EXHIBIT 10.7

SEMPRA ENERGY

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

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Table of Contents

     

Page

Section 1

 

Definitions

1

Section 2

 

Eligibility For Benefits

5

 

2.1

Participation

5

 

2.2

Supplemental Retirement Benefit

5

 

2.3

Spouse's Supplemental Retirement Benefit

5

 

2.4

Spouse's Death Benefit

5

 

2.5

Supplemental Disability Benefit

5

Section 3

 

Retirement Benefits

6

 

3.1

Amount of Supplemental Retirement Benefit

7

 

3.2

Amount of Spouse's Supplemental Retirement Benefit

7

 

3.3

Adjustments

7

 

3.4

Payment

7

Section 4

 

Supplemental Preretirement Spouse's Death Benefits

7

 

4.1

Benefit

7

 

4.2

Form of Benefit

8

Section 5

 

Supplemental Disability Benefits

8

 

5.1

Amount

8

 

5.2

Payment

9

Section 6

 

Administration

9

 

6.1

Authority of Committee

9

 

6.2

Calculation of Benefits

9

Section 7

 

Miscellaneous

9

 

7.1

Amendment, Termination or Removal of Participant

9

 

7.2

No Employment Right

10

 

7.3

Funding

10

 

7.4

Allocation of Costs

10

 

7.5

Nonassignment

10

 

7.6

Governing Law

10

Section 8

 

Offset For Certain Benefits Payable Under Other Plans

10

Section 9

 

Offset for EBP

12

Appendix

A

 

13

Appendix

B

 

14

Ministerial Changes

15

Amendment One

18

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This Supplemental Executive Retirement Plan provides retirement income,
disability income and death benefits to key executives and their spouses under
specified circumstances.

Except as provided in Appendix B, and except as to key executives who retired
before July 1, 1998, this Plan shall amend, restate and supercede the Prior
Plan.

SECTION 1

DEFINITIONS

1.1 "Actuarial Equivalent" means equivalent value when computed using the
applicable mortality table promulgated by the IRS under Code Section 417(e)(3)
as in effect on the first day of the Plan Year and the applicable interest rate
promulgated by the IRS under Code Section 417(e)(3) for the November preceding
the first day of the Plan Year.

1.2 "Average Bonus" means the average of the three highest annual incentive
awards earned by a Participant under the Executive Incentive Plan during the
Participant's last ten years of Service, determined an follows:

(a) Annual incentive awards shall be counted whether or not deferred under the
Deferred Compensation Plan.

(b) If a Participant was designated as a participant in the Executive Incentive
Plan for a year, but earned no annual incentive award during that year, the
award will be counted as zero, and if the Participant did not earn three annual
incentive awards during the other years during the last ten years of Service,
the zero amount will be used to attain the average of the three highest annual
incentive awards.

(c) If the Participant was not designated as a participant in the Executive
Incentive Plan for three full years of the last ten years of Service, the
average shall be based on the number of full years the Participant was
designated as a participant in the Executive Incentive Plan during the last ten
years of Service.

(d) As to a Participant in the Executive Incentive Plan who did not earn annual
incentive awards during the last ten years of Service solely due to a disability
which qualified him for a Basic Disability Plan Benefit, a Supplemental
Disability Benefit or both, the applicable ten year period will be extended
backwards for each year of such occurrence.

(e) Prorated annual incentive awards earned under the Executive Incentive Plan
will not be used in determining the average.

(f)

1.3 "Average Earnings" means the average Earnings of the highest two years of
Service in the last ten years while a Participant was not receiving a Basic
Disability Plan Benefit, a Supplemental Disability Benefit or both.

1.4 "Basic Disability Plan" means a disability plan maintained by Sempra Energy
or a subsidiary which provides coverage for most full time employees of the plan
sponsor.

1.5 "Basic Disability Plan Benefit" means the annual amount of benefit payable
from the Basic Disability Plan to a Participant.

1.6 "Basic Pension Plan" means the Sempra Energy Cash Balance Plan, and where
applicable by the context, the pension plan of a subsidiary of Sempra Energy.

1.7 "Basic Pension Plan Benefit" means the annual amount of benefit payable from
the Basic Pension Plan to a Participant on his Retirement Date in the form of a
straight life annuity without a cost-of-living feature unless one is provided
under the Basic Pension Plan.

1.8 "Committee" means the Compensation Committee of the Company's Board of
Directors.

1.9 "Company" means Sempra Energy.

1.10 "Deferred Compensation Plan" means the Sempra Energy Deferred Compensation
& Excess Savings Plan.

1.11 "Earnings" means base compensation only including any deferral under the
Savings Plan, the Supplemental Savings Plan and the Deferred Compensation Plan.

1.12 "Employer" means the Company and any of its subsidiaries (any corporation
of which 50% or more of the issued and outstanding stock having ordinary voting
rights is owned directly or indirectly by the Company or any other business
entity or association of which 50% or more of the outstanding equity interest is
so owned) which adopt this Plan.

1.13 "Employment" means employment by the Employer, including the period during
which a Participant is receiving a Basic Disability Plan Benefit, and any
additional period during which a Participant is receiving a Supplemental
Disability Benefit under this Plan.

1.14 "Executive Incentive Plan" means the Sempra Energy Executive Incentive
Plan, or such other Plan or Plans as may be designated by the Committee from
time to time.

1.15 "Participant" means an employee of the Employer designated to participate
in this Plan as specified in Section 2.1.

1.16 "Plan" means this Supplemental Executive Retirement Plan.

1.17 "Preretirement Spouse's Benefit" means the benefit payable or paid under
the Basic Pension Plan and Excess Cash Balance Plan to a Surviving Spouse of a
Participant who dies in Employment.

1.18 "Prior Plan" shall mean the Pacific Enterprises Supplemental Retirement and
Survivor Plan and the San Diego Gas and Electric Supplemental Executive
Retirement Plan.

1.19 "Retirement" means the termination of a Participant's Employment with the
Employer after five years of Service on or after the Participant attains age 55.

1.20 "Retirement Date" means the first day of the month following a
Participant's Retirement.

1.21 "Service" means a Participant's credited service which would be used to
compute retirement benefits under the Basic Pension Plan.

1.22 "Social Security Benefit" means the annual Primary Insurance Amount
estimated to be payable to the Participant at age 65 under the Federal Social
Security Act in effect at the time of the event.

1.23 "Spouse's Supplemental Retirement Benefit" means the benefit payable to the
Surviving Spouse of a Participant under Section 2.3 of this Plan after the
Participant has died on or after his Retirement Date.

1.24 "Supplemental Disability Benefit" means the benefit payable to a disabled
Participant under Section 2.5 of this Plan.

1.25 "Excess Cash Balance Plan" means the Sempra Energy Excess Cash Balance
Plan, or any other supplemental pension plan of any Employer providing
essentially the same benefits for one or more Participants.

1.26 "Excess Cash Balance Plan Benefits" means the annual amount of benefit
payable or paid from the Excess Cash Balance Plan to a Participant on his
Retirement Date in the form of a straight life annuity without a cost-of-living
adjustment feature unless one is provided under the Excess Cash Balance Plan.

1.27 "Supplemental Retirement Benefit" means the benefit payable to a
Participant under Section 2.2 of this Plan on his Retirement Date.

1.28 "Surviving Spouse" means in the case of a Spouse's Death Benefit, a spouse
married to the Participant for at least the one-year period ending on the
Participant's date of death, and means in the case of a Spouse's Supplemental
Retirement Benefit, a spouse who is married to the Participant for at least the
one-year period ending on the Participant's Retirement Date and who is still
married to the Participant on the date of the Participant's death. Surviving
Spouse also means a Spousal Equivalent as defined by the Company (subject to the
one-year requirements) under the Company Medical Plan.

1.29 The masculine pronoun whenever used shall include the feminine pronoun, and
the singular shall include the plural where the context requires it.

1.30 "Vesting Factor" means the following for a Participant who qualifies for
Retirement under paragraph 1.19.

Vesting Schedule

AGE

   

55

56

57

58

59

60
or older

YEARS OF SERVICE

5

50%

60%

70%

80%

90%

100%

6

55%

60%

70%

80%

90%

100%

7

60%

65%

70%

80%

90%

100%

8

65%

70%

75%

80%

90%

100%

9

70%

75%

80%

85%

90%

100%

10

75%

80%

85%

90%

95%

100%

11

80%

85%

90%

95%

100%

100%

12

85%

90%

95%

100%

100%

100%

13

90%

95%

100%

100%

100%

100%

14

95%

100%

100%

100%

100%

100%

15

or more

100%

100%

100%

100%

100%

100%

Based on attained age and completed years of service.

SECTION 2

ELIGIBILITY FOR BENEFITS

2.1 Participation

Executive Officers of the Company as designated shall be eligible to participate
in this Plan. The Committee may designate additional officers and key employees
of the Employer who shall participate in this Plan and the effective date of
such participation, subject to agreement by the Board of Directors of the
executive's Employer (if not the Company) that such executive participate and
that such Employer pay the costs of this Plan for the executive and his
Surviving Spouse.

2.2 Supplemental Retirement Benefit

Each Participant is eligible to retire and receive a benefit under this Plan as
specified in Sections 3.1 and 3.4 beginning on his Retirement Date. No
Supplemental Retirement Benefit will be paid to a Participant who leaves
Employment prior to attaining age 55 or completing five years of Service, except
as provided under other agreements.

2.3 Spouse's Supplemental Retirement Benefit

The Surviving Spouse of a Participant who dies on or after his Retirement Date
who did not receive a lump sum payment is eligible for a Spouse's Supplemental
Retirement Benefit in accordance with Sections 3.2 and 3.4.

2.4 Spouse's Death Benefit

The Surviving Spouse of a Participant who dies in Employment is eligible for a
Spouse's Death Benefit as specified in Sections 4.1 and 4.2 in either the form
of a lump sum benefit or lifetime annuity benefit as elected by the Participant.
There is no cost to the Participant for this benefit. If a Participant dies
during Employment without an eligible Surviving Spouse, no Spouse's Death
Benefit is payable under this Plan.

2.5 Supplemental Disability Benefit

A Participant who becomes disabled may be eligible to receive a supplemental
Disability Benefit as specified in Section 5.

SECTION 3

RETIREMENT BENEFITS

3.1 Amount of Supplemental Retirement Benefit

The Supplemental Retirement Benefit payable to a Participant as of his
Retirement Date is equal to (a) minus (b) with the resultant product multiplied
by the Participant's Vesting Factor and then the resultant product multiplied by
the early retirement reduction (pursuant to Appendix A) for Retirement Dates
which precede attainment of 62 years of age. The benefit will also be reduced as
provided in Section 8.

(a) is a lump sum using the actuarial and mortality assumptions in the Basic
Pension Plan based upon the single annuity value of the annual annuity with the
annual annuity determined as follows: the sum of the following percent of the
total of the Participant's Average Earnings and Average Bonus

 i.   1/3% for each month of Service through 120 (40% for 10 years of Service),
      plus
 ii.  1/6% for each month of Service in excess of 120, through 240 (60% for 20
      years of Service), plus
 iii. 1/48% for each month of Service in excess of 240 (65% for 40 years of
      Service).

(b) is a lump sum which is the sum of his

 i.  Basic Pension Plan Benefit, plus
 ii. Excess Cash Balance Plan Benefit

Provided however, that if a Participant commences receipt of benefits under this
Plan on a different date than the Participant commences receipt of benefits
under the Basic Pension Plan, this paragraph (b) shall be calculated based on
the benefits the Participant would have received if the Participant elected the
same Retirement Date under the Basic Pension Plan that he elected under this
Plan.

If (a) minus (b) results in zero or less, then no Supplemental Retirement
Benefit is payable.

The Participant may elect to receive the Supplemental Retirement Benefit,
payable on his behalf, paid in an actuarially equivalent annuity, provided the
Participant elects the annuity one year prior to retirement. The initial
election of benefit form shall be made at the time of commencement of
participation, or as soon thereafter as is reasonably practicable.

3.2 Amount of Spouse's Supplemental Retirement Benefit

The annual Spouse's Supplemental Retirement Benefit payable to a Surviving
Spouse of a Participant who did not receive a lump sum payment is equal to 50%
of the Participant's Supplemental Retirement Benefit as determined in accordance
with in Section 3.1(a) without the reduction in 3.1(b) but adjusted by the
Vesting Factor and the early retirement reduction pursuant to appendix A.

3.3 Adjustments

The annual Supplemental Retirement Benefit or the annual Spouse's Supplemental
Retirement Benefit will not be decreased or increased on account of any increase
or decrease in the Basic Pension Plan Benefit, Supplemental Pension Plan
Benefit, or Social Security Benefit occurring after a Participant's Retirement
Date or death.

3.4 Payment

A Supplemental Retirement Benefit will be paid as soon after the Participant's
Retirement Date as is reasonably practicable. If an annuity payment is elected
pursuant to Section 3.1, the Supplemental Retirement Benefit will be paid
monthly, beginning on the last day of the month of the Participant's Retirement
Date, and will continue to be paid monthly during the life of the Participant,
the last payment to be made to the Participant's spouse, or if none, to the
Participant's estate, on the last day of the month in which the death of the
Participant occurs. In all cases, the monthly benefit shall equal the annual
benefit divided by 12. If the Participant is survived by a Surviving Spouse, the
Surviving Spouse will receive a Spouse's Supplemental Retirement Benefit. The
Spouse's Supplemental Retirement Benefit will be paid monthly, and will commence
on the last day of the month following the month in which the Participant dies
and will continue during the life of the Surviving Spouse.

SECTION 4

SUPPLEMENTAL PRERETIREMENT SPOUSE'S DEATH BENEFITS

4.1 Benefit

The Spouse's Death Benefit that will be paid to a Surviving Spouse of a
Participant who dies in Employment prior to his Retirement Date is a lump sum
payment based on the Actuarial Value of an annuity equal to (a) minus (b) when:

(a) is 100% of the Participant's accrued benefit calculated in accordance with
3.1(a). If the Participant is under age 55 at the time of death, the age 55
early retirement factor shall be used, and

(b) is the Surviving Spouse's Preretirement Spouse's Benefit, plus any life
insurance benefit payable under any Split Dollar Life Insurance purchased in
accordance with Section 8.1 herein.

4.2 Form of Benefit

The Spouse's Death Benefit shall be paid in the form of a lump sum payment
unless the Participant has elected at least one year prior to the Participant's
date of death to have his Surviving Spouse receive an annuity benefit that is
the Actuarial Equivalent of the lump sum payment described above . . . Spouse's
Death Benefit shall automatically cease upon the earliest of:

(i) the Participant's termination of Employment,

(ii) the death of the Surviving Spouse, and

(iii) the Participant's Retirement Date.

SECTION 5

SUPPLEMENTAL DISABILITY BENEFITS

5.1 Amount

The annual Supplemental Disability Benefit payable to a Participant is equal to
(a) minus (b) when (a) is 60% multiplied by the total of the Participant's
Average Bonus and annual rate of Earnings in effect on the day immediately
preceding the day the Participant becomes eligible, and (b) is the sum of

(i) the Participant's Basic Disability Plan Benefit, and any other Company
provided disability plan, plus

(ii) the amount of benefits for which the Participant is eligible under the
provisions of any federal or state law providing payments on account of
disability, as these payments are defined in the Basic Disability Plan, during
the period of eligibility for a Supplemental Disability Benefit. If (a) minus
(b) results in zero or less, then no Supplemental Disability Benefit is payable.
If the Basic Disability Plan Benefit increases under the Basic Disability Plan,
the Supplemental Disability Benefit will be decreased by the same amount.

5.2 Payment

Eligibility for a Supplemental Disability Benefit is determined by the
Committee. The Supplemental Disability Benefit will be paid monthly. The last
Supplemental Disability Benefit will be paid to the Participant at the earliest
of (i) when the Committee deems that the Participant is no longer disabled, (ii)
when Participant starts receiving a Supplemental Retirement Benefit, or (iii)
when the Participant attains age 65.

SECTION 6

ADMINISTRATION

6.1 Authority of Committee

This Plan shall be administered by the Committee. Subject to the express
provisions of this Plan, the Committee shall have full and final authority to
interpret this Plan, to prescribe, amend and rescind rules, regulations and
guides relating to the Plan, and to make any other determinations that it
believes necessary or advisable for the administration of the Plan. The
Committee may delegate certain responsibilities in the administration of the
Plan. All decisions and determinations by the Committee shall be final and
binding upon all parties.

6.2 Calculation of Benefits

Any and all payments to be made under this Plan and all Actuarial Equivalents
shall be calculated by the Company's regularly employed independent actuaries,
and their determinations shall be final and binding on all parties.

SECTION 7

MISCELLANEOUS

7.1 Amendment, Termination or Removal of Participant

The Committee may, in its sole discretion, terminate, suspend, or amend this
Plan at any time, in whole or in part. However, no amendment or suspension of
the Plan will affect a retired or disabled Participant's right or the right of a
Surviving Spouse to continue receiving a benefit in accordance with this Plan as
in effect on the date such Participant or Surviving Spouse began to receive a
benefit under this Plan. The Committee may, in its sole discretion, remove an
executive as a Participant in this Plan due to changed job responsibilities or
other changed circumstances as long as no benefits are then being paid to the
Participant under this Plan.

7.2 No Employment Right

Nothing contained herein will confer upon any Participant the right to be
retained in Employment, nor will it interfere with the right of his Employer to
discharge or otherwise deal with the Participant without regard to the existence
of this Plan.

7.3 Funding

This Plan is unfunded, and the Employer will make Plan Benefit Payments solely
on a current disbursement basis. Participants and their Beneficiaries shall have
no legal or equitable rights, claims, or interest in any specific property or
assets of the Employer, and the rights of the Participants and Beneficiaries
shall be no greater than those of unsecured general creditors.

7.4 Allocation of Costs

Amounts accrued as expenses under this Plan, and the cost of any life insurance
policies purchased to fund for benefits payable under this Plan, shall be
allocated to Employers whose employees are Participants in this Plan.

7.5 Nonassignment

To the maximum extent permitted by law, no benefit under this Plan will be
assignable or subject in any manner to alienation, sale, transfer, claims of
creditors, pledge, attachment, or encumbrances of any kind.

7.6 Governing Law

This Plan is established under and will be construed according to the laws of
the State of California.

SECTION 8

OFFSET FOR CERTAIN BENEFITS PAYABLE UNDER

OTHER PLANS

8.1 Some of the Participants under this Plan own life insurance policies (the
"Policies") purchased on their behalf by the Company. The ownership of these
Policies by each Participant is, however, subject to certain conditions (set
forth in a "Split Dollar Life Insurance Agreement" or other comparable
agreements between the Participant and the Company) and, if the Participant
fails to meet the conditions set forth in the Split Dollar Life Insurance
Agreement, the Participant may lose certain rights under the Policy. In the
event that a Participant satisfies the conditions specified in Section 5 or 6 of
the Split Dollar Life Insurance Agreement, so that the Participant or his
beneficiary becomes entitled to benefits under one of those sections, the value
of those benefits shall constitute an offset to any benefits otherwise payable
under this Plan. As the case may be, this offset (the "Offset Value") shall be
calculated by determining the value of benefits payable under the Split Dollar
Life Insurance Agreement, that is, the cash surrender value of the Policy, or in
the case of the Participant's death, the death benefits payable to the
beneficiary under the Policy. The Offset Value shall then be compared to the
Actuarial Equivalent (as defined in Section 8.4) of the benefits payable under
this Plan (the "Plan Values), and the Plan Value shall be reduced by the Offset
Value.

8.2 At the time when the Participant terminates employment for any reason, if
the Plan Value exceeds the present value (determined using the interest rate
specified in Section 8.4) of the Offset Value, the excess of the Plan Value over
the present value of the Offset Value shall be paid to the Participant or
beneficiary at that time in a lump sum,. . The Participant may choose, one year
prior to the date of termination, to receive the remaining amount as an annuity.
Such payment shall completely discharge all obligations owed under this Plan on
account of Participant's participation in this Plan.

8.3 If the Policy described in Section 8.1 is not on the life of the
Participant, the insured dies prior to the Participant becoming eligible for
benefits under the Plan, and the Participant or the Participant's beneficiary
subsequently becomes eligible for benefits hereunder, the Actuarial Equivalent
of the benefits payable hereunder shall be offset by the Actuarial Equivalent of
the payments previously paid to the Participant in the Split Dollar Life
Insurance Agreement. Any remaining amount due the Participant or the
Participant's beneficiary shall thereupon be paid in a cash lump sum.

8.4 Notwithstanding anything contained herein to the contrary, in the event that
a Participant has a benefit under Excess Cash Balance Plan, the Offset Value
shall first be applied to reduce benefits paid under the Excess Cash Balance
Plan and any remaining Offset Value shall then be applied to reduce the Plan
Value under this Plan; provided, however, that for purposes of determining the
amount of benefits payable under this Plan, any benefits payable under the
Excess Cash Balance Plan shall be determined without regard to such offset.

8.5 The Committee may offer additional options which are of equivalent value.

SECTION 9

OFFSET FOR EBP

9.1 The benefit, if any, to be received under this Plan shall be reduced dollar
for dollar, but not below zero, by the benefits that a Participant (and/or his
or her Beneficiary) receives under the Sempra Energy Executive Security Bonus
Plan ("EBP") multiplied by a fraction the numerator of which is the present
value of the Participant's accrued benefit hereunder measured as of the date
payment is received under the EBP and the denominator of which is the sum of the
value of the Participant's account balance under the Sempra Energy Deferred
Compensation and Excess Savings Plan and the present value of the accrued
benefit under this Plan, both measured as of the date payment is received under
the EBP. Such reduction shall be further enhanced by interest on the offset
amount accruing at the rate of __% per annum from the time of distribution from
the EBP to the time of distribution hereunder.

SECTION 10

BENEFITS DEFERRED UNDER DEFERRED COMPENSATION PLAN

10.1 Notwithstanding any other provision of the Plan, if a Participant has
elected to defer the Participant's "SERP Lump Sum" as defined in the Sempra
Energy Deferred Compensation & Excess Savings Plan, pursuant to the terms of the
Sempra Energy Deferred Compensation & Excess Savings Plan, no retirement
benefits shall be payable under this Plan to the Participant, to the
Participant's Surviving Spouse or to any other person effective immediately at
and after the SERP Lump Sum has been credited to the Participant's account under
the Sempra Energy Deferred Compensation & Excess Savings Plan.

 

 

APPENDIX A

EARLY RETIREMENT REDUCTION FACTOR

Age

Early Retirement Factor

62 and later

100%

61

97

60

94

59

90

58

86

57

82

56

78

55

74

*Reduction factors vary by age and months.

 

 

 

 

APPENDIX B

GRANDFATHER BENEFIT

Current Participants in the Prior Plans are permanently grandfathered under the
Prior Plan provisions if the benefit is greater.