|                                                                                        |                                                                                                  |                        |                                   
|--------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ---------------------- | ----------------------------------
|                                                                                       
|                                                                                       
|UNITED STATESSECURITIES AND EXCHANGE
COMMISSIONWashington, D.C.  20549                 
|FORM 10-Q                                                                              
|QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THESECURITIES EXCHANGE ACT OF 1934
|                                                                                        | For the quarterly period ended                                                                   | March
31, 2008        
|                                                                                        |                                                                                                  |                       
|Commission File Number                                                                  | Name
of Registrant as Specified in its Charter, Address and Telephone
Number                     | State of Incorporation | I.R.S. Employer Identification No.
|1-40                                                                                    | PACIFIC
ENTERPRISES101 Ash StreetSan Diego, California 92101(619)
696-2020                       | California             | 94-0743670                        
|                                                                                        |                                                                                                  |                        |                                   
|1-1402                                                                                  | SOUTHERN
CALIFORNIA GAS COMPANY
555
West Fifth StreetLos Angeles, California 90013(213)
244-1200 | California             | 95-1240705                        



|                                                                                                                                                                                                                                                                                                                                                        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                        
|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 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 whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the
Exchange Act. (Check one):
|                                                                                                                                                                                                                                               
|Large
accelerated filer                                                                                                                                                                                                                         | [  ]                                | Accelerated filer | [  ] | Non-accelerated filer | [  X  ]
|                                                                                                                                                                                                                                               
|Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).                                                                                                                               
|                                                                                                                                                                                                                                                | Yes                                 |                   |      | No                    | X      
|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:                                                                                                                                                                                                                       |                                    
|Pacific
Enterprises                                                                                                                                                                                                                             | Wholly
owned by Sempra Energy      
|Southern
California Gas Company                                                                                                                                                                                                                 | Wholly
owned by Pacific Enterprises
|                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                               



1













INFORMATION REGARDING FORWARD-LOOKING STATEMENTS



This
Quarterly Report contains statements that are not historical fact and constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. The words "estimates," "believes," "expects,"
"anticipates," "plans," "intends," "may," "could," "would" and "should" or
similar expressions, or discussions of strategy or of plans are intended to
identify forward-looking statements. Forward-looking statements are not
guarantees of performance. They involve risks, uncertainties and assumptions.
Future results may differ materially from those expressed in these
forward-looking statements.



Forward-looking
statements are necessarily based upon various assumptions involving judgments
with respect to the future and other risks, including, among others, local,
regional and national economic, competitive, political, legislative and
regulatory conditions and developments; actions by the California Public
Utilities Commission, the California State Legislature, the Federal Energy
Regulatory Commission and other regulatory bodies in the United States; capital
markets conditions, inflation rates, interest rates and exchange rates; energy
and trading markets, including the timing and extent of changes in commodity
prices; the availability of natural gas and liquefied natural gas; weather
conditions and conservation efforts; war and terrorist attacks; business,
regulatory, environmental and legal decisions and requirements; the status of
deregulation of retail natural gas and electricity delivery; the timing and
success of business development efforts; the resolution of litigation; and other
uncertainties, all of which are difficult to predict and many of which are
beyond the control of the companies. Readers are cautioned not to rely unduly on
any forward-looking statements and are urged to review and consider carefully
the risks, uncertainties and other factors which affect the companies' business
described in this report and other reports filed by the companies from time to
time with the Securities and Exchange Commission.









2













|                                                          |                    |             |      |  |   |       |  
|--------------------------------------------------------- | ------------------ | ----------- | ---- |  | - | ----- | -
|PART I. FINANCIAL INFORMATION                            
|ITEM 1. CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS      
|                                                         
|PACIFIC ENTERPRISES AND SUBSIDIARIES                     
|STATEMENTS OF CONSOLIDATED INCOME                        
|                                                         
|                                                          | Three months ended
|                                                          | March 31,         
|(Dollars in millions)                                     | 2008               |             | 2007
|                                                          |                    | (unaudited) |     
|                                                          |                    |             |      |  |   |       |  
|Operating revenues                                        | $                  | 1,556       |      |  | $ | 1,368 |  
|                                                          |                    |             |      |  |   |       |  
|Operating expenses                                        |                    |             |      |  |   |       |  
|Cost of natural gas                                       |                    | 1,087       |      |  |   | 912   |  
|Other operating expenses                                  |                    | 250         |      |  |   | 243   |  
|Depreciation                                              |                    | 71          |      |  |   | 69    |  
|Franchise fees and other
taxes                            |                    | 39          |      |  |   | 36    |  
|Total operating expenses                                  |                    | 1,447       |      |  |   | 1,260 |  
|                                                          |                    |             |      |  |   |       |  
|Operating income                                          |                    | 109         |      |  |   | 108   |  
|                                                          |                    |             |      |  |   |       |  
|Other expense, net                                        |                    | --          |      |  |   | (2    | )
|Interest income                                           |                    | 7           |      |  |   | 12    |  
|Interest expense                                          |                    | (17         | )    |  |   | (19   | )
|Income before income taxes                                |                    | 99          |      |  |   | 99    |  
|                                                          |                    |             |      |  |   |       |  
|Income tax expense                                        |                    | 41          |      |  |   | 41    |  
|                                                          |                    |             |      |  |   |       |  
|Net income                                                |                    | 58          |      |  |   | 58    |  
|Preferred dividend requirements                           |                    | 1           |      |  |   | 1     |  
|Earnings applicable to common shares                      | $                  | 57          |      |  | $ | 57    |  
|                                                          |                    |             |      |  |   |       |  
|See Notes to Condensed Consolidated Financial
Statements.







3











|                                                          |                                                      |                                    |       |              |       |   |       |        |       | 
|--------------------------------------------------------- | ---------------------------------------------------- | ---------------------------------- | ----- | ------------ | ----- | - | ----- | ------ | ----- | 
|PACIFIC ENTERPRISES AND SUBSIDIARIES                      |                                                      |                                    |       |             
|CONSOLIDATED BALANCE SHEETS                               |                                                      |                                    |       |             
|                                                          |                                                      |                                    |       |             
|                                                          |                                                      | March 31,                          |       | December 31,
|(Dollars in millions)                                     |                                                      | 2008                               |       | 2007        
|                                                          |                                                      | (unaudited)                        |      
|ASSETS                                                    |                                                      |                                   
|Current assets:                                           |                                                      |                                    |       |              |       |   |       |       
|                                                          | Cash and cash equivalents                            |                                    | $     | 351          |       |   | $     | 59     |      
|                                                          | Accounts receivable - trade                          |                                    |       | 672          |       |   |       | 671    |      
|                                                          | Accounts receivable - other                          |                                    |       | 51           |       |   |       | 22     |      
|                                                          | Due from unconsolidated affiliates                   |                                    |       | 93           |       |   |       | 5      |      
|                                                          | Income taxes receivable                              |                                    |       | --           |       |   |       | 37     |      
|                                                          | Deferred income taxes                                |                                    |       | 36           |       |   |       | 33     |      
|                                                          | Inventories                                          |                                    |       | 27           |       |   |       | 98     |      
|                                                          | Other regulatory assets                              |                                    |       | 41           |       |   |       | 40     |      
|                                                          | Other                                                |                                    |       | 30           |       |   |       | 23     |      
|                                                          |                                                      | Total current assets               |       |              | 1,301 |   |       |        | 988   | 
|                                                          |                                                      |                                    |       |              |       |   |       |       
|Other assets:                                             |                                                      |                                    |       |              |       |   |       |       
|                                                          | Due from unconsolidated affiliates                   |                                    |       | 459          |       |   |       | 457    |      
|                                                          | Other regulatory assets                              |                                    |       | 102          |       |   |       | 100    |      
|                                                          | Pension plan assets in excess of benefit
obligations |                                    |       | 54           |       |   |       | 62     |      
|                                                          | Sundry                                               |                                    |       | 42           |       |   |       | 39     |      
|                                                          |                                                      | Total other assets                 |       |              | 657   |   |       |        | 658   | 
|                                                          |                                                      |                                    |       |              |       |   |       |       
|Property, plant and equipment:                            |                                                      |                                    |       |              |       |   |       |       
|                                                          | Property, plant and equipment                        |                                    |       | 8,530        |       |   |       | 8,448  |      
|                                                          | Less accumulated depreciation and
amortization       |                                    |       | (3,332       | )     |   |       | (3,292 | )    
|                                                          |                                                      | Property, plant and equipment, net |       |              | 5,198 |   |       |        | 5,156 | 
|Total assets                                              |                                                      | $                                  | 7,156 |              |       | $ | 6,802 |       
|                                                          |                                                      |                                    |       |              |       |   |       |       
|See Notes to Condensed Consolidated Financial
Statements.







4











|                                                          |                                                                                           |                                              |       |              |       |   |       |       |       | 
|--------------------------------------------------------- | ----------------------------------------------------------------------------------------- | -------------------------------------------- | ----- | ------------ | ----- | - | ----- | ----- | ----- | 
|PACIFIC ENTERPRISES AND SUBSIDIARIES                      |                                                                                           |                                              |       |             
|CONSOLIDATED BALANCE SHEETS                               |                                                                                           |                                              |       |             
|                                                          |                                                                                           |                                              |       |             
|                                                          |                                                                                           | March 31,                                    |       | December 31,
|(Dollars in millions)                                     |                                                                                           | 2008                                         |       | 2007        
|                                                          |                                                                                           | (unaudited)                                  |      
|LIABILITIES AND SHAREHOLDERS' EQUITY                      |                                                                                           |                                             
|Current liabilities:                                      |                                                                                           |                                              |       |              |       |   |       |      
|                                                          | Accounts payable - trade                                                                  |                                              | $     | 372          |       |   | $     | 300   |      
|                                                          | Accounts payable - other                                                                  |                                              |       | 96           |       |   |       | 130   |      
|                                                          | Due to unconsolidated affiliates                                                          |                                              |       | 94           |       |   |       | 125   |      
|                                                          | Income taxes payable                                                                      |                                              |       | 7            |       |   |       | --    |      
|                                                          | Regulatory balancing accounts, net                                                        |                                              |       | 243          |       |   |       | 183   |      
|                                                          | Customer deposits                                                                         |                                              |       | 93           |       |   |       | 90    |      
|                                                          | Temporary LIFO liquidation                                                                |                                              |       | 263          |       |   |       | --    |      
|                                                          | Other                                                                                     |                                              |       | 328          |       |   |       | 310   |      
|                                                          |                                                                                           | Total current liabilities                    |       |              | 1,496 |   |       |       | 1,138 | 
|                                                          |                                                                                           |                                              |       |              |       |   |       |      
|Long-term debt                                            |                                                                                           |                                              | 1,117 |              |       |   | 1,113 |      
|                                                          |                                                                                           |                                              |       |              |       |   |       |      
|Deferred credits and other liabilities:                   |                                                                                           |                                              |       |              |       |   |       |      
|                                                          | Customer advances for construction                                                        |                                              |       | 126          |       |   |       | 123   |      
|                                                          | Pension and
other postretirement benefit obligations, net of plan assets                  |                                              |       | 58           |       |   |       | 58    |      
|                                                          | Deferred income taxes                                                                     |                                              |       | 96           |       |   |       | 102   |      
|                                                          | Deferred investment tax credits                                                           |                                              |       | 32           |       |   |       | 33    |      
|                                                          | Regulatory liabilities arising from removal
obligations                                   |                                              |       | 1,193        |       |   |       | 1,187 |      
|                                                          | Regulatory
liabilities arising from pension and other postretirement benefit
obligations  |                                              |       | 26           |       |   |       | 34    |      
|                                                          | Asset retirement obligations                                                              |                                              |       | 571          |       |   |       | 562   |      
|                                                          | Deferred taxes refundable in rates                                                        |                                              |       | 234          |       |   |       | 231   |      
|                                                          | Preferred stock of subsidiary                                                             |                                              |       | 20           |       |   |       | 20    |      
|                                                          | Deferred credits and other                                                                |                                              |       | 269          |       |   |       | 285   |      
|                                                          |                                                                                           | Total deferred credits and other liabilities |       |              | 2,625 |   |       |       | 2,635 | 
|                                                          |                                                                                           |                                              |       |              |       |   |       |      
|Commitments and contingencies (Note 6)                    |                                                                                           |                                              |       |              |       |   |       |      
|                                                          |                                                                                           |                                              |       |              |       |   |       |      
|Shareholders equity:                                     |                                                                                           |                                              |       |              |       |   |       |      
|                                                          | Preferred stock                                                                           |                                              |       | 80           |       |   |       | 80    |      
|                                                          | Common
stock (600 million shares authorized; 84 million shares outstanding; no
par value) |                                              |       | 1,462        |       |   |       | 1,462 |      
|                                                          | Retained earnings                                                                         |                                              |       | 385          |       |   |       | 378   |      
|                                                          | Accumulated other comprehensive income
(loss)                                             |                                              |       | (9           | )     |   |       | (4    | )    
|                                                          |                                                                                           | Total shareholders' equity                   |       |              | 1,918 |   |       |       | 1,916 | 
|Total liabilities and shareholders' equity                |                                                                                           | $                                            | 7,156 |              |       | $ | 6,802 |      
|                                                          |                                                                                           |                                              |       |              |       |   |       |      
|See Notes to Condensed Consolidated Financial
Statements.





5











|                                                          |                                                                                   |                                                                                |                                                  |             |      |     |      |    |      |  
|--------------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ------------------------------------------------ | ----------- | ---- | --- | ---- | -- | ---- | -
|PACIFIC ENTERPRISES AND SUBSIDIARIES                     
|CONDENSED STATEMENTS OF CONSOLIDATED CASH
FLOWS          
|                                                          |                                                                                  
|                                                          | Three months ended                                                               
|                                                          | March 31,                                                                        
|(Dollars in millions)                                     | 2008                                                                              |                                                                                | 2007                                            
|                                                          |                                                                                   |                                                                                |                                                  | (unaudited)
|CASH FLOWS FROM OPERATING ACTIVITIES                      |                                                                                   |                                                                                |                                                  |             |      |     |     
|                                                          | Net income                                                                        | $                                                                              | 58                                               |             |      | $   | 58   |   
|                                                          | Adjustments
to reconcile net income to net cash provided by operating
activities: |                                                                                |                                                  |             |      |     |      |   
|                                                          |                                                                                   |                                                                                | Depreciation                                     |             | 71   |     |      |    | 69   |  
|                                                          |                                                                                   |                                                                                | Deferred income taxes and investment tax
credits |             | (3   | )   |      |    | (5   | )
|                                                          |                                                                                   |                                                                                | Other                                            |             | 1    |     |      |    | 1    |  
|                                                          | Net changes in other working capital
components                                   |                                                                                | 458                                              |             |      |     | 294  |   
|                                                          | Changes in other assets                                                           |                                                                                | 3                                                |             |      |     | --   |   
|                                                          | Changes in other liabilities                                                      |                                                                                | (16                                              | )           |      |     | (13  | ) 
|                                                          |                                                                                   |                                                                                | Net cash provided by operating activities        |             | 572  |     |      |    | 404  |  
|                                                          |                                                                                   |                                                                                |                                                  |             |      |     |      |    |      |  
|CASH FLOWS FROM INVESTING ACTIVITES                       |                                                                                   |                                                                                |                                                  |             |      |     |     
|                                                          | Expenditures for property, plant and
equipment                                    |                                                                                | (116                                             | )           |      |     | (86  | ) 
|                                                          | Increase in loans to affiliates, net                                              |                                                                                | (13                                              | )           |      |     | (20  | ) 
|                                                          | Other                                                                             |                                                                                | --                                               |             |      |     | (3   | ) 
|                                                          |                                                                                   |                                                                                | Net cash used in investing activities            |             | (129 | )   |      |    | (109 | )
|                                                          |                                                                                   |                                                                                |                                                  |             |      |     |      |    |      |  
|CASH FLOWS FROM FINANCING ACTIVITES                       |                                                                                   |                                                                                |                                                  |             |      |     |     
|                                                          | Common dividends paid                                                             |                                                                                | (150                                             | )           |      |     | (100 | ) 
|                                                          | Preferred dividends paid                                                          |                                                                                | (1                                               | )           |      |     | (1   | ) 
|                                                          |                                                                                   |                                                                                | Net cash used in financing activities            |             | (151 | )   |      |    | (101 | )
|                                                          |                                                                                   |                                                                                |                                                  |             |      |     |      |    |      |  
|Increase in cash and cash equivalents                     |                                                                                   | 292                                                                            |                                                  |             |      | 194 |     
|Cash and cash equivalents, January 1                      |                                                                                   | 59                                                                             |                                                  |             |      | 211 |     
|Cash and cash equivalents, March 31                       | $                                                                                 | 351                                                                            |                                                  |             | $    | 405 |     
|                                                          |                                                                                   |                                                                                |                                                  |             |      |     |      |    |      |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION          |                                                                                   |                                                                                |                                                  |             |      |     |     
|                                                          | Interest payments, net of amounts
capitalized                                     | $                                                                              | 9                                                |             |      | $   | 11   |   
|                                                          | Income tax payments, net of refunds                                               | $                                                                              | --                                               |             |      | $   | 18   |   
|                                                          |                                                                                   |                                                                                |                                                  |             |      |     |      |    |      |  
|SUPPLEMENTAL
DISCLOSURE OF NONCASH INVESTING ACTIVITY     |                                                                                   |                                                                                |                                                  |             |      |     |     
|                                                          |                                                                                   | Decrease in
accounts payable from investments in property, plant and
equipment | $                                                | (16         | )    |     | $    | (3 | )   
|                                                          |                                                                                   |                                                                                |                                                  |             |      |     |      |    |      |  
|See Notes to Condensed Consolidated Financial
Statements.



6













|                                                          |                    |             |      |  |   |       |  
|--------------------------------------------------------- | ------------------ | ----------- | ---- |  | - | ----- | -
|SOUTHERN CALIFORNIA GAS COMPANY AND
SUBSIDIARIES         
|STATEMENTS OF CONSOLIDATED INCOME                        
|                                                         
|                                                          | Three months ended
|                                                          | March 31,         
|(Dollars in millions)                                     | 2008               |             | 2007
|                                                          |                    | (unaudited) |     
|                                                          |                    |             |      |  |   |       |  
|Operating revenues                                        | $                  | 1,556       |      |  | $ | 1,368 |  
|                                                          |                    |             |      |  |   |       |  
|Operating expenses                                        |                    |             |      |  |   |       |  
|Cost of natural gas                                       |                    | 1,087       |      |  |   | 912   |  
|Other operating expenses                                  |                    | 249         |      |  |   | 243   |  
|Depreciation                                              |                    | 71          |      |  |   | 69    |  
|Franchise fees and other
taxes                            |                    | 39          |      |  |   | 36    |  
|Total operating expenses                                  |                    | 1,446       |      |  |   | 1,260 |  
|                                                          |                    |             |      |  |   |       |  
|Operating income                                          |                    | 110         |      |  |   | 108   |  
|                                                          |                    |             |      |  |   |       |  
|Other expense, net                                        |                    | --          |      |  |   | (2    | )
|Interest income                                           |                    | 3           |      |  |   | 6     |  
|Interest expense                                          |                    | (16         | )    |  |   | (18   | )
|Income before income taxes                                |                    | 97          |      |  |   | 94    |  
|                                                          |                    |             |      |  |   |       |  
|Income tax expense                                        |                    | 40          |      |  |   | 39    |  
|                                                          |                    |             |      |  |   |       |  
|Net income/earnings applicable to common
shares           | $                  | 57          |      |  | $ | 55    |  
|                                                          |                    |             |      |  |   |       |  
|See Notes to Condensed Consolidated Financial
Statements.







7











|                                                          |                                                      |                                    |       |              |       |   |       |        |       | 
|--------------------------------------------------------- | ---------------------------------------------------- | ---------------------------------- | ----- | ------------ | ----- | - | ----- | ------ | ----- | 
|SOUTHERN CALIFORNIA GAS COMPANY AND
SUBSIDIARIES         
|CONSOLIDATED BALANCE SHEETS                              
|                                                          |                                                      |                                    |       |             
|                                                          |                                                      | March 31,                          |       | December 31,
|(Dollars in millions)                                     |                                                      | 2008                               |       | 2007        
|                                                          |                                                      | (unaudited)                        |      
|ASSETS                                                    |                                                      |                                   
|Current assets:                                           |                                                      |                                    |       |              |       |   |       |       
|                                                          | Cash and cash equivalents                            |                                    | $     | 351          |       |   | $     | 59     |      
|                                                          | Accounts receivable - trade                          |                                    |       | 672          |       |   |       | 671    |      
|                                                          | Accounts receivable - other                          |                                    |       | 51           |       |   |       | 22     |      
|                                                          | Due from unconsolidated affiliates                   |                                    |       | 138          |       |   |       | 129    |      
|                                                          | Deferred income taxes                                |                                    |       | 36           |       |   |       | 33     |      
|                                                          | Inventories                                          |                                    |       | 27           |       |   |       | 98     |      
|                                                          | Other regulatory assets                              |                                    |       | 41           |       |   |       | 40     |      
|                                                          | Other                                                |                                    |       | 30           |       |   |       | 22     |      
|                                                          |                                                      | Total current assets               |       |              | 1,346 |   |       |        | 1,074 | 
|                                                          |                                                      |                                    |       |              |       |   |       |       
|Other assets:                                             |                                                      |                                    |       |              |       |   |       |       
|                                                          | Other regulatory assets                              |                                    |       | 102          |       |   |       | 100    |      
|                                                          | Pension plan assets in excess of benefit
obligations |                                    |       | 54           |       |   |       | 62     |      
|                                                          | Sundry                                               |                                    |       | 19           |       |   |       | 16     |      
|                                                          |                                                      | Total other assets                 |       |              | 175   |   |       |        | 178   | 
|                                                          |                                                      |                                    |       |              |       |   |       |       
|Property, plant and equipment:                            |                                                      |                                    |       |              |       |   |       |       
|                                                          | Property, plant and equipment                        |                                    |       | 8,528        |       |   |       | 8,446  |      
|                                                          | Less accumulated depreciation and
amortization       |                                    |       | (3,332       | )     |   |       | (3,292 | )    
|                                                          |                                                      | Property, plant and equipment, net |       |              | 5,196 |   |       |        | 5,154 | 
|Total assets                                              |                                                      | $                                  | 6,717 |              |       | $ | 6,406 |       
|                                                          |                                                      |                                    |       |              |       |   |       |       
|See Notes to Condensed Consolidated Financial
Statements.







8











|                                                          |                                                                                           |                                              |       |              |       |   |       |       |       | 
|--------------------------------------------------------- | ----------------------------------------------------------------------------------------- | -------------------------------------------- | ----- | ------------ | ----- | - | ----- | ----- | ----- | 
|SOUTHERN CALIFORNIA GAS COMPANY AND
SUBSIDIARIES         
|CONSOLIDATED BALANCE SHEETS                              
|                                                          |                                                                                           |                                              |       |             
|                                                          |                                                                                           | March 31,                                    |       | December 31,
|(Dollars in millions)                                     |                                                                                           | 2008                                         |       | 2007        
|                                                          |                                                                                           | (unaudited)                                  |      
|LIABILITIES AND SHAREHOLDERS' EQUITY                      |                                                                                           |                                             
|Current liabilities:                                      |                                                                                           |                                              |       |              |       |   |       |      
|                                                          | Accounts payable - trade                                                                  |                                              | $     | 372          |       |   | $     | 300   |      
|                                                          | Accounts payable - other                                                                  |                                              |       | 96           |       |   |       | 130   |      
|                                                          | Due to unconsolidated affiliates                                                          |                                              |       | 62           |       |   |       | 171   |      
|                                                          | Income taxes payable                                                                      |                                              |       | 69           |       |   |       | 26    |      
|                                                          | Regulatory balancing accounts, net                                                        |                                              |       | 243          |       |   |       | 183   |      
|                                                          | Customer deposits                                                                         |                                              |       | 93           |       |   |       | 90    |      
|                                                          | Temporary LIFO liquidation                                                                |                                              |       | 263          |       |   |       | --    |      
|                                                          | Other                                                                                     |                                              |       | 326          |       |   |       | 310   |      
|                                                          |                                                                                           | Total current liabilities                    |       |              | 1,524 |   |       |       | 1,210 | 
|                                                          |                                                                                           |                                              |       |              |       |   |       |      
|Long-term debt                                            |                                                                                           |                                              | 1,117 |              |       |   | 1,113 |      
|                                                          |                                                                                           |                                              |       |              |       |   |       |      
|Deferred credits and other liabilities:                   |                                                                                           |                                              |       |              |       |   |       |      
|                                                          | Customer advances for construction                                                        |                                              |       | 126          |       |   |       | 123   |      
|                                                          | Pension and
other postretirement benefit obligations, net of plan assets                  |                                              |       | 58           |       |   |       | 58    |      
|                                                          | Deferred income taxes                                                                     |                                              |       | 111          |       |   |       | 117   |      
|                                                          | Deferred investment tax credits                                                           |                                              |       | 32           |       |   |       | 33    |      
|                                                          | Regulatory liabilities arising from removal
obligations                                   |                                              |       | 1,193        |       |   |       | 1,187 |      
|                                                          | Regulatory
liabilities arising from pension and other postretirement benefit
obligations  |                                              |       | 26           |       |   |       | 34    |      
|                                                          | Asset retirement obligations                                                              |                                              |       | 571          |       |   |       | 562   |      
|                                                          | Deferred taxes refundable in rates                                                        |                                              |       | 234          |       |   |       | 231   |      
|                                                          | Deferred credits and other                                                                |                                              |       | 253          |       |   |       | 268   |      
|                                                          |                                                                                           | Total deferred credits and other liabilities |       |              | 2,604 |   |       |       | 2,613 | 
|                                                          |                                                                                           |                                              |       |              |       |   |       |      
|Commitments and contingencies (Note 6)                    |                                                                                           |                                              |       |              |       |   |       |      
|                                                          |                                                                                           |                                              |       |              |       |   |       |      
|Shareholders equity:                                     |                                                                                           |                                              |       |              |       |   |       |      
|                                                          | Preferred stock                                                                           |                                              |       | 22           |       |   |       | 22    |      
|                                                          | Common
stock (100 million shares authorized; 91 million shares outstanding; no
par value) |                                              |       | 866          |       |   |       | 866   |      
|                                                          | Retained earnings                                                                         |                                              |       | 593          |       |   |       | 586   |      
|                                                          | Accumulated other comprehensive income
(loss)                                             |                                              |       | (9           | )     |   |       | (4    | )    
|                                                          |                                                                                           | Total shareholders' equity                   |       |              | 1,472 |   |       |       | 1,470 | 
|Total liabilities and shareholders' equity                |                                                                                           | $                                            | 6,717 |              |       | $ | 6,406 |      
|                                                          |                                                                                           |                                              |       |              |       |   |       |      
|See Notes to Condensed Consolidated Financial
Statements.





9











|                                                          |                                                                                   |                                                                                |                                                  |             |      |     |      |    |      |  
|--------------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ------------------------------------------------ | ----------- | ---- | --- | ---- | -- | ---- | -
|SOUTHERN CALIFORNIA GAS COMPANY AND
SUBSIDIARIES         
|CONDENSED STATEMENTS OF CONSOLIDATED CASH
FLOWS          
|                                                          |                                                                                  
|                                                          | Three months ended                                                               
|                                                          | March 31,                                                                        
|(Dollars in millions)                                     | 2008                                                                              |                                                                                | 2007                                            
|                                                          |                                                                                   |                                                                                |                                                  | (unaudited)
|CASH FLOWS FROM OPERATING ACTIVITIES                      |                                                                                   |                                                                                |                                                  |             |      |     |     
|                                                          | Net income                                                                        | $                                                                              | 57                                               |             |      | $   | 55   |   
|                                                          | Adjustments
to reconcile net income to net cash provided by operating
activities: |                                                                                |                                                  |             |      |     |      |   
|                                                          |                                                                                   |                                                                                | Depreciation                                     |             | 71   |     |      |    | 69   |  
|                                                          |                                                                                   |                                                                                | Deferred income taxes and investment tax
credits |             | (3   | )   |      |    | (7   | )
|                                                          |                                                                                   |                                                                                | Other                                            |             | 1    |     |      |    | 1    |  
|                                                          | Net changes in other working capital
components                                   |                                                                                | 456                                              |             |      |     | 293  |   
|                                                          | Changes in other assets                                                           |                                                                                | 2                                                |             |      |     | --   |   
|                                                          | Changes in other liabilities                                                      |                                                                                | (15                                              | )           |      |     | (11  | ) 
|                                                          |                                                                                   |                                                                                | Net cash provided by operating activities        |             | 569  |     |      |    | 400  |  
|                                                          |                                                                                   |                                                                                |                                                  |             |      |     |      |    |      |  
|CASH FLOWS FROM INVESTING ACTIVITES                       |                                                                                   |                                                                                |                                                  |             |      |     |     
|                                                          | Expenditures for property, plant and
equipment                                    |                                                                                | (116                                             | )           |      |     | (86  | ) 
|                                                          | Increase in loans to affiliates, net                                              |                                                                                | (11                                              | )           |      |     | (20  | ) 
|                                                          |                                                                                   |                                                                                | Net cash used in investing activities            |             | (127 | )   |      |    | (106 | )
|                                                          |                                                                                   |                                                                                |                                                  |             |      |     |      |    |      |  
|CASH FLOWS FROM FINANCING ACTIVITES                       |                                                                                   |                                                                                |                                                  |             |      |     |     
|                                                          | Common dividends paid                                                             |                                                                                | (150                                             | )           |      |     | (100 | ) 
|                                                          |                                                                                   |                                                                                | Net cash used in financing activities            |             | (150 | )   |      |    | (100 | )
|                                                          |                                                                                   |                                                                                |                                                  |             |      |     |      |    |      |  
|Increase in cash and cash equivalents                     |                                                                                   | 292                                                                            |                                                  |             |      | 194 |     
|Cash and cash equivalents, January 1                      |                                                                                   | 59                                                                             |                                                  |             |      | 211 |     
|Cash and cash equivalents, March 31                       | $                                                                                 | 351                                                                            |                                                  |             | $    | 405 |     
|                                                          |                                                                                   |                                                                                |                                                  |             |      |     |      |    |      |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION          |                                                                                   |                                                                                |                                                  |             |      |     |     
|                                                          | Interest payments, net of amounts
capitalized                                     | $                                                                              | 8                                                |             |      | $   | 10   |   
|                                                          | Income tax payments, net of refunds                                               | $                                                                              | --                                               |             |      | $   | 18   |   
|                                                          |                                                                                   |                                                                                |                                                  |             |      |     |      |    |      |  
|SUPPLEMENTAL
DISCLOSURE OF NONCASH INVESTING ACTIVITY     |                                                                                   |                                                                                |                                                  |             |      |     |     
|                                                          |                                                                                   | Decrease in
accounts payable from investments in property, plant and
equipment | $                                                | (16         | )    |     | $    | (3 | )   
|                                                          |                                                                                   |                                                                                |                                                  |             |      |     |      |    |      |  
|See Notes to Condensed Consolidated Financial
Statements.





10









NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1.
GENERAL



Principles of
Consolidation



This Quarterly Report
on Form 10-Q is that of Pacific Enterprises (PE) and Southern California Gas
Company (SoCalGas) (collectively referred to as the company or the companies).
PEs common stock is wholly owned by Sempra Energy, a California-based Fortune
500 holding company, and PE owns all of the common stock of SoCalGas. The
accompanying financial statements are, in one case, the Condensed Consolidated
Financial Statements of PE and its subsidiary, SoCalGas, and, in the other case,
the Condensed Consolidated Financial Statements of SoCalGas and its
subsidiaries, which comprise less than one percent of SoCalGas' consolidated
financial position and results of operations.



Sempra Energy also
indirectly owns all of the common stock of San Diego Gas & Electric Company
(SDG&E). SoCalGas and SDG&E are collectively referred to as the Sempra
Utilities.



Basis of
Presentation



The Condensed
Consolidated Financial Statements have been prepared in conformity with
accounting principles generally accepted in the United States of America (GAAP)
and in accordance with the interim-period-reporting requirements of Form 10-Q.
Results of operations for interim periods are not necessarily indicative of
results for the entire year. In the opinion of management, the accompanying
statements reflect all adjustments necessary for a fair presentation. These
adjustments are only of a normal, recurring nature.



Information in this
Quarterly Report should be read in conjunction with the companys Annual Report
on Form 10-K for the year ended December 31, 2007 (the Annual Report).



The companies' significant accounting policies are described in
Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
The same accounting policies are followed for interim reporting purposes, except
for the adoption of new accounting standards as discussed in Note 2.



SoCalGas accounts for
the economic effects of regulation on utility operations in accordance with
Statement of Financial Accounting Standards (SFAS)71, Accounting for
the Effects of Certain Types of Regulation.



NOTE 2. NEW
ACCOUNTING STANDARDS



Recently issued
pronouncements that have had or may have a significant effect on the company's
financial statements are described below.



SFAS 159, "The
Fair Value Option for Financial Assets and Financial Liabilities  including an
amendment of FASB Statement No. 115" (SFAS 159): SFAS 159 allows
measurement at fair value of eligible financial assets and liabilities that are
not otherwise measured at fair value. If the fair value option for an eligible
item is elected, unrealized gains and losses for that item are reported in
current earnings at each subsequent reporting date. SFAS 159 also establishes
presentation and disclosure requirements designed to draw comparison between the
different measurement attributes the company elects for similar types of assets
and liabilities. This



11









statement is
effective for fiscal years beginning after November 15, 2007. The company
did not elect the fair value option at the adoption of SFAS 159 for any of its
eligible financial assets or liabilities.



SFAS 161,
"Disclosures about Derivative Instruments and Hedging Activities  an amendment
of FASB Statement No. 133" (SFAS 161):SFAS 161 expands the disclosure
requirements in Financial Accounting Standards Board (FASB) Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities (SFAS 133).
SFAS 161 requires qualitative disclosures about objectives and strategies for
using derivatives, quantitative disclosures about fair value amounts of and
gains and losses on derivative instruments, and disclosures about
credit-risk-related contingent features in derivative agreements. SFAS 161 is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008. Early application is encouraged. The company
is in the process of evaluating the effect of this statement on its
financial statement disclosures.



FASB Staff
Position (FSP) FIN 39-1, "Amendment of FASB Interpretation No. 39" (FSP FIN
39-1): FSP FIN 39-1 amends certain paragraphs of FASB Interpretation No.
39, Offsetting of Amounts Related to Certain Contracts, to permit a
reporting entity to offset fair value amounts recognized for the right to
reclaim or the obligation to return cash collateral against fair value amounts
recognized for derivative instruments executed with the same counterparty under
the same master netting arrangement. FSP FIN 39-1 is effective for fiscal years
beginning after November 15, 2007. The company adopted FSP FIN 39-1 effective
January 1, 2008. The company applied FSP FIN 39-1 as a change in accounting
principle through retrospective application. Each consolidated balance sheet
herein reflects the offsetting of net derivative positions with fair value
amounts for cash collateral with the same counterparty when management believes
a legal right of setoff exists. The adoption of FSP FIN 39-1 did not have a
material impact on the company's financial statements. Additional disclosure is
provided in Note 4.



NOTE
3. OTHER FINANCIAL DATA



Pension and Other
Postretirement Benefits



The following table
provides the components of benefit costs:



|                                |                             |      |                               |   |      |    |   |      |    |   |      |    |  
|------------------------------- | --------------------------- | ---- | ----------------------------- | - | ---- | -- | - | ---- | -- | - | ---- | -- | -
|                                | Pension Benefits            |      | Other Postretirement Benefits |  
|                                | Three months ended          |      | Three months ended            |  
|                                | March 31,                   |      | March 31,                     |  
|(Dollars in millions)           |                             | 2008 |                               |   | 2007 |    |   | 2008 |    |   | 2007 |   
|Service cost                    | $                           | 10   |                               | $ | 11   |    | $ | 4    |    | $ | 5    |   
|Interest cost                   |                             | 25   |                               |   | 24   |    |   | 11   |    |   | 11   |   
|Expected return on assets       |                             | (26  | )                             |   | (26  | )  |   | (11  | )  |   | (10  | ) 
|Amortization of:                |                             |      |                               |   |      |    |   |      |    |   |      |   
|                                | Prior
service cost (credit) |      | 1                             |   |      | 1  |   |      | (1 | ) |      | (2 | )
|                                | Actuarial loss              |      | --                            |   |      | -- |   |      | -- |   |      | 2  |  
|Regulatory adjustment           |                             | (9   | )                             |   | (10  | )  |   | 2    |    |   | 2    |   
|Total net
periodic benefit cost | $                           | 1    |                               | $ | --   |    | $ | 5    |    | $ | 8    |   



The company expects
to contribute $2 million to its pension plan and $19 million to its other
postretirement benefit plans in 2008. For the three months ended March 31, 2008,
the company made contributions of a negligible amount and $5 million to the
pension plan and other postretirement benefit plans, respectively.



12











Capitalized
Interest



The
company recorded $1 million and a negligible amount of capitalized interest for
the three months ended March 31, 2008 and 2007, respectively, including
primarily the debt-related portion of allowance for funds used during
construction.



Comprehensive
Income



The
following is a reconciliation of net income to comprehensive income for PE.



|                       |                                                                                    |    |      |   |    |  | 
|---------------------- | ---------------------------------------------------------------------------------- | -- | ---- | - | -- |  | 
|                       | Three months ended                                                                
|                       | March 31,                                                                         
|(Dollars in millions)  | 2008                                                                               |    | 2007
|Net income             | $                                                                                  | 58 |      | $ | 58 | 
|Financial instruments* |                                                                                    | (5 | )    |   | -- | 
|Comprehensive income   | $                                                                                  | 53 |      | $ | 58 | 
|*                      | Net of income tax benefit of $4
million for the three months ended March 31, 2008.



The
following is a reconciliation of net income to comprehensive income for
SoCalGas.



|                       |                                                                                    |    |      |   |    |  | 
|---------------------- | ---------------------------------------------------------------------------------- | -- | ---- | - | -- |  | 
|                       | Three months ended                                                                
|                       | March 31,                                                                         
|(Dollars in millions)  | 2008                                                                               |    | 2007
|Net income             | $                                                                                  | 57 |      | $ | 55 | 
|Financial instruments* |                                                                                    | (5 | )    |   | -- | 
|Comprehensive income   | $                                                                                  | 52 |      | $ | 55 | 
|*                      | Net of income tax benefit of $4
million for the three months ended March 31, 2008.



Other Expense,
Net



Other Expense, Net
consists of the following:



|                                                    |                    |      |   |  |  |   |    |  
|--------------------------------------------------- | ------------------ | ---- | - |  |  | - | -- | -
|                                                    | Three months ended
|                                                    | March 31,         
|(Dollars in millions)                               | 2008               | 2007
|Regulatory interest, net                            | $                  | (1   | ) |  |  | $ | (2 | )
|Allowance for equity funds used during
construction |                    | 2    |   |  |  |   | 1  |  
|Sundry, net                                         |                    | (1   | ) |  |  |   | (1 | )
|Total at SoCalGas and Pacific
Enterprises           | $                  | --   |   |  |  | $ | (2 | )



NOTE 4. FINANCIAL
INSTRUMENTS



The company
periodically uses commodity derivative instruments and interest-rate swap
agreements to moderate its exposure to commodity price changes and interest-rate
changes and to lower its overall cost of borrowing.





13









Fair
Value Hedges



As of March 31, 2008
and December 31, 2007, the company has a fair value hedge for a notional amount
of debt totaling $150 million. The fair value hedge balance was an asset of $7
million and $2 million at March 31, 2008 and December 31, 2007, respectively.
The hedge expires in 2011.



Market value
adjustments since inception of the hedge were recorded as an increase in
fixed-price contracts and other derivatives (in noncurrent assets as Sundry or
in Deferred Credits and Other) and as a corresponding increase or decrease in
Long-Term Debt without affecting net income or other comprehensive income. There
has been no hedge ineffectiveness on this swap.



Cash Flow
Hedges



As of March 31, 2008
and December 31, 2007, the company had established a cash flow interest-rate
swap hedge for a notional amount of debt totaling $183 million. The swap expires
in 2038. There has been no hedge ineffectiveness on this swap.



Natural
Gas Contracts



The use of derivative
instruments is subject to certain limitations imposed by company policy and
regulatory requirements. These instruments enable the company to estimate with
greater certainty the effective prices to be received by the company and the
prices to be charged to its customers. The company records realized gains or
losses on derivative instruments associated with transactions for natural gas
contracts in Cost of Natural Gas on the Statements of Consolidated Income. On
the Consolidated Balance Sheets, the company records corresponding regulatory
assets and liabilities related to unrealized gains and losses from these
derivative instruments to the extent derivative gains and losses associated with
these derivative instruments will be payable or recoverable in future rates.



Adoption of FSP FIN 39-1



The company adopted FSP FIN 39-1 effective
January 1, 2008. Each Consolidated Balance Sheet herein reflects the offsetting
of net derivative positions with fair value amounts for cash collateral with the
same counterparty when management believes a legal right of setoff exists. As of
March 31, 2008, the company offset fair value cash collateral receivables
against net derivative positions of $1 million. As of December 31, 2007, the
retrospective application of FSP FIN 39-1 had no impact on the Consolidated
Balance Sheet. The fair value of commodity derivative assets and liabilities as
of March 31, 2008 and December 31, 2007, determined in accordance with the
company's netting policy, is disclosed below. The fair value of cash collateral
that was not offset in the Consolidated Balance Sheets as of both March 31, 2008
and December 31, 2007 was $7 million.





14









Fair Value
Hierarchy



The companys
valuation techniques used to measure fair value and the definition of the three
levels of the fair value hierarchy, as defined in SFAS 157,Fair Value
Measurements (SFAS 157), are discussed in Note 7 of the Notes to
Consolidated Financial Statements in the Annual Report.



The following tables
set forth by level within the fair value hierarchy the company's financial
assets that were accounted for at fair value on a recurring basis as of March
31, 2008. The company's financial liabilities were a
negligible amount as of December 31, 2007. As required by SFAS 157, financial
assets and liabilities are classified in their entirety based on the lowest
level of input that is significant to the fair value measurement. The company's
assessment of the significance of a particular input to the fair value
measurement requires judgment, and may affect the valuation of fair value assets
and liabilities and their placement within the fair value hierarchy levels.



|                              |   |                                    |   |         |   |         |   |      
|----------------------------- | - | ---------------------------------- | - | ------- | - | ------- | - | -----
|Recurring Fair Value Measures |   | At fair value as of March 31,
2008
|(Dollars in millions)         |   | Level 1                            |   | Level 2 |   | Level 3 |   | Total
|Assets:                       |   |                                    |   |         |   |         |   |      
|Commodity derivatives         | $ | 7                                  | $ | 1       | $ | --      | $ | 8    
|Other derivatives             |   | --                                 |   | 7       |   | --      |   | 7    
|Total                         | $ | 7                                  | $ | 8       | $ | --      | $ | 15   
|                              |   |                                    |   |         |   |         |   |      
|Liabilities:                  |   |                                    |   |         |   |         |   |      
|Other derivatives             | $ | --                                 | $ | 7       | $ | --      | $ | 7    





|                              |   |                                       |   |         |   |         |   |      
|----------------------------- | - | ------------------------------------- | - | ------- | - | ------- | - | -----
|Recurring Fair Value Measures |   | At fair value as of December 31,
2007
|(Dollars in millions)         |   | Level 1                               |   | Level 2 |   | Level 3 |   | Total
|Assets:                       |   |                                       |   |         |   |         |   |      
|Commodity derivatives         | $ | 7                                     | $ | 1       | $ | --      | $ | 8    
|Other derivatives             |   | --                                    |   | 5       |   | --      |   | 5    
|Total                         | $ | 7                                     | $ | 6       | $ | --      | $ | 13   



NOTE 5. REGULATORY
MATTERS



General Rate Case
(GRC)



In December 2007, the
company filed a settlement agreement with the California Public Utilities
Commission (CPUC) pertaining to its 2008 General Rate Case (2008 GRC) that
would, if approved by the CPUC, provide a 2008 revenue requirement of $1.685
billion and would resolve all 2008 revenue requirement issues. If adopted, the
settlement would represent an increase in the annual revenue requirement in 2008
of $59 million, as compared to the 2007 revenue requirement. The company also
reached agreement with certain parties in the 2008 GRC, also subject to CPUC
approval, regarding post test-year provisions including the duration of the
post-test years (2008 GRC period), earnings sharing and the year-to-year
increases to the annual authorized revenue during the GRC period. The parties,
with the exception of the CPUC's Division of Ratepayer Advocates (DRA), agreed
to a GRC term of four years (2008 through 2011), with the DRA separately
agreeing to a term of five years (through 2012). All parties agreed to post
test-year revenue requirement increases in fixed dollar amounts. All parties
also agreed that there would be no earnings sharing between the company and
ratepayers should the company achieve earnings above or below the authorized
return on equity for any year in the post test-year period.



15











The company has filed
a request with the CPUC to make any decision on the 2008 GRC effective
retroactive to January 1, 2008. A final CPUC decision on all 2008 GRC issues, as
noted above, is expected in the second quarter of 2008.



As a final CPUC
decision in regard to the 2008 GRC has not been issued, the company is reporting
first quarter 2008 revenue associated with CPUC-regulated operations consistent
with the 2007 revenue requirement as established by the CPUC's 2004 Cost of
Service decision.



Utility Ratemaking
Incentive Awards



Performance-Based
Regulation (PBR) consists of a series of measures of utility performance.
Generally, if performance is outside of a band around specified benchmarks, the
utility is subject to financial rewards or penalties. The three areas that are
eligible for incentive awards or penalties are operational incentives, which
measure safety and customer service; energy efficiency (sometimes referred to as
demand-side management, or DSM or EE) awards based on the effectiveness of the
energy efficiency programs; and natural gas procurement awards or penalties. The
operational PBR incentives, and the associated benchmarks, are determined as a
component of a general rate case or cost of service decision. The operational
PBR incentives to be in effect for fiscal year 2008 through the end of the 2008
GRC period are under consideration as part of the 2008 GRC. The company has
recommended continuing the PBR measures that were in effect through 2007 with
slight modifications to the benchmarks. As noted above, the company expects a
final CPUC decision on this issue in the second quarter of 2008.



Incentive awards are
not included in the company's earnings until CPUC approval of the award is
received.



Energy
Efficiency



In January 2008, the
CPUC issued a decision modifying the measurement and verification process of
this incentive mechanism. The company submitted its initial report on its 2006
and 2007 energy efficiency results, as compared to goal, with the CPUC in the
first quarter of 2008. A final CPUC decision is anticipated by early 2009.



Natural Gas
Procurement



In January 2008, the
CPUC approved a SoCalGas gas cost incentive mechanism award of $9 million
(pretax), which was recorded in the first quarter of 2008.



NOTE 6.
COMMITMENTS AND CONTINGENCIES



Legal
Proceedings



At March 31, 2008,
the companys reserves for litigation matters were $75 million, all of which
related to settlements reached to resolve certain litigation arising out of the
2000  2001 California energy crisis. The uncertainties inherent in complex
legal proceedings make it difficult to estimate with reasonable certainty the
costs and effects of resolving legal matters. Accordingly, costs ultimately
incurred may differ materially from estimated costs and could materially
adversely affect the company's business, cash flows, results of operations and
financial condition.





16









Sempra Commodities,
Sempra Generation and Sempra LNG, referred to in the following discussion, are
business units of Sempra Energy.



Continental Forge
Settlement



The litigation that
is the subject of the settlements and $75million of reserves is
frequently referred to as the Continental Forge litigation, although the
settlements also include other cases. The Continental Forge class-action and
individual antitrust and unfair competition lawsuits in California and Nevada
alleged that Sempra Energy and the Sempra Utilities unlawfully sought to control
natural gas and electricity markets and claimed damages in excess of $23 billion
after applicable trebling.



The San Diego County
Superior Court entered a final order approving the settlement of the Continental
Forge class-action litigation as fair and reasonable in July 2006. The
California Attorney General and the Department of Water Resources (DWR) have
appealed the final order. Oral argument is expected to take place in 2008. The
Nevada Clark County District Court entered an order approving the Nevada
class-action settlement in September 2006. Both the California and Nevada
settlements must be approved for either settlement to take effect, but Sempra
Energyis permitted to waive this condition. The settlements are not
conditioned upon approval by the CPUC, the DWR, or any other governmental or
regulatory agency.



To settle the
California and Nevada litigation, in January 2006, Sempra Energy agreed to make
cash payments in installments aggregating $377 million, of which $347 million
relates to the Continental Forge and California class action price reporting
litigation and $30 million relates to the Nevada antitrust litigation. The Los
Angeles City Council had not previously voted to approve the City of Los
Angeles' participation in the January 2006 California settlement. In March 2007,
Sempra Energy and the Sempra Utilities entered into a separate settlement
agreement with the City of Los Angeles resolving all of its claims in the
Continental Forge litigation in return for the payment of $8.5 million in April
2007. This payment was made in lieu of the $12 million payable in eight annual
installments that the City of Los Angeles was to receive as part of the January
2006 California settlement.



Additional
consideration for the January 2006 California settlement includes an agreement
that Sempra LNG would sell to the Sempra Utilities, subject to CPUC approval,
regasified liquefied natural gas (LNG) from its LNG terminal being constructed
in Baja California, Mexico, for a period of 18 years at the California border
index price minus $0.02 per million British thermal units (MMBtu). Also, Sempra
Generation voluntarily would reduce the price that it charges for power and
limit the locations at which it would deliver power under its DWR contract.
Based on the expected contractual power deliveries, this discount would have
potential value aggregating $300 million over the contract's then remaining
six-year term.



Under the terms of
the January 2006 settlements, $83 million was paid in August 2006 and an
additional $83 million was paid in August 2007. Of the remaining amounts, $25.8
million is to be paid on the closing date of the January 2006 settlements, which
will take place after the resolution of all appeals, and $24.8 million will be
paid on each successive anniversary of the closing date through the seventh
anniversary of the closing date, as adjusted for the City of Los Angeles
settlement. Under the terms of the City of Los Angeles settlement, $8.5 million
was paid in April 2007. The reserves recorded for the California and Nevada
settlements by Sempra Energy, including SoCalGas, in 2005 fully provide for the
present value of both the cash amounts to be paid in the settlements and the
price discount to be provided on electricity to be delivered under the DWR
contract. A portion of the reserves was discounted at 7 percent, the rate
specified for



17









prepayments in the
settlement agreement. For payments not addressed in the agreement and for
periods from the settlement date through the estimated date of the first
payment, 5 percent was used to approximate Sempra Energy's average cost of
financing.



Other Natural Gas
Cases



In April 2003, Sierra
Pacific Resources and its utility subsidiary Nevada Power filed a lawsuit in the
U.S. District Court in Nevada against major natural gas suppliers, including
Sempra Energy, the Sempra Utilities and Sempra Commodities, seeking recovery of
damages alleged to aggregate in excess of $150 million (before trebling). The
lawsuit alleges a conspiracy to manipulate and inflate the prices that Nevada
Power had to pay for its natural gas by preventing the construction of natural
gas pipelines to serve Nevada and other Western states, and reporting
artificially inflated prices to trade publications. The U.S. District Court
dismissed the case in November 2004, determining that the Federal Energy
Regulatory Commission (FERC) had exclusive jurisdiction to resolve the claims.
In September 2007, the U.S. Court of Appeals for the Ninth Circuit (Ninth
Circuit Court of Appeals) reversed the dismissal and returned the case to the
District Court for further proceedings.



Apart from the claims
settled in connection with the Continental Forge settlement, the remaining 13
state antitrust actions that were coordinated in San Diego Superior Court
against Sempra Energy, the Sempra Utilities and Sempra Commodities and other,
unrelated energy companies,alleging that energy prices were unlawfully
manipulated by the reporting of artificially inflated natural gas prices to
trade publications and by entering into wash trades and churning transactions,
were settled on January 4, 2008, for $2.5 million.



Pending in the U.S.
District Court in Nevada are five cases against Sempra Energy, Sempra
Commodities, the Sempra Utilities and various other companies, which make
similar allegations to those in the state proceedings, four of which also
include conspiracy allegations similar to those made in the Continental Forge
litigation. The court dismissed four of these actions in 2005, determining that
the FERC had exclusive jurisdiction to resolve the claims. The remaining case,
which includes conspiracy allegations, was stayed. In September 2007, the Ninth
Circuit Court of Appeals reversed the dismissal and returned the cases to the
District Court for further proceedings.



Other
Litigation



In 1998, SoCalGas
converted its traditional pension plan for non-union employees to a cash balance
plan. In July 2005, a lawsuit was filed against the company in the U.S. District
Court for the Central District of California alleging that the conversion
unlawfully discriminated against older employees and failed to provide required
disclosure of a reduction in benefits. In October 2005, the court dismissed
three of the four causes of action and, in March 2006, dismissed the remaining
cause of action. The Ninth Circuit Court of Appeals heard oral argument on the
matter on February 15, 2008, and took the matter under submission.







18











ITEM
2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS





The following
discussion should be read in conjunction with the financial statements contained
in this Form 10-Q and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Risk Factors" contained in the
company's 2007 Annual Report on Form 10-K (Annual Report).



RESULTS OF
OPERATIONS



Revenues and Cost
of Sales



During the three
months ended March 31, 2008, natural gas revenues and the cost of natural gas
increased compared to the corresponding period in 2007, primarily as a result of
higher natural gas prices and volumes.



As a final decision
in the 2008 General Rate Case (GRC) was not issued by the California Public
Utilities Commission (CPUC) by March 31, 2008, revenues for the first quarter of
2008 associated with CPUC-regulated operations were consistent with the 2007
CPUC-authorized revenue established by the 2004 Cost of Service decision.



Although the current regulatory framework
provides that the cost of natural gas purchased for core customers be passed
through to the customers on a substantially concurrent basis, SoCalGas' Gas Cost
Incentive Mechanism (GCIM) allows SoCalGas to share in the savings or costs from
buying natural gas for its customers below or above market-based monthly
benchmarks. The mechanism permits full recovery of all costs within a tolerance
band around the benchmark price. The costs or savings outside the tolerance band
are shared between customers and shareholders. Further discussion is provided in
Notes 1 and 9 of the Notes to Consolidated Financial Statements in the Annual
Report.



The table below
summarizes natural gas volumes and revenues by customer class for the three
months ended March 31.





19









Natural Gas Sales,
Transportation and Exchange

(Volumes in billion
cubic feet, dollars in millions)



|                             |  |                   |  |                             |   |         |  |         |     |         |  |         |    |  |  |     |  |  |   |       | 
|---------------------------- |  | ----------------- |  | --------------------------- | - | ------- |  | ------- | --- | ------- |  | ------- | -- |  |  | --- |  |  | - | ----- | 
|                             |  | Natural Gas Sales |  | Transportation and Exchange |   | Total  
|                             |  | Volumes           |  | Revenue                     |   | Volumes |  | Revenue |     | Volumes |  | Revenue
|2008:                        |  |                   |  |                             |   |         |  |         |     |         |  |         |    |  |  |     |  |  |   |       | 
|Residential                  |  | 94                |  |                             | $ | 1,113   |  |         | --  |         |  | $       | 2  |  |  | 94  |  |  | $ | 1,115 | 
|Commercial and industrial    |  | 31                |  |                             |   | 340     |  |         | 71  |         |  |         | 32 |  |  | 102 |  |  |   | 372   | 
|Electric generation plants   |  | --                |  |                             |   | --      |  |         | 40  |         |  |         | 14 |  |  | 40  |  |  |   | 14    | 
|Wholesale                    |  | --                |  |                             |   | --      |  |         | 44  |         |  |         | 6  |  |  | 44  |  |  |   | 6     | 
|                             |  | 125               |  |                             | $ | 1,453   |  |         | 155 |         |  | $       | 54 |  |  | 280 |  |  |   | 1,507 | 
|Balancing
accounts and other |  |                   |  |                             |   |         |  |         |     |         |  |         |    |  |  |     |  |  |   | 49    | 
|Total                        |  |                   |  |                             |   |         |  |         |     |         |  |         |    |  |  |     |  |  | $ | 1,556 | 
|2007:                        |  |                   |  |                             |   |         |  |         |     |         |  |         |    |  |  |     |  |  |   |       | 
|Residential                  |  | 90                |  |                             | $ | 953     |  |         | --  |         |  | $       | 2  |  |  | 90  |  |  | $ | 955   | 
|Commercial and industrial    |  | 32                |  |                             |   | 299     |  |         | 68  |         |  |         | 39 |  |  | 100 |  |  |   | 338   | 
|Electric generation plants   |  | --                |  |                             |   | --      |  |         | 29  |         |  |         | 10 |  |  | 29  |  |  |   | 10    | 
|Wholesale                    |  | --                |  |                             |   | --      |  |         | 40  |         |  |         | 13 |  |  | 40  |  |  |   | 13    | 
|                             |  | 122               |  |                             | $ | 1,252   |  |         | 137 |         |  | $       | 64 |  |  | 259 |  |  |   | 1,316 | 
|Balancing
accounts and other |  |                   |  |                             |   |         |  |         |     |         |  |         |    |  |  |     |  |  |   | 52    | 
|Total                        |  |                   |  |                             |   |         |  |         |     |         |  |         |    |  |  |     |  |  | $ | 1,368 | 



Income
Taxes



Income tax expense
was$41 million and $41 million ($40 million and $39 million for
SoCalGas) for the three months ended March 31, 2008 and 2007, respectively, and
the effective income tax rates for the company and SoCalGas were 41 percent in
each of the three-month periods ended March 31, 2008 and 2007.



Net Income



Net income for
SoCalGas increased by $2 million (4%) in the three months ended March 31, 2008
to $57 million. The increase was primarily due to a GCIM award, after-tax, of $5
million in 2008, largely offset by $3 million lower earnings from the deferral
of 2008 non-core natural gas storage revenue in accordance with the Omnibus Gas
Settlements, as discussed in Note 9 of the Notes to Consolidated Financial
Statements in the Annual Report.



CAPITAL RESOURCES
AND LIQUIDITY



SoCalGas utility
operations generally are the major source of liquidity. In addition, cash
requirements can be met through the issuance of short-term and long-term debt.
Cash requirements primarily consist of capital expenditures for utility plant.



At March 31, 2008,
the company had $351 million in unrestricted cash and cash equivalents, and $500
million in available unused credit on its committed line at SoCalGas,which is shared with SDG&E and is discussed more fully in Note 3 of the
Notes to Consolidated Financial Statements in the Annual Report. Management
believes thatthese amounts and cash flows from operations andsecurity issuances, combined with current cash balances, will be adequate to
finance capital expenditures and meet liquidity requirements and to fund
shareholder dividends and other commitments. Management continues to regularly
monitor SoCalGas' ability to finance the needs



20









of its operating,
investing and financing activities in a manner consistent with its intention to
maintain strong, investment-quality credit ratings.



CASH FLOWS FROM
OPERATING ACTIVITIES



Net cash provided by
PE's operating activities increased by $168 million (42%) to $572 million for
2008 due to the increase in net cash provided by SoCalGas operating activities,
which increased by $169 million (42%) to $569 million for 2008. The changes were
primarily due to a $55 million increase in accounts payable in 2008 compared to
a $101 million decrease in 2007, a $113 million higher increase in other current
liabilities and a $39 million higher increase in overcollected regulatory
balancing accounts, offset by a $30 million increase in accounts receivable in
2008 compared to a $107 million decrease in 2007.



For the three months
ended March 31, 2008,the company made contributions of a negligible
amount and $5 million to the pension plan and other postretirement benefit
plans, respectively.



CASH FLOWS FROM
INVESTING ACTIVITIES



Net cash used in PE's
investing activities increased by $20 million (18%) to $129 million for 2008.
Net cash used in SoCalGas' investing activities increased by $21 million (20%)
to $127 million for 2008. The changes were primarily due to a $30 million
increase in capital expenditures.



Significant capital
expenditures in 2008 are expected to include $400 million for improvements to
distribution and transmission systems. These expenditures are expected to be
financed by cash flows from operations, cash on hand and security issuances.



CASH FLOWS FROM
FINANCING ACTIVITIES



Net cash used in PE's
financing activities increased by $50 million (50%) to $151 million for 2008.
Net cash used in SoCalGas' financing activities increased by $50 million (50%)
to $150 million for 2008. The changes were due to a $50 million increase in
common dividends paid in 2008 compared to 2007.



COMMITMENTS



At March 31, 2008,
there were no significant changes to the commitments that were disclosed in the
Annual Report, except for an increase of $1.2 billion related to natural gas
contracts at SoCalGas, of which $187 million related to the transfer of
SDG&Es natural gas supply portfolio to SoCalGas as part of the Omnibus Gas
Settlements discussed in Note 9 of the Notes to Consolidated Financial
Statements in the Annual Report. The future payments under these contractual
commitments are expected to be $717 million for 2008, $268 million for 2009, $28
million for 2010, $15 million for 2011, $15 million for 2012 and $132 million
thereafter.



FACTORS
INFLUENCING FUTURE PERFORMANCE



Performance of the
company will depend primarily on the ratemaking and regulatory process, natural
gas industry restructuring, and the changing energy marketplace. Performance
will also depend on the CPUCs final decision regarding the 2008 General Rate
Case and the successful completion of capital projects that are discussed in
various places in this report and in the Annual Report. These factors are
discussed in Note 5 of the Notes to Condensed Consolidated Financial



21









Statements herein and
in Note 9 of the Notes to Consolidated Financial Statements in the Annual
Report.



Litigation



Note 6 of the Notes
to Condensed Consolidated Financial Statements herein and Note 10 of the Notes
to Consolidated Financial Statements in the Annual Report describe litigation,
the ultimate resolution of which could have a material adverse effect on future
performance.



Industry
Developments



Note 5of the
Notes to Condensed Consolidated Financial Statements herein andNote 9 of
the Notes to Consolidated Financial Statements in the Annual Report describe
natural gas regulation and rates, and other pending proceedings and
investigations.



CRITICAL
ACCOUNTING POLICIES AND ESTIMATES



Certain accounting
policies are viewed by management as critical because their application is the
most relevant, judgmental and/or material to the company's financial position
and results of operations, and/or because they require the use of material
judgments and estimates. These accounting policies are discussed in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Annual Report.



The company's
significant accounting policies are described in Note 1 of the Notes to
Consolidated Financial Statements in the Annual Report.



NEW ACCOUNTING
STANDARDS



Recently issued
pronouncements that have had or may have a significant effect on the company's
financial statements are described in Note 2 of the Notes to Condensed
Consolidated Financial Statements herein.



ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



There have been no
significant changes in the risk issues affecting the company subsequent to those
discussed in the Annual Report.



As of March 31, 2008,
the total Value at Risk of SoCalGas' positions was not material.



ITEM
4. CONTROLS AND PROCEDURES



Company management is
responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Exchange Act Rules 13a-15(f). The company has
designed and maintains disclosure controls and procedures to ensure that
information required to be disclosed in the company's reports is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the Securities and Exchange Commission and is accumulated and
communicated to the company's management, including its Chief Executive Officer
and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. In designing and evaluating these controls and procedures,
management recognizes that any system of controls and procedures, no matter how
well designed and operated, can



22









provide only
reasonable assurance of achieving the desired objectives and necessarily applies
judgment in evaluating the cost-benefit relationship of other possible controls
and procedures. There have been no changes in the company's internal control
over financial reporting during the company's most recent fiscal quarter that
have materially affected, or are reasonably likely to materially affect, the
company's internal control over financial reporting.



The company evaluates
the effectiveness of its internal control over financial reporting based on the
framework in Internal Control--Integrated Frameworkissued by the
Committee of Sponsoring Organizations of the Treadway Commission. Under the
supervision and with the participation of management, including the Chief
Executive Officer and the Chief Financial Officer, the company evaluated the
effectiveness of the design and operation of the company's disclosure controls
and procedures as of March 31, 2008, the end of the period covered by this
report. Based on that evaluation, the company's Chief Executive Officer and
Chief Financial Officer concluded that the company's disclosure controls and
procedures were effective at the reasonable assurance level.



PART
II - OTHER INFORMATION



ITEM
1. LEGAL PROCEEDINGS



Except for the
matters described in Notes 5 and 6 of the Notes to Condensed Consolidated
Financial Statements herein, neither the company nor its subsidiaries are party
to, nor is their property the subject of, any material pending legal proceedings
other than routine litigation incidental to their businesses.



ITEM
1A. RISK FACTORS



There have been no
material changes from risk factors as previously disclosed in the company's 2007
Annual Report on Form 10-K.





23











|                                         |                                                                                                                                                                                                          
|---------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ITEM
6.EXHIBITS                         
|                                         |                                                                                                                                                                                                          
|Exhibit 10 -
Material Contracts         
|                                         |                                                                                                                                                                                                          
|10.1                                     | Indemnity
Agreement, dated as of April 1, 2008, between Sempra Energy, Pacific
Enterprises, Enova Corporation and The Royal Bank of Scotland plc. (March
31, 2008 Sempra Energy Form 10-Q, Exhibit 10.2).
|                                         |                                                                                                                                                                                                          
|Exhibit 12 -
Computation of ratios      
|                                         |                                                                                                                                                                                                          
|12.1                                     | Computation of
Ratio of Earnings to Combined Fixed Charges of PE.                                                                                                                                        
|                                         |                                                                                                                                                                                                          
|12.2                                     | Computation of
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
of SoCalGas.                                                                                                    
|                                         |                                                                                                                                                                                                          
|Exhibit 31 --
Section 302 Certifications
|                                         |                                                                                                                                                                                                          
|31.1                                     | Statement of
PE's Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 of the
Securities Exchange Act of 1934.                                                                                    
|                                         |                                                                                                                                                                                                          
|31.2                                     | Statement of
PE's Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 of the
Securities Exchange Act of 1934.                                                                                    
|                                         |                                                                                                                                                                                                          
|31.3                                     | Statement of
SoCalGas' Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 of
the Securities Exchange Act of 1934.                                                                               
|                                         |                                                                                                                                                                                                          
|31.4                                     | Statement of
SoCalGas' Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 of
the Securities Exchange Act of 1934.                                                                               
|                                         |                                                                                                                                                                                                          
|Exhibit 32 --
Section 906 Certifications
|                                         |                                                                                                                                                                                                          
|32.1                                     | Statement of
PE's Chief Executive Officer pursuant to 18 U.S.C. Sec. 1350.                                                                                                                               
|                                         |                                                                                                                                                                                                          
|32.2                                     | Statement of
PE's Chief Financial Officer pursuant to 18 U.S.C. Sec. 1350.                                                                                                                               
|                                         |                                                                                                                                                                                                          
|32.3                                     | Statement of
SoCalGas' Chief Executive Officer pursuant to 18 U.S.C. Sec.
1350.                                                                                                                          
|                                         |                                                                                                                                                                                                          
|32.4                                     | Statement of
SoCalGas' Chief Financial Officer pursuant to 18 U.S.C. Sec.
1350.                                                                                                                          





24













|                                                                                                                                                                                             |                                                                   
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------
|SIGNATURES                                                                                                                                                                                  
|Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by
the undersigned thereunto duly authorized.
|                                                                                                                                                                                             | PACIFIC
ENTERPRISES,(Registrant)                                  
|                                                                                                                                                                                             |                                                                   
|Date:
May 2, 2008                                                                                                                                                                            | By:
/s/ Dennis V. Arriola                                         
|                                                                                                                                                                                             | Dennis
V. ArriolaSenior Vice President and Chief Financial Officer
|                                                                                                                                                                                             |                                                                   
|                                                                                                                                                                                             | SOUTHERN
CALIFORNIA GAS COMPANY,(Registrant)                      
|                                                                                                                                                                                             |                                                                   
|Date:
May 2, 2008                                                                                                                                                                            | By:
/s/ Dennis V. Arriola                                         
|                                                                                                                                                                                             | Dennis
V. ArriolaSenior Vice President and Chief Financial
Officer









25