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What changed in Sempra's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Sempra's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+738 added−725 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)

Top changes in Sempra's 2023 10-K

738 paragraphs added · 725 removed · 541 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

133 edited+35 added−23 removed104 unchanged
Biggest changeNatural 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 Table of Contents SoCalGas’ assets at December 31, 2022 covered the following territory: 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.
Biggest changeCertain FERC transmission development projects are open to competition, allowing independent developers to compete with incumbent utilities for the construction and operation of transmission facilities. 2023 Form 10-K | 14 Table of Contents 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, 2023, approximately 21 million, covering an approximate 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).
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.
Rather, Oncor provides wholesale transmission services to its electricity distribution business as well as non-affiliated electricity distribution companies, electric 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 electric cooperatives and municipally owned utilities.
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.
Cost of Capital Proceedings A CPUC cost of capital proceeding every three years determines a utility’s authorized capital structure and 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.
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.
These applications for interim rate adjustments between base rate reviews, known as “capital tracker” provisions, are intended to encourage transmission and distribution investments 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.
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 limited representation on the Oncor Holdings and Oncor boards of directors.
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 or other distributions, strategic planning and other important corporate issues and actions, including limited representation on the Oncor Holdings and Oncor boards of directors.
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.
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 and interruptible transportation rights.
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.
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, 2023.
COMPANY WEBSITES Company website addresses are: ▪ Sempra – www.sempra.com ▪ SDG&E – www.sdge.com ▪ 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.
COMPANY WEBSITES Our Registrants’ website addresses are: ▪ Sempra – www.sempra.com ▪ SDG&E – www.sdge.com ▪ 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.
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.
To help achieve the goal of ratepayer indifference (as to whether customers’ energy is procured by SDG&E or by CCA or DA), the CPUC revised the Power Charge Indifference Adjustment framework.
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.
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.
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 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.
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.
At December 31, 2023, 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.
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.
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 mature oil and gas markets resulting in efficient unit costs of gas production ▪ availability of extensive 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.
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.
These procedures could result in delays or disallowances of recovery from customers. 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.
(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.
(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 PPAs under which SDG&E provides natural gas to the energy supplier.
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.
The proceeding generally establishes the test year revenue requirements, which authorize 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.
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.
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 supplies in Mexico.
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.
SoCalGas uses the remaining storage capacity for load balancing services for all customers and for storage for noncore 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.
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.
Alternatively, each of SDG&E and SoCalGas is permitted to file a cost of capital application to have its cost of capital determined in lieu of the CCM 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.
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 owns four natural gas storage facilities with a combined working gas capacity of 137 Bcf and 128 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.
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.
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 goals of delivering safe, reliable and increasingly clean forms of energy to customers and increasing shareholder value.
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.
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, SEFE and other similar counterparties.
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.
At December 31, 2023, 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.
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.
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 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.
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.
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.
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.
At December 31, 2023, Sempra Infrastructure had a fully contracted, total nameplate capacity of 1,044 MW related to its fully operating wind and solar power generation facilities.
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.
The table below shows the number of employees for each of our Registrants at December 31, 2023, as well as the number 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.
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 Table of Contents
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. 2023 Form 10-K | 33 Table of Contents
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.
In California, certification of a generation project by the CEC as an eligible renewable energy resource 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.
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.
Folkmann 56 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 58 Chief Operating Officer June 2022 to present Chief Safety Officer January 2021 to present Senior Vice President - Electric Operations July 2020 to June 2022 Chief Operating Officer and Senior Vice President, Operations, Nevada Energy, an electric and natural gas public utility in Nevada October 2017 to May 2020 Valerie A.
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 procures natural gas under short-term contracts for its owned generation facilities and for certain tolling contracts associated with PPAs. Purchases from various southwestern U.S. suppliers are primarily priced based on published monthly bid-week indices, which can be subject to volatility.
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.
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. ECA LNG Phase 1 Project.
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.
INFORMATION ABOUT EXECUTIVE OFFICERS Name Age (1) Positions held over last five years Time in position SoCalGas: Scott D. Drury 58 Chief Executive Officer August 2020 to present President, SDG&E January 2017 to July 2020 Maryam S. Brown 48 President March 2019 to present Vice President of Federal Government Affairs, Sempra September 2016 to March 2019 Jimmie I.
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.
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 rates, retail services, and ordinances of municipalities.
We did not experience any major work stoppages in 2022 and we maintain constructive relations with our labor unions.
We did not experience any major work stoppages in 2023 and we maintain constructive relations with our labor unions.
Risk Factors.” 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.
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 seven pipelines that offer access to major feed gas supply basins in Texas and the northeast, midcontinent and southeast regions of the U.S.
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.
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, subject to regulatory approval.
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.
These franchise agreements, which went into effect in July 2021, 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.
Winn 59 Chief Executive Officer August 2020 to present Chief Operating Officer January 2017 to July 2020 Bruce A.
Winn 60 Chief Executive Officer August 2020 to present Chief Operating Officer January 2017 to July 2020 Bruce A.
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.
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.
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.
These electric facilities are primarily in the San Diego, Imperial and Orange counties of California, and in Arizona and Nevada and consisted of 1,925 miles of transmission lines, 24,023 miles of distribution lines and 157 substations at December 31, 2023. Occasionally, various areas of the service territory require expansion to accommodate customer growth and maintain reliability and safety.
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.
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.
MD&A – Capital Resources and Liquidity – Sempra Infrastructure.” 2022 Form 10-K | 25 Table of Contents 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 Benjamin 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.
MD&A – Capital Resources and Liquidity – Sempra Infrastructure.” 2023 Form 10-K | 23 Table of Contents 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 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 Benjamin 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 Natural Gas-Fired Generation.
We discuss GHG emissions standards and credits further in Note 1 of the Notes to Consolidated Financial Statements. 2022 Form 10-K | 32 Table of Contents 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.
We discuss GHG emission standards and credits further in Note 1 of the Notes to the Consolidated Financial Statements. 2023 Form 10-K | 30 Table of Contents OTHER MATTERS Information About Our Executive Officers INFORMATION ABOUT EXECUTIVE OFFICERS Name Age (1) Positions held over last five years Time in position Sempra: Jeffrey W.
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.
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. LNG Projects Under Development.
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.
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.” 2023 Form 10-K | 28 Table of Contents Transmission Rate Cases SDG&E files separately with the FERC for its authorized ROE on FERC-regulated electric transmission operations and assets.
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.
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. 2023 Form 10-K | 16 Table of Contents Noncore customers at SoCalGas consist primarily of electric generation, wholesale, and large commercial and industrial customers.
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.
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 3,722 distribution feeders at December 31, 2023.
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.
Sempra Infrastructure owns and operates the TdM power plant in the vicinity of Mexicali, Baja California, adjacent to the Mexico-U.S. border.
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.
Sempra Infrastructure’s assets include investments in the U.S. and Mexico with a focus on LNG, energy networks and low carbon solutions. Business Strategy Our mission is to be North America’s premier energy infrastructure company.
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.
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.” PA LNG Phase 1 Project.
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.
Keith 63 Senior Vice President and General Counsel October 2022 to present Chief Risk Officer October 2022 to May 2023 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 27, 2024.
Edison’s transmission system is connected to SDG&E’s system via five 230-kV transmission lines. 2022 Form 10-K | 14 Table of Contents 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.
Edison’s transmission system is connected to SDG&E’s system via five 230-kV transmission lines. 2023 Form 10-K | 12 Table of Contents Electric Resources. 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 PPAs or purchases on the spot market.
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.
SI Partners holds a 100% ownership interest in Sempra LNG Holding, LP and a 99.9% ownership interest in IEnova at December 31, 2023. Sempra Infrastructure consolidates Sempra’s ownership and management of its non-U.S. utility, energy infrastructure assets in North America under a single platform.
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.
The TDF pipeline system runs from PEMEX’s Burgos facility in the Mexican state of Tamaulipas, Mexico to Sempra Infrastructure’s approximately 32,000-barrel LPG storage facility near the city of Monterrey, Mexico and is fully contracted to PEMEX on a firm basis through 2027.
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.
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 4.0 million homes and businesses, operating more than 143,000 circuit miles of transmission and distribution lines as of December 31, 2023 in a territory with an estimated population of approximately 13 million.
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.
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, Energy Networks and Low Carbon Solutions.
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. Sempra Texas Utilities Sempra Texas Utilities is comprised of our equity method investments in Oncor Holdings and Sharyland Holdings.
As is prevalent in the industry, subject to 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. 2023 Form 10-K | 17 Table of Contents Sempra Texas Utilities Sempra Texas Utilities is comprised of our equity method investments in Oncor Holdings and Sharyland Holdings.
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.
If LNG volumes received from Tangguh 2023 Form 10-K | 21 Table of Contents 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.
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.
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.
MD&A” and Note 16 of the Notes to Consolidated Financial Statements. 2022 Form 10-K | 26 Table of Contents Utility Regulation California SDG&E and SoCalGas are principally regulated at the state level by the CPUC, CEC and CARB.
MD&A” and Note 16 of the Notes to Consolidated Financial Statements. Utility Regulation California SDG&E and SoCalGas are principally regulated at the state level by the CPUC, CEC and CARB.
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.
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 2023 Form 10-K | 20 Table of Contents Nippon Yusen Kabushiki Kaisha) each own 16.6% of Cameron LNG JV.
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 Table of Contents Most core customers purchase natural gas directly from SoCalGas or SDG&E.
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. Most core customers purchase natural gas directly from SoCalGas or SDG&E.
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.
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.
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 Table of Contents 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.
Barrett 59 Senior Vice President July 2022 to present General Counsel January 2019 to present Vice President January 2019 to July 2022 (1) Ages are as of February 27, 2024 . 2023 Form 10-K | 32 Table of Contents 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.
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.
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. 2023 Form 10-K | 15 Table of Contents SoCalGas purchases natural gas under short-term and long-term contracts and on the spot market for SDG&E’s and SoCalGas’ core customers.
These responsibilities consist of the construction, maintenance and security of transmission 2022 Form 10-K | 20 Table of Contents 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.
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, 2023, Oncor’s transmission system included approximately 18,298 circuit miles of transmission lines, a total of 1,257 transmission and distribution substations, and interconnection to 173 third-party generation facilities totaling 54,277 MW.
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 Table of Contents 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.
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, 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.
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 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.
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.
Cho 59 Chief Operating Officer January 2019 to present Mia L. DeMontigny 51 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.
The Cameron LNG Phase 1 facility is located in Hackberry, Louisiana, along the Calcasieu Ship Channel, which handles significant industrial shipping, including large 2022 Form 10-K | 22 Table of Contents oil and LNG tankers, and is well positioned to supply the Atlantic and Pacific markets.
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, that we believe is well positioned to supply the Atlantic and Pacific markets.
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.
Bille 45 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 Erbin B.
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 ECA Regas Facility generates revenues from firm storage service fees under firm storage service agreements and nitrogen injection service agreements with Shell México Gas Natural, S. de R.L. de C.V. and SEFE 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 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.
The SST Committee 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.
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 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 discuss the ECA Regas Facility arbitration and land litigation in Note 16 of the Notes to Consolidated Financial Statements and “Part I – Item 1A.
We discuss litigation over land disputes and environmental and social impact permits at the ECA Regas Facility in Note 16 of the Notes to Consolidated Financial Statements and “Part I – Item 1A.
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.
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 and second phases of ESJ, wind power generation facilities that deliver energy into California, have been certified by the CEC and are in compliance with the RPS Program as of December 31, 2023.
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.
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. 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.
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.
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.
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 Table of Contents 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.
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, environmental compliance, 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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSuccess 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.
Biggest changeSuccess in developing each project depends on, 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 conducted before we 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, and many of the other factors described in this risk factor ▪ negotiation of satisfactory EPC agreements and renegotiation in the event of delays in final investment decisions or failures to meet other specified deadlines ▪ identification of suitable partners, customers, suppliers and other necessary counterparties ▪ progressing relationships from MOUs, HOAs or similar arrangements, which are non-binding, to execution of binding, definitive agreements and participation in the project ▪ negotiation and maintenance 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 under terms we find reasonable ▪ our project partners’, contractors’, equipment providers’ and other vendors’ and 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, 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 satisfactory financing for the project, particularly when inflation and interest rates are rising ▪ the absence of hidden defects on 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 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.
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.
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 or unforeseen defects.
Trust assets have been generally invested in equity and debt securities, which are subject to market fluctuations.
Trust assets generally have been invested in equity and debt securities, which are subject to market fluctuations.
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.
Any such occurrence could have a material adverse effect on SDG&E’s, SoCalGas’ and Sempra’s 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.
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.
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, operations and policies of Oncor Holdings and Oncor, including the deployment or disposition of their assets, declarations of dividends or other distributions, strategic planning and other important matters.
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 discuss these risks below and under “Risks Related to Sempra Infrastructure – Legal and Regulatory 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 in 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.
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.
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 our relationships with these counterparties, including increased impacts of disputes or other similar issues which we have experienced in the past.
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.
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.
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.
Depending on when the on-site generation is 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.
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.
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 ownership or rights to 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.
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.
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 inflation, 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 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.
Our ability to pay dividends and meet our debt and other obligations largely depends on distributions 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.
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.
The absence of a charge independent of consumption volume coupled with the continuing increase of solar installation and other forms of self-generation and DER, as well as energy efficiency initiatives that could also reduce delivered volumes, could adversely impact electricity rates and the reliability of the electric transmission and distribution system.
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 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 certain settlements with third parties.
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.
In addition, irrespective of whether 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.
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.
PG&E has indicated 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.
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.
We 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.
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.
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 or tax credit carryforwards if our corporation experiences an “ownership change” under applicable tax rules.
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.
The Wildfire Legislation’s 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, 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.
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.
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 at reasonable prices or on other reasonable terms in the future.
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.
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, liquefaction, energy storage, carbon sequestration, grid modernization and others.
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.
The markets in which we operate are characterized by numerous 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 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.
In addition, insurance for wildfire liabilities may not be sufficient to cover all losses we may incur, or it may not be available to meet the $1.0 billion of primary insurance required by the Wildfire Legislation.
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.
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 a substantial portion or any of the costs associated with a 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 reasonable.
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.
Oncor’s business is capital-intensive, with significant and increasing capital spending expected in future periods, and it relies on external financing as a significant source of liquidity for its capital requirements.
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.
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 or contractual restrictions, in times of financial distress or in other circumstances.
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.
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, 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.
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.
SDG&E is required by California law to submit 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.
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.
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, related regulatory decisions, 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.
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.
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.
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.
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, which could have a material adverse effect on our future results of operations, financial condition, cash flows and/or prospects.
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.
Alternatively, each of SDG&E and SoCalGas is permitted to file a cost of capital application to have its cost of capital determined in lieu of the CCM 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.
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.
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 based on potentially unclear standards or other factors as described above that may result in the disallowance of incurred costs.
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.
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 not 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.
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.
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 exchange rate and inflation risks. Our operations in Mexico pose foreign currency exchange rate and inflation 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.
We often rely on third-party vendors to deploy new technologies and maintain and update our systems, and these third parties may not have adequate risk management and information security measures with respect to their systems.
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.
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 related to fires for which SDG&E or SoCalGas may be liable.
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.
Any such investments could be substantial, would reduce the cash available to us for other purposes, may not be recovered, 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.
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.
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 us to new risks.
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.
Insurance coverage for these costs may continue to increase or become prohibitively expensive, be disputed by insurers, or become unavailable for certain of these risks or at adequate 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.
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.
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 foreign companies with which we conduct business, could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.
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 revised the 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.
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).
ITEM 1A. RISK FACTORS When evaluating our company and its consolidated entities 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.
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.
Sempra Infrastructure’s ability to enter into new or replace existing long-term capacity agreements for its natural gas pipeline operations depends 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.
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.
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 on the NYSE, our common stock is listed on the Mexican Stock Exchange and registered with the CNBV.
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.
Certain of these contracts are at fixed prices, and 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.
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.
Exchange and inflation rates with respect to Mexico and fluctuations in those rates may have an impact on the revenue, cash flows and costs from our international operations, which could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.
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.
A substantial reduction in or the elimination of natural gas use in California without adequate 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.
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.
Limitations on the availability of credit, increases in interest rates or credit spreads due to inflation 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 funds, 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.
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).
The CPUC may continue to 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 other changes (such as its decision to eliminate gas line extension allowances for new applications submitted on or after July 1, 2023).
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.
In connection with the signing and closing of the merger of EFH 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.
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.
U.S. and Mexican Laws and Foreign Policy 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.
Any such occurrence could materially adversely affect our results of operations, financial condition, cash flows and/or prospects. 2022 Form 10-K | 54 Table of Contents 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.
Any such occurrence could materially adversely affect our results of operations, financial condition, cash flows and/or prospects. 2023 Form 10-K | 51 Table of Contents 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 and PA LNG Phase 1 project under construction and our potential development of additional LNG export facilities.
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.
The occurrence of any of these events could materially adversely affect our results of operations, financial condition, cash flows and/or prospects. From time to time, we invest funds in capital projects prior to receiving all regulatory approvals.
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. 2022 Form 10-K | 53 Table of Contents 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.
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. 2023 Form 10-K | 50 Table of Contents 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.
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.
We are unable to predict the impact of the Wildfire Legislation on SDG&E’s ability to recover costs and expenses if SDG&E’s equipment is determined to be a cause of a fire, and specifically in the context of the application of inverse condemnation.
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.
If Oncor does not successfully respond to applicable legislative, regulatory, market or industry developments, 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.
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 2022 Form 10-K | 58 Table of Contents 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.
If future governmental actions are proposed and passed or otherwise become effective, if efforts to enjoin enforcement or suspend or overturn adopted governmental actions fail, or if other similar actions 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, result in increased costs for Sempra Infrastructure and its customers, adversely affect our ability to develop new projects, result in decreased revenues and cash flows, and 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.
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).
In addition, a CPUC cost of capital proceeding every three years determines a utility’s authorized capital structure and 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), subject to regulatory approval.
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.
This growth of DER will require further modernization of the electric grid to, among other things, accommodate increasing two-way flows of electricity and increase the grid’s capacity to interconnect these resources.
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.
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 timely or fully recover its actual costs and/or earn its full return on invested capital.
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 .
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 has increasingly been the subject of political and public debate, including a desire by some to eventually reduce or eliminate reliance on natural gas as an energy source .
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.
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 pose to our facilities and infrastructure, as well as to the surrounding communities for which we could be liable, are substantially greater than the potential risks to a typical business.
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.
SDG&E and SoCalGas also may be required to make investments and incur other costs to comply with proposed legislative and regulatory requirements and initiatives, including those related to California’s climate goals and policies, and the ability to recover these costs and investments may depend on the final form of the legislative or regulatory requirements and the corresponding ratemaking mechanisms.
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.
These risk factors are not prioritized in order of importance or materiality, and they should be read together with the other information in this report, including in the Consolidated Financial Statements and in “Part II – Item 7.
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.
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 subject to failure. In addition, many of these arrangements, including our relationships with the applicable counterparties, are important for the conduct and growth of our businesses.
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.
Even if such costs are recoverable, these costs, coupled with necessary safety and reliability investments, 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.
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.
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 2023 Form 10-K | 45 Table of Contents ▪ 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.
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.
We are not able to reasonably estimate the possible loss or a range of possible losses in excess of the amounts accrued, which 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.
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 2022 Form 10-K | 43 Table of Contents 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.
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 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.
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.
In addition, the CNBV, as the Mexican securities market regulator, has the authority to inspect Sempra’s business, primarily through requests for information and documents; impose fines or 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.
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.
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 also invests in companies it does not control or manage.
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.
These credit ratings could be downgraded or subject to other negative rating actions at any time. We discuss these credit ratings in “Part II – Item 7.
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.
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, including due to legal or regulatory changes. Obtaining or maintaining these approvals could result in higher costs or the imposition of conditions or restrictions on our operations.
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.
Additionally, the CPUC has regulatory authority related to safety standards and practices, reliability and planning, competitive conditions and a wide range of other operational matters, including citation and enforcement programs concerning matters such as safety activity, disconnection and billing practices, resource adequacy and environmental compliance.
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.
Any such wildfires in SDG&E’s and SoCalGas’ territories (or outside of these territories in the event the Wildfire Fund 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 further in this risk factor below and above under “Risks Related to All Sempra Businesses – Operational Risks.” 2023 Form 10-K | 43 Table of Contents 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.
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.
Energy Transition Risks The energy transition in California and elsewhere, including decarbonization goals, has introduced uncertainty in long-term investor support, leading some to reduce investment in or divest from our sector.
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.
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. We face risks from increased competition.
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.
Any such rate change due to a downward trigger of the CCM or the denial by the CPUC of an automatic upward 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.
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.
Because some of our facilities are interconnected with those of third parties, including third-party natural gas pipelines and power generation facilities that produce most of the power we distribute, the operation of our facilities could also be materially adversely affected by these or similar risks to such third-party systems, which may be unanticipated or uncontrollable by us.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 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.
Biggest changeITEM 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 Registrants currently has adequate space and, if we need more space, we believe it is readily available.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 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.
Biggest changeLEGAL 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) or environmental proceedings described in Item 103(c)(3) of SEC Regulation S-K except for the matters described in Note 16 of the Notes to Consolidated Financial Statements, “Part I – Item 1A.
Risk Factors” and “Part II – Item 7. MD&A.” 2022 Form 10-K | 59 Table of Contents
Risk Factors” and “Part II – Item 7. MD&A.”

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis 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.
Biggest changeAs of February 27, 2024, a maximum of $1.25 billion and no more than 19,632,529 shares may yet be purchased under this repurchase authorization. 2023 Form 10-K | 58 Table of Contents ITEM 6. (RESERVED) Not applicable.
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.
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 25,000,000 shares.
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.
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 20, 2024, there were approximately 20,353 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.
SoCalGas and SDG&E Common Stock Information concerning dividend declarations for SoCalGas and SDG&E is included in “Part II – Item 7.
Removed
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.
Added
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.” We file annual, quarterly and current reports, proxy statements and other information with the SEC. These reports are also publicly filed with the CNBV and Mexican Stock Exchange.
Added
We have filed these reports with these regulators in a complete and timely manner during the last three years (or, with respect to the regulators in Mexico, for the shorter period in which our common stock has been registered in Mexico).
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The financial information included in our annual and quarterly reports generally covers the most recently completed fiscal year or quarter, as applicable, as well as the most recently completed year-to-date period in our quarterly reports, in each case compared to the same period from the prior year, and the compensation information included in our proxy statements generally covers the most recently completed fiscal year.
Added
Our address and telephone number for the offices of our attorney-in-fact in Mexico are as follows: White & Case, S.C. Torre del Bosque - PH Blvd. Manuel Ávila Camacho #24 Col. Lomas de Chapultepec 11000 Ciudad de México +52 55 5540 9691 Exchange Controls and Other Limitations Affecting the Holders of Securities.
Added
U.S. federal laws do not currently impose any currency exchange controls that could affect the ability of holders of Sempra’s shares of common stock to transfer funds from the U.S. to Mexico in connection with a potential sale or other divestiture of Sempra’s shares of common stock.
Added
This repurchase authorization was publicly announced on August 5, 2020 and has no expiration date.
Added
The board of directors did not adjust the 25,000,000 aggregate number of shares that could be repurchased or the number of shares remaining authorized to be repurchased under this repurchase authorization in connection with the two-for-one split of Sempra’s common stock in the form of a 100% stock dividend effected in August 2023 that we discuss in Note 14 of the Notes to Consolidated Financial Statements.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSempra 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; ▪ $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; 2022 Form 10-K | 62 Table of Contents ▪ $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.
Biggest changeIn 2023 compared to 2022, the increase in earnings of $233 million (15%) was primarily due to: • $199 million charge in 2022 relating to litigation and regulatory matters pertaining to the Leak • $39 million higher net regulatory interest income • $37 million higher income tax benefits primarily from flow-through items, which includes $25 million related to income tax benefits in 2023 for previously unrecognized income tax benefits pertaining to gas repairs expenditures • $30 million higher CPUC base operating margin, net of operating expenses and $46 million from lower authorized cost of capital ▪ $21 million higher electric transmission margin ▪ $13 million higher regulatory awards approved by the CPUC ▪ $10 million in penalties in 2022 related to energy efficiency and advocacy OSCs Offset by: ▪ $90 million higher net interest expense ▪ $16 million lower income tax benefit from the resolution of prior year income tax items In 2022 compared to 2021, the increase in earnings of $1.1 billion was primarily due to: ▪ $949 million decrease in charges relating to litigation and regulatory matters pertaining to the Leak comprised of a $199 million charge in 2022 compared to $1,148 million in 2021 ▪ $161 million higher CPUC base operating margin, net of operating expenses ▪ $21 million lower net 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 ▪ $15 million higher net regulatory interest income ▪ $14 million higher AFUDC equity Offset by: ▪ $52 million higher net interest expense ▪ $10 million in penalties in 2022 related to energy efficiency and advocacy OSCs Sempra Texas Utilities In 2023 compared to 2022, the decrease in earnings of $42 million (6%) was primarily due to lower equity earnings from Oncor Holdings driven by: ▪ higher interest expense and depreciation expense attributable to invested capital ▪ higher O&M ▪ write-off of rate base disallowances in 2023 resulting from the PUCT’s final order in Oncor’s comprehensive base rate review Offset by: ▪ higher revenues attributable to: ◦ rate updates to reflect increases in invested capital ◦ increases in transmission billing units ◦ new base rates implemented in May 2023 ◦ customer growth Offset by: ◦ lower customer consumption primarily attributable to weather 2023 Form 10-K | 61 Table of Contents In 2022 compared to 2021, the increase in earnings of $120 million (19%) was primarily due to higher equity earnings from Oncor Holdings driven by: ▪ higher revenues attributable to: ◦ rate updates to reflect increases in invested capital ◦ higher customer consumption attributable primarily to weather ◦ customer growth Offset by: ▪ higher depreciation expense and interest expense attributable to invested capital ▪ higher O&M Sempra Infrastructure In 2023 compared to 2022, the increase in earnings of $567 million was primarily due to: ▪ $1.1 billion from asset and supply optimization driven by unrealized gains in 2023 compared to unrealized losses in 2022 on commodity derivatives due to changes in natural gas prices ▪ $112 million lower income tax expense in 2023 attributable to NCI’s share of higher U.S. partnerships’ pretax income ▪ $99 million from the transportation business driven by higher equity earnings and revenues, including the cumulative impact of new tariffs going into effect in June 2023 for certain pipelines in Mexico Offset by: ▪ $397 million decrease from $543 million earnings attributable to NCI in 2023 compared to $146 million earnings attributable to NCI in 2022 primarily due to an increase in SI Partners net income and from the sale of a 10% NCI in SI Partners to ADIA in June 2022 ▪ $127 million unfavorable impact from foreign currency and inflation effects on our monetary positions in Mexico, comprised of a $346 million unfavorable impact in 2023 compared to a $219 million unfavorable impact in 2022 ▪ $61 million lower net income tax benefit primarily from the remeasurement of certain deferred income taxes and outside basis differences in a JV investment ▪ $58 million lower equity earnings from Cameron LNG JV driven by lower revenues from excess LNG and higher interest expense ▪ $37 million higher O&M from a provision for expected credit losses on a customer’s past due receivable balance ▪ $21 million from the LNG business driven by higher development costs and certain non-capitalized expenses from projects under construction ▪ $19 million higher net interest expense due to $27 million net unrealized losses in 2023 compared to $27 million net unrealized gains in 2022 on a contingent interest rate swap related to the PA LNG Phase 1 project and higher interest rates and borrowings on committed lines of credit, offset by higher capitalization of interest expense on projects under construction In 2022 compared to 2021, the decrease in earnings of $372 million was primarily due to: ▪ $431 million from asset and supply optimization driven by $283 million losses in 2022 compared to $148 million earnings in 2021 driven by higher unrealized losses on commodity derivatives due to changes in natural gas prices, offset by higher diversion fees ▪ $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 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 ▪ $42 million from the transportation business in Mexico driven by higher rates and higher equity earnings at IMG excluding unfavorable impact from foreign currency and inflation 2023 Form 10-K | 62 Table of Contents Parent and Other In 2023 compared to 2022, the decrease in losses of $178 million (38%) was primarily due to: ▪ $120 million deferred income tax expense in 2022 associated with the change in our indefinite reinvestment assertion related to our foreign subsidiaries ▪ $63 million from $13 million net investment gains in 2023 compared to $50 million net investment losses in 2022 on dedicated assets in support of our employee nonqualified benefit plan and deferred compensation plan ▪ $40 million equity earnings in 2023 from our investment in RBS Sempra Commodities based on a legal settlement, which we discuss in Note 16 of the Notes to Consolidated Financial Statements ▪ $23 million income tax benefit in 2023 from the remeasurement of certain deferred income taxes Offset by: ▪ $68 million higher net interest expense ▪ $41 million lower income tax benefit from changes to a valuation allowance against certain tax credit carryforwards In 2022 compared to 2021, the increase in losses of $30 million (7%) was primarily due to: ▪ $120 million deferred income tax expense associated with the change in our indefinite reinvestment assertion related to our foreign subsidiaries ▪ $79 million from $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 plan ▪ $50 million equity earnings in 2021 related to our investment in RBS Sempra Commodities to settle pending VAT matters and related legal costs ▪ $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 Pinnacle in October 2021 ▪ $58 million decrease from $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 ▪ $19 million lower preferred dividends due to the mandatory conversion of all series B preferred stock in July 2021 SIGNIFICANT CHANGES IN REVENUES AND COSTS The regulatory framework permits SoCalGas and SDG&E to recover certain program expenditures and other costs authorized by the CPUC (referred to as “refundable programs”).
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.
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, net, and equity earnings.
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.
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 of 2022 The IRA was signed into law in August 2022.
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.
We provide details of our pension and PBOP plans in Note 9 of the Notes to Consolidated Financial Statements. SONGS 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.
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.
When we perform a 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 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.
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 GHG emissions, including a facility design utilizing renewable power sourcing and other technological solutions.
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.
CREDIT RATINGS AT DECEMBER 31, 2023 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 stable 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.
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.
As we discuss in Note 4 of the Notes to Consolidated Financial Statements, changes in regulatory 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.
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.
They also have significant deferred income tax assets and liabilities 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.
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.
If such 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.
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.
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.
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.
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, net.
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.
Also, cash flows from operations may be impacted by the timing of commencement and completion of, and potentially cost overruns for, large projects and other material events, such as the settlement of material litigation.
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.
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 legislatures, litigation and the changing energy marketplace, as well as other matters described in this report.
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.
Utility cost of electric fuel and purchased power includes utility-owned generation, power purchased from third parties, and net power purchases and sales to/from the California ISO.
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.
This remeasurement creates transactional gains and losses that are included in other income, net, for our consolidated entities and in equity earnings for our JVs. We may 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.
(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.
(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 and any letters of credit outstanding as a reduction to the available unused credit.
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.
Accordingly, dividends paid by SDG&E to Enova and dividends paid by Enova to Sempra are eliminated in Sempra’s consolidated financial statements. SoCalGas In 2023 and 2021, SoCalGas paid common stock dividends to PE and PE paid corresponding dividends to Sempra of $100 million and $75 million, respectively. SoCalGas did not declare or pay common stock dividends in 2022.
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 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 2023 Form 10-K | 96 Table of Contents ▪ 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 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.
The NDT’s ability to make ongoing required payments has not been materially or adversely affected by changes in asset values, which are dependent on market fluctuations, contributions and withdrawals.
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.
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 a non-binding HOA for the potential development of the Cameron LNG Phase 2 project.
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.
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, 2023 Uniform increase in escalation percentage of 1 percentage point $ 65 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.
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.
If cash flows from operations were to be significantly reduced or we were unable to borrow or obtain other financing under acceptable terms, we would likely first reduce or postpone discretionary capital expenditures (not related to safety/reliability) and investments in new businesses.
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.
In February 2017, the CPUC opened proceeding 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.
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.
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 $504 million as of December 31, 2023, based on the decommissioning cost study prepared in 2020.
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.
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 2023 Form 10-K | 89 Table of Contents 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 Sempra’s business, results of operations, financial condition, cash flows and/or prospects.
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.
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, 2023, Sempra had $312 million in loans due to unconsolidated affiliates.
Oncor’s senior secured debt was rated A2, A+ and A at Moody’s, S&P and Fitch, respectively, at December 31, 2022. 2022 Form 10-K | 72 Table of Contents Sempra, SDG&E and SoCalGas have committed lines of credit to provide liquidity and to support commercial paper.
Oncor’s senior secured debt was rated A2, A+ and A at Moody’s, S&P and Fitch, respectively, at December 31, 2023. 2023 Form 10-K | 80 Table of Contents Sempra, SDG&E and SoCalGas have committed lines of credit to provide liquidity and to support commercial paper.
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.
SOURCES AND USES OF CASH We discuss herein our sources and uses of cash for the year ended December 31, 2023 compared to the year ended December 31, 2022.
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.
For a discussion of our sources and uses of cash for the year ended December 31, 2022 compared to the year ended December 31, 2021, refer to “ Part II – Item 7. MD&A – Sources and Uses of Cash ” in our 2022 annual report on Form 10-K filed with the SEC on February 28, 2023.
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.
SoCalGas and SDG&E operate under a regulatory framework that permits the cost of natural gas purchased for customers (residential and small commercial and industrial customers, also referred to as core customers for SoCalGas) to be passed through to customers in rates substantially as incurred and without markup.
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 2022 Form 10-K | 70 Table of Contents ▪ 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.
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 or otherwise raise money at market rates from commercial banks, under existing revolving credit facilities, through public offerings of debt or equity securities, or through private placements of debt supported by our revolving credit facilities in the case of commercial paper.
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.
Natural gas withdrawn from storage is important to help maintain service reliability during peak demand periods, including consumer heating needs in the winter and peak electric generation needs in the summer. The Aliso Canyon natural gas storage facility is the largest SoCalGas storage facility and an important component of SoCalGas’ delivery system.
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 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 NCI owners, bank financing, issuances of debt, project financing, partnering in JVs and asset sales.
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.
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. 2023 Form 10-K | 95 Table of Contents INCOME TAXES Sempra, SDG&E, SoCalGas Our income tax expense and related balance sheet amounts involve significant management judgments and estimates.
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.
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 2023 Form 10-K | 97 Table of Contents ▪ 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.
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.
Risk Factors” for a discussion of these and 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.
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.
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 and non-FTA countries.
We provide additional detail in Note 15 of the Notes to Consolidated Financial Statements. 2022 Form 10-K | 90 Table of Contents 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.
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.
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.
The non-binding HOA provides a commercial framework for the proposed project, including the contemplated allocation to SI Partners of 50.2% of the fourth train production capacity and 25% of the debottlenecking capacity from the project under tolling agreements. The non-binding HOA contemplates the remaining capacity to be allocated equally to the existing Cameron LNG Phase 1 facility customers.
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.
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 U.S. income tax purposes, and thus we are only liable for income taxes on the portion of the earnings that are allocated to us.
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.
We have non-binding MOUs and/or HOAs with Mitsui & Co., Ltd., an affiliate of 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. PA LNG Phase 1 Project.
MD&A – Results of Operations ” in our 2021 annual report on Form 10-K filed with the SEC on February 25, 2022.
MD&A – Results of Operations ” in our 2022 annual report on Form 10-K filed with the SEC on February 28, 2023.
The guarantee will terminate upon full repayment of Cameron LNG JV’s debt, 2022 Form 10-K | 80 Table of Contents 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.
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.
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.
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.
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.
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 2023 Form 10-K | 98 Table of Contents In 2022, 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 were substantially above their respective carrying values as of October 1, our goodwill impairment testing date.
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.
WEIGHTED-AVERAGE RATE BASE (Dollars in millions) 2023 2022 2021 SDG&E $ 15,220 $ 13,780 $ 12,527 SoCalGas 11,671 10,494 9,371 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.
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 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.
EXPENDITURES FOR INVESTMENTS AND ACQUISITIONS (Dollars in millions) Years ended December 31, 2023 2022 2021 Sempra Texas Utilities $ 367 $ 346 $ 566 Sempra Infrastructure 15 30 67 Total $ 382 $ 376 $ 633 2023 Form 10-K | 91 Table of Contents 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.
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.
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.
Sempra Infrastructure is also developing terminals for the receipt, storage, and delivery of refined products in the vicinity of Manzanillo and Ensenada.
Sempra Infrastructure is also developing terminals for the receipt, storage, and delivery of refined products in the vicinity of Manzanillo and Ensenada. Port Arthur Pipeline Louisiana Connector.
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.
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 GAINS (LOSSES) FROM FOREIGN CURRENCY AND INFLATION EFFECTS (Dollars in millions) Total reported amounts Transactional gains (losses) included in reported amounts Years ended December 31, 2023 2022 2021 2023 2022 2021 Sempra: Other income, net $ 131 $ 24 $ 58 $ 6 $ (13) $ (46) Income tax expense (490) (556) (99) (283) (169) (4) Equity earnings 1,481 1,498 1,343 (68) (36) 2 Net income 3,618 2,285 1,463 (345) (218) (48) Earnings attributable to noncontrolling interests (543) (146) (145) 110 54 4 Earnings attributable to common shares 3,030 2,094 1,254 (235) (164) (44) 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.
Risk Factors.” 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.
Sempra Infrastructure is developing a second phase of the Port Arthur natural gas liquefaction project that we expect will be a similar size to the PA LNG Phase 1 project.
We discuss SDG&E’s NDT and its expected SONGS decommissioning payments in Note 15 of the Notes to Consolidated Financial Statements. 2022 Form 10-K | 74 Table of Contents 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.
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.
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.
The amendment also allows the design to be changed from a two-train gas turbine expansion to a one-train electric drive expansion along with other design enhancements that, together, we expect would result in a more cost-effective and efficient facility, while also reducing GHG emissions.
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.
Under the Cameron LNG JV equity agreements, the expansion of the project requires the unanimous consent of all the members, including with respect to the equity investment obligation of each member. ECA LNG Phase 1 Project.
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.
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.
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, 2022 Form 10-K | 86 Table of Contents Sempra could have received combined loans and dividends of approximately $504 million from SDG&E and $347 million from SoCalGas.
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, 2023, based on these regulations, Sempra could have received combined loans and dividends of approximately $442 million from SDG&E and $330 million from SoCalGas.
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 .
AVAILABLE FUNDS AT DECEMBER 31, 2023 (Dollars in millions) Sempra SDG&E SoCalGas Unrestricted cash and cash equivalents (1) $ 236 $ 50 $ 2 Available unused credit (2) 7,731 1,500 253 (1) Amounts at Sempra include $124 held in non-U.S. jurisdictions. We discuss repatriation in Note 8 of the Notes to Consolidated Financial Statements .
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.
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 2023 Form 10-K | 82 Table of Contents associated with retiring the assets.
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, 2023, SDG&E expects to make interest payments on long-term debt totaling $6.0 billion, of which $340 million is expected to be paid in 2024 and $5.7 billion is expected to be paid in subsequent years through 2053.
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.
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.
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. 2022 Form 10-K | 75 Table of Contents Sempra Texas Utilities Oncor relies on external financing as a significant source of liquidity for its capital requirements.
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.
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.
We discuss balancing accounts and their effects further in Note 4 of the Notes to Consolidated Financial Statements.
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.
Sempra, SDG&E and SoCalGas expect to contribute $265 million, $37 million and $174 million, respectively, to pension and PBOP plans in 2024 and $1.8 billion, $564 million and $983 million, respectively, in the nine years thereafter. At SDG&E and SoCalGas, funding requirements are generally recoverable in rates.
We describe these charges in Note 16 of the Notes to Consolidated Financial Statements. 2022 Form 10-K | 66 Table of Contents 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.
We describe these charges in Note 16 of the Notes to Consolidated Financial Statements. Gain on Sale of Assets In 2021, Parent and other recognized a $36 million gain on the sale of PXiSE.
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 has entered into a non-binding HOA for the negotiation and potential finalization of a definitive SPA with INEOS for approximately 0.2 Mtpa of LNG offtake from the proposed PA LNG Phase 2 project. Vista Pacifico LNG Liquefaction Project.
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.
At December 31, 2023, $31 million is accrued in Reserve for Aliso Canyon Costs and $2 million is accrued in Deferred Credits and Other on SoCalGas’ and Sempra’s Consolidated Balance Sheets.
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 2022 Form 10-K | 85 Table of Contents DIVIDENDS PER SHARE ON SEMPRA COMMON STOCK (As approved by our board of directors) 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.
Dividends Sempra Sempra paid cash dividends of: ▪ $1,483 million for common stock and $44 million for preferred stock in 2023 ▪ $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 DIVIDENDS PER SHARE ON SEMPRA COMMON STOCK (As approved by our board of directors) On February 26, 2024, our board of directors declared a dividend of $0.62 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, 2024. 2023 Form 10-K | 93 Table of Contents All declarations of dividends on our common stock and preferred stock are made at the discretion of the board of directors.
At December 31, 2022, the Aliso Canyon natural gas storage facility had a net book value of $958 million.
At December 31, 2023, the Aliso Canyon natural gas storage facility had a net book value of $1.0 billion.
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.
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.
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.
In March 2022, TotalEnergies SE and Sempra Infrastructure entered into a non-binding 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. 2023 Form 10-K | 87 Table of Contents Asset and Supply Optimization.
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.
Capitalization Our debt-to-capitalization ratio, which is 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) Total capitalization Debt-to-capitalization ratio December 31, 2023 2022 2023 2022 Sempra $ 64,730 $ 58,175 48 % 50 % SDG&E 19,796 18,258 50 50 SoCalGas 15,167 13,696 51 51 2023 Form 10-K | 94 Table of Contents Significant changes in 2023 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, sales of and contributions from NCI, offset by distributions to 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 debt and an increase in equity from comprehensive income exceeding dividends.
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.
Sempra Infrastructure Sempra Infrastructure expects to fund capital expenditures, investments and operations in part with available funds, including existing credit facilities, and cash flows from operations of the Sempra Infrastructure businesses.
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.
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.
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 2022 Form 10-K | 65 Table of Contents ◦ $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.
In 2023 compared to 2022, Sempra’s revenues from energy-related businesses increased by $1.1 billion to $2.9 billion primarily due to: ▪ $1.2 billion increase in revenues from asset and supply optimization from contracts to sell natural gas and LNG to third parties, including: ◦ $1.3 billion primarily driven by $710 million unrealized gains in 2023 compared to $660 million unrealized losses in 2022 on commodity derivatives offset by $223 million primarily from lower natural gas prices Offset by: ◦ $71 million lower LNG sales ◦ $33 million primarily from lower LNG diversion fees Offset by: ▪ $102 million decrease in revenues from TdM mainly due to lower power prices In 2023 compared to 2022, the cost of sales for Sempra’s energy-related businesses decreased by $394 million (42%) to $548 million primarily due to lower natural gas and LNG purchases related to asset and supply optimization. 2023 Form 10-K | 66 Table of Contents In 2022 compared to 2021, Sempra’s revenues from 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 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 ◦ $71 million higher LNG sales Offset by: ▪ $143 million increase in 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 ▪ $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 In 2022 compared to 2021, the cost of sales for Sempra’s energy-related businesses increased by $331 million to $942 million primarily due to: ▪ $257 million driven by higher natural gas and LNG purchases related to asset and supply optimization ▪ $65 million at TdM driven by higher natural gas prices offset by lower volumes from scheduled major maintenance completed in March 2022 Operation and Maintenance OPERATION AND MAINTENANCE (Dollars in millions) Year ended December 31, 2023 2022 2021 Sempra: Sempra California $ 4,591 $ 4,012 $ 3,707 Sempra Texas Utilities 5 6 6 Sempra Infrastructure 793 656 550 Parent and other (1) 70 72 78 Total $ 5,459 $ 4,746 $ 4,341 (1) Includes eliminations of intercompany activity.
Sempra Infrastructure plans to sell the LNG corresponding to its allocated capacity from the proposed Cameron LNG Phase 2 project under long-term 2022 Form 10-K | 76 Table of Contents SPAs prior to making a final investment decision. The HOA is a non-binding arrangement.
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.
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 received authorizations from the DOE that permit the LNG to be produced from the PA LNG Phase 1 project to be exported to all current and future FTA and non-FTA countries. In April 2019, the FERC approved the siting, construction and operation of the PA LNG Phase 1 project.
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.
An unfavorable outcome with respect to any of these factors could have a material adverse effect on (i) the development and construction of the applicable project, including a potential impairment of all or a substantial portion of the capital costs invested in the project to date, which could be material, and (ii) for any project that has reached a positive final investment decision, Sempra’s results of operations, financial condition, cash flows and/or prospects.
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.
We expect the ECA LNG Phase 1 project to commence commercial operations in the summer of 2025. 2023 Form 10-K | 85 Table of Contents 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 $832 million was outstanding at December 31, 2023.
The Participation Agreement contemplates that the combined Cameron LNG Phase 1 facility and proposed Cameron LNG Phase 2 project would potentially 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 Participation Agreement contemplates that the combined Cameron LNG Phase 1 facility and proposed Cameron LNG Phase 2 project would potentially serve as the anchor source for the capture and sequestration of carbon dioxide by the proposed project.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAn 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.
Biggest changeAn interest rate risk sensitivity analysis measures interest rate risk by calculating the estimated changes in earnings attributable to common shares (but disregarding capitalized interest and impacts on equity earnings from debt at our equity method investees) that would result from a hypothetical change in market interest rates.
(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.
(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, 2023 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.
(4) Amount represents the effects of currency exchange rate movement from December 31, 2023 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.
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.
The following discussion of these primary market-risk exposures as of December 31, 2023 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.
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.
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 EXPOSURE We discuss our foreign currency exchange rate risk and inflation exposure in “Part II – Item 7.
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.
During this period, Sempra Texas Utilities 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.
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.
In 2023 and 2022, SDG&E and SoCalGas 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.
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.
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 $14 million and $24 million at December 31, 2023 and 2022, respectively.
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.
If interest rates increased or decreased by 10% on all variable-rate long-term debt at December 31, 2023, after considering the effects of interest rate swaps, the change in earnings attributable to common shares over the 12-month period ending December 31, 2024 would be approximately $5 million.
MD&A – Impact of Foreign Currency and Inflation Rates on Results of Operations.” 2022 Form 10-K | 93 Table of Contents 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.
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.
Sempra Infrastructure has experienced inflationary pressures from increases in various costs, including the cost of labor, materials and supplies.
In 2023 and 2022, Sempra Infrastructure experienced inflationary pressures from increases in various costs, including the cost of labor, materials and supplies.
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.
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 2023 Form 10-K | 99 Table of Contents and financial derivatives, in an effort to mitigate these risks and optimize the value of these assets.
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.
The one-day VaR for SDG&E’s and SoCalGas’ commodity positions were $2 million and $4 million, respectively, at December 31, 2023 and $25 million and $2 million, respectively, at December 31, 2022. INTEREST RATE RISK We are exposed to fluctuations in interest rates primarily from our short- and long-term debt.
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.
We provide further information about debt and interest rate swap transactions in Notes 7 and 11, respectively, of the Notes to Consolidated Financial Statements. 2023 Form 10-K | 100 Table of Contents 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.
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.
Based on a net monetary liability position of $4.5 billion, including those related to our investments in JVs, at December 31, 2023, the hypothetical effect of a 10% increase in the Mexican inflation rate is approximately $91 million lower earnings attributable to common shares as a result of higher income tax expense for our consolidated entities, as well as lower equity earnings for our JVs.
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. 2022 Form 10-K | 91 Table of Contents MARKET RISK POLICIES Sempra has policies governing its market risk management and trading activities.
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.
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.
DOLLAR (1) (Dollars in millions) Hypothetical effects Sempra: Translation of 2023 earnings to U.S. dollars (2) $ (3) Transactional exposure (3) 126 Translation of net assets of foreign subsidiaries and investment in foreign entities (4) (23) (1) After the effects of foreign currency derivatives.
However, SoCalGas may, at times, be exposed to market risk as a result of the 2022 Form 10-K | 92 Table of Contents GCIM, which rewards or penalizes the utility for commodity costs below or above certain benchmarks.
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 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.
The table below shows the nominal amount of our debt: NOMINAL AMOUNT OF DEBT (1) (Dollars in millions) December 31, 2023 December 31, 2022 Sempra SDG&E SoCalGas Sempra SDG&E SoCalGas Short-term: Sempra California $ 947 $ — $ 947 $ 1,105 $ 205 $ 900 Other 1,397 — — 2,247 — — Long-term: Sempra California fixed-rate $ 15,109 $ 8,350 $ 6,759 $ 13,159 $ 7,400 $ 5,759 Sempra California variable-rate 400 400 — 700 400 300 Other fixed-rate 11,317 — — 10,079 — — Other variable-rate 890 — — 575 — — (1) After the effects of interest rate swaps.
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.
Earnings attributable to common shares 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, 2023 increased or decreased by 10%, the change in earnings attributable to common shares over the 12-month period ending December 31, 2024 would be approximately $9 million.
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.
Before reductions for unamortized discount and debt issuance costs and excluding finance lease obligations.

Other SRE 10-K year-over-year comparisons