<YEAR> Executive Incentive Compensation Plan – Southern California Gas Company

ICP Plan Year: January 1, <YEAR> to December 31, <YEAR>

INTRODUCTION

The Southern California Gas Company (SoCalGas) Incentive Compensation Plan (ICP)
is designed to attract, retain, and engage executives whose efforts contribute
to the success of SoCalGas and Sempra Energy (SE).  The plan aligns with Sempra
Energy’s goal of sustained earnings growth and the utility’s regulatory
framework with goals that encourage executives to drive towards our aspirations
and to:

*

Maintain high safety standards,  

*

Grow the business through enterprise thinking while maximizing revenues/profits,

*

Focus on a common set of high-level goals that encourages teamwork and
achievement of operational excellence,

*

Focus on business efficiencies and investments that produce long-term efficiency
benefits,

*

Increase reliability of delivery service,

*

Enhance customer focus to achieve optimal customer satisfaction, and

*

Achieve high level of employee commitment and contribution through sharing of
business success and the establishment of key performance indicators.

PARTICIPATION

Executives who meet all of the following eligibility requirements will
participate in this incentive plan for <YEAR>.

1.

Employee is an eligible executive, as determined by the SoCalGas Board of
Directors, for at least three consecutive full months during <YEAR> and is an
employee on December 31, <YEAR> or meets other eligibility requirements as
listed under section: Employee Status Changes.

2.

Participant has met minimum job expectations and performed satisfactorily, as
determined by his/her supervisor in conjunction with Human Resources.

3.

Participant is not in another formal incentive plan in <YEAR>.

Participation in one plan year does not constitute the right to participate in
succeeding plan years.  This plan does not constitute a contract of employment
or guarantee of an incentive award payment and cannot be relied on as such.

BASIS FOR AWARD CALCULATION

Awards are calculated based on the employee’s “Basis for Award Calculation”
(BAC) while on the active payroll.  BAC includes annual base salary on December
31, <YEAR> plus any eligible lump sum payment that may be granted during <YEAR>.
Other awards (e.g. spot cash); incentives, premiums and payments are not
included in the BAC.  

       <YEAR> PERFORMANCE GOALS AND MEASURES

 <YEAR> Performance Goals & Measures

Weight

Multiplier

Min

Target

Max

 

 

 

 

 

 

 FINANCIAL GOALS (in millions)

 

 

 

 

 

 

 OPERATIONAL GOALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL

100%

 

 

 

 

  FINANCIAL MEASURES

Sempra Energy Earnings

Sempra Energy Earnings are revenue minus expense, less tax.  Employees can
influence earnings by either increasing revenue or decreasing expenses. 
Earnings are determined after accounting for the appropriate accrued level of
incentive compensation expense.  

Sempra Energy Earnings exclude:

·

<DEFINE EXCLUSIONS>

Southern California Gas Company (SoCalGas) Earnings

<Define SCG Financial Measure>

OPERATIONAL GOALS

The payout for all Operational Goals range between 0%-200%.

<Define Operational Measures>

CALCULATION, CERTIFICATION AND PAYMENT OF AWARDS

Award potentials will be linearly interpolated between the minimum and target,
or target and maximum goals.  There is no award payout for performance at or
below the minimum goals.  The payout for the financial component may, at
management’s discretion, be reduced in consideration of individual performance.
 

Adjustments to the budget target for ICP calculation purposes will require the
written approval of the Chief Executive Officer of SoCalGas.  The approved
exceptions will be limited to costs or expenses related to future growth
opportunities and the funding of process improvements above the planned budget.
 

The SoCalGas Board of Directors must approve awards.  Approved awards will be
paid by March 15, 2014 and will be subject to appropriate tax withholding.  Such
awards are considered pension-eligible earnings for the Cash Balance Plan and
are included as eligible earnings for the 401(k) Plan.  Employees with
outstanding loan payments to the 401(k) plan and/or for medical premiums may, at
the Company’s option, have up to the full arrears deducted from their ICP check.
 Employees will be notified by mail with respect to any arrears payments for
these deductions.

EMPLOYEE STATUS CHANGES

All eligible employees (including new hires) will have their award prorated for
the period of participation in the plan while on the active payroll.  For
employees who change target percentages during a plan year, their award will be
calculated based on the effective period for each target percentage.

Employees who transfer within the corporation or among incentive plans during
the year will be eligible for an award under this plan provided that all
eligibility requirements are met.  The award will be based on the employee’s BAC
for the participation period in this plan.

An award will still be paid if a participant meets all other eligibility
requirements during <YEAR> but is not a regular employee on December 31, <YEAR>
due to the following reasons:

*

Participant’s employment terminates for any reason after he/she has attained age
55 and at the time his/her employment terminated he/she had completed at least
five years of service; or

*

Participant leaves his/her position under disability (as defined in the company
disability benefit plan), or

*

Participant dies during an award year (award will be paid to the participant’s
estate).

In the above circumstances, the award will be calculated based on the
participant’s BAC prorated for the period of participation in the plan while on
the active payroll.  Awards will be paid the same time payment is made to other
participants and will be offset by any amount paid pursuant the “Severance
Benefits upon Termination of Employment due to Death or Disability” section of
the participant’s Severance Pay Agreement.

If a participant leaves the company for any other reason, eligibility for an
award for the plan year will be forfeited unless an exception is made at the
discretion of the CEO.

PLAN ADMINISTRATION

The Company retains the discretion and authority to interpret, amend or modify
the plan; to grant incentive awards; as well as to terminate, increase or
decrease any incentive award opportunity during the performance period; and to
reduce or eliminate any incentive awards that would otherwise be payable at the
end of the performance period.  The Company, in its sole discretion determines
Sempra Energy Earnings, SoCalGas Earnings, operational measures and award
calculations.  

The Company shall require the forfeiture, recovery or reimbursement of awards or
compensation under this Plan as (i) required by applicable law, or (ii) required
under any policy implemented or maintained by the Company pursuant to any
applicable rules or requirements of a national securities exchange or national
securities association on which any securities of the Company are listed.  The
Company reserves the right to recoup compensation paid if it determines that the
results on which the compensation was paid were not actually achieved.

The SoCalGas Board may, in its sole discretion, require the recovery or
reimbursement of short-term incentive compensation awards from any employee
whose fraudulent or intentional misconduct materially affects the operations or
financial results of the Company or its subsidiaries.

Questions concerning the plan should be directed to the Sr. Vice President –
Human Resources, Diversity & Inclusion, Sempra Energy.