<PAGE> 
 
ENOVA CORPORATION PARENT COMPANY OF SDG&E 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS 
 
RESULTS OF OPERATIONS 
On December 6, 1995, San Diego Gas & Electric Company announced the 
formation of Enova Corporation as the parent company for SDG&E, an  
operating public utility, and unregulated subsidiaries. On January 1, 
1996, Enova Corporation became the parent of SDG&E. SDG&E's  
outstanding common stock was converted on a share-for-share basis  
into Enova Corporation common stock. SDG&E's debt securities, 
preferred stock and preference stock were unaffected and remain with 
SDG&E. On January  31, 1996, SDG&E's ownership interests in its  
subsidiaries were transferred to Enova Corporation at book value, 
completing the parent company structure. The consolidated financial 
statements include SDG&E and its subsidiaries and, therefore, also  
reflect what is now Enova and its subsidiaries. Beginning on January 1, 
1996, SDG&E's financial statements for periods prior to 1996 will be 
restated  to reflect the net results of non-utility subsidiaries as 
discontinued operations in accordance with Accounting Principles Board 
Opinion No. 30 "Reporting the Effects of a Disposal of a Segment of  
Business." 
 
     SDG&E is engaged in electric and gas businesses. It generates and 
purchases electric energy and distributes it to 1.2 million customers  
in San Diego County and an adjacent portion of Orange County,  
California. It also purchases and distributes natural gas to 700,000  
customers in San Diego County and transports gas for others. SDG&E has 
diversified into other businesses.  Enova  Financial, Inc., invests in 
limited partnerships representing approximately 800 affordable-housing 
projects located throughout the United States. Califia Company leases  
computer equipment. The investments in Enova Financial and Califia are 
expected to provide income tax benefits over the next several years. 
Enova Energy, Inc., is an energy management consulting firm offering 
services to utilities and large consumers. Pacific Diversified Capital 
Company is the parent company for non-utility subsidiaries, Phase  One 
Development,  Inc., which is engaged in real estate  development,  and 
Enova  Technologies,  Inc.  Enova Technologies,  whose  ownership  was 
transferred directly to Enova Corporation after December 31, 1995,  is 
in  the  business of developing new technologies generally related  to 
utilities and energy, including certain research transferred from  the 
utility.  Enova International was formed after December 31,  1995,  to 
develop and operate natural gas and power projects outside the  United 
States.  Additional  information  regarding  SDG&E's  subsidiaries  is 
described  in  Notes  1  and 3 of the notes to consolidated  financial 
statements. 
      
OPERATING REVENUES Electric revenues did not change  significantly  in 
1995  or  in  1994, decreasing less than one percent  each  year.  Gas 
revenues  decreased 10 percent in 1995, reflecting lower purchased-gas 
prices and lower sales volume due to warmer weather and an increase in 
customers'  purchases of gas directly from other suppliers  (for  whom 
SDG&E provides transportation). 
 
     Revenues from diversified operations increased in 1994, primarily 
due to Califia's leasing activities. 
      
OPERATING EXPENSES Electric fuel expense decreased 30 percent in  1995 
and  18  percent  in 1994. The decrease in 1995 was primarily  due  to 
lower prices for natural gas and the shifting of energy supply sources 
from  generation to purchased power as a result of nuclear  refuelings 
during  the  year.  The decrease in 1994 was due to lower  prices  for 
natural gas and the replacement of fossil fuel generation with  lower- 
cost nuclear generation. 
 
     Purchased-power expenses decreased in 1995, reflecting a decrease 
in  purchased-power prices, offset by higher volumes.  The  5  percent 
increase in 1994 was primarily due to increased purchases from higher- 
cost, independent power producers. 
 
     Gas  purchased  for resale decreased 23 percent in  1995  and  12 
percent  in  1994.  The decrease in 1995 was primarily  due  to  lower 
prices  for natural gas and lower sales volumes due to warmer  weather 
and  an  increase in customers' purchases of gas directly  from  other 
suppliers  (for whom SDG&E provides transportation). The  decrease  in 
1994  was due to lower natural gas prices and lower sales volumes  due 
to customers' purchases of gas directly from others. 
 
     The changes in maintenance expenses reflect unusually low charges 
in 1994, a year which included no nuclear plant refuelings. 
      
OTHER  INCOME AND DEDUCTIONS Other income and deductions increased  in 
1995  and  decreased in 1994. These changes, including the  change  in 
"Other-net,"  were primarily due to the 1994 writedowns  described  in 
Note 2 of the notes to consolidated financial statements. 
 
EARNINGS 1995 earnings per common share were $1.94, compared to  $1.17 
in  1994  and $1.81 in 1993. Earnings per common share from continuing 
operations were $1.94 in 1995, compared with $1.71 in 1994  and  $1.89 
in 1993. Excluding the impact of writedowns of utility and non-utility 
real  property and other assets ($0.20 per share), 1994  earnings  per 
share  from continuing operations were $1.91. The increase in earnings 
in 1995 is due to numerous offsetting factors, including the increased 
utility authorized rate of return and changes in incentive awards  for 
performance-based ratemaking and demand-side management programs.  The 
increase  in  earnings  in 1994 was the result of  several  offsetting 
factors,   including   lower   operating  and   maintenance   expense, 
performance-based  ratemaking  awards  and  lower  utility  authorized 
return. 
 
                                     18 
<PAGE> 
 
 
     Earnings per share for the quarter ended December 31, 1995,  were 
$0.50  compared  to  $0.47 for the same period in 1994.  Earnings  per 
share  from continuing operations for the quarter were $0.45  in  1995 
and  $0.49  in 1994. The latter decrease is due to numerous offsetting 
factors,  including changes in incentive awards for  performance-based 
ratemaking  and  demand-side management programs,  and  the  increased 
authorized rate of return. 
 
     Califia  and Enova Financial's contributions to earnings for  the 
year  were $0.17 in 1995, $0.15 in 1994 and $0.09 in 1993. The  impact 
of  the  remaining subsidiaries on earnings from continuing operations 
was not material. 
      
LIQUIDITY AND CAPITAL RESOURCES 
Utility  operations  continue to be a major source  of  liquidity.  In 
addition, financing needs are met primarily through issuances of short- 
term  and  long-term  debt, and of common and preferred  stock.  These 
capital  resources are expected to remain available. Cash requirements 
include   plant   construction   and   other   capital   expenditures; 
subsidiaries'  affordable-housing, leasing and other investments;  and 
repayments  and retirements of long-term debt. In addition to  changes 
described elsewhere, major changes in cash flows are described below. 
      
CASH  FLOWS  FROM OPERATING ACTIVITIES The major changes in cash flows 
from  operations  among  the  three  years  result  from  changes   in 
regulatory balancing accounts, income taxes, and accounts payable  and 
other current liabilities. The changes related to regulatory balancing 
accounts were due primarily to changes in prices for natural gas.  The 
changes  related  to income taxes (and other current assets) were  due 
primarily to the differences in timing of income tax payments  related 
to  regulatory balancing account activity in 1994. The changes related 
to  accounts payable and other current liabilities were due  primarily 
to  greater  demand-side management activity in December  1995,  lower 
employee  incentive  compensation and lower construction  activity  in 
December 1994. 
 
     Quarterly  cash dividends of $0.39 per share have  been  declared 
for each quarter during the year ended December 31, 1995. The dividend 
payout  ratio for the years ended December 31, 1995, 1994, 1993,  1992 
and  1991 were 80 percent, 130 percent, 82 percent, 81 percent and  79 
percent,  respectively. The increase in the payout ratio for the  year 
ended  December  31, 1994, was due to the writedowns  recorded  during 
1994.  Additional information regarding the writedowns is provided  in 
Notes  2 and 3 of the notes to consolidated financial statements.  The 
payment  of future dividends is within the discretion of the directors 
and  is dependent upon future business conditions, earnings and  other 
factors. Net cash flows provided by operating activities currently are 
sufficient to maintain the payment of dividends at the present level. 
      
CASH FLOWS FROM FINANCING ACTIVITIES SDG&E  had  only  short-   and 
intermediate-term financing needs during 1995 and does not  expect  to 
issue  any  intermediate-term debt in 1996. The utility did not  issue 
stock or long-term debt in 1995, except for refinancings, and does not 
plan  any  issuances  in  1996, other than refinancings.  Subsidiaries 
Enova  Financial, Califia, Pacific Diversified Capital and  Phase  One 
Development  repaid $40 million in long-term debt in 1995  during  the 
ordinary  course  of  business. To date, it has  not  been  determined 
whether the nonutility subsidiaries will issue debt in 1996. 
 
     SDG&E's  utility capital structure is one factor that has enabled 
it  to  obtain long-term financing at attractive rates. The  following 
table  shows  the percentages of capital represented  by  the  various 
components.  The capital structures are net of the construction  funds 
held by a trustee in 1992 and 1993. 
      
                  1991   1992   1993   1994   1995    Goal 
----------------------------------------------------------- 
Common equity      47%    47%    47%    48%    49%   45-48% 
Preferred stock     5      5      4      4      4      5-7 
Debt and leases    48     48     49     48     47    46-49 
----------------------------------------------------------- 
   Total          100%   100%   100%   100%   100%     100% 
___________________________________________________________ 
      
     In December 1995, Standard & Poor's and Moody's Investors Service 
affirmed  the  ratings  of  SDG&E following  the  CPUC's  decision  on 
restructuring California's electric utility industry. Moody's affirmed 
its  long-term bond rating of A1 and stable outlook. Standard & Poor's 
affirmed  its  long-term  bond  rating of  A+  and  negative  outlook. 
Standard  &  Poor's  said  the outlook would remain  negative  pending 
further  study  of  the  financial implications of  the  restructuring 
decision, as well as the potential for modification or approval by the 
governor and the California Legislature. 
 
     On  December  19,  1995, the Securities and  Exchange  Commission 
approved  SDG&E's application to delist its preferred  and  preference 
stock  from  the  Pacific  Stock Exchange.  All  SDG&E  preferred  and 
preference stock is now listed on the American Exchange only. 
 
     On  January  15, 1996, SDG&E redeemed its $7.20 series preference 
stock.   The  entire  $15  million  issue  was  called  for  mandatory 
redemption at $101 per share. 
      
DERIVATIVES SDG&E's policy is to use derivative financial  instruments 
to  reduce its exposure to fluctuations in interest rates and  foreign 
currency  exchange rates. These financial instruments are  with  major 
investment  firms  and,  along  with cash  and  cash  equivalents  and 
accounts  receivable, expose SDG&E to market and credit  risks.  These 
risks  may at times be concentrated with certain counterparties. SDG&E 
presently  contemplates  use  of similar  instruments  to  reduce  its 
exposure  to  fluctuations in natural gas prices. SDG&E does  not  use 
derivatives for trading or speculative purposes. 
 
                                      19 
<PAGE> 
 
 
     SDG&E  periodically  enters  into  interest  rate  swap  and  cap 
agreements  to moderate its exposure to interest rate changes  and  to 
lower  its  overall cost of borrowing. These swap and  cap  agreements 
generally remain off the balance sheet as they involve the exchange of 
fixed- and variable-rate interest payments without the exchange of the 
underlying  principal  amounts.  The  related  gains  or  losses   are 
reflected  in the income statement as part of interest expense.  SDG&E 
would be exposed to interest-rate fluctuations on the underlying  debt 
should  other  parties  to  the  agreement  not  perform.  Such   non- 
performance  is not anticipated. At December 31, 1995, SDG&E  had  two 
such  agreements, including an index cap agreement on $75  million  of 
bonds  maturing in 1996, and a floating-to-fixed-rate swap  associated 
with $45 million of variable-rate bonds maturing in 2002. 
 
     SDG&E's  pension fund periodically uses foreign currency  forward 
contracts  to  reduce  its  exposure from  exchange-rate  fluctuations 
associated  with  certain  investments in foreign  equity  securities. 
These  contracts generally have maturities ranging from three  to  six 
months.  At December 31, 1995, the pension fund held forward  Yen-U.S. 
Dollar contracts totaling $20 million. SDG&E's pension fund is exposed 
to  credit  loss  if  the counterparties fail to  perform.  Such  non- 
performance is not anticipated. 
 
     Additional  information  on derivative financial  instruments  is 
provided in Note 9 of the notes to consolidated financial statements. 
      
CASH FLOWS FROM INVESTING ACTIVITIES Cash used in investing activities 
in 1995 included utility construction expenditures and payments to its 
nuclear  decommissioning  trust. Construction expenditures,  excluding 
nuclear   fuel  and  the  allowance  for  equity  funds  used   during 
construction, were $221 million in 1995 and are estimated to  be  $220 
million  in  1996. The company continuously reviews its  construction, 
investment  and  financing programs and revises them  in  response  to 
changes  in  competition, customer growth, inflation, customer  rates, 
the  cost  of  capital, and environmental and regulatory requirements. 
Among  other things, the level of expenditures in the next  few  years 
will depend heavily on the impact of the CPUC's industry restructuring 
decision,  on  the timing of expenditures to comply with air  emission 
reduction  and other environmental requirements, on the company's plan 
to   transport  natural  gas  to  Mexico  and, on the scope  of  Enova 
Technologies'  investment  in  new  technologies.  These  matters  are 
discussed below. 
 
     Payments  to  the nuclear decommissioning trust are  expected  to 
continue until SONGS is decommissioned, which is not expected to occur 
before 2013. Although Unit 1 was permanently shut down in 1992, it  is 
expected to be decommissioned concurrently with Units 2 and 3. 
      
REGULATORY MATTERS 
ELECTRIC RATES In April 1995, the CPUC issued its decision on  SDG&E's 
May  1995 Energy Cost Adjustment Clause Application, approving an  $81 
million decrease in electric rates effective May 1, 1995. The decrease 
reflects, among other things, lower fuel and purchased-power costs and 
the return of previous overcollections from customers. The $81 million 
ECAC decrease was combined with previously approved increases for cost 
of capital ($31 million) and base rates ($41 million), resulting in an 
authorized system average electric rate of $0.0987. 
 
     In  October 1995, SDG&E filed its 1996 ECAC rate request with the 
CPUC for an $18 million decrease in electric rates which, if approved, 
would result in an authorized system average electric rate of $0.0967  
on June 1, 1996. The request reflects lower forecasted prices for fuel 
and purchased power, lower cost of capital, balancing account activity, 
and  inflation  and customer growth based on SDG&E's performance-based 
ratemaking  Base Rates  Mechanism formula. Settlement discussions are  
currently ongoing among SDG&E, the CPUC's Division of Ratepayer  
Advocates and  other parties. 
 
     In   December  1995,  the  CPUC  found  SDG&E  operations  to  be 
reasonable  for  the record period August 1, 1992,  through  July  31, 
1993, except for $1.8 million associated with a wholesale transaction. 
This   is   the   last  comprehensive  reasonableness  review,   since 
performance-based ratemaking (see below) limits such reviews to  those 
issues causing expenses to fall outside certain parameters. 
      
GAS RATES In  July 1995, the CPUC issued its decision on SDG&E's  June 
1995  application  to lower core gas rates by $16  million,  effective 
August 1, 1995. The decrease was based on the decline in gas prices to 
levels  below the Biennial Cost Allocation Proceeding's price forecast 
that became effective January 1, 1995, and lowered the gas portion  of 
a typical residential SDG&E natural gas bill by $1.60 per month or 6.5 
percent. 
 
     In  December 1995, the CPUC authorized SDG&E to implement  a  $21 
million   natural  gas  refund  as  a  result  of  balancing   account 
overcollections from lower-than-expected natural gas commodity  costs. 
The  typical customer's refund, distributed in February 1996, averaged 
$22.  In December 1995, the CPUC also authorized a $25 million natural 
gas  rate  increase for residential and small-business  customers.  In 
January  1996, the typical customer's gas bill increased approximately 
$1.78  per  month,  primarily  due  to  an  increase  in  natural  gas 
transportation prices from Southern California Gas and  an  update  of 
balancing account activity. 
 
                                        20 
<PAGE> 
 
 
PERFORMANCE-BASED RATEMAKING In December 1995,  the  CPUC  issued  its 
decision, authorizing rewards of $3.7 million for electric generation 
and dispatch (G&D) and $3.8 million for gas procurement based on first- 
year  (August  1993  through July 1994) results  of  performance-based 
ratemaking  (PBR). The CPUC also found SDG&E's nuclear and gas-storage 
operations reasonable for the same period. 
 
     In October 1995, SDG&E filed reports with the CPUC on the results 
of its electric generation and dispatch and gas procurement mechanisms 
for  the  year  ended July 31, 1995. SDG&E's fuel and  purchased-power 
expenses fell below the benchmarks for these mechanisms by a total  of 
$27.9 million ($2.8 million for G&D and $25.1 million for gas). In its 
filing for a rate adjustment effective June 1, 1996, SDG&E requested a 
total  shareholder reward of $3.4 million ($0.8 million  for  G&D  and 
$2.6 million for gas) and that the remainder of these savings be given 
to customers through lower rates. 
 
     In  July  1995,  the  CPUC authorized $7 million  in  rewards  to 
shareholders  as  a  result  of SDG&E's exceeding  CPUC-approved  1994 
benchmarks under the base-rates PBR mechanism. Performance measures in 
the  base-rates  mechanism  measures  include  customer  satisfaction, 
national rates comparison, system reliability and employee safety. 
 
     These  PBR  rewards are recorded in advance of receipt only  when 
the  entire reward will be collected in rates within 24 months of  the 
CPUC's approval. 
 
     The  gas  procurement and G&D mechanisms are  effective  under  a 
previously  authorized two-year experiment that began in August  1993. 
Both have been extended until the Division of Ratepayer Advocates  and 
the  Commission  Advisory  and Compliance Division  file  their  final 
reports  for the year ended July 31, 1995 (expected during  the  first 
quarter  of 1996). Thereafter, SDG&E will be applying for an extension 
and modification in conjunction with the restructuring of California's 
electric  utility industry (see "Competition" below), and the existing 
mechanisms are expected to remain in place until the CPUC acts on  the 
application.  The  base-rates mechanism was established  as  a  5-year 
experimental  mechanism  that is intended to  run  from  January  1994 
through December 1998. 
      
COST OF CAPITAL In  November  1995,  the  CPUC  issued  its  decision 
authorizing  SDG&E,  Pacific  Gas and  Electric,  Southern  California 
Edison, Southern California Gas and Sierra Pacific Power 11.60 percent 
returns  on  common  equity for 1996. (SDG&E's was  12.05  percent  in 
1995.)  SDG&E's resulting rate of return on ratebase is 9.37  percent, 
compared to 9.76 percent in 1995. 
 
     In  October  1995,  SDG&E  filed a  proposal  with  the  CPUC  to 
implement  a  mechanism to establish its cost of capital beginning  in 
January 1997. Each October, SDG&E's authorized rate of return would be 
adjusted  if single A bond rates change by 1 percent or more from  the 
prior  year's  benchmark. A 100-basis-point change in  single  A  bond 
rates  would result in a one-half percent change in SDG&E's return-on- 
equity.  In  addition, SDG&E's embedded costs of  debt  and  preferred 
stock would be adjusted to reflect SDG&E's outstanding long-term  debt 
and  preferred  stock  at  each September 30 if  the  return-on-equity 
adjustment  described  above is triggered. The  adjustments  would  be 
effective on January 1 of the following year. The proposal suggests  a 
3-year  trial period during which SDG&E's authorized capital structure 
would not change. 
      
SAN ONOFRE NUCLEAR GENERATING STATION SDG&E is currently recovering its 
existing  capital investment in San Onofre Nuclear Generating  Station 
Unit 1 over a 4-year period that began in November 1992, when the CPUC 
issued  a  decision  to permanently shut down the unit.  The  decision 
authorized Southern California Edison (majority owner and operator  of 
SONGS)  and  SDG&E to recover their investments in Unit  1,  of  which 
SDG&E's  share  was $111 million. SDG&E is recovering its  investment, 
earning  a  return of 9.1 percent. At December 31, 1995,  $18  million 
remained to be recovered. 
 
     In  January  1996, the CPUC approved the accelerated recovery  of 
SONGS  Units 2 and 3 existing capital costs. The decision allows SDG&E 
to recover its investment of approximately $750 million over an 8-year 
period beginning in 1996, rather than over the anticipated operational 
life of the units, which is expected to extend to 2013. During the  8- 
year  period, the authorized rate of return on the equity  portion  of 
the investment will be 90 percent of SDG&E's embedded cost of debt and 
the  return  on  the debt-financed component will be at  7.52  percent 
(SDG&E's  1995  authorized  cost of debt).  The  decision  includes  a 
performance  incentive  plan  that  encourages  continued,   efficient 
operation  of the plant during the 8-year period. During this  period, 
customers  will  pay  about  $0.04  per  kilowatt-hour.  This  pricing 
structure  replaces  the traditional method of recovering  the  units' 
operating expenses and capital improvements. This is intended to  make 
the units more competitive with other sources. 
      
COMPETITION 
ELECTRIC - CALIFORNIA In December 1995, the CPUC issued its policy 
decision on the restructuring of California's electric utility 
industry to stimulate competition and reduce rates. Beginning in 
January 1998, customers can buy their electricity through a power 
exchange that will obtain power from the lowest-bidding suppliers.  
The exchange is a spot market with visible pricing. Consumers also 
may choose to continue 
 
                                      21 
<PAGE> 
 
 
to purchase from their local utility under  
regulated tariffs. As a third option, a cross section of all customer 
groups (residential, industrial, commercial and agricultural) will be 
able to go directly to any energy supplier and enter into private   
contracts with generators, brokers or others (direct access). 
As the direct access mechanism has many technical issues to be 
resolved, a five-year phase-in is planned. All California electricity 
customers of investor-owned utilities will have the option to purchase 
generation services directly by 2003. Key points of the CPUC decision 
as it relates to SDG&E include: 
 
   -   An  independent  system  operator  (ISO)  will  schedule  power 
transactions  and  access to the state transmission  system,  enabling 
competing  power producers to have equal opportunity to deliver  their 
supplies.   Participation  in  the  power  exchange  or   "pool-based" 
wholesale electricity market will be voluntary for buyers and sellers, 
except  for  the  investor-owned utilities.  The  ISO  and  the  power 
exchange  will be separate, independent entities under Federal  Energy 
Regulatory Commission jurisdiction. 
 
   -  Utilities  will  be  allowed to fully recover  their  "stranded" 
costs  incurred  for facilities approved by the CPUC,  purchased-power 
and  other  contracts, and regulatory assets through the establishment 
of  a  non-bypassable competition transition charge  (CTC)  which  all 
customers will be assessed. 
 
   -  Utilities  will  continue  to have  the  obligation  to  provide 
distribution   service  to  all  customers  and   provide   least-cost 
generation  service to those customers who do not choose  the  direct- 
access  option.  Performance-based  regulation  rather  than  cost-of- 
service  regulation  will  be  used  to  encourage  efficient  utility 
operation. 
 
   -  Utilities will continue to have direct control and operation  of 
the  distribution business and procurement of generation services  for 
customers  who  continue  to purchase from  the  utility,  which  will 
continue to be regulated by the CPUC. Transmission facilities will  be 
owned by the utilities and operated by the ISO. 
 
   -  For  purposes of transition cost recovery, rates  for  customers 
taking  bundled utility service (energy, transmission and distribution 
included  into  one  rate) will be capped at  levels  consistent  with 
January 1, 1996, revenue requirements. Including the CTC, rates cannot 
exceed  the cap and, therefore, recovery of the CTC is limited by  the 
cap.  If  rates  not including the CTC meet or exceed the  cap  for  a 
particular  period,  no  CTC  can be  recouped,  but  rather  will  be 
accumulated in a balancing account for future recovery (see below). 
 
   -  The  CPUC  supports a non-bypassable surcharge  to  fund  public 
policy programs. 
 
     The  decision  identifies  three primary  sources  of  transition 
costs:  uneconomic utility-owned generating assets  (that  portion  of 
fossil units not recoverable in the energy price), existing purchased- 
power  obligations (including qualifying facilities),  and  regulatory 
assets  and  obligations  (including  deferred  operating  costs   and 
deferred  taxes). By September 1996, the utilities must  identify  and 
value  investments for inclusion in a transitional balancing  account, 
subject  to CPUC review and approval. The transition-balancing account 
can  be  adjusted through 2003 for errors or omissions. Collection  of 
any  investment-related transition costs must be  completed  by  2005. 
Thereafter,  participation  in the power  exchange  by  investor-owned 
utilities will be voluntary. 
 
     The  decision  allows  for recovery of all  remaining  generation 
investment  costs,  with a reduced rate of return on  any  investment- 
related  transition costs. The rate of return for the  debt  component 
would be equal to the utility's embedded cost of debt and the rate  of 
return  on  the equity component would be equal to 90 percent  of  the 
embedded cost of debt. SDG&E's authorized cost of debt is 7.52 percent 
for  1995.  The  CPUC  reduced  the rate  of  return  to  reflect  the 
perception   of  lower  risk,  due  to  the  non-bypassable   CTC   on 
distribution customers, and the reduced risk that the plants  will  be 
found no longer used and useful and removed from rate base. 
 
     The  CPUC's  concerns  over  market-power  problems  may  require 
investor-owned utilities to divest themselves of a substantial portion 
of their generating assets. PG&E and Edison are required to file plans 
to  voluntarily  divest themselves of at least  50  percent  of  their 
fossil-fueled generating assets through a spin-off or sale to  a  non- 
affiliated entity. SDG&E is not included in this requirement,  as  the 
CPUC  does  not perceive these market-power problems in San Diego.  In 
order  to  encourage  the  voluntary  divestiture  or  spin-off  of  a 
utility's  fossil generation, the decision provides for a 0.1  percent 
increase  in  equity  return  for each 10  percent  of  fossil  plants 
disposed of in excess of the mandatory percentage. 
 
     In  addition, the utilities are required to file plans  with  the 
CPUC  to  implement  direct access and new or revised  PBR  proposals. 
Plans to establish the power exchange and ISO are also required to  be 
filed  by  the utilities with both the CPUC and the FERC, as the  FERC 
has   jurisdiction   over  the  exchange,  the  ISO   and   interstate 
transmission. 
 
     The  California  Legislature has passed a resolution  forming  an 
oversight  committee to ensure the legislature's  involvement  in  the 
policies  presented  by the CPUC, and that the  policies  comply  with 
federal and state laws, and achieve the objectives both of competition 
and  the  various  social programs that are currently  funded  through 
utility rates. 
 
     The  CPUC is currently working on building a consensus on the new 
market  structure  with  the  California  Legislature,  the  governor, 
utilities and customers. 
      
ELECTRIC-FEDERAL In March 1995, the FERC issued a proposed rule that, 
if  adopted,  would  require all public utilities to  offer  wholesale 
"open-access"  transmission service on a nondiscriminatory  basis.  In 
addition,  public  utilities would be 
 
                                   22 
<PAGE> 
 
 
 required to  functionally  price 
their  generation and transmission services separately. The FERC  also 
stated  its  belief that utilities should be allowed  to  recover  the 
costs  of  assets  and  obligations made  uneconomic  by  the  changed 
regulatory environment. Although SDG&E's cost-recovery mechanisms  are 
not  currently under the jurisdiction of the FERC, the recognition  by 
the  FERC  of the propriety of such cost recovery supports the  CPUC's 
similar position. 
 
     In  October  1995,  SDG&E filed for approval of  its  open-access 
tariffs  for  its service territory with the FERC in conjunction  with 
its  request  for  a marketing license for Enova Energy.  In  December 
1995,  the  FERC  issued a draft order approving  SDG&E's  open-access 
tariff, but rejecting Enova Energy's filing. This limits Enova  Energy 
to  cost-based rates. All non-rate terms and conditions were  accepted 
subject to the outcome of the FERC's restructuring rulemaking. 
 
     Final  approval  of  the  FERC's rule and  the  CPUC's  industry- 
restructuring  plan  would  result in  the  creation  of  a  bid-based 
wholesale  electricity spot market with open-access transmission.  The 
FERC is expected to issue a final rule during the first half of 1996. 
      
GAS The  ongoing restructuring of the gas utility industry has  allowed 
customers to bypass utilities as suppliers and, to a lesser extent, as 
transporters  of  natural  gas.  Currently,  non-utility   electricity 
producers and other large customers may use a utility's facilities  to 
transport  gas  purchased  from non-utility suppliers.  Also,  smaller 
customers  may  form  groups to buy gas from another  supplier.  SDG&E 
would face significant competition if a major pipeline were to operate 
in or near SDG&E's service territory. 
 
     In  September  1995,  SDG&E  signed  an  agreement  with  Pacific 
Enterprises  International, an affiliate of Southern  California  Gas, 
and  Proxima,  a Mexican company, to develop and operate  natural  gas 
distribution  networks in Baja California, Mexico. Representing  SDG&E 
will be an Enova Corporation subsidiary, Enova International. 
 
     In  November  1995,  Mexico  issued  new  regulations   allowing 
privately owned companies, including companies with foreign ownership, 
to  participate  in  infrastructure  projects  involving  natural  gas 
transportation, storage and distribution. Previously, these activities 
were conducted by the government-owned oil company, Pemex. 
 
     In  November  1995,  the  three-company  consortium  submitted  a 
Statement of Interest to the Mexican government requesting a permit to 
distribute natural gas in the city of Mexicali and surrounding  areas. 
Other  companies have also expressed an interest in the project. Under 
the  new  regulations, the government will conduct a  bidding  process 
before a permit is issued. If the consortium is awarded the permit, it 
will  have an exclusive right to distribute natural gas in that region 
for 12 years. 
 
     The  proposed project would deliver gas to Mexicali  through  the 
pipeline network of Southern California Gas in the Imperial Valley. The 
initial capital will be $10 million to $15 million, and the initial 
load will be about 10 million cubic feet per day, serving mostly  
industrial customers.  The proposed pipeline network would be  
continuously expanded to serve residential and commercial customers. 
      
EFFECTS OF REGULATION SDG&E currently accounts for the economic effects 
of  regulation  in  accordance with Statement of Financial  Accounting 
Standards  No.  71, "Accounting for the Effects of  Certain  Types  of 
Regulation,"  under which a regulated utility may record a  regulatory 
asset  if  it  is probable that, through the rate-making process,  the 
utility will recover that asset from its customers. In the event  that 
recovery   of  specific  costs  through  rates  becomes  unlikely   or 
uncertain,  whether  resulting  from the  effects  of  competition  or 
regulatory  actions, it could result in the writeoff  of  portions  of 
these   regulatory   assets.  In  addition,  once  the   restructuring 
transition  is final, SDG&E may not continue to meet the criteria  for 
applying  SFAS  71  to  all of its operations in  the  new  regulatory 
framework. 
 
     As  the  restructuring of the industry evolves, SDG&E will become 
more   vulnerable  to  competition.  However,  based  on  recent  CPUC 
decisions,  recovery  of  stranded costs is  provided  for,  including 
recovery  of  investment in SONGS Units 2 and 3, and  SDG&E  does  not 
anticipate  incurring  a  material charge  against  earnings  for  its 
generating  facilities, the related regulatory assets and other  long- 
term  commitments. In addition, although California  utilities'  rates 
are  significantly higher than the national average, SDG&E has a lower 
concentration  of industrial customers and for 7 years  has  been  the 
lowest-cost provider among the investor-owned utilities in California, 
which make its customers a less likely target for outside competitors. 
      
RESOURCE PLANNING 
BIENNIAL  RESOURCE PLAN UPDATE PROCEEDING In December 1994,  the  CPUC 
issued  a  decision  ordering  SDG&E, Pacific  Gas  and  Electric  and 
Southern California Edison to proceed with the BRPU auction. SDG&E was 
ordered  to begin negotiating contracts (ranging from 17 to 30  years) 
to purchase 500 mw of power from qualifying facilities at an estimated 
cost  of  $4.8 billion beginning in 1997. In February 1995,  the  FERC 
issued  an order declaring the BRPU auction procedures unlawful  under 
federal law. In July 1995, the CPUC issued a ruling encouraging SDG&E, 
PG&E  and  Edison  to  reach  settlements with  the  auction  winners. 
Settlement   discussions  are  ongoing.  Additional   information   on 
potential  stranded costs and SDG&E's purchased-power  commitments  is 
described  in  Notes 10 and 11 of the notes to consolidated  financial 
statements. 
 
                                       23 
<PAGE> 
 
 
SOURCES OF  FUEL  AND  ENERGY SDG&E's  primary  sources  of  fuel  and 
purchased  power  include natural gas from Canada and  the  Southwest, 
surplus power from other utilities in the Southwest and the Northwest, 
and  uranium  from Canada. SDG&E expects its fuel and  purchased-power 
costs  to  remain  relatively low in the next few  years  due  to  the 
continued  availability  of surplus power in  the  Southwest  and  the 
continued availability of natural gas. Although short-term natural-gas 
supplies  are  volatile  due to weather and  other  conditions,  these 
sources  should  provide  SDG&E with an adequate  supply  of  low-cost 
natural gas. SDG&E is currently involved in litigation concerning  its 
long-term  contracts for natural gas with certain Canadian  suppliers. 
SDG&E  has settled with one supplier. SDG&E cannot predict the outcome 
of  the litigation with the other suppliers, but does not expect  that 
an  unfavorable outcome would have a material effect on its  financial 
condition or results of operations. 
      
ENVIRONMENTAL MATTERS 
SDG&E's operations are conducted in accordance with federal, state and 
local  environmental laws and regulations governing hazardous  wastes, 
air and water quality, land use and solid-waste disposal. SDG&E incurs 
significant costs to operate its facilities in compliance  with  these 
laws  and regulations, and to clean up the environment as a result  of 
prior  operations of SDG&E or of others. The costs of compliance  with 
environmental laws and regulations are normally recovered in  customer 
rates.  However, the CPUC's decision for restructuring the  California 
electric  utility  industry (see above) will change  the  way  utility 
rates  are set and costs are recovered. Depending on the final outcome 
of  industry restructuring and the impact of competition, the costs of 
compliance  with  future environmental regulations may  not  be  fully 
recoverable. 
 
     Capital  expenditures  to  comply  with  environmental  laws  and 
regulations were $4 million in 1995, $5 million in 1994 and $8 million 
in  1993,  and are expected to aggregate $38 million over the  next  5 
years.  These  expenditures primarily include the  estimated  cost  of 
retrofitting SDG&E's power plants to reduce air emissions. They do not 
include   potential   expenditures  to  comply  with   water-discharge 
requirements  for the Encina, South Bay and SONGS power plants,  which 
are discussed below. 
      
HAZARDOUS WASTES In  May  1994,  the CPUC  approved  a  mechanism  for 
utilities  to  recover  their  costs  to  clean  up  hazardous   waste 
contamination at sites at which the utility may have responsibility or 
liability  under  the law to conduct or participate  in  any  required 
cleanup.  Basically,  the  mechanism allows utilities  to  recover  90 
percent  of  their cleanup costs and any related costs  of  litigation 
with  responsible  parties, and 70 percent of their costs  related  to 
obtaining  recovery  of  such cleanup costs  from  insurance  carriers 
providing coverage for such costs. 
 
     SDG&E  disposes of its hazardous wastes at facilities  owned  and 
operated by other entities. Operations at these facilities may  result 
in  actual  or  threatened risks to the environment or public  health. 
Where  the owner or operator of such a facility fails to complete  any 
corrective action required by regulatory agencies to abate such risks, 
applicable  environmental laws may impose an obligation on  SDG&E  and 
others  who disposed of hazardous wastes at the facility to  undertake 
corrective actions. 
 
     This  type of obligation has been imposed upon SDG&E with respect 
to  the  Rosen's Electrical Equipment Supply Company site  located  in 
Pico Rivera, California. In December 1993, SDG&E received notification 
that  the  California  Department of Toxic Substances  Control  (DTSC) 
considered   SDG&E  and  eight  other  entities  to   be   potentially 
responsible  parties (PRPs) liable for any required corrective  action 
regarding polychlorinated biphenyls contamination at the Rosen's site. 
The  site was operated between approximately 1948 and 1984. As a  part 
of  its  operations,  Rosen's acquired and  scrapped  used  electrical 
transformers.  SDG&E sold some of its used electrical transformers  to 
Rosen's.  The  DTSC  considers SDG&E to be  responsible  for  about  7 
percent of the transformer-related contamination at the site. SDG&E is 
continuing  to  investigate this matter. In December  1995,  the  DTSC 
issued  an  Imminent  and Substantial Endangerment  Determination  and 
Remedial  Action  Order to SDG&E and 10 other PRPs requiring  them  to 
assess  and remove the risks of contamination from the site.  However, 
SDG&E  and the other PRPs have been negotiating with Rosen's  and  the 
DTSC  to  effect, before April 20, 1996, an alternative consent  order 
which  would  separate the development of the cleanup  plan  from  the 
actual  cleanup. This would provide the PRPs with greater  flexibility 
to  manage  and  implement the required actions.  Based  on  available 
information,  SDG&E is unable to estimate the range of  liability,  if 
any, it may have for the necessary corrective action at this site. 
 
     During  the  early 1900s SDG&E and its predecessors  manufactured 
gas  from  oil  at  its  Station A facility and  at  two  other  small 
facilities  in  Escondido and Oceanside. In 1995, SDG&E  commenced  an 
environmental  assessment of Station A. Some  significant  amounts  of 
residual  by-products  from the gas-manufacturing  process  have  been 
discovered on portions of the facility during the assessment. However, 
the  magnitude  of  such contamination has yet to be  determined.  The 
assessment will be completed in 1996, at which time the extent of  any 
required  remediation  activities  and  a  range  of  costs  will   be 
determined.  Sufficient  information is  not  currently  available  to 
estimate cleanup costs. The Escondido facility has been remediated  at 
a  cost  of approximately $3 million during the period of 1990 through 
1993.  A site closure letter for this  
 
                                     24 
<PAGE> 
 
 
facility has been obtained  from 
the  San  Diego  County Department of Environmental  Health  Services. 
However, contaminants similar to the ones found on the Escondido  site 
have  been observed on adjacent parcels of property. SDG&E will assess 
these contaminants in 1996. 
 
     SDG&E  has identified various other sites for which it  may  bear 
some responsibility or liability for any corrective action that may be 
required  under federal, state or local environmental laws. SDG&E  may 
be held partially or indirectly responsible for remediation of some of 
these  sites. However, SDG&E is unable to estimate the extent  of  its 
responsibility, if any, for remediation. Furthermore, the  timing  for 
assessing  the costs of remediation at these sites and the number  and 
identities  of other parties that may also be responsible  (and  their 
respective responsibilities and abilities to share in the cost of  the 
remediation) are also unknown. 
      
ELECTRIC  AND  MAGNETIC  FIELDS (EMF) SDG&E and  other  utilities  are 
involved  in  litigation concerning electric and magnetic  fields.  An 
unfavorable outcome of this litigation could have a significant impact 
on  the future operations of the electric utility industry, especially 
if relocation of existing power lines is ultimately required. To date, 
science  has  demonstrated  no cause-and-effect  relationship  between 
cancer  and  exposure  to  the  type of  EMFs  emitted  by  utilities' 
transmission  lines and generating facilities. To  respond  to  public 
concerns,  the CPUC has directed the California utilities to  adopt  a 
low-cost EMF-reduction policy that requires reasonable design  changes 
to  achieve  noticeable reduction of EMF levels that  are  anticipated 
from  new  projects.  However, consistent with  the  major  scientific 
reviews of available research literature, the CPUC has indicated  that 
no health risk has been identified with exposure to EMFs. 
      
AIR QUALITY In 1996, SDG&E must begin to comply with nitrogen  dioxide 
emission  limits  that  the San Diego Air Pollution  Control  District 
imposed on electric generating boilers through its Rule 69. Under  the 
initial rule, SDG&E would have been required to retrofit each  of  its 
nine  boilers  with  expensive pollution-control equipment  to  reduce 
nitrogen  dioxide emissions and to maintain the total  nitrogen  oxide 
emissions  from  the  entire system below a prescribed  emissions  cap 
(having  graduated emission reductions to be achieved  through  2001). 
The capital costs of compliance with the initial rule were expected to 
be approximately $110 million. However, in December 1995, the district 
amended   the   rule   to  remove  the  individual   boiler   retrofit 
requirements, but retained the system-wide emissions cap with  further 
system-wide emission reductions to be achieved by 2005. The  estimated 
capital  costs  for compliance with the amended rule are approximately 
$60  million.  The  California  Air Resources  Board  (ARB)  expressed 
concern  that  the amendments to Rule 69 did not meet the requirements 
of  the California Clean Air Act. However, the ARB withheld any formal 
objections pending its review of SDG&E's Rule 69 compliance plan to be 
submitted  in 1996. The ARB may seek to overturn some or  all  of  the 
Rule  69  amendments or to otherwise impose more restrictive emissions 
limitations,  which  would cause SDG&E's Rule 69 compliance  costs  to 
increase. 
 
     In  1990  the South Coast Air Quality Management District  (AQMD) 
passed  a rule which will require SDG&E's older natural gas compressor 
engines  at its Moreno facility to either meet new stringent  nitrogen 
oxide  emission levels or be converted to electric drive.  In  October 
1993,  the  AQMD adopted a new program called RECLAIM, which  replaced 
existing rules and requires SDG&E's natural-gas compressor engines  at 
its Moreno facility to reduce their nitrogen oxide emission levels  by 
about  10  percent  a  year through 2003. This  will  be  accomplished 
through   the  installation  of  new  emission-monitoring   equipment, 
operational  changes  to  take advantage of low-emission  engines  and 
engine retrofits. SDG&E has concluded negotiations with the AQMD  that 
resulted  in  the  reclassification of  three  of  these  engines  and 
eliminated  the  need for certain expensive monitoring  equipment  for 
those engines. The cost of complying with RECLAIM may be as much as $3 
million. 
      
WATER QUALITY In 1989, SDG&E submitted applications to the  San  Diego 
Regional  Water  Quality Control Board to renew the discharge  permits 
for  its  South Bay and Encina power plants. Supplemental applications 
were submitted in 1993. These discharge permits are required to enable 
SDG&E  to  discharge its cooling water and certain other  treated  and 
nontreated  nonhazardous wastewaters into the Pacific Ocean  and  into 
San  Diego  Bay.  The  permits are, therefore,  prerequisites  to  the 
continued  operation of its power plants as they are  now  configured. 
Increasingly   stringent   cooling-water  and   wastewater   discharge 
limitations may be imposed in the future, and SDG&E may be required to 
build  additional  facilities to comply with these requirements.  Such 
facilities  could  include  wastewater treatment  facilities,  cooling 
towers or offshore- discharge pipelines. 
 
     SDG&E anticipates that the regional board will issue a new permit 
for  SDG&E's  South  Bay  power plant in 1996.  Pending  the  regional 
board's action, the previous permit remains effective. 
 
     The  regional board issued SDG&E a new discharge permit  for  its 
Encina power plant in November 1994. However, SDG&E's application  for 
an  exception  to  certain  thermal-discharge  requirements  is  still 
pending  until  the completion of thermal studies to be  conducted  in 
1996.  If  SDG&E's  exception application is denied,  SDG&E  could  be 
required to construct offshore-discharge facilities at a cost of up to 
$75 million. 
 
                                     25 
<PAGE> 
 
 
     The  California  Coastal  Commission  required  a  study  of  the 
offshore  impact  on  the  marine environment from  the  cooling-water 
discharge  by  SONGS  Units  2 and 3. The study  concluded  that  some 
environmental  damage  is  caused by the discharge.  To  mitigate  the 
environmental damage, the California Coastal Commission ordered Edison 
and  SDG&E to improve the plant's fish-protection system, build a 300- 
acre  artificial reef to help restore kelp beds and restore 150  acres 
of  coastal wetlands. SDG&E may be required to incur capital costs  of 
up to $30 million to comply with this order. The new pricing structure 
contained  in  the CPUC's decision regarding accelerated  recovery  of 
SONGS  Units  2  and  3  (see "San Onofre Nuclear Generating  Station" 
above)  accommodates these added mitigation costs. In addition,  SDG&E 
and  Edison have asked the California Coastal Commission to reconsider 
and  modify  this mitigation plan to reduce the size of the artificial 
reef and shorten the monitoring period. Negotiations are ongoing. 
      
WOOD-POLE PRESERVATIVES The Pacific Justice Center (Pacific),  a  for- 
profit  law  firm,  and  the Mateel Environmental  Justice  Foundation 
(Mateel),  a  nonprofit  corporation,  claim  that  SDG&E  and   other 
utilities  and parties have violated California's Safe Drinking  Water 
and  Toxic Enforcement Act (Proposition 65) by failing to warn persons 
who  may come into contact with the preservatives used in treated wood 
utility  poles and by allowing such preservatives to be released  into 
sources  of drinking water. Some preservatives used in woodpoles  are 
included  on California's list of chemicals known to cause  cancer  or 
reproductive harm. Proposition 65 requires that prior warning be given 
to  individuals  who  may  be  exposed to such  chemicals  unless  the 
exposure  will  not pose a significant risk and that these  substances 
not  be  released  into  sources  of  drinking  water  in  significant 
quantities  or  otherwise in violation of the law. Violations  of  the 
Proposition 65 warning requirement can result in penalties  of  up  to 
$2,500  per  violation. SDG&E believes, on the basis  of  studies  and 
other  information,  that  exposure to  wood  poles  containing  these 
preservatives does not give rise to a significant risk and, therefore, 
no  warning  is  required  and that significant  quantities  of  these 
preservatives are not released to any source of drinking water.  SDG&E 
and  the  other utilities and parties have responded to the claims  by 
denying  their validity.  In  June  1995,  Mateel,  represented  by 
Pacific,  filed  a complaint in San Francisco Superior  Court  against 
Pacific  Bell,  PG&E  and  two  wood-pole manufacturers  alleging  the 
violations noted above. Although SDG&E was not named in this  lawsuit, 
it  is  anticipated  that Mateel may file a separate  lawsuit  against 
SDG&E  and  other utilities on the same grounds. SDG&E is  cooperating 
with  PG&E,  Pacific  Bell  and others to  achieve  an  effective  and 
favorable resolution of this matter. 
      
NEW ACCOUNTING STANDARDS 
In  March  1995,  the  Financial  Accounting  Standards  Board  issued 
Statement  of Financial Accounting Standards No. 121, "Accounting  for 
the  Impairment of Long-Lived Assets and for Long-Lived Assets  to  Be 
Disposed  Of."  This statement, which is effective for 1996  financial 
statements,  requires that long-lived assets and certain  identifiable 
intangibles be reviewed for impairment whenever events or  changes  in 
circumstances indicate that the carrying amount of an asset may not be 
recoverable.  In performing the review of recoverability,  the  entity 
should estimate the future cash flows expected to result from the  use 
of  the asset and its eventual disposition. As discussed above and  in 
Note  11  of the notes to consolidated financial statements, the  CPUC 
has  issued  a  decision  for restructuring  the  California  electric 
utility  industry to stimulate competition and has indicated that  the 
California utilities will, within certain limits, be allowed  recovery 
of  regulatory assets, the excess carrying amount of existing  utility 
plant  and obligations under long-term purchased-power contracts  over 
fair-market  value over a transition period that ends in  2005.  As  a 
result  of this and preliminary indications from the FERC on  recovery 
of  transition costs arising from industry restructuring, SFAS 121  is 
not  currently expected to have an adverse impact on SDG&E's financial 
condition  or results of operations. However, this may change  in  the 
future  as  restructuring, deregulation and competitive  factors  take 
effect in the electric utility industry. 
 
     In  October 1995, the Financial Accounting Standards Board issued 
Statement  of Financial Accounting Standards No. 123, "Accounting  for 
Stock-Based  Compensation." SFAS 123 is effective for  1996  financial 
statements and establishes a fair-value-based method of accounting for 
stock-based   compensation  plans.  SFAS  123  provides  a   voluntary 
alternative  to the provisions of Accounting Principles Board  Opinion 
25,  "Accounting for Stock Issued to Employees." However, it  requires 
pro  forma  disclosure  of the stock-based compensation  arrangement's 
impact on net income and earnings per share as though SFAS 123's fair- 
value  provisions had been adopted. SDG&E currently issues restricted- 
stock  awards under its Long-Term Incentive Plan and expects to  adopt 
the disclosure-only requirement of SFAS 123. Additional information on 
SDG&E's  stock-based compensation plans is provided in Note 7  of  the 
notes to consolidated financial statements. 
 
                                      26 
 
<PAGE> 
 
Responsibility Report for the Consolidated Financial Statements 
 
SDG&E  and Enova (collectively referred to as "SDG&E") are responsible 
for  the  consolidated financial statements and  other  data  in  this 
annual  report. To meet its responsibility for the reliability of  the 
consolidated  financial statements, SDG&E has developed  a  system  of 
internal  accounting  controls  and  engages  a  firm  of  independent 
auditors.   The   board  of  directors  of  SDG&E  carries   out   its 
responsibility for the consolidated financial statements  through  its 
audit  committee,  composed  of directors  who  are  not  officers  or 
employees of SDG&E. 
 
     Management maintains the system of internal accounting  controls, 
which it believes is adequate to provide reasonable, but not absolute, 
assurance  that  its  assets are safeguarded,  that  transactions  are 
executed  in  accordance with its objectives, and that  the  financial 
records  and  reports  are  reliable for  preparing  the  consolidated 
financial  statements in accordance with generally accepted accounting 
principles. 
 
     The concept of reasonable assurance recognizes that the cost of a 
system  of internal accounting controls should not exceed the benefits 
derived  and  that management makes estimates and judgments  of  these 
cost/benefit  factors. The system of internal accounting  controls  is 
supported  by  an extensive program of internal audits, selection  and 
training of qualified personnel, and written policies and procedures. 
 
     SDG&E's  independent auditors, Deloitte & Touche LLP, are engaged 
to  audit SDG&E's consolidated financial statements in accordance with 
generally  accepted auditing standards for the purpose  of  expressing 
their  opinion as to whether SDG&E's consolidated financial statements 
are  presented  fairly, in all material respects, in  accordance  with 
generally accepted accounting principles. 
 
     The  audit committee discusses with SDG&E's internal auditors and 
the  independent  auditors the overall scope and  specific  plans  for 
their   respective  audits.  The  committee  also  discusses   SDG&E's 
consolidated financial statements and the adequacy of SDG&E's internal 
controls.  The  committee met twice during the fiscal  year  with  the 
internal auditors, the independent auditors and management to  discuss 
the  results  of  their  examinations, their  evaluations  of  SDG&E's 
internal  controls,  and  the  overall quality  of  SDG&E's  financial 
reporting.  The  internal auditors and the independent  auditors  have 
full and free access to the committee throughout the year. 
 
     SDG&E's   management  has  prepared  the  consolidated  financial 
statements  and  other data in this annual report. In the  opinion  of 
SDG&E,  the  consolidated financial statements, which include  amounts 
based on estimates and judgments of management, have been prepared  in 
conformity with generally accepted accounting principles. 
      
DAVID R. KUZMA 
Senior Vice President, Chief Financial Officer and Treasurer 
      
 
      
Independent Auditors' Report 
      
To  the  Shareholders and Board of Directors of Enova Corporation  and 
San Diego Gas & Electric Company: 
 
We  have audited the accompanying consolidated balance sheets and  the 
statements of consolidated capital stock and of long-term debt of  San 
Diego Gas & Electric Company and subsidiaries as of December 31,  1995 
and  1994, and the related statements of consolidated income,  changes 
in  capital  stock  and retained earnings, cash flows,  and  financial 
information by segments of business for each of the three years in the 
period   ended   December  31,  1995.  These  consolidated   financial 
statements  are  the responsibility of the Company's  management.  Our 
responsibility is to express an opinion on these financial  statements 
based on our audits. 
 
     We  conducted  our  audits in accordance with generally  accepted 
auditing  standards. Those standards require that we plan and  perform 
the  audit  to obtain reasonable assurance about whether the financial 
statements  are  free  of  material misstatement.  An  audit  includes 
examining,  on  a  test  basis, evidence supporting  the  amounts  and 
disclosures  in  the  financial statements.  An  audit  also  includes 
assessing  the  accounting principles used and  significant  estimates 
made  by  management,  as  well as evaluating  the  overall  financial 
statement   presentation.  We  believe  that  our  audits  provide   a 
reasonable basis for our opinion. 
 
     In  our  opinion, such consolidated financial statements  present 
fairly, in all material respects, the financial position of San  Diego 
Gas  &  Electric Company and subsidiaries as of December 31, 1995  and 
1994,  and  the results of their operations and their cash  flows  for 
each  of  the  three years in the period ended December  31,  1995  in 
conformity with generally accepted accounting principles. 
      
      
DELOITTE & TOUCHE LLP 
San Diego, California 
February 16, 1996 
 
                                     27 
 
<PAGE> 
 
<TABLE> 
STATEMENTS OF CONSOLIDATED INCOME 
In thousands except per share amounts 
<CAPTION> 
                                                      
For the years ended December 31                        1995          1994          1993 
                                                   ------------  ------------  ------------ 
<S>                                                 <C>          <C>           <C> 
Operating Revenues   
  Electric                                          $1,503,926    $1,510,320    $1,514,608 
  Gas                                                  310,142       346,183       346,658 
  Diversified operations                                56,608        55,742        36,223 
                                                   ------------  ------------  ------------ 
Total operating revenues                             1,870,676     1,912,245     1,897,489 
                                                   ------------  ------------  ------------ 
Operating Expenses   
  Electric fuel                                        100,256       143,339       174,444 
  Purchased power                                      341,727       342,612       325,966 
  Gas purchased for resale                             113,355       146,579       165,876 
  Maintenance                                           91,740        70,776        81,788 
  Depreciation and decommissioning                     278,239       262,238       245,144 
  Property and other taxes                              45,566        44,746        44,902 
  General and administrative                           210,207       207,908       204,290 
  Other                                                209,358       208,533       196,564 
  Income taxes                                         134,578       153,298       154,571 
                                                   ------------  ------------  ------------ 
Total operating expenses                             1,525,026     1,580,029     1,593,545 
                                                   ------------  ------------  ------------ 
Operating Income                                       345,650       332,216       303,944 
                                                   ------------  ------------  ------------ 
Other Income and (Deductions) 
  Writedown of real estate                                --         (25,000)        --     
  Allow for equity funds used 
   during construction                                   6,435         6,274        17,909 
  Taxes on nonoperating income                             (27)       17,299           202 
  Other - net                                           (5,876)      (19,117)        5,160 
                                                   ------------  ------------  ------------ 
    Total other income and (deductions)                    532       (20,544)       23,271 
                                                   ------------  ------------  ------------ 
Income Before Interest Charges                         346,182       311,672       327,215 
                                                   ------------  ------------  ------------ 
Interest Charges                                                                           
  Long-term debt                                        95,523        92,770        92,596 
  Short-term debt and other                             20,215        14,619        11,335 
  Allowance for borrowed funds                                                         
   used during construction                             (2,865)       (2,658)       (4,245) 
                                                   ------------  ------------  ------------ 
    Net interest charges                               112,873       104,731        99,686 
                                                   ------------  ------------  ------------ 
Income From Continuing Operations                      233,309       206,941       227,529 
Discontinued Operations, Net Of Income Taxes               148       (63,464)       (8,814) 
                                                   ------------  ------------  ------------ 
Net Income (before preferred                                                             
  dividend requirements)                               233,457       143,477       218,715 
Preferred Dividend Requirements                          7,663         7,663         8,565 
                                                   ------------  ------------  ------------ 
Earnings Applicable to Common Shares                $  225,794    $  135,814    $  210,150 
                                                   ============  ============  ============ 
Average Common Shares Outstanding                      116,535       116,484       116,049 
                                                   ============  ============  ============ 
Earnings Per Common Share from  
Continuing operations                               $     1.94    $     1.71    $     1.89 
                                                   ============  ============  ============ 
Earnings Per Common Share                           $     1.94    $     1.17    $     1.81 
                                                   ============  ============  ============ 
Dividends Declared Per Common Share                 $     1.56    $     1.52    $     1.48 
                                                   ============  ============  ============ 
 
See notes to consolidated financial statements 
  
                                                  28                                     
</TABLE> 
<PAGE> 
<TABLE> 
 
CONSOLIDATED BALANCE SHEETS                                                           
In thousands of dollars                                      
<CAPTION> 
Balance at December 31                                        1995            1994 
                                                         --------------  -------------- 
<S>                                                      <C>             <C> 
ASSETS 
Utility plant - at original cost                           $5,533,554      $5,329,179 
Accumulated depreciation and decommissioning               (2,433,397)     (2,180,087) 
                                                         --------------  -------------- 
   Utility plant-net                                        3,100,157       3,149,092 
                                                         --------------  -------------- 
Investments and other property                                532,289         465,918 
                                                         --------------  -------------- 
Current assets                                             
   Cash and temporary investments                              96,429          25,405 
   Accounts receivable                                        178,155         187,988 
   Notes receivable                                            34,498          31,806 
   Inventories                                                 67,959          75,607 
   Other                                                       41,012          34,022 
                                                         --------------  -------------- 
     Total current assets                                     418,053         354,828 
                                                         --------------  -------------- 
Deferred taxes recoverable in rates                           298,748         305,717 
                                                         --------------  -------------- 
Deferred charges and other assets                             321,193         322,881 
                                                         --------------  -------------- 
     Total                                                 $4,670,440      $4,598,436 
                                                         ==============  ============== 
CAPITALIZATION AND LIABILITIES 
Capitalization (see Statements of Consolidated  
Capital Stock and of Long-Term Debt) 
   Common equity                                           $1,520,070      $1,474,430 
   Preferred stock not subject to mandatory redemption         93,475          93,493 
   Preferred stock subject to mandatory redemption             25,000          25,000 
   Long-term debt                                           1,350,094       1,339,201 
                                                         --------------  -------------- 
     Total capitalization                                   2,988,639       2,932,124 
                                                         --------------  -------------- 
Current liabilities 
   Short-term borrowings                                         --            89,325 
   Long-term debt redeemable within one year                  115,000         115,000 
   Current portion of long-term debt                           36,316          35,031 
   Accounts payable                                           145,517         130,157 
   Dividends payable                                           47,383          46,200 
   Taxes accrued                                                 --             5,519 
   Interest accrued                                            22,537          23,372 
   Regulatory balancing accounts overcollected-net            170,761         111,731 
   Other                                                      125,438         113,815 
                                                         --------------  -------------- 
     Total current liabilities                                662,952         670,150 
                                                         --------------  -------------- 
Customer advances for construction                             34,698          36,250 
Accumulated deferred income taxes-net                         523,335         513,592 
Accumulated deferred investment tax credits                   104,226         109,161 
Deferred credits and other liabilities                        356,590         337,159 
Contingencies and commitments (Notes 10 and 11)                  --              --    
                                                         --------------  -------------- 
     Total                                                 $4,670,440      $4,598,436 
                                                         ==============  ============== 
 
                      See notes to consolidated financial statements 
 
                                           29 
</TABLE> 
<PAGE> 
<TABLE> 
STATEMENTS OF CONSOLIDATED CASH FLOWS 
<CAPTION> 
 
In thousands of dollars 
For the years ended December 31                                 1995          1994          1993 
                                                            ------------  ------------  ------------ 
<S>                                                         <C>           <C>           <C> 
Cash Flows from Operating Activities                                                                 
  Income from continuing operations                         $  233,309    $  206,941    $  227,529   
  Adjustments to reconcile income from continuing                                                    
    operations to net cash provided by operating activities                                           
      Writedown of real property and other assests                --          37,000          --     
      Depreciation and decommissioning                         278,239       262,238       245,144   
      Amortization of deferred charges and other assets         12,068        12,944        12,309   
      Amortization of deferred credits and other                                                     
        liabilities                                            (32,975)      (30,370)      (18,616)  
      Allowance for equity funds used during construction       (6,435)       (6,274)      (17,909)  
      Deferred income taxes and investment tax credits         (30,748)      (55,069)       49,511   
      Other-net                                                 57,475        57,734         8,764   
  Changes in working capital components                                                              
      Accounts and notes receivable                              7,141        (9,110)       (5,916)  
      Regulatory balancing accounts                             59,030        78,552       (13,245)  
      Inventories                                                7,648           506           113   
      Other current assets                                      (5,609)       (1,518)          869   
      Interest and taxes accrued                                11,642        18,284       (19,141)  
      Accounts payable and other current liabilities            26,983        (9,271)       19,999   
  Cash flows provided(used) by discontinued operations           6,148         3,790        (1,979)  
                                                            -----------  -------------  ------------ 
        Net cash provided by operating activities              623,916       566,377       487,432   
                                                            -----------  -------------  ------------ 
Cash Flows from Financing Activities                                                                 
  Dividends paid                                              (188,288)     (183,492)     (178,708)  
  Short-term borrowings-net                                    (89,325)      (27,872)       48,397   
  Issuance of long-term debt                                   124,641          --         369,893   
  Repayment of long-term debt                                 (165,871)      (90,255)     (522,983)  
  Sale (redemption) of common stock                               (241)         (558)       38,850   
  Issuance of preferred stock                                     --            --          50,636   
  Redemption of preferred stock                                    (18)         --         (65,228)  
                                                            ------------  ------------  ------------ 
        Net cash used by financing activities                 (319,102)     (302,177)     (259,143) 
                                                            ------------  ------------  ------------ 
Cash Flows from Investing Activities                                                                 
  Utility construction expenditures                           (220,748)     (263,709)     (354,391)  
  Withdrawals from construction trust funds - net                 --          58,042       190,225   
  Contributions to decommissioning funds                       (22,038)      (22,038)      (22,038)  
  Leasing investments                                             --            --         (19,729)  
  Other-net                                                      3,874        (6,463)       (9,898)  
  Discontinued operations                                        5,122       (17,338)       (9,708)  
                                                            ------------  ------------  ------------ 
        Net cash used by investing activities                 (233,790)     (251,506)     (225,539)  
                                                            ------------  ------------  ------------ 
Net increase                                                    71,024        12,694         2,750   
Cash and temporary investments, beginning of year               25,405        12,711         9,961   
                                                            ------------  ------------  ------------ 
Cash and temporary investments, end of year                 $   96,429    $   25,405    $   12,711   
                                                            ============  ============  ============ 
Supplemental Schedule of Noncash Investing                                                           
  and Financing Activities                                                                           
    Leasing investments                                     $    --       $    --       $  150,880   
    Real estate investments                                     50,496        28,311        84,278   
                                                            ------------  ------------  ------------ 
        Total assets acquired                                   50,496        28,311       235,158   
    Cash paid                                                   (2,550)         (452)      (28,209)  
                                                            ------------  ------------  ------------ 
    Liabilities assumed                                     $   47,946    $   27,859    $  206,949   
                                                            ============  ============  ============ 
 
See notes to consolidated financial statements 
 
                                                           30 
</TABLE> 
 
<PAGE> 
<TABLE> 
STATEMENTS OF CONSOLIDATED CHANGES IN 
 CAPITAL STOCK AND RETAINED EARNINGS 
 
In thousands of dollars 
For the years ended December 31, 1993, 1994, 1995 
 
<CAPTION> 
                                                Preferred  Stock 
                                          ----------------------------- 
                                            Not Subject    Subject to             Premium on 
                                            to Mandatory   Mandatory    Common     Capital     Retained 
                                             Redemption    Redemption   Stock       Stock      Earnings 
                                             ---------     ---------   ---------   ---------   --------- 
<S>                                          <C>           <C>         <C>         <C>         <C> 
                                                                                                         
Balance, December 31, 1992                   $ 62,493      $ 68,200    $287,585    $529,486    $624,368 
  Net income                                                                                    218,715 
  Common stock sold (1,457,756 shares)                                    3,644      33,612               
  Long-term incentive plan activity-net                                      59       1,535                
  Preferred stock sold (2,040,000 shares)      51,000                                  (364)               
  Preferred stock retired (633,700 shares)    (20,000)      (43,200)                    850      (2,878) 
  Dividends declared                                                                                     
    Preferred stock                                                                              (8,526) 
    Common stock                                                                               (171,846) 
--------------------------                   ---------     ---------   ---------   ---------   --------- 
Balance, December 31, 1993                     93,493        25,000     291,288     565,119     659,833 
  Net income                                                                                    143,477 
  Long-term incentive plan activity-net                                      53        (611)              
  Dividends declared                                                                                     
    Preferred stock                                                                              (7,663) 
    Common stock                                                                               (177,066) 
--------------------------                   ---------     ---------   ---------   ---------   --------- 
Balance, December 31, 1994                     93,493        25,000     291,341     564,508     618,581 
  Net income                                                                                    233,457 
  Long-term incentive plan activity-net                                     117       1,530                 
  Preferred stock retired (880 shares)            (18)                                    8            
  Dividends declared                                                                                            
    Preferred stock                                                                              (7,663)    
    Common stock                                                                               (181,809) 
--------------------------                   ---------     ---------   ---------   ---------   --------- 
Balance, December 31, 1995                   $ 93,475      $ 25,000    $291,458    $566,046    $662,566 
==========================                   =========     =========   =========   =========   =========  
 
                             See notes to consolidated financial statements. 
                                                  31 
</TABLE> 
<TABLE> 
STATEMENTS OF CONSOLIDATED CAPITAL STOCK 
In thousands of dollars except call price                                                         
 
 
Balance at December 31                                                       1995         1994 
                                                                          -----------  ----------  
<S>                                               <C>          <C>        <C>           <C> 
 
COMMON EQUITY                                                                          
Common stock, without par value, authorized 
  255,000,000 shares, outstanding: 1995, 
  116,583,358 shares; 1994, 116,536,535 shares                              $291,458     $291,341 
Premium on capital stock                                                     566,046      564,508 
Retained earnings                                                            662,566      618,581 
                                                                          -----------  ---------- 
      Total common equity                                                 $1,520,070   $1,474,430 
                                                                          ===========  ========== 
 
PREFERRED STOCK (A)                                  Trading       Call 
Not subject to mandatory redemption                  Symbol(B)     Price 
  $20 par value, authorized 1,375,000 shares         ---------  -------- 
   5% Series, 375,000 shares outstanding             SDOPrA      $24.00       $7,500       $7,500 
   4.50% Series, 300,000 shares outstanding          SDOPrB      $21.20        6,000        6,000 
   4.40% Series, 325,000 shares outstanding          SDOPrC      $21.00        6,500        6,500 
   4.60% Series, 1995, 373,770 shares; 
    1994, 374,650 shares outstanding                 --          $20.25        7,475        7,493 
Without par value (C)                                                                          
   $7.20 Series, 150,000 shares outstanding (D)      SDOPrG     $101.00       15,000       15,000 
   $1.70 Series, 1,400,000 shares outstanding        --         $25.85(E)     35,000       35,000 
   $1.82 Series, 640,000 shares outstanding          SDOPrH     $26.00(E)     16,000       16,000 
                                                                          -----------  ---------- 
   Total not subject to mandatory redemption                                 $93,475      $93,493 
                                                                          ===========  ========== 
Subject to mandatory redemption                                                                   
  Without par value (C)                                                                           
   $1.7625 Series, 1,000,000 shares outstanding(F)   --         $25.00(E)    $25,000      $25,000 
                                                                          -----------  ---------- 
     Total subject to mandatory redemption                                   $25,000      $25,000 
                                                                          =========== =========== 

 
 
(A) All series of preferred stock have cumulative preferences as to dividends. 
    The $20 par value preferred stock has two votes per share, whereas the no 
    par value preferred stock is nonvoting. The $20 par value preferred stock 
    has a liquidation value at par. The no par value preferred stock has a 
    liquidation value of $25 per share, except for the $7.20 series, which had 
    a liquidation value of $100 per share (see Note D). 
 
(B) All listed shares are traded on the American Stock Exchange. 
 
(C) Authorized 10,000,000 shares total (both subject to and not subject to 
    mandatory redemption). 
 
(D) The $7.20 series was fully redeemed on January 15, 1996. 
 
(E) The $1.70 and $1.7625 series are not callable until 2003; the $1.82 series 
    is not callable until 1998. 
 
(F) The $1.7625 series has a sinking fund requirement to redeem 50,000 shares 
    per year from 2003 to 2007. The remaining 750,000 shares must be redeemed 
    in 2008. 
                      See notes to consolidated financial statements. 
                                               32 
</TABLE> 
<PAGE> 
<TABLE> 
 
STATEMENTS OF CONSOLIDATED LONG-TERM DEBT 
In thousands of dollars 
<Captions> 
                                                   First Call                
Balance at December 31                                Date            1995        1994 
                                                -----------------  ----------  ---------- 
<S>                                             <C>                <C>         <C> 
                                                                                          
First mortgage bonds                                                                      
  5.5% Series I, due March 1, 1997                 4/15/67         $   25,000  $   25,000 
  4.00% Series CC, due May 1, 2008(A)               9/1/96             53,000      53,000 
  4.00% Series DD, due December 1, 2008(A)          9/1/96             27,000      27,000 
  9.25% Series EE, due September 1, 2020(B)         9/1/95               --        74,350 
  3.95% Series FF, due December 1, 2007(A)          8/1/96             35,000      35,000 
  7.625% Series GG, due July 1, 2021(B)             7/1/96             44,250      44,250 
  7.375% Series HH, due December 1, 2021(B)        12/1/96             81,350      81,350 
  8.75% Series II, due March 1, 2023(B)             9/1/97             25,000      25,000 
  9.625% Series JJ, due April 15, 2020             4/15/00            100,000     100,000 
  6.8% Series KK, due June 1, 2015(A)         Non-callable             14,400      14,400 
  8.5% Series LL, due April 1, 2022                 4/1/02             60,000      60,000 
  7.625% Series MM, due June 15, 2002         Non-callable             80,000      80,000 
  6.1% and 6.4% Series NN, due September 1, 2018 
    and 2019(B)                                     9/1/02            118,615     118,615 
  Various % Series OO, due December 1, 2027(C)        (C)             250,000     250,000 
  5.9% Series PP, due June 1, 2018(B)               6/1/03             70,795      70,795 
  Variable % Series QQ, due June 1, 2018(B)           (D)              14,915      14,915 
  5.85% Series RR, due June 1, 2021(A)              6/1/03             60,000      60,000 
  5.9% Series SS, due September 1, 2018(B)          9/1/03             92,945      92,945 
  Variable % Series TT, due September 1, 2020(B)      (D)              57,650        --   
  Variable % Series UU, due September 1, 2020(B)      (D)              16,700        --   
                                                --------------     ----------  ---------- 
       Total                                                        1,226,620   1,226,620 
                                                                   ----------  ---------- 
Capitalized leases                                                    105,365     103,575 
Debt incurred to acquire limited partnerships, 
  various rates, payable annually through 2005                        142,198     109,473 
Bank loans, various rates                                                --        17,298 
Other long-term debt                                                   33,558      40,177 
Unamortized discount on long-term debt                                 (6,331)     (7,911) 
Long-term debt redeemable within one year                            (115,000)   (115,000) 
Current portion of long-term debt                                     (36,316)    (35,031) 
                                                                   ----------  ---------- 
Total                                                              $1,350,094  $1,339,201 
                                                                   ==========  ========== 
 
(A)  Issued to secure the company's obligation under a series of loan agreements with the 
     California Pollution Control Financing Authority under which the Authority loaned  
     proceeds from the sale of $115 million of variable-rate/demand (series CC, DD and FF) and 
     $74 million in fixed-rate (series KK and RR) tax-exempt pollution control revenue bonds to the 
     company to finance certain qualifying facilities associated with the company's 20 percent  
     interest in San Onofre Units 2 and 3. 
 
(B)  Issued to secure the company's obligation under a series of loan agreements with the City 
     of San Diego under which the city loaned the proceeds from the sale of $522 million in  
     industrial development revenue bonds to the company to finance certain qualifying facilities. 
     All series are tax-exempt except QQ and UU. 
 
(C)  Issued to secure the company's obligation under a loan agreement with the City of Chula  
     Vista under which the city loaned the proceeds from the sale of $250 million in tax-exempt  
     industrial development revenue bonds to the company to finance certain qualified facilities. 
     The first call date for $75 million is December 1, 2002.  The remaining $175 million of the bonds  
     is currently variable rate and is callable at various dates within 1 year. Of this, $45 million is  
     subject to a floating-to-fixed rate swap, which expires December 15, 2002 (See Note 9). 
 
(D)  Callable at various dates within 1 year. 
  
                           See notes to consolidated financial statements. 
                                                 33 
</TABLE> 
 
<PAGE> 
<TABLE> 
STATEMENTS OF CONSOLIDATED FINANCIAL 
INFORMATION BY SEGMENTS OF BUSINESS 
 
In thousands of dollars 
At December 31 or for the                   
years then ended                               1995         1994         1993 
----------------------------------          -----------  -----------  -----------   
<S>                                        <C>           <C>          <C>
Operating Revenues (A), (B)                 $1,870,676   $1,912,245   $1,897,489 
                                            ===========  ===========  =========== 
Operating Income 
  Electric operations                       $  263,346   $  255,768   $  242,143 
  Gas operations                                51,654       50,375       46,071 
  Diversified operations (B)                    30,650       26,073       15,730 
                                            -----------  -----------  ----------- 
       Total                                $  345,650   $  332,216   $  303,944 
                                            ===========  ===========  =========== 
Depreciation and Decommissioning 
  Electric operations                       $  227,616   $  220,811   $  210,890 
  Gas operations                                33,225       31,009       28,215 
  Diversified operations (B)                    17,398       10,418        6,039 
                                            -----------  -----------  ----------- 
       Total                                $  278,239   $  262,238   $  245,144 
                                            ===========  ===========  =========== 
Utility Plant Additions (C) 
  Electric operations                       $  171,151   $  203,887   $  291,456 
  Gas operations                                49,597       59,822       62,935 
                                            -----------  -----------  ----------- 
       Total                                $  220,748   $  263,709   $  354,391 
                                            ===========  ===========  =========== 
Identifiable Assets 
  Utility plant-net 
    Electric operations                     $2,659,017   $2,725,624   $2,724,139 
    Gas operations                             441,140      423,468      393,494 
                                            -----------  -----------  ----------- 
       Total                                 3,100,157    3,149,092    3,117,633 
                                            -----------  -----------  ----------- 
  Inventories 
    Electric operations                         53,828       56,209       57,410 
    Gas operations                              14,131       19,398       18,703 
                                            -----------  -----------  ----------- 
       Total                                    67,959       75,607       76,113 
                                            -----------  -----------  ----------- 
  Other identifiable assets 
    Electric operations                        802,172      732,941      744,335 
    Gas operations                             148,714      149,199      139,631 
    Diversified operations (B)                 434,940      373,076      467,691 
                                            -----------  -----------  ----------- 
       Total                                 1,385,826    1,255,216    1,351,657 
                                            -----------  -----------  ----------- 
Other Assets                                   116,498      118,521       97,481 
                                            -----------  -----------  ----------- 
Total Assets                                $4,670,440   $4,598,436   $4,642,884 
                                            ===========  ===========  =========== 
 
(A) The detail to operating revenues is provided in the Statements of 
    Consolidated Income.  The gas operating revenues shown therein include  
    $9 million in 1995, $18 million in 1994 and $16 million in 1993, 
    representing the gross margin on sales to the electric segment.  These  
    margins arose from interdepartmental transfers of $85 million in 1995, 
    $119 million in 1994 and $141 million in 1993, based on transfer pricing  
    approved by the California Public Utilities Commission in tariff rates. 
 
(B) As discussed in Note 3, during 1995 SDG&E sold its investment in Wahlco 
    Environmental Systems, Inc.  The sale of Wahlco is being accounted for  
    as a disposal of a segment of business and SDG&E's prior periods' financial 
    statements have been restated to reflect Wahlco as a discontinued operation. 
 
(C) Excluding allowance for equity funds used during construction. 
 
Utility income taxes and corporate expenses are allocated between electric and gas  
operations in accordance with regulatory accounting requirements. 
 
              See notes to consolidated financial statements. 
                                     34 
</TABLE> 
 
 
 
 
<PAGE> 
 
 
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES 
 
NATURE OF OPERATIONS On December 6, 1995, San Diego Gas and Electric 
Company announced the formation of Enova Corporation (Enova) as the 
parent company for SDG&E, an operating public utility, and its  
unregulated subsidiaries. On January 1, 1996, Enova became the parent 
of SDG&E. SDG&E's outstanding common stock was converted on a  
share-for-share basis into Enova common stock. SDG&E's debt securities, 
preferred and preference stock were unaffected and remain with SDG&E.  
On January 31, 1996, SDG&E's ownership interest in its non-utility 
subsidiaries was transferred to Enova at book value, completing the  
parent company structure. 
      
The consolidated financial statements include SDG&E and its  
subsidiaries and, therefore, also reflect what  is  now Enova 
and   its  subsidiaries.  The  subsidiaries  include   Pacific 
Diversified  Capital,  Enova  Financial,  Enova  Energy  and   Califia 
Company. The principal market for SDG&E's electric and gas business is 
in  San  Diego  County  and  an adjacent  portion  of  Orange  County, 
California.  SDG&E  is subject to regulation by the California  Public 
Utilities  Commission  and the Federal Energy  Regulatory  Commission. 
Califia  and  Enova  Financial are engaged in  non-utility  investment 
activities  throughout the United States. Enova Energy is  an  energy- 
management  consulting firm offering services to utilities  and  large 
consumers. Pacific Diversified Capital is the parent company for  non- 
utility subsidiaries, Phase One Development, which is engaged in  real 
estate  development, and Enova Technologies, which is in the  business 
of  developing  new technologies generally related  to  utilities  and 
energy.   In   1995,   non-utility  subsidiaries,   excluding   Wahlco 
Environmental  Systems, contributed 9 percent to operating  income  (8 
percent  in  1994). In June 1995, SDG&E sold its interest  in  Wahlco. 
Prior  periods  have been restated to account for the net  results  of 
Wahlco  as  discontinued  operations  in  accordance  with  Accounting 
Principles  Board Opinion No. 30 "Reporting the Effects of a  Disposal 
of a Segment of Business." Additional information concerning Wahlco is 
described in Note 3. 
      
PRINCIPLES OF CONSOLIDATION The accompanying  consolidated  financial 
statements  include the accounts of San Diego Gas &  Electric  Company 
and   its  wholly-owned  subsidiaries.  All  significant  intercompany 
accounts and transactions have been eliminated in consolidation. 
 
UTILITY PLANT AND DEPRECIATION Utility plant represents the buildings, 
equipment  and  other  facilities used to  provide  electric  and  gas 
service.  The cost of utility plant includes labor, material, contract 
services  and  other related items, and an allowance  for  funds  used 
during  construction. The cost of retired depreciable  utility  plant, 
plus  removal  costs  minus salvage value, is charged  to  accumulated 
depreciation.  Information regarding industry  restructuring  and  its 
effect  on  utility  plant is included in Note 11.  Utility  plant  in 
service  by  major functional categories at December  31,  1995,  are: 
electric generation $1.8 billion ($1.7 billion at December 31,  1994), 
electric  distribution  $2.1 billion ($2.0  billion  at  December  31, 
1994),  electric transmission $0.7 billion ($0.7 billion  at  December 
31,  1994), other electric $0.2 billion ($0.2 billion at December  31, 
1994)  and  gas  $0.7  billion ($0.7 billion at  December  31,  1994). 
Accumulated  depreciation  and decommissioning  of  electric  and  gas 
utility  plant in service at December 31, 1995, are $2.1  billion  and 
$0.3  billion, respectively ($1.9 billion and $0.3 billion at December 
31, 1994). 
 
     Depreciation expense reflects the straight-line, remaining-useful- 
life  method.  The  provisions for depreciation  as  a  percentage  of 
average  depreciable  utility plant (by major  functional  categories) 
are:  electric generation 4.04 in 1995 (4.04 in 1994, 4.03  in  1993), 
electric  distribution  4.36 in 1995 (4.35 in  1994,  4.35  in  1993), 
electric transmission 3.21 in 1995 (3.24 in 1994, 3.26 in 1993), other 
electric  5.89 in 1995 (5.88 in 1994, 5.80 in 1993) and  gas  4.06  in 
1995 (4.11 in 1994, 4.16 in 1993). 
      
INVENTORIES Included in inventories at December 31, 1995,  are SDG&E's 
$42  million of materials and supplies ($44 million in 1994), and  $26 
million  of fuel oil and natural gas ($32 million in 1994).  Materials 
and  supplies are valued at average cost; fuel oil and natural gas are 
valued by the last-in, first-out (LIFO) method. 
      
OTHER CURRENT ASSETS Included in other current assets at December  31, 
1995,  is SDG&E's $18 million of investment in SONGS 1, which will  be 
recovered in 1996. At December 31, 1994, $28 million of SDG&E's  SONGS 
1  investment is included in other current assets and the $17  million 
noncurrent portion of the investment is included in "Deferred  Charges 
and Other Assets" on the Consolidated Balance Sheets. 
      
OTHER  CURRENT LIABILITIES Included in other  current  liabilities  at 
December  31,  1995,  is  Califia's $34  million  current  portion  of 
deferred  lease  revenue  ($32  million  in  1994).  The  $54  million 
noncurrent  portion  ($88 million in 1994) is  included  in  "Deferred 
Credits and Other Charges." Deferred lease revenues are amortized over 
the lease terms, which expire in 1998. 
      
ALLOWANCE  FOR  FUNDS  USED DURING CONSTRUCTION  (AFUDC) The allowance 
represents  the  cost  of funds used to finance  the  construction  of 
utility  plant and is added to the cost of utility plant.  AFUDC  also 
increases income, partly as an offset to interest charges shown in the 
Statements of Consolidated Income, although it is not a current source 
of  cash.  The average rate used to compute AFUDC was 9.74 percent  in 
1995, 8.80 percent in 1994 and 9.57 percent in 1993. 
      
EFFECTS OF   REGULATION SDG&E's  accounting  policies  conform   with 
generally accepted accounting principles for regulated enterprises and 
reflect the policies of the California Public Utilities Commission and 
the Federal Energy Regulatory Commission. SDG&E prepares its financial 
statements in accordance with the provisions of Statement of Financial 
Accounting  Standards No. 71 "Accounting for the  Effects  of 
 
                                      35 
<PAGE> 
 
 
Certain Types  of  Regulation," under which a regulated utility may   
record  a regulatory  asset  if  it  is probable that, through  the   
rate-making process,   the  utility  will  recover  that  asset  from 
customers. Regulatory  liabilities represent future reductions  in   
revenues  for amounts  due  customers.  Additional  information   
concerning  SDG&E's regulatory assets and liabilities is described  
below in "Revenues  and Regulatory  Balancing Accounts" and in Note 11. 
To the extent  that  a portion  of SDG&E's operations are no longer subject to
 SFAS  71,  and recovery  is  no longer probable as a result  
of changes in  regulation and/or SDG&E's competitive position, the  
related regulatory assets and liabilities  would  be  written  off.  In 
addition,  a  new  standard effective for 1996 financial statements,  
SFAS No. 121, "Accounting for the  Impairment of Long-Lived Assets and 
for Long-Lived Assets  to  Be Disposed Of," affects utility plant and  
regulatory assets such that  a loss  must be recognized whenever a  
regulator excludes all or part  of an  asset's cost from rate base. As  
discussed in Note 11, the CPUC has issued  a  decision for  
restructuring the California electric  utility industry  to  stimulate  
competition. The CPUC has indicated  that  the California  utilities   
will  be allowed  recovery  of  their  existing utility plant and  
regulatory assets over a transition period that ends in  2005. SDG&E  
continues to evaluate the applicability of SFAS 71  as the electric  
industry restructuring progresses. 
      
REVENUES  AND  REGULATORY  BALANCING ACCOUNTS Revenues  from   utility 
customers  consist  of  deliveries to customers  and  the  changes  in 
regulatory  balancing accounts. Earnings fluctuations from changes  in 
the  costs  of  fuel  oil,  purchased  energy  and  natural  gas,  and 
consumption levels for electricity and the majority of natural gas are 
eliminated by balancing accounts authorized by the CPUC. The  balances 
of  these  accounts represent amounts that will be recovered from,  or 
repaid to, customers by adjustments to future prices, generally over a 
one-year  cycle.  It is uncertain whether the CPUC  will  continue  to 
allow these or some other form of balancing accounts once its electric 
industry restructuring decision takes effect in 1998. 
      
DEFERRED  CHARGES  AND OTHER ASSETS Deferred charges  include  SDG&E's 
unrecovered  premium on early retirement of debt and other regulatory- 
related  expenditures that SDG&E expects to recover in  future  rates. 
These   items   are  amortized  as  recovered  in  rates.   Additional 
information is included in Note 11. 
      
USE  OF  ESTIMATES  IN  THE  PREPARATION OF  FINANCIAL  STATEMENTS The 
preparation  of  financial  statements in  conformity  with  generally 
accepted  accounting principles requires management to make  estimates 
and  assumptions  that  affect  the reported  amounts  of  assets  and 
liabilities and disclosure of contingent assets and liabilities at the 
date  of the financial statements and the reported amounts of revenues 
and  expenses during the reporting period. Actual results could differ 
from those estimates. 
      
STATEMENTS OF CONSOLIDATED CASH FLOWS Temporary investments are  highly 
liquid investments with original maturities of 3 months or less. 
      
BASIS OF PRESENTATION Certain-prior year amounts have been reclassified 
to conform to the current year's format. 
      
NOTE 2: WRITEDOWNS 
 
In June 1994, SDG&E recorded writedowns related to the utility and its 
subsidiaries.  SDG&E  recorded  a $25  million  writedown  of  various 
commercial  properties, including $19 million of subsidiary properties 
in  Colorado Springs and in San Diego, to reflect continuing  declines 
in  commercial real estate values. SDG&E also recorded a  $12  million 
writedown  of various non-earning utility assets, including the  South 
Bay  Repower  project. Other writedowns, associated with  discontinued 
operations, are described in Note 3. 
      
NOTE 3: DISCONTINUED OPERATIONS - 
WAHLCO ENVIRONMENTAL SYSTEMS, INC. 
 
On  June  6,  1995, SDG&E sold its investment in Wahlco  Environmental 
Systems,  Inc., for $5 million. The sale of Wahlco has been  accounted 
for  as a disposal of a segment of business and SDG&E's prior periods' 
financial  statements  have  been restated  to  reflect  Wahlco  as  a 
discontinued  operation.  Discontinued  operations   consist  of   the 
following: 
      
Year Ended December 31           1995       1994       1993 
----------------------------------------------------------- 
in millions of dollars 
Revenues                         $24        $70        $82 
Loss from operations before 
  income taxes                    -         (70)       (14) 
Loss on disposal before 
  income taxes                   (12)        -          - 
Income tax benefits               12          7          5 
____________________________________________________________ 
 
The  loss on disposal of Wahlco was recorded in 1995 and reflects  the 
sale  of Wahlco and Wahlco's net operating losses after 1994. The loss 
from  discontinued operations for 1994 was primarily due  to  the  $59 
million writedown of Wahlco's goodwill and other intangible assets  as 
a  result of the depressed air pollution-control market and increasing 
competition. The 1995 income tax benefit includes the effects  of  the 
1994 writedown to the extent recognizable thus far. 
 
     Wahlco's net assets (included in "Investments and Other Property" 
on  the  Consolidated  Balance  Sheets)  at  December  31,  1994,  are 
summarized as follows: 
      
Current assets                                        $ 40.2 
Non-current assets                                      18.9 
Current liabilities                                    (27.1) 
Long-term debt and other liabilities                   (24.2) 
------------------------------------------------------------- 
    Net assets                                        $  7.8 
_____________________________________________________________ 
 
NOTE 4: LONG-TERM DEBT 
 
Amounts and due dates of long-term debt are shown on the Statements of 
Consolidated  Long-Term  Debt. Excluding  capital  leases,  which  are 
described  in Note 10, combined aggregate maturities and sinking  fund 
requirements of long-term debt are $28 million for 1996,  $55  million 
for  1997, $31 million for 1998, $27 million for 1999 and $17  million 
for  2000.  SDG&E  has CPUC authorization to issue an additional  $138 
million in long-term debt. 
 
                                    36 
<PAGE> 
 
FIRST MORTGAGE BONDS First mortgage bonds are secured  by  a  lien  on 
substantially all of SDG&E's utility plant. Additional first  mortgage 
bonds  may be issued upon compliance with the provisions of  the  bond 
indenture, which provides for, among other things, the issuance of  an 
additional $1.2 billion of first mortgage bonds at December 31,  1995. 
Certain of the first mortgage bonds may be called at SDG&E's option. 
 
     First mortgage bonds totaling $379 million have variable interest 
rate  provisions.  On $115 million, bondholders may  elect  to  redeem 
their  bonds at the annual interest-adjustment dates. For purposes  of 
determining the aggregate maturities listed above, it is assumed  that 
these issues will not be redeemed before their scheduled maturity. 
 
     During 1995, SDG&E issued $74 million of first mortgage bonds and 
retired  $74  million  of  first mortgage  bonds  prior  to  scheduled 
maturity. 
      
OTHER DEBT At December 31, 1995, SDG&E had $280 million of bank  lines 
providing a committed source of long-term borrowings, of which no debt 
was  outstanding. Bank lines, unless renewed by SDG&E, expire in 2000. 
Commitment fees are paid on the unused portion of the lines and  there 
are no requirements for compensating balances. 
 
     Loans of $161 million and $151 million at December 31, 1995,  and 
1994,  respectively,  are  secured by subsidiary  equipment  and  real 
estate. 
 
     Interest  payments,  including  those  applicable  to  short-term 
borrowings, amounted to $114 million in 1995, $102 million in 1994 and 
$104 million in 1993. 
 
     SDG&E  periodically  enters  into  interest-rate  swap-and-cap 
agreements  to moderate its exposure to interest-rate changes  and  to 
lower its overall cost of borrowings. At December 31, 1995, SDG&E  had 
such  agreements,  maturing  in 1996 and 2002,  with  underlying  debt 
aggregating $120 million. See additional information in Note 9. 
      
NOTE 5: SHORT-TERM BORROWINGS 
 
At  December  31, 1995, and 1994, short-term borrowings  and  weighted 
average interest rates thereon were: 
 
in millions of dollars         1995                  1994 
---------------------------------------------------------------------- 
                        Balance  Interest Rate  Balance  Interest Rate 
---------------------------------------------------------------------- 
Bank loans                $--         --          $58         6.4% 
Subsidiaries' bank 
  credit lines             --         --           31         7.1% 
---------------------------------------------------------------------- 
     Total                $--                     $89 
______________________________________________________________________ 
 
In  addition  to the $280 million of long-term bank lines (see  "Other 
Debt" in Note 4), at December 31, 1995, SDG&E had $30 million of  bank 
lines available to support commercial paper. Commitment fees are  paid 
on  the unused portion of the lines and there are no requirements  for 
compensating balances. 
      
NOTE 6: FACILITIES UNDER JOINT OWNERSHIP 
 
The  San Onofre nuclear generating station and the Southwest Powerlink 
transmission  line  are  jointly owned with other  utilities.  SDG&E's 
interests at December 31, 1995, were: 
      
in millions of dollars 
------------------------------------------------------ 
                                 San         Southwest 
Project                        Onofre        Powerlink 
------------------------------------------------------ 
Percentage ownership               20             89 
Utility plant in service       $1,127       $    216 
Accumulated depreciation       $  397       $     81 
Construction work in progress  $    9       $      - 
------------------------------------------------------ 
 
Each  participant in the projects must provide its own financing.  The 
amounts  specified  above for San Onofre include  nuclear  production, 
transmission and other facilities. 
 
     SDG&E's share of operating expenses is included in its Statements 
of Consolidated Income. 
 
     SDG&E's share of future dismantling and decontamination costs for 
the  San  Onofre  units  is estimated to be $343  million  in  current 
dollars  and  is  based  on studies performed by outside  consultants, 
updated  triennially.  The most recent study was  performed  in  1993. 
These costs are included in setting rates and are expected to be fully 
recovered by 2013, the estimated last year of service. 
 
     The  amount  accrued each year is based on the amount allowed  by 
regulators and is currently being collected in rates. This amount  and 
the  expected earnings of the trust fund are considered sufficient  to 
cover  SDG&E's share of future decommissioning costs. The depreciation 
and   decommissioning   expense  reflected  on   the   Statements   of 
Consolidated  Income  includes $22 million of decommissioning  expense 
for each of the years 1995, 1994 and 1993. 
 
     Decontamination objectives, work scope and procedures  must  meet 
the   requirements   of   the  Nuclear  Regulatory   Commission,   the 
Environmental Protection Agency, the California Public Utilities  Code 
and the requirements of other regulatory bodies. 
 
     The amounts collected in rates are invested in externally managed 
trust  funds.  In  accordance with SFAS 115,  Accounting  for  Certain 
Investments in Debt and Equity Securities, the securities held by  the 
trust  are  considered held for sale and are adjusted to market  value 
($270  million at December 31, 1995, which is included in "Investments 
and  Other  Property"  on the Consolidated Balance  Sheets  and  which 
includes a $25 million unrealized gain). The corresponding accumulated 
accrual is included in accumulated depreciation and decommissioning on 
the Consolidated Balance Sheets. 
 
     The  Financial Accounting Standards Board is currently  reviewing 
accounting  for  liabilities related to closure and removal  of  long- 
lived assets, such as nuclear power plants, including the recognition, 
measurement and classification of such costs. The Board could require, 
among  other  things,  that SDG&E's future balance  sheets  include  a 
liability  for  the  estimated decommissioning costs,  and  a  related 
regulatory  asset  reflecting  anticipated  rate  recovery   of   this 
liability to the extent not already collected from customers. This  is 
not expected to have an adverse effect on results of operations. 
 
                                       37 
<PAGE> 
 
 
     Additional information regarding San Onofre is included in  Notes 
10 and 11. 
      
NOTE 7: EMPLOYEE BENEFIT PLANS 
 
SDG&E  has  a defined-benefit pension plan, which covers substantially 
all   utility  employees.  Benefits  are  related  to  the  employees' 
compensation.  Plan  assets consist primarily  of  common  stocks  and 
bonds.  SDG&E  funds  the  plan based on  the  projected  unit  credit 
actuarial cost method. Net pension cost consisted of the following for 
the year ended December 31: 
      
in thousands of dollars              1995       1994       1993 
----------------------------------------------------------------- 
Cost related to current service    $ 14,598   $ 18,733   $ 18,233 
Interest on projected 
  benefit obligation                 30,760     33,254     29,745 
Return on plan assets              (132,674)    (1,319)   (39,351) 
Net amortization and deferral        93,708    (34,253)    5,342 
----------------------------------------------------------------- 
Cost pursuant to accounting 
  standards                           6,392     16,415    13,969 
Regulatory adjustment                   608    (16,415)  (13,969) 
----------------------------------------------------------------- 
    Net cost                         $7,000   $    -    $    - 
_________________________________________________________________ 
      
The plan's status was as follows at December 31: 
      
in thousands of dollars                    1995        1994 
------------------------------------------------------------- 
Accumulated benefit obligation 
Vested                                   $357,089    $308,672 
  Nonvested                                 8,880      10,480 
------------------------------------------------------------- 
    Total                                $365,969    $319,152 
------------------------------------------------------------- 
Plan assets at fair value                $542,336    $424,455 
Projected benefit obligation              481,450     417,625 
------------------------------------------------------------- 
Plan assets less projected benefit 
  obligation                               60,886       6,830 
Unrecognized effect of accounting 
  change                                   (1,139)     (1,328) 
Unrecognized prior service cost            11,869      12,956 
Unrecognized actuarial gains             (130,828)    (71,278) 
-------------------------------------------------------------- 
    Net liability                        $(59,212)   $(52,820) 
______________________________________________________________ 
 
The  projected  benefit  obligation assumes a 7.25  percent  actuarial 
discount rate in 1995 (8.25 percent in 1994) and a 5.0 percent average 
annual compensation increase. The expected long-term rate of return on 
plan  assets  is  8.5 percent. The increase in the  total  accumulated 
benefit  obligation and projected benefit obligation is due  primarily 
to the decrease in the actuarial discount rate. 
 
     Eligible  employees may make a contribution of 1  percent  to  15 
percent  of  their compensation to SDG&E's savings plan for investment 
in  mutual  funds or in SDG&E common stock. SDG&E contributes  amounts 
equal  to up to 3 percent of participants' compensation for investment 
in SDG&E common stock. SDG&E's expense for the pension and the savings 
plans  and a supplemental retirement plan for a limited number of  key 
employees  was approximately $13 million in 1995, $6 million  in  1994 
and $6 million in 1993. 
 
     SDG&E  has  a  long-term incentive stock compensation  plan  that 
provides  for  aggregate awards of up to 2,700,000  shares  of  common 
stock.  The  plan terminates in  April 2005. In each of  the  last  10 
years,  SDG&E issued approximately 45,000 shares to 65,000  shares  of 
stock  to  officers and key employees for $2.50 per share, subject  to 
buy back over 4 years if certain corporate goals are not met. 
 
     SDG&E  provides  certain health and life  insurance  benefits  to 
retired  utility  employees.  Prior  to  1993,  SDG&E  expensed  these 
benefits when paid and such amounts were normally recovered in  rates. 
Effective   January  1,  1993,  SDG&E  adopted  SFAS  106,  Employers' 
Accounting  for  Postretirement Benefits Other  Than  Pensions,  which 
requires that these benefits be accrued during the employee's years of 
service,  up  to   the  year of benefit eligibility.  The  unamortized 
transition obligation of approximately $35 million is being  amortized 
through  2012.  SDG&E is recovering the cost of these  benefits  based 
upon  actuarial  calculations  and funding  limitations.  The  amounts 
expensed  for these benefits were $5 million in 1995, in 1994  and  in 
1993. 
      
NOTE 8: INCOME TAXES 
 
SFAS 109, Accounting for Income Taxes, requires the use of the balance 
sheet  method  of accounting for income taxes. Under  this  method,  a 
deferred tax asset or liability represents the tax effect of temporary 
differences  between the financial statement and tax bases  of  assets 
and liabilities and is measured using the latest enacted tax rates. 
 
     As  a  result  of  adopting SFAS 109, SDG&E  recorded  additional 
deferred  income taxes related to the allowance for funds used  during 
construction and other temporary differences for which deferred income 
taxes  had  not  been provided. Existing deferred  income  taxes  were 
reduced  due to intervening income tax rate reductions, and a deferred 
income  tax  asset related to unamortized investment tax  credits  was 
recorded. 
 
     The  net effect of these changes is almost entirely offset  by  a 
regulatory asset of $299 million at December 31, 1995 ($306 million at 
December  31, 1994). This regulatory asset is expected to be recovered 
in  future  rates and will be adjusted as it is recovered through  the 
ratemaking  process and as tax rates and laws change.  See  additional 
discussion regarding regulatory assets in Note 11. 
 
     Income tax payments totaled $148 million in 1995, $167 million in 
1994 and $116 million in 1993. 
      
Components of Accumulated Deferred Income Taxes 
      
in thousands of dollars                        1995         1994 
------------------------------------------------------------------ 
Deferred tax liabilities 
  Differences in financial and 
    tax bases of utility plant               $619,062     $626,957 
  Loss on reacquired debt                      26,829       27,576 
  Other                                        66,411       60,056 
------------------------------------------------------------------ 
    Total deferred tax liabilities            712,302      714,589 
------------------------------------------------------------------ 
Deferred tax assets 
  Unamortized investment tax credits           71,451       74,563 
  Equipment leasing activities                 36,493       49,547 
  Regulatory balancing accounts                34,061       10,596 
  Other                                       143,892      133,748 
------------------------------------------------------------------ 
    Total deferred tax assets                 285,897      268,454 
------------------------------------------------------------------ 
Net deferred income tax liability             426,405      446,135 
Current portion (net asset)                    96,930       67,457 
------------------------------------------------------------------ 
Non-current portion (net liability)          $523,335     $513,592 
__________________________________________________________________ 
 
                                     38 
<PAGE> 
 
 
Components of Income Tax Expense 
      
in thousands of dollars          1995       1994        1993 
--------------------------------------------------------------- 
Current 
  Federal                      $134,212    $149,361   $ 84,555 
  State                          42,630      41,288     24,208 
-------------------------------------------------------------- 
    Total current taxes         176,842     190,649    108,763 
-------------------------------------------------------------- 
Deferred 
  Federal                       (23,914)    (37,605)    43,365 
  State                         (13,464)    (12,897)     7,001 
-------------------------------------------------------------- 
    Total deferred taxes        (37,378)    (50,502)    50,366 
-------------------------------------------------------------- 
Deferred investment 
  tax credits - net              (4,859)     (4,148)    (4,760) 
-------------------------------------------------------------- 
    Total income tax 
      expense                  $134,605    $135,999   $154,369 
______________________________________________________________ 
 
Federal and state income taxes are allocated between operating  income 
and other income. 
 
RECONCILIATION OF STATUTORY FEDERAL INCOME TAX RATE TO EFFECTIVE 
INCOME TAX RATE 
      
                                     1995     1994     1993 
------------------------------------------------------------- 
Statutory federal income tax rate    35.0%    35.0%    35.0% 
Depreciation                          5.4      6.6      4.8 
State income taxes - net of 
  federal income tax benefit          5.5      5.5      5.3 
Tax credits                          (7.4)    (5.4)    (3.7) 
Equipment leasing activities         (3.3)    (3.2)    (1.7) 
Repair allowance                     (3.0)    (2.8)    (2.0) 
Allowance for funds used 
  during construction                (0.7)    (0.7)    (1.9) 
Other - net                           5.1      4.7      4.6 
------------------------------------------------------------- 
    Effective income tax rate        36.6%    39.7%    40.4% 
_____________________________________________________________ 
 
NOTE 9: FINANCIAL INSTRUMENTS 
 
The  carrying  amounts and related estimated fair  values  of  SDG&E's 
financial instruments are as follows: 
      
in millions of dollars              1995              1994 
----------------------------------------------------------------- 
                              Carrying  Fair    Carrying   Fair 
                               Amount   Value     Amount   Value 
----------------------------------------------------------------- 
Assets 
  Cash and temporary 
   investments                 $ 96.4   $ 96.4   $ 25.4   $ 25.4 
  Funds held in trust           270.2    270.2    201.9    201.9 
  Notes receivable              103.7    107.3    121.5    121.1 
  Investments in limited 
   partnerships and 
   other assets                 206.0    220.7    170.2    182.5 
----------------------------------------------------------------- 
Liabilities 
  Dividends payable              47.4     47.4     46.2     46.2 
  Short-term debt and 
    current portion 
    of long-term debt           142.8    142.8    231.0    230.1 
  Deposits from customers        55.8     51.5     56.2     50.2 
  Long-term debt              1,253.2  1,307.9  1,244.0  1,210.1 
  Preferred stock subject to 
    mandatory redemption         25.0     26.7     25.0     23.8 
__________________________________________________________________ 
 
The  estimated fair values may not be representative of actual amounts 
that  could have been realized as of year end or that will be realized 
in the future. 
 
     The  following methods and assumptions were used to estimate  the 
fair value of each class of financial instruments. 
      
CASH  AND  TEMPORARY  INVESTMENTS AND  DIVIDENDS  PAYABLE The carrying 
amount  approximates  fair value due to the short  maturity  of  these 
items. 
      
NOTES RECEIVABLE The  fair  values  of  noncurrent  notes  receivable 
(included  in  "Deferred Charges and Other Assets" on the Consolidated 
Balance Sheets) are based on the present value of the estimated future 
cash  flows  discounted at current rates available for similar  notes. 
The  carrying amount of short-term notes receivable approximates  fair 
value due to the short maturities. 
      
FUNDS   HELD  IN TRUST Funds  held  in  trust  consist  of  the  SONGS 
decommissioning trust (included in "Investments and Other Property" on 
the Consolidated Balance Sheets). The fair values of the funds' assets 
are based on quoted market values. 
      
INVESTMENTS IN LIMITED PARTNERSHIPS AND OTHER ASSETS The fair values of 
Enova  Financial's investments in limited partnerships for  affordable 
housing  projects,  Califia's  leasing investments  and  other  assets 
(included  in  "Investments and Other Property"  on  the  Consolidated 
Balance  Sheets)  acquired  after 1993 are  estimated  to  approximate 
carrying value due to the relatively short periods of time between the 
purchase  dates  and  the  valuation date,  and  the  relative  market 
stability  during  those periods. Fair values of investments  acquired 
prior  to  1993  are  estimated based on  the  present  value  of  the 
estimated  future cash flows, discounted at yields currently available 
for similar investments. 
      
DEPOSITS FROM CUSTOMERS Deposits from customers include deposits  from 
residential  and  commercial  customers (included  in  "Other  Current 
Liabilities" on the Consolidated Balance Sheets) and customer advances 
for  construction. The carrying amounts of deposits  from  residential 
and  commercial  customers approximate fair value  due  to  the  short 
maturity   periods.   The  fair  values  of  customer   advances   for 
construction  are based on the present values of the estimated  future 
cash flows discounted at current rates of return. 
      
DEBT  AND  PREFERRED  STOCK  SUBJECT TO MANDATORY  REDEMPTION The fair 
values of SDG&E's first mortgage bonds and preferred stock issues  are 
estimated  based  on  quoted market prices for  them  or  for  similar 
issues, or on the current rates offered to SDG&E for debt and stock of 
the  same maturities. The fair values of long-term notes payable   are 
based  on  the present values of the future cash flows, discounted  at 
current  rates available for similar notes with comparable maturities. 
The carrying amounts of short-term loans and notes payable approximate 
fair value due to the short maturities. 
 
                                     39 
<PAGE> 
 
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS   SDG&E's policy is to use 
derivative  financial instruments to reduce its exposure to  interest- 
rate and foreign-currency fluctuations. SDG&E does not use derivatives 
for  trading or speculative purposes. These financial instruments  are 
with  major investment firms and, along with cash and cash equivalents 
and  accounts receivable, expose SDG&E to market and credit risks  and 
may  at  times  be  concentrated  with certain  counterparties.  SDG&E 
presently  contemplates  use  of similar  instruments  to  reduce  its 
exposure to fluctuations in natural gas prices. 
      
INTEREST RATE SWAP AND CAP AGREEMENTS   SDG&E periodically enters into 
interest  rate  swap and cap agreements to moderate  its  exposure  to 
interest  rate  changes and to lower its overall  cost  of  borrowing. 
These  swap and cap agreements generally remain off the balance  sheet 
as  they  involve  the  exchange of fixed- and variable-rate  interest 
payments  without   the exchange of the underlying principal  amounts. 
The  related gains or losses are reflected in the income statement  as 
part  of  the  expense item applicable to what is being hedged  (e.g., 
interest   expense).  At  December  31,  1995,  SDG&E  had  two   such 
agreements, including an index cap agreement on $75 million  of  bonds 
maturing  in  1996, and a floating-to-fixed-rate swap associated  with 
another  $45  million of variable-rate bonds maturing in  2002.  SDG&E 
expects  to  hold  these  derivative financial  instruments  to  their 
maturity.  These  cap  and  swap  agreements  have  effectively  fixed 
interest rates on the underlying variable-rate debt at 6.1 percent and 
5.4  percent,  respectively. SDG&E would be exposed  to  interest-rate 
fluctuations  on  the  underlying debt should  counterparties  to  the 
agreement  not  perform. Such nonperformance is not  anticipated.  The 
fair  value of these derivative financial instruments is the estimated 
amount  that  would  be  realized or paid  upon  termination  of   the 
agreements  based  on  quotes  from  dealers.  These  agreements,   if 
terminated,  would result in an obligation of $3 million  at  December 
31, 1995, compared to net proceeds to SDG&E of $2 million at  December 
31, 1994. 
      
FOREIGN CURRENCY FORWARD EXCHANGE CONTRACTS   SDG&E's pension fund 
periodically  uses foreign currency forward contracts  to  reduce  its 
exposure   to  exchange-rate  fluctuations  associated  with   certain 
investments  in  foreign equity securities. These contracts  generally 
have  maturities  ranging from three to six months.  At  December  31, 
1995,  the  pension  fund  held forward Yen -  U.S.  Dollar  contracts 
totaling  $20  million ($27million in 1994). SDG&E's pension  fund  is 
exposed  to  credit loss if the counterparties fail to  perform.  Such 
nonperformance is not anticipated. The fair value of these  derivative 
financial  instruments is the estimated amount that would be  realized 
or  paid  upon  termination of the agreements  based  on  quotes  from 
dealers. These agreements, if terminated, would result in net proceeds 
to  the pension fund of $2.7 million at December 31, 1995, compared to 
a net obligation of $0.2 million at December 31, 1994. 
      
NOTE 10: CONTINGENCIES AND COMMITMENTS 
 
PURCHASED POWER CONTRACTS   SDG&E buys electric power under several 
short-term and long-term contracts. Purchases are for 2 percent to 10 
percent of plant output under contracts with other utilities,  and  up 
to  100 percent of plant output under contracts with independent power 
producers  and  other non-utility suppliers. No one supplier  provides 
more  than  4  percent  of  SDG&E's  total  system  requirements.  The 
contracts expire on various dates between 1996 and 2024. 
 
     At December 31, 1995, the estimated future minimum payments under 
the contracts were: 
      
in millions of dollars 
------------------------------------------- 
1996                               $  265 
1997                                  172 
1998                                  176 
1999                                  175 
2000                                  156 
Thereafter                          2,502 
------------------------------------------- 
    Total minimum payments         $3,446 
___________________________________________ 
      
These   payments   represent  capacity  charges  and  minimum   energy 
purchases.  SDG&E  is required to pay additional  amounts  for  actual 
purchases  of  energy  under the contracts. Total payments,  including 
energy payments, under the contracts were $329 million in 1995,   $325 
million in 1994 and $305 million in 1993. See discussion of the CPUC's 
decision on the Biennial Resource Plan Update proceeding in Note 11. 
      
NATURAL GAS CONTRACTS   SDG&E has a contract with Southern California  
Gas Company that provides SDG&E with intrastate transportation capacity 
on SoCal's gas pipelines through August 1997. If a new agreement is not 
reached by then, SoCal has a continuing obligation to deliver  gas  to 
SDG&E  under a CPUC-approved tariff. SDG&E's long-term contracts  with 
interstate  pipelines for transportation capacity  expire  on  various 
dates between 2007 and 2023. SDG&E's contract with SoCal for 8 billion 
cubic feet of natural gas storage capacity expires in 1998. SDG&E also 
has  four long-term gas supply contracts that expire between 2001  and 
2004. 
 
     At  December 31, 1995, the future minimum payments under  natural 
gas contracts were: 
      
in millions of dollars 
___________________________________________________ 
                        Transportation    Natural 
                          and Storage        Gas 
--------------------------------------------------- 
1996                         $ 80          $ 20 
1997                           58            21 
1998                           18            21 
1999                           17            26 
2000                           17            27 
Thereafter                    289            82 
--------------------------------------------------- 
    Total minimum payments   $479          $197 
___________________________________________________ 
 
Total  payments  under the contracts were $95 million  in  1995,  $125 
million in 1994 and $86 million in 1993. 
 
                                       40 
<PAGE> 
 
 
LEASES Nuclear fuel, office buildings, a generating facility and other 
properties  are  financed by long-term capital leases.  Utility  plant 
included  $189  million  at December 31, 1995,  and  $173  million  at 
December 31, 1994, related to these leases. The associated accumulated 
amortization was $86 million and $73 million, respectively. SDG&E also 
leases  office  facilities,  computer  equipment  and  vehicles  under 
operating   leases.  Certain  leases  on  office  facilities   contain 
escalation clauses requiring annual increases in rent ranging  from  2 
percent to 7 percent. 
 
     The  minimum rental commitments payable in future years under all 
noncancellable leases were: 
      
in millions of dollars 
--------------------------------------------------------- 
                                Operating     Capitalized 
                                  Leases         Leases 
--------------------------------------------------------- 
1996                               $ 55           $ 26 
1997                                 49             27 
1998                                 33             12 
1999                                  9             12 
2000                                  7             12 
Thereafter                           44             45 
--------------------------------------------------------- 
Total future rental commitments    $197            134 
--------------------------------------------------------- 
Imputed interest (6% to 9%)                        (29) 
--------------------------------------------------------- 
Net commitment                                    $105 
_________________________________________________________ 
      
Rental  payments totaled $85 million in 1995, $91 million in 1994  and 
$89 million in 1993. 
      
ENVIRONMENTAL ISSUES   SDG&E's operations are conducted in accordance 
with  federal,  state  and local environmental  laws  and  regulations 
governing hazardous wastes, air and water quality, land use and  solid 
waste  disposal.  SDG&E  incurs  significant  costs  to  operate   its 
facilities in compliance with these laws and regulations. The costs of 
compliance  with  environmental  laws  and  regulations  are  normally 
recovered  in  customer  rates. Capital expenditures  to  comply  with 
environmental  laws and regulations were $4 million  in  1995  and  $5 
million  in 1994, and are expected to be $38 million over the  next  5 
years.  These  expenditures primarily include the  estimated  cost  of 
retrofitting SDG&E's power plants to reduce air emissions. 
 
     SDG&E  has identified, or has been associated with, various sites 
which   may  require  remediation  under  federal,  state   or   local 
environmental  laws. SDG&E may be partially or indirectly  responsible 
for  cleaning up these sites. SDG&E is unable to determine the  extent 
of  its  and/or others' responsibility for remediation of these  sites 
until  assessments are completed. Environmental liabilities  that  may 
arise   from   these  assessments  are  recorded  when   environmental 
assessments and/or remedial efforts are probable, and when the minimum 
costs  can  be  estimated.  In 1994, the  CPUC  approved  a  mechanism 
allowing  utilities to recover their hazardous waste costs,  including 
those  related to Superfund sites or similar sites requiring  cleanup. 
The  decision  allows  recovery of 90 percent  of  cleanup  costs  and 
related  third-party litigation costs and 70 percent  of  the  related 
insurance litigation expenses. As discussed in Note 11, the California 
Public   Utilities  Commission  has  issued  a  policy  decision   for 
restructuring  the California electric utility industry  to  stimulate 
competition. The CPUC has indicated that the California utilities will 
be  allowed  recovery of existing utility plant and regulatory  assets 
over  a  transition period that ends in 2005. Depending on  the  final 
outcome of industry restructuring and the impact of competition, SDG&E 
is  uncertain  whether  the  costs of  compliance  with  environmental 
regulations will continue to be recoverable in rates. 
      
NUCLEAR INSURANCE   SDG&E and the co-owners of the San Onofre units have
 purchased primary insurance of $200 million,  the maximum amount 
available, for public liability claims. An additional $8.7 billion  of 
coverage is provided by secondary financial protection required by the 
Nuclear  Regulatory  Commission and provides for  loss  sharing  among 
utilities  owning nuclear reactors if a costly accident occurs.  SDG&E 
could  be  assessed retrospective premium adjustments  of  up  to  $32 
million  in  the  event  of a nuclear incident involving  any  of  the 
licensed,  commercial reactors in the United States, if the amount  of 
the loss exceeds $200 million. In the event the public liability limit 
stated  above  is  insufficient, the Price-Anderson Act  provides  for 
Congress  to  enact further revenue-raising measures  to  pay  claims, 
which  could include an additional assessment on all licensed  reactor 
operators. 
 
     Insurance coverage is provided for up to $2.8 billion of property 
damage  and  decontamination liability. Coverage is also provided  for 
the  cost of replacement power, which includes indemnity payments  for 
up  to  2  years,  after  a waiting period of 21  weeks.  Coverage  is 
provided  primarily  through  mutual  insurance  companies  owned   by 
utilities  with  nuclear facilities. If losses at any of  the  nuclear 
facilities covered by the risk-sharing arrangements were to exceed the 
accumulated funds available from these insurance programs, SDG&E could 
be assessed retrospective premium adjustments of up to $9 million. 
      
DEPARTMENT  OF ENERGY DECOMMISSIONING The Energy Policy  Act  of  1992 
established a fund for the decontamination and decommissioning of  the 
Department  of  Energy  nuclear fuel enrichment facilities.  Utilities 
using  the  DOE  services are contributing a total  of  $2.3  billion, 
subject  to adjustment for inflation, over a 15-year period ending  in 
2006.  Each  utility's  share  is based on  its  share  of  enrichment 
services purchased from the DOE. SDG&E's share of the contribution  is 
$1 million per year. 
      
LITIGATION   SDG&E is involved in various legal matters arising out of 
the  ordinary  course  of  business. Management  believes  that  these 
matters will not have a material adverse effect on SDG&E's results  of 
operations, financial condition or liquidity. 
      
DISTRIBUTION  SYSTEM  CONVERSION Under a  CPUC-mandated  program   and 
through  franchise agreements with various cities, SDG&E is committed, 
in  varying  amounts, to convert overhead distribution  facilities  to 
underground. As of December 31, 1995, the aggregate unexpended  amount 
of this commitment was approximately $85 million. Capital expenditures 
for  underground conversions were $12 million in 1995, $11 million  in 
1994 and $22 million in 1993. 
 
                                      41 
<PAGE> 
 
 
CONCENTRATION OF CREDIT RISK   SDG&E grants credit to its utility 
customers,  substantially  all of whom  are  located  in  its  service 
territory,  which  covers  all of San Diego County  and  the  southern 
portion of Orange County. 
 
NOTE 11: INDUSTRY RESTRUCTURING 
 
In  December  1995,  the  CPUC  issued  its  policy  decision  on  the 
restructuring of California's electric utility industry  to  stimulate 
competition and reduce rates. The decision provides that beginning  in 
January  1998, customers will be able to buy their electricity through 
a  power  exchange  that  will obtain power  from  the  lowest-bidding 
suppliers.  The exchange is a spot market with published  pricing.  An 
independent system operator (ISO) will schedule power transactions and 
access  to  the  transmission system. Consumers  also  may  choose  to 
continue to purchase their local utility under regulated tariffs. As a 
third option,  a  cross  section  of  all customer groups (residential, 
industrial, commercial and agricultural) will be  able  to go directly 
to any energy supplier and enter into private contracts with  
generators, brokers or others (direct access).As  the  direct-access   
mechanism has  many  technical  issues  to  be resolved,  a  5-year   
phase-in is planned. All California  electricity consumers  will  have 
the  option  to  purchase  generation  services directly  by 2003. The 
utilities will continue to provide transmission and  distribution  
services to customers who choose to  purchase  their energy from other 
providers. 
 
     Utilities  will be allowed to recover their "stranded" investment 
costs  incurred for CPUC-approved facilities through the establishment 
of  a  non-bypassable competition transition charge (CTC). In addition 
to  $299  million  of deferred taxes recoverable in rates,  SDG&E  has 
approximately $215 million of other regulatory assets at December  31, 
1995  (included  in  "Deferred  Charges  and  Other  Assets"  on   the 
Consolidated   Balance  Sheets).  Included  in   these   amounts   are 
approximately $112 million related to generation operations, of  which 
$52  million  is  related  to  nuclear  operations.  Recovery  periods 
currently range from one to 30 years. It is estimated that at December 
31, 1995, SDG&E had approximately $950 million of net generating plant 
(including approximately $750 million of nuclear facilities) currently 
being  recovered  in  rates over various periods of  time.  Under  the 
CPUC's   industry   restructuring  decision,  to  the   extent   these 
investments exceed their market values, they must be recouped by  2005 
via the CTC mechanism. 
 
     In  addition,  as  described in Note 10, SDG&E has  entered  into 
significant   long-term  purchased-power  commitments   with   various 
utilities  and other providers totaling $3.4 billion. Also, under  the 
CPUC's  Biennial Resource Plan Update decision, SDG&E may be  required 
to  contract  for  an additional 500 megawatts of power  over  17-year 
terms  at an estimated cost of $4.8 billion beginning in 1997.  Prices 
under  these  contracts could significantly exceed the  future  market 
price. SDG&E is challenging the decision and the FERC has declared the 
BRPU  auction  procedures unlawful under federal  law.  The  CPUC  has 
issued  a  ruling  encouraging  SDG&E and  other  utilities  to  reach 
settlements  with  the  auction winners.  Settlement  discussions  are 
ongoing.  However,  under the CPUC's industry restructuring  decision, 
existing purchased-power obligations (including qualifying facilities) 
would  be recovered via the CTC mechanism. For purposes of CTC,  rates 
for  customers choosing traditional utility service (instead of  power 
exchange or direct access) will be capped at January 1, 1996,  levels. 
Including  the  CTC,  rates  cannot exceed  the  cap  and,  therefore, 
recovery of the CTC is limited by the cap. 
 
     Performance-based   regulation   will   replace   cost-of-service 
regulation.  SDG&E  is currently participating in a  performance-based 
ratemaking  process on an experimental basis which commenced  in  1993 
and runs through 1998. 
 
     The  utilities  are  required to file  plans  with  the  CPUC  to 
implement  direct  access and new or revised PBR proposals.  Plans  to 
establish the power exchange and ISO are also required to be filed  by 
the  utilities  with  both the CPUC and the  FERC,  as  the  FERC  has 
jurisdiction over the exchange, the ISO and interstate transmission. 
 
     The  CPUC is currently working on building a consensus on the new 
market  structure  with  the  California  Legislature,  the  governor, 
utilities  and  customers.  The California Legislature  has  passed  a 
resolution  forming an oversight committee to ensure the legislature's 
involvement  in  the  policies presented by the  CPUC,  and  that  the 
policies comply with federal and state laws and achieve the objectives 
both  of  competition  and  of the various social  programs  that  are 
currently funded through utility rates. 
 
     As  the  restructuring of the industry evolves, SDG&E will become 
more   vulnerable  to  competition.  However,  based  on  recent  CPUC 
decisions,  recovery  of  stranded costs is  provided  for,  including 
recovery  of  investment in SONGS Units 2 and 3.  Due  to  the  recent 
decisions,  SDG&E  does  not anticipate incurring  a  material  charge 
against earnings for its generating facilities, the related regulatory 
assets   and  other  long-term  commitments.  In  addition,   although 
California utilities' rates are significantly higher than the national 
average,  SDG&E has a lower concentration of industrial customers  and 
for 7 years has been the lowest-cost provider among the investor-owned 
utilities in California, which make its customers a less-likely target 
for outside competitors. 
 
     As described in Note 1, SDG&E currently accounts for the economic 
effects  of  regulation  in  accordance with  Statement  of  Financial 
Accounting  Standards No. 71, "Accounting for the Effects  of  Certain 
Types  of  Regulation." Once the restructuring  transition  is  final, 
SDG&E  may not continue to meet the criteria for applying SFAS  71  to 
all  of  its operations in the new regulatory framework. In a non-SFAS 
71  environment, additions to plant, among other things, would need to 
be recovered through market prices. 
 
                                      42 
 
<PAGE> 
<TABLE>  
QUARTERLY FINANCIAL DATA (UNAUDITED)  
In thousands except per share amounts  
----------------------------------------------------       ---------    ---------   ------------  -----------  
Quarter ended                                               March 31     June 30    September 30  December 31  
----------------------------------------------------       ---------    ---------   ------------  -----------  
<S>                                                        <C>          <C>         <C>           <C>  
1995                                                                                                
Operating revenues                                          $477,955     $445,239     $478,689     $468,793  
Operating expenses                                           384,300      365,751      388,387      386,588  
----------------------------------------------------       ---------    ---------   ------------  -----------  
Operating income                                              93,655       79,488       90,302       82,205  
Other income and (deductions)                                  1,744         (499)      (1,102)         389  
Net interest charges                                          28,059       29,095       27,380       28,339  
----------------------------------------------------       ---------    ---------   ------------  -----------  
Income from continuing operations                             67,340       49,894       61,820       54,255  
Discontinued operations, net of income taxes                  (5,490)        (678)          --        6,316  
----------------------------------------------------       ---------    ---------   ------------  -----------  
Net income (before preferred dividend requirements)           61,850       49,216       61,820       60,571  
Preferred dividend requirements                                1,916        1,915        1,916        1,916  
----------------------------------------------------       ---------    ---------   ------------  -----------  
Earnings applicable to common shares                        $ 59,934     $ 47,301     $ 59,904     $ 58,655  
----------------------------------------------------       ---------    ---------   ------------  -----------  
Average common shares outstanding                            116,533      116,534      116,538      116,545  
----------------------------------------------------       ---------    ---------   ------------  -----------  
Earnings per common share from continuing operations        $   0.56     $   0.41     $   0.51     $   0.45  
----------------------------------------------------       ---------    ---------   ------------  ------------  
Earnings per common share                                   $   0.51     $   0.41     $   0.51     $   0.50  
____________________________________________________       _________    _________   ____________  ____________  
1994                                                                                                
Operating revenues                                          $487,979     $444,050     $476,675     $503,541  
Operating expenses                                           403,897      380,241      392,361      403,530  
----------------------------------------------------       ---------    ---------   ------------  ------------  
Operating income                                              84,082       63,809       84,314      100,011  
Other income and (deductions)                                  2,880      (13,879)       2,935      (12,480)  
Net interest charges                                          24,180       25,124       27,075       28,352  
----------------------------------------------------       ---------    ---------   ------------  ------------  
Income from continuing operations                             62,782       24,806       60,174       59,179  
Discontinued operations, net of income taxes                  (2,986)     (58,025)        (385)      (2,068)  
----------------------------------------------------        --------     --------   ------------  -------------  
Net income (loss) (before preferred dividend requirements)    59,796      (33,219)      59,789       57,111  
Preferred dividend requirements                                1,916        1,915        1,916        1,916  
----------------------------------------------------       ---------     --------   ------------  -------------  
Earnings (loss) applicable to common shares                 $ 57,880     $(35,134)    $ 57,873     $ 55,195  
----------------------------------------------------       ---------     --------   ------------  -------------  
Average common shares outstanding                            116,492      116,473      116,475      116,496  
----------------------------------------------------       ---------     --------   ------------  -------------  
Earnings per common share from continuing operations        $   0.52     $   0.20     $   0.50     $   0.49  
----------------------------------------------------       ---------     --------   ------------  -------------  
Earnings (loss) per common share                            $   0.50     $  (0.30)    $   0.50     $   0.47  
____________________________________________________       _________     ________   ____________  _____________  
  
These amounts are unaudited, but in the opinion of SDG&E reflect all adjustments necessary for a fair   
presentation. Previously reported amounts have been restated to reflect discontinued operations.  
  
</TABLE>  
  
  
Information for Item 5.  
<TABLE>  
                                Quarterly Common Stock Data (Unaudited)  
<CAPTION>  
                                      1995                                   1994  
                 -------   -------   -------   -------      -------   -------   -------   -------  
                  First    Second     Third    Fourth        First    Second     Third    Fourth  
                 Quarter   Quarter   Quarter   Quarter      Quarter   Quarter   Quarter   Quarter  
------------     -------   -------   -------   -------      -------   -------   -------   -------  
<S>              <C>       <C>       <C>       <C>          <C>       <C>       <C>       <C>    
Market price                                                                                  
   High          21 5/8    22 7/8    23 1/4    23 7/8       25        23 1/4    20 7/8    20 1/8  
   Low           19 1/8    20 1/8    20 3/4    21 7/8       21 1/2    17 1/2    18        18 5/8  
Dividends  
 declared        $0.39     $0.39     $0.39     $0.39        $0.38     $0.38     $0.38     $0.38  
  
</TABLE>  
  
                                                        43