# EDGAR Filing Document

**Accession Number:** 0001032208
**File Stem:** 0001032208-23-000018
**Filing Date:** 2023-3
**Character Count:** 504857
**Document Hash:** e38af5035140850b50c05872d50d394a
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001032208-23-000018.hdr.sgml**: 20230329

**ACCESSION NUMBER**: 0001032208-23-000018

**CONFORMED SUBMISSION TYPE**: ARS

**PUBLIC DOCUMENT COUNT**: 1

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230329

**DATE AS OF CHANGE**: 20230329

**EFFECTIVENESS DATE**: 20230329

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** SEMPRA ENERGY
- **CENTRAL INDEX KEY:** 0001032208
- **STANDARD INDUSTRIAL CLASSIFICATION:** GAS & OTHER SERVICES COMBINED [4932]
- **IRS NUMBER:** 330732627
- **STATE OF INCORPORATION:** CA
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** ARS
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-14201
- **FILM NUMBER:** 23772025

**BUSINESS ADDRESS:**
- **STREET 1:** 488 8TH AVENUE
- **CITY:** SAN DIEGO
- **STATE:** CA
- **ZIP:** 92101
- **BUSINESS PHONE:** 6196962000

**MAIL ADDRESS:**
- **STREET 1:** 488 8TH AVENUE
- **CITY:** SAN DIEGO
- **STATE:** CA
- **ZIP:** 92101

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** MINERAL ENERGY CO
- **DATE OF NAME CHANGE:** 19970205

### Attached PDF Documents

**Attachment 1:** `a2022sempraannualreport.pdf`

2022
Annual
Report

# 2
YEARS AND GOING STRONG
5

SEMPRA

![img-0.jpeg](img-0.jpeg)

Jeffrey W. Martin

## Dear fellow shareholders:

We begin 2023 with great optimism. This year marks Sempra’s 25th anniversary - a milestone I am honored to recognize alongside thousands of talented employees across our family of companies. I am incredibly proud of the strong foundation we have built. Our company has long been committed to service to others, which is symbolized in the humanistic logo that accompanies our brand. At its heart, this commitment to service and the betterment of our community is central to our corporate culture and a constant reminder that we stand tallest when we are successful in finding new and better ways to serve customers, while enabling shareholders and stakeholders alike to thrive.

Today, in many ways, it is pride in our past that gives us confidence in our future. It is from

Sempra’s rich tradition of serving others that we understand our role in society and how we can meet the expectations of a growing list of stakeholders. While much has changed over the last quarter-century, our vision - *delivering energy with purpose* - has remained constant as we embrace each new challenge as an opportunity to create innovative, forward-looking solutions.

This is an important time for our company. Energy infrastructure is a great enabler of prosperity, health and well-being for billions of people around the world. That is why Sempra is pursuing the dual opportunities of advancing decarbonization and helping to deliver energy security globally, all while improving the resiliency of our delivery of energy in the markets we serve.

Visit our online annual report at sempra.com/annualreport

## Executing on Our Mission

At Sempra, our high-performing culture empowers us to deliver results the right way. Safety, affordability and reliability are core priorities of our business strategy as we execute a disciplined capital allocation approach to meet financial goals.

Our 2022 accomplishments include:

- Achieved outstanding safety records across our platforms.
- Achieved strong financial results while continuing to support a growing dividend.
- Delivered total shareholder return of 20% in 2022, which equals a return of 1,191% since we were founded in 1998, as compared to the S&P 500 Utilities and S&P 500 indices, which produced returns of 477% and 435%, respectively, during the same 25-year period.1
- Hit an all-time high stock price of $176.47 on September 12.2
- Completed the sale of a non-controlling, 10% interest in Sempra Infrastructure Partners to a subsidiary of Abu Dhabi Investment Authority for $1.7 billion, resulting in Sempra retaining a 70% controlling stake in Sempra Infrastructure Partners.
- Improved our sustainability programs to earn recognition as the #1 Ranked Utility in America for environmental, social and governance (ESG) and financial performance by Investor's Business Daily.

## Shaping the Future of Energy

For the past three years, our Leading 2025 strategic initiative - designed to drive sustained performance and long-term value for our shareholders and all stakeholders in the communities we serve - has guided our decisions. Our three growth platforms of Sempra California, Sempra Texas and Sempra Infrastructure are building the infrastructure that delivers electricity and cleaner fuels to some of North America's leading economies. Together, these growth platforms serve a common purpose of helping to meet the world's expanding decarbonization and energy security goals.

### Sempra California

Sempra's California utilities, San Diego Gas & Electric Co. (SDG&E) and Southern California Gas Co. (SoCalGas), are combining the power of research, technology and innovation to support California's ambitious clean energy goals.

Amid the urgency to address climate change and its impacts, SDG&E worked with third-party experts to create *The Path to Net Zero: A Decarbonization Roadmap for California*, which is an insightful study on how the state could achieve carbon neutrality by 2045 while increasing climate resiliency. In support of that strategy, SDG&E received California Public Utilities Commission (CPUC) approval of 200 megawatts of utility-owned energy storage, a portion of which is expected to support four microgrids located at strategic substations throughout the service territory. These initiatives are just a few of the examples of the operational excellence that earned SDG&E designation by PA Consulting in its ReliabilityOne® awards as the Best in the West for Electric Reliability for the 17th year in a row.

1Total shareholder return for 2022 is calculated for the one-year period ended December 31, 2022. Total shareholder return since Sempra's founding is calculated for the period from June 29, 1998 through December 31, 2022.

2Reflects the intraday high price of Sempra's common stock on September 12, 2022. The closing price of Sempra's common stock on March 1, 2023 was $147.86.

Sempra 2022 Annual Report 1

Sempra's California utilities are participating in more than 20 hydrogen research and demonstration projects underway aiming to enhance grid resiliency and help decarbonize the economy.

In 2022, SoCalGas announced a proposal to develop what would be the nation's largest green hydrogen energy infrastructure system, the Angeles Link. This proposal has the potential to significantly reduce greenhouse gas emissions from electric generation, industrial processes, heavy-duty trucking and other hard-to-electrify sectors in Southern California. In December, the CPUC approved SoCalGas establishing a memorandum account to track the costs of feasibility studies for Angeles Link - an important milestone for *SoCalGas' Aspire 2045* strategy.

### Sempra Texas

Oncor Electric Delivery Company LLC (Oncor), based in Dallas, continues to facilitate the growing integration of renewable energy throughout Texas. Its capital plan supports the build-out of critical new transmission and distribution infrastructure to support premise growth, new high-voltage interconnections and one of the fastest-growing economies in the nation. Oncor continues to grow and execute on its capital plan and harness innovative technologies to safely deliver reliable energy to Texans.

Oncor maintained steady operational execution in 2022, constructing new projects to support growth across Texas and increase reliability for the Electric Reliability Council of Texas market. The utility placed more than $1 billion of transmission projects into service, including

placement of 13 substations and 18 new switching stations into service and approximately 340 miles of new or upgraded high-voltage transmission lines. Additionally, in 2022, Oncor experienced a 53% increase in active generation and retail transmission interconnection requests. This strong momentum is driven by residential and commercial growth across Oncor's service territory and continued high demand for renewable energy.

### Sempra Infrastructure

The 2021 launch of Sempra Infrastructure, headquartered in Houston, is one of our most exciting milestones to date. With three innovative business lines - clean power, energy networks, and liquefied natural gas (LNG) and net-zero solutions - Sempra Infrastructure is making significant commercial advancements across its North American energy infrastructure projects, which are competitively positioned along the Gulf and Pacific Coasts.

Amidst heightened global interest in energy security concerns and the trend toward reducing the production of electricity from coal, the company's portfolio of LNG export development projects continued to make notable progress in 2022. Sempra Infrastructure's dual-coast strategy positions the company to supply LNG to both Atlantic and Pacific customers as the world marches forward on a decarbonization pathway while helping to meet the growing demands for secure and reliable energy. The company continues to make progress marketing its LNG development projects including Port Arthur LNG Phase 2 and Cameron LNG Phase 2.

2 Visit our online annual report at sempra.com/annualreport

The expansion at Cameron LNG currently targets a final investment decision after completion of a competitive front-end engineering and design process in the summer of 2023.

Sempra Infrastructure also made significant headway in the construction of Energía Costa Azul LNG Phase 1, contributing more than 5 million hours worked without a lost time incident.

### **Embracing a Dynamic Energy Future**

At Sempra, we believe we do well when the world around us thrives. That is why our purpose and business initiatives are aligned with addressing some of society's greatest challenges. At our very core, we need to deliver innovation and new infrastructure investments that help drive broad economic growth. We view these investments through the lens of enabling growth, prosperity and access to the cleaner fuels of the future.

As we look forward to the next 25 years, we envision a new era of technology and innovation with the potential to power advancements across the entire energy value chain. With new technologies, how energy is sustainably produced and transported will change - all with a view of producing more energy that is both cleaner and more affordable. We also believe that new technologies will emerge and unlock untold opportunities for consumer and industrial markets. Populations will grow and with them, the demand for energy essential to modern life. That is why our company views modern energy infrastructure as a key enabler of societal, economic, and environmental progress.

## **“It is pride in our past that gives us confidence in our future”**

At Sempra, progress means doing even more to deliver affordable, reliable and increasingly cleaner forms of energy. It means becoming more efficient, investing in innovation, growing the capabilities of our employees and returning greater value to our shareholders. I could not be more excited by Sempra's opportunity to continue to better serve customers by advancing our collective decarbonization and energy security goals - all while delivering value for shareholders.

On behalf of Sempra's leadership team and board of directors, thank you for your confidence in our mission and for partnering with us on this journey. Together, we are advancing a better future for all.

Boldly forward together,

Chairman and CEO

Sempra 2022 Annual Report 3

![img-1.jpeg](img-1.jpeg)

## About Sempra

Sempra is a leading North American energy infrastructure company that helps meet the daily energy needs of nearly 40 million consumers. As the owner of one of the largest energy networks on the continent, Sempra is helping to electrify and decarbonize some of the world's most significant economic markets, including California, Texas, Mexico and the LNG export market. The company is also consistently recognized as a leader in sustainable business practices and for its long-standing commitment to building a high-performance culture focused on safety, leadership and workforce development, and diversity and inclusion. Investor's Business Daily named Sempra the top-ranked utility in the U.S. for environmental, social and governance scores and financial performance. Sempra was also included on the Dow Jones Sustainability North America Index for the 12th consecutive year.

### Sempra California

SDG&E and SoCalGas are energy delivery companies that provide safe, reliable and increasingly clean energy to roughly 25 million consumers in Southern and Central California. With a focus on grid resiliency, reducing emissions and integrating more renewable energy onto its networks, they are also supporting California's goal of getting five million electric vehicles on the road by 2030. California is known for advancing new technologies and innovation, a spirit embraced at our California utilities that are at the forefront of research into hydrogen, battery storage, predictive technology and other tools designed to reduce the impact of severe weather events and support the state's ambitious climate goals.

### Sempra Texas*

Sempra Texas includes Oncor, a regulated electric transmission and distribution utility headquartered in Dallas that safely delivers reliable electricity to a population of approximately 13 million Texans. With more than 140,000 miles of transmission and distribution lines, Oncor is the largest pure-play transmission and distribution company in Texas, connecting communities across the state to Texas' diverse energy supplies.

### Sempra Infrastructure**

Sempra Infrastructure, headquartered in Houston, is focused on delivering energy for a better world by developing, building and operating and investing in renewable power plants, energy networks, and LNG and net-zero solutions that are expected to play a crucial role in the energy systems of the future. Through the combined strength of its assets in North America, Sempra Infrastructure is connecting customers across the globe to modern energy infrastructure to source and transport renewables and natural gas, while advancing carbon sequestration and clean hydrogen.

*Sempra indirectly owns an 80.25% interest in Oncor **Sempra owns a 70% interest in Sempra Infrastructure Partners, which, together with its operating company subsidiaries, primarily makes up the Sempra Infrastructure platform

4 Visit our online annual report at sempra.com/annualreport

# Financial Highlights

## Comparative Total Returns

![img-2.jpeg](img-2.jpeg)

The above graph compares the percentage change in the cumulative total shareholder return on Sempra common stock for the 20-year period ended December 31, 2022, with the performance over the same period of the S&P 500 Index and the S&P 500 Utilities Index.

These returns were calculated assuming an initial investment of $100 in our common stock, the S&P 500 Index and the S&P 500 Utilities Index on December 31, 2002, and the reinvestment of all dividends.

## Consolidated Data

| In millions, except per-share amounts | 2020 | 2021 | 2022 |
| --- | --- | --- | --- |
| Revenues | $11,370 | $12,857 | $14,439 |
| Earnings | $3,764 | $1,254 | $2,094 |
| Adjusted Earnings (1) | $2,342 | $2,637 | $2,915 |
| Earnings Per Common Share: |  |  |  |
| Basic | $12.93 | $4.03 | $6.65 |
| Diluted | $12.88 | $4.01 | $6.62 |
| Adjusted Diluted (1) | $8.00 | $8.43 | $9.21 |
| Diluted Weighted-Average Common Shares Outstanding: |  |  |  |
| GAAP | 292.3 | 313.0 | 316.4 |
| Adjusted (1) | 305.7 | 313.0 | 316.4 |
| Total Assets | $66,623 | $72,045 | $78,574 |
| Dividends Declared Per Common Share | $4.18 | $4.40 | $4.58 |
| Debt-to-Total Capitalization Ratio | 49% | 47% | 50% |
| Book Value Per Common Share | $70.11 | $79.17 | $83.43 |

(1) Represents a non-GAAP financial measure. GAAP represents generally accepted accounting principles in the United States of America. See A-pages for an explanation and reconciliation of non-GAAP financial measures.

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SEMPRA

# 2022
Form 10-K

![img-3.jpeg](img-3.jpeg)

[THIS PAGE INTENTIONALLY LEFT BLANK]

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

# **FORM 10-K**

(Mark One)

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended

December 31, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

to

| Commission File No. | Exact Name of Registrants as Specified in their Charters, Address and Telephone Number | State of Incorporation | I.R.S. Employer Identification Nos. |
| --- | --- | --- | --- |
| 1-14201 | SEMPRA ENERGY 488 8th Avenue San Diego, California 92101 (619) 696-2000 | California | 33-0732627 |
| 1-03779 | SAN DIEGO GAS & ELECTRIC COMPANY 8330 Century Park Court San Diego, California 92123 (619) 696-2000 | California | 95-1184800 |
| 1-01402 | SOUTHERN CALIFORNIA GAS COMPANY 555 West 5th Street Los Angeles, California 90013 (213) 244-1200 | California | 95-1240705 |

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
| --- | --- | --- |
| SEMPRA ENERGY: |  |  |
| Common Stock, without par value | SRE | New York Stock Exchange |
| 5.75% Junior Subordinated Notes Due 2079, $25 par value | SREA | New York Stock Exchange |
| SAN DIEGO GAS & ELECTRIC COMPANY: |  |  |
| None |  |  |
| SOUTHERN CALIFORNIA GAS COMPANY: |  |  |
| None |  |  |

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Title of Each Class

SEMPRA ENERGY:

None

SAN DIEGO GAS & ELECTRIC COMPANY:

None

SOUTHERN CALIFORNIA GAS COMPANY:

6% Preferred Stock, $25 par value

6% Preferred Stock, Series A, $25 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

| Sempra Energy | Yes ☑ | No ☐ |
| --- | --- | --- |
| San Diego Gas & Electric Company | Yes ☐ | No ☑ |
| Southern California Gas Company | Yes ☐ | No ☑ |

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

| Sempra Energy | Yes ☐ | No ☑ |
| --- | --- | --- |
| San Diego Gas & Electric Company | Yes ☐ | No ☑ |
| Southern California Gas Company | Yes ☐ | No ☑ |

Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants were required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Sempra Energy:

☑ Large Accelerated Filer ☐ Accelerated Filer ☐ Non-accelerated Filer ☐ Smaller Reporting Company ☐ Emerging Growth Company

San Diego Gas & Electric Company:

☐ Large Accelerated Filer ☐ Accelerated Filer ☑ Non-accelerated Filer ☐ Smaller Reporting Company ☐ Emerging Growth Company

Southern California Gas Company:

☐ Large Accelerated Filer ☐ Accelerated Filer ☑ Non-accelerated Filer ☐ Smaller Reporting Company ☐ Emerging Growth Company

2022 Form 10-K | 2

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Sempra Energy ☐
San Diego Gas & Electric Company ☐
Southern California Gas Company ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act by the registered public accounting firm that prepared or issued its audit report.

Sempra Energy ☒
San Diego Gas & Electric Company ☒
Southern California Gas Company ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Sempra Energy Yes ☐ No ☐
San Diego Gas & Electric Company Yes ☐ No ☐
Southern California Gas Company Yes ☐ No ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

Sempra Energy Yes ☐ No ☐
San Diego Gas & Electric Company Yes ☐ No ☐
Southern California Gas Company Yes ☐ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Sempra Energy Yes ☐ No ☒
San Diego Gas & Electric Company Yes ☐ No ☒
Southern California Gas Company Yes ☐ No ☒

Aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2022:

Sempra Energy $47.2 billion (based on the price at which the common equity was last sold as of the last business day of the most recently completed second fiscal quarter)
San Diego Gas & Electric Company $0
Southern California Gas Company $0

2022 Form 10-K | 3

Common Stock outstanding, without par value, as of February 21, 2023:

| Sempra Energy | 314,569,519 shares |
| --- | --- |
| San Diego Gas & Electric Company | Wholly owned by Enova Corporation, which is wholly owned by Sempra Energy |
| Southern California Gas Company | Wholly owned by Pacific Enterprises, which is wholly owned by Sempra Energy |

SAN DIEGO GAS & ELECTRIC COMPANY MEETS THE CONDITIONS OF GENERAL INSTRUCTIONS I(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS REPORT WITH A REDUCED DISCLOSURE FORMAT AS PERMITTED BY GENERAL INSTRUCTION I(2).

# DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Sempra Energy proxy statement to be filed for its May 2023 annual meeting of shareholders are incorporated by reference into Part III of this annual report on Form 10-K.

Portions of the Southern California Gas Company information statement to be filed for its May 2023 annual meeting of shareholders are incorporated by reference into Part III of this annual report on Form 10-K.

2022 Form 10-K | 4

# **SEMPRA ENERGY FORM 10-K**
**SAN DIEGO GAS & ELECTRIC COMPANY FORM 10-K**
**SOUTHERN CALIFORNIA GAS COMPANY FORM 10-K**
**TABLE OF CONTENTS**

|  | Page |
| --- | --- |
| Glossary | 6 |
| Information Regarding Forward-Looking Statements | 10 |
| Summary of Risk Factors | 12 |
| PART I |  |
| Item 1. Business | 13 |
| Item 1A. Risk Factors | 36 |
| Item 1B. Unresolved Staff Comments | 59 |
| Item 2. Properties | 59 |
| Item 3. Legal Proceedings | 59 |
| Item 4. Mine Safety Disclosures | 60 |
| PART II |  |
| Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 60 |
| Item 6. (Reserved) | 60 |
| Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations | 61 |
| Overview | 61 |
| Results of Operations | 61 |
| Capital Resources and Liquidity | 71 |
| Critical Accounting Estimates | 88 |
| Item 7A. Quantitative and Qualitative Disclosures About Market Risk | 92 |
| Item 8. Financial Statements and Supplementary Data | 95 |
| Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 95 |
| Item 9A. Controls and Procedures | 96 |
| Item 9B. Other Information | 100 |
| Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 100 |
| PART III |  |
| Item 10. Directors, Executive Officers and Corporate Governance | 100 |
| Item 11. Executive Compensation | 100 |
| Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 101 |
| Item 13. Certain Relationships and Related Transactions, and Director Independence | 101 |
| Item 14. Principal Accountant Fees and Services | 102 |
| PART IV |  |
| Item 15. Exhibits and Financial Statement Schedules | 103 |
| Item 16. Form 10-K Summary | 113 |
| Signatures | 114 |
| Index to Consolidated Financial Statements | F-1 |
| Index to Condensed Financial Information of Parent | S-1 |

This combined Form 10-K is separately filed by Sempra Energy doing business as Sempra, San Diego Gas & Electric Company and Southern California Gas Company. Information contained herein relating to any one of these individual reporting entities is filed by such entity on its own behalf. Each such reporting entity makes statements herein only as to itself and its consolidated entities and makes no statement whatsoever as to any other entity.

You should read this report in its entirety as it pertains to each respective reporting entity. No one section of the report deals with all aspects of the subject matter. A separate Part II - Item 8 is provided for each reporting entity, except for the Notes to Consolidated Financial Statements, which are combined for all of the reporting entities. All Items other than Part II - Item 8 are combined for the three reporting entities.

2022 Form 10-K | 5

The following terms and abbreviations appearing in this report have the meanings indicated below.

## GLOSSARY

| AB | California Assembly Bill |
| --- | --- |
| ADIA | Black Silverback ZC 2022 LP (assignee of Black River B 2017 Inc.), a wholly owned affiliate of Abu Dhabi Investment Authority |
| AFUDC | allowance for funds used during construction |
| AOCI | accumulated other comprehensive income (loss) |
| ARO | asset retirement obligation |
| ASC | Accounting Standards Codification |
| ASEA | Agencia de Seguridad, Energía y Ambiente (Mexico's National Agency for Industrial Safety and Environmental Protection) |
| ASR | accelerated share repurchase |
| ASU | Accounting Standards Update |
| Bcf | billion cubic feet |
| Bechtel | Bechtel Energy Inc. (formerly known as Bechtel Oil, Gas and Chemicals, Inc.) |
| bps | basis points |
| Cameron LNG JV | Cameron LNG Holdings, LLC |
| Cameron LNG Phase 1 facility | Cameron LNG JV liquefaction facility |
| Cameron LNG Phase 2 project | Cameron LNG JV liquefaction expansion project |
| CARB | California Air Resources Board |
| CCA | Community Choice Aggregation |
| CCM | cost of capital adjustment mechanism |
| CEC | California Energy Commission |
| CFE | Comisión Federal de Electricidad (Mexico's Federal Electricity Commission) |
| CFIN | Cameron LNG FINCO, LLC, a wholly owned and unconsolidated affiliate of Cameron LNG JV |
| Chilquinta Energía | Chilquinta Energía, S.A. and its subsidiaries |
| CNBV | Comisión Nacional Bancaria y de Valores (Mexico's National Banking and Securities Commission) |
| COVID-19 | coronavirus disease 2019 |
| CPUC | California Public Utilities Commission |
| CRE | Comisión Reguladora de Energía (Mexico's Energy Regulatory Commission) |
| CRR | congestion revenue right |
| DA | Direct Access |
| DEN | Ductos y Energéticos del Norte, S. de R.L. de C.V. |
| DER | distributed energy resources |
| DOE | U.S. Department of Energy |
| DOT | U.S. Department of Transportation |
| DWR | California Department of Water Resources |
| ECA LNG | ECA LNG Phase 1 and ECA LNG Phase 2, collectively |
| ECA LNG Phase 1 | ECA LNG Holdings B.V. |
| ECA LNG Phase 2 | ECA LNG II Holdings B.V. |
| ECA Regas Facility | Energía Costa Azul, S. de R.L. de C.V. LNG regasification facility |
| Ecogas | Ecogas México, S. de R.L. de C.V. |
| Edison | Southern California Edison Company, a subsidiary of Edison International |
| EFH | Energy Future Holdings Corp. (renamed Sempra Texas Holdings Corp.) |
| Eletrans | Eletrans S.A., Eletrans II S.A. and Eletrans III S.A., collectively |
| Enova | Enova Corporation |
| EPA | U.S. Environmental Protection Agency |
| EPC | engineering, procurement and construction |
| EPS | earnings (losses) per common share |
| ERCOT | Electric Reliability Council of Texas, Inc., the independent system operator and the regional coordinator of various electricity systems within Texas |
| ERR | eligible renewable energy resource |
| ESJ | Energía Sierra Juárez, S. de R.L. de C.V. |
| ETR | effective income tax rate |
| Exchange Act | Securities Exchange Act of 1934, as amended |
| FEED | front-end engineering design |
| FERC | Federal Energy Regulatory Commission |

2022 Form 10-K | 6

# **GLOSSARY (CONTINUED)**

| Fitch | Fitch Ratings, Inc. |
| --- | --- |
| FTA | Free Trade Agreement |
| Gazprom | Gazprom Marketing & Trading México S. de R.L. de C.V. |
| GCIM | Gas Cost Incentive Mechanism |
| GHG | greenhouse gas |
| GRC | General Rate Case |
| HMRC | His Majesty's Revenue and Customs (United Kingdom's Revenue and Customs Department) |
| HOA | Heads of Agreement |
| IEnova | Infraestructura Energética Nova, S.A.P.I. de C.V. |
| IEnova Pipelines | IEnova Pipelines, S. de R.L. de C.V. |
| IMG | Infraestructura Marina del Golfo |
| INEOS | INEOS Energy Trading Ltd., a subsidiary of INEOS Ltd. |
| IOU | investor-owned utility |
| IRA | Inflation Reduction Act of 2022 |
| IRS | U.S. Internal Revenue Service |
| ISFSI | independent spent fuel storage installation |
| ISO | Independent System Operator |
| JV | joint venture |
| KKR | KKR Pinnacle Investor L.P. (as successor-in-interest to KKR Pinnacle Aggregator L.P.), an affiliate of Kohlberg Kravis Roberts & Co. L.P. |
| kV | kilovolt |
| kW | kilowatt |
| kWh | kilowatt hour |
| LA Superior Court | Los Angeles County Superior Court |
| Leak | the leak at the SoCalGas Aliso Canyon natural gas storage facility injection-and-withdrawal well, SS25, discovered by SoCalGas on October 23, 2015 |
| LIBOR | London Interbank Offered Rate |
| LNG | liquefied natural gas |
| LPG | liquid petroleum gas |
| LTIP | long-term incentive plan |
| Luz del Sur | Luz del Sur S.A.A. and its subsidiaries |
| MD&A | Management's Discussion and Analysis of Financial Condition and Results of Operations |
| Mexican Stock Exchange | Bolsa Mexicana de Valores, S.A.B. de C.V., or BMV |
| MMBtu | million British thermal units (of natural gas) |
| MMcf | million cubic feet |
| Moody's | Moody's Investors Service, Inc. |
| MOU | Memorandum of Understanding |
| Mtpa | million tonnes per annum |
| MW | megawatt |
| MWh | megawatt hour |
| NAV | net asset value |
| NCI | noncontrolling interest(s) |
| NDT | nuclear decommissioning trusts |
| NEIL | Nuclear Electric Insurance Limited |
| NEM | net energy metering |
| NOL | net operating loss |
| NRC | Nuclear Regulatory Commission |
| NYSE | New York Stock Exchange |
| O&M | operation and maintenance expense |
| OCI | other comprehensive income (loss) |
| OEIS | Office of Energy Infrastructure Safety |
| OII | Order Instituting Investigation |
| Oncor | Oncor Electric Delivery Company LLC |
| Oncor Holdings | Oncor Electric Delivery Holdings Company LLC |
| ORLEN | Polski Koncern Naftowy Orlen S.A. (formerly Polish Oil & Gas Company) |

2022 Form 10-K | 7

| GLOSSARY (CONTINUED) |  |
| --- | --- |
| OSC | Order to Show Cause |
| PA LNG Phase 1 project | initial phase of the Port Arthur LNG liquefaction project |
| PA LNG Phase 2 project | second phase of the Port Arthur LNG liquefaction project |
| PA LNG projects | PA LNG Phase 1 project and PA LNG Phase 2 project, collectively |
| PBOP | postretirement benefits other than pension |
| PE | Pacific Enterprises |
| PEMEX | Petróleos Mexicanos (Mexican state-owned oil company) |
| PG&E | Pacific Gas and Electric Company |
| PHMSA | Pipeline and Hazardous Materials Safety Administration |
| PP&E | property, plant and equipment |
| PPA | power purchase agreement |
| PRP | Potentially Responsible Party |
| PUCT | Public Utility Commission of Texas |
| PURA | Texas Public Utility Regulatory Act |
| PXIeE | PXIeE Energy Solutions, LLC |
| Rating Agencies | Moody's, S&P and Fitch, collectively |
| RBS | The Royal Bank of Scotland plc |
| RBS SEE | RBS Sempra Energy Europe |
| RBS Sempra Commodities | RBS Sempra Commodities LLP |
| REC | renewable energy certificate |
| ROE | return on equity |
| ROU | right-of-use |
| RPS | Renewables Portfolio Standard |
| RSU | restricted stock unit |
| S&P | S&P Global Ratings, a division of S&P Global Inc. |
| SB | California Senate Bill |
| SDG&E | San Diego Gas & Electric Company |
| SDSRA | Senior Debt Service Reserve Account |
| SEC | U.S. Securities and Exchange Commission |
| SED | Safety and Enforcement Division of the CPUC |
| SEDATU | Secretaría de Desarrollo Agrario, Territorial y Urbano (Mexico's agency in charge of agriculture, land and urban development) |
| Sempra | Sempra Energy doing business as Sempra, together with its consolidated entities unless otherwise stated or indicated by the context |
| Sempra California | San Diego Gas & Electric Company and Southern California Gas Company, collectively |
| Sempra Global | Sempra Global, which was renamed Sempra Infrastructure Partners, LP on September 30, 2021 |
| SENER | Secretaría de Energía de México (Mexico's Ministry of Energy) |
| series A preferred stock | 6% mandatory convertible preferred stock, series A |
| series B preferred stock | 6.75% mandatory convertible preferred stock, series B |
| series C preferred stock | Sempra's 4.875% fixed-rate reset cumulative redeemable perpetual preferred stock, series C |
| Sharyland Holdings | Sharyland Holdings, L.P. |
| Sharyland Utilities | Sharyland Utilities, L.L.C. |
| Shell Mexico | Shell México Gas Natural, S. de R.L. de C.V. |
| SI Partners | Sempra Infrastructure Partners, LP, the holding company for most of Sempra's subsidiaries not subject to California or Texas utility regulation, which was formerly named Sempra Global before September 30, 2021 |
| SoCalGas | Southern California Gas Company |
| SOFR | Secured Overnight Financing Rate |
| SONGS | San Onofre Nuclear Generating Station |
| SPA | sale and purchase agreement |
| Support Agreement | support agreement, dated July 28, 2020 and amended on June 29, 2021, among Sempra and Sumitomo Mitsui Banking Corporation |
| TAG | TAG Norte Holding, S. de R.L. de C.V. |
| Tangguh PSC | Tangguh PSC Contractors |
| TdM | Termoeléctrica de Mexicali |
| Technip Energies | TP Oil & Gas Mexico, S. De R.L. De C.V., an affiliate of Technip Energies N.V. |
| Tecnored | Tecnored S.A. |

2022 Form 10-K | 8

## GLOSSARY (CONTINUED)

| Tecsur | Tecsur S.A. |
| --- | --- |
| TO5 | Electric Transmission Owner Formula Rate, effective June 1, 2019 |
| TTI | Texas Transmission Investment LLC |
| U.S. GAAP | generally accepted accounting principles in the United States of America |
| VaR | value at risk |
| VAT | value-added tax |
| Ventika | Ventika, S.A.P.I. de C.V. and Ventika II, S.A.P.I. de C.V., collectively |
| VIE | variable interest entity |
| Wildfire Fund | the fund established pursuant to AB 1054 |
| Wildfire Legislation | AB 1054 and AB 111 |

References in this report to “we,” “our,” “us,” “our company” and “Sempra” are to Sempra and its consolidated entities, collectively, unless otherwise stated or indicated by the context. All references in this report to our reportable segments are not intended to refer to any legal entity with the same or similar name.

Throughout this report, we refer to the following as Consolidated Financial Statements and Notes to Consolidated Financial Statements when discussed together or collectively:

- the Consolidated Financial Statements and related Notes of Sempra;
- the Financial Statements and related Notes of SDG&E; and
- the Financial Statements and related Notes of SoCalGas.

2022 Form 10-K | 9

# INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

We make statements in this report that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on assumptions with respect to the future, involve risks and uncertainties, and are not guarantees. Future results may differ materially from those expressed or implied in any forward-looking statement. These forward-looking statements represent our estimates and assumptions only as of the filing date of this report. We assume no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise.

Forward-looking statements can be identified by words such as “believes,” “expects,” “intends,” “anticipates,” “contemplates,” “plans,” “estimates,” “projects,” “forecasts,” “should,” “could,” “would,” “will,” “confident,” “may,” “can,” “potential,” “possible,” “proposed,” “in process,” “construct,” “develop,” “opportunity,” “initiative,” “target,” “outlook,” “optimistic,” “maintain,” “continue,” “progress,” “advance,” “goal,” “aim,” “commit,” or similar expressions, or when we discuss our guidance, priorities, strategy, goals, vision, mission, opportunities, projections, intentions or expectations.

Factors, among others, that could cause actual results and events to differ materially from those expressed or implied in any forward-looking statement include risks and uncertainties relating to:

- • California wildfires, including that we may be found liable for damages regardless of fault and that we may not be able to recover all or a substantial portion of costs from insurance, the Wildfire Fund, rates from customers or a combination thereof
- • decisions, investigations, inquiries, regulations, issuances or revocations of permits or other authorizations, renewals of franchises, and other actions by (i) the CPUC, CRE, DOE, FERC, PUCT, and other governmental and regulatory bodies and (ii) the U.S., Mexico and states, counties, cities and other jurisdictions therein and in other countries in which we do business
- • the success of business development efforts, construction projects and acquisitions and divestitures, including risks in (i) being able to make a final investment decision, (ii) completing construction projects or other transactions on schedule and budget, (iii) realizing anticipated benefits from any of these efforts if completed, and (iv) obtaining the consent or approval of partners or other third parties, including governmental and regulatory bodies
- • litigation, arbitrations, property disputes and other proceedings, and changes to laws and regulations, including those related to the energy industry in Mexico
- • cybersecurity threats, including by state and state-sponsored actors, of ransomware or other attacks on our systems or the systems of third-parties with which we conduct business, including the energy grid or other energy infrastructure, all of which have become more pronounced due to recent geopolitical events, such as the war in Ukraine
- • our ability to borrow money on favorable terms and meet our debt service obligations, including due to (i) actions by credit rating agencies to downgrade our credit ratings or to place those ratings on negative outlook or (ii) rising interest rates and inflation
- • failure of foreign governments, state-owned entities and our counterparties to honor their contracts and commitments
- • the impact on affordability of SDG&E's and SoCalGas' customer rates and their cost of capital and on SDG&E's, SoCalGas' and Sempra Infrastructure's ability to pass through higher costs to current and future customers due to (i) volatility in inflation, interest rates and commodity prices, (ii) with respect to SDG&E's and SoCalGas' businesses, the cost of the clean energy transition in California, (iii) with respect to SDG&E's business, departing retail load resulting from additional customers transferring to CCA and DA, and (iv) with respect to Sempra Infrastructure's business, volatility in foreign currency exchange rates
- • the impact of climate and sustainability policies, laws, rules, disclosures, and trends, including actions to reduce or eliminate reliance on natural gas, increased uncertainty in the political or regulatory environment for California natural gas distribution companies and the risk of nonrecovery for stranded assets
- • our ability to incorporate new technologies into our businesses, including those designed to support governmental and private party energy and climate goals
- • weather, natural disasters, pandemics, accidents, equipment failures, explosions, terrorism, information system outages or other events that disrupt our operations, damage our facilities or systems, cause the release of harmful materials, cause fires or subject us to liability for damages, fines and penalties, some of which may not be recoverable through regulatory mechanisms, may be disputed or not covered by insurers, or may impact our ability to obtain satisfactory levels of affordable insurance
- • the availability of electric power, natural gas and natural gas storage capacity, including disruptions caused by failures in the transmission grid, pipeline system or limitations on the withdrawal of natural gas from storage facilities
- • Oncor's ability to eliminate or reduce its quarterly dividends due to regulatory and governance requirements and commitments, including by actions of Oncor's independent directors or a minority member director
- • changes in tax and trade policies, laws and regulations, including tariffs, revisions to international trade agreements and sanctions, such as those that have been imposed and that may be imposed in the future in connection with the war in Ukraine,

2022 Form 10-K | 10

which may increase our costs, reduce our competitiveness, impact our ability to do business with certain counterparties, or impair our ability to resolve trade disputes

- other uncertainties, some of which are difficult to predict and beyond our control

We caution you not to rely unduly on any forward-looking statements. You should review and carefully consider the risks, uncertainties and other factors that affect our businesses as described herein and in other reports we file with the SEC.

2022 Form 10-K | 11

# SUMMARY OF RISK FACTORS

There are a number of risks you should understand before making an investment decision in our securities or the securities of our subsidiaries. This summary is not intended to be complete and should only be read together with the information set forth in “Part I - Item 1A. Risk Factors” in this report. If any of these risks occurs, Sempra’s and its subsidiaries’ results of operations, financial condition, cash flows and/or prospects could be materially adversely affected, and the trading price of Sempra’s securities and those of its subsidiaries could decline. These risks include the following:

# Risks Related to Sempra

- Sempra’s cash flows, ability to pay dividends and ability to meet its debt obligations largely depend on the performance of its subsidiaries and entities accounted for as equity method investments
- The economic interest, voting rights and market value of our outstanding common and preferred stock may be adversely affected by any additional equity securities we may issue

# Risks Related to All Sempra Businesses

- Our businesses are subject to risks arising from their infrastructure and information systems
- Severe weather, natural disasters and other similar events could materially adversely affect us
- Our debt service obligations expose us to risks and could require additional equity securities issuances by Sempra and sales of equity interests in various subsidiaries or projects under development
- The availability and cost of debt or equity financing could be negatively affected by market and economic conditions and other factors, and any such effects could materially adversely affect us
- Credit rating agencies may downgrade our credit ratings or place those ratings on negative outlook
- Our businesses require numerous permits, licenses, franchises and other approvals from various governmental agencies, and the failure to obtain or maintain any of them, or lengthy delays in obtaining them, could materially adversely affect us
- Our businesses face climate change concerns and have environmental compliance and clean energy transition costs, which could have a material adverse effect on us
- Our businesses are subject to numerous governmental regulations and complex tax and accounting requirements and may be materially adversely affected by them or any changes to them

# Risks Related to Sempra California

- Wildfires in California pose risks to Sempra California (particularly SDG&E) and Sempra
- The electricity industry is undergoing significant change, including increased deployment of DER, technological advancements, and political and regulatory developments
- Natural gas and natural gas storage have increasingly been the subject of political and public scrutiny, including a desire by some to reduce or eliminate reliance on natural gas as an energy source
- SDG&E and SoCalGas are subject to extensive regulation by federal, state and local legislative and regulatory authorities, which may materially adversely affect Sempra, SDG&E and SoCalGas

# Risks Related to Sempra Texas Utilities

- Certain ring-fencing measures, governance mechanisms and commitments limit our ability to influence the management, operations and policies of Oncor
- Changes in the regulation or operation of the electric utility industry and/or the ERCOT market, as well as the outcome of regulatory proceedings, could materially adversely affect Oncor, which could materially adversely affect us

# Risks Related to Sempra Infrastructure

- Project development activities may not be successful, projects under construction may not be completed on schedule or within budget, and completed projects may not operate at expected levels, any of which could materially adversely affect us
- We may not be able to enter into, maintain, extend or replace long-term supply, sales or capacity agreements
- Our international businesses and operations expose us to increased legal, regulatory, tax, economic, geopolitical and management oversight risks and challenges

2022 Form 10-K | 12

PART I.

ITEM 1. BUSINESS

OVERVIEW

We are a California-based holding company with energy infrastructure investments in North America. Our businesses invest in, develop and operate energy infrastructure, and provide electric and gas services to customers.

Sempra was formed in 1998 through a business combination of Enova and PE, the holding companies of our regulated public utilities in California: SDG&E, which began operations in 1881, and SoCalGas, which began operations in 1867. We have since expanded our regulated public utility presence into Texas through our 80.25% interest in Oncor and 50% interest in Sharyland Utilities. Sempra Infrastructure's assets include investments in the U.S. and Mexico with a focus on LNG and net zero solutions, energy networks and clean power.

Business Strategy

Our mission is to be North America's premier energy infrastructure company. We are primarily focused on transmission and distribution investments, among other areas, that we believe are capable of producing stable cash flows and earnings visibility, with the goal of delivering safe, reliable and increasingly clean forms of energy to customers and increasing shareholder value.

DESCRIPTION OF BUSINESS BY SEGMENT

Our business activities are organized under the following reportable segments:

- SDG&E
- SoCalGas
- Sempra Texas Utilities
- Sempra Infrastructure

2022 Form 10-K | 13

## SDG&E

SDG&E is a regulated public utility that provides electric services to a population of, at December 31, 2022, approximately 3.6 million and natural gas services to approximately 3.3 million of that population, covering a 4,100 square mile service territory in Southern California that encompasses San Diego County and an adjacent portion of Orange County.

SDG&E's assets at December 31, 2022 covered the following territory:

![img-0.jpeg](img-0.jpeg)

## Electric Utility Operations

**Electric Transmission and Distribution System.** Service to SDG&E's customers is supported by its electric transmission and distribution system, which includes substations and overhead and underground lines. These electric facilities are primarily in the San Diego, Imperial and Orange counties of California, and in Arizona and Nevada and consisted of 1,928 miles of transmission lines, 23,928 miles of distribution lines and 157 substations at December 31, 2022. Occasionally, various areas of the service territory require expansion to accommodate customer growth and maintain reliability and safety.

SDG&E's 500-kV Southwest Powerlink transmission line, which is shared with Arizona Public Service Company and Imperial Irrigation District, extends from Palo Verde, Arizona to San Diego, California. SDG&E's share of the line is 1,163 MW, although it can be less under certain system conditions. SDG&E's Sunrise Powerlink is a 500-kV transmission line constructed by SDG&E and operated by the California ISO. Both of these lines together provide SDG&E with import capability of 3,900 MW of power.

Mexico's Baja California transmission system is connected to SDG&E's system via two 230-kV interconnections with combined capacity of up to 600 MW in the north-to-south direction and 800 MW in the south-to-north direction. However, it can be less under certain system conditions.

Edison's transmission system is connected to SDG&E's system via five 230-kV transmission lines.

2022 Form 10-K | 14

**Electric Resources.** To meet customer demand, SDG&E supplies power from its own electric generation facilities and procures power on a long-term basis from other suppliers for resale through CPUC-approved purchased-power contracts or purchases on the spot market. SDG&E does not earn any return on commodity sales volumes. SDG&E's electric resources at December 31, 2022 were as follows:

#### SDG&E - ELECTRIC RESOURCES$^{(1)}$

|  | Contract expiration date | Net operating capacity (MW) | % of total |
| --- | --- | --- | --- |
| Owned generation facilities, natural gas (2) |  | 1,204 | 24% |
| Purchased-power contracts: |  |  |  |
| Renewables: |  |  |  |
| Wind | 2023 to 2042 | 1,236 | 24 |
| Solar | 2030 to 2042 | 1,390 | 27 |
| Other | 2023 and thereafter | 37 | 1 |
| Tolling and other | 2024 to 2042 | 1,206 | 24 |
| Total |  | 5,073 | 100% |

$^{(1)}$ Excludes approximately 321 MW of energy storage owned and approximately 164 MW of energy storage contracted.

$^{(2)}$ SDG&E owns and operates four natural gas-fired power plants, three of which are in California and one is in Nevada.

Charges under contracts with suppliers are based on the amount of energy received or are tolls based on available capacity. Tolling contracts are purchased-power contracts under which SDG&E provides natural gas to the energy supplier.

SDG&E procures natural gas under short-term contracts for its owned generation facilities and for certain tolling contracts associated with purchased-power arrangements. Purchases from various southwestern U.S. suppliers are primarily priced based on published monthly bid-week indices, which can be subject to volatility.

SDG&E participates in the Western Systems Power Pool, which includes an electric-power and transmission-rate agreement that allows access to power trading with more than 300 member utilities, power agencies, energy brokers and power marketers throughout the U.S. and Canada. Participants can make power transactions on standardized terms, including market-based rates, preapproved by the FERC. Participation in the Western Systems Power Pool is intended to assist members in managing power delivery and price risk.

**Customers and Demand.** SDG&E provides electric services through the generation, transmission and distribution of electricity to the following customer classes:

#### SDG&E - ELECTRIC CUSTOMER METERS AND VOLUMES

|  | Customer meter count | Volumes (1) (millions of kWh) |  |  |
| --- | --- | --- | --- | --- |
|  |  | Years ended December 31, |  |  |
|  | December 31, 2022 | 2022 | 2021 | 2020 |
| Residential | 615,126 | 3,940 | 5,657 | 6,606 |
| Commercial | 71,661 | 2,850 | 4,128 | 5,873 |
| Industrial | 471 | 909 | 1,398 | 1,842 |
| Street and highway lighting | 3,323 | 101 | 115 | 77 |
|  | 690,581 | 7,800 | 11,298 | 14,398 |
| CCA and DA | 813,304 | 9,900 | 5,916 | 3,482 |
| Total | 1,503,885 | 17,700 | 17,214 | 17,880 |

$^{(1)}$ Includes intercompany sales.

SDG&E currently provides procurement service for a portion of its customer load. Most customers receive procurement service from a load-serving entity other than SDG&E through programs such as CCA and DA. In such cases, SDG&E no longer procures energy for this departing load. Accordingly, SDG&E's CCA and DA customers receive primarily transportation and distribution services from SDG&E.

CCA is only available if the customer's local jurisdiction (city or county) offers such a program and DA is currently limited by a cap based on gigawatt hours. Several jurisdictions in SDG&E's territory have implemented CCA, including the City of San Diego in 2022. Additional jurisdictions are in the process of implementing or considering CCA.

2022 Form 10-K | 15

SDG&E's historical energy procurement for future deliveries exceeds the needs of its remaining bundled customers as customers have elected CCA and DA services. To help achieve the goal of ratepayer indifference (as to whether or not customers' energy is procured by SDG&E or by CCA or DA), the CPUC revised the Power Charge Indifference Adjustment framework. The purpose of the framework is to help ensure SDG&E's procurement cost obligations are more equitably shared among customers served by SDG&E and customers now served by CCA or DA. SDG&E implemented the framework on January 1, 2019.

San Diego's mild climate and SDG&E's robust energy efficiency programs contribute to lower consumption by our customers. Rooftop solar installations continue to reduce residential and commercial volumes sold by SDG&E. At December 31, 2022, 2021 and 2020, the residential and commercial rooftop solar capacity in SDG&E's territory totaled 1,864 MW, 1,620 MW and 1,423 MW, respectively.

Electricity demand is dependent on the health and expansion of the Southern California economy, prices of alternative energy products, consumer preference, environmental regulations, legislation, renewable power generation, the effectiveness of energy efficiency programs, demand-side management impact and distributed generation resources. California's energy policy supports increased electrification, particularly electrification of vehicles, which could significantly increase sales volumes in the coming years. Other external factors, such as the price of purchased power, the use of hydroelectric power, the use of and further development of renewable energy resources and energy storage, the development of or requirements for new natural gas supply sources, demand for and supply of natural gas and general economic conditions, can also result in significant shifts in the market price of electricity, which may in turn impact demand. Electricity demand is also impacted by seasonal weather patterns (or 'seasonality'), tending to increase in the summer months to meet the cooling load and in the winter months to meet the heating load.

**Competition.** SDG&E faces competition to serve its customer load from distributed and local power generation growth, including solar installations. In addition, the electric industry is undergoing rapid technological change, and third-party energy storage alternatives and other technologies may increasingly compete with SDG&E's traditional transmission and distribution infrastructure in delivering electricity to consumers.

#### *Natural Gas Utility Operations*

We describe SDG&E's natural gas utility operations below in 'Sempra California's Natural Gas Utility Operations.'

#### *SoCalGas*

SoCalGas is a regulated public utility that owns and operates a natural gas distribution, transmission and storage system that delivers natural gas to a population of, at December 31, 2022, approximately 21.1 million, covering a 24,000 square mile service territory that encompasses Southern California and portions of central California (excluding San Diego County, the City of Long Beach and the desert area of San Bernardino County).

2022 Form 10-K | 16

SoCalGas' assets at December 31, 2022 covered the following territory:

![img-1.jpeg](img-1.jpeg)

### *Natural Gas Utility Operations*

We describe SoCalGas' natural gas utility operations below in 'Sempra California's Natural Gas Utility Operations.'

### ***Sempra California's Natural Gas Utility Operations***

#### *Natural Gas Procurement and Transportation*

At December 31, 2022, SoCalGas' natural gas facilities included 3,046 miles of transmission and storage pipelines, 52,020 miles of distribution pipelines, 48,918 miles of service pipelines and nine transmission compressor stations, and SDG&E's natural gas facilities consisted of 168 miles of transmission pipelines, 9,112 miles of distribution pipelines, 6,718 miles of service pipelines and one compressor station.

SoCalGas' and SDG&E's gas transmission pipelines interconnect with four major interstate pipeline systems: El Paso Natural Gas, Transwestern Pipeline, Kern River Pipeline Company, and Mojave Pipeline Company, allowing customers to bring gas supplies into the SoCalGas gas transmission pipeline system from the various out-of-state gas producing basins. Additionally, an interconnection with PG&E's intrastate gas transmission pipeline system allows gas to flow into SoCalGas' gas transmission pipeline system. SoCalGas' gas transmission pipeline system also has an interconnect with a Mexican gas pipeline company at Otay Mesa on the California/Mexico border that allows gas to not only flow south from the gas producing basins in the southwestern U.S., but to also flow north into SoCalGas' gas transmission pipeline system from LNG-sourced supplies in Mexico. There are also several in-state gas interconnections allowing for delivery of California-produced gas, including a number of direct connections from renewable natural gas producers.

SoCalGas purchases natural gas under short-term and long-term contracts and on the spot market for SDG&E's and SoCalGas' core customers. SoCalGas purchases natural gas from various sources, including from Canada, the U.S. Rockies and the southwestern regions of the U.S. Purchases of natural gas are primarily priced based on published monthly bid week indices,

2022 Form 10-K | 17

which can be subject to volatility. The cost of purchases of natural gas for SDG&E's and SoCalGas' core customers is billed to those customers without markup.

To support the delivery of natural gas supplies to its distribution system and to meet the needs of customers, SoCalGas has firm and variable interstate pipeline capacity contracts that require the payment of fixed and variable tariffed and negotiated reservation charges to reserve firm transportation rights. Energy companies, primarily El Paso Natural Gas Company, Transwestern Pipeline Company and Kern River Gas Transmission Company, provide transportation services into SoCalGas' intrastate transmission system for supplies purchased by SoCalGas.

### *Natural Gas Storage*

SoCalGas owns four natural gas storage facilities with a combined working gas capacity of 137 Bcf and 126 injection, withdrawal and observation wells that provide natural gas storage service. SoCalGas' and SDG&E's core customers, along with certain third-party market participants, are allocated a portion of SoCalGas' storage capacity. SoCalGas uses the remaining storage capacity for load balancing services for all customers. Natural gas withdrawn from storage is important to help maintain service reliability during peak demand periods, including consumer heating needs in the winter, as well as peak electric generation needs in the summer. The Aliso Canyon natural gas storage facility has a storage capacity of 86 Bcf and, subject to the CPUC limitations described below, represents 63% of SoCalGas' natural gas storage capacity. SoCalGas discovered a natural gas leak at one of its wells at the Aliso Canyon natural gas storage facility in October 2015 and permanently sealed the well in February 2016. SoCalGas was subsequently authorized to make limited withdrawals and injections of natural gas at the Aliso Canyon natural gas storage facility and, on an interim basis, has been directed by the CPUC to maintain up to 41.16 Bcf of working gas at the facility to help achieve reliability for the region as determined by the CPUC. To help maintain system reliability, the CPUC issued a protocol authorizing withdrawals of natural gas from the facility if available gas supply reaches defined thresholds for SoCalGas' system, or public health and safety is at risk, as determined by the protocol. We discuss the Leak in Note 16 of the Notes to Consolidated Financial Statements, in 'Part I - Item 1A. Risk Factors' and in 'Part II - Item 7. MD&A - Capital Resources and Liquidity - SoCalGas.'

### *Customers and Demand*

SoCalGas and SDG&E sell, distribute and transport natural gas. SoCalGas purchases and stores natural gas for its core customers in its territory and SDG&E's territory on a combined portfolio basis. SoCalGas also offers natural gas transportation and storage services for others.

## **SEMPRA CALIFORNIA - NATURAL GAS CUSTOMER METERS AND VOLUMES**

|  | Customer meter count | Volumes (Bcf) (1) |  |  |
| --- | --- | --- | --- | --- |
|  | December 31, | Years ended December 31, |  |  |
|  | 2022 | 2022 | 2021 | 2020 |
| SDG&E: |  |  |  |  |
| Residential | 878,220 |  |  |  |
| Commercial | 29,180 |  |  |  |
| Electric generation and transportation | 2,540 |  |  |  |
| Natural gas sales |  | 45 | 46 | 43 |
| Transportation |  | 39 | 38 | 40 |
| Total | 909,940 | 84 | 84 | 83 |
| SoCalGas: |  |  |  |  |
| Residential | 5,857,280 |  |  |  |
| Commercial | 248,800 |  |  |  |
| Industrial | 24,390 |  |  |  |
| Electric generation and wholesale | 40 |  |  |  |
| Natural gas sales |  | 304 | 314 | 312 |
| Transportation |  | 586 | 568 | 572 |
| Total | 6,130,510 | 890 | 882 | 884 |

$^{(1)}$ Includes intercompany sales.

For regulatory purposes, end-use customers are classified as either core or noncore customers. Core customers are primarily residential and small commercial and industrial customers.

2022 Form 10-K | 18

Most core customers purchase natural gas directly from SoCalGas or SDG&E. While core customers are permitted to purchase their natural gas supplies from producers, marketers or brokers, SoCalGas and SDG&E are obligated to maintain adequate delivery capacity to serve the requirements of all their core customers.

Noncore customers at SoCalGas consist primarily of electric generation, wholesale, and large commercial and industrial customers. A portion of SoCalGas' noncore customers are non-end-users, which include wholesale customers consisting primarily of other utilities, including SDG&E, or municipally owned natural gas distribution systems. Noncore customers at SDG&E consist primarily of electric generation and large commercial customers.

Noncore customers are responsible for procuring their natural gas requirements, as the regulatory framework does not allow SoCalGas and SDG&E to recover the cost of natural gas procured and delivered to noncore customers.

Natural gas demand largely depends on the health and expansion of the Southern California economy, prices of alternative energy products, consumer preference, environmental regulations, legislation, California's energy policy supporting increased electrification and renewable power generation, and the effectiveness of energy efficiency programs. Other external factors such as weather, the price of, demand for, and supply sources of electricity, the use of and further development of renewable energy resources and energy storage, development of or requirements for new natural gas supply sources, demand for natural gas outside California, storage levels, transport capacity and availability of supply into California and general economic conditions can also result in significant shifts in the market price of natural gas, which may in turn impact demand.

One of the larger sources for natural gas demand is electric generation. Natural gas-fired electric generation within Southern California (and demand for natural gas supplied to such plants) competes with electric power generated throughout the western U.S. Natural gas transported for electric generating plant customers may be affected by the overall demand for electricity, growth in self-generation from rooftop solar, the addition of more efficient gas technologies, new energy efficiency initiatives, and the degree to which regulatory changes in electric transmission infrastructure investment divert electric generation from SoCalGas' and SDG&E's service areas. The demand for natural gas may also fluctuate due to volatility in the demand for electricity due to seasonality, weather conditions and other impacts, and the availability of competing supplies of electricity, such as hydroelectric generation and other renewable energy sources. Given the significant quantity of natural gas-fired generation, we believe natural gas is a dispatchable fuel that can continue to help provide electric reliability in our California service territories.

The natural gas distribution business is subject to seasonality, and cash provided by operating activities generally is greater during and immediately following the winter heating months. As is prevalent in the industry, but subject to current regulatory limitations, SoCalGas typically injects natural gas into storage during the months of April through October, and usually withdraws natural gas from storage during the months of November through March.

2022 Form 10-K | 19

### *Sempra Texas Utilities*

Sempra Texas Utilities is comprised of our equity method investments in Oncor Holdings and Sharyland Holdings. Oncor Holdings is an indirect, wholly owned entity of Sempra that owns an 80.25% interest in Oncor. TTI owns the remaining 19.75% interest in Oncor. Sempra owns an indirect, 50% interest in Sharyland Holdings, which owns a 100% interest in Sharyland Utilities.

Sempra Texas Utilities' assets at December 31, 2022 covered the following territory:

![img-2.jpeg](img-2.jpeg)

### *Oncor*

Oncor is a regulated electricity transmission and distribution utility that operates in the north-central, eastern, western and panhandle regions of Texas. Oncor delivers electricity to end-use consumers through its electrical systems, and also provides transmission grid connections to merchant generation facilities and interconnections to other transmission grids in Texas. Oncor's transmission and distribution assets are located in over 120 counties and more than 400 incorporated municipalities, including the cities of Dallas and Fort Worth and surrounding suburbs, as well as Waco, Wichita Falls, Odessa, Midland, Tyler, Temple, Killeen and Round Rock, among others. Most of Oncor's power lines have been constructed over lands of others pursuant to easements or along public highways, streets and rights-of-way pursuant to permits, public utility easements, franchise or other agreements or as otherwise permitted by law.

At December 31, 2022, Oncor had 4,561 employees, including 764 employees covered under a collective bargaining agreement.

Certain ring-fencing measures, governance mechanisms and commitments, which we describe in 'Part I - Item 1A. Risk Factors,' are in effect and are intended to enhance Oncor Holdings' and Oncor's separateness from their owners and to mitigate the risk that these entities would be negatively impacted by the bankruptcy of, or other adverse financial developments affecting, their owners. Sempra does not control Oncor Holdings or Oncor, and the ring-fencing measures, governance mechanisms and commitments limit our ability to direct the management, policies and operations of Oncor Holdings and Oncor, including the deployment or disposition of their assets, declarations of dividends, strategic planning and other important corporate issues and actions, including

2022 Form 10-K | 20

limited representation on the Oncor Holdings and Oncor boards of directors. Because Oncor Holdings and Oncor are managed independently (i.e., ring-fenced), we account for our 100% ownership interest in Oncor Holdings as an equity method investment.

**Electricity Transmission.** Oncor’s electricity transmission business is responsible for the safe and reliable operations of its transmission network and substations. These responsibilities consist of the construction, maintenance and security of transmission facilities and substations and the monitoring, controlling and dispatching of high-voltage electricity over its transmission facilities in coordination with ERCOT, which we discuss below in “Regulation - Utility Regulation - ERCOT Market.”

At December 31, 2022, Oncor’s transmission system included approximately 18,268 circuit miles of transmission lines, a total of 1,207 transmission and distribution substations, and interconnection to 146 third-party generation facilities totaling 48,430 MW.

Transmission revenues are provided under tariffs approved by either the PUCT or, to a small degree related to limited interconnection to other markets, the FERC. Network transmission revenues compensate Oncor for delivery of electricity over transmission facilities operating at 60 kV and above. Other services offered by Oncor through its transmission business include system impact studies, facilities studies, transformation service and maintenance of transformer equipment, substations and transmission lines owned by other parties.

**Electricity Distribution.** Oncor’s electricity distribution business is responsible for the overall safe and reliable operation of distribution facilities, including electricity delivery, power quality, security and system reliability. These responsibilities consist of the ownership, management, construction, maintenance and operation of the electricity distribution system within its certificated service area. Oncor’s distribution system receives electricity from the transmission system through substations and distributes electricity to end-users and wholesale customers through 3,681 distribution feeders.

Oncor’s distribution system included nearly 3.9 million points of delivery at December 31, 2022 and consisted of 123,500 miles of overhead and underground lines.

Distribution revenues from residential and small business users are based on actual monthly consumption (kWh) and distribution revenues from large commercial and industrial users are based on, depending on size and annual load factor, either actual monthly demand (kW) or the greater of actual monthly demand (kW) or 80% of peak monthly demand during the prior eleven months.

**Customers and Demand.** Oncor operates the largest transmission and distribution system in Texas based on the number of end-use customers and miles of transmission and distribution lines, delivering electricity to nearly 3.9 million homes and businesses, operating more than 141,000 miles of transmission and distribution lines as of December 31, 2022 in a territory with an estimated population of approximately 13 million. The consumers of the electricity Oncor delivers (other than ultimate end-use customers served by an electric cooperative or a municipally owned utility) are free to choose their electricity supplier from retail electric providers who compete for their business. Oncor is not a seller of electricity, nor does it purchase electricity for resale. Rather, Oncor provides transmission services to its electricity distribution business as well as non-affiliated electricity distribution companies, cooperatives and municipally owned utilities. Oncor also provides distribution services, consisting of retail delivery services to retail electric providers that sell electricity to end-use customers, as well as wholesale delivery services to cooperatives and municipally owned utilities. At December 31, 2022, Oncor’s distribution business customers primarily consisted of over 100 retail electric providers that sell the electricity it distributes to consumers in its certificated service areas.

Oncor’s revenues and results of operations are subject to seasonality, weather conditions and other electricity usage drivers, with revenues being highest in the summer.

**Competition.** Oncor operates in certificated areas designated by the PUCT. The majority of Oncor’s service territory is single certificated, with Oncor as the only certificated electric transmission and distribution provider. However, in multi-certificated areas of Texas, Oncor competes with certain other utilities and rural electric cooperatives for the right to serve end-use customers. In addition, the electric industry is undergoing rapid technological change, and third-party distributed energy resources and other technologies may increasingly compete with Oncor’s traditional transmission and distribution infrastructure in delivering electricity to consumers.

### *Sharyland Utilities*

Sharyland Utilities is a regulated electric transmission utility that owns and operates, at December 31, 2022, approximately 64 miles of electric transmission lines in south Texas, including a direct current line connecting Mexico and assets in McAllen, Texas. Sharyland Utilities is responsible for providing safe, reliable and efficient transmission and substation services and investing to support infrastructure needs in its service territory, which we discuss below in “Regulation - Utility Regulation - ERCOT Market.” Transmission revenues are provided under tariffs approved by the PUCT.

2022 Form 10-K | 21

## Sempra Infrastructure

Our Sempra Infrastructure segment includes the operating companies of our subsidiary, SI Partners, as well as a holding company and certain services companies. SI Partners is included within our Sempra Infrastructure reportable segment, but is not the same in its entirety as the reportable segment. Sempra Infrastructure develops, builds, operates and invests in energy infrastructure to help enable the energy transition in North American markets and globally.

Sempra Infrastructure owned a 70% interest in SI Partners at December 31, 2022, following its sale of a 20% NCI in SI Partners to KKR in October 2021 and sale of a 10% NCI in SI Partners to ADIA in June 2022. SI Partners has two authorized classes of limited partnership interests designated as “Class A Units” (which are common voting units) and “Sole Risk Interests” (which are only owned by Sempra, are non-voting and are not considered in the calculation of each limited partner’s respective ownership interests, subject to certain restrictions). We discuss KKR’s and ADIA’s purchases of NCI in SI Partners, as well as SI Partners’ limited partnership agreement that governs the partners’ respective rights and obligations in respect of their ownership interests in SI Partners in Note 1 of the Notes to Consolidated Financial Statements.

SI Partners held a 100% ownership interest in Sempra LNG Holding, LP and a 99.9% ownership interest in IEnova at December 31, 2022, which consolidates Sempra’s ownership and management of its non-utility, energy infrastructure assets in North America under a single platform. These assets include LNG and natural gas infrastructure in the U.S. and Mexico and renewable energy, LPG and refined products infrastructure in Mexico, which are managed through three business lines: LNG and Net-Zero Solutions, Energy Networks and Clean Power.

At December 31, 2022, Sempra Infrastructure owned or held interests in the following assets:

![img-0.jpeg](img-0.jpeg)

## LNG and Net-Zero Solutions

Sempra Infrastructure’s LNG and Net-Zero Solutions business line is comprised of a natural gas liquefaction portfolio in operation, construction or development, and is focused on energy diversification and the clean energy transition in markets that our customers serve.

2022 Form 10-K | 22

**Cameron LNG Phase 1 Facility.** SI Partners owns 50.2% of Cameron LNG JV, while an affiliate of TotalEnergies SE, an affiliate of Mitsui & Co., Ltd., and Japan LNG Investment, LLC (a company jointly owned by Mitsubishi Corporation and Nippon Yusen Kabushiki Kaisha) each own 16.6% of Cameron LNG JV. We account for our ownership interest in Cameron LNG JV under the equity method. No single owner controls or can unilaterally direct significant activities of Cameron LNG JV.

Cameron LNG JV owns and operates the Cameron LNG Phase 1 facility, a natural gas liquefaction, export, regasification and import facility with three natural gas pre-treatment, processing and liquefaction trains. The Cameron LNG Phase 1 facility is located in Hackberry, Louisiana, along the Calcasieu Ship Channel, which handles significant industrial shipping, including large oil and LNG tankers, and is well positioned to supply the Atlantic and Pacific markets. The three liquefaction trains have a combined nameplate capacity of 13.9 Mtpa of LNG with an export capacity of 12 Mtpa of LNG, or approximately 1.7 Bcf of natural gas per day. The Cameron LNG Phase 1 facility has 20-year liquefaction and regasification tolling capacity agreements in place with affiliates of TotalEnergies SE, Mitsubishi Corporation and Mitsui & Co., Ltd., which collectively subscribe for the full nameplate capacity of the three trains at the facility.

**ECA Regas Facility.** Sempra Infrastructure owns and operates the ECA Regas Facility in Baja California, Mexico, which is capable of processing one Bcf of natural gas per day and has a storage capacity of 320,000 cubic meters in two tanks of 160,000 cubic meters each.

The ECA Regas Facility generates revenues from firm storage service fees under firm storage service agreements and nitrogen injection service agreements with Shell Mexico and Gazprom that expire in 2028, which permit them to collectively use 50% of the terminal's capacity, with the remaining 50% of the capacity available for Sempra Infrastructure's use. The land on which the ECA Regas Facility and the ECA LNG liquefaction projects under construction and in development are expected to be situated, as well as land adjacent to those properties, are the subject of litigation. We discuss the ECA Regas Facility arbitration and land litigation in Note 16 of the Notes to Consolidated Financial Statements and 'Part I - Item 1A. Risk Factors.'

Sempra Infrastructure uses its 50% capacity at the ECA Regas Facility to satisfy its obligation under an LNG SPA with Tangguh PSC through 2029, which we discuss below, and ECA LNG Phase 1 will be the sole user of this capacity thereafter.

**Asset and Supply Optimization.** Sempra Infrastructure has an LNG SPA through 2029 with Tangguh PSC for the supply of the equivalent of 500 MMcf of natural gas per day at a price based on the SoCal Border index for natural gas. The LNG SPA allows Tangguh PSC to divert certain LNG volumes to other global markets in exchange for payments of diversion fees. Sempra Infrastructure may also enter into short-term supply agreements to purchase LNG to be received, stored and regasified at the ECA Regas Facility for sale to other parties. Sempra Infrastructure uses the natural gas produced from this LNG to supply a contract for the sale of natural gas to the CFE at prices that are based on the SoCal Border index. If LNG volumes received from Tangguh PSC are not sufficient to satisfy the commitment to the CFE, Sempra Infrastructure may purchase natural gas in the market to satisfy such commitment.

Sempra Infrastructure purchases, transports and sells natural gas, and has customers in both the U.S. and Mexico, including the CFE. Sempra Infrastructure may also purchase natural gas from other Sempra affiliates. Natural gas purchases and transportation arrangements are substantially backed by long-term, U.S. dollar-based contracts for the sale of natural gas to third parties (both U.S. sourced and derived from imported LNG), LNG offtake and natural gas storage and pipeline capacity.

**ECA LNG Phase 1 Project.** SI Partners owns an 83.4% interest in ECA LNG Phase 1, and an affiliate of TotalEnergies SE owns the remaining 16.6% interest. ECA LNG Phase 1 is constructing a one-train natural gas liquefaction facility at the site of Sempra Infrastructure's existing ECA Regas Facility with a nameplate capacity of 3.25 Mtpa and an initial offtake capacity of 2.5 Mtpa. We expect the ECA LNG Phase 1 project to commence commercial operations in the summer of 2025.

ECA LNG Phase 1 has definitive 20-year SPAs with an affiliate of TotalEnergies SE for approximately 1.7 Mtpa of LNG and Mitsui & Co., Ltd. for approximately 0.8 Mtpa of LNG.

The construction of the ECA LNG Phase 1 project is subject to numerous risks and uncertainties. For a discussion of these risks and uncertainties, see 'Part I - Item 1A. Risk Factors' and 'Part II - Item 7. MD&A - Capital Resources and Liquidity - Sempra Infrastructure.'

**Additional Potential LNG and Net-Zero Solutions' Projects.** Sempra Infrastructure is evaluating the following development opportunities:

- ECA LNG Phase 2 project, a large-scale natural gas liquefaction project to be located at the site of Sempra Infrastructure's existing ECA Regas Facility in Baja California, Mexico

2022 Form 10-K | 23

• PA LNG projects, a large-scale natural gas liquefaction project, to be developed in two phases, and associated infrastructure on a greenfield site in the vicinity of Port Arthur, Texas located along the Sabine-Neches waterway
• Vista Pacifico LNG project, a mid-scale natural gas liquefaction project and associated infrastructure in the vicinity of Topolobampo in Sinaloa, Mexico
• Hackberry Carbon Sequestration project, a carbon capture and sequestration project that is intended to reduce emissions at the Cameron LNG Phase 1 facility and proposed Cameron LNG Phase 2 project

No final investment decision has been reached for any of these potential projects. The development of these projects is subject to numerous risks and uncertainties. For a discussion of these proposed projects and their risks, see “Part I - Item 1A. Risk Factors” and “Part II - Item 7. MD&A - Capital Resources and Liquidity - Sempra Infrastructure.”

**Demand and Competition.** North America benefits from numerous competitive advantages as a potential supplier of LNG to world markets, including the following:

• high levels of developed and undeveloped natural gas resources, including unconventional natural gas and tight oil relative to domestic consumption levels
• flexible and elastic markets in gas and oil drilling and production resulting in efficient unit costs of gas production
• availability of extensive pre-existing natural gas pipeline transmission systems and natural gas storage capacity with proximity to production locations

Brownfield liquefaction projects also benefit from the particular competitive advantage of the proximity of pre-existing infrastructure, such as LNG tankage and berths.

Global LNG competition may limit North American LNG exports, as international liquefaction projects attempt to match North American LNG production costs and customer contractual rights such as volume and destination flexibility. It is expected that North American LNG exports will increase competition for current and future global natural gas demand, and thereby facilitate additional growth of a global commodity market for natural gas and LNG.

Cameron LNG JV co-owners and customers compete globally to market and sell LNG to end users, including gas and electric utilities located in LNG-importing countries around the world. By providing liquefaction services, Cameron LNG JV and future LNG export development projects compete indirectly with liquefaction projects currently operating and those under development in the global LNG market. In addition to the U.S., these competitors are located in the Middle East, Southeast Asia, Africa, South America, Australia and Europe. The competitive environment shifted in favor of North American LNG development projects in 2022 in the wake of the war in Ukraine and the resulting focus by European markets on alternative supplies. This shift in demand underscores the attractiveness of long-term contracts from North American LNG projects.

The LNG regasification business is impacted by global LNG market prices. High LNG prices in markets outside the market in which Sempra Infrastructure’s ECA Regas Facility operates have resulted and could continue to result in lower-than-expected deliveries of LNG cargoes to the ECA Regas Facility, which could increase costs if Sempra Infrastructure is instead required to obtain LNG in the open market at prevailing prices. Any inability to obtain expected LNG cargoes could also impact Sempra Infrastructure’s ability to maintain the minimum level of LNG required to keep the ECA Regas Facility in operation at the proper temperature. Prices in international LNG markets through which Sempra Infrastructure must purchase natural gas to meet its contractual obligations to deliver natural gas to customers may also affect how Sempra Infrastructure optimizes its assets and supply, which could have an adverse impact on its earnings.

### *Energy Networks*

Sempra Infrastructure’s Energy Networks business line is comprised of a natural gas transportation and distribution network.

**Cross-Border Interconnections and In-Country Pipelines.** Sempra Infrastructure develops, builds, operates and invests in systems for the receipt, transportation, compression and delivery of natural gas and ethane. At December 31, 2022, these systems consisted of 1,850 miles of natural gas transmission pipelines plus 124 miles under construction, 16 natural gas compression stations plus one under construction, and 139 miles of ethane pipelines in Mexico. The design capacity of these pipeline assets is over 16,400 MMcf per day of natural gas, 204 MMcf per day of ethane gas and 106,000 barrels per day of ethane liquid. Capacity on Sempra Infrastructure’s pipelines and related assets is substantially contracted under long-term, U.S. dollar-based agreements with major industry participants such as the CFE, Centro Nacional de Control de Gas, PEMEX, Gazprom and other similar counterparties. Some of these pipeline assets are affected by disputes related to the property on which the pipelines are located, which we discuss in Note 16 of the Notes to Consolidated Financial Statements and “Part I - Item 1A. Risk Factors.”

2022 Form 10-K | 24

Sempra Infrastructure owns a 40-mile natural gas pipeline in south Louisiana, the Cameron Interstate Pipeline, which links the Cameron LNG Phase 1 facility in Cameron Parish in Louisiana, to five interstate pipelines that offer access to major feed gas supply basins in Texas and the northeast, midcontinent and southeast regions of the U.S. The majority of transportation capacity on the Cameron Interstate Pipeline is under long-term transportation service agreements with shippers for delivery to the Cameron LNG Phase 1 facility.

**Natural Gas Distribution.** Sempra Infrastructure’s natural gas distribution regulated utility, Ecogas, operates in three separate distribution zones in Mexicali, Chihuahua and La Laguna-Durango, Mexico. At December 31, 2022, Ecogas had approximately 2,952 miles of distribution pipeline, and approximately 150,000 customer meters serving more than 525,000 residential, commercial and industrial consumers with sales volume of approximately 10 MMcf per day in 2022. Ecogas relies on supply and transportation services from Sempra Infrastructure, SoCalGas and PEMEX for the natural gas it distributes to its customers.

**LPG Storage and Associated Systems.** Sempra Infrastructure owns and operates the TDF, S. de R. L. de C. V. (TDF) pipeline system and the Guadalajara LPG terminal. At December 31, 2022, the TDF pipeline system consisted of approximately 118 miles of 12-inch diameter LPG pipeline with a design capacity of 34,000 barrels per day and associated storage and dispatch facilities. The TDF pipeline system runs from PEMEX’s Burgos facility in the Mexican State of Tamaulipas, Mexico to Sempra Infrastructure’s delivery facility near the city of Monterrey, Mexico and is fully contracted to PEMEX on a firm basis through 2027. Sempra Infrastructure’s Guadalajara LPG terminal is an 80,000-barrel LPG storage facility near Guadalajara, Mexico, with associated loading and dispatch facilities, and serves the LPG needs of Guadalajara. The Guadalajara LPG terminal is fully contracted to PEMEX on a firm basis through 2028. Both contracts are U.S. dollar-denominated or referenced and are periodically adjusted for inflation.

**Refined Products Storage.** Sempra Infrastructure’s refined products storage business develops, constructs and operates systems for the receipt, storage and delivery of refined products, principally gasoline, diesel and jet fuel, throughout the Mexican states of Baja California, Colima, Puebla, Sinaloa, Veracruz and Valle de México for private companies, with a combined storage capacity of 4.6 million barrels fully operating or under construction/commissioning as of December 31, 2022. The inland terminal in the vicinity of Puebla reached commercial operations in October 2022. Construction of the Topolobampo marine terminal was substantially completed in May 2022, at which time commissioning activities commenced. Subject to the receipt of pending permits, we expect the Topolobampo terminal will commence commercial operations in the first half of 2023. Our customer contracts for our refined products storage business are structured as long-term, U.S. dollar-denominated, firm capacity storage agreements with counterparties including Chevron Corporation, Marathon Petroleum Corporation and Valero Energy Corporation. The contracted rate under these contracts is independent from each terminal’s regulated rate as determined by the CRE.

**Demand and Competition.** Ecogas faces competition from other distributors of natural gas in each of its three distribution zones in Mexicali, Chihuahua and La Laguna-Durango, Mexico as other distributors of natural gas build or consider building natural gas distribution systems. Sempra Infrastructure’s pipeline and storage facilities businesses compete with other regulated and unregulated pipeline and storage facilities. They compete primarily on the basis of price (in terms of storage and transportation fees), available capacity and interconnections to downstream markets. The overall demand for natural gas distribution services increases during the winter months, while the overall demand for power increases during the summer months.

### *Clean Power*

Sempra Infrastructure’s Clean Power business line consists of a renewable energy infrastructure portfolio and a natural gas-fired power plant in Mexico.

**Renewable Power Generation.** Sempra Infrastructure develops, builds, invests in and operates renewable energy generation facilities that have long-term PPAs to sell the electricity they generate to their customers, which are generally load serving entities, as well as industrial and other customers. Load serving entities sell electric service to their end-users and wholesale customers upon receipt of power delivery from these energy generation facilities, while industrial and other customers consume the electricity to run their facilities. At December 31, 2022, Sempra Infrastructure had a fully contracted, total nameplate capacity of 1,044 MW related to its fully operating wind and solar power generation facilities. Some of these facilities are impacted by regulatory actions by the Mexican government and related litigation, which we discuss in Note 16 of the Notes to Consolidated Financial Statements, “Part I - Item 1A. Risk Factors” and “Part II - Item 7. MD&A - Capital Resources and Liquidity - Sempra Infrastructure.”

2022 Form 10-K | 25

## SEMPRA INFRASTRUCTURE - RENEWABLE POWER GENERATION

|  | Location | Contract expiration date | Nameplate capacity (MW) |
| --- | --- | --- | --- |
| Wind power generation facilities: |  |  |  |
| ESJ - first phase | Tecate, Baja California | 2035 | 155 |
| ESJ - second phase (1) | Tecate, Baja California | 2042 | 108 |
| Ventika | Nuevo León, Mexico | 2036 | 252 |
| Solar power generation facilities: |  |  |  |
| Border Solar | Ciudad Juarez, Chihuahua | 2032 and 2037 | 150 |
| Don Diego Solar | Benjamín Hill, Sonora | 2034 and 2037 | 125 |
| Pima Solar | Caborca, Sonora | 2038 | 110 |
| Rumorosa Solar | Tecate, Baja California | 2034 | 44 |
| Tepezalá Solar | Aguascalientes | 2034 | 100 |
| Total |  |  | 1,044 |

$^{(1)}$ Commenced commercial operations in January 2022.

**Natural Gas-Fired Generation.** Sempra Infrastructure owns and operates the TdM power plant in the vicinity of Mexicali, Baja California, adjacent to the Mexico-U.S. border. TdM is a 625-MW natural gas-fired, combined-cycle power plant that is connected to our Gasoducto Rosarito pipeline system, which enables it to receive regasified LNG from the ECA Regas Facility as well as continental gas supplied from the U.S. on the North Baja pipeline. TdM generates revenue from selling electricity and resource adequacy to the California ISO and to governmental, public utility and wholesale power marketing entities.

**Demand and Competition.** Sempra Infrastructure competes with Mexican and foreign companies for new energy infrastructure projects in Mexico. Some of its competitors (including public or state-operated companies and their affiliates) may have better access to capital and greater financial and other resources, which could give them a competitive advantage for such projects.

Generation from Sempra Infrastructure's renewable energy assets is susceptible to fluctuations in naturally occurring conditions such as wind, inclement weather and hours of sunlight. Because Sempra Infrastructure sells power that it generates at its ESJ wind power generation facility into California, Sempra Infrastructure's future performance and the demand for renewable energy may be impacted by U.S. state mandated requirements to deliver a portion of total energy load from renewable energy sources. The rules governing these requirements in California are generally known as the RPS Program. In California, certification of a generation project by the CEC as an ERR allows the purchase of output from such generation facility to be counted towards fulfillment of the RPS Program requirements, if such purchase meets the provisions of SB X1-2, the California Renewable Energy Resources Act. The RPS Program may affect the demand for output from renewable energy projects developed by Sempra Infrastructure, particularly the demand from California's utilities. The first phase of ESJ, a wind power generation facility that delivers energy into California, has been certified by the CEC and is in compliance with the RPS Program as of December 31, 2022. Sempra Infrastructure is pursuing ERR certification for the second phase of ESJ.

TdM competes daily with other generating plants that supply power into the California electricity market. Sempra Infrastructure manages commodity price risk at TdM by using a mix of day ahead sales of energy, energy spreads hedging, ancillary services, and short-term to medium-term capacity sales.

### *Discontinued Operations*

We completed the sales of our equity interests in our Peruvian businesses in April 2020 and our Chilean businesses in June 2020. These South American businesses included our former 100% interest in Chilquinta Energía (an electric distribution utility in Chile), our former 83.6% interest in Luz del Sur (an electric distribution utility in Peru) and our former interests in two energy-services companies, Tecnored and Tecsur, which provide electric construction and infrastructure services to Chilquinta Energía and Luz del Sur, respectively, as well as third parties. These businesses and certain activities associated with these businesses are presented as discontinued operations in this report. We provide further information about discontinued operations in Note 5 of the Notes to Consolidated Financial Statements.

## REGULATION

We discuss the material effects of compliance with all government regulations, including environmental regulations, on our capital expenditures, earnings and competitive position in 'Part II - Item 7. MD&A' and Note 16 of the Notes to Consolidated Financial Statements.

2022 Form 10-K | 26

## *Utility Regulation*

### *California*

SDG&E and SoCalGas are principally regulated at the state level by the CPUC, CEC and CARB.

The CPUC:

- consists of five commissioners appointed by the Governor of California for staggered, six-year terms;
- regulates, among other things, SDG&E's and SoCalGas' customer rates and conditions of service, sales of securities, rates of return, capital structure, rates of depreciation, and long-term resource procurement, except as described below in "U.S. Federal;"
- has jurisdiction over the proposed construction of major new electric generation, transmission and distribution, and natural gas storage, transmission and distribution facilities in California;
- conducts reviews and audits of utility performance and compliance with regulatory guidelines and conducts investigations related to various matters, such as safety, reliability and planning, deregulation, competition and the environment; and
- regulates the interactions and transactions of SDG&E and SoCalGas with Sempra and its other affiliates.

The CPUC also oversees and regulates other energy-related products and services, including solar and wind energy, bioenergy, alternative energy storage and other forms of renewable energy. In addition, the CPUC's safety and enforcement role includes inspections, investigations and penalty and citation processes for safety and other violations.

The CEC publishes electric demand forecasts for the state and specific service territories. Based on these forecasts, the CEC:

- determines the need for additional energy sources and conservation programs;
- sponsors alternative-energy research and development projects;
- promotes energy conservation programs to reduce demand for natural gas and electricity within California;
- maintains a statewide plan of action in case of energy shortages; and
- certifies power-plant sites and related facilities within California.

The CEC conducts a 20-year forecast of available supplies and prices for every market sector that consumes natural gas in California. This forecast includes resource evaluation, pipeline capacity needs, natural gas demand and wellhead prices, and transportation and distribution costs. This analysis is one of many resource materials used to support SDG&E's and SoCalGas' long-term investment decisions.

California requires certain electric retail sellers, including SDG&E, to deliver a significant percentage of their retail energy sales from renewable energy sources. The rules governing this requirement, administered by the CPUC and the CEC, are generally known as the RPS Program. California has implemented a program whereby IOUs providing gas service in California will procure a portion of the natural gas they deliver from biomethane. The proportion of biomethane procured will be phased-in with a state-wide, short-term target in 2025 of 17.6 Bcf per year and a medium-term target in 2030 of 72.8 Bcf per year. SDG&E and SoCalGas are allocated 6.77% and 49.26%, respectively, of the 2025 target, and 7.60% and 52.02%, respectively, of the 2030 target. The rules governing this program are administered by the CPUC under SB 1440.

AB 32, the California Global Warming Solutions Act of 2006, assigns responsibility to CARB for monitoring and establishing policies for reducing GHG emissions. The law requires CARB to develop and adopt a comprehensive plan for achieving real, quantifiable and cost-effective GHG emissions reductions, including a statewide GHG emissions cap, mandatory reporting rules, and regulatory and market mechanisms to achieve reductions of GHG emissions. CARB is a department within the California Environmental Protection Agency, an organization that reports directly to the Governor's Office. Sempra Infrastructure is also subject to the rules and regulations of CARB.

The California Geologic Energy Management Division, the CPUC, and various other state and local agencies regulate the operation and maintenance of SoCalGas' natural gas storage facilities.

### *Texas*

Oncor's and Sharyland Utilities' rates are regulated at the state level by the PUCT and, in the case of Oncor, at the city level by certain cities. The PUCT has original jurisdiction over wholesale transmission rates and services and retail rates and services in unincorporated areas and in those municipalities that have ceded original jurisdiction to the PUCT, and has exclusive appellate jurisdiction to review the retail rate and service orders and ordinances of municipalities. Generally, the Texas PURA prohibits the collection of any rates or charges by a public utility (as defined by PURA) that do not have the prior approval of the appropriate regulatory authority (i.e., the PUCT or the municipality with original jurisdiction).

2022 Form 10-K | 27

At the state level, PURA requires utility owners or operators of electric transmission facilities to provide open-access wholesale transmission services to third parties at rates and terms that are nondiscriminatory and comparable to the rates and terms of the utility's own use of its system. The PUCT has adopted rules implementing the state open-access requirements for all utilities that are subject to the PUCT's jurisdiction over electric transmission services, including Oncor.

### *U.S. Federal*

SDG&E and SoCalGas are also regulated at the federal level by the FERC, the EPA, the DOE and the DOT, and for SDG&E the NRC.

The FERC regulates SDG&E's and SoCalGas' interstate sale and transportation of natural gas. The FERC also regulates SDG&E's transmission and wholesale sales of electricity in interstate commerce, transmission access, rates of return on transmission investment, rates of depreciation, electric rates involving sales for resale and the application of the uniform system of accounts. The U.S. Energy Policy Act governs procedures for requests for electric transmission service. The California IOUs' electric transmission facilities are under the operational control of the California ISO. As member utilities, Oncor and Sharyland Utilities operate within the ERCOT market, which we discuss below. To a small degree related to limited interconnections to other markets, Oncor's electric transmission revenues are provided under tariffs approved by the FERC.

The NRC oversees the licensing, construction, operation and decommissioning of nuclear facilities in the U.S., including SONGS, in which SDG&E owns a 20% interest and which was permanently retired in 2013. The NRC and various state regulations require extensive review of these facilities' safety, radiological and environmental aspects. We provide further discussion of SONGS matters, including the closure and decommissioning of the facility, in Note 15 of the Notes to Consolidated Financial Statements.

The EPA implements federal laws to protect human health and the environment, including federal laws on air quality, water quality, wastewater discharge, solid waste management, and hazardous waste disposal and remediation. The EPA also sets national environmental standards that state and tribal governments implement through their regulations. As a result, SDG&E, SoCalGas, Oncor and Sharyland Utilities are subject to an interrelated framework of environmental laws and regulations.

The DOT, through PHMSA, has established regulations regarding engineering standards and operating procedures, including procedures intended to manage cybersecurity risks, applicable to SDG&E's and SoCalGas' natural gas transmission and distribution pipelines, as well as natural gas storage facilities. The DOT has certified the CPUC to administer oversight and compliance with these regulations for the entities they regulate in California.

### *ERCOT Market*

As member utilities, Oncor and Sharyland Utilities operate within the ERCOT market, which represents approximately 90% of the electricity consumption in Texas. ERCOT is the regional reliability coordinating organization for member electricity systems in Texas and the ISO of the interconnected transmission grid for those systems. ERCOT is subject to oversight by the PUCT and the Texas Legislature. ERCOT is responsible for ensuring reliability, adequacy and security of the electric systems, as well as nondiscriminatory access to transmission service by all wholesale market participants, in the ERCOT region. ERCOT's membership consists of corporate and associate members, including electric cooperatives, municipal power agencies, independent generators, independent power marketers, transmission service providers, distribution service providers, independent retail electric providers and consumers.

The PUCT has primary jurisdiction over the ERCOT market to ensure the adequacy and reliability of power supply across Texas' main interconnected electric transmission grid. Oncor and Sharyland Utilities, along with other owners of electric transmission and distribution facilities in Texas, participate with the ERCOT ISO and other member utilities in its operations. Each of these Texas utilities has planning, design, construction, operation, maintenance and security responsibility for the portion of the transmission grid and the load-serving substations it owns, primarily within its certificated distribution service area. Each participates with the ERCOT ISO and other ERCOT utilities in obtaining regulatory approvals and planning, designing, constructing and upgrading transmission lines in order to remove any existing constraints and interconnect energy generation on the ERCOT transmission grid. These transmission line projects are necessary to meet reliability needs, support energy production and increase bulk power transfer capability.

Oncor and Sharyland Utilities are subject to reliability standards adopted and enforced by the Texas Reliability Entity, Inc., an independent organization that develops reliability standards for the ERCOT region and monitors and enforces compliance with the standards of the North American Electric Reliability Corporation, including critical infrastructure protection, and ERCOT protocols.

2022 Form 10-K | 28

### ***Other U.S. State and Local Territories Regulation***

The South Coast Air Quality Management District is the air pollution control agency responsible for regulating stationary sources of air pollution in the South Coast Air Basin in Southern California. The district's territory covers all of Orange County and the urban portions of Los Angeles, San Bernardino and Riverside counties.

SDG&E has electric franchise agreements with the two counties and the 27 cities in its electric service territory, and natural gas franchise agreements with the one county and the 18 cities in its natural gas service territory. These franchise agreements allow SDG&E to locate, operate and maintain facilities for the transmission and distribution of electricity or natural gas. Most of the franchise agreements have no expiration dates, while some have expiration dates that range from 2028 to 2041. In June 2021, the City of San Diego approved ordinances granting SDG&E the electric and natural gas franchises for the City of San Diego. These franchise agreements provide SDG&E the opportunity to serve the City of San Diego for the next 20 years, consisting of 10-year agreements that will automatically renew for an additional 10 years unless the City Council voids the automatic renewal with a supermajority vote. These franchise agreements went into effect in July 2021.

SoCalGas has natural gas franchise agreements with the 12 counties and the 232 cities in its service territory. These franchise agreements allow SoCalGas to locate, operate and maintain facilities for the transmission and distribution of natural gas. Most of the franchise agreements have no expiration dates, while some have expiration dates that range from 2023 to 2069, including the Los Angeles County franchise, which is scheduled to expire in June 2023.

### ***Other U.S. Regulation***

The FERC regulates certain Sempra Infrastructure assets pursuant to the U.S. Federal Power Act and Natural Gas Act, which provide for FERC jurisdiction over, among other things, sales of wholesale power in interstate commerce, transportation of natural gas in interstate commerce, and siting and permitting of LNG facilities.

The FERC may regulate rates and terms of service based on a cost-of-service approach or, in geographic and product markets determined by the FERC to be sufficiently competitive, rates may be market-based. FERC-regulated rates at Sempra Infrastructure are market-based for wholesale electricity sales, cost-based for the transportation of natural gas, and market-based for the purchase and sale of LNG and natural gas.

Sempra Infrastructure's investment in Cameron LNG JV is subject to regulations of the DOE regarding the export of LNG. Sempra Infrastructure's other potential natural gas liquefaction projects would, if completed, be subject to similar regulations.

SDG&E, SoCalGas and businesses in which Sempra Infrastructure invests are subject to the DOT rules and regulations regarding pipeline safety. PHMSA, acting through the Office of Pipeline Safety, is responsible for administering the DOT's national regulatory program to help ensure the safe transportation of natural gas, petroleum and other hazardous materials by pipelines, including pipelines associated with natural gas storage, and develops regulations and other approaches to risk management to help ensure safety in design, construction, testing, operation, maintenance and emergency response of pipeline facilities. SDG&E, SoCalGas and Sempra Infrastructure are also subject to regulation by the U.S. Commodity Futures Trading Commission.

### ***Foreign Regulation***

Operations and projects in our Sempra Infrastructure segment are subject to regulation by the CRE, ASEA, SENER, the Mexican Ministry of Environment and Natural Resources of Mexico (Secretaría del Medio Ambiente y Recursos Naturales), and other labor and environmental agencies of city, state and federal governments in Mexico. New energy infrastructure projects may also require a favorable opinion from Comisión Federal de Competencia Económica (Mexico's Competition Commission) in order to be constructed and operated.

### ***Licenses and Permits***

Our utilities in California and Texas obtain numerous permits, authorizations and licenses for, as applicable, the transmission and distribution of natural gas and electricity and the operation and construction of related assets, including electric generation and natural gas storage facilities, some of which may require periodic renewal.

Sempra Infrastructure obtains numerous permits, authorizations and licenses for its electric and natural gas distribution, generation and transmission systems from the local governments where these services are provided. The permits for generation, transportation, storage and distribution operations at Sempra Infrastructure are generally for 30-year terms, with options for renewal under certain regulatory conditions.

Sempra Infrastructure obtains licenses and permits for the construction, operation and expansion of LNG facilities and for the import and export of LNG and natural gas. Sempra Infrastructure also obtains licenses and permits for the construction and operation of facilities for the receipt, storage and delivery of refined products.

2022 Form 10-K | 29

Sempra Infrastructure obtains permits, authorizations and licenses for the construction and operation of natural gas storage facilities and pipelines, and in connection with participation in the wholesale electricity market.

Most of the permits and licenses associated with Sempra Infrastructure's construction and operations are for periods generally in alignment with the construction cycle or expected useful life of the asset and in many cases are greater than 20 years.

## **RATEMAKING MECHANISMS**

### ***Sempra California***

#### ***General Rate Case Proceedings***

A CPUC GRC proceeding is designed to set sufficient base rates to allow SDG&E and SoCalGas to recover their reasonable forecasted operating costs and to provide the opportunity to realize their authorized rates of return on their investments. The proceeding generally establishes the test year revenue requirements, which authorizes how much SDG&E and SoCalGas can collect from their customers, and provides for attrition, or annual increases in revenue requirements, for each year following the test year.

We discuss the GRC in Note 4 of the Notes to Consolidated Financial Statements.

#### ***Cost of Capital Proceedings***

A CPUC cost of capital proceeding every three years determines a utility's authorized capital structure and authorized return on rate base, which is a weighted-average of the authorized returns on debt, preferred equity and common equity (referred to as return on equity or ROE), weighted on a basis consistent with the authorized capital structure. The authorized return on rate base approved by the CPUC is the rate that SDG&E and SoCalGas use to establish customer rates to finance investments in CPUC-regulated electric distribution and generation, natural gas distribution, transmission and storage assets, as well as general plant and information technology systems investments to support operations.

A cost of capital proceeding also addresses the CCM, which applies in the interim years between required cost of capital applications and considers changes in the cost of capital based on changes in interest rates based on the applicable utility bond index published by Moody's (the CCM benchmark rate) for each 12-month period ending September 30 (the measurement period). The index applicable to SDG&E and SoCalGas is based on each utility's credit rating. The CCM benchmark rate is the basis of comparison to determine if the CCM is triggered in each measurement period, which occurs if the change in the applicable Moody's utility bond index relative to the CCM benchmark rate is larger than plus or minus 1.000% at the end of the measurement period. The CCM, if triggered, would automatically update the authorized cost of debt based on actual costs and update the authorized ROE upward or downward by one-half of the difference between the CCM benchmark rate and the applicable Moody's utility bond index. Alternatively, each of SDG&E and SoCalGas are permitted to file a cost of capital application in an interim year in which an extraordinary or catastrophic event materially impacts its cost of capital and affects utilities differently than the market as a whole to have its cost of capital determined in lieu of the CCM.

We discuss the cost of capital and CCM in Note 4 of the Notes to Consolidated Financial Statements and in 'Part I - Item 1A. Risk Factors.'

#### ***Transmission Rate Cases***

SDG&E files separately with the FERC for its authorized ROE on FERC-regulated electric transmission operations and assets. The proceeding establishes a ROE and a formulaic rate whereby rates are determined using (i) a base period of historical costs and a forecast of capital investments, and (ii) a true-up period, similar to balancing account treatment, that is designed to provide earnings equal to SDG&E's actual cost of service including its authorized return on investment. SDG&E makes annual information filings with the FERC in December to update rates for the following calendar year. SDG&E may also file for ROE incentives that might apply under FERC rules. SDG&E's debt-to-equity ratio is set annually based on the actual ratio at the end of each year.

#### ***Incentive Mechanisms***

The CPUC applies certain performance-based measures and incentive mechanisms to all California IOUs, under which SDG&E and SoCalGas have earnings potential above the authorized CPUC base operating margin if they achieve or exceed specific performance and operating goals. Generally, for performance-based measures, if performance is above or below specific benchmarks, the utility is eligible for financial awards or subject to financial penalties.

2022 Form 10-K | 30

### *Other Cost-Based Recovery*

The CPUC, and the FERC as it relates to SDG&E, authorize SDG&E and SoCalGas to collect revenue requirements from customers for operating and capital-related costs (depreciation, taxes and return on rate base), including:

- costs to purchase natural gas and electricity;
- costs associated with administering public purpose, demand response, and customer energy efficiency programs;
- other programmatic activities, such as gas distribution, gas transmission, gas storage integrity management and wildfire mitigation; and
- costs associated with third-party liability insurance premiums.

Authorized costs are recovered as the commodity or service is delivered. To the extent authorized amounts collected vary from actual costs, the differences are generally recovered or refunded in a subsequent period based on the nature of the balancing account mechanism. Generally, the revenue recognition criteria for balanced costs billed to customers are met when the costs are incurred. Because these costs are substantially recovered in rates through a balancing account mechanism, changes in these costs are reflected as changes in revenues. The CPUC and the FERC may impose various review procedures before authorizing recovery or refund of amounts accumulated for authorized programs, including limitations on the program's total cost, revenue requirement limits or reviews of costs for reasonableness. These procedures could result in delays or disallowances of recovery from ratepayers.

### *Sempra Texas Utilities*

#### *Rates and Cost Recovery*

Oncor's and Sharyland Utilities' rates are each regulated at the state level by the PUCT and, in the case of Oncor, at the city level by certain cities, and are subject to regulatory rate-setting processes and earnings oversight. This regulatory treatment does not provide assurance as to achievement of earnings levels or recovery of actual costs. Instead, their rates are based on an analysis of each utility's costs and capital structure in a designated test year, as reviewed and approved in regulatory proceedings. Rate regulation is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. However, there is no assurance that the PUCT will judge all of the Texas utilities' costs to have been prudently incurred and therefore fully recoverable. The approved levels of recovery could be significantly less than requested levels. There can also be no assurance that the PUCT will approve other items proposed in any rate proceeding or that the regulatory process in which rates are determined will necessarily result in rates that produce full recovery of the Texas utilities' actual post-test year costs and/or the return on invested capital allowed by the PUCT.

PUCT rules allow Texas electric utilities providing wholesale or retail distribution service to file applications, under certain circumstances, once per year to recover distribution-related investments placed into service between base rate review proceedings. PUCT rules also allow the Texas utilities to update their transmission rates twice a year between base rate review proceedings to reflect changes in transmission-related invested capital. These applications for interim rate adjustments between base rate reviews, known as "capital tracker" provisions, are intended to encourage investment in the electric system to help ensure reliability and efficiency by helping to shorten the time period between a utility's investment in transmission and distribution infrastructure and its ability to start recovering and earning a return on such investments. However, all investments included in a capital tracker are ultimately subject to prudence review by the PUCT in the next base rate review, after such assets are put into service.

#### *Capital Structure and Return on Equity*

Oncor currently has a PUCT-authorized ROE of 9.8% and an authorized regulatory capital structure of 57.5% debt to 42.5% equity. Oncor filed its base rate review request with the PUCT in May 2022. Resolution of the base rate review requires issuance of a final order by the PUCT, which Oncor expects to receive around the end of the first quarter of 2023. Once the final order is issued, the approved rates will be in effect until the next base rate review is finalized. In accordance with PUCT rules, Oncor must file a comprehensive base rate review within four years of the order setting rates in Oncor's most recent comprehensive base rate proceeding, unless an extension is otherwise approved by the PUCT. However, the PUCT or any city retaining original jurisdiction over rates may direct Oncor to file a base rate review, or Oncor may voluntarily file a base rate review, any time prior to that filing deadline.

Sharyland Utilities' 2020 rate case became effective in July 2021 and remains effective until the next rate case is finalized, which we expect could be in late 2025. Sharyland Utilities' PUCT-authorized ROE is 9.38% and its authorized regulatory capital structure is 60% debt to 40% equity.

2022 Form 10-K | 31

### ***Sempra Infrastructure***

Ecogas' revenues are derived from service and distribution fees charged to its customers in Mexican pesos. The price Ecogas pays to purchase natural gas, which is based on international price indices, is passed through directly to its customers. The service and distribution fees charged by Ecogas are regulated by the CRE, which performs a review of rates every five years and monitors prices charged to end-users. In the fourth quarter of 2020, Ecogas filed its rate case for 2021 through 2025 and is awaiting CRE approval. The tariffs operate under a return-on-asset-base model. In the annual tariff adjustment, rates are adjusted to account for inflation or fluctuations in exchange rates, and inflation indexing includes separate U.S. and Mexican cost components so that U.S. costs can be included in the final distribution rates.

### **ENVIRONMENTAL MATTERS**

We discuss environmental issues affecting us in Note 16 of the Notes to Consolidated Financial Statements and 'Part I - Item 1A. Risk Factors.' You should read the following additional information in conjunction with those discussions.

#### ***Hazardous Substances***

The CPUC's Hazardous Waste Collaborative mechanism allows California's IOUs to recover hazardous waste cleanup costs for certain sites, including those related to certain Superfund sites. For sites that are covered by this mechanism, SDG&E and SoCalGas are permitted to recover in rates 90% of hazardous waste cleanup costs and related third-party litigation costs, and 70% of related insurance-litigation expenses. In addition, SDG&E and SoCalGas can retain a percentage of any recoveries from insurance carriers and other third parties to offset the cleanup and associated litigation costs not recovered in rates.

We record estimated liabilities for environmental remediation when amounts are probable and estimable. In addition, we record amounts authorized to be recovered in rates under the Hazardous Waste Collaborative mechanism as regulatory assets.

#### ***Air and Water Quality***

The natural gas and electric industries are subject to increasingly stringent air quality and GHG emissions standards, such as those established by CARB and the South Coast Air Quality Management District. SDG&E and SoCalGas generally recover the costs to comply with these standards in rates. We discuss GHG emissions standards and credits further in Note 1 of the Notes to Consolidated Financial Statements.

2022 Form 10-K | 32

## OTHER MATTERS

### *Information About Our Executive Officers*

#### INFORMATION ABOUT EXECUTIVE OFFICERS AT SEMPRA

| Name | Age (1) | Positions held over last five years | Time in position |
| --- | --- | --- | --- |
| Jeffrey W. Martin | 61 | Chairman | December 2018 to present |
|  |  | Chief Executive Officer | May 2018 to present |
|  |  | President | March 2020 to present |
|  |  | Executive Vice President and Chief Financial Officer | January 2017 to May 2018 |
| Kevin C. Sagara | 61 | Executive Vice President and Group President | June 2020 to present |
|  |  | Chief Executive Officer, SDG&E | September 2018 to June 2020 |
|  |  | President, Sempra Renewables | October 2013 to September 2018 |
| Trevor I. Mihalik | 56 | Executive Vice President and Chief Financial Officer | May 2018 to present |
|  |  | Senior Vice President | December 2013 to April 2018 |
|  |  | Controller and Chief Accounting Officer | July 2012 to April 2018 |
| Peter R. Wall | 51 | Senior Vice President | April 2020 to present |
|  |  | Controller and Chief Accounting Officer | May 2018 to present |
|  |  | Vice President | May 2018 to April 2020 |
|  |  | Vice President and Chief Financial Officer, Sempra Infrastructure | January 2017 to April 2018 |
| Karen L. Sedgwick | 56 | Chief Administrative Officer and Chief Human Resources Officer | December 2021 to present |
|  |  | Senior Vice President and Chief Human Resources Officer | September 2020 to December 2021 |
|  |  | Chief Human Resources Officer and Chief Administrative Officer, SDG&E | April 2019 to September 2020 |
|  |  | Vice President and Treasurer | August 2018 to April 2019 |
|  |  | Vice President, Audit Services | January 2014 to August 2018 |

$^{(1)}$ Ages are as of February 28, 2023.

2022 Form 10-K | 33

## INFORMATION ABOUT EXECUTIVE OFFICERS AT SDG&E

| Name | Age (1) | Positions held over last five years | Time in position |
| --- | --- | --- | --- |
| Caroline A. Winn | 59 | Chief Executive Officer | August 2020 to present |
|  |  | Chief Operating Officer | January 2017 to July 2020 |
| Bruce A. Folkmann | 55 | President | August 2020 to present |
|  |  | Chief Financial Officer | March 2015 to present |
|  |  | Senior Vice President | August 2019 to July 2020 |
|  |  | Controller, Chief Accounting Officer and Treasurer | March 2015 to August 2020 |
|  |  | Vice President | March 2015 to August 2019 |
|  |  | Vice President, Controller, Chief Financial Officer, Chief Accounting Officer and Treasurer, SoCalGas | March 2015 to June 2019 |
| Kevin Geraghty | 57 | Chief Operating Officer and Chief Safety Officer | June 2022 - Present |
|  |  | Chief Safety Officer | January 2021 - June 2022 |
|  |  | Senior Vice President - Electric Operations | July 2020 - June 2022 |
|  |  | Chief Operating Officer and Senior Vice President, Operations, Nevada Energy, an electric and natural gas public utility in Nevada | October 2017 - May 2020 |
| Valerie A. Bille | 44 | Vice President, Controller, Chief Accounting Officer and Treasurer | August 2020 to present |
|  |  | Assistant Controller, Sempra | June 2019 to August 2020 |
|  |  | Assistant Controller | June 2018 to June 2019 |
|  |  | Director, Utility Financial Reporting | June 2017 to June 2018 |
| Erbin B. Keith | 62 | Senior Vice President, General Counsel, Chief Risk Officer | October 2022 to present |
|  |  | Deputy General Counsel, Sempra | March 2019 to October 2022 |
|  |  | Chief Regulatory Officer and Special Counsel, Sempra | September 2017 to March 2019 |

$^{(1)}$ Ages are as of February 28, 2023.

## INFORMATION ABOUT EXECUTIVE OFFICERS AT SOCALGAS

| Name | Age (1) | Positions held over last five years | Time in position |
| --- | --- | --- | --- |
| Scott D. Drury | 57 | Chief Executive Officer | August 2020 to present |
|  |  | President, SDG&E | January 2017 to July 2020 |
| Maryam S. Brown | 47 | President | March 2019 to present |
|  |  | Vice President of Federal Government Affairs, Sempra | September 2016 to March 2019 |
| Jimmie I. Cho | 58 | Chief Operating Officer | January 2019 to present |
|  |  | Senior Vice President of Customer Services and Gas Distribution Operations | April 2018 to January 2019 |
|  |  | Senior Vice President of Gas Distribution Operations, SDG&E | April 2018 to January 2019 |
|  |  | Senior Vice President of Gas Engineering and Distribution Operations, SoCalGas and SDG&E | October 2017 to April 2018 |
| Mia L. DeMontigny | 50 | Senior Vice President | July 2022 to present |
|  |  | Chief Financial Officer, Chief Accounting Officer and Treasurer | June 2019 to present |
|  |  | Controller | June 2019 to July 2022 |
|  |  | Vice President | June 2019 to August 2021 |
|  |  | Assistant Controller, Sempra | August 2015 to June 2019 |
| David J. Barrett | 58 | Senior Vice President | July 2022 to present |
|  |  | General Counsel | January 2019 to present |
|  |  | Vice President | January 2019 to July 2022 |
|  |  | Associate General Counsel of Gas Infrastructure, Sempra | June 2018 to January 2019 |
|  |  | Assistant General Counsel of Gas Infrastructure, Sempra | February 2017 to June 2018 |

$^{(1)}$ Ages are as of February 28, 2023.

2022 Form 10-K | 34

## Human Capital

Our ability to advance our mission to be North America's premier energy infrastructure company largely depends on the safety, engagement, and responsible actions of our employees.

Safety is foundational at Sempra and its subsidiaries. We strive to foster a strong safety culture and reinforce this culture through training programs, benchmarking, review and analysis of safety trends, and sharing lessons learned from safety incidents across our businesses. Our businesses also engage in safety-related scenario planning and simulation, develop and implement operational contingency plans, and review safety plans and procedures with work crews regularly. We also participate in emergency planning and preparedness in the communities we serve and train critical employees in emergency management and response each year. The Safety, Sustainability and Technology committee of the Sempra board of directors assists the board in overseeing the corporation's oversight programs and performance related to safety, and our executives' annual incentive compensation is based in part on safety metrics established by the Compensation and Talent Development Committee of the Sempra board of directors.

Our overall culture is another important aspect of our ability to advance our mission. We embrace diversity in our workforce and strive to create a high-performing, inclusive and supportive workplace where employees of all backgrounds and experiences feel valued and respected. We invest in recruiting, developing and retaining high-potential employees who represent the communities we serve, and we provide a range of programs to advance those objectives, including internal and external mentoring and leadership training and workshops, employee resource groups, and a benefits package including wellness benefits and a tuition reimbursement program. We also invest in internal communications programs, including in-person and virtual learning and networking opportunities as well as regular executive communications to employees on topics of interest. In addition, we offer a variety of employee community service opportunities and, at our U.S. operations, we support employees' personal volunteering and charitable giving through Sempra's charitable matching program. Employees participate in annual ethics and compliance training, which includes a review of Sempra's Code of Business Conduct as well as information about resources such as Sempra's ethics and compliance helpline. We measure culture and employee engagement through a variety of channels including pulse surveys, suggestion boxes and a biannual engagement survey administered by a third party.

The table below shows the number of employees for each of our registrants at December 31, 2022, as well as the percentage of those employees represented by labor unions under various collective bargaining agreements that generally cover wages, benefits, working conditions and other terms and conditions of employment. We did not experience any major work stoppages in 2022 and we maintain constructive relations with our labor unions.

### NUMBER OF EMPLOYEES

|  | Number of employees | % of employees covered under collective bargaining agreements | % of employees covered under collective bargaining agreements expiring within one year |
| --- | --- | --- | --- |
| Sempra (1) | 15,785 | 37% | - % |
| SDG&E | 4,633 | 30% | - % |
| SoCalGas | 8,460 | 53% | - % |

$^{(1)}$ Excludes employees of equity method investees.

## COMPANY WEBSITES

Company website addresses are:

- SoCalGas - www.socalgas.com

We make available free of charge on the Sempra website, and for SDG&E and SoCalGas, via a hyperlink on their websites, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.

The references to our websites in this report are not active hyperlinks and the information contained on, or that can be accessed through, the websites of Sempra, SDG&E and SoCalGas or any other website referenced herein is not a part of or incorporated by reference in this report or any other document that we file with or furnish to the SEC.

2022 Form 10-K | 35

# ITEM 1A. RISK FACTORS

*When evaluating our company and its subsidiaries and any investment in our or their securities, you should carefully consider the following risk factors and all other information contained in this report and the other documents we file with the SEC (including those filed subsequent to this report). We also may be materially harmed by risks and uncertainties not currently known to us or that we currently consider immaterial. If any of these risks occurs, our results of operations, financial condition, cash flows and/or prospects could be materially adversely affected, our actual results could differ materially from those expressed in any forward-looking statements made by us or on our behalf, and the trading price of our securities and those of our subsidiaries could decline. These risk factors are not prioritized in order of importance or materiality, and they should be read in conjunction with the other information in this report, including the information set forth in the Consolidated Financial Statements and in 'Part II - Item 7. MD&A.'*

## RISKS RELATED TO SEMPRA

### Operational and Structural Risks

***Sempra's cash flows, ability to pay dividends and ability to meet its debt obligations largely depend on the performance of its subsidiaries and entities accounted for as equity method investments.***

We are a holding company and substantially all our assets are owned by our subsidiaries or entities we do not control, including equity method investments. Our ability to pay dividends and meet our debt and other obligations largely depends on cash flows from our subsidiaries and equity method investments, which in turn depend on their ability to execute their business strategies and generate cash flows in excess of their own expenditures, dividend payments to third-party owners (if any) and debt and other obligations. In addition, entities accounted for as equity method investments, which we do not control, and our subsidiaries are all separate and distinct legal entities that are not obligated to pay dividends or make loans or distributions to us and could be precluded from doing so by legislation, regulation, court order or contractual restrictions, in times of financial distress or in other circumstances. The inability to access capital from our subsidiaries and entities accounted for as equity method investments could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Sempra's rights to the assets of its subsidiaries and equity method investments are structurally subordinated to the claims of each entity's trade and other creditors. If Sempra is a creditor of any such entity, its rights as a creditor would be effectively subordinated to any security interest in the entity's assets and any indebtedness of the entity senior to that held by Sempra. In addition, Sempra may elect to make capital contributions to its subsidiaries, which are not required to be repaid and generally are structurally subordinated to claims by creditors of the applicable subsidiary.

***Sempra has substantial investments in and obligations arising from businesses it does not control or manage or in which it shares control.***

We have investments in businesses we do not control or manage or in which we share control. In some cases, we engage in arrangements with or for these businesses that could expose us to risks in addition to our investment, including guarantees, indemnities and loans. For businesses we do not control, we are subject to the decisions of others, which may not always be in our interest and could negatively affect us. When we share control of a business with other owners, any disagreements among the owners about strategy, financial, operational, transactional or other important matters could hinder the business from moving forward with key initiatives or taking other actions and could negatively affect the relationships among the owners and the efficient functioning of the business. In addition, irrespective of whether or not we control these businesses, we could be responsible for liabilities or losses related to these businesses or elect to make capital contributions to these businesses. Any such circumstance could materially adversely affect our results of operations, financial condition, cash flows and/or prospects. We discuss these investments in Note 6 of the Notes to Consolidated Financial Statements.

***Our business could be negatively affected by activist shareholders.***

Activist shareholders may engage in proxy solicitations, advance shareholder proposals or otherwise attempt to effect changes in or assert influence on our board of directors and management. In taking these steps, activist shareholders could seek to acquire our capital stock, which at certain ownership levels could threaten our ability to use some or all our NOL carryforwards if our corporation experiences an 'ownership change' under applicable tax rules. Responding to activist shareholders could require us to

2022 Form 10-K | 36

incur legal and advisory fees, proxy solicitation expenses and administrative and associated costs and require time and attention by our board of directors and management, diverting their attention from the pursuit of our business strategies.

Any perceived uncertainties about our future direction or control, our ability to execute our strategies, or the composition of our board of directors or management team arising from activist shareholder attention or other action could lead to a perception of instability or a change in the direction of our business, which could be exploited by our competitors and/or other activist shareholders, result in the loss of business opportunities, and make it more difficult to pursue our strategic initiatives or attract and retain qualified personnel and business partners, any of which could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects. Further, any such actions could cause fluctuations in the trading prices of our securities based on temporary or speculative market perceptions or other factors.

## Financial and Capital Stock-Related Risks

### *Any impairment of our assets or investments could negatively impact us.*

We could experience a reduction in the fair value of our assets, including our long-lived assets, intangible assets or goodwill, and/or our investments that we account for under the equity method upon the occurrence of many of the risks discussed in these risk factors and elsewhere in this report, including any closure of the Aliso Canyon natural gas storage facility without adequate cost recovery, any inability to operate our existing facilities or develop new projects in Mexico due to proposed changes to existing laws or regulations or other circumstances affecting the energy sector or our assets in that country, and more generally any loss of permits or approvals that requires us to adjust or cease certain operations and any investment in capital projects that do not receive required approvals or are changed, abandoned or otherwise not completed. Any such reduction in the fair value of our assets or investments could result in an impairment loss that could materially adversely affect our results of operations for the period in which the charge is recorded. We discuss our impairment testing of long-lived assets and goodwill and the factors considered in such testing in “Part II - Item 7. MD&A - Critical Accounting Estimates” and in Note 1 of the Notes to Consolidated Financial Statements.

### *The economic interest, voting rights and market value of our outstanding common and preferred stock may be adversely affected by any additional equity securities we may issue.*

At February 21, 2023, we had 314,569,519 shares of our common stock and 900,000 shares of our non-convertible series C preferred stock outstanding. We may seek to raise capital by issuing additional equity or convertible debt securities, which may materially dilute the voting rights and economic interests of holders of our outstanding common and preferred stock and materially adversely affect the trading price of our common and preferred stock.

### *Dividend requirements associated with our preferred stock subject us to risks.*

Any failure to pay scheduled dividends on our series C preferred stock when due would have a material adverse impact on the market price of our securities and would prohibit us, under the terms of the series C preferred stock, from paying cash dividends on or repurchasing shares of our common stock (subject to limited exceptions) until we have paid all accumulated and unpaid dividends on the series C preferred stock. Additionally, the terms of the series C preferred stock generally provide that if dividends on any shares of the preferred stock have not been declared and paid or have been declared but not paid for three or more semi-annual dividend periods, whether or not consecutive, the holders of the preferred stock would be entitled to elect two additional members to our board of directors, subject to certain terms and limitations.

### *Our common stock is listed on the Mexican Stock Exchange and registered with the CNBV, which subjects us to additional regulation and liability in Mexico.*

In addition to being listed for trading on the NYSE, our common stock is listed for trading on the Mexican Stock Exchange and registered with the CNBV. Such listing and registration subjects us to filing and other requirements in Mexico that could increase costs and increase performance risk of personnel given additional responsibilities. In addition, the CNBV, as the Mexican securities market regulator, has the authority to make inspections of Sempra’s business, primarily in the form of requests for information and documents; impose fines or other penalties on Sempra and its directors and officers for violations of Mexican securities laws and regulations; and seek criminal liability for certain actions conducted or with effects in Mexico. The occurrence of any of these risks could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

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# RISKS RELATED TO ALL SEMPRA BUSINESSES

# Operational Risks

# *Our businesses are subject to risks arising from their infrastructure and information systems.*

Our businesses' facilities and the information systems that interconnect and/or manage them are subject to risks of, among other things, potential breakdown or failure of equipment or processes due to aging infrastructure and systems; human error; shortages of or delays in obtaining equipment, materials, commodities or labor, which may be exacerbated by current or future supply chain constraints and tight labor market conditions, and increases to the costs of these items due to inflationary pressures or otherwise, which may not be recoverable in a timely manner or at all; operational restrictions resulting from environmental requirements or governmental interventions; inability to enter into, maintain, extend or replace long-term supply or transportation contracts; and performance below expected levels. Even though our businesses undertake capital investment projects to construct, replace, maintain, improve and upgrade facilities and systems, such projects may not be effective at managing the aforementioned risks, and may involve significant costs that may not be recoverable and challenges in achieving completion. We often rely on third parties, including contractors, to perform work related to these projects and other maintenance activities, which may subject us to increased risks because we manage the safety and quality of work performed by third parties and may retain liability for their work. Because our facilities are interconnected with those of third parties, including receiving natural gas supply from third party pipelines and power generation facilities that produce most of the power that we distribute to customers, the operation of our facilities could also be adversely affected by these or similar risks to the systems of such third parties, many of which may be unanticipated or uncontrollable by us.

Additional risks associated with our businesses' ability to safely and reliably construct, replace, operate, maintain, improve and upgrade their respective facilities and systems, many of which are beyond our control, include:

- failure to meet customer demand for electricity and/or natural gas, including electrical blackouts or curtailments or gas outages
- natural gas surges into homes or other properties
- the release of hazardous or toxic substances, including gas leaks
- inadequate emergency preparedness plans and the failure to respond effectively to catastrophic events

The occurrence of any of these events could affect supply and demand for electricity, natural gas or other forms of energy, cause unplanned outages, damage our businesses' assets and/or operations, damage the assets and/or operations of third parties on which our businesses rely, damage property owned by customers or others, and cause personal injury or death. In addition, if we are unable to defend and retain title to the properties we own or if we are unable to obtain or retain rights to construct and operate on the properties we do not own in a timely manner, on reasonable terms or at all, we could lose our rights to occupy and use these properties and the related facilities, which could result in modification, delay or curtailment of existing or proposed operations or projects, increase our costs, and result in breaches of one or more permits or contracts related to the affected facilities that could lead to legal costs, impairments or fines or penalties. Any such outcome could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

# *Severe weather, natural disasters and other similar events could materially adversely affect us.*

Our facilities and infrastructure, including projects in development and under construction, may be damaged by severe weather, natural disasters, accidents, explosions or acts of terrorism, war or criminality. Because we are in the business of using, storing, transporting and disposing of highly flammable, explosive and radioactive materials and operating highly energized equipment, the risks such incidents may pose to our facilities and infrastructure, as well as the risks to the surrounding communities for which we could be held responsible, are substantially greater than the risks such incidents pose to a typical business.

Such incidents could result in business and project development disruptions, power or gas outages, property damage, injuries and loss of life for which we could be liable and could cause secondary incidents that also may have these or other negative effects, such as fires; leaks of natural gas, natural gas odorant, propane, ethane, other GHG emissions or radioactive material; spills or other damage to natural resources; or other nuisances to affected communities. Any of these occurrences could decrease revenues and earnings and/or increase costs, including maintenance costs or restoration expenses, amounts associated with claims against us, and regulatory fines, penalties and disallowances. In some cases, we may be liable for damages even though we are not at fault, such as when the doctrine of inverse condemnation applies, which we discuss below under "Risks Related to Sempra California - Operational Risks." For our regulated utilities, these costs may not be recoverable in rates. Insurance coverage for these costs may increase or become prohibitively expensive, be disputed by insurers, or become unavailable for certain of these risks or at sufficient levels, and any insurance proceeds may be insufficient to cover our losses or liabilities due to limitations, exclusions, high deductibles, failure to comply with procedural requirements or other factors. Such incidents that do not directly

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affect our facilities may impact our business partners, supply chains and transportation channels, which could negatively impact construction projects and our ability to provide electricity and natural gas to customers. Moreover, weather-related incidents have become more prevalent, unpredictable and severe as a result of climate change or other factors, which could have a greater impact on our businesses than currently anticipated and, for our regulated utilities, rates may not be adequately or timely adjusted to reflect any such increased impact. Any such outcome could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

# ***In addition to general information and cyber risks that all large corporations face, we face evolving cybersecurity risks associated with the energy grid, natural gas pipelines, storage and other infrastructure and protecting sensitive and confidential customer and employee information.***

Our use of complex technologies and systems in our operations, including deployment of any new technologies, and our collection and retention of sensitive information, represent large-scale opportunities for attacks on or other failures to protect our information systems, confidential information and energy grid and natural gas infrastructure. In particular, cyber-attacks targeting utility systems and other energy infrastructure, as well as the impacts of these attacks on companies and their communities, are increasing in sophistication, magnitude and frequency and may further increase in connection with certain geopolitical events, such as the war in Ukraine. Additionally, SDG&E and SoCalGas are increasingly required to disclose large amounts of data (including customer personal information and energy use data) to support changes to California's electricity and gas markets related to grid modernization and customer choice as well as energy efficiency, demand response and conservation, increasing the risks of inadvertent disclosure or other unauthorized access of sensitive information. Further, the virtualization of many business activities increases cyber risk, and generally there has been an associated increase in targeted cyber-attacks. Moreover, all our businesses operating in California (and any other states and countries where we do business that adopt similar laws) are subject to enhanced state privacy laws, which require companies that collect information about California residents to, among other things, make disclosures to consumers about their data collection, use and sharing practices; allow consumers to opt out of certain data sharing with third parties; and assume liability under a new cause of action for unauthorized disclosure of certain highly sensitive personal information.

Although we invest in risk management and information security measures for the protection of our systems and information, these measures could be insufficient or otherwise fail. The costs and operational consequences of implementing, maintaining and enhancing these protection measures are significant, and they could materially increase to address increasingly intense and complex cyber risks. We often rely on third-party vendors to deploy new business technologies and maintain, modify and update our systems, and these third parties may not have adequate risk management and information security measures with respect to their systems. Any cyber-attack, including ransomware attacks, on our or our vendors' information systems or the integrity of the energy grid, our pipelines or our distribution, storage and other infrastructure, or unauthorized access, damage or improper disclosure of confidential information, could result in disruptions to our business operations, regulatory compliance failures, inabilities to produce accurate and timely financial statements, energy delivery failures, financial and reputational loss, customer dissatisfaction, litigation, violation of privacy laws and fines or penalties, any of which could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects. Although Sempra currently maintains cyber liability insurance, this insurance is limited in scope and subject to exceptions, conditions and coverage limitations and may not cover any or even a substantial portion of the costs associated with any compromise of our information systems or confidential information, and there is no guarantee that the insurance we currently maintain will continue to be available at rates we believe are commercially reasonable.

# ***We seek growth opportunities in the market organically and inorganically, including through the acquisition of, or partnerships in, operating companies.***

We diligently analyze the financial viability of each acquisition, partnership and JV we pursue. However, our diligence may prove to be insufficient and there could be latent, unforeseen defects. In addition, we may not realize all the anticipated benefits from future acquisitions, partnerships or JVs for various reasons, including difficulties integrating operations and personnel to our standards or in a timely manner, higher and unexpected acquisition and operating costs, unknown liabilities, and fluctuations in markets. Any of these outcomes could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

# ***Increasing activities and projects intended to advance new energy technologies could introduce new risks to our businesses.***

We regularly undertake or become involved in research and development projects and other activities designed to develop new technologies in the energy space, including those related to hydrogen, energy storage, carbon sequestration, grid modernization and others. These activities and projects can involve significant employee time, as well as substantial capital resources that may

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not be recoverable in rates or, with respect to our non-regulated utility businesses, may not be able to be passed through to customers. We may also seek a variety of federal and state funding opportunities for these activities and projects (such as loans and grants, including in conjunction with third-party commercial or governmental entities), which may involve significant employee time and effort and increased compliance requirements with no guarantee that any such funding would be received. In addition, the timing to complete these activities and projects is inherently uncertain and may require significantly more time and funding than we initially anticipate. Moreover, many of these technologies are in the early stage of development, and the applicable activities and projects may not be completed or the applicable technologies may not prove economically and technically feasible. If any of these circumstances occurs, we may not receive an adequate or any return on our investment and other resources invested in these activities and our results of operations, financial condition, cash flows and/or prospects could be materially adversely affected.

### *The operation of our facilities depends on good labor relations with our employees.*

Several of our businesses have in place collective bargaining agreements with different labor unions, which are generally negotiated on a company-by-company basis. Any failure to negotiate and reach an agreement on these labor contracts as they are up for renewal could result in strikes, boycotts or other labor disruptions. Any such labor disruption or negotiated wage or benefit increases, whether due to union activities, employee turnover or otherwise, could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

### *Our businesses depend on the performance of counterparties, and any performance failures by these counterparties could materially adversely affect us.*

Our businesses depend on the performance of business partners, customers, suppliers and other counterparties who owe money or commodities as a result of market transactions or other long-term arrangements. If they fail to perform their obligations in accordance with these arrangements, we may need to enter into alternative arrangements or honor our underlying commitments at then-current market prices, which may result in additional losses to us to the extent of amounts already paid to such counterparties. Any efforts to enforce the terms of these arrangements through legal or other means could involve significant time and costs and would be unpredictable and may not be successful. In addition, many of these arrangements, including our relationships with the applicable counterparties, are important for the conduct and growth of our businesses. We also may not be able to secure replacement agreements with other counterparties on favorable terms, in a timely manner or at all if any of these arrangements terminate. Further, we often extend credit to customers and other counterparties and, although we perform credit analyses prior to extending credit, we may not be able to collect the amounts owed to us, which presents an increased risk for our long-term supply, sales and capacity contracts. The failure of any of our counterparties to perform in accordance with their arrangements with us could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

Sempra Infrastructure's obligations and those of its LNG suppliers are contractually subject to suspension or termination for force majeure events, which generally are beyond the control of the parties, and limitations of remedies for other failures to perform, including limitations on damages that may prohibit recovery of costs incurred for any breach of an agreement. Any such occurrence could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Sempra Infrastructure engages in JVs and invests in companies in which other equity partners may have or share with us control over the applicable project or investment. Sempra Texas Utilities also invests in companies that it does not control or manage. We discuss the risks related to these arrangements above under "Risks Related to Sempra - Operational and Structural Risks."

### *Our businesses face risks related to the COVID-19 pandemic.*

The COVID-19 pandemic has materially impacted communities, supply chains, economies and markets around the world since March 2020. To date, the COVID-19 pandemic has not had a material impact on our results of operations. However, Sempra and some or all its businesses have been and could continue to be impacted by this pandemic or any future pandemic in a number of ways, including:

- Disruption in supply chains and the capital markets, which has affected and could further affect liquidity, strategic initiatives and prospects, including in some cases a slowdown of planned capital spending
- Customer-protection measures implemented by SDG&E and SoCalGas, including suspending service disconnections due to nonpayment for all customers early in the pandemic (except for SoCalGas' noncore customers and, since the second half of 2022, SDG&E's and SoCalGas' commercial and industrial customers), waiving late payment fees, offering flexible payment plans and automatically enrolling residential and small business customers with past-due balances in long-term repayment plans, which have collectively resulted in a reduction in payments from SDG&E and SoCalGas' customers and an increase in uncollectible accounts that could become material and may not be fully recoverable

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• Precautionary, preemptive and responsive actions taken by our current and prospective counterparties, customers and partners, as well as regulators and other governing bodies that affect our businesses, which have affected and could further affect our operations, results, liquidity and ability to pursue capital projects and strategic initiatives

Any of these impacts could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects. We will continue to actively monitor the effects of the COVID-19 pandemic and may take further actions that alter our business operations as may be required by federal, state or local authorities, or that we determine are necessary for the safety of our employees, customers, partners and suppliers and, generally, the communities we serve. However, we cannot at this time predict the extent to which the COVID-19 pandemic may further impact our businesses.

## Financial Risks

*Our debt service obligations expose us to risks and could require additional equity securities issuances by Sempra and sales of equity interests in various subsidiaries or projects under development.*

Our businesses have debt service obligations, which could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects by, among other things:

- making it more difficult and costly for each of these businesses to service, pay or refinance their debts as they come due, particularly during adverse economic or industry conditions or in periods of significant increases in interest rates
- limiting flexibility to pursue strategic opportunities or react to business developments or changes in the industry sectors in which they operate
- requiring cash to be used for debt service payments, thereby reducing the cash available for other purposes
- causing lenders to require materially adverse terms in the instruments for new debt, such as restrictions on uses of proceeds or other assets or limitations on incurring additional debt, creating liens, paying dividends, repurchasing stock, making investments or receiving distributions from subsidiaries or equity method investments

Sempra's goal is to maintain or improve its credit ratings, but it may not be able to do so. To maintain these credit ratings, we may seek to reduce our outstanding indebtedness or our need for additional indebtedness with the proceeds from issuances of equity securities by Sempra or the sale of equity interests in our subsidiaries or development projects. We may not be able to complete any such equity sales on terms we consider acceptable or at all, and any new equity issued by Sempra may dilute the voting rights and economic interests of existing holders of Sempra's common and preferred stock. Any such outcome could have a material adverse effect on Sempra's results of operations, financial condition, cash flows and/or prospects.

*The availability and cost of debt or equity financing could be negatively affected by market and economic conditions and other factors, and any such effects could materially adversely affect us.*

Our businesses are capital-intensive, with significant capital spending expected in future periods. In general, we rely on long-term debt to fund a significant portion of our capital expenditures and repay outstanding debt and we rely on short-term borrowings to fund a significant portion of day-to-day business operations. Sempra may also seek to raise capital by issuing equity or selling equity interests in our subsidiaries or investments.

Limitations on the availability of credit, increases in interest rates or credit spreads due to inflationary pressures or otherwise or other negative effects on the terms of any financing we pursue could cause us to fund operations and capital expenditures at a higher cost or fail to raise our targeted amount of funding, which could negatively impact our ability to meet contractual and other commitments, progress development projects, make non-safety related capital expenditures and effectively sustain operations. Any of these outcomes could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

In addition to market and economic conditions, factors that can affect the availability and cost of capital include:

- adverse changes to laws and regulations, including recent and proposed changes to the regulation of the energy market in Mexico
- the overall health of the energy industry
- volatility in electricity or natural gas prices
- for Sempra, SDG&E and SoCalGas, risks related to California wildfires
- for Sempra, SDG&E and SoCalGas, any deterioration of or uncertainty in the political or regulatory environment for local natural gas distribution companies operating in California
- credit ratings downgrades

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# ***We are subject to risks due to uncertainty relating to the calculation of LIBOR and its scheduled discontinuance.***

Certain of our financial and commercial agreements, including those for variable rate indebtedness, as well as interest rate derivatives, incorporate LIBOR as a benchmark for establishing certain rates. As directed by the U.S. Federal Reserve, banks ceased making new LIBOR-based issuances at the end of 2021, and publication of certain key U.S. dollar LIBOR tenors for existing loans is expected to cease in mid-2023. These events could cause LIBOR to perform differently than it has performed historically. Use of the SOFR, which has been identified as the replacement benchmark rate for LIBOR, may result in interest payments that are higher than expected or that do not otherwise correlate over time with the payments that would have been made using LIBOR. Changes to or the discontinuance of LIBOR, any uncertainty regarding such changes or discontinuance, and the performance and characteristics of alternative benchmark rates, could negatively affect our existing and future variable rate indebtedness and interest rate hedges and the cost of doing business under our commercial agreements that incorporate LIBOR, SOFR or other alternative benchmark rates, and could require us to seek to amend the terms of the relevant indebtedness or agreements, which may not be possible and/or may require us to accept terms that are materially worse than existing terms. The occurrence of any of these risks could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

# ***Credit rating agencies may downgrade our credit ratings or place those ratings on negative outlook.***

Credit rating agencies routinely evaluate Sempra, SDG&E, SoCalGas and SI Partners and certain of our other businesses, and their ratings are based on a number of factors, including the factors described below and the ability to generate cash flows; level of indebtedness; overall financial strength; specific transactions or events, such as share repurchases and significant litigation; the status of certain capital projects; and the state of the economy and our industry generally. These credit ratings could be downgraded or other negative credit rating actions could occur at any time. We discuss these credit ratings in “Part II - Item 7. MD&A - Capital Resources and Liquidity.”

For Sempra, the Rating Agencies have noted that the following events, among others, could lead to negative ratings actions:

- expansion of natural gas liquefaction projects or other unregulated businesses in a manner inconsistent with its present level of credit quality
- Sempra’s consolidated financial measures do not improve, or it fails to meet certain financial credit metrics
- catastrophic wildfires caused by SDG&E or by any California electric IOUs that participate in the Wildfire Fund, which could exhaust the fund considerably earlier than expected

For SDG&E, the Rating Agencies have noted that the following events, among others, could lead to negative ratings actions:

- catastrophic wildfires caused by SDG&E or by any California electric IOUs that participate in the Wildfire Fund, which could exhaust the fund considerably earlier than expected
- a consistent weakening of SDG&E’s financial metrics or a deterioration in the regulatory environment
- a ratings downgrade at Sempra

For SoCalGas, the Rating Agencies have noted that the following events, among others, could lead to negative ratings actions:

- SoCalGas’ financial measures consistently weaken, or it fails to meet certain financial credit metrics
- SoCalGas experiences increased business risk, including a deterioration in the regulatory environment, leading to weakening of its stand-alone business risk profile
- a ratings downgrade at Sempra

For SI Partners, the Rating Agencies have noted that the following events, among others, could lead to negative ratings actions:

- SI Partners’ failure to meet certain financial credit metrics
- a deterioration in SI Partners’ business risk profile, including incremental construction risk or adverse changes in the operating environment in Mexico
- a ratings downgrade at Sempra, IEnova and/or Cameron LNG, LLC

A downgrade of any of our businesses’ credit ratings or ratings outlooks, as well as the reasons for such downgrades, may materially adversely affect the market prices of our securities, the interest rates at which borrowings can be made and debt securities issued, and the various fees on our credit facilities. This could make it more costly for the affected businesses to borrow money, issue securities and/or raise other types of capital, any of which could materially adversely affect our ability to meet our debt obligations and contractual commitments, and our results of operations, financial condition, cash flows and/or prospects.

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*We do not fully hedge our assets or contract positions against changes in commodity prices or interest rates, and for those positions that are hedged, our hedging procedures may not mitigate our risk as expected or prevent us from experiencing losses.*

We have used and may continue to use forward contracts, futures, financial swaps and/or options, among other mechanisms, to hedge our known or anticipated purchase and sale commitments, inventories of natural gas and LNG, natural gas storage and pipeline capacity and electric generation capacity in an effort to reduce our financial exposure related to commodity price fluctuations. We do not hedge the entire exposure to market price volatility of our assets or our contract positions, and the extent of the coverage to these exposures varies over time. In addition, we have used and may continue to use similar financial instruments to hedge against changes in interest rates. Certain derivative securities we use to hedge are recorded at fair value through earnings to reflect movements in the price of the security, which has in the past and could in the future create volatility in our earnings (such as the significantly higher unrealized losses on commodity derivatives that we recognized in 2022 compared to 2021 as we discuss in “Part II - Item 7. MD&A - Results of Operations”). To the extent we have unhedged positions, or if our hedging strategies do not work as expected, fluctuating commodity prices could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects. Certain of the contracts we may use for hedging purposes are subject to fair value accounting, which may result in gains or losses in earnings for those contracts that may not reflect the associated gains or losses of the underlying position being hedged and could result in fluctuations of our results from period to period.

# ***Risk management procedures may not prevent or mitigate losses.***

Although we have in place risk management and control systems designed to quantify and manage risk, these systems may not prevent material losses. Risk management procedures may not always be followed as intended or function as expected. In addition, daily VaR and loss limits, which are primarily based on historic price movements and which we discuss in “Part II - Item 7A. Quantitative and Qualitative Disclosures About Market Risk,” may not protect us from losses if prices significantly or persistently deviate from historic prices. As a result of these and other factors, our risk management procedures and systems may not prevent or mitigate losses that could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

# ***Market performance or changes in other assumptions could require unplanned contributions to pension and PBOP plans.***

Sempra, SDG&E and SoCalGas provide defined benefit pension and PBOP plans to eligible employees and retirees. The cost of providing these benefits is affected by many factors, including the market value of plan assets and the other factors described in Note 9 of the Notes to Consolidated Financial Statements. A decline in the market value of plan assets or an adverse change in any of these other factors could cause a material increase in our funding obligations for these plans, which could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

# **Legal and Regulatory Risks**

*Our businesses require numerous permits, licenses, franchises and other approvals from various governmental agencies, and the failure to obtain or maintain any of them, or lengthy delays in obtaining them, could materially adversely affect us.*

Our businesses require numerous permits, licenses, rights-of-way, franchises, certificates and other approvals from federal, state, local and foreign governmental agencies. These approvals may not be granted in a timely manner or at all or may be modified, rescinded or fail to be extended for a variety of reasons. Obtaining or maintaining these approvals could result in higher costs or the imposition of conditions or restrictions on our operations. For example, SoCalGas’ franchise agreement with Los Angeles County is scheduled to expire in June 2023. Further, these approvals require compliance by us and may require compliance by our customers, which could result in modification, suspension or rescission and subject us to fines and penalties in the event of noncompliance. If one or more of these approvals were to be suspended, rescinded or otherwise terminated, including due to expiration or legal or regulatory changes, or modified in a manner that makes our continued operation of the applicable business prohibitively expensive or otherwise undesirable or impossible, we may be required to adjust or temporarily or permanently cease certain of our operations, sell the associated assets or remove them from service and/or construct new assets intended to bypass the impacted area, in which case we may lose some of our rate base or revenue-generating assets, our development projects may be negatively affected and we may incur impairment charges or other costs that may not be recoverable. The occurrence of any of these events could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

We may invest funds in capital projects prior to receiving all regulatory approvals. If there is a delay in obtaining these approvals; if any approval is conditioned on changes or other requirements that increase costs or impose restrictions on our existing or

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planned operations; if we fail to obtain or maintain these approvals or comply with them or other applicable laws or regulations; if we are involved in litigation that adversely impacts any approval or rights to the applicable property or assets; or if management decides not to proceed with a project, we may be unable to recover any or all amounts invested in that project. Any such occurrence could cause our costs to materially increase, result in material impairments, and otherwise materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

# ***Our businesses face climate change concerns and have environmental compliance and clean energy transition costs, which could have a material adverse effect on us.***

Climate change and the costs associated with its impacts and mitigation may have the potential to adversely affect our businesses, including by increasing the costs we incur to transmit energy and provide other services, impacting the demand for and consumption of the natural gas we distribute and the energy we transmit (due to changes in costs, weather patterns, the type of energy transmitted as a result of increasing customer preference for carbon-neutral and renewable sources of energy, and other factors), and affecting the economic health of the regions in which we operate.

Our businesses are subject to extensive federal, state, local and foreign statutes, orders, rules and regulations relating to climate change and environmental protection. To comply with these requirements, we must expend significant capital and employee resources on (i) environmental monitoring, surveillance and other measures to track performance; (ii) acquisitions of pollution control equipment; (iii) mitigation efforts; and (iv) emissions fees, which could increase as a result of various factors we may not control, including changing laws and regulations, increased enforcement activities, delays in the renewal and issuance of permits, and changes to the mix of energy we are required to supply. In addition, we are generally responsible for hazardous substances and other contamination on and the conditions of our projects and properties, regardless of when these conditions arose and whether they are known or unknown. In addition, we could be liable for contamination at our former facilities and off-site waste disposal sites that have been used in our operations. For our regulated utilities, some of these costs may not be recoverable in rates. Failure to comply with environmental laws and regulations may subject our businesses to fines and penalties, including criminal penalties in some cases, and/or curtailment of our operations. Any of these outcomes could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

Increasing international, national, regional, state and local-level environmental concerns and related new or proposed legislation and regulation or changes to existing legislation or regulation, such as increased requirements for monitoring and surveillance, disclosures on environmental performance and targets, pollution monitoring and control equipment, safety practices, emissions fees, taxes, penalties or other obligations or restrictions, may have material negative effects on our operations, operating costs, corporate planning, and the scope and economics of proposed expansions, infrastructure projects or other capital expenditures.

In addition, existing and potential new or amended legislation and regulation relating to the control and reduction of GHG emissions and mitigating climate change may materially restrict our operations, negatively impact demand for our services, the natural gas we distribute and/or the energy we transmit, limit development opportunities, force costly or otherwise burdensome changes to our operations or otherwise materially adversely affect us. For example, SB 100 (enacted in 2018) and SB 1020 (enacted in 2022) requires each California electric utility, including SDG&E, to procure at least 50% of its annual electric energy requirements from renewable energy sources by 2026, 60% by 2030, 90% by 2035, and 95% by 2040. State law also creates the policy of meeting all of California's retail electricity supply with a mix of RPS Program-eligible and zero-carbon resources by 2045. The law also includes stipulations that this policy not increase carbon emissions elsewhere in the western grid and not allow resource shuffling, and requires that the CPUC, CEC, CARB and other state agencies incorporate this policy into all relevant planning. In addition, the Governor of California signed an executive order establishing a new statewide goal to achieve carbon neutrality as soon as possible, and no later than 2045, and achieve and maintain net negative emissions thereafter. The executive order calls on CARB to address this goal in future scoping plans, which affect several major sectors of California's economy, including transportation, agriculture, development, industrial and others. California has issued new climate initiatives in line with this statewide goal, including two executive orders requiring sales of all passenger vehicles to be zero-emission by 2035.

Moreover, the energy transition in California and elsewhere, including decarbonization goals, has introduced uncertainty in investor support over the long term, leading some to reduce investment in or divest from the energy sector. Maintaining investor confidence and attracting capital at a competitive cost will depend in part on successfully demonstrating our ability to reduce emissions associated with our operations and the energy we transmit, consistent with Sempra's aim to have net-zero emissions by 2050 and SDG&E's and SoCalGas' aim to have net-zero emissions by 2045. Our ability to achieve this aim depends on many factors, some of which we do not control, including supportive energy laws and policies, development, availability and adoption of alternative fuels, successful research and development efforts focused on low-carbon technologies that are economically and technically feasible, cooperation from our partners, financing sources and commercial counterparties, customer participation in conservation and energy efficiency programs, and our ability to execute our planned investments in and advancement of our

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infrastructure. Although we have developed interim targets and various plans designed to support California in reaching its GHG emissions and renewable energy mandates and our own energy goals, we may not be successful.

We will need to continue to expend capital and employee resources to develop and deploy new technologies and modernize grid systems in our efforts to support the clean energy transition in California and elsewhere and achieve our climate targets and those mandated by applicable authorities, which may not be recoverable in rates or, with respect to our non-regulated utility businesses, may not be able to be passed through to customers. Even if such costs are recoverable, the costs of these efforts and complying with these mandates, coupled with the necessary costs of investing for safety and reliability, may negatively impact the affordability of SDG&E's and SoCalGas' customer rates and, for our non-regulated utility businesses, may cause costs to increase to levels that reduce customer demand and growth. SDG&E and SoCalGas, as well as any of our other businesses affected by GHG emissions mandates, may also be subject to fines and penalties if mandated renewable energy goals are not met, and all our businesses could suffer difficulties attracting investors and business partners, reputational harm and other negative effects if we do not meet or if we scale back our GHG emissions goals or there are negative views about our environmental disclosures or practices generally. Any of these outcomes could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

# ***Our businesses are subject to numerous governmental regulations and complex tax and accounting requirements and may be materially adversely affected by them or any changes to them.***

The electric power and natural gas industries are subject to numerous governmental regulations, and our businesses are also subject to complex tax and accounting requirements. These regulations and requirements may undergo changes at the federal, state, local and foreign levels, including in response to economic or political conditions. Compliance with these regulations and requirements, including in the event of changes to them or how they are implemented, interpreted or enforced, could increase our operating costs and materially adversely affect how we conduct our business. New tax legislation, regulations or interpretations or changes in tax policies in the U.S. or other countries in which we operate or do business could negatively affect our tax expense and/or tax balances and our businesses generally. Any failure to comply with these regulations and requirements could subject us to fines and penalties, including criminal penalties in some cases, and result in the temporary or permanent shutdown of certain facilities or operations. The occurrence of any of these risks could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Our operations are subject to rules relating to transactions among SDG&E, SoCalGas and other Sempra businesses. These rules are commonly referred to as 'affiliate rules,' and they primarily impact transmission supply, capacity and marketing activities, including restricting our ability to sell natural gas or electricity to, or trade with, SDG&E and SoCalGas and their ability to complete these transactions with each other. These rules, as well as any changes to these rules or their interpretations or additional more restrictive CPUC or FERC rules related to transactions with affiliates, could materially adversely affect our operations and, in turn, our results of operations, financial condition, cash flows and/or prospects.

# ***We may be materially adversely affected by the outcome of litigation or other proceedings in which we are involved.***

Our businesses are involved in a number of lawsuits, binding arbitrations, regulatory investigations and other proceedings. We discuss material pending proceedings in Note 16 of the Notes to Consolidated Financial Statements. We have spent, and continue to spend, substantial money, time and employee and management focus on these lawsuits and other proceedings. The uncertainties inherent in lawsuits and other proceedings make it difficult to estimate with any degree of certainty the timing, costs and ranges of costs or effects of resolving these matters. In addition, juries have demonstrated a willingness to grant large awards, including punitive damages, in response to personal injury, product liability, property damage and other claims. Accordingly, actual costs incurred have and may continue to differ materially from insured or reserved amounts and may not be recoverable, in whole or in part, from insurance or in customer rates. Any of the foregoing could cause reputational damage and materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

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# RISKS RELATED TO SEMPRA CALIFORNIA

## Operational Risks

### *Wildfires in California pose risks to Sempra California (particularly SDG&E) and Sempra.*

#### *Potential for Increased and More Severe Wildfires*

Over the past few years, California has been experiencing some of the largest wildfires (measured by acres burned) in its history. Frequent and severe drought conditions, inconsistent and extreme swings in precipitation, changes in vegetation, unseasonably warm temperatures, low humidity, strong winds and other factors have increased the duration of the wildfire season and the intensity, prevalence and difficulty of prevention and containment of wildfires in California, including in SDG&E's and SoCalGas' service territories. Changing weather patterns, including as a result of climate change, could cause these conditions to become even more extreme and unpredictable. These wildfires could jeopardize SDG&E's and SoCalGas' electric and natural gas infrastructure and third-party property and result in temporary power shortages in SDG&E's and SoCalGas' service territories. Certain of California's local land use policies and forestry management practices have been relaxed to allow for the construction and development of residential and commercial projects in high-risk fire areas, which could lead to increased third-party claims and greater losses in the event of fires in these areas for which SDG&E or SoCalGas may be liable. Any such wildfires in SDG&E's and SoCalGas' territories (or outside of these territories in the event the Wildfire Fund described below is materially diminished) could materially adversely affect SDG&E's, SoCalGas' and Sempra's results of operations, financial condition, cash flows and/or prospects, which we discuss in this risk factor below and above under 'Risks Related to All Sempra Businesses - Operational Risks.'

#### *The Wildfire Legislation*

In July 2019, the Wildfire Legislation was signed into law, which we discuss in Note 1 of the Notes to Consolidated Financial Statements. The Wildfire Legislation's revised legal standard for the recovery of wildfire costs may not be implemented effectively or applied consistently, we may not be eligible for the Wildfire Legislation's cap on wildfire-related liability if SDG&E fails to maintain a valid annual safety certification from the OEIS or meet other requirements of the legislation, and/or the Wildfire Fund could be exhausted due to claims against the fund by SDG&E or other participating IOUs as a result of fires in their respective service territories, any of which could have a material adverse effect on Sempra's and SDG&E's results of operations, financial condition, cash flows and/or prospects. PG&E has indicated that it will seek reimbursement from the Wildfire Fund for losses associated with the Dixie fire, which burned from July 2021 through October 2021 and was reported to be the largest single wildfire (measured by acres burned) in California history. In addition, the Wildfire Legislation did not change the doctrine of inverse condemnation, which imposes strict liability (meaning that liability is imposed regardless of fault) on a utility whose equipment, such as its electric distribution and transmission lines, is determined to be a cause of a fire. In such an event, the utility would be responsible for the costs of damages, including potential business interruption losses, and interest and attorneys' fees, even if the utility has not been found negligent. The doctrine of inverse condemnation also is not exclusive of other theories of liability, including if the utility were found negligent, in which case additional liabilities, such as fire suppression, clean-up and evacuation costs, medical expenses, and personal injury, punitive and other damages, could be imposed. We are unable to predict the impact of the Wildfire Legislation on SDG&E's ability to recover costs and expenses in the event that SDG&E's equipment is determined to be a cause of a fire, and specifically in the context of the application of inverse condemnation.

#### *Cost Recovery Through Insurance or Rates*

As a result of the strict liability standard applied to electric IOU-caused wildfires in California, substantial losses recently recorded by insurance companies, and the risk of an increase in the number and size of wildfires, obtaining insurance coverage for wildfires that could be caused by SDG&E (or, to a lesser extent, SoCalGas) has become increasingly difficult and costly. If these conditions continue or worsen, insurance for wildfire liabilities may become unavailable or may become prohibitively expensive and we may be challenged or unsuccessful when we seek recovery of insurance cost increases through the regulatory process. In addition, insurance for wildfire liabilities may not be sufficient to cover all losses we may incur, or it may not be available in sufficient amounts to meet the $1.0 billion of primary insurance required by the Wildfire Legislation. We are unable to predict whether we would be able to recover in rates or from the Wildfire Fund the amount of any uninsured losses. A loss that is not fully insured, is not sufficiently covered by the Wildfire Fund and/or cannot be recovered in customer rates could materially adversely affect Sempra's and one or both of SDG&E's and SoCalGas' results of operations, financial condition, cash flows and/or prospects.

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### *Wildfire Mitigation Efforts*

Although we expend significant resources on measures designed to mitigate wildfire risks, these measures may not be effective in preventing wildfires or reducing our wildfire-related losses and their costs may not be fully recoverable in rates. SDG&E is required by applicable California law to submit annual wildfire mitigation plans for approval by the OEIS and could be subject to increased risks if these plans are not approved in a timely manner or the measures set forth in the plans are not implemented effectively, as well as fines or penalties for any failure to comply with the approved plans. One of our wildfire mitigation and safety tools is to de-energize certain of our facilities when weather conditions become extreme and there is elevated wildfire ignition risk. These “public safety power shutoffs” have been subject to scrutiny by various stakeholders, including customers, regulators and lawmakers, which could increase the risk of liability for damages associated with these events. Such costs may not be recoverable in rates. Unrecoverable costs, adverse legislation or rulemaking, scrutiny by key stakeholders, ineffective wildfire mitigation measures or other negative effects associated with these efforts could materially adversely affect Sempra’s and SDG&E’s results of operations, financial condition, cash flows and/or prospects.

### ***The electricity industry is undergoing significant change, including increased deployment of DER, technological advancements, and political and regulatory developments.***

Electric utilities in California are experiencing increasing deployment of DER, such as solar generation, energy storage and energy efficiency and demand management technologies, and California’s environmental policy objectives are accelerating the pace and scope of these changes. This growth of DER and demand management will require further modernization of the electric distribution grid to, among other things, accommodate increasing two-way flows of electricity and increase the grid’s capacity to interconnect these resources. In addition, enabling California’s clean energy goals will require sustained investments in grid modernization, renewable integration projects, energy efficiency programs, energy storage options, operational and data management systems, and electric vehicle infrastructure. The growth of third-party energy storage alternatives and other technologies also may increasingly compete with SDG&E’s traditional transmission and distribution infrastructure in delivering electricity to consumers. The CPUC is conducting several proceedings regarding DER and demand management, including the evaluation of various projects and pilots; changes to the planning and operation of the electric distribution grid to prepare for higher penetration of DER; future grid modernization and grid investments; the deferral of traditional grid investments by DER; and the role of the electric distribution grid operator. These proceedings and the broader changes in California’s electricity industry could result in new regulations, policies and/or operational changes that could materially adversely affect SDG&E’s and Sempra’s results of operations, financial condition, cash flows and/or prospects.

SDG&E provides bundled electric procurement service through various resources that are typically procured on a long-term basis. Although SDG&E currently provides such procurement service for a portion of its customer load, most customers receive procurement service from a load-serving entity other than SDG&E through programs such as CCA and DA, in which case SDG&E no longer procures energy for this departing load. CCA is only available if a customer’s local jurisdiction (city or county) offers such a program and DA is currently limited by a cap based on gigawatt hours. Several jurisdictions in SDG&E’s territory, including the City of San Diego, have implemented CCA, and additional jurisdictions are in the process of implementing or considering CCA. SDG&E’s historical energy procurement for future deliveries exceeds the needs of its remaining bundled customers as customers have elected CCA and DA services. To help achieve the goal of ratepayer indifference (as to whether or not customers’ energy is procured by SDG&E or by CCA or DA), the CPUC revised the Power Charge Indifference Adjustment framework. The purpose of the framework is to help ensure SDG&E’s procurement cost obligations are more equitably shared among customers served by SDG&E and customers now served by CCA and DA. SDG&E implemented the framework on January 1, 2019. If the framework or other mechanisms designed to achieve ratepayer indifference do not perform as intended, if the law changes, or if the law is not interpreted or enforced as expected, SDG&E’s remaining bundled customers could experience large increases in rates for commodity costs under commitments made on behalf of CCA and DA customers prior to their departure or, if all such costs are not recoverable in rates, SDG&E could experience material increases in its unrecoverable commodity costs. Any of these outcomes could have a material adverse effect on SDG&E’s and Sempra’s results of operations, financial condition, cash flows and/or prospects.

### ***Natural gas and natural gas storage have increasingly been the subject of political and public scrutiny, including a desire by some to reduce or eliminate reliance on natural gas as an energy source.***

Certain California legislators, as well as stakeholder, advocacy and activist groups, have expressed a desire to limit or eliminate reliance on natural gas as an energy source by advocating increased use of renewable electricity and electrification in lieu of the use of natural gas. Reducing methane emissions also has become a major focus of certain local and state agencies and the U.S. Administration, as well as the CPUC, resulting in passed or proposed legislation, regulation, policies and ordinances to prohibit or restrict the use and consumption of natural gas in new buildings, appliances and other applications. These actions could have the effect of reducing natural gas use over time.

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CARB, California's primary regulator for GHG emissions reduction programs, continues to pursue plans for reducing GHG emissions in line with California's climate goals that include proposals to reduce natural gas demand through proposed building decarbonization measures (for example, zero-emission standards for space and water heaters), or through promoting legislation for increased renewable electricity generation. Additionally, the CEC's Title 24 requirements mandate that new construction include electric-ready buildings and heat pump technologies beginning in 2023.

The CPUC has an ongoing proceeding that seeks to establish a state-wide process to help utilities plan appropriate gas infrastructure portfolios as natural gas usage in the state is expected to decline. This includes a new gas infrastructure General Order (GO 177) requiring site-specific approvals for certain gas infrastructure projects as well as issuance of a CPUC staff proposal to develop a gas distribution infrastructure decommissioning framework. The CPUC may similarly enact measures to reduce natural gas demand (such as more aggressive energy efficiency programs), promote fuel substitution (such as replacement of natural gas appliances with electric appliances), and order changes (such as its recent decision to eliminate gas line extension allowances for new applications submitted on or after July 1, 2023).

A substantial reduction in or the elimination of natural gas as an energy source in California without adequate and appropriate recovery of investments could result in impairment of some or all of SoCalGas' and SDG&E's natural gas infrastructure assets if they were not permitted to be repurposed for alternative fuels, were required to be depreciated on an accelerated basis or were to become stranded, which could have a material adverse effect on SoCalGas', SDG&E's and Sempra's results of operations, financial conditions, cash flows and/or prospects.

***SDG&E may incur significant costs and liabilities from its partial ownership of a nuclear facility being decommissioned.***

SDG&E has a 20% ownership interest in SONGS, which we discuss in Note 15 of the Notes to Consolidated Financial Statements. SDG&E and each of the other owners of SONGS is responsible for financing its share of the facility's expenses and capital expenditures, including those related to decommissioning activities. Although the facility is being decommissioned, SDG&E's ownership interest in SONGS continues to subject it to risks, including:

- the potential release of radioactive material
- the potential harmful effects from the former operation of the facility
- limitations on the insurance commercially available to cover losses associated with operating and decommissioning the facility
- uncertainties with respect to the technological and financial aspects of decommissioning the facility

SDG&E maintains the SONGS NDT to provide funds for nuclear decommissioning. Trust assets have been generally invested in equity and debt securities, which are subject to market fluctuations. A decline in the market value of trust assets, an adverse change in the law regarding funding requirements for decommissioning trusts, or changes in assumptions or forecasts related to decommissioning dates, technology and the cost of labor, materials and equipment due to inflationary pressures or otherwise could increase the funding requirements for these trusts, which costs may not be fully recoverable in rates. In addition, CPUC approval is required to make withdrawals from the NDT, and CPUC approval for certain expenditures may be denied if the CPUC determines the expenditures are unreasonable. In addition, decommissioning may be materially more expensive than we currently anticipate and therefore decommissioning costs may exceed the amounts in the NDT. Rate recovery for overruns would require CPUC approval, which may not occur.

The occurrence of any of these events could result in a reduction in our expected recovery and have a material adverse effect on SDG&E's and Sempra's results of operations, financial condition, cash flows and/or prospects.

**Legal and Regulatory Risks**

***SDG&E and SoCalGas are subject to extensive regulation by federal, state and local legislative and regulatory authorities, which may materially adversely affect Sempra, SDG&E and SoCalGas.***

***Rates and Other Financial Matters***

The CPUC regulates SDG&E's and SoCalGas' customer rates, except for SDG&E's electric transmission rates that are regulated by the FERC, and conditions of service. The CPUC also regulates SDG&E's and SoCalGas' sales of securities, rates of return, capital structure, rates of depreciation, long-term resource procurement and other financial matters in various ratemaking proceedings. The CPUC periodically approves SDG&E's and SoCalGas' customer rates based on authorized capital expenditures, operating costs, including income taxes, and an authorized rate of return on investments while incorporating a risk-based decision-making framework, as well as settlements with third parties. The outcome of ratemaking proceedings can be affected by

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various factors, many of which are not in our control, including the level of opposition by intervening parties; any rejection by the CPUC of settlements with third parties; potential rate impacts; increasing levels of regulatory review; changes in the political, regulatory, or legislative environments; and the opinions of regulators, consumer and other stakeholder groups and customers. These ratemaking proceedings include decisions about major programs in which SDG&E and SoCalGas make investments under an approved CPUC framework, such as wildfire mitigation and pipeline and storage integrity and safety enhancement programs, but which investments may remain subject to a CPUC filing or reasonableness review with potentially unclear standards or other factors as described above that may result in the disallowance of incurred costs. SDG&E and SoCalGas also may be required to incur costs and make investments to comply with proposed legislative and regulatory requirements and initiatives, including those related to California's climate goals and policies, and their ability to recover these costs and investments may depend on the final form of the legislative or regulatory requirements and the ratemaking mechanisms associated with them. Recovery can also be affected by the timing and process of the ratemaking mechanism, in which there can be a significant time lag between when costs are incurred and when those costs are recovered in customers' rates and material differences between the forecasted and authorized costs embedded in rates (which are set on a prospective basis) and the actual costs incurred. The CPUC may also experience delays in its decisions on recovery or may deny recovery altogether on the basis that costs were not reasonably or prudently incurred or for other reasons. Even if recoverable, the cost of investments to support the clean energy transition in California while also investing in necessary safety and reliability may negatively impact the affordability of SDG&E's and SoCalGas' customer rates and their and Sempra's results of operations, financial condition, cash flows and/or prospects.

In addition, a CPUC cost of capital proceeding every three years determines a utility's authorized capital structure and authorized return on rate base, and the CCM applies in the interim years and considers changes in the cost of capital based on changes in interest rates for each 12-month period ending September 30 (the measurement period). Alternatively, each of SDG&E and SoCalGas are permitted to file a cost of capital application in an interim year in which an extraordinary or catastrophic event materially impacts its cost of capital and affects utilities differently than the market as a whole to have its cost of capital determined in lieu of the CCM. Any such rate change due to a downward trigger of the CCM could have a material adverse effect on Sempra's and the applicable utility's results of operations, financial condition, cash flows and/or prospects. We discuss the CCM in 'Part I - Item 1. Business - Ratemaking Mechanisms - Sempra California - Cost of Capital Proceedings,' and in Note 4 of the Notes to Consolidated Financial Statements.

The FERC regulates electric transmission rates, the transmission and wholesale sales of electricity in interstate commerce, transmission access, the rates of return on investments in electric transmission assets, and other similar matters involving SDG&E. These ratemaking mechanisms are subject to many risks similar to those described above regarding the CPUC ratemaking proceedings.

### *CPUC Authority Over Operational Matters*

The CPUC has regulatory authority related to safety standards and practices, competitive conditions, reliability and planning, affiliate relationships and a wide range of other operational matters, including citation programs concerning matters such as safety activity, disconnection and billing practices, resource adequacy and environmental compliance. Many of these standards and citation programs are becoming more stringent and could impose significant penalties, including enforcement programs under which the CPUC staff can issue citations that in some cases can impose substantial fines. The CPUC also continues to explore expansion of its programs to provide additional oversight. The CPUC conducts reviews and audits of the matters under its authority and could launch investigations or open proceedings at any time on any such matter it deems appropriate, the results of which could lead to citations, disallowances, fines and penalties, as well as corrective or mitigation actions required to address any noncompliance that may not be sufficiently funded by customer rates or at all. Any such occurrence could have a material adverse effect on Sempra's, SDG&E's and SoCalGas' results of operations, financial condition, cash flows and/or prospects.

We discuss various CPUC proceedings relating to SDG&E and SoCalGas in Notes 4 and 16 of the Notes to Consolidated Financial Statements.

### *Potential Regulatory Changes and Influence of Other Organizations*

SDG&E, SoCalGas and Sempra may be materially adversely affected by revisions or reinterpretations of existing or new legislation, regulations, decisions, orders or interpretations of the CPUC, the FERC or other regulatory bodies, any of which could change how SDG&E and SoCalGas operate, affect their ability to recover various costs through rates or adjustment mechanisms, require them to incur additional expenses or otherwise materially adversely affect their and Sempra's results of operations, financial condition, cash flows and/or prospects.

SDG&E and SoCalGas are also affected by numerous advocacy groups, including California Public Advocates Office, The Utility Reform Network, Utility Consumers' Action Network and the Sierra Club. Any success by any of these groups in directly or

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indirectly influencing regulatory bodies with authority over their operations could have a material adverse effect on SDG&E's, SoCalGas' and Sempra's results of operations, financial condition, cash flows and/or prospects.

# ***SoCalGas has incurred and may continue to incur significant costs, expenses and other liabilities related to the Leak.***

From October 23, 2015 through February 11, 2016, SoCalGas experienced the Leak, which we describe in Note 16 of the Notes to Consolidated Financial Statements.

# ***Litigation***

In September 2021, SoCalGas and Sempra entered into an agreement with counsel to resolve lawsuits filed by approximately 36,000 plaintiffs (the Individual Plaintiffs) against SoCalGas and Sempra related to the Leak resulting in a payment of approximately $1.8 billion. The Individual Plaintiffs who do not participate in that settlement (the Remaining Individual Plaintiffs) will be able to continue to pursue their claims. As of February 21, 2023, lawsuits filed by the Remaining Individual Plaintiffs and several shareholder derivative actions are pending against SoCalGas related to the Leak, some of which have also named Sempra and/or certain officers and directors of SoCalGas and Sempra. Additional litigation may be filed against us related to the Leak or our responses to it. The costs of defending against, settling or otherwise resolving the pending lawsuits or any new litigation could materially adversely affect SoCalGas' and Sempra's results of operations, financial condition, cash flows and/or prospects. We discuss these risks above under 'Risks Related to All Sempra Businesses - Legal and Regulatory Risks' and in this risk factor below under 'Estimated Costs, Insurance and Accounting and Other Impacts.'

# ***Regulatory Proceedings***

SoCalGas has been subject to an OII to investigate and consider, among other things, what damages, fines or other penalties, if any, should be imposed against SoCalGas in connection with the Leak (the Leak OII). In October 2022, SoCalGas executed a settlement agreement with SED and the Public Advocates Office at the CPUC to resolve all aspects of the Leak OII, which is subject to CPUC approval. The settlement agreement provides for financial penalties, certain costs that SoCalGas will reimburse, a violation of California Public Utilities Code section 451, and costs previously incurred by SoCalGas for which it will not seek recovery from ratepayers, among other provisions. Other investigations related to the Leak could result in additional findings of violations of laws, orders, rules or regulations as well as fines and penalties, any of which could involve substantial costs and cause reputational damage. In addition, SoCalGas may incur higher operating costs and additional capital expenditures as a result of new investigations or new laws, orders, rules and regulations arising out of this incident, or our responses thereto, which may not be recoverable through insurance or in customer rates. The occurrence of any of these risks could materially adversely affect SoCalGas' and Sempra's results of operations, financial condition, cash flows and/or prospects.

# ***Natural Gas Storage Operations and Reliability***

In February 2017, the CPUC opened a proceeding pursuant to SB 380 OII to determine the feasibility of minimizing or eliminating the use of the Aliso Canyon natural gas storage facility while still maintaining energy and electric reliability for the region, including analyzing alternative means for meeting or avoiding the demand for the facility's services if it were eliminated.

If the Aliso Canyon natural gas storage facility were to be permanently closed or if future cash flows from its operation were otherwise insufficient to recover its carrying value, we may record an impairment of the facility, which could be material, incur materially higher than expected operating costs and/or be required to make material additional capital expenditures (any or all of which may not be recoverable in rates), and natural gas reliability and electric generation could be jeopardized. Any such outcome could have a material adverse effect on SoCalGas' and Sempra's results of operations, financial condition, cash flows and/or prospects.

# ***Cost Estimate, Insurance and Accounting and Other Impacts***

At December 31, 2022, SoCalGas estimates certain costs related to the Leak are $3,486 million (the cost estimate), including $1,279 million of costs recovered from insurance. Other than insurance for directors' and officers' liability, we have exhausted all of our insurance for this matter. We continue to pursue other sources of insurance coverage for costs related to this matter, but we may not be successful in obtaining additional insurance recovery for any of these costs. At December 31, 2022, $129 million of the cost estimate is accrued in Reserve for Aliso Canyon Costs and $4 million of the cost estimate is accrued in Deferred Credits and Other on SoCalGas' and Sempra's Consolidated Balance Sheets.

The civil litigation that remains pending against us related to the Leak seeks compensatory, statutory and punitive damages, restitution, and civil and administrative fines, penalties and other costs. We also could be subject to damages, fines or other penalties as a result of the pending regulatory investigation related to the Leak. Except for the amounts paid or estimated to settle

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certain pending legal and regulatory matters as we describe in Note 16 of the Notes to Consolidated Financial Statements, the cost estimate does not include any amounts necessary to resolve pending litigation or regulatory proceedings, other potential litigation or other costs, in each case to the extent it is not possible to predict at this time the outcome of these actions or reasonably estimate the possible costs or a range of possible costs. Further, we are not able to reasonably estimate the possible loss or a range of possible losses in excess of the amounts accrued. The costs or losses not included in the cost estimate could be significant and could have a material adverse effect on SoCalGas' and Sempra's results of operations, financial condition, cash flows and/or prospects.

# ***Any failure by the CPUC to adequately reform SDG&E's rate structure could have a material adverse effect on SDG&E and Sempra.***

The NEM program is an electric billing tariff mechanism designed to promote the installation of on-site renewable generation (primarily solar installations) for residential and business customers. Depending on when the on-site generation was installed, NEM customers receive a full retail rate or a reduced retail rate for energy they generate but do not use that is fed to the utility's power grid, which results in these customers not paying their proportionate share of the cost of maintaining and operating the electric transmission and distribution system, subject to certain exceptions, but still receiving electricity from the system when their self-generation is inadequate to meet their electricity needs. As more and higher electric-use customers switch to NEM and self-generate energy, the burden on remaining non-NEM customers, who effectively subsidize the unpaid NEM costs, increases, which in turn encourages more self-generation and further increases rate pressure on remaining non-NEM customers.

The current electric residential rate structure in California is primarily based on consumption volume, which places a higher rate burden on customers with higher electric use while subsidizing lower-use customers. In August 2020, the CPUC initiated a rulemaking to further develop a successor to the existing NEM tariff. In November 2022, a previous proposed decision was withdrawn and a new proposed decision was issued, recommending substantial reform of the NEM program through the establishment of a new Net Billing Tariff that would apply to new net metered customers. The new Net Billing Tariff revises the current NEM structure for new customers with a retail export compensation rate that is better aligned with the value provided to the grid by behind-the-meter energy generation systems and retail import rates that encourage electrification and adoption of solar systems paired with storage. The new Net Billing Tariff is designed to compensate customers for the value of their exports to the grid based on avoided cost. In December 2022, the CPUC approved the new Net Billing Tariff for customers who interconnect their qualifying on-site renewable generation after April 14, 2023. Additionally, in response to California legislation adopted in 2022, the CPUC has initiated a rulemaking to broadly restructure the way fixed costs are collected, moving from volumetric charges to an income-graduated fixed charge for default residential rates by July 1, 2024. The intent of such a fixed charge would be to further help reduce cost shifts through an equitable approach to the distribution of electric costs. Depending on the effectiveness of the new Net Billing Tariff and any new rules related to fixed charges, which are uncertain, the risks associated with the existing NEM tariff could continue or increase.

SDG&E believes the establishment of a charge independent of consumption volume for residential customers is critical to help distribute rates among all customers that rely on the electric transmission and distribution system, including those participating in the NEM program. The absence of a charge independent of consumption volume coupled with the continuing increase of solar installation and other forms of self-generation, as well as the progression of DER and energy efficiency initiatives that could also reduce delivered volumes, could adversely impact electricity rates and the reliability of the electric transmission and distribution system. Any such impact could subject SDG&E to increased customer dissatisfaction, increased likelihood of noncompliance with CPUC or other safety or operational standards and increased risks attendant to any such noncompliance, as we discuss above, as well as increased costs, including power procurement, operating and capital costs, and potential disallowance of recovery for these costs.

If the CPUC does not continue to adequately reform SDG&E's residential rate structure for all customers to better achieve reasonable, cost-based electric rates that are competitive with alternative sources of power and adequate to maintain the reliability of the electric transmission and distribution system, such failure could have a material adverse effect on SDG&E's and Sempra's results of operations, financial condition, cash flows and/or prospects.

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# RISKS RELATED TO SEMPRA TEXAS UTILITIES

# Operational and Structural Risks

*Certain ring-fencing measures, governance mechanisms and commitments limit our ability to influence the management, operations and policies of Oncor.*

Various “ring-fencing” measures, governance mechanisms and commitments are in place that create legal and financial separation between Oncor Holdings, Oncor and their subsidiaries, on the one hand, and Sempra and its affiliates and subsidiaries, on the other hand. These measures are designed to enhance Oncor’s separateness from its owners and mitigate the risk that Oncor would be negatively impacted by a bankruptcy or other adverse financial development affecting its owners. These measures subject us and Oncor to various restrictions, including:

- seven members of Oncor’s 13-person board of directors must be independent directors in all material respects under the rules of the NYSE in relation to Sempra and its affiliates and any other owners of Oncor, and also must have no material relationship with Sempra or its affiliates or any other owners of Oncor currently or within the previous 10 years; of the six remaining directors, two must be designated by Sempra, two must be designated by Oncor’s minority owner, TTI, and two must be current or former Oncor officers
- Oncor will not pay dividends or other distributions (except for contractual tax payments) if (i) a majority of Oncor’s independent directors or any of the directors appointed by TTI determines that it is in the best interest of Oncor to retain such amounts to meet expected future requirements, (ii) the payment would cause Oncor’s debt-to-equity ratio to exceed the debt-to-equity ratio approved by the PUCT, or (iii) unless otherwise allowed by the PUCT, Oncor’s senior secured debt credit rating by any of the Rating Agencies falls below BBB (or Baa2 for Moody’s)
- there must be certain “separateness measures” maintained to reinforce the legal and financial separation of Oncor from Sempra, including a requirement that dealings between Oncor and Sempra or Sempra’s affiliates (other than Oncor Holdings and its subsidiaries) must be on an arm’s-length basis, limitations on affiliate transactions and a prohibition on pledging Oncor assets or membership interests for any entity other than Oncor
- a majority of Oncor’s independent directors and the directors designated by TTI that are present and voting (with at least one required to be present and voting) must approve any annual or multi-year budget if the aggregate amount of capital expenditures or O&M in the budget differs by more than 10% from the corresponding amounts in the budget for the preceding fiscal year or multi-year period, as applicable

As a result of these measures, we do not control Oncor Holdings or Oncor, and we have limited ability to direct the management, policies and operations of Oncor Holdings and Oncor, including the deployment or disposition of their assets, declarations of dividends, strategic planning and other important matters. We have limited representation on the Oncor Holdings and Oncor boards of directors, which are each controlled by independent directors. Moreover, all directors of Oncor, including the directors we have appointed, have considerable autonomy and have a duty to act in the best interest of Oncor consistent with the approved ring-fence and Delaware law, which may in some cases be contrary to our interests. To the extent the directors approve or Oncor otherwise pursues actions that are not in our interest, our results of operations, financial condition, cash flows and/or prospects may be materially adversely affected.

# Industry-Related Risks

*Changes in the regulation or operation of the electric utility industry and/or the ERCOT market, as well as the outcome of regulatory proceedings, could materially adversely affect Oncor, which could materially adversely affect us.*

Oncor operates in the electric utility industry and, as a result, it is subject to many of the same or similar risks as Sempra California as we describe above under “Risks Related to Sempra California,” particularly with respect to regulation by federal, state, and local legislative and regulatory authorities regarding rates and other financial matters as well as operational matters. Oncor operates in the ERCOT market. In ERCOT, rates are set by the PUCT based on a historical test year, and as a result, the rates Oncor is allowed to charge generally will not exactly match its costs at any given point in time and there is no assurance that it will be able to earn its full return on invested capital. Further, the PUCT may not approve all items requested by Oncor in any rate proceeding, such as Oncor’s base rate review currently pending with the PUCT, including, among other things, recovery of all costs in rates, capital structure and authorized ROE. Failure to receive approval of its requests in any rate proceeding could adversely impact Oncor, which could adversely impact us, and those impacts could potentially be material.

The costs and burdens associated with complying with the various legislative and regulatory requirements to which Oncor is subject at the federal, state, and local levels and adjusting Oncor’s business and operations in response to legislative and

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regulatory developments, including changes in ERCOT, and any fines or penalties that could result from any noncompliance, may have a material adverse effect on Oncor. In addition, any economic weakness in the ERCOT market or slowing growth in Oncor's service territory could lead to reduced electricity demand, which could materially adversely affect Oncor. Moreover, legislative, regulatory, market or industry activities could adversely impact Oncor's collections and cash flows and jeopardize the predictability of utility earnings. For instance, the PUCT has instituted various projects reviewing the regulatory framework regarding DER and other non-traditional technologies. As DER usage continues to grow, regulatory decisions made with respect to DER, including with respect to ERCOT market rules and transmission and distribution utilities' ability to invest in non-traditional electricity delivery solutions, could adversely impact Oncor's revenues and operations. If Oncor does not successfully respond to any legislative, regulatory, market or industry changes applicable to it, Oncor could suffer a deterioration in its results of operations, financial condition, cash flows and/or prospects, which could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

## Financial Risks

### *Oncor could have liquidity needs that necessitate additional investments.*

Oncor's business is capital-intensive, with significant capital spending expected in future periods, and it relies on external financing as a significant source of liquidity for its capital requirements. In the past, Oncor has financed much of its cash needs from operations and with proceeds from indebtedness, but these sources of capital may not be adequate or available on reasonable terms or at reasonable prices in the future. Because our commitments to the PUCT prohibit us from making loans to Oncor, we may elect to make capital contributions to Oncor if it fails to meet its capital requirements or is unable to access sufficient capital from other sources to finance its ongoing needs. Any such investments could be substantial, would reduce the cash available to us for other purposes, and could increase our indebtedness, any of which could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

### *Sempra could incur substantial tax liabilities if EFH's 2016 spin-off of Vistra is deemed to be taxable.*

As part of its ongoing bankruptcy proceedings, in 2016, EFH distributed all the outstanding shares of common stock of its subsidiary Vistra Energy Corp. (formerly TCEH Corp. and referred to herein as Vistra) to certain creditors of TCEH LLC (the spin-off), and Vistra became an independent, publicly traded company. Vistra's spin-off from EFH was intended to qualify for partially tax-free treatment to EFH and its shareholders under Sections 368(a)(1)(G), 355 and 356 of the U.S. Internal Revenue Code of 1986 (as amended) (collectively referred to as the Intended Tax Treatment). In connection with and as a condition to the spin-off, EFH received a private letter ruling from the IRS regarding certain issues relating to the Intended Tax Treatment, as well as tax opinions from counsel to EFH and Vistra regarding certain aspects of the spin-off not covered by the private letter ruling.

In connection with the signing and closing of the merger of EFH (now Sempra Texas Holdings Corp. and a subsidiary of Sempra) with an indirect subsidiary of Sempra (the Merger), EFH sought and received a supplemental private letter ruling from the IRS and Sempra and EFH received tax opinions from their respective counsels that generally provide that the Merger will not affect the conclusions reached in, respectively, the IRS private letter ruling and tax opinions issued with respect to the spin-off described above. Similar to the IRS private letter ruling and opinions issued with respect to the spin-off, the supplemental private letter ruling is generally binding on the IRS and any opinions issued with respect to the Merger are based on factual representations and assumptions, as well as certain undertakings, made by Sempra and EFH. If such representations and assumptions are untrue or incomplete, any such undertakings are not complied with, or the facts upon which the IRS supplemental private letter ruling or tax opinions (which will not impact the IRS position on the transactions) are based are different from the actual facts relating to the Merger, the tax opinions and/or supplemental private letter ruling may not be valid and could be challenged by the IRS. Even though Sempra Texas Holdings Corp. would have administrative appeal rights if the IRS were to invalidate its private letter ruling and/or supplemental private letter ruling, including the right to challenge any adverse IRS position in court, any such appeal would be subject to uncertainties and could fail. If it is ultimately determined that the Merger caused the spin-off not to qualify for the Intended Tax Treatment, Sempra, through its ownership of Sempra Texas Holdings Corp., could incur substantial tax liabilities, which would materially reduce the value associated with our indirect investment in Oncor and could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

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# RISKS RELATED TO SEMPRA INFRASTRUCTURE

## Operational Risks

*Project development activities may not be successful, projects under construction may not be completed on schedule or within budget, and completed projects may not operate at expected levels, any of which could materially adversely affect us.*

### All Energy Infrastructure Projects

We are involved in a number of energy infrastructure projects in various stages of development and construction, which subject us to numerous risks. Success in developing each project is contingent upon, among other things:

- • our financial condition and cash flows and other factors that impact our ability to invest sufficient funds in the project, including for preliminary activities that may need to be accomplished before we can determine whether the project is feasible or economically attractive
- • project assessment and design and our ability to foresee and incorporate new and developing trends and technologies in the energy industry, such as our pursuit of projects and design solutions to help enable our and our customers' climate goals
- • our ability to reach a final investment decision or meet other milestones, which may be influenced by external factors outside our control, including the global economy and energy and financial markets, actions by regulators, achieving necessary internal and external approvals from project partners (if applicable) and others, and many of the other factors described in this risk factor
- • negotiation of satisfactory EPC agreements, including any renegotiation that may be required in the event of delays in final investment decisions or failures to meet other specified deadlines
- • progressing relationships from MOUs, HOAs or similar arrangements, which are non-binding and generally do not impose obligations on any of the parties, to execution of definitive agreements and participation in the project
- • identification of suitable partners, customers, suppliers and other necessary counterparties, negotiation of satisfactory equity, purchase, sale, supply, transportation and other appropriate commercial agreements, and satisfaction of any conditions to effectiveness of such agreements, including reaching a positive final investment decision within agreed timelines
- • timely receipt and maintenance of required governmental permits, licenses and other authorizations that do not impose material conditions and are otherwise granted under terms we find reasonable
- • our project partners', contractors' and other counterparties' willingness and financial or other ability to make their required investments or fulfill their contractual commitments on a timely basis
- • timely, satisfactory and on-budget completion of construction, which could be negatively affected by engineering problems, work stoppages, unavailability or increased costs of materials, equipment, labor and commodities due to inflation or supply chain or other issues, contractor nonperformance and a variety of other factors, many of which we discuss above under 'Risks Related to All Sempra Businesses - Operational Risks' and elsewhere in this risk factor
- • implementation of new or changes to existing laws or regulations that impact our infrastructure or the energy sector generally
- • obtaining adequate and reasonably priced financing for the project, particularly in light of rising inflation and interest rates
- • the absence of hidden defects or inherited environmental liabilities for the site of the project
- • fast and cost-effective resolution of any litigation or unsettled property rights affecting the project
- • geopolitical events and other uncertainties, such as the war in Ukraine

Any failures with respect to the above factors or other factors material to any particular project could involve additional costs, otherwise negatively affect our ability to successfully complete the project and force us to impair or write off amounts we have invested in the project. If we are unable to complete a development project, if we experience delays, or if construction, financing or other project costs exceed our estimated budgets and we are required to make additional capital contributions, we may never recover or receive an adequate or any return on our investment and other resources expended on the project and our results of operations, financial condition, cash flows and/or prospects could be materially adversely affected.

The operation of existing facilities and any future projects we are able to complete involves many risks, including the potential for unforeseen design flaws, engineering challenges, equipment failures or the breakdown for other reasons of facilities, equipment or processes; labor disputes; fuel interruption; environmental contamination; and the other operational risks that we discuss above under 'Risks Related to All Sempra Businesses - Operational Risks.' Any of these events could lead to our facilities being idle for an extended period of time or operating below expected levels, which may result in lost revenues or increased expenses, including higher maintenance costs and penalties. Any such occurrence could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

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### *LNG Export Projects*

In addition to the risks described above that are applicable to all our energy infrastructure projects, we are exposed to additional risks in connection with our LNG export projects, including the ECA LNG Phase 1 project under construction and our potential development of additional LNG export facilities. We discuss our LNG export projects in “Part II - Item 7. MD&A - Capital Resources and Liquidity - Sempra Infrastructure.” Each of these projects faces numerous risks. Our ability to reach a final investment decision for each project and, if a positive decision is made and a project is completed, the overall success of the project are dependent on global energy markets, including natural gas and oil supply, demand and pricing, the ability to reach advantageous agreements with our counterparties, including our partners, off-takers, and EPC contractors, risks inherent in construction, and the ability to obtain and maintain government approvals, among other things. In general, depressed natural gas and LNG prices in the markets we intend to serve due to shifts in supply or other factors could reduce the pricing and cost advantages of exporting domestically produced natural gas and LNG, which could lead to decreased demand. In addition, global oil prices and their associated current and forward projections could reduce demand for natural gas and LNG in some sectors. Although demand for natural gas is currently strong due to the geopolitical consequences of the war in Ukraine and increased recognition of the importance of energy security, a reduction in natural gas demand could also occur from higher penetration of alternative fuels in new power generation, or as a result of calls by some to limit or eliminate reliance on natural gas as an energy source globally. Oil prices could also make LNG projects in other parts of the world more feasible and competitive with LNG projects in North America, thus increasing supply and competition for any available LNG demand. Moreover, because LNG projects take a number of years to develop and construct, it is difficult to match current and expected demand with the projected supply from projects under development. Any of these occurrences could impact competition and prospects for developing LNG export projects and negatively affect the performance and prospects of any of our projects that are or become operational.

Our projects may face distinct disadvantages relative to some LNG projects being pursued by other project developers, including:

- • The proposed Cameron LNG Phase 2 project is subject to certain restrictions and conditions under the financing agreements for the Cameron LNG Phase 1 facility and requires unanimous consent of all JV members, including with respect to the equity investment obligations of each partner. We may not be able to satisfy these conditions and requirements, in which case our ability to develop the Cameron LNG Phase 2 project would be jeopardized.
- • The ECA LNG projects under construction and in development are subject to ongoing land and permit disputes that could obstruct efforts to find or maintain suitable partners, customers and financing arrangements and hinder or halt construction and, if the projects are completed, operations. We discuss these risks below and under “Risks Related to Sempra Infrastructure - Legal Risks.” In addition, the Mexican regulatory process and overlay of U.S. regulation for natural gas exports to LNG facilities in Mexico are not well developed, which, among other factors, contributed to delays obtaining a necessary permit from the Mexican government for the ECA LNG Phase 1 project and could cause similar delays or other hurdles in the future and lead to difficulties finding or maintaining suitable partners, customers and financing arrangements. We have entered into contracts with affiliates and third parties, subject to certain conditions, to supply and transport gas across the U.S.-Mexico border to meet the requirements of the ECA LNG Phase 1 project if and when it becomes operational. If affiliates or third parties experience delays or fail to obtain and maintain necessary permits and arrangements to provide such supply or transportation services or if we fail to maintain adequate gas supply and transportation agreements to support the project fully, it could cause additional costs or delays to the ECA LNG Phase 1 project. Finally, although we have planned measures to not disrupt operations at the ECA Regas Facility with the construction or operation of the ECA LNG Phase 1 project, these measures may not be effective. Moreover, we expect construction of the proposed ECA LNG Phase 2 project to conflict with ECA Regas Facility operations, making the decisions on whether, when and how to pursue the ECA LNG Phase 2 project dependent in part on whether the investment in this project would, over the long term, be more beneficial than continuing to provide regasification services under existing contracts for 100% of the ECA Regas Facility’s capacity through 2028.
- • The PA LNG projects in development are to be located at a greenfield site and therefore are subject to disadvantages relative to projects being developed at brownfield sites, including increased time and costs to develop and construct the project.

Development of these or any other LNG export projects will depend on the ability of our existing pipeline interconnections to be expanded or the ability to permit and construct new pipeline facilities, each of which may require us to enter into additional pipeline interconnection agreements with third-party pipelines. We and third parties may not be able to successfully develop and construct such new pipeline facilities, or we may not be able to secure such additional pipeline interconnections on commercially reasonable terms or at all.

The capital requirements for LNG export projects that we decide to pursue can be significant, even if we ultimately decide not to make a positive final investment decision. In addition, our proposed facilities may not be completed in accordance with estimated timelines or budgets or at all as a result of the above or other factors, and delays, cost overruns or our inability to complete one or more of these projects could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

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### *Financing Arrangements*

We may become involved in various financing arrangements with respect to any of our energy infrastructure projects, such as guarantees, indemnities or loans. These arrangements could expose us to additional risks, including exposure to losses upon the occurrence of certain events related to the development, construction, operation or financing of the applicable projects that could have a material adverse effect on our future results of operations, financial condition, cash flows and/or prospects.

### ***We are dependent on the equipment provided by third parties to operate the Cameron LNG Phase 1 facility and the failure of such equipment may adversely impact our business and performance.***

Cameron LNG JV has experienced operating issues with equipment provided by third-party vendors, which have caused reductions in operating capacity and the declaration of force majeure events by Cameron LNG JV under its tolling agreements for its Cameron LNG Phase 1 facility. Certain of Cameron LNG JV's customers have raised objections regarding these force majeure declarations, and Cameron LNG JV's customers may raise objections in the future regarding these declarations or other force majeure declarations for similar operating issues. Cameron LNG JV's customers have obtained certain, and may in the future obtain additional, quantities of excess LNG production in connection with these and certain other force majeure events, and future force majeure events may also lead to the additional accrual of similar rights. The requirement to deliver excess LNG production to these customers in connection with these force majeure events has had, and in the future could have, an adverse impact on Sempra Infrastructure's and our business and cash flows because Cameron LNG JV loses fees related to the excess production.

These and other operational issues arising from equipment or facilities provided by third-party vendors may require us to undertake remediation, repair or equipment replacement activities that could result in reductions or cessations in production from our facilities. Although we are seeking to enforce warranty and other claims against our EPC contractors and other equipment vendors and suppliers, we may face challenges in successfully enforcing these claims against these third parties. Any such occurrence could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

### ***Fixed-price long-term contracts for services or commodities expose our businesses to inflationary pressures.***

Sempra Infrastructure seeks to secure long-term contracts for services and commodities in an effort to optimize the use of its facilities, reduce volatility in earnings and support the construction of new infrastructure. If these contracts are at fixed prices, their profitability may be negatively affected by inflationary pressures, including increased labor, materials, equipment, commodities and other operational costs, rising interest rates that affect financing costs and changes in applicable exchange rates. We may try to mitigate these risks by, among other things, using variable pricing tied to market indices, anticipating and providing for cost escalation when bidding on projects, contracting for direct pass-through of operating costs and/or entering into hedges. However, these measures may not fully or substantially offset any increases in operating expenses or financing costs caused by inflationary pressures and their use could introduce additional risks, any of which could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

### ***Increased competition could materially adversely affect us.***

The markets in which we operate are characterized by numerous strong and capable competitors, many of which have extensive and diversified development and/or operating experience domestically and internationally and financial resources similar to or greater than ours. In particular, the natural gas pipeline, storage and LNG market segments recently have been characterized by strong and increasing competition for winning new development projects and acquiring existing assets. In addition, our Mexican natural gas distribution business faces increased competition now that its former exclusivity period with respect to its distribution zones has expired and other distributors are legally permitted to build and operate natural gas distribution systems and compete to attract customers in the locations where it operates. These competitive factors could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

### ***We may not be able to enter into, maintain, extend or replace long-term supply, sales or capacity agreements.***

The ECA Regas Facility has long-term capacity agreements with a limited number of counterparties, and also may enter into short-term and/or long-term supply agreements to purchase LNG to be received, stored and regasified for sale to other parties. In addition, Cameron LNG JV has long-term liquefaction and regasification tolling agreements with three counterparties that collectively subscribe for the full nameplate capacity of the Cameron LNG Phase 1 facility. The long-term nature of these agreements and the small number of customers at each of these facilities exposes us to risks, including increased risk if these counterparties fail to meet their contractual obligations on a timely basis, increased credit risks, and risks associated with the long-term nature of our relationships with these counterparties, including increased impacts of disputes or other similar issues which we have experienced in the past. Any such issues that arise in the future with respect to our long-term contracts, including any that may be caused by or related to the war in Ukraine, could lead to significant legal and other costs, result in cancellation of certain key contracts or otherwise adversely affect our relationships with long-term customers, suppliers or partners, and could negatively

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impact the reliability of revenues from the applicable projects and the prospects for any implicated development projects. Any such event could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Sempra Infrastructure's ability to enter into new or replace existing long-term capacity agreements for its natural gas pipeline operations is dependent on, among other factors, demand for and supply of LNG and/or natural gas from its transportation customers, which may include our LNG export facilities. A decrease in demand for or supply of LNG or natural gas from such customers or the occurrence of other events that hinder Sempra Infrastructure from maintaining such agreements or establishing new ones could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

The electric generation and wholesale power sales industries are highly competitive. As more plants are built, supplies of energy and related products may exceed demand, competitive pressures may increase and wholesale electricity prices may decline or become more volatile. Without long-term power sales agreements, our revenues may be subject to increased volatility, and we may be unable to sell the power that Sempra Infrastructure's facilities are capable of producing or sell it at favorable prices, any of which could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

***We rely on transportation assets and services, much of which we do not own or control, to deliver natural gas and electricity.***

We depend on electric transmission lines, natural gas pipelines and other transportation facilities and services owned and operated by third parties to, among other things:

- deliver the natural gas, LNG, electricity and LPG we sell to customers or use for our LNG export facilities
- supply natural gas to our gas storage and electric generation facilities
- provide retail energy services to customers

If transportation is disrupted, if the construction of new or modified interconnecting infrastructure is not completed on schedule or if capacity is inadequate, we may not be able to move forward with our projects on schedule, we may be unable to sell and deliver our commodities, electricity and other services to our customers, we may be responsible for damages incurred by these customers, such as the cost of acquiring alternative supplies at then-current spot market rates, and we could lose customers that may be difficult to replace in competitive market conditions. Any such occurrence could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

**Financial Risks**

***Our international businesses and operations expose us to foreign currency and inflation risks.***

Our operations in Mexico pose foreign currency and inflation risks. Exchange and inflation rates with respect to the Mexican peso and fluctuations in those rates may have an impact on the revenue, costs and cash flows from our international operations, which could materially adversely affect our results of operations, financial condition, cash flows and/or prospects. We may attempt to hedge cross-currency transactions and earnings exposure through various means, including financial instruments and short-term investments, but these hedges may not fully achieve our objectives of mitigating earnings volatility that would otherwise occur due to exchange rate fluctuations. Because we do not hedge our net investments in foreign countries, we are susceptible to volatility in OCI caused by exchange rate fluctuations for entities whose functional currencies are not the U.S. dollar. Moreover, Mexico has experienced periods of high inflation and exchange rate instability in the past, and severe devaluation of the Mexican peso could result in governmental intervention to institute restrictive exchange control policies, as has occurred before in Mexico and other Latin American countries. We discuss our foreign currency exposure at our Mexican subsidiaries in "Part II - Item 7. MD&A" and "Part II - Item 7A. Quantitative and Qualitative Disclosures About Market Risk."

***Our businesses are exposed to market risks, including fluctuations in commodity prices, that could materially adversely affect us.***

We buy energy-related commodities from time to time for pipeline operations, LNG facilities or power plants to satisfy contractual obligations with customers. The regional and other markets in which we purchase these commodities are competitive and can be subject to significant pricing volatility as a result of many factors, including adverse weather conditions, supply and demand changes, availability of competitively priced alternative energy sources, commodity production levels and storage capacity, energy and environmental legislation and regulations, and economic and financial market conditions. Our results of operations, financial condition, cash flows and/or prospects could be materially adversely affected if the prevailing market prices for natural gas, LNG, electricity or other commodities we buy change in a direction or manner not anticipated and for which we have not provided adequately through purchase or sale commitments or other hedging transactions.

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# Legal and Regulatory Risks

*Our international businesses and operations expose us to increased legal, regulatory, tax, economic, geopolitical and management oversight risks and challenges.*

# Overview

We own or have interests in a variety of energy infrastructure assets in Mexico, and we do business with companies based in foreign markets, including particularly our LNG export operations. Conducting these activities in foreign jurisdictions subjects us to complex management, security, political, legal, economic and financial risks that vary by country, many of which may differ from and potentially be greater than those associated with our wholly domestic businesses, and the occurrence of any of these risks could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects. These risks include the following and the other risks discussed in this risk factor below:

- compliance with tax, trade, environmental and other foreign laws and regulations, including legal limitations on ownership in some foreign countries and inadequate or inconsistent enforcement of regulations
- actions by local regulatory bodies, including setting rates and tariffs that may be earned by or charged to our businesses
- adverse changes in social, political, economic or market conditions or the stability of foreign governments
- adverse rulings by foreign courts or tribunals; challenges to or difficulty obtaining, maintaining and complying with permits or approvals; difficulty enforcing contractual and property rights; differing legal standards for lawsuits or other proceedings; and unsettled property rights and titles in Mexico
- expropriation or theft of assets
- with respect to our non-utility international business activities, changes in the priorities and budgets of international customers, which may be driven by many of the factors listed above, among others

# Mexican Government Influence on Economic and Energy Matters

The Mexican government exercises significant and increasing influence over the Mexican economy and energy sector and has adopted or proposed additional changes that, in each case, could fundamentally impact private investment in this sector.

Mexican governmental actions in the past several years in the electricity market include resolutions, orders, decrees, regulations and proposed and adopted amendments to Mexican law that could, among other things, threaten the prospects for private-party renewable energy generation in the country, limit the ability to dispatch renewable energy and receive or maintain operational permits, and increase costs of electricity for legacy renewables and cogeneration energy contract holders. The President of Mexico also proposed constitutional reform in September 2021 that would have eliminated the wholesale electricity market in Mexico and significantly limited the ability of private parties to participate in electricity generation. Although the proposed constitutional reform did not reach the two-third majority required for its approval and was therefore rejected by Mexico's Chamber of Deputies, other similar reforms to centralize and de-privatize the electricity market in Mexico could be proposed in the future.

With respect to midstream and downstream activities, amendments to Mexico's Hydrocarbons Law that give SENER and the CRE additional powers to suspend and revoke permits became effective in May 2021. The amendments provide that suspension of permits will be determined by SENER or the CRE when a danger to national security, energy security, or the national economy is foreseen, and also provide new grounds for the revocation of permits under certain other circumstances related to a permit holder's use of illegally imported products, failure to comply with provisions applicable to quantity, quality and measurement of products, or unauthorized modification of the technical condition of its infrastructure. Additionally, the amendments direct authorities to revoke permits that fail to comply with certain minimum storage and other requirements or violate provisions established by SENER or the amended Hydrocarbons Law, as applicable.

We discuss these Mexican governmental actions in Note 16 of the Notes to Consolidated Financial Statements. We cannot predict whether proposed governmental actions will ultimately be passed or otherwise become effective in their current forms, nor can we predict the nature or level of their impact on the various segments of the energy sector in which we participate. We also cannot predict whether pending actions to enjoin enforcement or suspend or overturn existing laws and other governmental actions will be successful. More generally, we cannot predict the impact that the political, social and judicial landscape in Mexico will have on that country's economy and energy sector and our business in Mexico. If any of the proposed governmental actions are passed or otherwise become effective, if efforts to enjoin enforcement or suspend or overturn adopted governmental actions fail, or if other similar moves by the Mexican government are taken to curb private-party participation in the energy sector, including through further amendments to Mexican laws, rules or the constitution or increased investigative and enforcement activities, it may impact our ability to operate our facilities at existing levels or at all, may result in increased costs for Sempra Infrastructure and its customers, may adversely affect our ability to develop new projects, may result in decreased revenues and cash flows, and may

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negatively impact our ability to recover the carrying values of our investments in Mexico, any of which may have a material adverse effect on our business, results of operations, financial condition, cash flows and/or prospects.

#### *U.S. and Mexican Laws and Foreign Policy, including Trade and Related Matters*

Our international business activities are subject to U.S. and Mexican laws and regulations related to foreign operations or doing business internationally, including the U.S. Foreign Corrupt Practices Act, the Mexican Federal Anticorruption Law in Public Contracting (Ley Federal Anticorrupción en Contrataciones Públicas) and similar laws, and are sensitive to U.S. and Mexican foreign policy, trade policy and other geopolitical factors. The current and the last U.S. Administrations have taken different stances with respect to international trade agreements, tariffs, immigration policy and other matters of foreign policy that impact trade and foreign relations. Shifts in foreign policy could result in or increase adverse effects on our businesses and create uncertainty, making it difficult to predict the impact these policies could have on our businesses. Violations or alleged violations of the laws referred to above, as well as foreign policy positions that adversely affect imports and exports between the U.S., Mexican and other economies and foreign companies with whom we conduct business, could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

#### ***Our businesses are subject to various legal actions challenging our property rights and permits, and our properties in Mexico could be subject to expropriation by the Mexican government.***

We are engaged in disputes regarding our title to the property in Mexico where our ECA Regas Facility is situated and our ECA LNG projects under construction and in development are expected to be situated, which we discuss in Note 16 of the Notes to Consolidated Financial Statements. In addition, we may have or seek to obtain long-term leases or rights-of-way from governmental agencies or other third parties to operate our energy infrastructure on land we do not own. In addition to the risks associated with such property ownership and use that we describe above under “Risks Related to All Sempra Businesses - Operational Risks,” disputes regarding any of these properties could lead to difficulties finding or maintaining suitable partners, customers and project financing arrangements and could hinder or halt our ability to construct and, if completed, operate the affected facilities or proposed projects. Any of these outcomes could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Sempra Infrastructure’s energy infrastructure assets may be considered by the Mexican government to be a public service or essential for the provision of a public service, in which case these assets and the related businesses could be subject to expropriation or nationalization, loss of concessions, renegotiation or annulment of existing contracts, and other similar risks. Any such occurrence could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

### ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

### ITEM 2. PROPERTIES

We own or lease land, warehouses, offices, operating and maintenance centers, shops and service facilities necessary to conduct our businesses. Each of our operating segments currently has adequate space and, if we need more space, we believe it is readily available. We discuss properties related to our electric, natural gas and energy infrastructure operations in “Part I - Item 1. Business” and Note 1 of the Notes to Consolidated Financial Statements.

### ITEM 3. LEGAL PROCEEDINGS

We are not party to, and our property is not the subject of, any material pending legal proceedings (other than ordinary routine litigation incidental to our businesses) except for the matters described in Notes 15 and 16 of the Notes to Consolidated Financial Statements, “Part I - Item 1A. Risk Factors” and “Part II - Item 7. MD&A.”

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# ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

# PART II.

# ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

# MARKET INFORMATION

# Sempra Common Stock

Our common stock is traded on the NYSE under the trading symbol SRE and the Mexican Stock Exchange under the trading symbol SRE.MX. At February 21, 2023, there were approximately 21,229 record holders of our common stock. Information concerning dividend declarations for Sempra is included in "Part II - Item 7. MD&A - Capital Resources and Liquidity - Sources and Uses of Cash - Dividends."

# SoCalGas and SDG&E Common Stock

Information concerning dividend declarations for SoCalGas and SDG&E is included in "Part II - Item 7. MD&A - Capital Resources and Liquidity - Sources and Uses of Cash - Dividends."

# PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

On July 6, 2020, our board of directors authorized the repurchase of shares of our common stock at any time and from time to time in an aggregate amount not to exceed the lesser of $2 billion or amounts spent to purchase no more than 25 million shares. This repurchase authorization was publicly announced on August 5, 2020 and has no expiration date. As of February 28, 2023, a maximum of $1.25 billion and no more than 19,632,529 shares may yet be purchased under this repurchase authorization.

We may also, from time to time, purchase shares of our common stock to which participants would otherwise be entitled from LTIP participants who elect to sell a sufficient number of shares in connection with the vesting of RSUs and stock options in order to satisfy minimum statutory tax withholding requirements.

# ITEM 6. (RESERVED)

Not applicable.

2022 Form 10-K | 60

# ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

# OVERVIEW

Our 2022 operational and financial results reflect our mission to be North America's premier energy infrastructure company. Key events in 2022 include:

- SDG&E and SoCalGas filed their 2024 GRC applications and a CPUC proposed decision is scheduled for the second quarter of 2024
- SDG&E and SoCalGas received final decisions from the CPUC on their cost of capital for 2023 through 2025, and SDG&E received a final decision on its cost of capital for 2022
- SoCalGas made significant progress to substantially resolve legal and regulatory matters pertaining to the Leak
- Oncor filed its comprehensive base rate review and expects to receive a final order from the PUCT around the end of the first quarter of 2023
- Sempra Infrastructure completed the sale of a 10% NCI in SI Partners to ADIA
- Sempra Infrastructure advanced development of the PA LNG projects and Cameron LNG Phase 2 project and expects to make a final investment decision for the PA LNG Phase 1 project in the first quarter of 2023
- We invested $5.7 billion in capital expenditures and investments
- We completed $450 million of common stock repurchases pursuant to ASR programs

Our former South American businesses and certain activities associated with those businesses are presented as discontinued operations. Nominal activities that are not classified as discontinued operations have been subsumed into Parent and other. We completed the sales of these businesses in the second quarter of 2020.

# RESULTS OF OPERATIONS

We discuss the following in Results of Operations:

- Overall results of operations of Sempra;
- Segment results;
- Significant changes in revenues, costs and earnings; and
- Impact of foreign currency and inflation rates on results of operations.

We discuss herein our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021. For a discussion of our results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020, refer to "Part II - Item 7. MD&A - Results of Operations" in our 2021 annual report on Form 10-K filed with the SEC on February 25, 2022.

# OVERALL RESULTS OF OPERATIONS OF SEMPRA

# OVERALL RESULTS OF OPERATIONS OF SEMPRA

(Dollars and shares in millions, except per share amounts)

![img-0.jpeg](img-0.jpeg)

2022 Form 10-K | 61

Our earnings and diluted EPS were impacted by variances discussed below in “Segment Results.”

## SEGMENT RESULTS

This section presents earnings (losses) by Sempra segment, as well as Parent and other and discontinued operations, and a related discussion of the changes in segment earnings (losses). Throughout the MD&A, our reference to earnings represents earnings attributable to common shares. Variance amounts presented are the after-tax earnings impact (based on applicable statutory tax rates), unless otherwise noted, and before foreign currency and inflation effects and NCI, where applicable.

### SEMPRA EARNINGS (LOSSES) BY SEGMENT

(Dollars in millions)

|  | Years ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| SDG&E | $915 | $819 | $824 |
| SoCalGas | 599 | (427) | 504 |
| Sempra Texas Utilities | 736 | 616 | 579 |
| Sempra Infrastructure | 310 | 682 | 580 |
| Parent and other (1) | (466) | (436) | (563) |
| Discontinued operations | - | - | 1,840 |
| Earnings attributable to common shares | $2,094 | $1,254 | $3,764 |

$^{(1)}$ Includes intercompany eliminations recorded in consolidation and certain corporate costs.

### SDG&E

The increase in earnings of $96 million (12%) in 2022 compared to 2021 was primarily due to:

- $56 million higher CPUC base operating margin, net of operating expenses;
- $26 million lower income tax expense primarily from flow-through items, net of lower associated regulatory revenues;
- $20 million higher income tax benefit from the resolution of prior year income tax items;
- $9 million higher net regulatory interest income; and
- $7 million higher AFUDC equity; offset by
- $26 million higher net interest expense.

### SoCalGas

Earnings of $599 million in 2022 compared to losses of $427 million in 2021 was primarily due to:

- $949 million decrease in charges relating to litigation and regulatory matters pertaining to the Leak comprised of $199 million in 2022 compared to $1,148 million in 2021;
- $105 million higher CPUC base operating margin, net of operating expenses;
- $7 million higher AFUDC equity; and
- $6 million higher net regulatory interest income; offset by
- $26 million higher net interest expense; and
- $10 million in penalties related to the energy efficiency and advocacy OSCs, which we discuss in Note 4 of the Notes to Consolidated Financial Statements.

### Sempra Texas Utilities

The increase in earnings of $120 million (19%) in 2022 compared to 2021 was primarily due to higher equity earnings from Oncor Holdings driven by:

- higher revenues from rate updates to reflect increases in invested capital, higher customer consumption attributable primarily to weather, and customer growth; offset by
- higher depreciation expense and interest expense attributable to invested capital; and
- higher O&M.

### Sempra Infrastructure

The decrease in earnings of $372 million in 2022 compared to 2021 was primarily due to:

- $283 million losses in 2022 compared to $148 million earnings in 2021 from asset and supply optimization driven by higher unrealized losses on commodity derivatives due to changes in natural gas prices, offset by higher diversion revenues;

2022 Form 10-K | 62

- • \$169 million unfavorable impact from foreign currency and inflation effects on our monetary positions in Mexico, net of foreign currency derivative effects, comprised of a \$216 million unfavorable impact in 2022 compared to a \$47 million unfavorable impact in 2021; and
- • \$13 million selling profit on a sales-type lease relating to the commencement of a rail facility lease at the Veracruz terminal in 2021; **offset by**
- • \$79 million higher equity earnings from Cameron LNG JV primarily from higher revenues from excess LNG production and maintenance revenues;
- • \$50 million higher net income tax benefit primarily from the remeasurement of certain deferred income taxes and outside basis differences in JV investments;
- • \$50 million lower net interest expense, including \$37 million in charges associated with hedge termination costs and a write-off of unamortized debt issuance costs from the early redemptions of debt in October 2021 and \$27 million net unrealized gains in 2022 on a contingent interest rate swap related to the proposed PA LNG Phase 1 project that we discuss in Note 11 of the Notes to Consolidated Financial Statements;
- • \$42 million higher earnings from the transportation business in Mexico driven by higher rates and higher equity earnings at IMG excluding unfavorable impact from foreign currency and inflation;
- • \$14 million higher earnings due to the start of commercial operations of the Veracruz and Mexico City terminals in March and July of 2021, respectively, and remeasurement of operating leases;
- • \$12 million higher earnings from the renewables business due to Border Solar and the second phase of ESJ being placed in service in March 2021 and January 2022, respectively; and
- • \$10 million higher earnings from TdM driven by higher power prices offset by lower volumes.

### *Parent and Other*

The increase in losses of $30 million (7%) in 2022 compared to 2021 was primarily due to:

- • \$120 million deferred income tax expense associated with the change in our indefinite reinvestment assertion related to our foreign subsidiaries, which we discuss in Note 8 of the Notes to Consolidated Financial Statements;
- • \$50 million net investment losses in 2022 compared to \$29 million net investment gains in 2021 on dedicated assets in support of our employee nonqualified benefit plan and deferred compensation obligations;
- • \$50 million equity earnings in 2021 related to our investment in RBS Sempra Commodities to settle pending VAT matters and related legal costs; and
- • \$26 million gain on the sale of PXiSE in December 2021; **offset by**
- • \$92 million in charges associated with make-whole premiums and a write-off of unamortized discount and debt issuance costs from the early redemptions of debt in December 2021;
- • \$72 million net income tax expense related to the utilization of a deferred income tax asset upon completing the sale of a 20% NCI in SI Partners to KKR in October 2021;
- • \$49 million income tax benefit in 2022 compared to \$9 million income tax expense in 2021 from changes to a valuation allowance against certain tax credit carryforwards; and
- • \$19 million lower preferred dividends due to the mandatory conversion of all series B preferred stock in July 2021.

## **SIGNIFICANT CHANGES IN REVENUES, COSTS AND EARNINGS**

This section contains a discussion of the differences between periods in the specific line items of the Consolidated Statements of Operations for Sempra, SDG&E and SoCalGas.

### *Utilities Revenues and Cost of Sales*

Our utilities revenues include natural gas revenues at SoCalGas and SDG&E and Sempra Infrastructure's Ecogas and electric revenues at SDG&E. Intercompany revenues included in the separate revenues of each utility are eliminated in Sempra's Consolidated Statements of Operations.

SoCalGas and SDG&E currently operate under a regulatory framework that permits:

- The cost of natural gas purchased for core customers (primarily residential and small commercial and industrial customers) to be passed through to customers in rates substantially as incurred and without markup. The GCIM provides for SoCalGas to share in the savings and/or costs from buying natural gas for its core customers at prices below or above monthly market-based benchmarks. This mechanism permits full recovery of costs incurred when average purchase costs are within a price range around the benchmark price. Any higher costs incurred or savings realized outside this range are shared between core customers and SoCalGas. We provide further discussion in Note 3 of the Notes to Consolidated Financial Statements.

2022 Form 10-K | 63

- • SDG&E to recover the actual cost incurred to generate or procure electricity based on annual estimates of the cost of electricity supplied to customers. The differences in cost between estimates and actual are recovered or refunded in subsequent periods through rates.
- • SoCalGas and SDG&E to recover certain program expenditures and other costs authorized by the CPUC, or “refundable programs.”

Because changes in SoCalGas’ and SDG&E’s cost of natural gas and/or electricity are recovered in rates, changes in these costs are offset in the changes in revenues and therefore do not impact earnings, other than potential impacts related to the GCIM for SoCalGas that we describe above. In addition to the changes in cost or market prices, natural gas or electric revenues recorded during a period are impacted by the difference between customer billings and recorded or CPUC-authorized amounts. These differences are required to be balanced over time, resulting in over- and undercollected regulatory balancing accounts. We discuss balancing accounts and their effects further in Note 4 of the Notes to Consolidated Financial Statements.

The table below summarizes utilities revenues and cost of sales.

# UTILITIES REVENUES AND COST OF SALES

(Dollars in millions)

|  | Years ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Natural gas revenues: |  |  |  |
| SoCalGas | $6,840 | $5,515 | $4,748 |
| SDG&E | 1,043 | 838 | 694 |
| Sempra Infrastructure | 89 | 81 | 58 |
| Eliminations and adjustments | (104) | (101) | (89) |
| Total | 7,868 | 6,333 | 5,411 |
| Electric revenues: |  |  |  |
| SDG&E | 4,795 | 4,666 | 4,619 |
| Eliminations and adjustments | (12) | (8) | (5) |
| Total | 4,783 | 4,658 | 4,614 |
| Total utilities revenues | $12,651 | $10,991 | $10,025 |
| Cost of natural gas (1) : |  |  |  |
| SoCalGas | $2,233 | $1,369 | $783 |
| SDG&E | 363 | 242 | 162 |
| Sempra Infrastructure | 37 | 24 | 12 |
| Eliminations and adjustments | (30) | (38) | (32) |
| Total | 2,603 | 1,597 | 925 |
| Cost of electric fuel and purchased power (1) : |  |  |  |
| SDG&E | 994 | 1,069 | 1,191 |
| Eliminations and adjustments | (57) | (59) | (4) |
| Total | 937 | 1,010 | 1,187 |
| Total utilities cost of sales | $3,540 | $2,607 | $2,112 |

(1) Excludes depreciation and amortization, which are presented separately on the Sempra, SDG&E and SoCalGas Consolidated Statements of Operations.

# Natural Gas Revenues and Cost of Natural Gas

The table below summarizes the average cost of natural gas sold by Sempra California and included in cost of natural gas. The average cost of natural gas sold at each utility is impacted by market prices, as well as transportation, tariff and other charges.

# SEMPRA CALIFORNIA AVERAGE COST OF NATURAL GAS

(Dollars per thousand cubic feet)

|  | Years ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| SoCalGas | $7.48 | $4.53 | $2.59 |
| SDG&E | 8.01 | 5.30 | 3.74 |

2022 Form 10-K | 64

In 2022 compared to 2021, our natural gas revenues increased by $1.5 billion (24%) to $7.9 billion primarily due to:

- $1.3 billion increase at SoCalGas, which included:
  - $864 million increase in cost of natural gas sold, which we discuss below,
  - $202 million higher recovery of costs associated with refundable programs, which revenues are offset in O&M,
  - $146 million higher CPUC-authorized revenues,
  - $69 million higher revenues from incremental and balanced capital projects, and
  - $35 million higher revenues associated with impacts resulting from changes in tax laws tracked in the income tax expense memorandum account; and
- $205 million increase at SDG&E, which included:
  - $121 million increase in cost of natural gas sold, which we discuss below,
  - $35 million higher recovery of costs associated with refundable programs, which revenues are offset in O&M,
  - $31 million higher revenues from balanced capital projects, and
  - $10 million higher CPUC-authorized revenues.

Our cost of natural gas increased by $1.0 billion to $2.6 billion in 2022 compared to 2021 primarily due to:

- $864 million increase at SoCalGas primarily due to higher average natural gas prices; and
- $121 million increase at SDG&E primarily due to higher average natural gas prices.

### Electric Revenues and Cost of Electric Fuel and Purchased Power

In 2022 compared to 2021, our electric revenues, substantially all of which are at SDG&E, increased by $125 million (3%) to $4.8 billion primarily due to:

- $70 million higher CPUC-authorized revenues;
- $68 million higher revenues associated with SDG&E's wildfire mitigation plan;
- $35 million higher recovery of costs associated with refundable programs, which revenues are offset in O&M;
- $19 million higher revenues from transmission operations; and
- $14 million higher revenues associated with lower income tax benefits from flow-through items; offset by
- $75 million lower cost of electric fuel and purchased power, which we discuss below.

Our utility cost of electric fuel and purchased power includes utility-owned generation, power purchased from third parties, and net power purchases and sales to the California ISO. Our cost of electric fuel and purchased power decreased by $73 million (7%) to $937 million in 2022 compared to 2021 primarily due to $75 million at SDG&E from higher sales to the California ISO due to higher market prices offset by higher purchased power from the California ISO due to higher market prices, net of lower customer demand due to departing load now served by CCAs, and higher utility-owned generation costs.

### Energy-Related Businesses: Revenues and Cost of Sales

The table below shows revenues and cost of sales for our energy-related businesses.

# ENERGY-RELATED BUSINESSES: REVENUES AND COST OF SALES

(Dollars in millions)

|  | Years ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| REVENUES |  |  |  |
| Sempra Infrastructure | $1,830 | $1,916 | $1,342 |
| Parent and other (1) | (42) | (50) | 3 |
| Total revenues | $1,788 | $1,866 | $1,345 |
| COST OF SALES (2) |  |  |  |
| Sempra Infrastructure | $942 | $608 | $275 |
| Parent and other (1) | - | 3 | 1 |
| Total cost of sales | $942 | $611 | $276 |

(1) Includes eliminations of intercompany activity.

(2) Excludes depreciation and amortization, which are presented separately on Sempra's Consolidated Statements of Operations.

2022 Form 10-K | 65

In 2022 compared to 2021, revenues from our energy-related businesses decreased by $78 million (4%) to $1.8 billion primarily due to:

- $344 million decrease in revenues from asset and supply optimization from contracts to sell natural gas and LNG to third parties, including:
  - $498 million lower revenues primarily driven by $639 million from higher unrealized losses on commodity derivatives offset by $148 million from higher natural gas prices and volumes, offset by
  - $83 million higher diversion fees due to higher natural gas prices, and
  - $71 million higher LNG sales; offset by
- $143 million higher revenues from TdM mainly due to higher power prices offset by lower volumes from scheduled major maintenance completed in March 2022, which resulted in increased plant reliability;
- $53 million higher transportation revenues driven by higher rates;
- $46 million higher revenues from the renewables business due to Border Solar and the second phase of ESJ being placed in service in March 2021 and January 2022, respectively, the acquisition of ESJ in March 2021 and higher transmission rates; and
- $5 million higher revenues from the Veracruz and Mexico City terminals placed in service in March and July of 2021, respectively, offset by an $18 million selling profit on a sales-type lease relating to the commencement of a rail facility lease at the Veracruz terminal in the third quarter of 2021 and a remeasurement of an operating lease.

The cost of sales for our energy-related businesses increased by $331 million to $942 million in 2022 compared to 2021 primarily due to higher natural gas prices and higher LNG purchases related to asset and supply optimization and higher prices offset by lower volumes from scheduled major maintenance completed in March 2022 at TdM.

### Operation and Maintenance

In the table below, we provide O&M by segment.

# OPERATION AND MAINTENANCE

(Dollars in millions)

|  | Years ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| SDG&E | $1,677 | $1,587 | $1,455 |
| SoCalGas | 2,402 | 2,180 | 2,029 |
| Sempra Texas Utilities | 6 | 6 | - |
| Sempra Infrastructure | 656 | 550 | 427 |
| Parent and other (1) | 5 | 18 | 30 |
| Total operation and maintenance | $4,746 | $4,341 | $3,941 |

(1) Includes eliminations of intercompany activity.

Our O&M increased by $405 million (9%) to $4.7 billion in 2022 compared to 2021 primarily due to:

- $222 million increase at SoCalGas due to:
  - $202 million higher expenses associated with refundable programs, which costs incurred are recovered in revenue, and
  - $20 million higher non-refundable operating costs; and
- $106 million increase at Sempra Infrastructure due to:
  - $28 million at the transportation business due to maintenance on pipelines and new compressor stations and higher administrative costs,
  - $28 million higher development costs and purchased services,
  - $20 million from the renewables business primarily due to construction repairs and maintenance at Ventika,
  - $19 million due to the start of commercial operations of the Veracruz and Mexico City terminals in March and July of 2021, respectively, and
  - $10 million higher operating costs at TdM from higher purchased materials and services due to scheduled major maintenance completed in March 2022, offset by
  - $16 million lower operating cost due to remeasurement of operating leases at the refined products terminals; and
- $90 million increase at SDG&E due to:
  - $70 million higher expenses associated with refundable programs, which costs incurred are recovered in revenue, and
  - $20 million higher non-refundable operating costs; offset by

2022 Form 10-K | 66

• $13 million decrease at Parent and other primarily from deferred compensation benefit in 2022 compared to an expense in 2021.

### *Aliso Canyon Litigation and Regulatory Matters*

SoCalGas recorded charges of $259 million and $1,593 million in 2022 and 2021, respectively, relating to litigation and regulatory matters pertaining to the Leak. We describe these charges in Note 16 of the Notes to Consolidated Financial Statements.

### *Gain (Loss) on Sale of Assets*

In 2021, Parent and other recognized a $36 million gain on the sale of PXiSE, which we discuss in Note 5 of the Notes to Consolidated Financial Statements.

### *Other Income (Expense), Net*

As part of our central risk management function, we may enter into foreign currency derivatives to hedge SI Partners' exposure to movements in the Mexican peso from its controlling interest in IEnova. The gains/losses associated with these derivatives are included in other income (expense), net, as described below, and partially mitigate the transactional effects of foreign currency and inflation included in income tax expense for SI Partners' consolidated entities and in equity earnings for SI Partners' equity method investments. We discuss policies governing our risk management below in "Part II - Item 7A. Quantitative and Qualitative Disclosures About Market Risk."

Other income (expense), net, decreased by $34 million to $24 million compared to the same period in 2021 primarily due to:

- $42 million investment losses in 2022 compared to $50 million investment gains in 2021 on dedicated assets in support of our executive retirement and deferred compensation plans; and
- $10 million in penalties at SoCalGas in 2022 related to the energy efficiency and advocacy OSCs; offset by
- $33 million lower net losses from impacts associated with interest rate and foreign exchange instruments and foreign currency transactions, including:
  - $12 million gains in 2022 on cross-currency swaps compared to $28 million losses in 2021 on foreign currency derivatives and cross-currency swaps as a result of fluctuation of the Mexican peso, and
  - $12 million lower foreign currency losses on a Mexican peso-denominated loan to IMG, which is offset in equity earnings, offset by
  - $13 million losses in 2022 compared to $5 million net gains in 2021 on other foreign currency transactional effects;
- $20 million higher net interest income on regulatory balancing accounts at SDG&E and SoCalGas;
- $10 million higher AFUDC equity, including $7 million at both SDG&E and SoCalGas;
- $8 million lower non-service component of net periodic benefit cost; and
- $5 million reversal of penalties in 2021 related to an OII related to SoCalGas' billing practices.

We provide further details of the components of other income (expense), net, in Note 1 of the Notes to Consolidated Financial Statements.

### *Interest Expense*

Interest expense decreased by $144 million (12%) to $1.1 billion in 2022 compared to 2021 primarily due to:

- $121 million decrease at Parent and other primarily due to $126 million in charges associated with make-whole premiums and a write-off of unamortized discount and debt issuance costs from the early redemptions of debt in December 2021, offset by higher debt balances from debt issuances;
- $101 million decrease at Sempra Infrastructure primarily due to:
  - $54 million in charges associated with hedge termination costs and a write-off of unamortized debt issuance costs from the early redemptions of debt in October 2021, and
  - $33 million net unrealized gains in 2022 on a contingent interest rate swap related to the proposed PA LNG Phase 1 project that we discuss in Note 11 of the Notes to Consolidated Financial Statements; offset by
- $41 million increase at SoCalGas primarily from higher debt balances from debt issuances; and
- $37 million increase at SDG&E from higher debt balances from debt issuances.

2022 Form 10-K | 67

## Income Taxes

The table below shows the income tax expense (benefit) and ETRs for Sempra, SDG&E and SoCalGas.

### INCOME TAX EXPENSE (BENEFIT) AND EFFECTIVE INCOME TAX RATES

(Dollars in millions)

|  | Years ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Sempra: |  |  |  |
| Income tax expense from continuing operations | $556 | $99 | $249 |
| Income from continuing operations before income taxes and equity earnings | $1,343 | $219 | $1,489 |
| Equity earnings, before income tax (1) | 666 | 614 | 294 |
| Pretax income | $2,009 | $833 | $1,783 |
| Effective income tax rate | 28% | 12% | 14% |
| SDG&E: |  |  |  |
| Income tax expense | $182 | $201 | $190 |
| Income before income taxes | $1,097 | $1,020 | $1,014 |
| Effective income tax rate | 17% | 20% | 19% |
| SoCalGas: |  |  |  |
| Income tax expense (benefit) | $138 | $(310) | $96 |
| Income (loss) before income taxes | $738 | $(736) | $601 |
| Effective income tax rate | 19% | 42% | 16% |

$^{(1)}$ We discuss how we recognize equity earnings in Note 6 of the Notes to Consolidated Financial Statements.

## Sempra

Sempra's income tax expense increased by $457 million in 2022 compared to 2021 primarily due to:

- $60 million income tax benefit in 2022 compared to $445 million income tax benefit in 2021 associated with charges relating to litigation and regulatory matters pertaining to the Leak;
- $169 million income tax expense in 2022 compared to $4 million income tax expense in 2021 from foreign currency and inflation effects on our monetary positions in Mexico and associated derivatives;
- $120 million deferred income tax expense associated with the change in our indefinite reinvestment assertion related to our foreign subsidiaries, which we discuss in Note 8 of the Notes to Consolidated Financial Statements; and
- lower income tax benefits from flow-through items; offset by
- $72 million net income tax expense related to the utilization of a deferred income tax asset upon completing the sale of a 20% NCI in SI Partners to KKR in October 2021;
- $49 million income tax benefit in 2022 compared to $9 million income tax expense in 2021 from changes to a valuation allowance against certain tax credit carryforwards;
- $28 million higher net income tax benefit in 2022 from the remeasurement of certain deferred income taxes; and
- $22 million higher income tax benefit in 2022 from the resolution of prior year income tax items.

We report as part of our pretax results the income or loss attributable to NCI. However, we do not record income taxes for a portion of this income or loss, as some of our entities with NCI are currently treated as partnerships for income tax purposes, and thus we are only liable for income taxes on the portion of the earnings that are allocated to us. Our pretax income, however, includes 100% of these entities. If our entities with NCI grow, and if we continue to invest in such entities, the impact on our ETR may become more significant.

We discuss the impact of foreign currency exchange rates and inflation on income taxes below in "Impact of Foreign Currency and Inflation Rates on Results of Operations." See Notes 1 and 8 of the Notes to Consolidated Financial Statements for further details about our accounting for income taxes and items subject to flow-through treatment.

## SDG&E

SDG&E's income tax expense decreased by $19 million (9%) in 2022 compared to 2021 primarily due to:

- higher income tax benefits from flow-through items; and
- $14 million higher income tax benefit in 2022 from the resolution of prior year income tax items; offset by

2022 Form 10-K | 68

• higher income tax expense from higher pretax income.

# SoCalGas

SoCalGas' $138 million income tax expense in 2022 compared to a $310 million income tax benefit in 2021 was primarily due to:

• $60 million income tax benefit in 2022 compared to $445 million income tax benefit in 2021 associated with charges relating to litigation and regulatory matters pertaining to the Leak; and
• lower income tax benefits from flow-through items.

# Equity Earnings

Equity earnings increased by $155 million (12%) to $1.5 billion in 2022 compared to 2021 primarily due to:

• $118 million higher equity earnings at Oncor Holdings due to higher revenues from rate updates to reflect increases in invested capital, higher customer consumption attributable primarily to weather, and customer growth, offset by higher depreciation expense and interest expense attributable to invested capital and higher O&M; and
• $100 million higher equity earnings at Cameron LNG JV primarily due to excess LNG production and maintenance revenues; offset by
• $50 million equity earnings in 2021 related to our investment in RBS Sempra Commodities to settle pending VAT matters and related legal costs; and
• $15 million lower equity earnings at IMG due to higher income tax expense and foreign currency effects, including $12 million lower foreign currency gains on IMG's Mexican peso-denominated loans from its JV owners, which is fully offset in other income (expense), net, offset by lower interest expense.

# Earnings Attributable to Noncontrolling Interests

Earnings attributable to NCI increased by $1 million (1%) to $146 million in 2022 compared to 2021 primarily due to:

• $120 million increase as a result of a decrease in our ownership interest in SI Partners offset by an increase in our ownership interest in IEnova; offset by
• $121 million decrease due to a decrease in SI Partners subsidiaries net income.

# Preferred Dividends

Preferred dividends decreased by $19 million to $44 million in 2022 compared to 2021 due to the conversion of all series B preferred stock in July 2021.

# IMPACT OF FOREIGN CURRENCY AND INFLATION RATES ON RESULTS OF OPERATIONS

Because our natural gas distribution utility in Mexico, Ecogas, uses its local currency as its functional currency, its revenues and expenses are translated into U.S. dollars at average exchange rates for the period for consolidation in Sempra's results of operations. Prior to the sales of our South American businesses in 2020, our operations in South America used their local currency as their functional currency.

# Foreign Currency Translation

Any difference in average exchange rates used for the translation of income statement activity from year to year can cause a variance in Sempra's comparative results of operations. Changes in our earnings as a result of foreign currency translation rates between years were negligible in 2022 compared to 2021.

# Transactional Impacts

Although the financial statements of most of our Mexican subsidiaries and JVs have the U.S. dollar as the functional currency, some transactions may be denominated in the local currency; such transactions are remeasured into U.S. dollars. This remeasurement creates transactional gains and losses that are included in other income (expense), net, for our consolidated entities and in equity earnings for our JVs.

We utilize cross-currency swaps that exchange our Mexican peso-denominated principal and interest payments into the U.S. dollar and swap Mexican fixed interest rates for U.S. fixed interest rates. The impacts of these cross-currency swaps are offset in OCI and are reclassified from AOCI into earnings through other income (expense), net and interest expense as settlements occur.

Certain of our Mexican pipelines (namely Los Ramones I at IEnova Pipelines and Los Ramones Norte at TAG) generate revenue based on tariffs that are set by government agencies in Mexico, with contracts denominated in Mexican pesos that are indexed to

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the U.S. dollar, adjusted annually for inflation and fluctuation in the exchange rate. The resultant gains and losses from remeasuring the local currency amounts into U.S. dollars and the offsetting settlement of foreign currency forwards and swaps related to these contracts are included in revenues: energy-related businesses or equity earnings.

Income statement activities at our foreign operations and their JVs are also impacted by transactional gains and losses, a summary of which is shown in the table below:

# **TRANSACTIONAL (LOSSES) GAINS FROM FOREIGN CURRENCY AND INFLATION EFFECTS AND ASSOCIATED DERIVATIVES**  
(Dollars in millions)

|  | Total reported amounts |  |  | Transactional (losses) gains included in reported amounts |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Years ended December 31, |  |  |  |  |  |
|  | 2022 | 2021 | 2020 | 2022 | 2021 | 2020 |
| Other income (expense), net | $24 | $58 | $(48) | $(13) | $(46) | $(92) |
| Income tax expense | (556) | (99) | (249) | (169) | (4) | 59 |
| Equity earnings | 1,498 | 1,343 | 1,015 | (36) | 2 | 41 |
| Income from continuing operations, net of income tax | 2,285 | 1,463 | 2,255 | (218) | (48) | 8 |
| Income from discontinued operations, net of income tax | - | - | 1,850 | - | - | 15 |
| Earnings attributable to noncontrolling interests | (146) | (145) | (172) | 54 | 4 | (24) |
| Earnings attributable to common shares | 2,094 | 1,254 | 3,764 | (164) | (44) | (1) |

# ***Foreign Currency Exchange Rate and Inflation Impacts on Income Taxes and Related Hedging Activity***

Our Mexican subsidiaries have U.S. dollar-denominated cash balances, receivables, payables and debt (monetary assets and liabilities) that are affected by Mexican currency exchange rate movements for Mexican income tax purposes. They also have deferred income tax assets and liabilities, which are significant, denominated in the Mexican peso that must be translated to U.S. dollars for financial reporting purposes. In addition, monetary assets and liabilities and certain nonmonetary assets and liabilities are adjusted for Mexican inflation for Mexican income tax purposes. As a result, fluctuations in both the currency exchange rate for the Mexican peso against the U.S. dollar and Mexican inflation may expose us to fluctuations in income tax expense, other income (expense), net, and equity earnings. We may use foreign currency derivatives as a means to help manage exposure to the currency exchange rate on our monetary assets and liabilities, and this derivative activity impacts other income (expense), net. However, we generally do not hedge our deferred income tax assets and liabilities, which makes us susceptible to volatility in income tax expense caused by exchange rate fluctuations and inflation.

We also utilized foreign currency derivatives in 2020 to hedge exposure to fluctuations in the Peruvian sol and Chilean peso related to the sales of our operations in Peru and Chile in discontinued operations.

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CAPITAL RESOURCES AND LIQUIDITY

# OVERVIEW

# Sempra

# Liquidity

We expect to meet our cash requirements through cash flows from operations, unrestricted cash and cash equivalents, borrowings under or supported by our credit facilities, other incurrences of debt including issuing debt securities and obtaining term loans, distributions from our equity method investments, project financing and funding from minority interest owners. We believe that these cash flow sources, combined with available funds, will be adequate to fund our operations in both the short-term and long-term, including to:

- finance capital expenditures
- repay debt
- fund dividends
- fund contractual and other obligations and otherwise meet liquidity requirements
- fund capital contribution requirements
- fund new business or asset acquisitions or start-ups

Sempra, SDG&E and SoCalGas currently have reasonable access to the money markets and capital markets and are not currently constrained in their ability to borrow money at market rates from commercial banks, under existing revolving credit facilities, through public offerings registered with the SEC, or through private placements of debt supported by our revolving credit facilities in the case of commercial paper. However, our ability to access the money markets and capital markets or obtain credit from commercial banks outside of our committed revolving credit facilities could become materially constrained if changing economic conditions or disruptions to or volatility in the money markets and capital markets worsen. These sources of funding have become less attractive due to the recent rise in both short-term and long-term interest rates. In addition, our financing activities and actions by credit rating agencies, as well as many other factors, could negatively affect the availability and cost of both short-term and long-term financing. Also, cash flows from operations may be impacted by the timing of commencement and completion, and potentially cost overruns, of large projects and other material events, such as the settlement of material litigation. If cash flows from operations were to be significantly reduced or we were unable to borrow under acceptable terms, we would likely first reduce or postpone discretionary capital expenditures (not related to safety/reliability) and investments in new businesses. We monitor our ability to finance the needs of our operating, investing and financing activities in a manner consistent with our goal to maintain our investment-grade credit ratings.

# Available Funds

Our committed lines of credit provide liquidity and support commercial paper. Sempra, SDG&E and SoCalGas each have five-year credit agreements expiring in 2027 and Sempra Infrastructure has a three-year credit agreement expiring in 2024, committed lines of credit expiring in 2023 and 2024, and an uncommitted revolving credit facility expiring in 2023.

# AVAILABLE FUNDS AT DECEMBER 31, 2022

(Dollars in millions)

|  | Sempra | SDG&E | SoCalGas |
| --- | --- | --- | --- |
| Unrestricted cash and cash equivalents (1) | $370 | $7 | $21 |
| Available unused credit (2) | 7,348 | 1,295 | 1,100 |

(1) Amounts at Sempra include $92 held in non-U.S. jurisdictions. We discuss repatriation in Note 8 of the Notes to Consolidated Financial Statements.

(2) Available unused credit is the total available on committed and uncommitted lines of credit that we discuss in Note 7 of the Notes to Consolidated Financial Statements. Because our commercial paper programs are supported by these lines, we reflect the amount of commercial paper outstanding as a reduction to the available unused credit.

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### Short-Term Borrowings

We use short-term debt primarily to meet liquidity requirements, fund shareholder dividends, and temporarily finance capital expenditures, acquisitions or start-ups. SDG&E and SoCalGas use short-term debt primarily to meet working capital needs or to help fund event-specific costs, such as payments made by SoCalGas relating to litigation and regulatory matters pertaining to the Leak. Commercial paper, lines of credit and term loans were our primary sources of short-term debt funding in 2022.

We discuss our short-term debt activities in Note 7 of the Notes to Consolidated Financial Statements and below in “Sources and Uses of Cash.”

The following table shows selected statistics for our commercial paper borrowings.

#### COMMERCIAL PAPER STATISTICS

(Dollars in millions)

|  | Sempra |  | SDG&E |  | SoCalGas |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | December 31, |  | December 31, |  | December 31, |  |
|  | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
| Amount outstanding at period end | $759 | $2,026 | $205 | $401 | $100 | $385 |
| Weighted-average interest rate at period end | 4.75% | 0.34% | 4.79% | 0.47% | 4.41% | 0.21% |
| Daily weighted-average outstanding balance | $905 | $1,107 | $59 | $168 | $145 | $118 |
| Daily weighted-average yield | 1.58% | 0.16% | 0.28% | 0.12% | 1.16% | 0.07% |
| Maximum daily amount outstanding | $2,364 | $2,824 | $401 | $473 | $607 | $580 |

### Long-Term Debt Activities

Significant issuances of and payments on long-term debt in 2022 included the following:

#### LONG-TERM DEBT ISSUANCES AND PAYMENTS

(Dollars in millions)

| Issuances: | Amount at issuance | Maturity |
| --- | --- | --- |
| Sempra 3.30% fixed rate notes | $750 | 2025 |
| Sempra 3.70% fixed rate notes | 500 | 2029 |
| SDG&E variable rate term loan | 400 | 2024 |
| SDG&E 3.00% first mortgage bonds | 500 | 2032 |
| SDG&E 3.70% first mortgage bonds | 500 | 2052 |
| SoCalGas 2.95% fixed rate notes | 700 | 2027 |
| SoCalGas 6.35% first mortgage bonds | 600 | 2052 |
| Sempra Infrastructure variable rate notes | 298 | 2025 |
| Sempra Infrastructure 3.25% fixed rate notes | 400 | 2032 |

| Payments: | Payments | Maturity |
| --- | --- | --- |
| SDG&E 1.914% amortizing first mortgage bonds | $17 | 2022 |
| Sempra Infrastructure amortizing variable rate notes (5.13% after floating-to-fixed rate swaps) | 162 | 2022-2026 |
| Sempra Infrastructure variable rate notes | 64 | 2025 |

At December 31, 2022, Sempra expects to make interest payments on long-term debt totaling $17.3 billion, of which $1.0 billion is expected to be paid in 2023 and $16.3 billion is expected to be paid in subsequent years through 2079. At December 31, 2022, SDG&E expects to make interest payments on long-term debt totaling $4.9 billion, of which $298 million is expected to be paid in 2023 and $4.6 billion is expected to be paid in subsequent years through 2052. At December 31, 2022, SoCalGas expects to make interest payments on long-term debt totaling $3.9 billion, of which $255 million is expected to be paid in 2023 and $3.6 billion is expected to be paid in subsequent years through 2052. We calculate expected interest payments using the stated interest rate for fixed-rate obligations, including floating-to-fixed interest rate swaps and cross-currency swaps. We calculated expected interest payments for variable-rate obligations based on forecasted rates in effect at December 31, 2022.

We discuss our long-term debt activities, including the use of proceeds on long-term debt issuances, and maturities in Note 7 of the Notes to Consolidated Financial Statements.

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## Credit Ratings

The credit ratings of Sempra, SDG&E and SoCalGas remained at investment grade levels in 2022.

# CREDIT RATINGS AT DECEMBER 31, 2022

|  | Sempra | SDG&E | SoCalGas |
| --- | --- | --- | --- |
| Moody's | Baa2 with a stable outlook | A3 with a stable outlook | A2 with a stable outlook |
| S&P | BBB+ with a negative outlook | BBB+ with a stable outlook | A with a negative outlook |
| Fitch | BBB+ with a stable outlook | BBB+ with a stable outlook | A with a stable outlook |

A downgrade of Sempra's or any of its subsidiaries' credit ratings or rating outlooks may, depending on the severity, result in the imposition of financial or other burdensome covenants or a requirement for collateral to be posted in the case of certain financing arrangements, and may materially and adversely affect the market prices of their equity and debt securities, the rates at which borrowings are made and commercial paper is issued, and the various fees on their outstanding credit facilities. This could make it more costly for Sempra, SDG&E, SoCalGas and Sempra's other subsidiaries to issue debt securities, to borrow under credit facilities and to raise certain other types of financing. We provide additional information about our credit ratings at Sempra, SDG&E and SoCalGas in "Part I - Item 1A. Risk Factors."

Sempra has agreed that, if the credit rating of Oncor's senior secured debt by any of the Rating Agencies falls below BBB (or the equivalent), Oncor will suspend dividends and other distributions (except for contractual tax payments), unless otherwise allowed by the PUCT. Oncor's senior secured debt was rated A2, A+ and A at Moody's, S&P and Fitch, respectively, at December 31, 2022.

Sempra, SDG&E and SoCalGas have committed lines of credit to provide liquidity and to support commercial paper. Borrowings under these facilities bear interest at benchmark rates plus a margin that varies with market index rates and each borrower's credit rating. Each facility also requires a commitment fee on available unused credit that may be impacted by each borrower's credit rating. For example, assuming a one-notch downgrade:

- If Sempra were to experience a ratings downgrade from its current level, the rate at which borrowings bear interest would increase by 25 bps. The commitment fee on available unused credit would also increase 5 bps.
- If SDG&E were to experience a ratings downgrade from its current level, the rate at which borrowings bear interest would increase by 12.5 bps. The commitment fee on available unused credit would also increase 5 bps.
- If SoCalGas were to experience a ratings downgrade from its current level, the rate at which borrowings bear interest would increase by 12.5 bps. The commitment fee on available unused credit would also increase 2.5 bps.

Sempra's, SDG&E's and SoCalGas' credit ratings also may affect their respective credit limits related to derivative instruments, as we discuss in Note 11 of the Notes to Consolidated Financial Statements.

## Loans to/from Affiliates

At December 31, 2022, Sempra had $301 million in loans due to unconsolidated affiliates. In July 2022, a $626 million loan due to Sempra from an unconsolidated affiliate was paid in full, prior to its March 2023 maturity date.

## Postretirement Benefits

Sempra, SDG&E and SoCalGas have significant investments in several trusts to provide for future payments of pensions and PBOP. The trusts' ability to make ongoing required benefit payments has not been materially adversely affected by changes in asset values, which are dependent on market fluctuations, contributions and withdrawals. However, changes in asset values or other factors in future periods, such as changes to discount rates, assumed rates of return, mortality tables and regulations, may impact funding requirements for pension and PBOP plans. Additionally, contributions to our plans are based on our funding policy, which generally limits payments from exceeding plan assets of 110% of the projected benefit obligation, which are subject to maximum income tax deduction limitations. Sempra, SDG&E and SoCalGas expect to contribute $238 million, $54 million and $154 million, respectively, to pension and PBOP plans in 2023 and $1.8 billion, $459 million and $1.1 billion, respectively, in the nine years thereafter. At SDG&E and SoCalGas, funding requirements are generally recoverable in rates. We discuss our employee benefit plans and our expected contributions to those plans in Note 9 of the Notes to Consolidated Financial Statements.

## Inflation Reduction Act

The IRA was signed into law in August 2022. The IRA includes tax credits and other incentives for energy and climate initiatives and introduces a 15% corporate alternative minimum tax on adjusted financial statement income for tax years beginning after

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December 31, 2022. We continue to assess the impacts of the IRA as the U.S. Department of the Treasury and the IRS issue guidance on tax implementation, and the EPA and DOE issue guidance on energy and climate initiatives. We do not expect the IRA to have a material adverse impact on Sempra's, SDG&E's or SoCalGas' results of operations, financial condition and/or cash flows.

### ***Sempra California***

SDG&E's and SoCalGas' operations have historically provided relatively stable earnings and liquidity. Their future performance and liquidity will depend primarily on the ratemaking and regulatory process, environmental regulations, economic conditions, actions by the California legislature, litigation and the changing energy marketplace, as well as other matters described in this report. SDG&E and SoCalGas expect that the available unused funds from their credit facilities described above, which also supports their commercial paper programs, cash flows from operations, and other incurrences of debt including issuing debt securities and obtaining term loans will continue to be adequate to fund their respective current operations and planned capital expenditures. Additionally, as we discuss below, Sempra elected to make equity contributions to SoCalGas of $800 million in September 2021, $150 million in June 2022 and $500 million in August 2022. These voluntary equity contributions were intended to assist SoCalGas in maintaining its authorized capital structure. SDG&E and SoCalGas manage their capital structures and pay dividends when appropriate and as approved by their respective boards of directors.

As we discuss in Note 4 of the Notes to Consolidated Financial Statements, changes in balancing accounts for significant costs at SDG&E and SoCalGas, particularly a change between over- and undercollected status, may have a significant impact on cash flows. These changes generally represent the difference between when costs are incurred and when they are ultimately recovered or refunded in rates through billings to customers.

### ***COVID-19 Pandemic Protections***

SDG&E and SoCalGas are continuing to monitor the impacts of the COVID-19 pandemic on cash flows and results of operations. Some customers have experienced and continue to experience a diminished ability to pay their electric or gas bills, leading to slower payments and higher levels of nonpayment than has been the case historically. These impacts could become significant and could require modifications to our financing plans.

In connection with the COVID-19 pandemic and at the direction of the CPUC, SDG&E and SoCalGas implemented certain measures to assist customers, including automatically enrolling residential and small business customers with past-due balances in long-term repayment plans.

In 2021, SDG&E and SoCalGas applied, on behalf of their customers, for financial assistance from the California Department of Community Services and Development under the 2021 California Arrearage Payment Program, which provided funds of $63 million and $79 million for SDG&E and SoCalGas, respectively. In the first quarter of 2022, SDG&E and SoCalGas received and applied the amounts directly to eligible customer accounts to reduce past due balances. In June 2022, AB 205 was approved establishing, among other things, the 2022 California Arrearage Payment Program. In December 2022, SDG&E and SoCalGas received funding of $51 million and $59 million, respectively, related to this program and, in January 2023, applied the amounts directly to eligible customer accounts to reduce past due balances.

### ***SDG&E***

#### ***Wildfire Fund***

The carrying value of SDG&E's Wildfire Fund asset totaled $332 million at December 31, 2022. We describe the Wildfire Legislation and SDG&E's commitment to make annual shareholder contributions to the Wildfire Fund through 2028 in Note 1 of the Notes to Consolidated Financial Statements.

SDG&E is exposed to the risk that the participating California electric IOUs may incur third-party wildfire costs for which they will seek recovery from the Wildfire Fund with respect to wildfires that have occurred since enactment of the Wildfire Legislation in July 2019. In such a situation, SDG&E may recognize a reduction of its Wildfire Fund asset and record an impairment charge against earnings when available coverage is reduced due to recoverable claims from any of the participating IOUs. PG&E has indicated that it will seek reimbursement from the Wildfire Fund for losses associated with the Dixie Fire, which burned from July 2021 through October 2021 and was reported to be the largest single wildfire (measured by acres burned) in California history. If any California electric IOU's equipment is determined to be a cause of a fire, it could have a material adverse effect on SDG&E's and Sempra's financial condition and results of operations up to the carrying value of our Wildfire Fund asset, with additional potential material exposure if SDG&E's equipment is determined to be a cause of a fire. In addition, the Wildfire Fund could be completely exhausted due to fires in the other California electric IOUs' service territories, by fires in SDG&E's service territory or by a combination thereof. In the event that the Wildfire Fund is materially diminished, exhausted or terminated, SDG&E will lose

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the protection afforded by the Wildfire Fund, and as a consequence, a fire in SDG&E's service territory could have a material adverse effect on SDG&E's and Sempra's results of operations, financial condition, cash flows and/or prospects.

#### *Wildfire Mitigation Cost Recovery Mechanism*

In July 2021, SDG&E filed a request with the CPUC to establish an interim cost recovery mechanism that would recover 50% of its costs associated with implementation of its wildfire mitigation plan. The proposed recovery would be incremental to wildfire costs currently authorized in its GRC and subject to reasonableness review. In May 2022, the CPUC issued a final decision denying SDG&E's request and directing SDG&E to file for the review and recovery of its wildfire mitigation plan costs through its next GRC or a separate application. SDG&E expects to submit separate requests in its GRC for review and recovery of its wildfire mitigation plan costs in mid-2023 for costs incurred from 2019 through 2022 and in mid-2024 for costs incurred in 2023.

#### *SONGS Decommissioning*

SDG&E has significant investments in the SONGS NDT to provide for future payments of nuclear decommissioning. The NDT's ability to make ongoing required payments have not been materially or adversely affected by changes in asset values, which are dependent on market fluctuations, contributions and withdrawals. However, asset values could be materially and adversely affected by future activity in the equity and fixed income markets, and changes in the estimated decommissioning costs, or in the assumptions and judgments made by management underlying these estimates, could cause revisions to the estimated total cost associated with retiring the assets. Funding requirements are generally recoverable in rates. We discuss SDG&E's NDT and its expected SONGS decommissioning payments in Note 15 of the Notes to Consolidated Financial Statements.

#### *Off-Balance Sheet Arrangements*

SDG&E has entered into PPAs and tolling agreements that are variable interests in unconsolidated entities. We discuss variable interests in Note 1 of the Notes to Consolidated Financial Statements.

#### *SoCalGas*

SoCalGas' future performance and liquidity may be impacted by the resolution of legal, regulatory and other matters pertaining to the Leak, which we discuss below, in Note 16 of the Notes to Consolidated Financial Statements and in 'Part I - Item 1A. Risk Factors.'

#### *Aliso Canyon Natural Gas Storage Facility Gas Leak*

From October 23, 2015 through February 11, 2016, SoCalGas experienced the Leak.

**Cost Estimate, Insurance and Accounting and Other Impacts.** At December 31, 2022, SoCalGas estimates certain costs related to the Leak are $3,486 million (the cost estimate), including $1,279 million of costs recovered from insurance. Other than insurance for directors' and officers' liability, we have exhausted all of our insurance for this matter. We continue to pursue other sources of insurance coverage for costs related to this matter, but we may not be successful in obtaining additional insurance recovery for any of these costs. At December 31, 2022, $129 million of the cost estimate is accrued in Reserve for Aliso Canyon Costs and $4 million of the cost estimate is accrued in Deferred Credits and Other on SoCalGas' and Sempra's Consolidated Balance Sheets.

Sempra elected to make equity contributions to SoCalGas of $800 million in September 2021, $150 million in June 2022 and $500 million in August 2022. These voluntary equity contributions were intended to assist SoCalGas in maintaining its authorized capital structure. SoCalGas paid $1.79 billion in 2022 related to the settlement of the Individual Plaintiff Litigation. SoCalGas funded the settlement payment using a combination of equity contributions from Sempra, short-term debt and cash on hand.

Except for the amounts paid or estimated to settle certain legal and regulatory matters, the cost estimate does not include any amounts necessary to resolve the matters that we describe in 'Litigation - Unresolved' and 'Regulatory Proceedings - Unresolved' in Note 16 of the Notes to Consolidated Financial Statements, threatened litigation, other potential litigation or other costs, in each case to the extent it is not possible to predict at this time the outcome of these actions or reasonably estimate the possible costs or a range of possible costs. Further, we are not able to reasonably estimate the possible loss or a range of possible losses in excess of the amounts accrued. The costs or losses not included in the cost estimate could be significant.

An adverse outcome with respect to (i) the litigation described in Note 16 of the Notes to Consolidated Financial Statements under 'Litigation - Unresolved,' (ii) threatened or other potential litigation related to the Leak, (iii) the Leak OII that we discuss in Note 16 of the Notes to Consolidated Financial Statements, if approval of the negotiated settlement is not obtained, or (iv) the unresolved proceeding pursuant to the SB 380 OII that we discuss below, could have a material adverse effect on SoCalGas' and Sempra's results of operations, financial condition, cash flows and/or prospects.

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**Natural Gas Storage Operations and Reliability.** Natural gas withdrawn from storage is important for service reliability during peak demand periods, including peak electric generation needs in the summer and consumer heating needs in the winter. The Aliso Canyon natural gas storage facility is the largest SoCalGas storage facility and an important component of SoCalGas' delivery system. As a result of the Leak, the CPUC has issued a series of directives to SoCalGas specifying the range of working gas to be maintained in the Aliso Canyon natural gas storage facility as well as protocols for the withdrawal of gas, to support safe and reliable natural gas service. In February 2017, the CPUC opened a proceeding pursuant to the SB 380 OII to determine the feasibility of minimizing or eliminating the use of the Aliso Canyon natural gas storage facility while still maintaining energy and electric reliability for the region, including considering alternative means for meeting or avoiding the demand for the facility's services if it were eliminated.

At December 31, 2022, the Aliso Canyon natural gas storage facility had a net book value of $958 million. If the Aliso Canyon natural gas storage facility were to be permanently closed or if future cash flows from its operation were otherwise insufficient to recover its carrying value, we may record an impairment of the facility, which could be material, or we could incur materially higher than expected operating costs and/or be required to make material additional capital expenditures (any or all of which may not be recoverable in rates), and natural gas reliability and electric generation could be jeopardized.

### ***Sempra Texas Utilities***

Oncor relies on external financing as a significant source of liquidity for its capital requirements. In the event that Oncor fails to meet its capital requirements, access sufficient capital, or raise capital on favorable terms to finance its ongoing needs, we may elect to make additional capital contributions to Oncor (as our commitments to the PUCT prohibit us from making loans to Oncor), which could be substantial and reduce the cash available to us for other purposes, increase our indebtedness and ultimately materially adversely affect our results of operations, financial condition, cash flows and/or prospects. Oncor's ability to make distributions may be limited by factors such as its credit ratings, regulatory capital requirements, increases in its capital plan, debt-to-equity ratio approved by the PUCT and other restrictions and considerations. In addition, Oncor will not make distributions if a majority of Oncor's independent directors or any minority member director determines it is in the best interests of Oncor to retain such amounts to meet expected future requirements.

### ***Off-Balance Sheet Arrangement***

Our investment in Oncor Holdings is a variable interest in an unconsolidated entity. We discuss variable interests in Note 1 of the Notes to Consolidated Financial Statements.

### ***Sempra Infrastructure***

Sempra Infrastructure expects to fund capital expenditures, investments and operations in part with available funds, including credit facilities, and cash flows from operations of the Sempra Infrastructure businesses. We expect Sempra Infrastructure will require additional funding for the development and expansion of its portfolio of projects, which may be financed through a combination of funding from the parent and minority interest owners, bank financing, issuances of debt, project financing and partnering in JVs. We describe Sempra Infrastructure's commitments related to construction and development projects in Note 16 of the Notes to Consolidated Financial Statements.

In June 2022, we completed the sale of a 10% NCI in SI Partners to ADIA for cash proceeds of $1.7 billion. We used a portion of the proceeds from the sale to ADIA to repay commercial paper borrowings used to repurchase $750 million in shares of our common stock ($300 million of which was completed in the fourth quarter of 2021, $200 million of which was completed in the first quarter of 2022 and $250 million of which was completed in the second quarter of 2022), and we used the remaining proceeds to help fund capital expenditures at Sempra California and Sempra Texas Utilities and to further strengthen our balance sheet.

Following the closing of the ADIA transaction, Sempra, KKR and ADIA directly or indirectly own a 70%, 20%, and 10% interest, respectively, in SI Partners. The sale of NCI in SI Partners to ADIA has reduced our ownership interest in SI Partners and requires us to involve a new minority partner in making certain business decisions. Moreover, the decrease in our ownership of SI Partners also decreases our share of the cash flows, profits and other benefits these businesses currently or may in the future produce.

In 2022, SI Partners distributed $237 million to its minority shareholders.

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## *LNG and Net-Zero Solutions*

**Cameron LNG Phase 2 Project.** Cameron LNG JV is developing a proposed expansion project that would add one liquefaction train with an expected maximum production capacity of approximately 6.75 Mtpa and would increase the production capacity of the existing three trains at the Cameron LNG Phase 1 facility by up to approximately 1 Mtpa through debottlenecking activities. The Cameron LNG JV site can accommodate additional trains beyond the proposed Cameron LNG Phase 2 project.

Cameron LNG JV previously received major permits and FTA and non-FTA approvals associated with the potential expansion that included up to two additional liquefaction trains and up to two additional full containment LNG storage tanks. In January 2022, Cameron LNG JV filed an amendment, subject to approval by the FERC, to modify the permits to allow the use of electric drives, instead of gas turbine drives, which would reduce overall emissions. The amendment, if approved, would also change the design from a two-train gas turbine expansion to a one-train electric drive expansion along with other design enhancements that, together, are expected to result in a more cost-effective and efficient facility, while also reducing overall GHG emissions.

Sempra Infrastructure and the other Cameron LNG JV members, namely affiliates of TotalEnergies SE, Mitsui & Co., Ltd. and Japan LNG Investment, LLC, a company jointly owned by Mitsubishi Corporation and Nippon Yusen Kabushiki Kaisha, have entered into an HOA for the potential development of the Cameron LNG Phase 2 project. The HOA provides a commercial framework for the proposed project, including the contemplated allocation to Sempra Infrastructure of 50.2% of the fourth train production capacity and 25% of the debottlenecking capacity from the project under tolling agreements. The HOA contemplates the remaining capacity to be allocated equally to the existing Cameron LNG Phase 1 facility customers. Sempra Infrastructure plans to sell the LNG corresponding to its allocated capacity from the proposed Cameron LNG Phase 2 project under long-term SPAs prior to making a final investment decision. The HOA is a non-binding arrangement. The ultimate participation in and offtake by Sempra Infrastructure, TotalEnergies SE, Mitsui & Co., Ltd. and Japan LNG Investment, LLC remain subject to negotiation and finalization of definitive agreements, among other factors, and the HOA does not commit any party to enter into definitive agreements with respect to the proposed Cameron LNG Phase 2 project.

Sempra Infrastructure, the other Cameron LNG JV members, and Cameron LNG JV have entered into a Phase 2 Project Development Agreement under which Sempra Infrastructure, subject to certain conditions and ongoing approvals by the Cameron LNG JV board, will manage and lead the Cameron LNG Phase 2 project development work until Cameron LNG JV makes a final investment decision.

Cameron LNG JV, upon the unanimous approval of the Cameron LNG JV board, awarded two FEED contracts, one to Bechtel and the other to a joint venture between JGC America Inc. and Zachry Industrial Inc. At the conclusion of the resulting competitive FEED process, we expect to select one contractor to be the EPC contractor for the proposed Cameron LNG Phase 2 project.

In connection with the execution of the Phase 2 Project Development Agreement and the award of the FEED contracts, the Cameron LNG JV board unanimously approved an expansion development budget to fund, subject to the terms of the Phase 2 Project Development Agreement, development work necessary to prepare for a potential final investment decision.

Cameron LNG JV has entered into an MOU with Entergy Louisiana, LLC, a subsidiary of Entergy Corporation, to negotiate the terms and conditions for a new electric service agreement intended to reduce Cameron LNG JV's scope 2 emissions from the electricity it purchases from Entergy Louisiana, LLC. The MOU sets forth a framework for Entergy Louisiana, LLC and Cameron LNG JV to finalize and sign a minimum 20-year agreement for the procurement of new renewable generation resources in Louisiana, subject to the ultimate approval of the Louisiana Public Service Commission and Cameron LNG JV. The MOU is a non-binding arrangement. The ultimate arrangement between Cameron LNG JV and Entergy Louisiana, LLC remains subject to negotiation and finalization of definitive agreements, among other factors, and the MOU does not commit any party to enter into definitive agreements with respect to the proposed electric services agreement.

Sempra Infrastructure has entered into a non-binding HOA for the negotiation and potential finalization of a definitive 20-year SPA with ORLEN for 2 Mtpa of LNG offtake from the proposed Cameron LNG Phase 2 project. Sempra Infrastructure also entered into a non-binding HOA for the negotiation and potential finalization of definitive SPAs with Williams for two 20-year terms for approximately 3 Mtpa of LNG offtake in the aggregate from the PA LNG Phase 2 project and Cameron LNG Phase 2 project that are under development, and a separate natural gas sales agreement for approximately 0.5 Bcf per day to be delivered as feed gas supply for the proposed PA LNG projects and Cameron LNG Phase 2 project. In addition, the parties anticipate forming a strategic JV to own, expand and operate the existing Cameron Interstate Pipeline that we expect will deliver natural gas to the proposed Cameron LNG Phase 2 project and the proposed Port Arthur Pipeline Louisiana Connector that we expect will deliver natural gas to the proposed PA LNG projects. The ultimate participation in and offtake from the proposed projects remain subject to negotiation and finalization of definitive agreements, among other factors, and the HOAs do not commit any party to enter into definitive agreements with respect to any of the applicable proposed projects.

2022 Form 10-K | 77

Expansion of the Cameron LNG Phase 1 facility beyond the first three trains is subject to certain restrictions and conditions under the JV project financing agreements, including among others, scope restrictions on expansion of the project unless appropriate prior consent is obtained from the existing project lenders. Under the Cameron LNG JV equity agreements, the expansion of the project requires the unanimous consent of all the partners, including with respect to the equity investment obligation of each partner. Working under the framework established in the Phase 2 Project Development Agreement, Sempra Infrastructure is targeting completing the FEED work in the summer of 2023 and expects to be in a position to make a final investment decision shortly thereafter. The timing of when or if Cameron LNG JV will receive approval from the FERC to amend its permits and from the existing project lenders to conduct the expansion under its financing agreements is uncertain, and there is no assurance that Sempra Infrastructure will complete the necessary development work or that the Cameron LNG JV members will unanimously agree in a timely manner or at all on making a final investment decision, which, if not accomplished, would materially and adversely impact the development of the Cameron LNG Phase 2 project.

The development of the proposed Cameron LNG Phase 2 project is subject to numerous other risks and uncertainties, including securing binding customer commitments; reaching unanimous agreement with our partners to proceed; obtaining and maintaining a number of permits and regulatory approvals, including approval from the FERC for amendments to existing permits; securing certain consents under the existing financing agreements and securing sufficient new financing; negotiating and completing suitable commercial agreements for the project, including a definitive EPC contract and definitive tolling and governance agreements; reaching a positive final investment decision; and other factors associated with this potential investment. For a discussion of these risks, see “Part I - Item 1A. Risk Factors.”

**ECA LNG Phase 1 Project.** SI Partners owns an 83.4% interest in ECA LNG Phase 1, and an affiliate of TotalEnergies SE owns the remaining 16.6% interest. ECA LNG Phase 1 is constructing a one-train natural gas liquefaction facility at the site of Sempra Infrastructure’s existing ECA Regas Facility with a nameplate capacity of 3.25 Mtpa and an initial offtake capacity of 2.5 Mtpa. We do not expect the construction or operation of the ECA LNG Phase 1 project to disrupt operations at the ECA Regas Facility, and have planned measures to limit disruption of operations should any arise. We expect the ECA LNG Phase 1 project to commence commercial operations in the summer of 2025.

We received authorizations from the DOE to export U.S.-produced natural gas to Mexico and to re-export LNG to non-FTA countries from the ECA LNG Phase 1 project. ECA LNG Phase 1 has definitive 20-year SPAs with an affiliate of TotalEnergies SE for approximately 1.7 Mtpa of LNG and with Mitsui & Co., Ltd. for approximately 0.8 Mtpa of LNG.

In February 2020, we entered into an EPC contract with Technip Energies for the ECA LNG Phase 1 project. Since reaching a positive final investment decision with respect to the project in November 2020, Technip Energies has been working to construct the ECA LNG Phase 1 project. We estimate the total price of the EPC contract to be approximately $1.5 billion, with capital expenditures approximating $2.0 billion including capitalized interest and project contingency. The actual cost of the EPC contract and the actual amount of these capital expenditures may differ substantially from our estimates.

ECA LNG Phase 1 has a five-year loan agreement with a syndicate of seven external lenders that matures in December 2025 for an aggregate principal amount of up to $1.3 billion, of which $575 million was outstanding at December 31, 2022. Proceeds from the loan are being used to finance the cost of construction of the ECA LNG Phase 1 project. We discuss the details of this loan in Note 7 of the Notes to Consolidated Financial Statements.

The construction of the ECA LNG Phase 1 project is subject to numerous risks and uncertainties, including maintaining permits and regulatory approvals; construction delays; securing and maintaining commercial arrangements, such as gas supply and transportation agreements; the impact of recent and proposed changes to the law in Mexico; and other factors associated with the project and its construction. In addition, as we discuss in Note 16 of the Notes to Consolidated Financial Statements, an unfavorable decision on certain property disputes or permit challenges could materially adversely affect construction of this project and Sempra’s results of operations, financial condition, cash flows and/or prospects, including the impairment of all or a substantial portion of the capital costs invested in the project to date. For a discussion of these risks, see “Part I - Item 1A. Risk Factors.”

**ECA LNG Phase 2 Project.** Sempra Infrastructure is developing a second, large-scale natural gas liquefaction project at the site of its existing ECA Regas Facility. We expect the proposed ECA LNG Phase 2 project to be comprised of two trains and one LNG storage tank and produce approximately 12 Mtpa of export capacity. We expect that construction of the proposed ECA LNG Phase 2 project would conflict with the current operations at the ECA Regas Facility, which currently has long-term regasification contracts for 100% of the regasification facility’s capacity through 2028. This makes the decisions on whether, when and how to pursue the proposed ECA LNG Phase 2 project dependent in part on whether the investment in a large-scale liquefaction facility would, over the long term, be more beneficial financially than continuing to supply regasification services under our existing contracts.

2022 Form 10-K | 78

We received authorizations from the DOE to export U.S.-produced natural gas to Mexico and to re-export LNG to non-FTA countries from the proposed ECA LNG Phase 2 project.

We have MOUs and/or HOAs with Mitsui & Co., Ltd., TotalEnergies SE, and ConocoPhillips that provide a framework for their potential offtake of LNG from the proposed ECA LNG Phase 2 project and potential acquisition of an equity interest in ECA LNG Phase 2. These MOUs and HOAs are non-binding arrangements. The ultimate participation in and offtake by these parties remains subject to negotiation and finalization of definitive agreements, among other factors, and the MOUs and HOAs do not commit any party to enter into definitive agreements with respect to the proposed ECA LNG Phase 2 project.

Development of the ECA LNG Phase 2 project is subject to numerous risks and uncertainties, including obtaining binding customer commitments; the receipt of a number of permits and regulatory approvals; obtaining financing; negotiating and completing suitable commercial agreements, including a definitive EPC contract, equity acquisition and governance agreements, LNG sales agreements and gas supply and transportation agreements; reaching a positive final investment decision; the impact of recent and proposed changes to the law in Mexico; the property disputes and permit challenges that we reference in the ECA LNG Phase 1 project discussion above; and other factors associated with this potential investment.

**PA LNG Phase 1 Project.** Sempra Infrastructure is developing a proposed natural gas liquefaction project on a greenfield site that it owns in the vicinity of Port Arthur, Texas, located along the Sabine-Neches waterway. We are developing the PA LNG Phase 1 project, which we expect will consist of two liquefaction trains, two LNG storage tanks, a marine berth and associated loading facilities and related infrastructure necessary to provide liquefaction services with a nameplate capacity of approximately 13 Mtpa and an initial offtake capacity of approximately 10.5 Mtpa.

In April 2019, the FERC approved the siting, construction and operation of the proposed PA LNG Phase 1 project facilities, along with certain natural gas pipelines, including the Port Arthur Pipeline Louisiana Connector and Texas Connector, that could be used to supply feed gas to the liquefaction facility if and when the project is completed. Sempra Infrastructure received authorizations from the DOE in August 2015 and May 2019 that collectively permit the LNG to be produced from the proposed PA LNG Phase 1 project to be exported to all current and future FTA and non-FTA countries.

Sempra Infrastructure has entered into the following definitive SPAs, each of which is subject to making a positive final investment decision and customary closing conditions, for LNG offtake from the proposed PA LNG Phase 1 project with:

- ConocoPhillips for a 20-year term for 5 Mtpa of LNG. In addition, the parties entered into an equity purchase and sale agreement whereby ConocoPhillips will acquire a 30% ownership interest in the proposed PA LNG Phase 1 project, and a natural gas supply management agreement whereby ConocoPhillips will manage the feed gas supply requirements for the proposed facility.
- RWE Supply & Trading GmbH, a subsidiary of RWE AG, for a 15-year term for 2.25 Mtpa of LNG.
- INEOS for a 20-year term for approximately 1.4 Mtpa of LNG.
- ORLEN for a 20-year term for approximately 1 Mtpa of LNG.
- ENGIE S.A. for a 15-year term for approximately 0.875 Mtpa of LNG.

In February 2020, we entered into an EPC contract with Bechtel for the proposed PA LNG Phase 1 project. We have no obligation to move forward under the EPC contract, and we may release Bechtel to perform portions of the work pursuant to limited notices to proceed. In October 2022, we amended and restated the EPC contract to reflect an estimated price of approximately $10.5 billion, subject to adjustments. The contract price is valid until May 8, 2023, subject to certain conditions, including timely issuances of limited notices to proceed and price escalations of up to a maximum of $149 million. Sempra Infrastructure and Bechtel must mutually agree to an adjustment to the contract price if the full notice to proceed is issued after May 8, 2023. Any agreement on such an amendment to the EPC contract by both parties or on favorable terms to Sempra Infrastructure cannot be assured. Either party may terminate the EPC contract if the full notice to proceed is not issued by May 8, 2024.

We are progressing the development of the proposed PA LNG Phase 1 project, and are targeting a final investment decision in the first quarter of 2023 taking into account market demands given the current geopolitical environment, executing definitive agreements for LNG offtake and equity investments, and obtaining financing.

Development of the PA LNG Phase 1 project is subject to a number of risks and uncertainties, including obtaining binding customer commitments; identifying suitable project and equity partners; completing the required commercial agreements, such as equity acquisition and governance agreements and gas supply and transportation agreements; maintaining all necessary permits and approvals; obtaining financing and incentives; reaching a positive final investment decision; and other factors associated with the potential investment. An unfavorable outcome with respect to any of these factors could have a material adverse effect on Sempra's results of operations, financial condition, cash flows and/or prospects, including the impairment of all or a substantial portion of the capital costs invested in the project to date. For a discussion of these risks, see "Part I - Item 1A. Risk Factors."

2022 Form 10-K | 79

**PA LNG Phase 2 Project.** Sempra Infrastructure is developing a second phase of the natural gas liquefaction project that we expect will be a similar size to the proposed PA LNG Phase 1 project. We are progressing the development of the proposed PA LNG Phase 2 project, while continuing to evaluate overall opportunities to develop the entirety of the Port Arthur site as well as potential design changes that could reduce overall emissions, including a facility design utilizing renewable power sourcing and other technological solutions.

In February 2020, Sempra Infrastructure filed an application, subject to approval by the FERC, for the siting, construction and operation of the proposed PA LNG Phase 2 project, including the potential addition of up to two liquefaction trains. Also in February 2020, Sempra Infrastructure filed an application with the DOE to permit LNG produced from the proposed PA LNG Phase 2 project to be exported to all current and future FTA and non-FTA countries.

Sempra Infrastructure has entered into non-binding HOAs for the negotiation and potential finalization of definitive SPAs with INEOS for approximately 0.2 Mtpa of LNG offtake and with Williams, as we discuss above, for LNG offtake, in each case from the proposed PA LNG Phase 2 project. The ultimate participation in and offtake from the proposed project remains subject to negotiation and finalization of definitive agreements, among other factors, and the HOAs do not commit any party to enter into a definitive agreement with respect to the proposed project.

Development of the PA LNG Phase 2 project is subject to a number of risks and uncertainties, including obtaining binding customer commitments; identifying suitable project and equity partners; completing the required commercial agreements, such as equity acquisition and governance agreements, LNG sales agreements and gas supply and transportation agreements; securing and maintaining all necessary permits and approvals, including approval from the FERC; obtaining financing and incentives; reaching a positive final investment decision; and other factors associated with the potential investment. An unfavorable outcome with respect to any of these factors could have a material adverse effect on Sempra's results of operations, financial condition, cash flows and/or prospects, including the impairment of all or a substantial portion of the capital costs invested in the project to date. For a discussion of these risks, see 'Part I - Item 1A. Risk Factors.'

**Vista Pacifico LNG Liquefaction Project.** Sempra Infrastructure is developing Vista Pacifico LNG, a potential natural gas liquefaction, storage, and mid-scale export facility proposed to be located in the vicinity of Topolobampo in Sinaloa, Mexico, under an MOU with the CFE, which was subsequently updated in July 2022, that contemplates the negotiation of definitive agreements that would cover development of Vista Pacifico LNG and the re-routing of a portion of the Guaymas-El Oro segment of the Sonora pipeline and resumption of its operations. The proposed LNG export terminal would be supplied with U.S. natural gas and would use excess natural gas and pipeline capacity on existing pipelines in Mexico with the intent of helping to meet growing demand for natural gas and LNG in the Mexican and Pacific markets.

Sempra Infrastructure received authorization from the DOE to permit the export of U.S.-produced natural gas to Mexico and for LNG produced from the proposed Vista Pacifico LNG facility to be re-exported to all current and future FTA countries in April 2021 and non-FTA countries in December 2022.

In March 2022, TotalEnergies SE and Sempra Infrastructure entered into an MOU that contemplates TotalEnergies SE potentially contracting approximately one-third of the long-term export production of the proposed Vista Pacifico LNG project and potentially participating as a minority partner in the project.

The MOUs related to the proposed Vista Pacifico LNG project are non-binding arrangements. The ultimate participation in and offtake from the proposed project remain subject to negotiation and finalization of definitive agreements, among other factors, and the MOUs do not commit any party to enter into definitive agreements with respect to the project.

The development of the potential Vista Pacifico LNG project is subject to numerous risks and uncertainties, including securing binding customer commitments; obtaining and maintaining a number of permits and regulatory approvals; securing financing; identifying suitable project partners; negotiating and completing suitable commercial agreements, including definitive EPC contracts, equity acquisition and governance agreements, LNG sales agreements and gas supply and transportation agreements; reaching a positive final investment decision; the impact of recent and proposed changes to the law in Mexico; and other factors associated with this potential investment. For a discussion of these risks, see 'Part I - Item 1A. Risk Factors.'

**Hackberry Carbon Sequestration Project.** Sempra Infrastructure is developing the potential Hackberry Carbon Sequestration project near Hackberry, Louisiana. This proposed project under development is designed to permanently sequester carbon dioxide from the Cameron LNG Phase 1 facility and the proposed Cameron LNG Phase 2 project. In the third quarter of 2021, Sempra Infrastructure filed an application with the EPA for a Class VI carbon injection well to advance this project.

In May 2022, Sempra Infrastructure, TotalEnergies SE, Mitsui & Co., Ltd. and Mitsubishi Corporation signed a Participation Agreement for the development of the proposed Hackberry Carbon Sequestration project. The Participation Agreement contemplates that the combined Cameron LNG Phase 1 facility and proposed Cameron LNG Phase 2 project would potentially

2022 Form 10-K | 80

serve as the anchor source for the capture and sequestration of carbon dioxide by the proposed project. It also provides the basis for the parties to enter into a JV with Sempra Infrastructure for the Hackberry Carbon Sequestration project.

The development of the potential Hackberry Carbon Sequestration project is subject to numerous risks and uncertainties, including obtaining required consents from the Cameron LNG JV members, securing binding customer commitments; identifying suitable project partners; obtaining and maintaining a number of permits and regulatory approvals; securing financing; negotiating and completing suitable commercial agreements, including a definitive EPC contract, and equity acquisition and governance agreements; reaching a positive final investment decision; and other factors associated with this potential investment. For a discussion of these risks, see “Part I - Item 1A. Risk Factors.”

**Asset and Supply Optimization.** As we discuss in “Part II - Item 7A. Quantitative and Qualitative Disclosures About Market Risk,” Sempra Infrastructure enters into hedging transactions to help mitigate commodity price risk. Sempra Infrastructure posted net margin of approximately $1.4 billion in 2022 and anticipates that, once the natural gas is sold and derivatives are settled, the previously unrealized gains or losses associated with the economic hedge positions would be realized, with the cash collateral posted largely offset by collections from natural gas sales.

**Off-Balance Sheet Arrangements.** Our investment in Cameron LNG JV is a variable interest in an unconsolidated entity. We discuss variable interests in Note 1 of the Notes to Consolidated Financial Statements.

In June 2021, Sempra provided a promissory note, which constitutes a guarantee, for the benefit of Cameron LNG JV with a maximum exposure to loss of $165 million. The guarantee will terminate upon full repayment of Cameron LNG JV’s debt, scheduled to occur in 2039, or replenishment of the amount withdrawn by Sempra Infrastructure from the SDSRA. We discuss this guarantee in Note 6 of the Notes to Consolidated Financial Statements.

In July 2020, Sempra entered into a Support Agreement, which contains a guarantee and represents a variable interest, for the benefit of CFIN with a maximum exposure to loss of $979 million. The guarantee will terminate upon full repayment of the guaranteed debt by 2039, including repayment following an event in which the guaranteed debt is put to Sempra. We discuss this guarantee in Notes 1, 6 and 9 of the Notes to Consolidated Financial Statements.

#### *Energy Networks*

**Construction Projects.** In 2022, Sempra Infrastructure completed construction of a terminal for the receipt, storage, and delivery of refined products in the vicinity of Puebla. Sempra Infrastructure is also developing terminals for the receipt, storage, and delivery of refined products in the vicinity of Manzanillo and Ensenada.

As part of an industrywide audit and investigative process initiated by the CRE to enforce fuel procurement laws, federal prosecutors conducted inspections at several refined products terminals, including Sempra Infrastructure’s refined products terminal in Puebla, to confirm that the gasoline and/or diesel in storage were legally imported. During the inspection of the Puebla terminal in September 2021, a federal prosecutor took samples from all the train and storage tanks in the terminal and ordered that the facility be temporarily shut down during the pendency of the analysis of the samples and investigation, while leaving the terminal in Sempra Infrastructure’s custody. In November 2021, the CRE notified Sempra Infrastructure that it had started a process to revoke Sempra Infrastructure’s storage permit at the Puebla terminal. In December 2021, Sempra Infrastructure filed its response to the CRE. In May 2022, the CRE provided a final resolution that stopped the permit revocation process. In August 2022, the federal prosecutor concluded the investigation and lifted the order that had temporarily shut down the facility. Commissioning activities were restarted, and commercial operations commenced in October 2022.

Construction of the Topolobampo terminal was substantially completed in May 2022, at which time commissioning activities commenced. Subject to the receipt of pending permits, we expect the Topolobampo terminal will commence commercial operations in the first half of 2023.

The ability to successfully complete major construction projects is subject to a number of risks and uncertainties. For a discussion of these risks and uncertainties, see “Part I - Item 1A. Risk Factors.”

#### *Clean Power*

**Construction Projects.** ESJ completed construction and began commercial operations of a second, 108-MW wind power generation facility in January 2022. This second wind power generation facility is fully contracted by SDG&E under a long-term PPA expiring in 2042.

2022 Form 10-K | 81

# *Legal and Regulatory Matters*

See Note 16 of the Notes to Consolidated Financial Statements and “Part I - Item 1A. Risk Factors” for discussions of the following legal and regulatory matters affecting our operations in Mexico:

# **Energia Costa Azul**

- Land Disputes
- Environmental and Social Impact Permits

One or more unfavorable final decisions on these land disputes or environmental and social impact permit challenges could materially adversely affect our existing natural gas regasification operations and proposed natural gas liquefaction projects at the site of the ECA Regas Facility and have a material adverse effect on Sempra’s business, results of operations, financial condition, cash flows and/or prospects.

# **Sonora Pipeline**

- Guaymas-El Oro Segment

Our investment in the Guaymas-El Oro segment of the Sonora pipeline could be subject to impairment if Sempra Infrastructure and the CFE are unable to re-route a portion of the pipeline (which has not been agreed to by the parties, but is subject to negotiation pursuant to a non-binding MOU and a Shareholders’ Agreement with the CFE that remains subject to regulatory and corporate authorizations) and resume operations or if Sempra Infrastructure terminates the contract and is unable to obtain recovery. Any such occurrence could have a material adverse effect on Sempra’s business, results of operations, financial condition, cash flows and/or prospects.

# **Regulatory and Other Actions by the Mexican Government**

- Amendments to Mexico’s Hydrocarbons Law
- Amendments to Mexico’s Electricity Industry Law

Sempra Infrastructure and other parties affected by these amendments to Mexican law have challenged them by filing amparo and other claims, some of which remain pending. An unfavorable decision on one or more of these amparo or other challenges, the impact of the amendments that have become effective (due to unsuccessful amparo challenges or otherwise), or the possibility of future reforms to the energy industry through additional amendments to Mexican laws, regulations or rules (including through amendments to the constitution) may impact our ability to operate our facilities at existing levels or at all, may result in increased costs for Sempra Infrastructure and its customers, may adversely affect our ability to develop new projects, may result in decreased revenues and cash flows, and may negatively impact our ability to recover the carrying values of our investments in Mexico, any of which may have a material adverse effect on our business, results of operations, financial condition, cash flows and/or prospects.

2022 Form 10-K | 82

## SOURCES AND USES OF CASH

We discuss herein our sources and uses of cash for the year ended December 31, 2022 compared to the year ended December 31, 2021. For a discussion of our sources and uses of cash for the year ended December 31, 2021 compared to the year ended December 31, 2020, refer to “Part II - Item 7. MD&A - Sources and Uses of Cash” in our 2021 annual report on Form 10-K filed with the SEC on February 25, 2022.

The following tables include only significant changes in cash flow activities for each of our registrants.

### CASH FLOWS FROM OPERATING ACTIVITIES

(Dollars in millions)

| Years ended December 31, | Sempra | SDG&E | SoCalGas |
| --- | --- | --- | --- |
| 2022 | $1,142 | $1,729 | $(454) |
| 2021 | 3,842 | 1,376 | 1,033 |
| Change | $(2,700) | $353 | $(1,487) |
| Net decrease in Reserve for Aliso Canyon Costs, current and noncurrent, due to $2,054 higher payments and $1,328 lower accruals | $(3,382) |  | $(3,382) |
| Change in net margin posted | (1,154) | $3 | 29 |
| Change in accounts receivable | (377) | (58) | (129) |
| Change in net undercollected regulatory balancing accounts (including long-term amounts in regulatory assets) | (288) | 62 | (350) |
| Change in GHG allowances, current and noncurrent | (108) | (72) | (27) |
| Change in accounts payable | 167 | 146 | 10 |
| Change in GHG liabilities, current and noncurrent | 171 | 34 | 141 |
| Higher proceeds received from Insurance Receivable for Aliso Canyon | 275 |  | 275 |
| Higher net income, adjusted for noncash items included in earnings | 1,992 | 155 | 1,750 |
| Other | 4 | 83 | 196 |
|  | $(2,700) | $353 | $(1,487) |

### CASH FLOWS FROM INVESTING ACTIVITIES

(Dollars in millions)

| Years ended December 31, | Sempra | SDG&E | SoCalGas |
| --- | --- | --- | --- |
| 2022 | $(5,039) | $(2,412) | $(1,993) |
| 2021 | (5,508) | (2,213) | (1,984) |
| Change | $469 | $(199) | $(9) |
| Higher repayments received from a note receivable from IMG | $588 |  |  |
| Advance to note receivable with KKR in 2021 | 305 |  |  |
| Lower contributions to Oncor Holdings | 225 |  |  |
| Acquisition of 50% interest in ESJ in March 2021 for $79, net of $14 of cash and cash equivalents acquired | 65 |  |  |
| Higher contributions to Cameron LNG JV | (28) |  |  |
| Proceeds received from sale of PXIeE in 2021 | (38) |  |  |
| Increase in capital expenditures | (342) | $(253) | $(9) |
| Distributions from Oncor Holdings in 2021 | (361) |  |  |
| Other | 55 | 54 |  |
|  | $469 | $(199) | $(9) |

2022 Form 10-K | 83

# **CASH FLOWS FROM FINANCING ACTIVITIES**

*(Dollars in millions)*

| Years ended December 31, | Sempra | SDG&E | SoCalGas |
| --- | --- | --- | --- |
| 2022 | $3,779 | $665 | $2,431 |
| 2021 | 1,260 | 600 | 984 |
| Change | $2,519 | $65 | $1,447 |
| Lower (higher) payments on long-term debt and finance leases | $4,147 | $563 | $(3) |
| Higher (lower) issuances of short-term debt with maturities greater than 90 days | 3,640 | (375) | 800 |
| Higher issuances of long-term debt | 2,571 | 650 | 1,295 |
| Proceeds from sale of NCI to ADIA in 2022, net of $12 of transaction costs | 1,719 |  |  |
| Purchases of NCI in 2021 | 224 |  |  |
| Make-whole premium payments related to early redemptions of debt in 2021 | 121 |  |  |
| Lower early termination of interest rate swap | 66 |  |  |
| Lower preferred dividends paid | 55 |  |  |
| Higher contributions from noncontrolling interest | 27 |  |  |
| (Higher) lower common dividends paid | (99) | 200 | 75 |
| Higher repurchases of common stock | (139) |  |  |
| Distributions to SI Partners' minority shareholders in 2022 | (237) |  |  |
| Higher payments for commercial paper and other short-term debt with maturities greater than 90 days | (3,168) | (375) |  |
| Change in borrowings and repayments of short-term debt, net | (3,179) | (597) | (557) |
| Proceeds from sale of NCI to KKR in 2021, net of $170 of transaction costs | (3,199) |  |  |
| Lower equity contributions from Sempra Energy |  |  | (150) |
| Other | (30) | (1) | (13) |
|  | $2,519 | $65 | $1,447 |

# **Expenditures for PP&E**

We invest the majority of our capital expenditures in Sempra California, primarily for transmission and distribution improvements, including pipeline and wildfire safety. The following table summarizes by segment capital expenditures for the last three years.

# **EXPENDITURES FOR PP&E**

*(Dollars in millions)*

|  | Years ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| SDG&E | $2,473 | $2,220 | $1,942 |
| SoCalGas | 1,993 | 1,984 | 1,843 |
| Sempra Infrastructure | 884 | 802 | 879 |
| Parent and other | 7 | 9 | 12 |
| Total | $5,357 | $5,015 | $4,676 |

# **Expenditures for Investments and Acquisitions**

The following table summarizes by segment our investments in entities that we account for under the equity method, as well as asset acquisitions.

# **EXPENDITURES FOR INVESTMENTS AND ACQUISITIONS**

*(Dollars in millions)*

|  | Years ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Sempra Texas Utilities | $346 | $566 | $648 |
| Sempra Infrastructure | 30 | 67 | 4 |
| Total | $376 | $633 | $652 |

2022 Form 10-K | 84

### *Future Capital Expenditures and Investments*

The amounts and timing of capital expenditures and certain investments are generally subject to approvals by various regulatory and other governmental and environmental bodies, including the CPUC, the FERC and the PUCT, and various other factors described in this MD&A and in “Part I - Item 1A. Risk Factors.” In 2023, we expect to make capital expenditures and investments of approximately $5.7 billion (which excludes capital expenditures that will be funded by unconsolidated entities), as summarized by segment in the following table.

#### **FUTURE CAPITAL EXPENDITURES AND INVESTMENTS**

*(Dollars in millions)*

|  | Year ending December 31, 2023 |
| --- | --- |
| SDG&E | $2,300 |
| SoCalGas | 2,100 |
| Sempra Texas Utilities | 300 |
| Sempra Infrastructure | 1,000 |
| Total | $5,700 |

We expect the majority of our capital expenditures and investments in 2023 will relate to transmission and distribution improvements at our regulated public utilities, and construction of the ECA LNG Phase 1 liquefaction project and natural gas pipelines at Sempra Infrastructure.

From 2023 through 2026, and subject to the factors described below, which could cause these estimates to vary substantially, Sempra expects to make aggregate capital expenditures and investments of approximately $18.7 billion (which excludes capital expenditures that will be funded by unconsolidated entities), as follows: $8.9 billion at SDG&E, $7.8 billion at SoCalGas, $0.8 billion at Sempra Texas Utilities and $1.2 billion at Sempra Infrastructure. Capital expenditure amounts include capitalized interest and AFUDC related to debt.

Periodically, we review our construction, investment and financing programs and revise them in response to changes in regulation, economic conditions, competition, customer growth, inflation, customer rates, the cost and availability of capital, and safety and environmental requirements.

Our level of capital expenditures and investments in the next few years may vary substantially and will depend on, among other things, the cost and availability of financing, regulatory approvals, changes in U.S. federal tax law and business opportunities providing desirable rates of return. See “Part I - Item 1A. Risk Factors” for a discussion of other factors that could affect future levels of our capital expenditures and investments. We intend to finance our capital expenditures in a manner that will maintain our investment-grade credit ratings and capital structure, but there is no guarantee that we will be able to do so.

### *Weighted-Average Rate Base*

Rate base is the value of assets on which SDG&E and SoCalGas are permitted to earn a specified rate of return in accordance with rules set by regulatory agencies, including the CPUC and the FERC (for SDG&E), which is calculated using a 13-month average in accordance with CPUC methodology as adopted in rate-setting proceedings. The following table summarizes the weighted-average rate base for SDG&E and SoCalGas for the last three years.

#### **WEIGHTED-AVERAGE RATE BASE**

*(Dollars in millions)*

|  | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| SDG&E | $13,780 | $12,527 | $11,109 |
| SoCalGas | 10,494 | 9,371 | 8,228 |

The increase in weighted-average rate base reflects the significant capital investments that SDG&E and SoCalGas have made in transmission and distribution safety and reliability. We expect the weighted-average rate base to continue to increase in 2023 based on our expected capital investments.

2022 Form 10-K | 85

# *Capital Stock Transactions*

# *Sempra*

Cash provided by issuances of common and preferred stock was:

- $4 million in 2022
- $5 million in 2021
- $902 million in 2020

Cash used for repurchases of common stock was:

- $478 million in 2022
- $339 million in 2021
- $566 million in 2020

**Sempra Common Stock Repurchases.** As we discuss in Note 14 of the Notes to Consolidated Financial Statements, we repurchased 1,472,756 shares of our common stock for $200 million pursuant to an ASR program that was completed in February 2022. We repurchased an additional 1,471,957 shares of our common stock for $250 million pursuant to an ASR program that was completed in April 2022. These share repurchases were funded with commercial paper borrowings that we repaid with a portion of the proceeds received from the sale of NCI in SI Partners to ADIA, which closed in June 2022.

# *Dividends*

# *Sempra*

Sempra paid cash dividends of:

- $1,430 million for common stock and $44 million for preferred stock in 2022
- $1,331 million for common stock and $99 million for preferred stock in 2021
- $1,174 million for common stock and $157 million for preferred stock in 2020

# **DIVIDENDS PER SHARE ON SEMPRA COMMON STOCK**

*(As approved by our board of directors)*

![img-0.jpeg](img-0.jpeg)

2022 Form 10-K | 86

On February 27, 2023, our board of directors declared a dividend of $1.19 per share on our common stock and a dividend of $24.375 per share on our series C preferred stock, both payable on April 15, 2023.

All declarations of dividends on our common stock and preferred stock are made at the discretion of the board of directors. While we view dividends as an integral component of shareholder return, the amount of future dividends will depend on earnings, cash flows, financial and legal requirements, and other relevant factors at that time. As a result, Sempra’s dividends on common stock and preferred stock declared on a historical basis may not be indicative of future declarations.

### *SDG&E*

In 2022, 2021 and 2020, SDG&E paid common stock dividends to Enova and Enova paid corresponding dividends to Sempra of $100 million, $300 million and $200 million, respectively. SDG&E’s dividends on common stock declared on an annual historical basis may not be indicative of future declarations and could be impacted over the next few years in order for SDG&E to maintain its authorized capital structure while managing its capital investment program.

Enova, a wholly owned subsidiary of Sempra, owns all of SDG&E’s outstanding common stock. Accordingly, dividends paid by SDG&E to Enova and dividends paid by Enova to Sempra are eliminated in Sempra’s consolidated financial statements.

### *SoCalGas*

SoCalGas did not declare or pay common stock dividends in 2022. In 2021 and 2020, SoCalGas paid common stock dividends to PE and PE paid corresponding dividends to Sempra of $75 million and $100 million, respectively. SoCalGas’ dividends on common stock declared on an annual historical basis may not be indicative of future declarations and could be impacted over the next few years in order for SoCalGas to maintain its authorized capital structure.

PE, a wholly owned subsidiary of Sempra, owns all of SoCalGas’ outstanding common stock. Accordingly, dividends paid by SoCalGas to PE and dividends paid by PE to Sempra are eliminated in Sempra’s consolidated financial statements.

### *Dividend Restrictions*

The board of directors for each of Sempra, SDG&E and SoCalGas has the discretion to determine whether to declare and, if declared, the amount of any dividends by each such entity. The CPUC’s regulation of SDG&E’s and SoCalGas’ capital structures limits the amounts that are available for loans and dividends to Sempra. At December 31, 2022, based on these regulations, Sempra could have received combined loans and dividends of approximately $504 million from SDG&E and $347 million from SoCalGas. In addition, the terms of Sempra’s series C preferred stock limit Sempra’s ability to declare dividends on its common stock under certain circumstances.

We provide additional information about dividend restrictions in “Restricted Net Assets” in Note 1 of the Notes to Consolidated Financial Statements and in Note 13 of the Notes to Consolidated Financial Statements.

### *Book Value Per Common Share*

Sempra’s book value per common share on the last day of each of the last three fiscal years was as follows:

- $83.43 in 2022

The increase in 2022 was primarily due to comprehensive income exceeding dividends and a fair value that was higher than carrying value related to the change in ownership, which did not result in a change of control, from the sale of NCI in SI Partners to ADIA. In 2021, the increase was primarily due to a fair value that was higher than carrying value related to the change in ownership, which did not result in a change of control, from the sale of NCI in SI Partners to KKR, the IEnova exchange offer and subsequent cash tender offer, and the common shares issued from the conversion of series A preferred stock and series B preferred stock.

2022 Form 10-K | 87

## Capitalization

Our debt to capitalization ratio, calculated as total debt as a percentage of total debt and equity, was as follows:

# TOTAL CAPITALIZATION AND DEBT-TO-CAPITALIZATION RATIOS

(Dollars in millions)

|  | Sempra | SDG&E | SoCalGas |
| --- | --- | --- | --- |
|  | December 31, 2022 |  |  |
| Total capitalization | $58,175 | $18,258 | $13,696 |
| Debt-to-capitalization ratio | 50% | 50% | 51% |
|  | December 31, 2021 |  |  |
| Total capitalization | $52,064 | $16,655 | $10,611 |
| Debt-to-capitalization ratio | 47% | 50% | 49% |

Significant changes in 2022 that affected capitalization included the following:

- Sempra: increase in long-term debt, offset by a decrease in short-term debt and increase in equity primarily from comprehensive income exceeding dividends and the sale of NCI.
- SDG&E: increase in long-term debt, offset by a decrease in short-term debt and increase in equity from comprehensive income exceeding dividends.
- SoCalGas: increase in short-term and long-term debt, offset by an increase in equity from comprehensive income and equity contributions from Sempra.

# CRITICAL ACCOUNTING ESTIMATES

Management views certain accounting estimates as critical because their application is the most relevant, judgmental and/or material to our financial position and results of operations, and/or because they require the use of material judgments and estimates. We discuss critical accounting estimates that are material to our financial statements with the Audit Committee of Sempra's board of directors.

# CONTINGENCIES

# Sempra, SDG&E, SoCalGas

We accrue losses for the estimated impacts of various conditions, situations or circumstances involving uncertain outcomes. For loss contingencies, we accrue the loss if an event has occurred on or before the balance sheet date and if:

- information available through the date we file our financial statements indicates it is probable that a loss has been incurred, given the likelihood of uncertain future events
- the amount of the loss or a range of possible losses can be reasonably estimated

We do not accrue contingencies that might result in gains. We continuously assess contingencies for litigation claims, environmental remediation and other events.

Actual amounts realized upon settlement of contingencies may be different than amounts recorded and disclosed and may affect our results of operations, financial condition and cash flows. Details of our issues in this area are discussed in Note 16 of the Notes to Consolidated Financial Statements.

2022 Form 10-K | 88

# REGULATORY ACCOUNTING

# Sempra, SDG&E, SoCalGas

As regulated entities, SDG&E's and SoCalGas' customer rates, as set and monitored by regulators, are designed to recover the cost of providing service and to provide the opportunity to realize their authorized rates of return on their investments. SDG&E and SoCalGas assess probabilities of future rate recovery associated with regulatory account balances at the end of each reporting period and whenever new and/or unusual events occur, such as:

- changes in the regulatory and political environment or the utility's competitive position
- issuance of a regulatory commission order
- passage of new legislation

To the extent that circumstances associated with regulatory balances change, the regulatory balances are evaluated and adjusted if appropriate.

Significant management judgment is required to evaluate the anticipated recovery of regulatory assets and plant investments, the recognition of incentives and revenues subject to refund, as well as the existence and amount of regulatory liabilities. Adverse regulatory or legislative actions could materially impact the amounts of our regulatory assets and liabilities and could materially adversely impact our results of operations and financial condition. Specifically, if future recovery of costs ceases to be probable, all or part of the associated regulatory assets and/or plant investments would need to be written off against current period earnings, or adverse regulatory or legislative actions could give rise to material new or higher regulatory liabilities. We discuss details of SDG&E's and SoCalGas' regulatory assets and liabilities and additional factors that management considers when assessing probabilities associated with regulatory balances in Notes 1, 4, 15 and 16 of the Notes to Consolidated Financial Statements.

# INCOME TAXES

# Sempra, SDG&E, SoCalGas

Our income tax expense and related balance sheet amounts involve significant management judgments and estimates. Amounts of deferred income tax assets and liabilities, as well as current and noncurrent accruals, involve judgments and estimates of the timing and probability of recognition of income and deductions by taxing authorities. When we evaluate the anticipated resolution of income tax issues, we consider:

- past resolutions of the same issue or similar issues
- the status of any income tax examination in progress
- positions taken by taxing authorities with other taxpayers with similar issues

The likelihood of deferred income tax recovery is based on analyses of the deferred income tax assets and our expectation of future taxable income, based on our strategic planning. Should a change in facts or circumstances lead to a change in judgment about the ultimate realizability of a deferred tax asset, we would record or adjust the related valuation allowance in the period that the change in facts and circumstances occurs, along with a corresponding increase or decrease in the provision for income taxes.

Actual income taxes could vary from estimated amounts because of:

- future impacts of various items, including changes in tax laws, regulations, interpretations and rulings
- our financial condition in future periods
- the resolution of various income tax issues between us and taxing and regulatory authorities

Unrecognized tax benefits involve management's judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect our results of operations, financial condition and cash flows.

We discuss these matters and additional information related to accounting for income taxes, including uncertainty in income taxes, in Note 8 of the Notes to Consolidated Financial Statements.

2022 Form 10-K | 89

## PENSION AND PBOP PLANS

### *Sempra, SDG&E, SoCalGas*

To measure our pension and PBOP obligations, costs and liabilities, we rely on several assumptions. We consider current market conditions, including interest rates, in making these assumptions. We review these assumptions annually and update when appropriate.

The critical assumptions used to develop the required estimates include the following key factors:

- discount rates
- expected return on plan assets
- health care cost trend rates
- interest crediting rate on cash balance accounts
- mortality rate
- rate of compensation increases
- termination and retirement rates
- utilization of postretirement welfare benefits
- payout elections (lump sum or annuity)
- lump sum interest rates

The actuarial assumptions we use may differ materially from actual results due to:

- return on plan assets
- changing market and economic conditions
- higher or lower withdrawal rates
- longer or shorter participant life spans
- more or fewer lump sum versus annuity payout elections made by plan participants
- higher or lower retirement rates

Changes in the estimated costs or timing of pension and PBOP, or the assumptions and judgments used by management underlying these estimates (primarily the discount rate and assumed rate of return on plan assets), as well as changes in the circumstances associated with rate recovery, could have a material effect on the recorded expenses and liabilities. The following tables summarize the impact to our projected benefit obligation for pension and accumulated benefit obligation for PBOP at December 31, 2022, and 2022 net periodic benefit costs, in each case if the discount rate or assumed rate of return on plan assets were changed by 100 bps.

#### IMPACT DUE TO INCREASE/DECREASE IN DISCOUNT RATE

(Dollars in millions)

|  | Sempra |  | SDG&E |  | SoCalGas |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Increase | Decrease | Increase | Decrease | Increase | Decrease |
| Pension: |  |  |  |  |  |  |
| (Decrease) increase to projected benefit obligation, net | $(251) | $279 | $(38) | $40 | $(198) | $223 |
| (Decrease) increase to net periodic benefit cost | (16) | 23 | 5 | (2) | (21) | 25 |
| PBOP: |  |  |  |  |  |  |
| (Decrease) increase to accumulated benefit obligation, net | (69) | 85 | (13) | 16 | (54) | 67 |
| (Decrease) increase to net periodic benefit cost | (8) | 11 | (2) | 2 | (7) | 9 |

#### IMPACT DUE TO INCREASE/DECREASE IN RETURN ON PLAN ASSETS

(Dollars in millions)

|  | Sempra |  | SDG&E |  | SoCalGas |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Increase | Decrease | Increase | Decrease | Increase | Decrease |
| Pension: |  |  |  |  |  |  |
| (Decrease) increase to net periodic benefit cost | $(29) | $29 | $(8) | $8 | $(19) | $19 |
| PBOP: |  |  |  |  |  |  |
| (Decrease) increase to net periodic benefit cost | (14) | 14 | (2) | 2 | (11) | 11 |

2022 Form 10-K | 90

For SDG&E and SoCalGas plans, the effects of the assumptions on earnings are expected to be recovered in rates and therefore are offset in regulatory accounts. We provide details of our pension and PBOP plans in Note 9 of the Notes to Consolidated Financial Statements.

## ASSET RETIREMENT OBLIGATIONS

### *Sempra, SDG&E*

SDG&E's legal AROs related to the decommissioning of SONGS are estimated based on a site-specific study performed no less than every three years. The estimate of the obligations includes:

- estimated decommissioning costs, including labor, equipment, material and other disposal costs
- inflation adjustment applied to estimated cash flows
- discount rate based on a credit-adjusted risk-free rate
- actual decommissioning costs, progress to date and expected duration of decommissioning activities

SDG&E's nuclear decommissioning expenses are subject to rate recovery and, therefore, rate-making accounting treatment is applied to SDG&E's nuclear decommissioning activities. SDG&E recognizes a regulatory asset, or liability, to the extent that its SONGS ARO exceeds, or is less than, the amount collected from customers and the amount earned in SDG&E's NDT.

SDG&E's ARO related to the decommissioning of SONGS was $540 million as of December 31, 2022, based on the decommissioning cost study prepared in 2020. Changes in the estimated costs, execution strategy or timing of decommissioning, or in the assumptions and judgments by management underlying these estimates, could cause material revisions to the estimated total cost to decommission this facility, which could have a material effect on the recorded liability.

The following table illustrates the increase to SDG&E's and Sempra's ARO liability if the cost escalation rate was adjusted while leaving all other assumptions constant:

### INCREASE TO ARO AND REGULATORY ASSET

(Dollars in millions)

|  | December 31, 2022 |
| --- | --- |
| Uniform increase in escalation percentage of 1 percentage point | $62 |

The increase in the ARO liability driven by an increase in the cost escalation rate would result in a decrease in the regulatory liability for recoveries in excess of ARO liabilities. We provide additional detail in Note 15 of the Notes to Consolidated Financial Statements.

## IMPAIRMENT TESTING OF LONG-LIVED ASSETS

### *Sempra*

Whenever events or changes in circumstances indicate that an asset's carrying amount may not be recoverable, we consider if the estimated future undiscounted cash flows are less than the carrying amount of the asset. If so, we estimate the fair value of the asset to determine the extent to which carrying value exceeds fair value. For such an estimate, we may consider data from multiple valuation methods, including data from market participants. We exercise judgment to estimate the future cash flows and the useful life of a long-lived asset and to determine our intent to use the asset. Our intent to use or dispose of a long-lived asset is subject to re-evaluation and can change over time. If an impairment test is required, the fair value of a long-lived asset can vary if differing estimates and assumptions are used in the valuation techniques applied as indicated by changing market or other conditions. Critical assumptions that affect our estimates of fair value may include:

- consideration of market transactions
- future cash flows
- the appropriate risk-adjusted discount rate, including the impacts of country risk and entity risk

We discuss impairment of long-lived assets in Note 1 of the Notes to Consolidated Financial Statements.

2022 Form 10-K | 91

# IMPAIRMENT TESTING OF GOODWILL

# Sempra

When determining if goodwill is impaired, the fair value of the reporting unit can vary if differing estimates and assumptions are used in the valuation techniques applied as indicated by changing market or other conditions. As a result, recognizing a goodwill impairment may or may not be required. When we perform the quantitative goodwill impairment test, we exercise judgment to develop estimates of the fair value of the reporting unit and compare that to its carrying value. Our fair value estimates are developed from the perspective of a knowledgeable market participant. We consider observable transactions in the marketplace for similar investments, if available, as well as an income-based approach such as a discounted cash flow analysis. A discounted cash flow analysis may be based directly on anticipated future revenues and expenses and may be performed based on free cash flows generated within the reporting unit. Critical assumptions that affect our estimates of fair value may include:

- consideration of market transactions
- future cash flows
- projected revenue and expense growth rates
- the appropriate risk-adjusted discount rate, including the impacts of country risk and entity risk

In 2022 and 2021, we performed a quantitative goodwill impairment test and determined that the estimated fair values of our reporting units in Mexico to which goodwill was allocated was substantially above their carrying value for each year as of October 1, our goodwill impairment testing date. Our goodwill impairment test is determined based on assumptions existing as of that point in time. Changes in the business (such as loss of future cash flows from customer disputes, renegotiation of customer contracts or the macroeconomic environment, including rising interest rates) may result in us having to perform an interim goodwill impairment test, which could result in an impairment of our goodwill.

# NEW ACCOUNTING STANDARDS

We discuss the recent accounting pronouncements that have had or may have a significant effect on our financial statements and/or disclosures in Note 2 of the Notes to Consolidated Financial Statements.

# ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of erosion of our cash flows, earnings, asset values or equity due to adverse changes in commodity market prices, interest rates and foreign currency and inflation rates.

# MARKET RISK POLICIES

Sempra has policies governing its market risk management and trading activities. Sempra, SDG&E, SoCalGas and Sempra Infrastructure maintain separate risk management committees, organizations and processes to provide oversight of these activities for their respective businesses. The committees consist of senior officers who establish policy, oversee energy risk management activities, and monitor the results of trading and other activities to help ensure compliance with our stated energy risk management and trading policies. These activities include, but are not limited to, monitoring of market positions that create credit, liquidity and market risk. The respective oversight organizations and committees are independent from energy procurement departments.

Along with other tools, we use VaR and liquidity metrics to measure our exposure to market risk associated with commodity portfolios. VaR is an estimate of the potential loss on a position or portfolio of positions over a specified holding period, based on normal market conditions and within a given statistical confidence interval. We use a variance-covariance VaR model at a 95% confidence level. A liquidity metric is intended to monitor the amount of financial resources needed for meeting potential margin calls as forward market prices move. VaR and liquidity risk metrics are independently verified by the respective risk management oversight organizations.

SDG&E and SoCalGas use natural gas derivatives and SDG&E uses electricity derivatives to manage natural gas and electric price risk associated with servicing load requirements. The use of natural gas and electricity derivatives is subject to certain limitations imposed by company policy and regulatory requirements. SDG&E's risk management and transacting activity plans for electricity derivatives are also required to be filed with, and have been approved by, the CPUC. SoCalGas is also subject to certain regulatory requirements and thresholds related to natural gas procurement under the GCIM. We discuss revenue

2022 Form 10-K | 92

recognition in Note 3 and additional market-risk information regarding derivative instruments in Note 11 of the Notes to Consolidated Financial Statements.

We have exposure to changes in commodity prices, interest rates and foreign currency and inflation rates. The following discussion of these primary market-risk exposures as of December 31, 2022 includes a discussion of how these exposures are managed.

## COMMODITY PRICE RISK

Market risk related to physical commodities is created by volatility in the prices and basis of certain commodities. Our various subsidiaries are exposed, in varying degrees, to commodity price risk, primarily to prices in the natural gas and electricity markets. Our policy is to manage this risk within a framework that considers the specific markets and operating and regulatory environments of each subsidiary.

Sempra Infrastructure is exposed to commodity price risk indirectly through its LNG, natural gas pipelines and storage, and power-generating assets. Sempra Infrastructure has utilized and may continue to utilize commodity contracts, including physical and financial derivatives, in an effort to mitigate these risks and optimize the value of these assets. These transactions are typically priced based on market indices, but may also include fixed price purchases and sales of commodities. Any residual exposure is monitored as described above. Some of these derivatives that we use as economic hedges do not meet the requirements for hedge accounting, or hedge accounting is not elected, and as a result, the changes in fair value of these derivatives are recorded in earnings. Consequently, significant changes in commodity prices have in the past and could in the future result in earnings volatility as the economic offset of these derivatives may not be recorded at fair value. A significant decrease in the fair value of these economic hedges could also result in higher collateral requirements, which could negatively impact our liquidity and our ability to continue to mitigate our commodity risk exposure. We try to structure our hedging transactions with the objective that over time (i) realized gains and losses on our economic hedges would be largely offset by gains and losses related to our purchases or sales of natural gas and (ii) we would realize the economic benefit we anticipated at the time we structured the original transaction.

A hypothetical 10% change in commodity prices would have resulted in a change in the fair value of our commodity-based natural gas and electricity derivatives of $24 million and $3 million at December 31, 2022 and 2021, respectively. The impact of a change in energy commodity prices on our commodity-based derivative instruments at a point in time is not necessarily representative of the results that will be realized when the contracts are ultimately settled and does not typically include the generally offsetting impact of our underlying asset positions.

SDG&E and SoCalGas separately manage risk within the parameters of their market risk management frameworks. In addition, their market-risk exposure is limited due to CPUC-authorized rate recovery of the costs of commodity purchases, interstate and intrastate transportation, and storage activity. However, SoCalGas may, at times, be exposed to market risk as a result of the GCIM, which rewards or penalizes the utility for commodity costs below or above certain benchmarks. The one-day VaR for SDG&E and SoCalGas' commodity positions were $25 million and $2 million, respectively, at December 31, 2022 and $5 million and $1 million, respectively, at December 31, 2021.

## INTEREST RATE RISK

We are exposed to fluctuations in interest rates primarily from our short- and long-term debt. Subject to regulatory constraints, we periodically enter into interest rate swap agreements to moderate our exposure to interest rate changes and to lower our overall cost of borrowing.

2022 Form 10-K | 93

The table below shows the nominal amount of our debt:

#### NOMINAL AMOUNT OF DEBT$^{(1)}$

(Dollars in millions)

|  | December 31, 2022 |  |  | December 31, 2021 |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Sempra | SDG&E | SoCalGas | Sempra | SDG&E | SoCalGas |
| Short-term: |  |  |  |  |  |  |
| Sempra California | $1,105 | $205 | $900 | $1,161 | $776 | $385 |
| Other | 2,247 | - | - | 2,310 | - | - |
| Long-term: |  |  |  |  |  |  |
| Sempra California fixed-rate | $13,159 | $7,400 | $5,759 | $10,876 | $6,417 | $4,459 |
| Sempra California variable-rate | 700 | 400 | 300 | 300 | - | 300 |
| Other fixed-rate | 10,079 | - | - | 8,591 | - | - |
| Other variable-rate | 575 | - | - | 341 | - | - |

$^{(1)}$ After the effects of interest rate swaps. Before reductions for unamortized discount and debt issuance costs and excluding finance lease obligations at December 31, 2022 and 2021, and before the effects of acquisition-related fair value adjustments at December 31, 2021.

An interest rate risk sensitivity analysis measures interest rate risk by calculating the estimated changes in earnings that would result from a hypothetical change in market interest rates. Earnings are affected by changes in interest rates on short-term debt and variable-rate long-term debt. If weighted-average interest rates on short-term debt outstanding at December 31, 2022 increased or decreased by 10%, the change in earnings over the 12-month period ending December 31, 2023 would be approximately $12 million. If interest rates increased or decreased by 10% on all variable-rate long-term debt at December 31, 2022, after considering the effects of interest rate swaps, the change in earnings over the 12-month period ending December 31, 2023 would be approximately $5 million.

We provide further information about debt and interest rate swap transactions in Notes 7 and 11, respectively, of the Notes to Consolidated Financial Statements.

We also are subject to the effect of interest rate fluctuations on the assets of our pension plans, PBOP plans, and SDG&E's NDT. However, we expect the effects of these fluctuations, as they relate to Sempra California, to be reflected in future rates.

#### FOREIGN CURRENCY EXCHANGE RATE RISK AND INFLATION EXPOSURES

We discuss our foreign currency exchange rate risk and inflation exposures in 'Part II - Item 7. MD&A - Impact of Foreign Currency and Inflation Rates on Results of Operations.'

The hypothetical effect for every 10% appreciation in the U.S. dollar against the Mexican peso, in which we have operations and investments, are as follows:

#### HYPOTHETICAL EFFECTS FROM 10% STRENGTHENING OF U.S. DOLLAR$^{(1)}$

(Dollars in millions)

|  | Hypothetical effects |
| --- | --- |
| Translation of 2022 earnings to U.S. dollars (2) | $(3) |
| Transactional exposure (3) | 153 |
| Translation of net assets of foreign subsidiaries and investment in foreign entities (4) | (19) |

$^{(1)}$ After the effects of foreign currency derivatives.

$^{(2)}$ Amount represents the impact to earnings for a change in the average exchange rate throughout the reporting period.

$^{(3)}$ Amount primarily represents the effects of currency exchange rate movement from December 31, 2022 on monetary assets and liabilities and remeasurement of non-U.S. deferred income tax balances at our Mexican subsidiaries.

$^{(4)}$ Amount represents the effects of currency exchange rate movement from December 31, 2022 that would be recorded to OCI at the end of the reporting period.

Monetary assets and liabilities at our Mexican subsidiaries and JVs that are denominated in U.S. dollars may fluctuate significantly throughout the year. These monetary assets and liabilities and certain nonmonetary assets and liabilities are adjusted for Mexican inflation for Mexican income tax purposes. Based on a net monetary liability position of $4.8 billion, including those related to our investments in JVs, at December 31, 2022, the hypothetical effect of a 10% increase in the Mexican inflation rate is approximately $104 million lower earnings as a result of higher income tax expense for our consolidated entities, as well as lower equity earnings for our JVs.

2022 Form 10-K | 94

In 2022 and 2023 to date, SDG&E and SoCalGas have experienced inflationary pressures from increases in various costs, including the cost of natural gas, electric fuel and purchased power, labor, materials and supplies, as well as availability of labor and materials. Sempra Texas Utilities has experienced increased costs of labor and materials and does not have specific regulatory mechanisms that allow for recovery of higher costs due to inflation; rather, recovery is limited to rate updates through capital trackers and base rate reviews, which may result in partial non-recovery due to the regulatory lag. If such costs were to continue to be subject to significant inflationary pressures and we are not able to fully recover such higher costs in rates or there is a delay in recovery, these increased costs may have a significant effect on Sempra's, SDG&E's and SoCalGas' results of operations, financial condition, cash flows and/or prospects.

Sempra Infrastructure has experienced inflationary pressures from increases in various costs, including the cost of labor, materials and supplies. Sempra Infrastructure generally secures long-term contracts that are U.S. dollar-denominated or referenced and are periodically adjusted for market factors, including inflation, and Sempra Infrastructure generally enters into lump-sum contracts for its large construction projects in which much of the risk during construction is absorbed or hedged by the EPC contractor. If additional costs were to become subject to significant inflationary pressures, we may not be able to fully recover such higher costs through contractual adjustments for inflation, which may have a significant effect on Sempra's results of operations, financial condition, cash flows and/or prospects.

#### ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements are listed on the Index to Consolidated Financial Statements set forth on page F-1 of this annual report on Form 10-K.

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

None.

2022 Form 10-K | 95

# ITEM 9A. CONTROLS AND PROCEDURES

## EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

### *Sempra, SDG&E, SoCalGas*

Sempra, SDG&E and SoCalGas maintain disclosure controls and procedures designed to ensure that information required to be disclosed in their respective reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to the management of each company, including each respective principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. In designing and evaluating these controls and procedures, the management of each company recognizes that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives; therefore, the management of each company applies judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of the principal executive officers and principal financial officers of Sempra, SDG&E and SoCalGas, each such company's management evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of December 31, 2022, the end of the period covered by this report. Based on these evaluations, the principal executive officers and principal financial officers of Sempra, SDG&E and SoCalGas concluded that their respective company's disclosure controls and procedures were effective at the reasonable assurance level as of such date.

## MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

### *Sempra, SDG&E, SoCalGas*

The respective management of Sempra, SDG&E and SoCalGas is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f).

Under the supervision and with the participation of the principal executive officers and principal financial officers of Sempra, SDG&E and SoCalGas, each such company's management evaluated the effectiveness of its internal control over financial reporting based on the framework in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on these evaluations, each company's management concluded that its internal control over financial reporting was effective as of December 31, 2022. Deloitte & Touche LLP audited the effectiveness of each company's internal control over financial reporting as of December 31, 2022, as stated in their reports, which are included in this annual report on Form 10-K.

There have been no changes in Sempra's, SDG&E's or SoCalGas' internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, any such company's internal control over financial reporting.

2022 Form 10-K | 96

# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

*To the Shareholders and Board of Directors of Sempra Energy:*

## Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Sempra Energy and subsidiaries (“Sempra”) as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, Sempra maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements as of and for the year ended December 31, 2022, of Sempra and our report dated February 28, 2023, expressed an unqualified opinion on those financial statements.

## Basis for Opinion

Sempra’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on Sempra’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Sempra in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

## Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

*/s/ DELOITTE & TOUCHE LLP*

San Diego, California February 28, 2023

2022 Form 10-K | 97

# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

*To the Shareholder and Board of Directors of San Diego Gas & Electric Company:*

## Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of San Diego Gas & Electric Company (“SDG&E”) as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, SDG&E maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the financial statements as of and for the year ended December 31, 2022, of SDG&E and our report dated February 28, 2023, expressed an unqualified opinion on those financial statements.

## Basis for Opinion

SDG&E’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on SDG&E’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to SDG&E in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

## Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

*/s/ DELOITTE & TOUCHE LLP*

San Diego, California February 28, 2023

2022 Form 10-K | 98

# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

*To the Shareholders and Board of Directors of Southern California Gas Company:*

## Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Southern California Gas Company (“SoCalGas”) as of December 31, 2022, based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, SoCalGas maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in *Internal Control - Integrated Framework (2013)* issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the financial statements as of and for the year ended December 31, 2022, of SoCalGas and our report dated February 28, 2023, expressed an unqualified opinion on those financial statements.

## Basis for Opinion

SoCalGas’ management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on SoCalGas’ internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to SoCalGas in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

## Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

San Diego, California February 28, 2023

2022 Form 10-K | 99

# ITEM 9B. OTHER INFORMATION

None.

# ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

# PART III.

Because SDG&E meets the conditions of General Instructions I(1)(a) and (b) of Form 10-K and is therefore filing this report with a reduced disclosure format as permitted by General Instruction I(2), the information required by Part III - Items 10, 11, 12 and 13 below is not required for SDG&E. We have, however, voluntarily provided the information required by Item 401 of SEC Regulation S-K, as required by Part III - Item 10 with respect to SDG&E’s executive officers in “Part I - Item 1. Business - Other Matters - Information About Our Executive Officers.”

# ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

We provide the information required by Item 401 of SEC Regulation S-K, as required by this item, with respect to executive officers of Sempra and SoCalGas in “Part I - Item 1. Business - Other Matters - Information About Our Executive Officers.” All other information required by this item is incorporated by reference from “Corporate Governance” and “Proposal 1: Election of Directors” in the proxy statement to be filed for the May 2023 annual meeting of shareholders for Sempra and from the information statement to be filed for the May 2023 annual meeting of shareholders for SoCalGas. In all cases, only the specific information that is expressly required by this item is incorporated herein by reference.

# ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference from “Executive Compensation,” including “Compensation Discussion and Analysis,” “Compensation and Talent Committee Report” and “Compensation Tables” (except for the disclosure under the heading “Pay-Versus-Performance”), in the proxy statement to be filed for the May 2023 annual meeting of shareholders for Sempra and from the information statement to be filed for the May 2023 annual meeting of shareholders for SoCalGas. In all cases, only the specific information that is expressly required by this item is incorporated herein by reference.

2022 Form 10-K | 100

## ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

### SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

Sempra has LTIPs that permit the grant of a wide variety of equity and equity-based incentive awards to directors, officers and key employees. At December 31, 2022, outstanding awards consisted of stock options and RSUs held by 424 employees.

The following table sets forth information regarding our equity compensation plans at December 31, 2022.

#### EQUITY COMPENSATION PLANS

| Equity compensation plans approved by shareholders | Number of shares to be issued upon exercise of outstanding options, warrants and rights (1) | Weighted-average exercise price of outstanding options, warrants and rights (2) | Number of additional shares remaining available for future issuance (3) |
| --- | --- | --- | --- |
| 2013 LTIP | 151,876 | $106.76 | - |
| 2019 LTIP | 1,680,168 | $132.47 | 5,056,550 |

$^{(1)}$ The 2013 LTIP consists of 151,876 options to purchase shares of our common stock, all of which were granted at an exercise price equal to 100% of the grant date fair market value of the shares subject to the option, no performance-based RSUs and no service-based RSUs. The 2019 LTIP consists of 564,736 options to purchase shares of our common stock, all of which were granted at an exercise price equal to 100% of the grant date fair market value of the shares subject to the option, 839,795 performance-based RSUs and 275,637 service-based RSUs. Each performance-based RSU granted under the 2013 LTIP and the 2019 LTIP represents the right to receive from zero to 2.0 shares of our common stock if applicable performance conditions are satisfied. For purposes of this table, the number of shares of common stock shown to be subject to each performance-based RSU is 1.0 share, which assumes performance conditions are satisfied at the target level.

$^{(2)}$ Represents the weighted-average exercise price of the 151,876 and 564,736 outstanding options to purchase shares of our common stock under the 2013 LTIP and the 2019 LTIP, respectively.

$^{(3)}$ The number of shares available for future issuance is increased by the number of shares to which each participant would otherwise be entitled that are withheld or surrendered to satisfy the exercise price or to satisfy tax withholding obligations relating to any plan awards, and is also increased by the number of shares subject to awards that expire or are forfeited, canceled or otherwise terminated without the issuance of shares. No new awards may be granted under the 2013 LTIP.

We provide additional discussion of share-based compensation in Note 10 of the Notes to Consolidated Financial Statements.

### SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The information required by Item 403 of SEC Regulation S-K, as required by this item, is incorporated by reference from “Share Ownership” in the proxy statement to be filed for the May 2023 annual meeting of shareholders for Sempra and from the information statement to be filed for the May 2023 annual meeting of shareholders for SoCalGas. In all cases, only the specific information that is expressly required by this item is incorporated herein by reference.

## ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated by reference from “Corporate Governance” in the proxy statement to be filed for the May 2023 annual meeting of shareholders for Sempra and from the information statement to be filed for the May 2023 annual meeting of shareholders for SoCalGas. In all cases, only the specific information that is expressly required by this item is incorporated herein by reference.

2022 Form 10-K | 101

## ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information regarding principal accountant fees and services is presented below for Sempra, SDG&E and SoCalGas. The following table shows the fees paid to Deloitte & Touche LLP, the independent registered public accounting firm for Sempra, SDG&E and SoCalGas, for services provided for 2022 and 2021.

### PRINCIPAL ACCOUNTANT FEES

(Dollars in thousands)

|  | Sempra |  | SDG&E |  | SoCalGas |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Fees | Percent of total | Fees | Percent of total | Fees | Percent of total |
| 2022: |  |  |  |  |  |  |
| Audit fees: |  |  |  |  |  |  |
| Consolidated financial statements, internal controls audits and subsidiary audits | $10,872 |  | $3,013 |  | $3,549 |  |
| Regulatory filings and related services | 290 |  | 65 |  | 130 |  |
| Total audit fees | 11,162 | 83% | 3,078 | 87% | 3,679 | 92% |
| Audit-related fees: |  |  |  |  |  |  |
| Employee benefit plan audits | 520 |  | 169 |  | 287 |  |
| Other audit-related services (1) | 1,245 |  | 165 |  | - |  |
| Total audit-related fees | 1,765 | 13 | 334 | 10 | 287 | 7 |
| Tax fees (2) | 477 | 3 | 116 | 3 | 17 | 1 |
| All other fees (3) | 94 | 1 | - | - | - | - |
| Total fees | $13,498 | 100% | $3,528 | 100% | $3,983 | 100% |
| 2021: |  |  |  |  |  |  |
| Audit fees: |  |  |  |  |  |  |
| Consolidated financial statements, internal controls audits and subsidiary audits | $10,166 |  | $2,753 |  | $3,486 |  |
| Regulatory filings and related services | 807 |  | 60 |  | - |  |
| Total audit fees | 10,973 | 81% | 2,813 | 87% | 3,486 | 91% |
| Audit-related fees: |  |  |  |  |  |  |
| Employee benefit plan audits | 520 |  | 184 |  | 309 |  |
| Other audit-related services (1) | 1,840 |  | 119 |  | - |  |
| Total audit-related fees | 2,360 | 17 | 303 | 9 | 309 | 8 |
| Tax fees (2) | 272 | 2 | 113 | 4 | 33 | 1 |
| All other fees (3) | 13 | - | - | - | 8 | - |
| Total fees | $13,618 | 100% | $3,229 | 100% | $3,836 | 100% |

$^{(1)}$ Other audit-related services primarily relate to statutory audits and agreed upon procedures.

$^{(2)}$ Tax fees relate to tax consulting and compliance services.

$^{(3)}$ All other fees relate to training and conferences.

The Audit Committee of Sempra's board of directors is directly responsible for the appointment, compensation, retention and oversight, including the oversight of the audit fee negotiations, of the independent registered public accounting firm for Sempra and its subsidiaries, including SDG&E and SoCalGas. As a matter of good corporate governance, each of the Sempra, SDG&E and SoCalGas boards of directors reviewed the performance of Deloitte & Touche LLP and appointed them as the independent registered public accounting firm for each of Sempra, SDG&E and SoCalGas, respectively. Sempra's board of directors has determined that each member of its Audit Committee is an independent director and is financially literate, and that Mr. Jack T. Taylor, who chairs the committee, and Ms. Cynthia L. Walker, who is a member of the committee, are audit committee financial experts as defined by the rules of the SEC.

Except where pre-approval is not required by SEC rules, Sempra's Audit Committee pre-approves all audit, audit-related and permissible non-audit services provided by Deloitte & Touche LLP for Sempra and its subsidiaries, including all services provided by Deloitte & Touche LLP for Sempra, SDG&E and SoCalGas in 2022 and 2021. The committee's pre-approval policies and procedures provide for the general pre-approval of specific types of services and give detailed guidance to management as to the services that are eligible for general pre-approval, and they require specific pre-approval of all other permitted services. For both types of pre-approval, the committee considers whether the services to be provided are consistent with maintaining the firm's independence. The committee's policies and procedures also delegate authority to the Chair of the committee to address any

2022 Form 10-K | 102

requests for pre-approval of services between committee meetings, with any pre-approval decisions to be reported to the committee at its next scheduled meeting.

## PART IV.

### ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:

#### FINANCIAL STATEMENTS

Our consolidated financial statements are listed on the Index to Consolidated Financial Statements set forth on page F-1 of this annual report on Form 10-K.

#### FINANCIAL STATEMENT SCHEDULES

Schedule I is listed on the Index to Condensed Financial Information of Parent as set forth on page S-1 of this annual report on Form 10-K.

Any other schedule for which provision is made in SEC Regulation S-X is not required under the instructions contained therein, is inapplicable or the information is included in the Consolidated Financial Statements and Notes thereto in this annual report on Form 10-K.

2022 Form 10-K | 103

## EXHIBITS

### EXHIBIT INDEX

The exhibits listed below relate to each registrant as indicated. Unless otherwise indicated, the exhibits that are incorporated by reference herein were filed under File Number 1-14201 (Sempra Energy), File Number 1-40 (Pacific Lighting Corporation), File Number 1-03779 (San Diego Gas & Electric Company) and/or File Number 1-01402 (Southern California Gas Company).

#### EXHIBIT INDEX

| Exhibit Number | Exhibit Description | Filed or Furnished Herewith | Incorporated by Reference |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  |  | Form or Registration Statement No. | Exhibit or Appendix | Filing Date |

### EXHIBIT 2 -- PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR SUCCESSION

#### *Sempra Energy*

| 2.1 | Purchase and Sale Agreement, dated as of September 27, 2019, by and between Sempra International Holdings N.V. and China Yangtze Power International (Hongkong) Co., Limited. | 8-K | 2.1 | 09/30/19 |
| --- | --- | --- | --- | --- |
| 2.2 | Letter of Undertaking, dated as of September 27, 2019, by and between Sempra Energy International Holdings N.V., China Three Gorges Corporation and Ching Three Gorges Construction Management Co., Ltd. | 8-K | 2.2 | 09/30/19 |
| 2.3 | Purchase and Sale Agreement, dated as of October 12, 2019, by and between Sempra Energy International Holdings N.V. and State Grid International Development Limited. | 8-K | 2.1 | 10/15/19 |

### EXHIBIT 3 -- BYLAWS AND ARTICLES OF INCORPORATION

#### *Sempra Energy*

| 3.1 | Amended and Restated Articles of Incorporation of Sempra Energy effective May 23, 2008. | 10-K | 3.1 | 02/27/20 |
| --- | --- | --- | --- | --- |
| 3.2 | Bylaws of Sempra Energy (as amended through April 14, 2020). | 8-K | 3.1 | 04/14/20 |
| 3.3 | Certificate of Determination of Preferences of the 6% Mandatory Convertible Preferred Stock, Series A, of Sempra Energy (including the form of certificate representing the 6% Mandatory Convertible Preferred Stock, Series A), filed with the Secretary of State of the State of California and effective January 5, 2018. | 8-K | 3.1 | 01/09/18 |
| 3.4 | Certificate of Determination of Preferences of the 6.75% Mandatory Convertible Preferred Stock, Series B, of Sempra Energy (including the form of certificate representing the 6.75% Mandatory Convertible Preferred Stock, Series B), filed with the Secretary of State of the State of California and effective July 11, 2018. | 8-K | 3.1 | 07/13/18 |
| 3.5 | Certificate of Determination of Preferences of 4.875% Fixed-Rate Reset Cumulative Redeemable Perpetual Stock, Series C, of Sempra Energy (including the form of certificate representing the 4.875% Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock, Series C), filed with the Secretary of State of California and effective June 11, 2020. | 8-K | 3.1 | 06/15/20 |

#### *San Diego Gas & Electric Company*

| 3.6 | Amended and Restated Articles of Incorporation of San Diego Gas & Electric Company effective August 15, 2014. | 10-K | 3.4 | 02/26/15 |
| --- | --- | --- | --- | --- |
| 3.7 | Bylaws of San Diego Gas & Electric (as amended through October 26, 2016). | 10-Q | 3.1 | 11/02/16 |

#### *Southern California Gas Company*

| 3.8 | Restated Articles of Incorporation of Southern California Gas Company effective October 7, 1996. | 10-K | 3.01 | 03/28/97 |
| --- | --- | --- | --- | --- |
| 3.9 | Bylaws of Southern California Gas Company (as amended through January 30, 2017). | 8-K | 3.1 | 01/31/17 |

2022 Form 10-K | 104

# **EXHIBIT INDEX (CONTINUED)**

| Exhibit Number | Exhibit Description | Filed or Furnished Herewith | Incorporated by Reference |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  |  | Form or Registration Statement No. | Exhibit or Appendix | Filing Date |

# **EXHIBIT 4 -- INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES**

Certain instruments defining the rights of holders of long-term debt instruments are not required to be filed or incorporated by reference herein pursuant to Item 601(b)(4)(iii)(A) of SEC Regulation S-K. Each registrant agrees to furnish a copy of such instruments to the SEC upon request.

# ***Sempra Energy***

| 4.1 | Description of rights of Sempra Energy Common Stock (Amended and Restated Articles of Incorporation of Sempra Energy effective May 23, 2008) (included as Exhibit 3.1 above). | 10-K | 3.1 | 02/27/20 |
| --- | --- | --- | --- | --- |
| 4.2 | Description of Securities. | X |  |  |
| 4.3 | Certificate of Determination of Preferences of the 6% Mandatory Convertible Preferred Stock, Series A, of Sempra Energy (including the form of certificate representing the 6% Mandatory Convertible Preferred Stock, Series A), filed with the Secretary of State of the State of California and effective January 5, 2018 (included as Exhibit 3.3 above). | 8-K | 3.1 | 01/09/18 |
| 4.4 | Certificate of Determination of Preferences of the 6.75% Mandatory Convertible Preferred Stock, Series B, of Sempra Energy (including the form of certificate representing the 6.75% Mandatory Convertible Preferred Stock, Series B) filed with the Secretary of State of California and effective July 11, 2018 (included as Exhibit 3.4 above). | 8-K | 3.1 | 07/13/18 |
| 4.5 | Certificate of Determination of Preferences of 4.875% Fixed-Rate Reset Cumulative Redeemable Perpetual Stock, Series C, of Sempra Energy (including the form of certificate representing the 4.875% Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock, Series C), filed with the Secretary of State of California and effective June 11, 2020 (included as Exhibit 3.5 above). | 8-K | 3.1 | 06/15/20 |
| 4.6 | Indenture dated as of February 23, 2000, between Sempra Energy and U.S. Bank Trust National Association, as Trustee. | S-3ASR 333-153425 | 4.1 | 09/11/08 |
| 4.7 | Officers' Certificate of Sempra Energy, including the form of its 6.00% Note due 2039. | 8-K | 4.1 | 10/08/09 |
| 4.8 | Officers' Certificate of Sempra Energy, including the form of its 3.250% Note due 2027. | 8-K | 4.1 | 06/09/17 |
| 4.9 | Officers' Certificate of Sempra Energy, including the forms of its 2.900% Note due 2023, 3.400% Note due 2028, 3.800% Note due 2038, and 4.000% Note due 2048. | 8-K | 4.1 | 01/12/18 |
| 4.10 | Officers' Certificate of Sempra Energy, including the form of 3.300% Note due 2025 and the form of 3.700% Note due 2029. | 8-K | 4.1 | 03/24/22 |
| 4.11 | Subordinated Indenture, dated as of June 26, 2019, between Sempra Energy and U.S. Bank National Association, as trustee. | 8-K | 4.2 | 06/26/19 |
| 4.12 | Officers' Certificate of Sempra Energy, including the form of its 5.750% Junior Subordinated Note due 2079. | 8-K | 4.1 | 06/26/19 |
| 4.13 | Officers' Certificate of Sempra Energy, including the form of its 4.125% Fixed-to-Fixed Reset Rate Junior Subordinated Note due 2052. | 8-K | 4.1 | 11/19/21 |

2022 Form 10-K | 105

# **EXHIBIT INDEX (CONTINUED)**

| Exhibit Number | Exhibit Description | Filed or Furnished Herewith | Incorporated by Reference |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  |  | Form or Registration Statement No. | Exhibit or Appendix | Filing Date |
| Southern California Gas Company |  |  |  |  |  |
| 4.14 | Description of preferences of Preferred Stock, Preference Stock and Series Preferred Stock (Southern California Gas Company Restated Articles of Incorporation) (included as Exhibit 3.8 above). |  | 10-K | 3.01 | 03/28/97 |
| 4.15 | Description of Securities. |  | 10-K | 4.9 | 02/27/20 |
| Sempra Energy / San Diego Gas & Electric Company |  |  |  |  |  |
| 4.16 | Mortgage and Deed of Trust dated July 1, 1940. |  | 2-4769 | B-3 | (1) |
| 4.17 | Second Supplemental Indenture dated as of March 1, 1948. |  | 2-7418 | B-5B | (1) |
| 4.18 | Ninth Supplemental Indenture dated as of August 1, 1968. |  | 333-52150 | 4.5 | (1) |
| 4.19 | Tenth Supplemental Indenture dated as of December 1, 1968. |  | 2-36042 | 2-K | (1) |
| 4.20 | Sixteenth Supplemental Indenture dated August 28, 1975. |  | 33-34017 | 4.2 | (1) |
| 4.21 | Fiftieth Supplemental Indenture, dated as of May 19, 2005. |  | 8-K | 4.1 | 05/19/05 |
| 4.22 | Fifty-Second Supplemental Indenture, dated as of June 8, 2006. |  | 8-K | 4.1 | 06/08/06 |
| 4.23 | Fifty-Fourth Supplemental Indenture, dated as of September 20, 2007. |  | 8-K | 4.1 | 09/20/07 |
| 4.24 | Fifty-Fifth Supplemental Indenture, dated as of May 14, 2009. |  | 8-K | 4.1 | 05/15/09 |
| 4.25 | Fifty-Sixth Supplemental Indenture, dated as of May 13, 2010. |  | 8-K | 4.1 | 05/13/10 |
| 4.26 | Fifty-Seventh Supplemental Indenture, dated as of August 26, 2010. |  | 8-K | 4.1 | 08/26/10 |
| 4.27 | Sixtieth Supplemental Indenture, dated as of November 17, 2011. |  | 8-K | 4.1 | 11/17/11 |
| 4.28 | Sixty-First Supplemental Indenture, dated as of March 22, 2012. |  | 8-K | 4.1 | 03/23/12 |
| 4.29 | Sixty-Second Supplemental Indenture, dated as of September 9, 2013. |  | 8-K | 4.1 | 09/09/13 |
| 4.30 | Sixty-Fifth Supplemental Indenture, dated as of May 19, 2016. |  | 8-K | 4.1 | 05/19/16 |
| 4.31 | Sixty-Sixth Supplemental Indenture, dated as of June 8, 2017. |  | 8-K | 4.1 | 06/08/17 |
| 4.32 | Sixty-Seventh Supplemental Indenture, dated as of May 17, 2018. |  | 8-K | 4.1 | 05/17/18 |
| 4.33 | Sixty-Eighth Supplemental Indenture, dated as of May 31, 2019. |  | 8-K | 4.1 | 05/31/19 |
| 4.34 | Sixty-Ninth Supplemental Indenture, dated as of April 7, 2020. |  | 8-K | 4.1 | 04/07/20 |
| 4.35 | Seventieth Supplemental Indenture, dated as of September 28, 2020. |  | 8-K | 4.1 | 09/28/20 |
| 4.36 | Seventy-First Supplemental Indenture, dated as of August 13, 2021. |  | 8-K | 4.1 | 08/13/21 |
| 4.37 | Seventy-Second Supplemental Indenture, dated as of March 11, 2022. |  | 8-K | 4.1 | 03/11/22 |
| 4.38 | Seventy-Third Supplemental Indenture, dated as of March 11, 2022. |  | 8-K | 4.2 | 03/11/22 |

$^{(1)}$ Exhibit is not available on the SEC's website as it was filed in paper and predates the SEC's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) database.

2022 Form 10-K | 106

# **EXHIBIT INDEX (CONTINUED)**

| Exhibit Number | Exhibit Description | Filed or Furnished Herewith | Incorporated by Reference |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  |  | Form or Registration Statement No. | Exhibit or Appendix | Filing Date |
| Sempra Energy / Southern California Gas Company |  |  |  |  |  |
| 4.39 | First Mortgage Indenture of Southern California Gas Company to American Trust Company dated October 1, 1940. |  | 2-4504 | B-4 | (1) |
| 4.40 | Supplemental Indenture of Southern California Gas Company to American Trust Company dated as of July 1, 1947. | X |  |  |  |
| 4.41 | Supplemental Indenture of Southern California Gas Company to American Trust Company dated as of August 1, 1955. |  | 2-11997 | 4.07 | (1) |
| 4.42 | Supplemental Indenture of Southern California Gas Company to American Trust Company dated as of December 1, 1956. |  | 10-K | 4.09 | 02/23/07 |
| 4.43 | Supplemental Indenture of Southern California Gas Company to Wells Fargo Bank dated as of June 1, 1965. |  | 10-K | 4.10 | 02/23/07 |
| 4.44 | Supplemental Indenture of Southern California Gas Company to Wells Fargo Bank, National Association dated as of August 1, 1972. |  | 2-59832 | 2.19 | (1) |
| 4.45 | Supplemental Indenture of Southern California Gas Company to Wells Fargo Bank, National Association dated as of May 1, 1976. |  | 2-56034 | 2.20 | (1) |
| 4.46 | Supplemental Indenture of Southern California Gas Company to Wells Fargo Bank, National Association dated as of September 15, 1981. |  | 333-70654 | 4.24 | (1) |
| 4.47 | Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of November 18, 2005. |  | 8-K | 4.1 | 11/18/05 |
| 4.48 | Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of November 18, 2010. |  | 8-K | 4.1 | 11/18/10 |
| 4.49 | Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of September 21, 2012. |  | 8-K | 4.1 | 09/21/12 |
| 4.50 | Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of March 13, 2014. |  | 8-K | 4.1 | 03/13/14 |
| 4.51 | Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of September 11, 2014. |  | 8-K | 4.1 | 09/11/14 |
| 4.52 | Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of June 18, 2015. |  | 8-K | 4.2 | 06/18/15 |
| 4.53 | Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of June 3, 2016. |  | 8-K | 4.1 | 06/03/16 |
| 4.54 | Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of May 15, 2018. |  | 8-K | 4.1 | 05/15/18 |
| 4.55 | Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of September 24, 2018. |  | 8-K | 4.1 | 09/24/18 |
| 4.56 | Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of June 4, 2019. |  | 8-K | 4.1 | 06/04/19 |
| 4.57 | Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of January 9, 2020. |  | 8-K | 4.1 | 01/09/20 |
| 4.58 | Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of March 29, 2022. |  | 10-Q | 4.5 | 05/05/22 |

$^{(1)}$ Exhibit is not available on the SEC's website as it was filed in paper and predates EDGAR.

2022 Form 10-K | 107

# **EXHIBIT INDEX (CONTINUED)**

| Exhibit Number | Exhibit Description | Filed or Furnished Herewith | Incorporated by Reference |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  |  | Form or Registration Statement No. | Exhibit or Appendix | Filing Date |
| 4.59 | Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of November 14, 2022. |  | 8-K | 4.1 | 11/14/22 |
| 4.60 | Indenture, dated as of May 1, 1989, between Southern California Gas Company and Citibank, N.A., as trustee. |  | 333-28260 | 4.1.1 | (1) |
| 4.61 | First Supplemental Indenture, dated as of October 1, 1992, between Southern California Gas Company and Citibank, N.A., as trustee. |  | 8-K | 4.1.2 | (1) |
| 4.62 | Form of 5.670% Medium Term Note due 2028. |  | 8-K | 4.2.1 | (1) |
| 4.63 | Senior Indenture, dated as of September 21, 2020, between Southern California Gas Company and U.S. Bank National Association, as trustee. |  | 8-K | 4.1 | 09/21/20 |
| 4.64 | Officers' Certificate of Southern California Gas Company, including the form of its Floating Rate Note due 2023. |  | 8-K | 4.2 | 09/21/20 |
| 4.65 | Officers' Certificate of Southern California Gas Company, including the form of its 2.950% Note due 2027. |  | 8-K | 4.1 | 03/14/22 |

# **EXHIBIT 10 -- MATERIAL CONTRACTS**

# ***Sempra Energy***

| 10.1* | Second Amended and Restated Engineering, Procurement and Construction Contract, dated as of October 19, 2022, between Port Arthur LNG, LLC and PALNG Common Facilities Company, LLC (but only for the limited purpose set forth therein), and Bechtel Energy Inc. (F/K/A Bechtel Oil, Gas and Chemicals, Inc.) | X |  |  |  |
| --- | --- | --- | --- | --- | --- |

# ***Sempra Energy / San Diego Gas & Electric Company / Southern California Gas Company***

| 10.2 | Form of Continental Forge and California Class Action Price Reporting Settlement Agreement dated as of January 4, 2006. |  | 8-K | 99.1 | 01/05/06 |
| --- | --- | --- | --- | --- | --- |

# ***Sempra Energy / San Diego Gas & Electric Company***

| 10.3 | Amended and Restated Operating Order between San Diego Gas & Electric Company and the California Department of Water Resources effective March 10, 2011. |  | 10-Q | 10.4 | 05/09/11 |
| --- | --- | --- | --- | --- | --- |
| 10.4 | Amended and Restated Servicing Order between San Diego Gas & Electric Company and the California Department of Water Resources effective March 10, 2011. |  | 10-Q | 10.5 | 05/09/11 |

# ***Sempra Energy / Southern California Gas Company***

| 10.5 | Master Agreement to Resolve JCCP No. 4861 Private Party Claims, dated as of September 26, 2021, by and among Sempra Energy, Southern California Gas Company, and the plaintiffs' law firms listed on the signature pages thereto. |  | 8-K | 10.1 | 09/27/21 |
| --- | --- | --- | --- | --- | --- |
| 10.6 | First Amendment to Master Agreement to Resolve JCCP No. 4861 Private Party Claims, dated as of July 15, 2022, by and among Sempra Energy, Southern California Gas Company, and the plaintiffs' law firms listed on the signature pages thereto. |  | 10-Q | 10.1 | 08/04/22 |

# ***Management Contract or Compensatory Plan, Contract or Arrangement***

# ***Sempra Energy / San Diego Gas & Electric Company / Southern California Gas Company***

| 10.7 | Form of Sempra Energy 2019 Long-Term Incentive Plan 2021, 2022 and 2023 Nonqualified Stock Option Award Agreement. |  | 10-K | 10.6 | 02/25/21 |
| --- | --- | --- | --- | --- | --- |
| 10.8 | Form of Sempra Energy 2019 Long-Term Incentive Plan 2021, 2022 and 2023 Performance-Based Restricted Stock Unit Award - EPS Growth Performance Measure. |  | 10-K | 10.7 | 02/25/21 |

* Portions of the exhibit have been omitted in accordance with applicable SEC rules.

(1) Exhibit is not available on the SEC's website as it was filed in paper and predates EDGAR.

2022 Form 10-K | 108

# **EXHIBIT INDEX (CONTINUED)**

| Exhibit Number | Exhibit Description | Filed or Furnished Herewith | Incorporated by Reference |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  |  | Form or Registration Statement No. | Exhibit or Appendix | Filing Date |
| 10.9 | Form of Sempra Energy 2019 Long-Term Incentive Plan 2021, 2022 and 2023 Performance-Based Restricted Stock Unit Award - Relative Total Shareholder Return Performance Measure-S&P 500 Index. |  | 10-K | 10.8 | 02/25/21 |
| 10.10 | Form of Sempra Energy 2019 Long-Term Incentive Plan 2021, 2022 and 2023 Performance-Based Restricted Stock Unit Award - Relative Total Shareholder Return Performance Measure-S&P 500 Utilities Index. |  | 10-K | 10.9 | 02/25/21 |
| 10.11 | Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Nonqualified Stock Option Award Agreement. |  | 10-K | 10.5 | 02/27/20 |
| 10.12 | Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Time-Based Restricted Stock Unit Award - Three Year Ratable Vest. |  | 10-K | 10.6 | 02/27/20 |
| 10.13 | Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Time-Based Restricted Stock Unit Award - Four Year Award Vest. |  | 10-Q | 10.1 | 11/05/20 |
| 10.14 | Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Performance-Based Restricted Stock Unit Award - EPS Growth Performance Measure. |  | 10-K | 10.7 | 02/27/20 |
| 10.15 | Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Performance-Based Restricted Stock Unit Award - Relative Total Shareholder Return Performance Measure - S&P 500 Index. |  | 10-K | 10.8 | 02/27/20 |
| 10.16 | Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Performance-Based Restricted Stock Unit Award - Relative Total Shareholder Return Performance Measure - S&P 500 Utilities Index. |  | 10-K | 10.9 | 02/27/20 |
| 10.17 | Sempra Energy 2019 Long-Term Incentive Plan. |  | DEF 14A | E | 03/22/19 |
| 10.18 | Form of Sempra Energy 2019 Long-Term Incentive Plan 2019 Time-Based Restricted Stock Unit Award - Five Year Vest. |  | 10-Q | 10.2 | 08/02/19 |
| 10.19 | Form of Sempra Energy 2013 Long-Term Incentive Plan 2019 Nonqualified Stock Option Award Agreement. |  | 10-Q | 10.1 | 05/07/19 |
| 10.20 | Form of Indemnification Agreement with Directors and Executive Officers (executed before January 2011). |  | 10-Q | 10.2 | 08/07/08 |
| 10.21 | Form of Indemnification Agreement with Directors and Executive Officers (executed after January 2011). |  | 10-Q | 10.1 | 05/04/16 |
| 10.22 | Form of Sempra Energy Shared Services Executive Incentive Compensation Plan. |  | 10-K | 10.19 | 02/27/14 |
| 10.23 | Amendment Number 1 to the Amended and Restated Sempra Energy 2013 Long-Term Incentive Plan. |  | 10-K | 10.26 | 02/25/21 |
| 10.24 | Amended and Restated Sempra Energy 2013 Long-Term Incentive Plan. |  | 10-K | 10.5 | 02/26/16 |
| 10.25 | Amended and Restated Sempra Energy 2005 Deferred Compensation Plan, now known as Sempra Energy Employee and Director Savings Plan. |  | 10-K | 10.33 | 02/25/21 |
| 10.26 | Amended and Restated Sempra Energy Deferred Compensation and Excess Savings Plan. |  | 10-K | 10.28 | 02/28/17 |
| 10.27 | 2009 Amendment and Restatement of the Sempra Energy Supplemental Executive Retirement Plan effective July 1, 2009. |  | 10-K | 10.28 | 02/26/16 |
| 10.28 | First Amendment to the 2009 Amendment and Restatement of the Sempra Energy Supplemental Executive Retirement Plan effective February 11, 2010. |  | 10-K | 10.29 | 02/26/16 |

2022 Form 10-K | 109

# **EXHIBIT INDEX (CONTINUED)**

| Exhibit Number | Exhibit Description | Filed or Furnished Herewith | Incorporated by Reference |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  |  | Form or Registration Statement No. | Exhibit or Appendix | Filing Date |
| 10.29 | Second Amendment to the 2009 Amendment and Restatement of the Sempra Energy Supplemental Executive Retirement Plan effective January 1, 2014. |  | 10-K | 10.43 | 02/26/15 |
| 10.30 | 2015 Amendment and Restatement of the Sempra Energy Cash Balance Restoration Plan effective November 10, 2015. |  | 10-K | 10.31 | 02/26/16 |
| 10.31 | Sempra Energy Amended and Restated Executive Life Insurance Plan. |  | 10-K | 10.22 | 02/26/13 |
| 10.32 | Sempra Energy Executive Personal Financial Planning Program Policy Document. |  | 10-K | 10.35 | 02/27/20 |
| Sempra Energy |  |  |  |  |  |
| 10.33 | Form of Sempra Energy 2019 Long-Term Incentive Plan Non-Employee Directors' Annual Restricted Stock Unit Award. |  | 10-Q | 10.3 | 08/02/19 |
| 10.34 | Form of Sempra Energy 2019 Long-Term Incentive Plan Non-Employee Directors' Initial Restricted Stock Unit Award. |  | 10-Q | 10.4 | 08/02/19 |
| 10.35 | Form of 2018 Sempra Energy Non-Employee Directors' Initial Restricted Stock Unit Award. |  | 10-K | 10.50 | 02/27/18 |
| 10.36 | Sempra Energy Amended and Restated Retirement Plan for Directors. |  | 10-Q | 10.7 | 08/07/08 |
| 10.37 | Sempra Energy Annual Incentive Plan. |  | 10-Q | 10.7 | 05/07/18 |
| 10.38 | Amended and Restated Severance Pay Agreement between Sempra Energy and Jeffrey W. Martin, signed January 4, 2023 and effective January 1, 2023. | X |  |  |  |
| 10.39 | Amended and Restated Severance Pay Agreement between Sempra Energy and Kevin C. Sagara, signed January 2, 2023 and effective January 1, 2023. | X |  |  |  |
| 10.40 | Amended and Restated Severance Pay Agreement between Sempra Energy and Trevor I. Mihalik, signed January 3, 2023 and effective January 1, 2023. | X |  |  |  |
| 10.41 | Amended and Restated Severance Pay Agreement between Sempra Energy and Peter R. Wall, signed December 30, 2022 and effective January 1, 2023. | X |  |  |  |
| 10.42 | Amended and Restated Severance Pay Agreement between Sempra Energy and Karen L. Sedgwick, signed December 29, 2022 and effective January 1, 2023. | X |  |  |  |
| Sempra Energy / San Diego Gas & Electric Company |  |  |  |  |  |
| 10.43 | Form of San Diego Gas & Electric Company Executive Incentive Compensation |  | 10-K | 10.64 | 02/27/14 |
| 10.44 | Severance Pay Agreement between Sempra Energy and Caroline A. Winn, signed May 7, 2020 and effective as of January 1, 2020. |  | 10-Q | 10.1 | 08/05/20 |
| 10.45 | Severance Pay Agreement between Sempra Energy and Bruce A. Folkmann, dated March 1, 2017. |  | 10-Q | 10.15 | 05/09/17 |
| 10.46 | Severance Pay Agreement between Sempra Energy and Valerie A. Bille, signed September 30, 2020 and effective as of August 22, 2020. |  | 10-Q | 10.4 | 11/05/20 |
| 10.47 | Severance Pay Agreement between Sempra Energy and Erbin B. Keith, signed June 20, 2017 and effective as of March 1, 2017. | X |  |  |  |
| Sempra Energy / Southern California Gas Company |  |  |  |  |  |
| 10.48 | Form of Southern California Gas Company Executive Incentive Compensation Plan. |  | 10-K | 10.71 | 02/27/14 |

2022 Form 10-K | 110

# **EXHIBIT INDEX (CONTINUED)**

| Exhibit Number | Exhibit Description | Filed or Furnished Herewith | Incorporated by Reference |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  |  | Form or Registration Statement No. | Exhibit or Appendix | Filing Date |
| 10.49 | Severance Pay Agreement between Sempra Energy and Scott D. Drury dated August 25, 2018. |  | 10-Q | 10.4 | 11/07/18 |
| 10.50 | Severance Pay Agreement between Sempra Energy and Maryam S. Brown, dated March 1, 2017. |  | 10-Q | 10.7 | 08/02/19 |
| 10.51 | Severance Pay Agreement between Sempra Energy and Jimmie I. Cho, signed May 4, 2020, effective as of January 1, 2020. |  | 10-Q | 10.2 | 08/05/20 |
| 10.52 | Severance Pay Agreement between Sempra Energy and David J. Barrett, dated July 23, 2022. |  | 10-Q | 10.1 | 11/03/22 |
| 10.53 | Severance Pay Agreement between Sempra Energy and Mia L. DeMontigny, dated July 23, 2022. |  | 10-Q | 10.2 | 11/03/22 |

# **EXHIBIT 14 -- CODE OF ETHICS**

# ***Sempra Energy / San Diego Gas & Electric Company / Southern California Gas Company***

| 14.1 | Sempra Energy Code of Business Conduct and Ethics for Directors and Principal and Executive Officers (also applies to Principal Officers of San Diego Gas & Electric Company and Southern California Gas Company). | 10-K | 14.1 | 02/25/22 |
| --- | --- | --- | --- | --- |

2022 Form 10-K | 111

# **EXHIBIT INDEX (CONTINUED)**

| Exhibit Number | Exhibit Description | Filed or Furnished Herewith |
| --- | --- | --- |
| EXHIBIT 21 -- SUBSIDIARIES |  |  |
| Sempra Energy |  |  |
| 21.1 | Sempra Energy Schedule of Certain Subsidiaries at December 31, 2022. | X |
| EXHIBIT 23 -- CONSENTS OF EXPERTS AND COUNSEL |  |  |
| Sempra Energy |  |  |
| 23.1 | Sempra Energy Consent of Independent Registered Public Accounting Firm. | X |
| 23.2 | Oncor Electric Delivery Holdings Company LLC Consent of Independent Auditors. | X |
| San Diego Gas & Electric Company |  |  |
| 23.3 | San Diego Gas & Electric Company Consent of Independent Registered Public Accounting Firm. | X |
| Southern California Gas Company |  |  |
| 23.4 | Southern California Gas Company Consent of Independent Registered Public Accounting Firm. | X |
| EXHIBIT 24 -- POWERS OF ATTORNEY |  |  |
| Sempra Energy |  |  |
| 24.1 | Power of attorney of Sempra Energy signatories (incorporated by reference to the signature page hereto). | X |
| San Diego Gas & Electric Company |  |  |
| 24.2 | Power of attorney of San Diego Gas & Electric Company signatories (incorporated by reference to the signature page hereto). | X |
| Southern California Gas Company |  |  |
| 24.3 | Power of attorney of Southern California Gas Company signatories (incorporated by reference to the signature page hereto). | X |
| EXHIBIT 31 -- SECTION 302 CERTIFICATIONS |  |  |
| Sempra Energy |  |  |
| 31.1 | Certification of Sempra Energy's Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934. | X |
| 31.2 | Certification of Sempra Energy's Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934. | X |
| San Diego Gas & Electric Company |  |  |
| 31.3 | Certification of San Diego Gas & Electric Company's Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934. | X |
| 31.4 | Certification of San Diego Gas & Electric Company's Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934. | X |
| Southern California Gas Company |  |  |
| 31.5 | Certification of Southern California Gas Company's Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934. | X |
| 31.6 | Certification of Southern California Gas Company's Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934. | X |

2022 Form 10-K | 112

# **EXHIBIT INDEX (CONTINUED)**

| Exhibit Number | Exhibit Description | Filed or Furnished Herewith |
| --- | --- | --- |

# **EXHIBIT 32 -- SECTION 906 CERTIFICATIONS**

# ***Sempra Energy***

| 32.1 | Certification of Sempra Energy's Principal Executive Officer pursuant to 18 U.S.C. Sec. 1350. | X |
| --- | --- | --- |
| 32.2 | Certification of Sempra Energy's Principal Financial Officer pursuant to 18 U.S.C. Sec. 1350. | X |

# ***San Diego Gas & Electric Company***

| 32.3 | Certification of San Diego Gas & Electric Company's Principal Executive Officer pursuant to 18 U.S.C. Sec. 1350. | X |
| --- | --- | --- |
| 32.4 | Certification of San Diego Gas & Electric Company's Principal Financial Officer pursuant to 18 U.S.C. Sec. 1350. | X |

# ***Southern California Gas Company***

| 32.5 | Certification of Southern California Gas Company's Principal Executive Officer pursuant to 18 U.S.C. Sec. 1350. | X |
| --- | --- | --- |
| 32.6 | Certification of Southern California Gas Company's Principal Financial Officer pursuant to 18 U.S.C. Sec. 1350. | X |

# **EXHIBIT 99 -- ADDITIONAL EXHIBITS**

# ***Sempra Energy***

| 99.1 | Audited consolidated financial statements of Oncor Electric Delivery Holdings Company LLC and subsidiaries as of December 31, 2022 and 2021 for each of the three years ended in the period ended December 31, 2022, and the related Independent Auditors' Report. | X |
| --- | --- | --- |

# **EXHIBIT 101 -- INTERACTIVE DATA FILE**

| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document. | X |
| --- | --- | --- |
| 101.SCH | XBRL Taxonomy Extension Schema Document. | X |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | X |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | X |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | X |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | X |

# **EXHIBIT 104 -- COVER PAGE**

| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| --- | --- |

# **ITEM 16. FORM 10-K SUMMARY**

Not applicable.

2022 Form 10-K | 113

# **Sempra Energy:**

# **SIGNATURES**

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

SEMPRA ENERGY, (Registrant)

By: /s/ J. Walker Martin

Chairman, Chief Executive Officer and President

Date: February 28, 2023

# **POWER OF ATTORNEY**

Each of the undersigned officers and directors of the registrant hereby severally constitutes and appoints each individual who, at the time of acting under this power of attorney, is the Principal Executive Officer (however designated), the Principal Financial Officer (however designated) or the Principal Accounting Officer (however designated) of Sempra Energy, and each of them singly (with full power to each of them to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them, for him or her and in his or her name, place and stead, and in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This power of attorney shall be governed by and construed in accordance with the laws of the State of California and applicable federal securities laws.

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

| Name/Title | Signature | Date |
| --- | --- | --- |
| Principal Executive Officer: |  |  |
| J. Walker Martin Chief Executive Officer and President | /s/ J. Walker Martin | February 28, 2023 |
| Principal Financial Officer: |  |  |
| Trevor I. Mihalik Executive Vice President and Chief Financial Officer | /s/ Trevor I. Mihalik | February 28, 2023 |
| Principal Accounting Officer: |  |  |
| Peter R. Wall Senior Vice President, Controller and Chief Accounting Officer | /s/ Peter R. Wall | February 28, 2023 |

2022 Form 10-K | 114

| Directors: | Signature | Date |
| --- | --- | --- |
| J. Walker Martin, Chairman | /s/ J. Walker Martin | February 28, 2023 |
| Alan L. Boeckmann, Director | /s/ Alan L. Boeckmann | February 28, 2023 |
| Andrés Conesa, Director | /s/ Andrés Conesa | February 28, 2023 |
| Maria Contreras-Sweet, Director | /s/ Maria Contreras-Sweet | February 28, 2023 |
| Pablo A. Ferrero, Director | /s/ Pablo A. Ferrero | February 28, 2023 |
| Bethany J. Mayer, Director | /s/ Bethany J. Mayer | February 28, 2023 |
| Michael N. Mears, Director | /s/ Michael N. Mears | February 28, 2023 |
| Jack T. Taylor, Director | /s/ Jack T. Taylor | February 28, 2023 |
| Cynthia L. Walker, Director | /s/ Cynthia L. Walker | February 28, 2023 |
| Cynthia J. Warner, Director | /s/ Cynthia J. Warner | February 28, 2023 |
| James C. Yardley, Director | /s/ James C. Yardley | February 28, 2023 |

2022 Form 10-K | 115

San Diego Gas & Electric Company:

# SIGNATURES

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

SAN DIEGO GAS & ELECTRIC COMPANY,
(Registrant)

By: /s/ Caroline A. Winn

Caroline A. Winn
Chief Executive Officer

Date: February 28, 2023

# POWER OF ATTORNEY

Each of the undersigned officers and directors of the registrant hereby severally constitutes and appoints each individual who, at the time of acting under this power of attorney, is the Principal Executive Officer (however designated), the Principal Financial Officer (however designated) or the Principal Accounting Officer (however designated) of San Diego Gas & Electric Company, and each of them singly (with full power to each of them to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them, for him or her and in his or her name, place and stead, and in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This power of attorney shall be governed by and construed in accordance with the laws of the State of California and applicable federal securities laws.

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

| Name/Title | Signature | Date |
| --- | --- | --- |
| Principal Executive Officer: Caroline A. Winn Chief Executive Officer | /s/ Caroline A. Winn | February 28, 2023 |
| Principal Financial Officer: Bruce A. Folkmann President and Chief Financial Officer | /s/ Bruce A. Folkmann | February 28, 2023 |
| Principal Accounting Officer: Valerie A. Bille Vice President, Controller and Chief Accounting Officer | /s/ Valerie A. Bille | February 28, 2023 |
| Directors: |  |  |
| Kevin C. Sagara, Non-Executive Chairman | /s/ Kevin C. Sagara | February 28, 2023 |
| Robert J. Borthwick, Director | /s/ Robert J. Borthwick | February 28, 2023 |
| Karen L. Sedgwick, Director | /s/ Karen L. Sedgwick | February 28, 2023 |
| Caroline A. Winn, Director | /s/ Caroline A. Winn | February 28, 2023 |

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT:

No annual report to security holders covering the registrant's last fiscal year and no proxy statement, form of proxy or other proxy soliciting material with respect to any annual or other meeting of security holders has been sent to security holders during the period covered by this annual report on Form 10-K, and no such materials are to be furnished to security holders subsequent to the filing of this annual report on Form 10-K.

2022 Form 10-K | 116

# **Southern California Gas Company:**

# **SIGNATURES**

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

SOUTHERN CALIFORNIA GAS COMPANY, (Registrant)

By: /s/ Scott D. Drury

Chief Executive Officer

Date: February 28, 2023

# **POWER OF ATTORNEY**

Each of the undersigned officers and directors of the registrant hereby severally constitutes and appoints each individual who, at the time of acting under this power of attorney, is the Principal Executive Officer (however designated), the Principal Financial Officer (however designated) or the Principal Accounting Officer (however designated) of Southern California Gas Company, and each of them singly (with full power to each of them to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them, for him or her and in his or her name, place and stead, and in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This power of attorney shall be governed by and construed in accordance with the laws of the State of California and applicable federal securities laws.

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

| Name/Title | Signature | Date |
| --- | --- | --- |
| Principal Executive Officer: |  |  |
| Scott D. Drury Chief Executive Officer | /s/ Scott D. Drury | February 28, 2023 |
| Principal Financial and Accounting Officer: |  |  |
| Mia L. DeMontigny Senior Vice President, Chief Financial Officer and Chief Accounting Officer | /s/ Mia L. DeMontigny | February 28, 2023 |
| Directors: |  |  |
| Kevin C. Sagara, Non-Executive Chairman | /s/ Kevin C. Sagara | February 28, 2023 |
| Diana L. Day, Director | /s/ Diana L. Day | February 28, 2023 |
| Scott D. Drury, Director | /s/ Scott D. Drury | February 28, 2023 |
| Lisa Larroque Alexander, Director | /s/ Lisa Larroque Alexander | February 28, 2023 |

2022 Form 10-K | 117

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2022 Form 10-K | 118

# INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm (PCAOB ID 34)

F-2

| Consolidated Financial Statements: | Sempra | San Diego Gas & Electric Company | Southern California Gas Company |
| --- | --- | --- | --- |
| Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020 | F-8 | F-16 | F-22 |
| Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020 | F-9 | F-17 | F-23 |
| Consolidated Balance Sheets at December 31, 2022 and 2021 | F-10 | F-18 | F-24 |
| Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020 | F-12 | F-20 | F-26 |
| Consolidated Statements of Changes in Equity for the years ended December 31, 2022, 2021 and 2020 | F-14 | N/A | N/A |
| Statements of Changes in Shareholders Equity for the years ended December 31, 2022, 2021 and 2020 | N/A | F-21 | F-27 |

Notes to Consolidated Financial Statements

| Note 1. Significant Accounting Policies and Other Financial Data | F-28 |
| --- | --- |
| Note 2. New Accounting Standards | F-52 |
| Note 3. Revenues | F-53 |
| Note 4. Regulatory Matters | F-58 |
| Note 5. Acquisitions, Divestitures and Discontinued Operations | F-62 |
| Note 6. Investments in Unconsolidated Entities | F-64 |
| Note 7. Debt and Credit Facilities | F-70 |
| Note 8. Income Taxes | F-76 |
| Note 9. Employee Benefit Plans | F-83 |
| Note 10. Share-Based Compensation | F-101 |
| Note 11. Derivative Financial Instruments | F-104 |
| Note 12. Fair Value Measurements | F-110 |
| Note 13. Preferred Stock | F-116 |
| Note 14. Sempra - Shareholders' Equity and Earnings Per Common Share | F-119 |
| Note 15. San Onofre Nuclear Generating Station | F-121 |
| Note 16. Commitments and Contingencies | F-124 |
| Note 17. Segment Information | F-141 |

2022 Form 10-K | F-1

# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

*To the Shareholders and Board of Directors of Sempra Energy:*

## Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Sempra Energy and subsidiaries (“Sempra”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows for each of the three years in the period ended December 31, 2022, the related notes, and the schedule listed in Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Sempra as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), Sempra’s internal control over financial reporting as of December 31, 2022, based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2023, expressed an unqualified opinion on Sempra’s internal control over financial reporting.

## Basis for Opinion

These financial statements are the responsibility of Sempra’s management. Our responsibility is to express an opinion on Sempra’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Sempra in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

## Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

## *Regulatory Accounting - Impact of Rate Regulation on the Financial Statements - Refer to Note 1 of the Notes to Consolidated Financial Statements*

### *Critical Audit Matter Description*

Sempra is subject to rate regulation by regulators and commissions in various jurisdictions (collectively, the “Commissions”) that have jurisdiction with respect to the rates of electric and gas transmission and distribution companies in those jurisdictions. Management has determined it meets the requirements under U.S. GAAP to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation. Accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures, such as property, plant and equipment; regulatory assets and liabilities; operating revenues; operation and maintenance expense; depreciation expense; and taxes.

We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about impacted account balances and disclosures and the high degree of subjectivity involved in assessing the impact of future regulatory orders on the financial statements. Management’s judgments include assessing the likelihood of (1) the recovery in future rates of incurred costs and (2) potential refunds to customers. Auditing these judgments required specialized knowledge of accounting for rate regulation and the rate setting process due to its inherent complexities.

2022 Form 10-K | F-2

# *How the Critical Audit Matter Was Addressed in the Audit*

Our audit procedures related to the application of specialized rules to account for the effects of cost-based rate regulation and the uncertainty of future decisions by the Commissions included the following, among others:

- We tested the effectiveness of management's controls over the evaluation of the likelihood of (1) the recovery in future rates of costs deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. We tested the effectiveness of management's controls over the initial recognition of amounts as regulatory assets or liabilities and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates.
- We read relevant regulatory orders issued by the Commissions for Sempra and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the Commissions' treatment of similar costs under similar circumstances. We evaluated the external information and compared to management's recorded regulatory asset and liability balances for completeness.
- We evaluated Sempra's disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.

/s/ DELOITTE & TOUCHE LLP

San Diego, California

February 28, 2023

We have served as Sempra's auditor since 1935.

2022 Form 10-K | F-3

# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

*To the Shareholder and Board of Directors of San Diego Gas & Electric Company:*

## Opinion on the Financial Statements

We have audited the accompanying balance sheets of San Diego Gas & Electric Company (“SDG&E”) as of December 31, 2022 and 2021, the related statements of operations, comprehensive income (loss), changes in shareholder’s equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of SDG&E as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), SDG&E’s internal control over financial reporting as of December 31, 2022, based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2023, expressed an unqualified opinion on SDG&E’s internal control over financial reporting.

## Basis for Opinion

These financial statements are the responsibility of SDG&E’s management. Our responsibility is to express an opinion on SDG&E’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to SDG&E in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

## Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

## *Regulatory Accounting - Impact of Rate Regulation on the Financial Statements - Refer to Note 1 of the Notes to Consolidated Financial Statements*

### *Critical Audit Matter Description*

SDG&E is subject to rate regulation by regulators and commissions in various jurisdictions (collectively, the “Commissions”) that have jurisdiction with respect to the rates of electric and gas transmission and distribution companies in those jurisdictions. Management has determined it meets the requirements under U.S. GAAP to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation. Accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures, such as property, plant and equipment; regulatory assets and liabilities; operating revenues; operation and maintenance expense; depreciation expense; and taxes.

We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about impacted account balances and disclosures and the high degree of subjectivity involved in assessing the impact of future regulatory orders on the financial statements. Management’s judgments include assessing the likelihood of (1) the recovery in future rates of incurred costs and (2) potential refunds to customers. Auditing these judgments required specialized knowledge of accounting for rate regulation and the rate setting process due to its inherent complexities.

2022 Form 10-K | F-4

# *How the Critical Audit Matter Was Addressed in the Audit*

Our audit procedures related to the application of specialized rules to account for the effects of cost-based rate regulation and the uncertainty of future decisions by the Commissions included the following, among others:

- We tested the effectiveness of management's controls over the evaluation of the likelihood of (1) the recovery in future rates of costs deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. We tested the effectiveness of management's controls over the initial recognition of amounts as regulatory assets or liabilities and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates.
- We read relevant regulatory orders issued by the Commissions for SDG&E and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the Commissions' treatment of similar costs under similar circumstances. We evaluated the external information and compared to management's recorded regulatory asset and liability balances for completeness.
- We evaluated SDG&E's disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.

/s/ DELOITTE & TOUCHE LLP

San Diego, California

February 28, 2023

We have served as SDG&E's auditor since 1935.

2022 Form 10-K | F-5

# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

*To the Shareholders and Board of Directors of Southern California Gas Company:*

## Opinion on the Financial Statements

We have audited the accompanying balance sheets of Southern California Gas Company (“SoCalGas”) as of December 31, 2022 and 2021, the related statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of SoCalGas as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), SoCalGas’ internal control over financial reporting as of December 31, 2022, based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2023, expressed an unqualified opinion on SoCalGas’ internal control over financial reporting.

## Basis for Opinion

These financial statements are the responsibility of SoCalGas’ management. Our responsibility is to express an opinion on SoCalGas’ financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to SoCalGas in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

## Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

## *Regulatory Accounting - Impact of Rate Regulation on the Financial Statements - Refer to Note 1 of the Notes to Financial Statements*

### *Critical Audit Matter Description*

SoCalGas is subject to rate regulation by regulators and commissions in various jurisdictions (collectively, the “Commissions”) that have jurisdiction with respect to the rates of gas transmission and distribution companies in those jurisdictions. Management has determined it meets the requirements under U.S. GAAP to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation. Accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures, such as property, plant and equipment; regulatory assets and liabilities; operating revenues; operation and maintenance expense; depreciation expense; and taxes.

We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about impacted account balances and disclosures and the high degree of subjectivity involved in assessing the impact of future regulatory orders on the financial statements. Management’s judgments include assessing the likelihood of (1) the recovery in future rates of incurred costs and (2) potential refunds to customers. Auditing these judgments required specialized knowledge of accounting for rate regulation and the rate setting process due to its inherent complexities.

2022 Form 10-K | F-6

# *How the Critical Audit Matter Was Addressed in the Audit*

Our audit procedures related to the application of specialized rules to account for the effects of cost-based rate regulation and the uncertainty of future decisions by the Commissions included the following, among others:

- We tested the effectiveness of management's controls over the evaluation of the likelihood of (1) the recovery in future rates of costs deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. We tested the effectiveness of management's controls over the initial recognition of amounts as regulatory assets or liabilities and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates.
- We read relevant regulatory orders issued by the Commissions for SoCalGas and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the Commissions' treatment of similar costs under similar circumstances. We evaluated the external information and compared to management's recorded regulatory asset and liability balances for completeness.
- We evaluated SoCalGas' disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.

/s/ DELOITTE & TOUCHE LLP

San Diego, California

February 28, 2023

We have served as SoCalGas' auditor since 1937.

2022 Form 10-K | F-7

# **SEMPRA ENERGY**  
 **CONSOLIDATED STATEMENTS OF OPERATIONS**

*(Dollars in millions, except per share amounts, shares in thousands)*

|  | Years ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| REVENUES |  |  |  |
| Utilities: |  |  |  |
| Natural gas | $7,868 | $6,333 | $5,411 |
| Electric | 4,783 | 4,658 | 4,614 |
| Energy-related businesses | 1,788 | 1,866 | 1,345 |
| Total revenues | 14,439 | 12,857 | 11,370 |
| EXPENSES AND OTHER INCOME |  |  |  |
| Utilities: |  |  |  |
| Cost of natural gas | (2,603) | (1,597) | (925) |
| Cost of electric fuel and purchased power | (937) | (1,010) | (1,187) |
| Energy-related businesses cost of sales | (942) | (611) | (276) |
| Operation and maintenance | (4,746) | (4,341) | (3,941) |
| Aliso Canyon litigation and regulatory matters | (259) | (1,593) | (307) |
| Depreciation and amortization | (2,019) | (1,855) | (1,666) |
| Franchise fees and other taxes | (635) | (596) | (543) |
| Gain (loss) on sale of assets | - | 36 | (3) |
| Other income (expense), net | 24 | 58 | (48) |
| Interest income | 75 | 69 | 96 |
| Interest expense | (1,054) | (1,198) | (1,081) |
| Income from continuing operations before income taxes and equity earnings | 1,343 | 219 | 1,489 |
| Income tax expense | (556) | (99) | (249) |
| Equity earnings | 1,498 | 1,343 | 1,015 |
| Income from continuing operations, net of income tax | 2,285 | 1,463 | 2,255 |
| Income from discontinued operations, net of income tax | - | - | 1,850 |
| Net income | 2,285 | 1,463 | 4,105 |
| Earnings attributable to noncontrolling interests | (146) | (145) | (172) |
| Preferred dividends | (44) | (63) | (168) |
| Preferred dividends of subsidiary | (1) | (1) | (1) |
| Earnings attributable to common shares | $2,094 | $1,254 | $3,764 |
| Basic EPS: |  |  |  |
| Earnings from continuing operations | $6.65 | $4.03 | $6.61 |
| Earnings from discontinued operations | $ - | $ - | $6.32 |
| Earnings | $6.65 | $4.03 | $12.93 |
| Weighted-average common shares outstanding | 315,159 | 311,755 | 291,077 |
| Diluted EPS: |  |  |  |
| Earnings from continuing operations | $6.62 | $4.01 | $6.58 |
| Earnings from discontinued operations | $ - | $ - | $6.30 |
| Earnings | $6.62 | $4.01 | $12.88 |
| Weighted-average common shares outstanding | 316,378 | 313,036 | 292,252 |

*See Notes to Consolidated Financial Statements.*

2022 Form 10-K | F-8

# **SEMPRA ENERGY**  
 **CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)**

*(Dollars in millions)*

Years ended December 31, 2022, 2021 and 2020

|  | Sempra Energy shareholders' equity |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | Pretax amount | Income tax (expense) benefit | Net-of-tax amount | Noncontrolling interests (after tax) | Total |
| 2022: |  |  |  |  |  |
| Net income | $2,695 | $(556) | $2,139 | $146 | $2,285 |
| Other comprehensive income (loss): |  |  |  |  |  |
| Foreign currency translation adjustments | 11 | - | 11 | 4 | 15 |
| Financial instruments | 221 | (55) | 166 | 50 | 216 |
| Pension and other postretirement benefits | 3 | (6) | (3) | - | (3) |
| Total other comprehensive income | 235 | (61) | 174 | 54 | 228 |
| Comprehensive income | 2,930 | (617) | 2,313 | 200 | 2,513 |
| Preferred dividends of subsidiary | (1) | - | (1) | - | (1) |
| Comprehensive income, after preferred dividends of subsidiary | $2,929 | $(617) | $2,312 | $200 | $2,512 |
| 2021: |  |  |  |  |  |
| Net income | $1,417 | $(99) | $1,318 | $145 | $1,463 |
| Other comprehensive income (loss): |  |  |  |  |  |
| Foreign currency translation adjustments | (6) | - | (6) | (3) | (9) |
| Financial instruments | 191 | (47) | 144 | 14 | 158 |
| Pension and other postretirement benefits | 28 | (6) | 22 | - | 22 |
| Total other comprehensive income | 213 | (53) | 160 | 11 | 171 |
| Comprehensive income | 1,630 | (152) | 1,478 | 156 | 1,634 |
| Preferred dividends of subsidiary | (1) | - | (1) | - | (1) |
| Comprehensive income, after preferred dividends of subsidiary | $1,629 | $(152) | $1,477 | $156 | $1,633 |
| 2020: |  |  |  |  |  |
| Net income | $5,368 | $(1,435) | $3,933 | $172 | $4,105 |
| Other comprehensive income (loss): |  |  |  |  |  |
| Foreign currency translation adjustments | 547 | - | 547 | (12) | 535 |
| Financial instruments | (146) | 33 | (113) | (12) | (125) |
| Pension and other postretirement benefits | 11 | 1 | 12 | - | 12 |
| Total other comprehensive income (loss) | 412 | 34 | 446 | (24) | 422 |
| Comprehensive income | 5,780 | (1,401) | 4,379 | 148 | 4,527 |
| Preferred dividends of subsidiary | (1) | - | (1) | - | (1) |
| Comprehensive income, after preferred dividends of subsidiary | $5,779 | $(1,401) | $4,378 | $148 | $4,526 |

See Notes to Consolidated Financial Statements.

2022 Form 10-K | F-9

# **SEMPRA ENERGY  
CONSOLIDATED BALANCE SHEETS**

*(Dollars in millions)*

|  | December 31, |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| ASSETS |  |  |
| Current assets: |  |  |
| Cash and cash equivalents | $370 | $559 |
| Restricted cash | 40 | 19 |
| Accounts receivable - trade, net | 2,635 | 2,071 |
| Accounts receivable - other, net | 685 | 398 |
| Due from unconsolidated affiliates | 54 | 23 |
| Income taxes receivable | 113 | 79 |
| Inventories | 403 | 389 |
| Prepaid expenses | 268 | 260 |
| Regulatory assets | 351 | 271 |
| Fixed-price contracts and other derivatives | 803 | 179 |
| Greenhouse gas allowances | 141 | 97 |
| Other current assets | 49 | 30 |
| Total current assets | 5,912 | 4,375 |
| Other assets: |  |  |
| Restricted cash | 52 | 3 |
| Due from unconsolidated affiliates | - | 637 |
| Regulatory assets | 2,588 | 2,011 |
| Insurance receivable for Aliso Canyon costs | - | 360 |
| Greenhouse gas allowances | 796 | 422 |
| Nuclear decommissioning trusts | 841 | 1,012 |
| Dedicated assets in support of certain benefit plans | 505 | 567 |
| Deferred income taxes | 135 | 151 |
| Right-of-use assets - operating leases | 655 | 594 |
| Investment in Oncor Holdings | 13,665 | 12,947 |
| Other investments | 2,012 | 1,525 |
| Goodwill | 1,602 | 1,602 |
| Other intangible assets | 344 | 370 |
| Wildfire fund | 303 | 331 |
| Other long-term assets | 1,382 | 1,244 |
| Total other assets | 24,880 | 23,776 |
| Property, plant and equipment: |  |  |
| Property, plant and equipment | 63,893 | 58,940 |
| Less accumulated depreciation and amortization | (16,111) | (15,046) |
| Property, plant and equipment, net | 47,782 | 43,894 |
| Total assets | $78,574 | $72,045 |

*See Notes to Consolidated Financial Statements.*

2022 Form 10-K | F-10

# **SEMPRA ENERGY  
CONSOLIDATED BALANCE SHEETS (CONTINUED)**

*(Dollars in millions)*

|  | December 31, |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| LIABILITIES AND EQUITY |  |  |
| Current liabilities: |  |  |
| Short-term debt | $3,352 | $3,471 |
| Accounts payable - trade | 1,994 | 1,671 |
| Accounts payable - other | 275 | 178 |
| Dividends and interest payable | 621 | 563 |
| Accrued compensation and benefits | 484 | 479 |
| Regulatory liabilities | 504 | 359 |
| Current portion of long-term debt and finance leases | 1,019 | 106 |
| Reserve for Aliso Canyon costs | 129 | 1,980 |
| Greenhouse gas obligations | 141 | 97 |
| Other current liabilities | 1,380 | 1,131 |
| Total current liabilities | 9,899 | 10,035 |
| Long-term debt and finance leases | 24,548 | 21,068 |
| Deferred credits and other liabilities: |  |  |
| Due to unconsolidated affiliates | 301 | 287 |
| Regulatory liabilities | 3,341 | 3,402 |
| Greenhouse gas obligations | 565 | 225 |
| Pension and other postretirement benefit plan obligations, net of plan assets | 410 | 687 |
| Deferred income taxes | 4,591 | 3,477 |
| Asset retirement obligations | 3,546 | 3,375 |
| Deferred credits and other | 2,117 | 2,070 |
| Total deferred credits and other liabilities | 14,871 | 13,523 |
| Commitments and contingencies (Note 16) |  |  |
| Equity: |  |  |
| Preferred stock (50 million shares authorized): |  |  |
| Preferred stock, series C (0.9 million shares outstanding) | 889 | 889 |
| Common stock (750 million shares authorized; 314 million and 317 million shares outstanding at December 31, 2022 and 2021, respectively; no par value) | 12,160 | 11,862 |
| Retained earnings | 14,201 | 13,548 |
| Accumulated other comprehensive income (loss) | (135) | (318) |
| Total Sempra Energy shareholders' equity | 27,115 | 25,981 |
| Preferred stock of subsidiary | 20 | 20 |
| Other noncontrolling interests | 2,121 | 1,418 |
| Total equity | 29,256 | 27,419 |
| Total liabilities and equity | $78,574 | $72,045 |

*See Notes to Consolidated Financial Statements.*

2022 Form 10-K | F-11

# **SEMPRA ENERGY**  
 **CONSOLIDATED STATEMENTS OF CASH FLOWS**

*(Dollars in millions)*

|  | Years ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |
| Net income | $2,285 | $1,463 | $4,105 |
| Less: Income from discontinued operations, net of income tax | - | - | (1,850) |
| Income from continuing operations, net of income tax | 2,285 | 1,463 | 2,255 |
| Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |
| Depreciation and amortization | 2,019 | 1,855 | 1,666 |
| Deferred income taxes and investment tax credits | 392 | (78) | 159 |
| (Gain) loss on sale of assets | - | (36) | 3 |
| Equity earnings | (1,498) | (1,343) | (1,015) |
| Foreign currency transaction losses, net | 24 | 18 | 25 |
| Share-based compensation expense | 71 | 63 | 71 |
| Fixed-price contracts and other derivatives | 863 | 206 | (7) |
| Other | 154 | 170 | 140 |
| Net change in other working capital components: |  |  |  |
| Accounts receivable | (976) | (599) | (328) |
| Due to/from unconsolidated affiliates, net | (31) | (1) | 12 |
| Income taxes receivable/payable, net | (29) | (38) | (94) |
| Inventories | (17) | (87) | (35) |
| Other current assets | (1,608) | (220) | 38 |
| Accounts payable | 430 | 263 | 74 |
| Regulatory balancing accounts, net | 36 | 249 | (231) |
| Reserve for Aliso Canyon costs | (1,851) | 1,532 | 141 |
| Other current liabilities | 228 | (105) | (127) |
| Insurance receivable for Aliso Canyon costs | 360 | 85 | (106) |
| Distributions from investments | 854 | 941 | 651 |
| Reserve for Aliso Canyon costs, noncurrent | 1 | - | 294 |
| Changes in other noncurrent assets and liabilities, net | (565) | (496) | 56 |
| Net cash provided by continuing operations | 1,142 | 3,842 | 3,642 |
| Net cash used in discontinued operations | - | - | (1,051) |
| Net cash provided by operating activities | 1,142 | 3,842 | 2,591 |
| CASH FLOWS FROM INVESTING ACTIVITIES |  |  |  |
| Expenditures for property, plant and equipment | (5,357) | (5,015) | (4,676) |
| Expenditures for investments and acquisitions | (376) | (633) | (652) |
| Proceeds from sale of assets | - | 38 | 19 |
| Distributions from investments | - | 366 | 761 |
| Purchases of nuclear decommissioning and other trust assets | (700) | (961) | (1,439) |
| Proceeds from sales of nuclear decommissioning and other trust assets | 762 | 961 | 1,439 |
| Advances to unconsolidated affiliates | - | (8) | (92) |
| Repayments of advances to unconsolidated affiliates | 626 | 38 | 7 |
| Disbursement for note receivable | - | (305) | - |
| Other | 6 | 11 | 15 |
| Net cash used in continuing operations | (5,039) | (5,508) | (4,618) |
| Net cash provided by discontinued operations | - | - | 5,171 |
| Net cash (used in) provided by investing activities | (5,039) | (5,508) | 553 |

See Notes to Consolidated Financial Statements.

2022 Form 10-K | F-12

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