(1)		—
Actuarial loss (gain)	9		8		(2)		(3)
Settlement charges	13		4		—		—
Net periodic benefit cost (credit)	47		40		(4)		(7)
Regulatory adjustments	37		3		4		8
Total expense recognized	$	84	$	43	$	—	$	1
	Nine months ended September 30,
	2020		2019		2020		2019
Service cost	$	97	$	82	$	14	$	12
Interest cost	97		104		24		27
Expected return on assets	(126)		(108)		(41)		(52)
Amortization of:
Prior service cost (credit)	9		9		(2)		—
Actuarial loss (gain)	26		29		(7)		(8)
Settlement charges	22		26		—		—
Net periodic benefit cost (credit)	125		142		(12)		(21)
Regulatory adjustments	31		(30)		12		22
Total expense recognized	$	156	$	112	$	—	$	1

NET PERIODIC BENEFIT COST – SDG&E
(Dollars in millions)
	Pension benefits				Other postretirement benefits
	Three months ended September 30,
	2020		2019		2020		2019
Service cost	$	7	$	7	$	1	$	1
Interest cost	7		9		2		1
Expected return on assets	(12)		(9)		(3)		(3)
Amortization of:
Prior service cost	1		—		—		1
Actuarial loss (gain)	1		2		(1)		—
Net periodic benefit cost (credit)	4		9		(1)		—
Regulatory adjustments	22		(1)		1		—
Total expense recognized	$	26	$	8	$	—	$	—
	Nine months ended September 30,
	2020		2019		2020		2019
Service cost	$	23	$	22	$	3	$	3
Interest cost	22		26		5		5
Expected return on assets	(37)		(29)		(8)		(9)
Amortization of:
Prior service cost	2		2		—		2
Actuarial loss (gain)	3		9		(2)		(1)
Net periodic benefit cost (credit)	13		30		(2)		—
Regulatory adjustments	28		(13)		2		—
Total expense recognized	$	41	$	17	$	—	$	—

NET PERIODIC BENEFIT COST – SOCALGAS
(Dollars in millions)
	Pension benefits				Other postretirement benefits
	Three months ended September 30,
	2020		2019		2020		2019
Service cost	$	20	$	17	$	3	$	3
Interest cost	22		23		7		6
Expected return on assets	(27)		(24)		(11)		(14)
Amortization of:
Prior service cost (credit)	2		2		(1)		(1)
Actuarial loss (gain)	6		3		(1)		(2)
Net periodic benefit cost (credit)	23		21		(3)		(8)
Regulatory adjustments	15		4		3		8
Total expense recognized	$	38	$	25	$	—	$	—
	Nine months ended September 30,
	2020		2019		2020		2019
Service cost	$	64	$	51	$	10	$	9
Interest cost	66		68		19		20
Expected return on assets	(81)		(71)		(32)		(43)
Amortization of:
Prior service cost (credit)	6		6		(2)		(2)
Actuarial loss (gain)	19		14		(5)		(6)
Net periodic benefit cost (credit)	74		68		(10)		(22)
Regulatory adjustments	3		(17)		10		22
Total expense recognized	$	77	$	51	$	—	$	—

Benefit Plan Contributions

The following table shows our year-to-date contributions to pension and other postretirement benefit plans and the amounts we expect to contribute in 2020.

BENEFIT PLAN CONTRIBUTIONS
(Dollars in millions)
	Sempra Energy Consolidated		SDG&E		SoCalGas
Contributions through September 30, 2020:
Pension plans	$	202	$	39	$	76
Other postretirement benefit plans	6		1		1
Total expected contributions in 2020:
Pension plans	$	298	$	54	$	155
Other postretirement benefit plans	8		1		1

RABBI TRUST

In support of its Supplemental Executive Retirement, Cash Balance Restoration and Deferred Compensation Plans, Sempra Energy maintains dedicated assets, including a Rabbi Trust and investments in life insurance contracts, which totaled $469 million and $488 million at September 30, 2020 and December 31, 2019, respectively.

SEMPRA ENERGY EARNINGS PER COMMON SHARE

Basic EPS is calculated by dividing earnings attributable to common shares (from both continuing and discontinued operations) by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

EARNINGS PER COMMON SHARE COMPUTATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Numerator for continuing operations:
Income from continuing operations, net of income tax	$	428	$	653	$	1,823	$	1,570
Earnings attributable to noncontrolling interests	(22)		(52)		(191)		(121)
Preferred dividends	(48)		(36)		(121)		(107)
Preferred dividends of subsidiary	—		—		(1)		(1)
Earnings from continuing operations attributable to common shares for basic EPS	358		565		1,510		1,341
Add back dividends for dilutive mandatory convertible preferred stock(1)	—		26		—		—
Earnings from continuing operations attributable to common shares for diluted EPS	$	358	$	591	$	1,510	$	1,341
Numerator for discontinued operations:
(Loss) income from discontinued operations, net of income tax	$	(7)	$	256	$	1,850	$	292
Earnings attributable to noncontrolling interests	—		(8)		(10)		(25)
(Losses) earnings from discontinued operations attributable to common shares	$	(7)	$	248	$	1,840	$	267
Numerator for earnings:
Earnings attributable to common shares for basic EPS	$	351	$	813	$	3,350	$	1,608
Add back dividends for dilutive mandatory convertible preferred stock(1)	—		26		—		—
Earnings attributable to common shares for diluted EPS	$	351	$	839	$	3,350	$	1,608
Denominator:
Weighted-average common shares outstanding for basic EPS(2)	289,490		277,360		291,771		275,684
Dilutive effect of stock options and RSUs(3)	1,092		1,636		1,164		1,381
Dilutive effect of common shares sold forward	—		3,555		—		2,744
Dilutive effect of mandatory convertible preferred stock	—		13,238		—		—
Weighted-average common shares outstanding for diluted EPS	290,582		295,789		292,935		279,809
Basic EPS:
Earnings from continuing operations	$	1.23	$	2.04	$	5.17	$	4.86
(Losses) earnings from discontinued operations	$	(0.02)	$	0.89	$	6.31	$	0.97
Earnings	$	1.21	$	2.93	$	11.48	$	5.83
Diluted EPS:
Earnings from continuing operations	$	1.23	$	2.00	$	5.15	$	4.79
(Losses) earnings from discontinued operations	$	(0.02)	$	0.84	$	6.28	$	0.95
Earnings	$	1.21	$	2.84	$	11.43	$	5.74

(1)    In the three months ended September 30, 2019, due to the dilutive effect of our series A preferred stock, the numerator used to calculate diluted EPS includes an add-back of dividends declared on our series A preferred stock.

(2)    Includes 535 and 618 average fully vested RSUs held in our Deferred Compensation Plan for the three months ended September 30, 2020 and 2019, respectively, and 536 and 615 of such RSUs for the nine months ended September 30, 2020 and 2019, respectively. These fully vested RSUs are included in weighted-average common shares outstanding for basic EPS because there are no conditions under which the corresponding shares will not be issued.

(3)    Due to market fluctuations of both Sempra Energy common stock and the comparative indices used to determine the vesting percentage of our total shareholder return performance-based RSUs, which we discuss in Note 10 of the Notes to Consolidated Financial Statements in the Annual Report, dilutive RSUs may vary widely from period-to-period.

The potentially dilutive impact from stock options and RSUs is calculated under the treasury stock method. Under this method, proceeds based on the exercise price and unearned compensation are assumed to be used to repurchase shares on the open market at the average market price for the period, reducing the number of potential new shares to be issued and sometimes causing an antidilutive effect. The computation of diluted EPS for the three months and nine months ended September 30, 2020 excludes 142,100 and 204,426 potentially dilutive shares, respectively, because to include them would be antidilutive for the period. The computation of diluted EPS for the three months and nine months ended September 30, 2019 excludes zero and 107,042, respectively, of such potentially dilutive shares. However, these shares could potentially dilute basic EPS in the future.

The potentially dilutive impact from the forward sale of our common stock pursuant to forward sale agreements that we entered into in 2018 and fully settled by the end of 2019 is reflected in our diluted EPS calculation using the treasury stock method until settlement. After settlement, those shares are included in weighted-average common shares outstanding for basic EPS.

The potentially dilutive impact from mandatory convertible preferred stock is calculated under the if-converted method. The computation of diluted EPS for the three months and nine months ended September 30, 2020 excludes 19,292,641 potentially dilutive shares and for the three months and nine months ended September 30, 2019 excludes 4,219,350 and 17,457,000 potentially dilutive shares, respectively, because to include them would be antidilutive for those periods. However, these shares could potentially dilute basic EPS in the future.

Pursuant to our Sempra Energy share-based compensation plans, the compensation committee of Sempra Energy’s board of directors granted 154,860 nonqualified stock options that vest over a three-year period, 265,236 performance-based RSUs and 163,475 service-based RSUs in the nine months ended September 30, 2020, primarily in January.

We discuss share-based compensation plans and related awards and the terms and conditions of Sempra Energy’s equity securities further in Notes 10, 13 and 14 of the Notes to Consolidated Financial Statements in the Annual Report.

COMPREHENSIVE INCOME

The following tables present the changes in AOCI by component and amounts reclassified out of AOCI to net income, excluding amounts attributable to NCI.

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1)
(Dollars in millions)
	Foreign currency translation adjustments		Financial instruments		Pension and other postretirement benefits		Total accumulated other comprehensive income (loss)
	Three months ended September 30, 2020 and 2019
Sempra Energy Consolidated(2):
Balance as of June 30, 2020	$	(83)	$	(361)	$	(98)	$	(542)
OCI before reclassifications	6		14		(7)		13
Amounts reclassified from AOCI	—		4		12		16
Net OCI(3)	6		18		5		29
Balance as of September 30, 2020	$	(77)	$	(343)	$	(93)	$	(513)
Balance as of June 30, 2019	$	(518)	$	(213)	$	(117)	$	(848)
OCI before reclassifications	(91)		(41)		(7)		(139)
Amounts reclassified from AOCI	—		4		5		9
Net OCI	(91)		(37)		(2)		(130)
Balance as of September 30, 2019	$	(609)	$	(250)	$	(119)	$	(978)
SDG&E:
Balance as of June 30, 2020 and September 30, 2020					$	(12)	$	(12)
Balance as of June 30, 2019 and September 30, 2019					$	(11)	$	(11)
SoCalGas:
Balance as of June 30, 2020 and September 30, 2020			$	(13)	$	(9)	$	(22)
Balance as of June 30, 2019			$	(14)	$	(6)	$	(20)
Amounts reclassified from AOCI			1		—		1
Net OCI			1		—		1
Balance as of September 30, 2019			$	(13)	$	(6)	$	(19)

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

(2)    Includes discontinued operations in 2019.

(3)    Total AOCI includes $5 million associated with purchases of NCI, which we discuss below in “Other Noncontrolling Interests – Sempra Mexico,” and which does not impact the Condensed Consolidated Statement of Comprehensive Income (Loss).

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1) (CONTINUED)
(Dollars in millions)
	Foreign currency translation adjustments		Financial instruments		Pension and other postretirement benefits		Total accumulated other comprehensive income (loss)
	Nine months ended September 30, 2020 and 2019
Sempra Energy Consolidated(2):
Balance as of December 31, 2019	$	(607)	$	(215)	$	(117)	$	(939)
OCI before reclassifications(3)	(115)		(153)		(5)		(273)
Amounts reclassified from AOCI(3)	645		25		29		699
Net OCI(4)	530		(128)		24		426
Balance as of September 30, 2020	$	(77)	$	(343)	$	(93)	$	(513)
Balance as of December 31, 2018	$	(564)	$	(82)	$	(118)	$	(764)
Adoption of ASU 2018-02	—		(25)		(17)		(42)
OCI before reclassifications(3)	(45)		(153)		(13)		(211)
Amounts reclassified from AOCI(3)	—		10		29		39
Net OCI	(45)		(143)		16		(172)
Balance as of September 30, 2019	$	(609)	$	(250)	$	(119)	$	(978)
SDG&E:
Balance as of December 31, 2019					$	(16)	$	(16)
Amounts reclassified from AOCI(3)					4		4
Net OCI					4		4
Balance as of September 30, 2020					$	(12)	$	(12)
Balance as of December 31, 2018					$	(10)	$	(10)
Adoption of ASU 2018-02					(2)		(2)
Amounts reclassified from AOCI					1		1
Net OCI					1		1
Balance as of September 30, 2019					$	(11)	$	(11)
SoCalGas:
Balance as of December 31, 2019			$	(13)	$	(10)	$	(23)
Amounts reclassified from AOCI			—		1		1
Net OCI			—		1		1
Balance as of September 30, 2020			$	(13)	$	(9)	$	(22)
Balance as of December 31, 2018			$	(12)	$	(8)	$	(20)
Adoption of ASU 2018-02			(2)		(2)		(4)
Amounts reclassified from AOCI(3)			1		4		5
Net OCI			1		4		5
Balance as of September 30, 2019			$	(13)	$	(6)	$	(19)

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

(2)    Includes discontinued operations.

(3)    Pension and Other Postretirement Benefits and Total AOCI include $3 million in transfers of liabilities from SDG&E to Sempra Energy in 2020 and $4 million in transfers of liabilities from SoCalGas to Sempra Energy in 2019 related to the nonqualified pension plans.

(4)    Total AOCI includes $5 million associated with purchases of NCI, which we discuss below in “Other Noncontrolling Interests – Sempra Mexico,” and which does not impact the Condensed Consolidated Statement of Comprehensive Income (Loss).

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 September 30,
	2020		2019
Sempra Energy Consolidated:
Financial instruments:
Interest rate and foreign exchange instruments(1)	$	3	$	1	Interest Expense
	(4)		5		Other Income (Expense), Net
Interest rate and foreign exchange instruments	5		2		Equity Earnings
Total before income tax	4		8
	—		(2)		Income Tax Expense
Net of income tax	4		6
	—		(2)		Earnings Attributable to Noncontrolling Interests
	$	4	$	4
Pension and other postretirement benefits(2):
Amortization of actuarial loss	$	3	$	3	Other Income (Expense), Net
Amortization of prior service cost	1		1		Other Income (Expense), Net
Settlement charges	13		4		Other Income (Expense), Net
Total before income tax	17		8
	(5)		(3)		Income Tax Expense
Net of income tax	$	12	$	5
Total reclassifications for the period, net of tax	$	16	$	9
SDG&E:
Financial instruments:
Interest rate instruments(1)	$	—	$	1	Interest Expense
	—		(1)		Earnings Attributable to Noncontrolling Interest
Total reclassifications for the period, net of tax	$	—	$	—
SoCalGas:
Financial instruments:
Interest rate instruments	$	—	$	1	Interest Expense
Total reclassifications for the period, net of tax	$	—	$	1

(1)    Amounts in 2019 include Otay Mesa VIE. All of SDG&E’s interest rate derivative activity relates to Otay Mesa VIE.

(2)    Amounts are included in the computation of net periodic benefit cost (see “Pension and Other Postretirement Benefits” above).

RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (CONTINUED)
(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
	Nine months ended September 30,
	2020		2019
Sempra Energy Consolidated:
Foreign currency translation adjustments	$	645	$	—	(Loss) Income from Discontinued Operations, Net of Income Tax
Financial instruments:
Interest rate and foreign exchange instruments(1)	$	7	$	2	Interest Expense
	33		—		Other Income (Expense), Net
Interest rate instruments	—		10		(Loss) Gain on Sale of Assets
Interest rate and foreign exchange instruments	6		3		Equity Earnings
Foreign exchange instruments	(2)		1		Revenues: Energy-Related Businesses
	(1)		—		Other Income (Expense), Net
Total before income tax	43		16
	(12)		(3)		Income Tax Expense
Net of income tax	31		13
	(6)		(3)		Earnings Attributable to Noncontrolling Interests
	$	25	$	10
Pension and other postretirement benefits(2):
Amortization of actuarial loss	$	6	$	7	Other Income (Expense), Net
Amortization of actuarial loss	6		—		(Loss) Income from Discontinued Operations, Net of Income Tax
Amortization of prior service cost	3		2		Other Income (Expense), Net
Settlement charges	22		26		Other Income (Expense), Net
Total before income tax	37		35
	(2)		—		(Loss) Income from Discontinued Operations, Net of Income Tax
	(9)		(10)		Income Tax Expense
Net of income tax	$	26	$	25
Total reclassifications for the period, net of tax	$	696	$	35
SDG&E:
Financial instruments:
Interest rate instruments(1)	$	—	$	3	Interest Expense
	—		(3)		Earnings Attributable to Noncontrolling Interest
	$	—	$	—
Pension and other postretirement benefits(2):
Amortization of prior service cost	$	1	$	1	Other Income, Net
Total reclassifications for the period, net of tax	$	1	$	1
SoCalGas:
Financial instruments:
Interest rate instruments	$	—	$	1	Interest Expense
Pension and other postretirement benefits(2):
Amortization of prior service cost	$	1	$	—	Other Income, Net
Total reclassifications for the period, net of tax	$	1	$	1

(1)    Amounts in 2019 include Otay Mesa VIE. All of SDG&E’s interest rate derivative activity relates to Otay Mesa VIE.

(2)    Amounts are included in the computation of net periodic benefit cost (see “Pension and Other Postretirement Benefits” above).

SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS

Sempra Energy Series A Preferred Stock

The terms of our series A preferred stock require a notice to holders when the aggregate adjustment to the conversion rates at which shares of series A preferred stock are convertible into shares of Sempra Energy common stock is more than 1%. On July 6, 2020, we notified the holders of the series A preferred stock of such an adjustment. These adjustments, which resulted from the incremental impact of our second quarter dividend declared on our common stock and which became effective as of June 25, 2020, the ex-dividend date for such dividend, include adjustments to the minimum and maximum conversion rates and the related initial and threshold appreciation prices as shown in the following table:

CONVERSION RATES
Applicable market value per share of our common stock	Conversion rate (number of shares of our common stock to be received upon conversion of each share of series A preferred stock)
Greater than $129.668 (which is the adjusted threshold appreciation price)	0.7712 shares (equal to $100.00 divided by the adjusted threshold appreciation price)
Equal to or less than $129.668 but greater than or equal to $105.8425	Between 0.7712 and 0.9448 shares, determined by dividing $100.00 by the applicable market value of our common stock
Less than $105.8425 (which is the adjusted initial price)	0.9448 shares (equal to $100.00 divided by the adjusted initial price)

Sempra Energy Series C Preferred Stock

On June 19, 2020, we issued 900,000 shares of our 4.875% fixed-rate reset cumulative redeemable perpetual preferred stock, series C (series C preferred stock) in a registered public offering at a price to the public of $1,000 per share and received net proceeds of $889 million after deducting the underwriting discount and equity issuance costs of $11 million. We used the net proceeds for working capital and other general corporate purposes, including the repayment of indebtedness.

Liquidation Preference

Each share of series C preferred stock has a liquidation preference of $1,000 plus any accumulated and unpaid dividends (whether or not declared) on such share.

Redemption at the Option of Sempra Energy

The shares of series C preferred stock are perpetual and have no maturity date. However, we may, at our option, redeem the series C preferred stock in whole or in part, from time to time, on any day during the period from and including the July 15 immediately preceding October 15, 2025 and October 15 of every fifth year after 2025 through and including such October 15 at a redemption price in cash equal to $1,000 per share. Additionally, in the event that a credit rating agency then publishing a rating for us makes certain amendments, clarifications or changes to the criteria it uses to assign equity credit to securities such as the series C preferred stock (Ratings Event), we may redeem the series C preferred stock, in whole but not in part, at any time within 120 days after the conclusion of any review or appeal process instituted by us following the occurrence of the Ratings Event or, if no such review or appeal process is available or sought, the occurrence of such Ratings Event, at a redemption price in cash equal to $1,020 per share (102% of the liquidation preference per share).

Dividends

Dividends on the series C preferred stock, when, as and if declared by our board of directors or an authorized committee thereof, are payable in cash, on a cumulative basis, semi-annually in arrears beginning on October 15, 2020. Dividends on the series C preferred stock will be cumulative:

▪whether or not we have earnings;

▪whether or not the payment of such dividends is then permitted under California law;

▪whether or not such dividends are authorized or declared; and

▪whether or not any agreements to which we are a party prohibit the current payment of dividends, including any agreement relating to our indebtedness.

We accrue dividends on the series C preferred stock on a monthly basis. The dividend rate from and including June 19, 2020 to, but excluding, October 15, 2025 is 4.875% per annum of the $1,000 liquidation preference per share. The dividend rate will reset on October 15, 2025 and on October 15 of every fifth year after 2025 and, for each five-year period following such reset dates, will be a per annum rate equal to the Five-year U.S. Treasury Rate as of the second business day prior to such reset date, plus a spread of 4.550%, of the $1,000 liquidation preference per share.

Voting Rights

The holders of series C preferred stock do not have any voting rights, except with respect to any authorization, creation or increase in the authorized amount of any class or series of capital stock ranking senior to the series C preferred stock, certain amendments to the terms of the series C preferred stock, in certain other limited circumstances and as otherwise specifically required by California law. In addition, whenever dividends on any shares of series C preferred stock have not been declared and paid or have been declared but not paid for three or more dividend periods, whether or not consecutive, the authorized number of directors on our board of directors will automatically be increased by two and the holders of the series C preferred stock, voting together as a single class with holders of any and all other outstanding series of preferred stock of equal rank having similar voting rights, will be entitled to elect two directors to fill such two newly created directorships. This voting right will terminate when all accumulated and unpaid dividends on the series C preferred stock have been paid in full and, upon such termination and the termination of the same voting rights of all other holders of outstanding series of preferred stock that have such voting rights, the term of office of each director elected pursuant to such rights will terminate and the authorized number of directors will automatically decrease by two, subject to the revesting of such rights in the event of each subsequent nonpayment.

Ranking

The series C preferred stock ranks, with respect to dividend rights and distribution rights upon our liquidation, winding-up or dissolution:

▪senior to our common stock and each other class or series of our capital stock established in the future, unless the terms of such capital stock expressly provide otherwise;

▪on parity with our outstanding series A preferred stock and series B preferred stock and each class or series of our capital stock established in the future if the terms of such capital stock provide that it ranks on parity with the series C preferred stock;

•junior to each class or series of our capital stock established in the future, if the terms of such capital stock provide that it ranks senior to the series C preferred stock;

▪junior to our existing and future indebtedness and other liabilities; and

•structurally subordinated to all existing and future indebtedness and other liabilities of our subsidiaries and capital stock of our subsidiaries held by third parties.

Settlement of Sempra Energy Common Stock Forward Sale Agreements

In the third quarter of 2019, we received $728 million (net of underwriting discounts of $13 million) from the settlement of 7,156,185 shares of our common stock at a forward sale price of $101.74 related to our January 2018 offering. We provide additional information regarding the common stock offering in Note 14 of the Notes to Consolidated Financial Statements in the Annual Report.

Sempra Energy Common Stock Repurchases

On September 11, 2007, our board of directors authorized the repurchase of shares of our common stock, provided that the amounts spent for such purpose do not exceed the greater of $2 billion or amounts spent to purchase no more than 40 million shares. On July 1, 2020, we entered into an ASR program under which we prepaid $500 million to repurchase shares of our common stock in a share forward transaction. The total number of shares purchased was determined by dividing the $500 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 July 2, 2020 through August 4, 2020, minus a fixed discount. The program was completed on August 4, 2020 with an aggregate of 4,089,375 shares of Sempra Energy common stock repurchased at an average price of $122.27 per share. Following the completion of the ASR program, the aggregate dollar amount authorized by the September 11, 2007 share repurchase authorization was exhausted.

On July 6, 2020, our board of directors authorized the repurchase of shares of our common stock at any time and from time to time in an aggregate amount not to exceed the lesser of $2 billion or amounts spent to purchase no more than 25 million shares. No shares have been repurchased under this authorization.

SoCalGas Preferred Stock

The preferred stock at SoCalGas is presented at Sempra Energy as a NCI. Sempra Energy records charges against income related to NCI for preferred dividends declared by SoCalGas. We provide additional information regarding preferred stock in Note 13 of the Notes to Consolidated Financial Statements in the Annual Report.

Other Noncontrolling Interests

SDG&E

As we discuss in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report, on August 23, 2019, SDG&E and Sempra Energy deconsolidated Otay Mesa VIE after SDG&E determined that it was no longer the primary beneficiary of the VIE.

Sempra Mexico

In the nine months ended September 30, 2020, IEnova repurchased 57,547,381 shares of its outstanding common stock held by NCI for $167 million, resulting in an increase in Sempra Energy’s ownership interest in IEnova from 66.6% at December 31, 2019 to 69.2% at September 30, 2020. Since October 1, 2020, IEnova repurchased a total of 19,575,399 shares for $64 million.

In the nine months ended September 30, 2019, IEnova repurchased 2,620,000 shares of its outstanding common stock held by NCI for $10 million resulting in an increase in Sempra Energy’s ownership interest in IEnova from 66.5% at December 31, 2018 to 66.6% at September 30, 2019.

In the first quarter of 2020, IEnova purchased additional shares in ICM Ventures Holdings B.V. for $9 million, increasing its ownership from 53.7% to 82.5%. ICM Ventures Holdings B.V. owns certain permits and land where IEnova is building terminals for the receipt, storage and delivery of liquid fuels.

Sempra Renewables

As we discuss in Note 5, in April 2019, Sempra Renewables sold its remaining wind assets and investments, which included its wind tax equity arrangements. The remaining ownership interest in PXiSE Energy Solutions, LLC was subsumed into Parent and other.

Sempra LNG

In March 2020, Sempra LNG purchased for $7 million the 24.6% minority interest in Liberty Gas Storage LLC, which owns 100% of LA Storage, LLC, increasing Sempra LNG’s ownership in Liberty Gas Storage LLC to 100%. Prior to the purchase, the minority partner converted $22 million in notes payable due from Sempra LNG to equity. As a result of the purchase, we recorded an increase in Sempra Energy’s shareholders’ equity of $2 million for the difference between the carrying value and fair value related to the change in ownership.

In February 2019, Sempra LNG purchased for $20 million the 9.1% minority interest in Bay Gas immediately prior to the sale of 100% of Bay Gas.

Sempra LNG and IEnova are jointly developing a proposed natural gas liquefaction project at the site of IEnova’s existing ECA LNG Regasification terminal. Sempra LNG consolidates the proposed ECA LNG JV liquefaction project. Thus, Sempra Energy’s NCI in IEnova’s 50% interest in the proposed project is reported at Sempra LNG.

Discontinued Operations

As we discuss in Note 5, we completed the sales of our equity interests in our Peruvian and Chilean businesses in the second quarter of 2020. The minority interests in Luz del Sur and Tecsur were deconsolidated upon sale of our Peruvian businesses in April 2020, and the minority interests in the Chilquinta Energía subsidiaries were deconsolidated upon sale of our Chilean businesses in June 2020.

The following table provides information about NCI held by others in subsidiaries or entities consolidated by us and recorded in Other Noncontrolling Interests in Total Equity on Sempra Energy’s Condensed Consolidated Balance Sheets.

OTHER NONCONTROLLING INTERESTS
(Dollars in millions)
	Percent ownership held by noncontrolling interests				Equity (deficit) held by noncontrolling interests
	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Sempra Mexico:
IEnova	30.8	%	33.4	%	$	1,586	$	1,608
IEnova subsidiaries(1)	17.5		10.0 – 46.3		7		15
Sempra LNG:
Liberty Gas Storage LLC	—		24.6		—		(13)
ECA LNG JV	15.4		16.7		15		12
Parent and other:
PXiSE Energy Solutions, LLC	20.0		20.0		—		1
Discontinued Operations:
Chilquinta Energía subsidiaries(1)	—		19.7 – 43.4		—		23
Luz del Sur	—		16.4		—		205
Tecsur	—		9.8		—		5
Total Sempra Energy					$	1,608	$	1,856

(1)    IEnova and Chilquinta Energía have subsidiaries with NCI held by others. Percentage range reflects the highest and lowest ownership percentages among these subsidiaries.

TRANSACTIONS WITH AFFILIATES

We summarize amounts due from and to unconsolidated affiliates at Sempra Energy Consolidated, SDG&E and SoCalGas in the following table.

AMOUNTS DUE FROM (TO) UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	September 30, 2020		December 31, 2019
Sempra Energy Consolidated:
Total due from various unconsolidated affiliates – current, net of negligible allowance for credit losses at September 30, 2020(1)(2)	$	46	$	32
Total due from unconsolidated affiliates – noncurrent – Sempra Mexico – IMG JV – Note due March 15, 2022, net of allowance for credit losses of $3 at September 30, 2020(2)(3)	$	617	$	742
Total due to various unconsolidated affiliates – current	$	(6)	$	(5)
Sempra Mexico(2):
TAG Pipelines Norte, S. de. R.L. de C.V.:
Note due December 20, 2021(4)	$	(41)	$	(39)
5.5% Note due January 9, 2024(5)	(67)		—
TAG JV – 5.74% Note due December 17, 2029(5)	(163)		(156)
Total due to unconsolidated affiliates – noncurrent	$	(271)	$	(195)
SDG&E:
SoCalGas	$	2	$	—
Various affiliates	1		—
Total due from unconsolidated affiliates – current	$	3	$	—
Sempra Energy	$	(56)	$	(37)
SoCalGas	—		(10)
Various affiliates	(5)		(6)
Total due to unconsolidated affiliates – current	$	(61)	$	(53)
Income taxes due from Sempra Energy(6)	$	25	$	130
SoCalGas:
SDG&E	$	—	$	10
Various affiliates	1		1
Total due from unconsolidated affiliates – current	$	1	$	11
Sempra Energy	$	(49)	$	(45)
SDG&E	(2)		—
Pacific Enterprises	(50)		—
Various affiliates	—		(2)
Total due to unconsolidated affiliates – current	$	(101)	$	(47)
Income taxes due from Sempra Energy(6)	$	20	$	152

(1)    Amount at September 30, 2020 includes $25 million of outstanding principal and a negligible amount of accrued interest receivable from a U.S. dollar-denominated loan from IEnova to ESJ at a variable interest rate based on 1-month LIBOR plus 196 bps (2.12% at September 30, 2020) with a maturity date of December 31, 2020. Pursuant to the agreement, if ESJ is unable to meet certain conditions for an expansion project by December 31, 2020, IEnova and ESJ have the option to convert the loan to a 10-year note.

(2)    Amounts include principal balances plus accumulated interest outstanding.

(3)    Mexican peso-denominated revolving line of credit for up to 14.2 billion Mexican pesos or approximately $641 million U.S. dollar-equivalent, at a variable interest rate based on the 91-day Interbank Equilibrium Interest Rate plus 220 bps (6.75% at September 30, 2020), to finance construction of a natural gas marine pipeline. At September 30, 2020, $2 million of accrued interest receivable is included in Due from Unconsolidated Affiliates – Current.

(4)    U.S. dollar-denominated loan at a variable interest rate based on 6-month LIBOR plus 290 bps (3.16% at September 30, 2020).

(5)     U.S. dollar-denominated loan at a fixed interest rate.

(6)    SDG&E and SoCalGas are included in the consolidated income tax return of Sempra Energy and their respective income tax expense is computed as an amount equal to that which would result from each company having always filed a separate return.

The following table summarizes revenues and cost of sales from unconsolidated affiliates.

REVENUES AND COST OF SALES FROM UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Revenues:
Sempra Energy Consolidated	$	9	$	13	$	31	$	40
SDG&E	1		2		4		5
SoCalGas	23		16		61		50
Cost of Sales:
Sempra Energy Consolidated	$	9	$	12	$	35	$	40
SDG&E	17		16		56		56
SoCalGas	2		2		2		6

Guarantees

Sempra Energy has provided guarantees related to Cameron LNG JV, as we discuss in Note 6 below and in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

OTHER INCOME (EXPENSE), NET

Other Income (Expense), Net, on the Condensed Consolidated Statements of Operations consists of the following:

OTHER INCOME (EXPENSE), NET
(Dollars in millions)
	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Sempra Energy Consolidated:
Allowance for equity funds used during construction	$	34	$	25	$	96	$	69
Investment gains(1)	16		9		9		46
Gains (losses) on interest rate and foreign exchange instruments, net	19		(17)		(129)		7
Foreign currency transaction gains (losses), net(2)	15		(13)		(95)		(2)
Non-service component of net periodic benefit cost	(48)		(13)		(45)		(19)
Fine related to Energy Efficiency Program inquiry	(6)		—		(6)		—
Penalties related to billing practices OII	—		—		—		(8)
Interest on regulatory balancing accounts, net	—		4		13		9
Sundry, net	(1)		(2)		(6)		1
Total	$	29	$	(7)	$	(163)	$	103
SDG&E:
Allowance for equity funds used during construction	$	21	$	15	$	61	$	42
Non-service component of net periodic benefit (cost) credit	(18)		—		(15)		8
Fine related to Energy Efficiency Program inquiry	(6)		—		(6)		—
Interest on regulatory balancing accounts, net	—		4		8		10
Sundry, net	1		—		(1)		—
Total	$	(2)	$	19	$	47	$	60
SoCalGas:
Allowance for equity funds used during construction	$	11	$	9	$	29	$	25
Non-service component of net periodic benefit (cost) credit	(15)		(5)		(3)		9
Penalties related to billing practices OII	—		—		—		(8)
Interest on regulatory balancing accounts, net	—		—		5		(1)
Sundry, net	(3)		(3)		(10)		(7)
Total	$	(7)	$	1	$	21	$	18

(1)    Represents investment gains on dedicated assets in support of our executive retirement and deferred compensation plans. These amounts are partially offset by corresponding changes in compensation expense related to the plans, recorded in O&M on the Condensed Consolidated Statements of Operations.

(2)    Includes gains of $15 million and losses of $120 million in the three months and nine months ended September 30, 2020, respectively, and losses of $17 million and a negligible amount in the three months and nine months ended September 30, 2019, respectively, from translation to U.S. dollars of a Mexican peso-denominated loan to IMG JV, which are offset by corresponding amounts included in Equity Earnings on the Condensed Consolidated Statements of Operations.

INCOME TAXES

We provide our calculations of ETRs in the following table.

INCOME TAX EXPENSE (BENEFIT) AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
	Three months ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
Sempra Energy Consolidated:
Income tax expense from continuing operations	$	99		$	61		$	60		$	150
Income from continuing operations before income taxes and equity earnings	$	201		$	448		$	1,061		$	1,235
Equity earnings, before income tax(1)	117			17			158			24
Pretax income	$	318		$	465		$	1,219		$	1,259
Effective income tax rate	31		%	13		%	5		%	12		%
SDG&E:
Income tax expense	$	33		$	71		$	161		$	111
Income before income taxes	$	211		$	337		$	794		$	700
Effective income tax rate	16		%	21		%	20		%	16		%
SoCalGas:
Income tax (benefit) expense	$	(6)		$	35		$	95		$	50
(Loss) income before income taxes	$	(30)		$	178		$	521		$	488
Effective income tax rate	20		%	20		%	18		%	10		%

(1)    We discuss how we recognize equity earnings in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

Sempra Energy, SDG&E and SoCalGas record income taxes for interim periods utilizing a forecasted ETR anticipated for the full year. Unusual and infrequent items and items that cannot be reliably estimated are recorded in the interim period in which they occur, which can result in variability in the ETR.

For SDG&E and SoCalGas, the CPUC requires flow-through rate-making treatment for the current income tax benefit or expense arising from certain property-related and other temporary differences between the treatment for financial reporting and income tax, which will reverse over time. Under the regulatory accounting treatment required for these flow-through temporary differences, deferred income tax assets and liabilities are not recorded to deferred income tax expense, but rather to a regulatory asset or liability, which impacts the ETR. As a result, changes in the relative size of these items compared to pretax income, from period to period, can cause variations in the ETR. The following items are subject to flow-through treatment:

▪repairs expenditures related to a certain portion of utility plant fixed assets

▪the equity portion of AFUDC, which is non-taxable

▪a portion of the cost of removal of utility plant assets

▪utility self-developed software expenditures

▪depreciation on a certain portion of utility plant assets

▪state income taxes

The AFUDC related to equity recorded for regulated construction projects at Sempra Mexico has similar flow-through treatment.

We record income tax (expense) benefit from the transactional effects of foreign currency and inflation. Such effects are partially offset by net gains (losses) from foreign currency derivatives that are hedging Sempra Mexico parent’s exposure to movements in the Mexico peso from its controlling interest in IEnova.

In the nine months ended September 30, 2019, SDG&E and SoCalGas recorded income tax benefits of $31 million and $38 million, respectively, from the release of a regulatory liability established in connection with 2017 tax reform for excess deferred income tax balances that the CPUC directed be allocated to shareholders in a January 2019 decision.

Discontinued Operations

In January 2019, our board of directors approved a plan to sell our South American businesses and we completed the sales in the second quarter of 2020, as we discuss in Note 5. Prior to this decision, our repatriation estimate excluded post-2017 earnings and other basis differences related to our South American businesses. Because of our decision to sell our South American businesses, we no longer assert indefinite reinvestment of these basis differences. Accordingly, in the nine months ended September 30, we recorded the following income tax impacts from changes in outside basis differences in our discontinued operations in South America:

▪$89 million income tax benefit in 2019 primarily related to outside basis differences existing as of the January 25, 2019 approval of our plan to sell our South American businesses. The amount is comprised of $103 million of income tax expense recorded in the first quarter of 2019, which was then reduced by $192 million in the third quarter of 2019 as a result of a change in the anticipated structure of the sale; and

▪$7 million income tax benefit in 2020 compared to $32 million income tax expense in 2019 related to changes in outside basis differences from earnings and foreign currency effects since January 25, 2019.

We have not changed our indefinite reinvestment assertion or repatriation plan for our continuing international operations during 2020.