SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C.  20549
                   -----------------------------
                             FORM 10-K

                 FOR ANNUAL AND TRANSITION REPORTS
              PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION 
I(1)(a) AND  (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH 
THE REDUCED DISCLOSURE FORMAT.

(MARK ONE)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998.

                                 OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM 
___________ TO _____________

                  COMMISSION FILE NUMBER 333-30761

        CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
                   SPECIAL PURPOSE TRUST SDG&E-1
                    (Issuer of the Certificates)

                         SDG&E FUNDING LLC
(Exact name of registrant as specified in its Certificate of Formation)
                                        
DELAWARE                                               95-1184800
-----------------------------------------------------------------------
(State or other jurisdiction of                      (I.R.S. Employer
incorporation or organization)                      Identification No.)

101 ASH STREET, ROOM 111,
SAN DIEGO, CALIFORNIA                                     92101
-----------------------------------------------------------------------
(Address of principal executive offices)               (Zip Code)

Registrant's telephone number, including area code:  (619) 696-2328

Securities Registered Pursuant to Section 12(b) of the Act:  None

Securities Registered Pursuant to Section 12(g) of the Act:

California Infrastructure and Economic Development Bank Special Purpose 
Trust SDG&E-1 Rate Reduction Certificates, Series 1997-1: Class A-1 
5.97% Certificates; Class A-2 6.04% Certificates; Class A-3 6.07% 
Certificates; Class A-4 6.15% Certificates; Class A-5 6.19% 
Certificates; Class A-6 6.31% Certificates; Class A-7 6.37% Certificates 
(maturing serially from 1998 to 2007, and underlying SDG&E Funding LLC 
Notes of the same respective classes)
-----------------------------------------------------------------------
                          (Title of Class)


 
Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 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 by check mark if disclosure of delinquent filers pursuant to 
Item 405 of Regulation S-K is not contained herein, and will not be 
contained, to the best of registrant's knowledge, in definitive proxy 
or information statements incorporated by reference in Part III of this 
Form 10-K or any amendment to this Form 10-K.  [ ]

The aggregate market value of the voting and non-voting common equity 
held by non-affiliates of the registrant as of February 28, 1999 was $0.

                DOCUMENTS INCORPORATED BY REFERENCE

Not applicable.



 

                               PART I

ITEM 1.  BUSINESS

          GENERAL

          SDG&E Funding LLC (the "Note Issuer") is a special-purpose, 
single-member limited liability company organized under the laws of the 
State of Delaware. San Diego Gas & Electric Company ("SDG&E"), as the 
sole member of the Note Issuer, owns all of the equity securities of 
the Note Issuer. The principal executive office of the Note Issuer is 
located at 101 Ash Street, Room 111, San Diego, California 92101. Its 
phone number is (619) 696-2328. The Note Issuer was organized in July 
1997 for the limited purposes of holding and servicing the Transition 
Property (as described below) and issuing notes secured by the 
Transition Property and other limited collateral and related 
activities, and is restricted by its organizational documents from 
engaging in other activities. The Note Issuer's organizational 
documents require it to operate in a manner such that it should not be 
consolidated in the bankruptcy estate of SDG&E in the event SDG&E 
becomes subject to such a proceeding.

          The only material business conducted by the Note Issuer has 
been the acquisition of Transition Property and the issuance on 
December 16, 1997 of $658,000,000 in principal amount of the SDG&E 
Funding LLC Notes, Series 1997-1, Class A-1 through Class A-7 (the 
"Notes"), with scheduled maturities ranging from one year to ten years 
and final maturities ranging from three to twelve years. The specific 
interest rate and maturity of each class of Notes is specified herein 
under Note C of the Notes to Financial Statements attached hereto. The 
Notes were issued pursuant to an Indenture between the Note Issuer and 
Bankers Trust Company of California, N.A., as trustee (the 
"Indenture"). The Note Issuer sold the Notes to the California 
Infrastructure and Economic Development Bank Special Purpose Trust 
SDG&E-1, a Delaware business trust (the "Trust"), which issued 
certificates corresponding to each class of Notes (the "Certificates") 
in a public offering.

          The Note Issuer has no employees. It has entered into a 
servicing agreement (the "Servicing Agreement") with SDG&E, pursuant to 
which SDG&E is required to service the Transition Property on behalf of 
the Note Issuer. In addition, the Note Issuer has entered into an 
Administrative Services Agreement with SDG&E pursuant to which SDG&E 
performs administrative and operational duties for the Note Issuer.

          TRANSITION PROPERTY

          The California Public Utilities Code (the "PU Code") provides 
for the creation of "Transition Property." A financing order dated 
September 3, 1997 (the "Financing Order") issued by the California 
Public Utilities Commission (the "CPUC"), together with the related 
Issuance Advice Letter, establishes, among other things, separate 
nonbypassable charges (the "FTA Charges") payable by residential 
electric customers and small commercial electric customers in an 
aggregate amount sufficient to repay in full the Certificates, fund the 
Overcollateralization Subaccount established under the Indenture and 
pay all related costs and fees. Under the PU Code and the Financing 
Order, the owner of the Transition Property is entitled to collect FTA 
Charges until such owner has received amounts sufficient to retire all 
outstanding series of Certificates and cover related fees and expenses 
and the Overcollateralization Amount described in the Financing Order. 
The Transition Property is a property right under California law that 
includes, without limitation, ownership of the FTA Charges and any 
adjustments thereto as described in the next paragraph.

          In order to enhance the likelihood that actual collections 
with respect to the Transition Property are neither more nor less than 
the amount necessary to amortize the Notes in accordance with their 
expected amortization schedules, pay all related fees and expenses, and 
fund certain accounts established pursuant to the Indenture as 
required, the Servicing Agreement requires SDG&E, as the servicer of 
the Transition Property (in such capacity, the "Servicer"), to seek, 
and the Financing Order and the PU Code require the CPUC to approve, 
periodic adjustments to the FTA Charges. Such adjustments will be based 
on actual collections with respect thereto and updated assumptions by 
the Servicer as to future usage of electricity by specified customers, 
future expenses relating to the Transition Property, the Notes and the 
Certificates, and the rate of delinquencies and write-offs. The 
Servicer anticipates filing for such adjustments annually beginning 
with calendar year 1999.

          THE TRUST

          The Trust was organized in November 1997 solely for the 
purpose of purchasing the Notes and issuing the Certificates. It will 
not conduct any other material business activities.

ITEM 2.  PROPERTIES

          The Note Issuer has no tangible properties.  Its primary 
asset is the Transition Property described above in "Item 1. Business." 
The Trust has no materially important physical properties.  Its primary 
assets are the Notes as described above in "Item 1. Business." 
Collections related to the Transition Property and the related payments 
on the Notes in 1998 are shown on the Statements of Cash Flows included 
in this Annual Report.

ITEM 3.  LEGAL PROCEEDINGS

          On October 6, 1997 The Utility Reform Network ("TURN"), a 
California consumer-advocacy group, filed an application for rehearing 
with the CPUC seeking rehearing of the Financing Order, alleging that 
the Financing Order was unlawful on various grounds. The CPUC denied 
the application for rehearing on October 22, 1997. On November 24, 
1997, TURN, Public Media Center, Consumers Union and Harvey Rosenfield 
filed a petition for writ of review of the Financing Order with the 
California Supreme Court. In connection with their petition for writ of 
review, TURN and the other petitioners requested that the California 
Supreme Court issue an interim writ or order suspending implementation 
of the Financing Order until such time as the Court resolved the 
petition for writ of review. On November 25, 1997, Pacific Gas and 
Electric Company, San Diego Gas & Electric Company and Southern 
California Edison Company jointly filed an opposition to the request 
for an interim writ or order suspending implementation of the Financing 
Order. On December 4, 1997, the California Supreme Court denied both 
the request for an interim writ or order and the petition for writ of 
review.

          Various consumer groups filed a voter initiative with the 
California Attorney General which sought, among other things, to 
prohibit the collection of any customer charges for the Certificates 
or, alternatively, require SDG&E to offset such charges with an equal 
credit to customers. In February 1998, the California Secretary of 
State released the title and summary prepared for the proposed 
initiative by the office of the California Attorney General. The 
initiative appeared on the November 1998 statewide ballot and was 
defeated by the voters. If the initiative had been voted into law and 
been upheld by the courts, it could have had a material adverse effect 
on the Note Issuer and the holders of the Certificates.

          No other legal proceedings affecting either the Note Issuer 
or the Trust occurred in 1997 or 1998.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

          Omitted with respect to the Note Issuer pursuant to 
Instruction I of Form 10-K.

          No matters were submitted for a vote or consent of holders of
Certificates in 1997.

                                PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER 
         MATTERS

(a)       There is no established public trading market for the Note 
Issuer's equity securities. All of the Note Issuer's equity is owned by 
SDG&E. On August 11, 1997, SDG&E transferred $400,000 to the Note 
Issuer as an initial capital contribution, and SDG&E made capital 
contributions to the Note Issuer aggregating to $3,290,000. The sale of 
such membership interest was exempt from registration under the 
Securities Act of 1933, as amended, pursuant to Section 4(2) thereof. 
The Note Issuer has made no other sales of unregistered securities.

          The Indenture prohibits the Note Issuer from making any 
distributions to the sole member from the amounts allocated to the Note 
Issuer unless no default has occurred and is continuing thereunder and 
the book value of the remaining equity of the Note Issuer, after giving 
effect to such distribution, is equal to at least 0.5% of the original 
principal amount of all series of Notes which then remains outstanding. 
As of December 31, 1998, the original principal amount of all series of 
Notes which then remained outstanding was $592,200,000. As of December 
31, 1998, the Note Issuer has not made any distributions to SDG&E. The 
Note Issuer intends to make distributions to the sole member from time 
to time in the future as permitted by the Indenture.

          The registered owner for each class of the Certificates is 
Cede & Co., as nominee of The Depository Trust Company ("DTC"). DTC has 
informed the Note Issuer that as of March 26, 1999, there were 
approximately 100 beneficial holders of Certificates. The Certificates 
are not registered and do not trade on any established trading market.

(b)       The Note Issuer's Amendment No. 4 to the Registration 
Statement No. 333-30761 on Form S-3, as filed with the Securities and 
Exchange Commission (the "Commission") on November 21, 1997 (the 
"Registration Statement") for the sale of the Notes and the 
Certificates was declared effective by the Commission on November 24, 
1997. The Certificates were offered for sale beginning on December 4, 
1997. Certificates in the aggregate amount of $658,000,000 were sold on 
December 16, 1997. In connection with the offering of the Certificates, 
Morgan Stanley, Inc. and Lehman Brothers Inc. acted as the managing 
underwriters. The Trust purchased the Notes from the Note Issuer on 
December 16, 1997, pursuant to a private sale in the aggregate amount 
of $658,000,000. Notes and Certificates in the aggregate principal 
amount of $800,000,000 were registered and $658,000,000 have been 
offered and sold to date. All of the Notes offered in the sale were 
purchased. The amount of each class of Notes and Certificates 
registered and the respective sale prices, which exclude the original 
issue discount, are as follows:

<TABLE>
<CAPTION>
Class                             Principal Amount Registered     Sale Price
------                            ---------------------------     ----------
<S>                               <C>                           <C>         
Class A-1 Notes and Certificates        $ 65,800,000.00         $ 65,797,058.74 
Class A-2 Notes and Certificates          82,639,254.00           82,628,229.92 
Class A-3 Notes and Certificates          66,230,948.00           66,218,105.82 
Class A-4 Notes and Certificates          65,671,451.00           65,648,886.29 
Class A-5 Notes and Certificates          96,537,839.00           96,536,159.24 
Class A-6 Notes and Certificates         197,584,137.00          197,544,718.97 
Class A-7 Notes and Certificates          83,536,371.00           83,481,128.40 
                                        ---------------         --------------- 
                                                                                
Total:                                  $658,000,000.00         $657,854,287.38 
                                        ===============         ===============  
</TABLE>
                                                                                

          The net offering proceeds to the Trust were $654,728,789: the 
$658,000,000 received in the sale of the Certificates less $3,125,498 of 
underwriting discount and commission, and $145,713 of original issue 
discount. The Trust used all of the net proceeds from the sale of 
Certificates to purchase the Notes from the Note Issuer. The net 
offering proceeds to the Note Issuer were used to purchase the 
Transition Property. Compensation paid to the independent director of 
the Note Issuer was $3,800. Other than the payment to the independent 
director, no additional net offering proceeds were used to pay, either 
directly or indirectly, any director, officer or affiliate of the Note 
Issuer.

ITEM 6.   SELECTED FINANCIAL DATA

          Omitted pursuant to Instruction I of Form 10-K.
 
ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
          AND RESULTS OF OPERATIONS

          The following analysis of the Note Issuer's results of 
operations is in an abbreviated format pursuant to Instruction I of Form 
10-K. 

          As discussed above under "Item 1. Business", the Note Issuer 
was established in July 1997 for limited purposes. As discussed above 
under Item 5 (Market for Registrant's Common Equity and Related 
Stockholder Matters), on December 16, 1997, the Note Issuer issued Notes 
in order to purchase Transition Property. The Note Issuer is restricted 
by its organizational documents from engaging in activities other than 
those described in Item 1 (Business).

          The Note Issuer expects to use collections with respect to the 
Transition Property to make scheduled principal and interest payments on 
the Notes. Interest income earned on the Transition Property is expected 
to offset (1) interest expense on the Notes, (2) amortization of debt-
issuance expenses and the discount on the Notes and (3) the fees charged 
by SDG&E for servicing the Transition Property and providing 
administrative services to the Note Issuer. (These agreements are 
discussed in greater detail in Note D to the Financial Statements 
attached hereto.)

          Collections of FTA Charges are currently meeting expectations. 
For 1998, collections were sufficient to cover scheduled payments on the 
Notes and related expenses. Excess collections will be applied toward 
future payments on the Notes. Management believes that it is reasonable 
to expect future collections of FTA Charges to be sufficient to make 
scheduled payments on the Notes and pay related expenses on a timely 
basis.

     The Note Issuer has no computer systems of its own and relies on 
certain systems of SDG&E for information. While there is the potential 
for SDG&E's system to be unable to recognize the year 2000, SDG&E is in 
the process of an extensive evaluation of its computer systems and an 
enterprise-wide date-conversion project.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          Not applicable to the Note Issuer or the Trust.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          The financial statements and related financial information 
required to be filed hereunder are indexed on page 10 of this Annual 
Report. 

          Since the Trust is a pass-through entity with no assets other 
than the Notes, financial statements for the Trust are not included. In 
addition, Exhibit 99.1 contains financial information regarding 
collections of FTA Charges by the Servicer for the fourth quarter of 
1998.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 
          AND FINANCIAL DISCLOSURE

          Not applicable with respect to the Note Issuer or the Trust.

                               PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          Omitted pursuant to Instruction I of Form 10-K.

ITEM 11.  EXECUTIVE COMPENSATION

          Omitted pursuant to Instruction I of Form 10-K.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

          Omitted pursuant to Instruction I of Form 10-K.



ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          Omitted with respect to the Note Issuer pursuant to 
Instruction I of Form 10-K.

          Not applicable to the Trust.

                                 PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 
          8-K

(a)  The following documents are filed as part of this report:

     1. Financial Statements.

          The following financial statements of the Note Issuer and 
          report of independent accountants are included in Item 8:

            Independent Auditors' Report 
            Statements of Operations and Changes in Member's Equity
            Balance Sheets
            Statements of Cash Flows
            Notes to Financial Statements

     2. Financial Statement Schedule.

          None.


     3. Exhibits.

        The following exhibits are filed as a part of this report:

     Exhibit      Description
     -------      -----------

     3.1  Certificate of Formation. (1)
     3.2  Limited Liability Company Agreement. (1)
     3.3  Amended and Restated Limited Liability Company Agreement. (1)
     4.1  Note Indenture. (2)
     4.2  Amended and Restated Declaration and Agreement of Trust. (1)
     4.3  Series Supplement. (2)
     4.4  Form of Note. (1)
     4.5  First Supplemental Trust Agreement. (2)
     4.6  Form of Rate Reduction Certificate. (2)
    10.1  Transition Property Purchase and Sale Agreement. (2)
    10.2  Transition Property Servicing Agreement. (2)
    10.3  Note Purchase Agreement. (2)
    10.4  Fee and Indemnity Agreement. (2)
    23.1  Consent of Deloitte & Touche LLP.
    27.1  Financial Data Schedule.
    99.1  Quarterly Servicer's Certificate dated December 23, 1998.
    ____________________________
(1)  Incorporated by reference to the same-titled exhibit to the 
Note Issuer and Trust's Registration Statement on Form S-3, 
as amended, File No. 333-30761.

(2)  Incorporated by reference to the same-titled exhibit to the 
Note Issuer and Trust's Current Report on Form 8-K filed with 
the Commission on December 23, 1997.

(b)  Reports on 8-K.

The Note Issuer and Trust filed a Current Report on Form 8-K dated 
November 4, 1998, discussing the defeat of the Voter Initiative which 
sought to amend or repeal California's electric industry restructuring 
legislation in various respects.


FINANCIAL STATEMENT INDEX



Independent Auditors' Report..............................  11

Statements of Operations and Changes In Member's Equity...  12

Balance Sheets............................................  13

Statements of Cash Flows..................................  14

Notes to Financial Statements.............................  15






INDEPENDENT AUDITORS' REPORT

To the Board of Directors of SDG&E Funding LLC:

     We have audited the accompanying balance sheets of SDG&E Funding 
LLC as of December 31, 1998 and 1997, and the related statements of 
operations and changes in member's equity and cash flows for the 
period from July 1, 1997 (inception) to December 31, 1997 and for the 
year ended December 31, 1998.  These 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 financial statements present fairly, in all 
material respects, the financial position of SDG&E Funding LLC as of 
December 31, 1998 and 1997, and the results of their operations and 
their cash flows for the period from July 1, 1997 (inception) to 
December 31, 1997 and for the year ended December 31, 1998 in 
conformity with generally accepted accounting principles.

/s/ DELOITTE & TOUCHE LLP

San Diego, California
January 27, 1999


<TABLE>


                         SDG&E FUNDING LLC
        STATEMENTS OF OPERATIONS AND CHANGES IN MEMBER'S EQUITY 
                     (In thousands of dollars)
<CAPTION>


                                                   For the Period
                                 For the           From Inception
                                Year Ended        (July 1, 1997) to
                                December 31,        December 31,
                                    1998                1997
                                --------------     --------------
<S>                               <C>                <C>
INCOME
------

   Interest income                 $40,907           $      8 
   Other income                      1,122                 -- 
                                   -------            -------
      Total Income                  42,029                  8 
                                   -------            -------
EXPENSES
--------

   Interest expense                 41,366                 --       
   Amortization of deferred 
     financing costs                   642                 --
   Other expenses                       24                  5
                                   -------            -------
       Total Expenses               42,032                  5
                                   -------            -------
       NET(LOSS)INCOME                  (3)                 3 

Member's equity, beginning 
  of period                          3,293              3,290
                                   -------            ------- 
              
MEMBER'S EQUITY, DECEMBER 31      $  3,290           $  3,293
                                   =======            =======

</TABLE>


See notes to financial statements.



<TABLE>

                      SDG&E FUNDING LLC
                        BALANCE SHEETS
                   (In thousands of dollars)
<CAPTION>


Balance at December 31               1998              1997 
                                --------------     --------------
<S>                              <C>               <C>
ASSETS
-------

Current Assets:
   Cash and cash equivalents      $    565           $  2,427
   Interest receivable                  --                  8
   Current portion of
      transition property           65,800             65,800
                                --------------     --------------
Total Current Assets                66,365             68,235

Noncurrent Assets:
   Transition property             519,404            585,204
   Deferred financing costs          5,902              4,920
   Restricted funds                  9,939              3,190
                                --------------     --------------

      TOTAL ASSETS               $ 601,610          $ 661,549
                                ==============     ==============

LIABILITIES AND MEMBER'S EQUITY
-------------------------------

Current Liabilities:
   Current portion of 
      long-term debt             $  65,800          $  65,800
   Accounts payable and 
      accrued expenses               6,120                256

                               --------------     --------------
Total Current Liabilities           71,920             66,056

Long-term debt                     526,400            592,200
                                --------------     --------------
Total Liabilities                  598,320            658,256

Member's Equity                      3,290              3,293
                                --------------     --------------

      TOTAL LIABILITIES AND
      MEMBER'S EQUITY          $   601,610          $ 661,549

                                ==============     ==============
</TABLE>
See notes to financial statements.


<TABLE>
                             SDG&E FUNDING LLC
                          STATEMENTS OF CASH FLOWS
                          (In thousands of dollars)
<CAPTION>
                                                                      For the Period
                                                     For the          From Inception
                                                    Year Ended       (July 1, 1997) to
                                                    December 31,        December 31,
                                                        1998                1997
                                                   --------------     --------------
<S>                                                    <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:                     
 
Net (Loss) Income                                        $    (3)         $     3   
   Adjustments to reconcile net loss to net cash
     provided by operating activities:
         Amortization of deferred financing costs            642               --  
         Decrease (increase) in interest receivable            8               (8)
         Increase in accounts payable and                      
           accrued expenses                                5,864              256     
                                                          ------           ------
      NET CASH PROVIDED BY OPERATING ACTIVITIES            6,511              251
                                                          ------           ------ 
CASH FLOWS FROM FINANCING ACTIVITIES:

   Proceeds from issuance of underlying notes                 --          654,729
   Equity contribution from San Diego Gas & Electric          --            3,290
   Collection of transition property from SDG&E           65,800               --
   Payments on long-term debt                            (65,800)              -- 
   Incurrence of deferred financing costs                 (1,624)          (1,649)
   Increase in restricted funds                           (6,749)          (3,190)
                                                          -------         --------
      NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES    (8,373)         653,180
                                                          -------         -------- 
CASH FLOWS FROM INVESTING ACTIVITIES:

    Purchase of transition property                           --         (651,004)
                                                        --------          --------
           
NET (DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS       (1,862)           2,427

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD           2,427               --
                                                        --------          --------        

CASH AND CASH EQUIVALENTS AT END OF PERIOD            $      565         $  2,427
                                                        ========          ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
   Interest payments                                  $   40,757         $     --
                                                        ========          ========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
   Debt-issuance costs deducted from the note proceeds        --         $  3,125
                                                        ========          ======== 
</TABLE>
See notes to financial statements.

NOTES TO FINANCIAL STATEMENTS

A. Nature of Operations

The financial statements include the accounts of SDG&E Funding LLC 
(SDG&E Funding), a Delaware special-purpose limited-liability company, 
whose sole member is San Diego Gas & Electric Company (San Diego Gas & 
Electric), a provider of electric and natural gas services. San Diego 
Gas & Electric is a wholly owned subsidiary of Sempra Energy. SDG&E 
Funding was formed on July 1, 1997, in order to effect the issuance of 
notes (the Underlying Notes) intended to support a 10-percent 
electric-rate reduction. This reduction is provided to San Diego Gas & 
Electric's residential and small commercial customers in connection 
with the electric industry restructuring mandated by California 
Assembly Bill 1890.  

SDG&E Funding was organized for the limited purposes of issuing the 
Underlying Notes and purchasing Transition Property. Transition 
Property is the right to be paid a specified amount from a 
nonbypassable charge levied on residential and small commercial 
customers. The nonbypassable charge has been authorized by the 
California Public Utility Commission (CPUC) pursuant to electric 
restructuring legislation.

SDG&E Funding is restricted by its organizational documents from 
engaging in any other activities. In addition, SDG&E Funding's 
organizational documents require it to operate in such a manner that 
it should not be consolidated in the bankruptcy estate of San Diego 
Gas & Electric in the event that San Diego Gas & Electric becomes 
subject to such a proceeding.

SDG&E Funding is legally separate from San Diego Gas & Electric. The 
assets of SDG&E Funding are not available to creditors of San Diego 
Gas & Electric or Sempra Energy. SDG&E Funding will cease to exist 
upon the maturation or retirement of the Underlying Notes.

B. Summary of Accounting Policies

Restricted Funds

SDG&E Funding is required to maintain funds of approximately $3 
million. These funds are to be used to make scheduled payments on the 
Underlying Notes and to pay other expenses of SDG&E Funding in the 
event that collections of the nonbypassable charge provide 
insufficient funds to make such payments.

Unamortized Debt Issuance Expense

The expenses associated with the issuance of the Underlying Notes have 
been capitalized and are being amortized over the life of the 
Underlying Notes.

Income Taxes

SDG&E Funding is a single-member limited-liability company. 
Accordingly, all federal income tax effects and all material State of 
California franchise tax effects of SDG&E Funding's activities accrue 
to San Diego Gas & Electric.



Use of Estimates

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, 
liabilities, revenues and expenses during the reporting period. Actual 
results could differ from these estimates.

C. Long Term Debt

In December 1997, SDG&E Funding issued $658 million of the Underlying 
Notes to the California Infrastructure and Economic Development Bank 
Special Purpose Trust (the Trust). The Trust, in turn, issued pass-
through certificates known as "rate-reduction bonds" with a original 
principal amount equal to the original principal amount of the 
Underlying Notes. SDG&E Funding used the proceeds from the Underlying 
Notes to purchase the Transition Property from San Diego Gas & 
Electric.

The Underlying Notes are secured solely by the Transition Property and 
other assets of SDG&E Funding. Scheduled maturities and interest rates 
for the Underlying Notes at December 31 are as follows:

              Scheduled                       1998          1997
               Maturity          Interest    Amount        Amount
Class           Date               Rate     (Dollars in thousands)
---------------------------------------------------------------------
A-1         December 26, 1998     5.97%        --        $ 65,800
A-2         March 25, 2000        6.04%    $ 82,639        82,639
A-3         March 25, 2001        6.07%      66,231        66,231
A-4         March 25, 2002        6.15%      65,672        65,672
A-5         September 25, 2003    6.19%      96,538        96,538
A-6         September 25, 2006    6.31%     197,584       197,584
A-7         December 26, 2007     6.37%      83,536        83,536
                                          -----------   ----------
                                            592,200       658,000
Less Current Portion                        (65,800)      (65,800)
                                          -----------   -----------
Long-Term Debt                             $526,400      $592,200
                                          ===========   ===========

The carrying amounts and fair values of the Underlying Notes are $592 
million and $607 million, respectively, at December 31, 1998, and $658 
million each at December 31, 1997. The fair values of the Underlying 
Notes are estimated based on quoted market prices for them or for 
similar issues.

The source of repayment is a nonbypassable charge authorized by the 
CPUC. This nonbypassable charge is collected by San Diego Gas & 
Electric, as Servicer, from its residential and small commercial 
customers. Collections of the nonbypassable charge are deposited on a 
monthly basis by San Diego Gas & Electric in an account maintained by 
the trustee (Bankers Trust Company). Each quarter such monies are used 
to make principal and interest payments on the Underlying Notes. The 
debt service requirements include an overcollateralization amount that 
is retained for the benefit of the holders of the Underlying Notes. 
Any amounts not required for debt service will be returned to SDG&E 
Funding.



D. Significant Agreements and Related Party Transactions

Under a Transition Property Servicing Agreement, San Diego Gas & 
Electric, as Servicer, is required to manage and administer the 
Transition Property of SDG&E Funding and to collect the nonbypassable 
charge from electric customers on behalf of SDG&E Funding. SDG&E 
Funding pays a servicing fee equal to 0.25% of the outstanding 
principal amount of the Underlying Notes. The Servicer is also 
entitled to receive as compensation any interest earnings on 
nonbypassable charge collections prior to remittance to the Trust and 
any late payment charges collected from San Diego Gas & Electric's 
customers.

The Trust was created for the limited purposes of purchasing the 
Underlying Notes from SDG&E Funding, issuing the rate-reduction bonds, 
and applying the proceeds from the Underlying Notes to the payment of 
the rate-reduction bonds. Under a Fee and Indemnity Agreement, SDG&E 
Funding is responsible for paying all fees and expenses incurred by 
the Certificate Trustee (Bankers Trust Company) and the Delaware 
Trustee (Bankers Trust Delaware).

E. 1998 Quarterly Financial Data (Unaudited)

                                       Quarter ended
                       -----------------------------------------------
Dollars in millions     March 31   June 30   September 30  December 31
----------------------------------------------------------------------
Income                 $ 12,112    $ 10,172    $  9,925     $  9,820

Expenses                 12,115      10,172       9,925        9,820
                       -----------------------------------------------
Net income (loss)      $ (    3)   $      0    $      0     $      0
                       ===============================================






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the registrant has duly caused this report to be 
signed on its behalf by the undersigned, thereunto duly authorized.

                                    SDG&E Funding LLC,
                                    as Registrant


                                    By:  /s/ Charles A. McMonagle
                                       ------------------------------
                                      Name:  Charles A. McMonagle
                                      Title: President and Chief
                                             Executive Officer


Pursuant to the requirements of the Securities Act of 1934, this report 
has been signed below by the following persons on behalf of the 
registrant and in the capacities and on the date indicated.


Signature                    Title                           Date
----------                   -----                           ----


/s/ Charles A. McMonagle    President, Chief Executive   March 31, 1999
-------------------------   Officer and Director 
Charles A. McMonagle        


/s/ James P. Trent          Chief Financial Officer,     March 31, 1999
------------------------    Chief Accounting Officer 
James P. Trent              and Director
                            

/s/ Donald J. Puglisi       Director                     March 31, 1999
------------------------                                     
Donald J. Puglisi


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