SECURITIES AND EXCHANGE COMMISSION  
 
                            WASHINGTON, D.C. 20549  
 
                                  FORM 10-Q  
(Mark One)  
  
[..X..]  Quarterly report pursuant to Section 13 or 15(d) of the  
         Securities Exchange Act of 1934  
                                               September 30, 1997     
For the quarterly period ended....................................... 
                                 Or                                   
[.....]  Transition report pursuant to Section 13 or 15(d) of the  
         Securities Exchange Act of 1934  
  
For the transition period from ________________  to _________________ 
 
               Name of                                                 
Commission     Registrant                             IRS Employer     
File           as specified        State of           Identification   
Number         in its charter      Incorporation      Number           
----------     --------------      --------------     --------------   
1-11439        ENOVA CORPORATION     California       33-0643023        
                                                                        
1-3779         SAN DIEGO GAS &                                         
               ELECTRIC COMPANY      California       95-1184800        
 
                                                                    
101 ASH STREET, SAN DIEGO, CALIFORNIA                           92101   
----------------------------------------                     ---------- 
(Address of principal executive offices)                     (Zip Code) 
                                                                        
 
Registrants' telephone number, including area code    (619) 696-2000    
                                                    ------------------- 
                                  No Change                             
----------------------------------------------------------------------- 
Former name, former address and former fiscal year, if changed since  
last report 
  
     Indicate by check mark whether the registrant (1) has filed all  
reports required to be filed by Sections 13 or 15(d) of the Securities  
Exchange Act of 1934 during the preceding 12 months (or for such shorter  
period that the registrant was required to file such reports), and  
(2) has been subject to such filing requirements for the past  
90 days.                                           Yes...X... No......  
  
     Indicate the number of shares outstanding of each of the issuer's  
classes of common stock, as of the latest practicable date.  
 
Common Stock outstanding September 30, 1997:                                 
 
Enova Corporation                                        113,616,714    
                                                         ----------- 
San Diego Gas & Electric Company      Wholly owned by Enova Corporation 
 
 
 
<PAGE>
 
                             ENOVA CORPORATION 
 
                                    AND 
 
                      SAN DIEGO GAS & ELECTRIC COMPANY 
 
 
 
                                  CONTENTS 
 
                                         									Page No. 
                                                  -------- 
PART I.	FINANCIAL INFORMATION 
 
		Statements of Income. . . . . . . . . . . . . . . . 3 
		Balance Sheets. . . . . . . . . . . . . . . . . . . 5 
		Statements of Cash Flows. . . . . . . . . . . . . . 6 
		Notes to Financial Statements . . . . . . . . . . . 7 
 
Item 2.	Management's Discussion and Analysis of 
		Financial Condition and Results of Operations . . .11 
 
 
PART II.	OTHER INFORMATION 
 
Item 1.	Legal Proceedings . . . . . . . . . . . . . .21 
 
Item 6.	Exhibits and Reports on Form 8-K. . . . . . .23 
 
Signature . . . . . . . . . . . . . . . . . . . . . .24 
 
 
 
 
                                    2 
 
 
<PAGE> 
<TABLE> 
STATEMENTS OF INCOME (unaudited) 
In thousands except per share amounts 
<CAPTION> 
                                          Enova Corporation 
                                          and Subsidiaries             SDG&E 
                                       -----------------------  ------------------- 
For the three months ended September 30,      1997       1996      1997       1996 
                                       -------------------------------------------- 
<S>                                        <C>        <C>       <C>        <C> 
Operating Revenues 
  Electric                                 $484,218   $419,809  $484,218   $419,809 
  Gas                                        82,079     73,676    82,079     73,676 
  Other                                      14,761     14,108      --         --   
                                       -------------------------------------------- 
      Total operating revenues              581,058    507,593   566,297    493,485 
                                       -------------------------------------------- 
Operating Expenses 
  Electric fuel                              45,661     42,794    45,661     42,794 
  Purchased power                           134,712     85,777   134,712     85,777 
  Gas purchased for resale                   32,254     24,137    32,254     24,283 
  Maintenance                                19,440     16,201    19,440     16,201 
  Depreciation and decommissioning           86,887     84,607    81,116     79,522 
  Property and other taxes                   10,882     10,719    10,870     10,719 
  General and administrative                 52,287     59,024    50,002     54,270 
  Other                                      56,618     50,786    45,041     38,937 
  Income taxes                               46,958     46,262    61,207     59,154 
                                       -------------------------------------------- 
      Total operating expenses              485,699    420,307   480,303    411,657 
                                       -------------------------------------------- 
Operating Income                             95,359     87,286    85,994     81,828 
                                       -------------------------------------------- 
Other Income and (Deductions)                                                        
  Allowance for equity funds used                                                   
    during construction                       1,402      1,443     1,402      1,443 
  Taxes on nonoperating income                2,880     (2,086)      536     (2,514) 
  Other - net                                (7,707)     5,016    (1,955)     5,443  
                                       -------------------------------------------- 
      Net other income and 
          (deductions)                       (3,425)     4,373       (17)     4,372  
                                       -------------------------------------------- 
Income Before Interest Charges               91,934     91,659    85,977     86,200 
                                       -------------------------------------------- 
Interest Charges 
  Long-term debt                             21,361     22,423    17,293     19,228 
  Short-term debt and other                   4,487      5,527     4,391      5,527 
  Allowance for borrowed funds 
    used during construction                   (626)      (682)     (626)      (682) 
  Preferred dividend requirements of 
    SDG&E                                     1,646      1,646      --         --   
                                       -------------------------------------------- 
      Net interest charges                   26,868     28,914    21,058     24,073 
                                       -------------------------------------------- 
Net Income                                   65,066     62,745    64,919     62,127 
Preferred Dividend Requirements                --         --       1,646      1,646 
                                       -------------------------------------------- 
Earnings Applicable to Common Shares        $65,066    $62,745   $63,273    $60,481 
                                       ============================================ 
Average Common Shares Outstanding           113,616    116,566 
                                       ======================= 
Earnings Per Common Share                     $0.57      $0.54 
                                       ======================= 
Dividends Declared Per Common Share           $0.39      $0.39 
                                       ======================= 
 
See notes to financial statements. 
 
</TABLE> 
                                            3 
 
 
<PAGE> 
<TABLE> 
STATEMENTS OF INCOME (unaudited) 
In thousands except per share amounts 
<CAPTION> 
                                          Enova Corporation 
                                          and Subsidiaries             SDG&E 
                                       -----------------------  -------------------- 
For the nine months ended September 30,      1997       1996      1997       1996 
                                       --------------------------------------------- 
<S>                                        <C>        <C>       <C>        <C> 
Operating Revenues 
  Electric                               $1,274,928 $1,164,073 $1,274,928 $1,164,073 
  Gas                                       277,897    239,575    277,897    239,575 
  Other                                      37,644     40,809       --         --   
                                       --------------------------------------------- 
      Total operating revenues            1,590,469  1,444,457  1,552,825  1,403,648 
                                       --------------------------------------------- 
Operating Expenses 
  Electric fuel                             124,083     92,198    124,083     92,198 
  Purchased power                           311,480    233,925    311,391    233,925 
  Gas purchased for resale                  122,887     93,324    122,767     93,169 
  Maintenance                                62,795     47,854     62,795     47,854 
  Depreciation and decommissioning          258,768    248,536    242,244    234,326 
  Property and other taxes                   33,640     33,930     33,542     33,930 
  General and administrative                148,133    156,956    139,253    148,630 
  Other                                     164,841    154,187    128,502    119,370 
  Income taxes                              113,848    128,744    161,102    164,406 
                                       --------------------------------------------- 
      Total operating expenses            1,340,475  1,189,654  1,325,679  1,167,808 
                                       --------------------------------------------- 
Operating Income                            249,994    254,803    227,146    235,840 
                                       --------------------------------------------- 
Other Income and (Deductions)                                                        
  Allowance for equity funds used                                                   
    during construction                       4,271      4,159      4,271      4,159 
  Taxes on nonoperating income                8,579     (1,001)     1,824     (2,229) 
  Other - net                               (10,313)     2,394     (6,392)     2,954  
                                       --------------------------------------------- 
      Net other income and 
          (deductions)                        2,537      5,552       (297)     4,884 
                                       --------------------------------------------- 
Income Before Interest Charges              252,531    260,355    226,849    240,724 
                                       --------------------------------------------- 
Interest Charges 
  Long-term debt                             65,220     66,856     53,226     57,438 
  Short-term debt and other                  13,987     14,891     13,795     14,891 
  Allowance for borrowed funds 
    used during construction                 (1,923)    (2,476)    (1,923)    (2,476) 
  Preferred dividend requirements of 
    SDG&E                                     4,937      4,937       --         --   
                                       --------------------------------------------- 
      Net interest charges                   82,221     84,208     65,098     69,853 
                                       --------------------------------------------- 
Net Income                                  170,310    176,147    161,751    170,871 
Preferred Dividend Requirements                --         --        4,937      4,937 
                                       --------------------------------------------- 
Earnings Applicable to Common Shares       $170,310   $176,147   $156,814   $165,934 
                                       ============================================= 
Average Common Shares Outstanding           114,551    116,567 
                                       ======================= 
Earnings Per Common Share                     $1.49      $1.51 
                                       ======================= 
Dividends Declared Per Common Share           $1.17      $1.17 
                                       ======================= 
 
See notes to financial statements. 
 
</TABLE> 
                                            4 
 
 
<PAGE> 
<TABLE> 
BALANCE SHEETS 
In thousands of dollars 
<CAPTION> 
                                            Enova Corporation 
                                            and Subsidiaries               SDG&E 
                                     -------------------------- -------------------------- 
Balance at                           September 30, December 31, September 30, December 31, 
                                           1997         1996         1997         1996 
                                       (unaudited)               (unaudited) 
                                     ------------- ------------ ------------- ------------ 
<S>                                     <C>          <C>          <C>          <C> 
ASSETS 
Utility plant - at original cost        $5,821,280   $5,704,464   $5,821,280   $5,704,464 
Accumulated depreciation  
  and decommissioning                   (2,871,008)  (2,630,093)  (2,871,008)  (2,630,093) 
                                       -----------  -----------  -----------  ----------- 
         Utility plant-net               2,950,272    3,074,371    2,950,272    3,074,371 
                                       -----------  -----------  -----------  ----------- 
Investments and other property             802,063      650,188      388,158      337,520 
                                       -----------  -----------  -----------  ----------- 
Current assets                                                                            
Cash and temporary investments             143,058      173,079       48,891       81,409 
Accounts receivable                        255,001      186,529      251,422      187,986 
Notes receivable                            28,961       33,564         --           --   
Inventories                                 67,001       63,437       65,710       63,078 
Other                                       38,160       47,094       25,582       33,227 
                                       -----------  -----------  -----------  ----------- 
         Total current assets              532,181      503,703      391,605      365,700 
                                       -----------  -----------  -----------  ----------- 
Deferred taxes recoverable in rates        175,367      189,193      175,367      189,193 
                                       -----------  -----------  -----------  ----------- 
Deferred charges and other assets          205,635      231,782      193,567      193,732 
                                       -----------  -----------  -----------  ----------- 
         Total                          $4,665,518   $4,649,237   $4,098,969   $4,160,516 
                                       ===========  ===========  ===========  =========== 
CAPITALIZATION AND LIABILITIES                                                                            
Capitalization                                                                                            
Common equity                           $1,539,618   $1,569,670   $1,356,849   $1,404,136 
Preferred stock of SDG&E                                                                                  
  Not subject to mandatory redemption       78,475       78,475       78,475       78,475 
  Subject to mandatory redemption           25,000       25,000       25,000       25,000 
Long-term debt                           1,465,483    1,479,338    1,218,151    1,284,816 
                                       -----------  -----------  -----------  ----------- 
         Total capitalization            3,108,576    3,152,483    2,678,475    2,792,427 
                                       -----------  -----------  -----------  ----------- 
Current liabilities 
Current portion of long-term debt           57,622       69,902        6,748       33,639 
Accounts payable                           145,937      175,815      143,699      174,884 
Due to affiliates                             --           --          5,467        7,214 
Dividends payable                           45,956       47,213       45,956       47,131 
Interest and taxes accrued                  25,537       21,259       23,041       12,824 
Regulatory balancing accounts  
  overcollected-net                        113,550       35,338      113,550       35,338 
Other                                      178,413      158,317      122,583      110,743 
                                       -----------  -----------  -----------  ----------- 
         Total current liabilities         567,015      507,844      461,044      421,773 
                                       -----------  -----------  -----------  ----------- 
Customer advances for construction          35,910       34,666       35,910       34,666 
Accumulated deferred income taxes-net      498,233      497,400      477,148      487,119 
Accumulated deferred investment  
  tax credits                               62,179       64,410       62,179       64,410 
Deferred credits and other liabilities     393,605      392,434      384,213      360,121 
                                       -----------  -----------  -----------  ----------- 
         Total                          $4,665,518   $4,649,237   $4,098,969   $4,160,516 
                                       ===========  =========== ============ ============ 
 
See notes to financial statements. 
 
</TABLE> 
                                             5 
 
 
<PAGE> 
<TABLE> 
STATEMENTS OF CASH FLOWS (unaudited) 
In thousands of dollars 
<CAPTION> 
                                                           Enova Corporation      
                                                            and Subsidiaries              SDG&E 
                                                         ----------------------  ---------------------- 
For the nine months ended September 30,                      1997       1996         1997        1996 
                                                         ----------  ----------  ----------  ---------- 
<S>                                                       <C>         <C>         <C>         <C> 
Cash Flows from Operating Activities 
   Net income                                             $170,310    $176,147    $161,751    $170,871     
Adjustments to reconcile net income from continuing 
   operations to net cash provided by operating activities 
     Depreciation and decommissioning                      258,768     248,536     242,244     234,326 
     Amortization of deferred charges and other assets       4,714       4,267       4,714       3,536 
     Amortization of deferred credits  
       and other liabilities                               (28,737)    (28,608)     (3,183)     (2,883) 
     Allowance for equity funds used during construction    (4,271)     (4,159)     (4,271)     (4,159) 
     Deferred income taxes and investment tax credits        3,289     (29,308)        (14)    (28,603)  
     Other-net                                              31,267      23,199       5,611       5,080   
Changes in working capital components 
     Accounts and notes receivable                         (63,869)    (27,009)    (63,436)    (16,467) 
     Inventories                                            (3,564)      4,045      (2,632)      4,924   
     Other current assets                                   (2,826)     (8,986)       (702)    (10,424) 
     Interest and taxes accrued                             40,885      62,054      35,910      64,440 
     Accounts payable and other current liabilities         (6,171)    (13,960)    (21,331)    (24,196) 
     Regulatory balancing accounts                          78,212      30,061      78,212      30,061 
Cash used by discontinued operations                          --          --          --       (11,544) 
                                                         ----------  ----------  ----------  ---------- 
       Net cash provided by operating activities           478,007     436,279     432,873     414,962 
                                                         ----------  ----------  ----------  ---------- 
Cash Flows from Financing Activities 
     Regular dividends paid                               (135,357)   (136,388)   (140,212)   (141,594)
     Special dividend paid	                                   --          --       (66,150)       --   
     Issuances of long-term debt                              --       169,452        --       167,152 
     Repayment of long-term debt                          (126,672)   (199,816)    (92,796)   (174,743)
     Repurchase of common stock                            (66,314)       (480)       --          --   
     Redemption of preferred stock                            --       (15,155)       --       (15,155)
                                                         ----------  ----------  ----------  ----------
       Net cash used by financing activities              (328,343)   (182,387)   (299,158)   (164,340) 
                                                         ----------  ----------  ----------  ---------- 
Cash Flows from Investing Activities 
     Utility construction expenditures                    (141,544)   (144,192)   (141,544)   (144,192) 
     Contributions to decommissioning funds                (16,527)    (16,527)    (16,527)    (16,527) 
     Other-net                                             (21,614)      2,879      (8,162)      7,217 
                                                         ----------  ----------  ----------  ---------- 
       Net cash used by investing activities              (179,685)   (157,840)   (166,233)   (153,502) 
                                                         ----------  ----------  ----------  ---------- 
Net increase (decrease)                                    (30,021)     96,052     (32,518)     97,120 
Cash and temporary investments, beginning of period        173,079      96,429      81,409      20,755 
                                                         ----------  ----------  ----------  ---------- 
Cash and temporary investments, end of period             $143,058    $192,481    $ 48,891    $117,875 
                                                         ==========  ==========  ==========  ========== 
Supplemental Disclosure of Cash Flow Information 
     Income tax payments (net of refunds)                 $ 84,761    $112,528    $135,745    $146,934 
                                                         ==========  ==========  ==========  ========== 
     Interest payments, net of amounts capitalized        $ 77,943    $ 74,754    $ 61,544    $ 64,570 
                                                         ==========  ==========  ==========  ========== 
Supplemental Schedule of Noncash Activities: 
   Investing and Financing 
     Real estate investments                              $101,576    $ 52,367        --          --   
     Cash paid                                                (279)       --          --          --   
                                                         ----------  ----------  ----------  ---------- 
     Liabilities assumed                                  $101,297    $ 52,367        --          --    
                                                         ==========  ==========  ==========  ========== 
 
   Net assets of affiliates transferred to parent             --          --          --      $150,069 
                                                         ==========  ==========  ==========  ========== 
 
See notes to financial statements. 
</TABLE> 
                                    6 
 
 
<PAGE> 
               NOTES TO FINANCIAL STATEMENTS (Unaudited) 
 
1.	GENERAL 
 
This Quarterly Report on Form 10-Q is a combined filing of Enova  
Corporation (Enova) and San Diego Gas & Electric (SDG&E). The financial  
statements presented herein represent the consolidated statements of  
Enova Corporation and its subsidiaries (including SDG&E), as well as the  
stand-alone statements of SDG&E. Unless otherwise indicated, the "Notes  
to Financial Statements" and "Management's Discussion and Analysis of  
Financial Condition and Results of Operations" herein pertain both to  
SDG&E and to Enova as a consolidated entity. 
 
The Registrants believe all adjustments necessary to present a fair  
statement of the consolidated financial position and results of  
operations for the periods covered by this report, consisting of  
recurring accruals, have been made. 
 
The Registrants' significant accounting policies, as well as those of  
their subsidiaries, are described in the notes to consolidated financial  
statements in Enova Corporation's 1996 Annual Report to Shareholders.  
The same accounting policies are followed for interim reporting  
purposes. 
 
This quarterly report should be read in conjunction with the  
Registrants' 1996 Annual Report on Form 10-K, which included the  
financial statements and notes thereto, and their Quarterly Reports on  
Form 10-Q for the three months ended March 31, 1997 and the six months  
ended June 30, 1997. The "Management's Discussion and Analysis of  
Financial Condition and Results of Operations" included in the  
Registrants' 1996 Annual Report to Shareholders was incorporated by  
reference into the Registrants' 1996 Annual Report on Form 10-K and  
filed as an exhibit thereto. 
 
2.	BUSINESS COMBINATION 
 
In October 1996 Enova and Pacific Enterprises Inc., parent company of  
Southern California Gas Company, announced an agreement to combine the  
two companies. Additional information on the proposed business  
combination is discussed on page 13 in "Management's Discussion and  
Analysis of Financial Condition and Results of Operations." 
 
3.	MATERIAL CONTINGENCIES 
 
INDUSTRY RESTRUCTURING -- CALIFORNIA PUBLIC UTILITIES COMMISSION 
 
In May 1997 the CPUC issued a decision stating that direct access will  
be available to all electric customers on January 1, 1998. The CPUC  
concluded that there are no technical or operational barriers to justify  
limiting direct access availability once electric restructuring  
commences. The decision gave power companies permission to begin direct  
marketing on July 1, 1997 and set November 1, 1997 as the date customers  
can begin choosing electricity providers.   
 
As discussed in Note 10 in the notes to consolidated financial  
statements of the 1996 Annual Report to Shareholders, electric utilities  
 
                                    7 
 
<PAGE> 
 
will be allowed a reasonable opportunity to recover their stranded costs  
through December 31, 2001. SDG&E estimated its transition costs totaled  
$2 billion (net present value in 1998 dollars). These identified  
transition costs have been audited by independent auditors selected by  
the CPUC. The auditors found SDG&E's recorded and forecasted cost  
estimates reasonable and have identified $73 million as requiring  
further action before being deemed a recoverable CTC. Through September  
30, 1997 SDG&E has recovered transition costs of $0.2 billion for  
nuclear generation and $0.1 billion for non-nuclear generation.  
Additionally, overcollections of $0.1 billion recorded in the Energy  
Cost Adjustment Clause and Electric Revenue Adjustment Mechanism  
balancing accounts as of December 31, 1996, have been applied to  
transition cost recovery, leaving approximately $1.6 billion for future  
CTC recovery. Included therein is $0.4 billion for post-2001 purchased- 
power-contract payments that may be recovered after 2001, subject to an  
annual reasonableness review. During the 1997-2001 period recovery of  
transition costs is limited by the rate cap (discussed below). 
 
In October 1997 a CPUC Administrative Law Judge issued a proposed  
decision allowing SDG&E the opportunity to recover of all of its sunk  
non-nuclear generation costs, with the exception of $39 million in fixed  
costs relating to gas transportation to power plants. An additional $34  
million is still pending final determination. In any event, SDG&E is  
confident that the costs excluded from CTC recovery can be recovered  
through other CPUC proceedings. The decision does not include generation  
plant additions made after December 20, 1995. Instead, each utility must  
file a separate application seeking a reasonableness review thereof. In  
October 1997 SDG&E filed an application with the CPUC seeking the  
recovery of $13 million in 1996 capital additions for the Encina and  
South Bay power plants. A final CPUC decision is expected in the first  
half of 1998. 
 
California's electric restructuring law (AB 1890) requires a 10-percent  
reduction of residential and small commercial customers' rates beginning  
in January 1998. AB 1890 provides for the issuance of rate-reduction  
bonds by an agency of the State of California to enable the investor- 
owned utilities (IOUs) to achieve this rate reduction. In September 1997  
the CPUC approved SDG&E's application for the issuance of up to $800  
million in rate-reduction bonds. SDG&E estimated that it would need $710  
million of bond proceeds to enable it to effect a sufficient decrease in  
rate base to finance the desired rate reduction. These bonds will be  
repaid over 10 years by SDG&E's residential and small commercial  
customers via a charge on their electric bills. In September 1997 SDG&E  
and the other California IOUs received a favorable Internal Revenue  
Service ruling on the tax treatment of the rate-reduction bonds. The  
ruling states that the bond proceeds are taxable over the life of bonds  
rather than at the time of issuance. The Securities and Exchange  
Commission (SEC) has ruled that these bonds should be reflected on the  
utilities' balance sheets as debt, even though the bonds would not be  
secured by utility assets, but rather by the revenue streams collected  
from the charge to residential and small commercial customers. SDG&E has  
formed a subsidiary, SDG&E Funding LLC., to facilitate the issuance of  
the rate-reduction bonds. In exchange for the proceeds from the bond  
 
                                    8 
 
<PAGE> 
 
issue, SDG&E will sell to SDG&E Funding its rights to the revenue  
streams. 
 
AB 1890 includes a rate freeze for all customers. Until the earlier of  
March 31, 2002, or when transition cost recovery is complete, SDG&E's  
system average rate will be frozen at June 10, 1996 levels (9.64 cents  
per kilowatt-hour (kwh)), except for the impact of fuel cost changes and  
the 10-percent rate reduction. In any event, rates cannot be increased  
above 9.985 cents per kwh. During the first quarter of 1997, rising  
natural-gas prices resulted in electric rate increases that raised  
SDG&E's system average rate from 9.64 cents per kwh to 9.985 cents per  
kwh. SDG&E's ability to recover its stranded costs is dependent on its  
total revenues under the rate cap exceeding normal cost-of-service  
revenues during the transition period by at least the amount of the  
stranded costs. During the transition period SDG&E will not earn awards  
from special programs, such as demand-side management, unless total  
revenues are also adequate to cover the awards. Fuel-price volatility is  
the most significant variable in the ability of SDG&E to recover its  
stranded costs and program awards.  
 
SDG&E had been accounting for the economic effects of regulation on all  
of its utility operations in accordance with SFAS No. 71, "Accounting  
for the Effects of Certain Types of Regulation," as described in the  
notes to consolidated financial statements in the 1996 Annual Report to  
Shareholders. The SEC had indicated a concern that the California  
investor-owned utilities may not meet the criteria of SFAS No. 71 with  
respect to their electric generation net regulatory assets. SDG&E has  
ceased the application of SFAS No. 71, in accordance with the conclusion  
of the Emerging Issues Task Force of the Financial Accounting Standards  
Board that the discontinuance of SFAS No. 71 applied to the utilities'  
generation business would not result in a write-off of their net  
regulatory assets, since the CPUC has approved the recovery of these  
assets by the distribution portion of their business, subject to the  
rate cap. 
 
INDUSTRY RESTRUCTURING -- FEDERAL ENERGY REGULATORY COMMISSION 
 
The IOUs have jointly filed plans with the FERC, detailing the structure  
of California's independent system operator (ISO) that will manage the  
state's transmission grid and outlining the development of a power  
exchange to act as a spot market for trading electricity. The FERC has  
conditionally approved joint recommendations from the IOUs on the  
creation of an ISO and power exchange, but has required further  
information from the utilities as to their structure and operation. In  
October 1997 the power exchange and the ISO filed their proposed rate  
structures with the FERC. The ISO filing proposes that the California  
IOUs pay an up-front restructuring charge and an administrative usage  
charge for each megawatt-hour of volume transacted. SDG&E's share of the  
restructuring charge would be $8.5 million. The IOUs have jointly  
guaranteed $250 million of commercial loans to the ISO and power  
exchange for their development and initial start-up. SDG&E's share of  
the guarantee is $25 million. The IOUs have filed with the CPUC to  
increase this amount to $300 million, increasing SDG&E's share to $30  
million. 
                                    9 
 
<PAGE> 
 
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 $2.75 billion of property  
damage and decontamination liability. Coverage is also provided for the  
cost of replacement power, which includes indemnity payments for up to  
three years, after a waiting period of 17 weeks. Coverage is provided  
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 $5.1 million. 
 
CANADIAN GAS 
 
SDG&E has long-term pipeline capacity commitments related to its  
contracts for Canadian natural-gas supplies. These contracts are  
currently in litigation, as described in "Legal Proceedings" in the 1996  
Annual Report on Form 10-K beginning on page 19. If the supply of  
Canadian natural-gas to SDG&E is not resumed to a level approximating  
the related committed long-term pipeline capacity, SDG&E intends to  
continue using the capacity in other ways, including the release of a  
portion of this capacity to third parties.  
 
                                    10 
 
 
<PAGE> 
ITEM 2. 
           ENOVA CORPORATION/SAN DIEGO GAS & ELECTRIC COMPANY 
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
 
 
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS 
 
This Quarterly Report on Form 10-Q includes forward-looking statements  
within the definition of Section 27A of the Securities Act of 1933 and  
Section 21E of the Securities Exchange Act of 1934. When used in  
"Management's Discussion and Analysis of Financial Condition and Results  
of Operations," the words "estimates", "expects", "anticipates", "plans"  
and similar expressions are intended to identify forward-looking  
statements that involve risks and uncertainties. 
 
Although the Registrants believe that their expectations are based on  
reasonable assumptions, they can give no assurance that those  
expectations will be realized. Important factors that could cause actual  
results to differ materially from those in the forward-looking  
statements herein include political developments affecting state and  
federal regulatory agencies, the pace and substance of electric industry  
deregulation in California and in the United States, the ability to  
create a market for rate-reduction bonds, the ability to effect a  
coordinated and orderly implementation of both state legislation and the  
CPUC's restructuring regulations, the consummation and timing of the  
proposed business combination of Enova and Pacific Enterprises, the  
level of sales of electricity, international political developments, and  
the timing and extent of changes in interest rates and prices for  
natural gas and electricity.  
 
RESULTS OF OPERATIONS: 
 
EARNINGS  
 
Earnings per common share for the quarter ended September 30, 1997 were  
$0.57 compared to $0.54 for the corresponding period in 1996. Earnings  
per common share for the nine months ended September 30, 1997 were $1.49  
compared to $1.51 for 1996. The 1997 increase in earnings for the  
quarter is primarily due to previously announced changes related to the  
elimination of electric balancing accounts, partially offset by expenses  
relating to the proposed business combination with Pacific Enterprises.  
Although the elimination of the balancing accounts is not expected to  
have a significant effect for any full year, quarterly earnings will  
fluctuate significantly, depending on monthly or seasonal changes in  
electric sales and fuel prices. In general, earnings are expected to be  
higher in high sales-volume months and lower in others. The 1997  
decrease in earnings for the nine months is primarily due to the  
balancing accounts' elimination, partially offset by improved earnings  
at Enova's non-regulated subsidiaries. 
 
OPERATING REVENUES 
 
For the quarter ended September 30, 1997 electric revenues increased  
from the corresponding period in 1996 primarily due to increased sales  
volume due to weather. During the quarter SDG&E reached new all-time  
electric system peaks on three occasions, resulting in a new peak demand  
 
                                    11 
 
<PAGE> 
 
of 3,668 megawatts reached on September 4, 1997. Prior to 1997 the  
record for electricity demand was 3,355 megawatts on August 17, 1992.  
Electric revenues increased for the nine months ended September 30, 1997  
due to the increased sales volume and the accelerated recovery of San  
Onofre Nuclear Generating Station Units 2 and 3 which commenced in April  
1996. Additional information concerning the recovery of SONGS Units 2  
and 3 is provided in "Management's Discussion and Analysis of Financial  
Condition and Results of Operations" in the 1996 Annual Report to  
Shareholders on page 27. Gas revenues increased for the quarter  
primarily due to an increase in natural-gas sales volume. Gas revenues  
increased for the nine months primarily due to an increase in sales  
volume and higher natural-gas prices during the first quarter of 1997. 
 
OPERATING EXPENSES  
 
For the nine months ended September 30, 1997 electric fuel expense  
increased from the corresponding period in 1996 primarily due to  
increases in natural-gas-fired generation and natural-gas prices, offset  
by a decrease in nuclear generation as a result of SONGS Units 2 and 3  
refuelings during the first half of 1997. The increase in purchased- 
power expense for the quarter and the nine months is primarily due to  
the higher sales volume. The lower nuclear generation availability  
resulting from the SONGS refuelings also contributed to the increase in  
purchased-power expense for the nine months. Gas purchased for resale  
increased for the quarter due to the increase in sales volume. Gas  
purchased for resale increased for the nine months due to the increases  
in sales volume and in natural-gas prices in the first quarter of 1997.  
 
In addition, for the nine months ended September 30, 1997 maintenance  
expense increased due to the additional costs incurred during the SONGS  
Units 2 and 3 refuelings. Depreciation and decommissioning expense  
increased for the nine months due to the accelerated recovery of SONGS  
Units 2 and 3. The decrease in general and administrative expense for  
the quarter and the nine months is primarily due to higher 1996 costs  
for customer service, partially offset by the expenses relating to the  
business combination with Pacific Enterprises. The increase in other  
expense for the quarter and the nine months reflects an increase in  
electric transmission expense associated with the higher sales volume.  
Income-tax expense decreased for the nine months due to the decrease in  
operating income and the increase in income-tax benefits related to  
Enova Financial's increased investments in affordable-housing projects. 
 
OTHER INCOME 
 
Other income decreased for the quarter and the nine months ended  
September 30, 1997 due to losses associated with the start-up of Energy  
Pacific, the joint venture of Enova and Pacific Enterprises to market  
integrated energy and energy-related products and services. For the nine  
months, these losses were partially offset by the first quarter 1997 tax  
benefits on nonoperating income relating to the 1995 sale of Wahlco  
Environmental Systems, Inc. Additional information concerning the sale  
 
                                   12 
 
<PAGE> 
 
of Wahlco is provided in Note 3 in the notes to consolidated financial  
statements of the 1996 Annual Report to Shareholders. 
 
BUSINESS COMBINATION 
 
Consummation of the proposed business combination of Enova and Pacific  
Enterprises (PE) is conditional upon the approvals of the California  
Public Utilities Commission (CPUC) and various other regulatory bodies.  
In June 1997 the CPUC revised its procedural schedule for the business  
combination after delaying until July 1997 its final decision on the  
Performance-Based Ratemaking (PBR) proceeding for Southern California  
Gas Company (SoCalGas), PE's principal subsidiary. Under the new  
timeline, a CPUC Administrative Law Judge is expected to issue a  
proposed decision on the combination in late January 1998, with a CPUC  
decision scheduled for March 1998. The CPUC evidentiary hearings on the  
business combination concluded in October 1997. 
 
In July 1997 the CPUC issued its decision on SoCalGas's PBR proceeding.  
The decision adopts a rate-setting mechanism for SoCalGas that provides  
incentives for cost control and efficiency improvement, including  
comparisons of productivity and other factors against benchmarks based  
on industry performance. SoCalGas had been operating under traditional  
"cost of service" regulation. The decision provides for, among other  
things, a net rate reduction of $160 million.  
 
In August 1997 Enova and PE, after having reviewed the totality of  
circumstances surrounding the business combination, announced that both  
companies remain committed to its successful completion. Enova and PE  
further agreed to extend the deadline by which they must complete the  
combination from April 30, 1998 to September 1, 1998. 
 
In September 1997 the CPUC staff issued a final Negative Declaration,  
concluding that the business combination will not result in any  
activities or operational changes that may cause a significant adverse  
effect on the environment. 
 
In June 1997 the Federal Energy Regulatory Commission (FERC) approved  
the proposed business combination subject to conditions that the  
combined company will not unfairly use any potential market power  
regarding natural-gas transportation to gas-fired electric-generation  
plants. In its decision, the FERC acknowledged that this issue is  
clearly within the jurisdiction of the CPUC and the conditions will be  
considered during the CPUC review process. Various parties have since  
filed a joint petition with the FERC asking it for a rehearing. 
 
In August 1997 the Nuclear Regulatory Commission (NRC) approved the  
business combination, ruling that the creation of the new company will  
not affect SDG&E's qualifications to hold the license for its 20-percent  
interest in the San Onofre Nuclear Generating Station (SONGS). The NRC's  
approval was required since the business combination would result in an  
indirect transfer of control of the SONGS' license to the new company. 
 
                                    13 
 
<PAGE> 
 
In August 1997 Enova and PE announced an agreement to jointly acquire  
AIG Trading Corporation, a leading natural-gas and power-marketing firm  
based in Greenwich, Connecticut, for $190 million. Enova and PE will  
also commit up to $35 million for certain long-term incentive  
compensation and retention arrangements. AIG will become a subsidiary of  
the new company formed by the business combination. The acquisition,  
subject to various federal regulatory approvals, is expected to be  
completed by the end of 1997. 
 
Remaining regulatory approvals and the commencement of combined  
operations are expected by the summer of 1998. Earnings of the combined  
company could be negatively impacted in 1998, and to a lesser extent in  
subsequent years by delays in achieving cost savings from the  
combination caused by the later-than-expected effective combination  
date, potential CPUC limitations on affiliate transactions by all  
California energy utilities (see below), the possibility that the CPUC  
might not permit recovery of certain costs of the combination and might  
reduce the period or percentage for shareholder participation in the  
related cost savings, and slower-than-anticipated growth in revenues  
from Energy Pacific. 
 
REGULATORY MATTERS: 
 
CALIFORNIA PUBLIC UTILITIES COMMISSION'S 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. In addition, in September 1996 California  
Governor Wilson signed into law a bill restructuring the industry. See  
additional discussion of industry restructuring in Note 3 of the notes  
to financial statements.  
 
AFFILIATE TRANSACTION GUIDELINES 
 
On October 31, 1997 the CPUC issued the ALJ's draft decision on  
guidelines for transactions between a utility that it regulates and the  
utility's affiliates that it does not regulate. If the final decision of  
the CPUC is substantially the same as the draft decision, it would limit  
the ability of Enova/SDG&E and the other California energy utilities  
(and the unregulated affiliates in each case) to operate as totally  
cohesive units by, among other things, restricting the sharing of  
information, facilities, etc., which would reduce opportunities for  
efficiencies and impact marketing opportunities for the affiliates. In  
addition, an alternate draft decision sponsored by two of the CPUC's  
five commissioners would add additional restrictions, such as  
prohibiting the energy utilities' affiliates from marketing in the  
respective utility's service territory for two years and banning the  
joint use of names and logos. 
 
                                   14 
<PAGE> 
 
As expected, guidelines on transactions between SDG&E and SoCal Gas (see  
"Business Combinations" above) were not addressed; they were considered  
in the business combination proceedings and will be addressed in the  
decision that results therefrom. 
 
CONSUMER EDUCATION 
 
In August 1997 the CPUC authorized $89 million in rate recovery to fund  
California's Consumer Education Plan (CEP). SDG&E's share of this amount  
is approximately $9 million. The CEP's objective will be to provide  
California electric customers information to help them compare and  
choose among electric products and services in a competitive  
environment. The CEP's program began in September 1997 and is expected  
to end by May 31, 1998. In a draft decision, the CPUC rejected SDG&E's  
request for rate recovery of a $1.4 million SDG&E-specific CEP, which  
was to be an enhancement to the statewide program. The CPUC decision  
does allow SDG&E to recover certain customer-service costs associated  
with its additional customer inquiries concerning industry  
restructuring. 
 
PUBLIC POLICY PROGRAMS 
 
The CPUC has established a new administrative structure and initial  
funding levels to manage demand-side management, renewable-energy, low- 
income assistance, and research and development (R&D) programs beginning  
in January 1998. The CPUC has formed independent boards to oversee a  
competitive bidding process to administer demand-side management and  
low-income assistance programs. In an interim decision, the CPUC has  
required that the California IOUs transfer their administration of  
demand-side management and low-income programs to these independent  
boards by October 1998 and January 1999, respectively. Until the  
transition to a fully competitive energy-services market is complete,  
customers will be required to provide the funding. For 1998 SDG&E will  
be funded $32 million and $12 million for demand-side management and  
renewables programs, respectively. Low-income assistance funding will  
remain at 1996 authorized levels. The California Energy Commission will  
be allocated most of the $63 million authorized to administer the R&D  
programs, of which SDG&E will be funded $4 million. SDG&E cannot predict  
the impact on future earnings of these programs when the transition to  
the competitive markets is complete. 
 
ELECTRIC BALANCING ACCOUNTS 
 
In October 1997 the CPUC issued a decision eliminating the Electric Cost  
Adjustment Clause (ECAC) and the Electric Revenue Adjustment Mechanism  
(ERAM) balancing accounts effective December 31, 1997. The balances in  
these accounts will be transferred to the interim transition cost  
balancing account, subject to a reasonableness review. The decision  
eliminates further ECAC proceedings for generation costs incurred  
beginning in January 1998. Additionally, the decision eliminates all  
other electric balancing accounts except for those associated with the  
 
                                   15 
<PAGE> 
 
administration of public purpose funds (described above). For the nine  
months ended September 30, 1997 SDG&E had charged against earnings its  
undercollection in the ECAC balancing account under the expectation that  
this balance would continue to exist for the remainder of 1997 and could  
not be netted with its ERAM overcollection. Because the CPUC decision  
allows for the transfer of both accounts to the transition cost  
balancing account, SDG&E will record a favorable adjustment of $9  
million, after income taxes, in its fourth-quarter 1997 earnings. 
 
PERFORMANCE-BASED RATEMAKING (PBR) 
 
Base Rates:  In August 1997 SDG&E filed an advice letter with the CPUC  
to revise its 1996 Performance-Based Ratemaking Base-Rate Annual Report  
to reflect new data received from the Edison Electric Institute (EEI)  
relating to the national-rate comparison. The EEI revised its 1996  
national average electric rate from 6.95 to 7.12 cents per kwh, causing  
SDG&E's calculation of the PBR price-performance benchmark to change  
from a $4 million penalty to a $3 million reward. This change also  
allows SDG&E to eliminate the $1.4 million two-way conditionality  
penalty that was originally filed for exceeding the national-rate  
benchmark. The effect of the change would result in a total PBR reward  
of $6.5 million as compared to a $1.9 million penalty that was  
previously reported. A CPUC decision is expected in December 1997. The  
CPUC has eliminated the price-performance indicator from SDG&E's Base- 
Rate PBR effective in 1997 since the electric-rate freeze renders this  
indicator meaningless. The five-year PBR mechanism, which began in 1994,  
is in its mid-course review by the CPUC.  
 
A CPUC Administrative Law Judge has ruled that SDG&E's requirement to  
file a 1999 General Rate Case should be eliminated and replaced by a  
1999 Cost of Service study in its new PBR application due in December  
1997. SDG&E's ability to control its costs within the limits of the  
revenues authorized by the study will impact future earnings. 
 
1998 Revenues:  In October 1997 SDG&E filed an advice letter with the  
CPUC to request an update to its electric distribution and gas base-rate  
revenue requirements to reflect the PBR base-rate revenue escalation for  
1998. The escalation would increase SDG&E's authorized electric  
distribution revenues by $33 million and its gas base-rate amount by $7  
million. The increase would not affect rates and, therefore, would  
reduce the amount available to recover stranded costs (see Note 3 of the  
notes to financial statements). A CPUC decision is expected in the  
fourth quarter of 1997. 
 
Natural Gas:  In September 1997 SDG&E filed with the CPUC its  
application for a permanent Gas Procurement PBR mechanism. The filing  
proposes a mechanism structured around a commodity price cap plus an  
incremental adjustment, designed to recover transportation costs to the  
California border. 
 
                                    16 
<PAGE> 
 
COST OF CAPITAL 
 
In October 1997 SDG&E filed with the CPUC its 1998 Market Indexed  
Capital Adjustment Mechanism (MICAM). MICAM, approved by the CPUC in  
1996, adjusts SDG&E's authorized cost of capital based on changes in  
interest rates. For the current MICAM review, interest-rate movements  
over the past 12 months have not triggered the mechanism to change,  
resulting in SDG&E's 1998 cost of capital remaining at the 1997  
authorized levels of 11.60 percent for the rate of return on equity and  
9.35 percent for the rate of return on rate base. Excluded from this are  
the rates of return on nuclear and non-nuclear generating assets  
(recovered as transition costs), which are authorized at rates of 7.14  
percent and 6.75 percent, respectively. 
 
ELECTRIC GENERATION 
 
GENERAL 
 
SDG&E is considering the divestiture of its non-nuclear generating  
assets, which would allow it to concentrate on providing electric  
distribution and other energy services in a deregulated market. Although  
the other California IOUs are required by the CPUC to divest themselves  
of at least 50 percent of their fossil-fueled power plants as part of  
industry restructuring, SDG&E is not under the same mandate. However,  
SDG&E's principal fossil plants (Encina and South Bay) may not be as  
competitive as newer facilities in a deregulated market. The FERC has  
ruled that it has jurisdiction over all electricity sales into the  
California Power Exchange, meaning that the buyers of divested  
California power plants would qualify as wholesale power generators. The  
FERC's ruling is expected to increase the interest in the California  
utilities' generating plants. 
 
SAN ONOFRE NUCLEAR GENERATING STATION UNITS 2 & 3 
 
In October 1997 the California Coastal Commission (CCC) staff approved  
the SONGS owners plan to provide 150 acres of wetlands restoration, 150  
acres of kelp reef and other mitigation that was ordered by the CCC in  
April 1997. A final CCC decision is expected in the fourth quarter of  
1997. SDG&E's share of the cost is estimated to be $23 million. 
 
SONGS Units 2 and 3 are scheduled for 30-day mid-cycle outages for  
inspections of their steam generators in January 1998 and March 1998,  
respectively. These inspections were prompted when it was discovered in  
a routine inspection during last quarter's refueling of Unit 3 that the  
thickness of the heat transfer tubes' structural supports was  
significantly reduced, apparently due to erosion. 
 
LIQUIDITY AND CAPITAL RESOURCES: 
 
Utility operations continue to be a major source of liquidity. In  
addition, financing needs are met primarily through the issuance of  
 
                                   17 
<PAGE> 
 
short-term and long-term debt, and common and preferred stock. These  
capital resources are expected to remain available. SDG&E's cash  
requirements include plant construction and other capital expenditures.  
Nonutility cash requirements include capital expenditures associated  
with subsidiary activities related to the plans to distribute natural  
gas in Mexico and the northeast United States; new products; 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.  
 
OPERATING ACTIVITIES 
 
Besides the effects of other items discussed in this report, there were  
other significant changes in cash flows from operations for the nine  
months ended September 30, 1997 compared to the corresponding 1996  
period. Cash flows from accounts and notes receivable decreased due to  
an increase in accounts receivable at September 30, 1997 resulting from  
an increase in SDG&E's sales in September 1997. Regulatory balancing  
accounts increased due to overcollections in the ERAM and gas fixed cost  
accounts as a result of higher-than-authorized sales volumes. As  
discussed above, the December 31, 1996 ERAM balancing account has been  
applied to the recovery of transition costs and the new overcollected  
balance at December 31, 1997 will be similarly applied. 
 
FINANCING ACTIVITIES  
 
Enova Corporation anticipates that it will require only minimal amounts  
of short-term debt in 1997, primarily for utility operations. Enova does  
not expect to issue stock or long-term debt in 1997, other than for  
SDG&E-related refinancings. In conjunction with electric industry  
restructuring, rate-reduction bonds are expected to be issued by an  
agency of the State of California. Additional information concerning  
these bonds is provided in Note 3 of the notes to financial statements,  
above. 
 
During the first nine months of 1997 SDG&E and Califia repaid long-term  
debt of $87 million and $3 million, respectively. During that same  
period Enova Financial repaid $31 million and issued $101 million of  
long-term debt. 
 
SDG&E had short-term bank lines of $50 million and long-term bank lines  
of $380 million at September 30, 1997. Commitment fees are paid on the  
unused portion of the lines. There are no requirements for compensating  
balances. 
 
In March 1997 Enova Corporation repurchased three million shares of its  
outstanding common stock. 
 
Quarterly cash dividends of $0.39 per share were declared for the first  
three quarters of 1997 and for each quarter during the year ended  
December 31, 1996. The dividend payout ratio for the twelve months ended  
 
                                    18 
<PAGE> 
 
September 30, 1997 and years ended December 31, 1996, 1995, 1994, 1993  
and 1992 were 80 percent, 79 percent, 80 percent, 130 percent, 82  
percent and 81 percent, respectively. The increase in the payout ratio  
for the year ended December 31, 1994 was due to the writedowns recorded  
during 1994. For additional information regarding the writedowns, see  
Enova Corporation's 1996 Annual Report on Form 10-K. 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 anticipated level.  
 
SDG&E maintains its capital structure so as to obtain long-term  
financing at the lowest possible 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.      
 
                                                                   Sept. 30, 
                                  1992   1993   1994   1995   1996   1997       
                -----------------------------------------------------------  
                Common equity      47%    47%    48%    49%    50%    50%    
                Preferred stock     5      4      4      4      4      4    
                Debt and leases    48     49     48     47     46     46    
                -----------------------------------------------------------  
                Total             100%   100%   100%   100%   100%   100%  
                ----------------------------------------------------------- 
 
The following table lists key financial ratios for SDG&E. 
 
                                         Twelve                     Year 
                                      months ended                  ended 
                                      September 30,              December 31, 
                                          1997                       1996 
                                   -----------------           ------------- 
Pretax interest coverage                 5.3 X                       5.2 X 
Internal cash generation                 153 %                       127 % 
Construction expenditures as  
   a percent of capitalization           7.9 %                       7.4 % 
 
DERIVATIVES: Registrants use derivative financial instruments to reduce  
exposure to fluctuations in interest rates, foreign currency exchange  
rates and natural-gas prices. These financial instruments are with major  
investment firms and expose Registrants to market and credit risks if  
the counterparties fail to perform. These risks may at times be  
concentrated with certain counterparties, although counterparty non- 
performance is not anticipated. Registrants do not use derivatives for  
trading or speculative purposes. 
 
At September 30, 1997 SDG&E had one interest-rate swap agreement: a  
floating-to-fixed-rate swap maturing in 2002 associated with $45 million  
of variable-rate bonds. 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. 
                                    19 
 
<PAGE> 
 
At September 30, 1997 Enova had various open natural-gas futures  
positions to hedge against the volatility of natural-gas prices. The  
total amount of these open positions was immaterial. There were no other  
derivative financial instruments outstanding at September 30, 1997. 
 
INVESTING ACTIVITIES  
 
Cash used in investing activities for the nine months ended September  
30, 1997 included utility construction expenditures and payments to the  
SONGS decommissioning trust. Utility construction expenditures,  
excluding nuclear fuel and the allowance for equity funds used during  
construction, were $209 million in 1996 and are estimated to be $218  
million in 1997. Enova 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, SDG&E's level of expenditures in the next few years will depend  
heavily on the impacts of industry restructuring, and on the timing of  
expenditures to comply with air-emission reduction and other  
environmental requirements. Payments to the nuclear decommissioning  
trust are expected to continue until SONGS is decommissioned. 
 
In April 1997 Enova invested $21 million in Energy Pacific. Enova's  
level of non-utility expenditures in the next few years will depend  
primarily on the activities of its subsidiaries other than SDG&E,  
including Enova International's plan to develop natural-gas distribution  
systems in Mexico. In July 1997 Enova International and its partners,  
Pacific Enterprises International and Proxima S.A. de C.V., delivered  
its first supply of natural gas to Baja California. The Mexican company  
formed by the three partners, Distribuidora de Gas Natural de Mexicali,  
will invest up to $25 million during the first five years of the 30-year  
license period to supply natural gas to the region. In March 1997 the  
Mexican Energy Regulatory Commission awarded the partners its second  
natural-gas privatization license in Mexico, allowing the partnership to  
build and operate a natural-gas distribution system in Chihuahua. The  
partnership plans to invest approximately $50 million in the project and  
serve at least 50,000 customers in the first five years of operation. In  
September 1997 Energy Pacific formed a joint venture with Bangor Hydro  
to build, own and operate a $40 million natural-gas distribution system  
in Bangor, Maine. The joint venture plans to file with the Maine Public  
Utilities Commission to provide natural-gas service for the first time  
to residential, commercial and industrial customers in the Bangor area.  
Finally, as discussed in Note 2 of the notes to financial statements,  
Enova has agreed to provide 50 percent of the total funding ($190  
million plus additional incentive commitments) to acquire AIG Trading  
Corporation. 
                                   20 
 
 
<PAGE> 
PART II - OTHER INFORMATION 
 
 
ITEM 1.	LEGAL PROCEEDINGS 
 
Other than as discussed below, there have been no significant subsequent  
developments in litigation proceedings that were outstanding at December  
31, 1996, nor have there been any significant new litigation proceedings  
since that date. 
 
SONGS Pricing 
 
Southern California Edison (Edison) and SDG&E are co-owners of the San  
Onofre Nuclear Generating Station. SDG&E owns a 20-percent interest. In  
May 1997 Ayad Rubaii, an employee of Edison, filed a complaint under the  
federal False Claims Act against Edison and SDG&E in United States  
District Court for the Southern District of California. The complaint  
was unsealed in July 1997 and served upon Edison and SDG&E in September  
1997. In the complaint, the plaintiff alleges that Edison and SDG&E have  
overcharged customers since early 1996 for energy produced at SONGS  
under a pricing mechanism approved by the CPUC and codified by the State  
Legislature in AB 1890. The plaintiff alleges that he filed the lawsuit  
on behalf of the United States Government. The Department of Justice has  
elected not to intervene in the lawsuit, but could elect to do so in the  
future if new information becomes available. The plaintiff is claiming  
damages of $383 million from Edison and $102 million from SDG&E. Under  
the False Claims Act, any damages would be trebled and penalties could  
be assessed. SDG&E intends to vigorously defend this action. SDG&E  
cannot predict the ultimate outcome. 
 
Employee Benefits 
 
In September 1997 two individual plaintiffs filed a complaint (Mascari  
v. SDG&E) in United States District Court for the Southern District of  
California on behalf of themselves and a purported class consisting of  
temporary employees and independent contractors employed at SDG&E.  
Plaintiffs allege that they are and have been common law employees of  
SDG&E and, as such, under recent Ninth Circuit decisional law, are and  
have been entitled to participate in SDG&E's health and welfare, defined  
benefit and defined contribution plans. They seek to recover past and  
future benefits under each plan. In October 1997 SDG&E filed its answer  
to the complaint, denying that the plaintiffs were or are entitled to  
any benefits and denying the appropriateness of a class. SDG&E intends  
to vigorously defend this action. SDG&E cannot predict the ultimate  
outcome. 
 
Public Service Company of New Mexico 
 
As described in the "Legal Proceedings -- Public Service of New Mexico"  
section on page 19 of the Registrants' 1996 Annual Report on Form 10-K,  
SDG&E has filed two previous complaints with the FERC against Public  
Service of New Mexico (PNM). In August 1997 SDG&E filed a third  
complaint against PNM alleging that the demand rate paid by SDG&E under  
the PNM power-purchase agreement during 1996 was unjust and  
unreasonable, resulting in an overcharge of up to $9.6 million during  
this period.  
                                    21 
 
<PAGE> 
 
SONGS Personal Injury Litigation  
 
As described in the "Legal Proceedings -- SONGS Personal Injury  
Litigation" section on page 21 of the Registrants' 1996 Annual Report on  
Form 10-K, the McLandrich wrongful death case is currently on appeal.  
The Ninth Circuit Court of Appeals rejected SDG&E's petition for  
permission to challenge the lower court's determination that SDG&E is  
not an employer and thus may not avail itself of the workers'  
compensation exclusivity rule. McLandrich, Metler and Knapp are stayed  
pending the outcome of a plaintiff appeal in McLandrich, challenging the  
District Court's ruling that Southern California Edison can avail itself  
to the workers' compensation exclusivity rule. 
 
 
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<PAGE> 
 
 
ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K 
 
(a)	Exhibits  
 
	Exhibit 12 - Computation of ratios 
 
	12.1	Computation of Ratio of Earnings to Combined Fixed Charges 
		and Preferred Stock Dividends as required under SDG&E's 
		August 1993 registration of 5,000,000 shares of Preference 
		Stock (Cumulative). 
 
	Exhibit 27 - Financial Data Schedules 
 
	27.1	Financial Data Schedule for the nine months ended September  
		30, 1997 for Enova Corporation. 
 
	27.2	Financial Data Schedule for the nine months ended September  
		30, 1997 for SDG&E. 
 
(b)	Reports on Form 8-K 
 
	A Current Report on Form 8-K was filed on August 12, 1997  
	announcing the joint acquisition of AIG Trading Corp. by Enova  
	Corporation and Pacific Enterprises (PE), and the amendment to  
	the Enova and PE merger agreement extending the completion  
	deadline from April 30, 1998 to September 1, 1998. 
 
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<PAGE> 
 
                                SIGNATURE 
 
Pursuant to the requirement of the Securities Exchange Act of 1934, the  
registrant has duly caused this quarterly report to be signed on its  
behalf by the undersigned thereunto duly authorized. 
 
	                                      					ENOVA CORPORATION 
 
	                                      					SAN DIEGO GAS & ELECTRIC COMPANY 
	                                                       							(Registrants) 
 
 
 
Date: November 4, 1997             	By:        /s/ F. H. Ault
                                        ---------------------------------- 
                                   							      (Signature) 
 
	                             					             F. H. AULT 
                                        Vice President and Controller 
 
 
 
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