SRE 10-Q Quarter ended June 30, 2016

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

FORM 10-Q

(Mark One)

[X]

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

For the quarterly period ended

June 30, 2016

or

[   ]

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

For the transition period from

to

Commission File No.

Exact Name of Registrants as Specified in their Charters, Address and Telephone Number

States of Incorporation

I.R.S. Employer Identification Nos.

Former name, former address and former fiscal year, if changed since last report

1-14201

SEMPRA ENERGY

California

33-0732627

No change

488 8 th Avenue

San Diego, California 92101

(619)696-2000

1-03779

SAN DIEGO GAS & ELECTRIC COMPANY

California

95-1184800

No change

8326 Century Park Court

San Diego, California 92123

(619)696-2000

1-01402

SOUTHERN CALIFORNIA GAS COMPANY

California

95-1240705

No change

555 West Fifth Street

Los Angeles, California 90013

(213)244-1200

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

Yes

X

No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Sempra Energy

Yes

X

No

San Diego Gas & Electric Company

Yes

X

No

Southern California Gas Company

Yes

X

No

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Sempra Energy

[  X  ]

[      ]

[       ]

[      ]

San Diego Gas & Electric Company

[       ]

[      ]

[  X  ]

[      ]

Southern California Gas Company

[       ]

[      ]

[  X  ]

[      ]

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

Sempra Energy

Yes

No

X

San Diego Gas & Electric Company

Yes

No

X

Southern California Gas Company

Yes

No

X

Indicate the number of shares outstanding of each of the issuers' classes of common stock, as of the latest practicable date.

Common stock outstanding on July 29, 2016:

Sempra Energy

249,801,432 shares

San Diego Gas & Electric Company

Wholly owned by Enova Corporation, which is wholly owned by Sempra Energy

Southern California Gas Company

Wholly owned by Pacific Enterprises, which is wholly owned by Sempra Energy

SEMPRA ENERGY FORM 10-Q SAN DIEGO GAS & ELECTRIC COMPANY FORM 10-Q SOUTHERN CALIFORNIA GAS COMPANY FORM 10-Q TABLE OF CONTENTS
		Page
Information Regarding Forward-Looking Statements		4
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	81
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	128
Item 4.	Controls and Procedures	129
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	130
Item 1A.	Risk Factors	130
Item 6.	Exhibits	130
Signatures		132

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
		Three months ended June 30,				Six months ended June 30,
		2016		2015		2016		2015
		(unaudited)
REVENUES
Utilities		$	1,994	$	2,133	$	4,436	$	4,555
Energy-related businesses			162		234		342		494
Total revenues			2,156		2,367		4,778		5,049
EXPENSES AND OTHER INCOME
Utilities:
Cost of natural gas			(183)		(239)		(494)		(585)
Cost of electric fuel and purchased power			(561)		(498)		(1,076)		(979)
Energy-related businesses:
Cost of natural gas, electric fuel and purchased power			(62)		(73)		(118)		(171)
Other cost of sales			(226)		(42)		(261)		(77)
Operation and maintenance			(727)		(713)		(1,428)		(1,371)
Depreciation and amortization			(314)		(307)		(642)		(610)
Franchise fees and other taxes			(96)		(96)		(207)		(203)
Plant closure adjustment			―		―		―		21
Gain on sale of assets			―		62		―		62
Equity earnings (losses), before income tax			14		27		(8)		46
Other income, net			23		37		72		76
Interest income			6		10		12		17
Interest expense			(142)		(139)		(285)		(273)
(Loss) income before income taxes and equity earnings
of certain unconsolidated subsidiaries			(112)		396		343		1,002
Income tax benefit (expense)			106		(98)		(36)		(261)
Equity earnings, net of income tax			33		22		50		37
Net income			27		320		357		778
Earnings attributable to noncontrolling interests			(10)		(24)		(21)		(45)
Preferred dividends of subsidiary			(1)		(1)		(1)		(1)
Earnings		$	16	$	295	$	335	$	732
Basic earnings per common share		$	0.06	$	1.19	$	1.34	$	2.95
Weighted-average number of shares outstanding,
basic (thousands)			250,096		248,108		249,915		247,916
Diluted earnings per common share		$	0.06	$	1.17	$	1.33	$	2.91
Weighted-average number of shares outstanding,
diluted (thousands)			251,938		251,491		251,686		251,264
Dividends declared per share of common stock		$	0.75	$	0.70	$	1.51	$	1.40
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
		June 30,		December 31,
		2016		2015(1)
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	616	$	403
Restricted cash			17		27
Accounts receivable – trade, net			994		1,283
Accounts receivable – other			140		190
Due from unconsolidated affiliates			6		6
Income taxes receivable			36		30
Inventories			270		298
Regulatory balancing accounts – undercollected			336		307
Fixed-price contracts and other derivatives			65		80
Assets held for sale			654		―
Other			207		267
Total current assets			3,341		2,891
Other assets:
Restricted cash			18		20
Due from unconsolidated affiliates			192		186
Regulatory assets			3,353		3,273
Nuclear decommissioning trusts			1,103		1,063
Investments			2,267		2,905
Goodwill			786		819
Other intangible assets			399		404
Dedicated assets in support of certain benefit plans			436		464
Insurance receivable for Aliso Canyon costs			679		325
Sundry			806		761
Total other assets			10,039		10,220
Property, plant and equipment:
Property, plant and equipment			39,756		38,200
Less accumulated depreciation and amortization			(10,261)		(10,161)
Property, plant and equipment, net ($372 and $383 at June 30, 2016 and December 31, 2015, respectively, related to VIE)			29,495		28,039
Total assets		$	42,875	$	41,150
(1)	Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
		June 30,		December 31,
		2016		2015(1)
		(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt		$	1,777	$	622
Accounts payable – trade			1,140		1,133
Accounts payable – other			101		142
Due to unconsolidated affiliates			8		14
Dividends and interest payable			314		303
Accrued compensation and benefits			289		423
Regulatory balancing accounts – overcollected			120		34
Current portion of long-term debt			907		907
Fixed-price contracts and other derivatives			54		56
Customer deposits			150		153
Reserve for Aliso Canyon costs			117		274
Liabilities held for sale			222		―
Other			481		551
Total current liabilities			5,680		4,612
Long-term debt ($298 and $303 at June 30, 2016 and December 31, 2015, respectively, related to VIE)			13,178		13,134
Deferred credits and other liabilities:
Customer advances for construction			152		149
Pension and other postretirement benefit plan obligations, net of plan assets			1,171		1,152
Deferred income taxes			3,071		3,157
Deferred investment tax credits			32		32
Regulatory liabilities arising from removal obligations			2,891		2,793
Asset retirement obligations			2,491		2,126
Fixed-price contracts and other derivatives			262		240
Deferred credits and other			1,384		1,176
Total deferred credits and other liabilities			11,454		10,825
Commitments and contingencies (Note 11)
Equity:
Preferred stock (50 million shares authorized; none issued)			―		―
Common stock (750 million shares authorized; 250 million and 248 million shares
outstanding at June 30, 2016 and December 31, 2015, respectively; no par value)			2,681		2,621
Retained earnings			9,952		9,994
Accumulated other comprehensive income (loss)			(852)		(806)
Total Sempra Energy shareholders' equity			11,781		11,809
Preferred stock of subsidiary			20		20
Other noncontrolling interests			762		750
Total equity			12,563		12,579
Total liabilities and equity		$	42,875	$	41,150
(1)	Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
		Six months ended June 30,
		2016		2015
		(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	357	$	778
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			642		610
Deferred income taxes and investment tax credits			(42)		203
Gain on sale of assets			―		(62)
Plant closure adjustment			―		(21)
Equity earnings			(42)		(83)
Fixed-price contracts and other derivatives			41		―
Other			33		(8)
Net change in other working capital components			167		(116)
Insurance receivable for Aliso Canyon costs			(354)		―
Changes in other assets			(67)		(89)
Changes in other liabilities			147		7
Net cash provided by operating activities			882		1,219
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment			(2,006)		(1,466)
Expenditures for investments and acquisition of business			(46)		(161)
Proceeds from sale of assets			443		347
Distributions from investments			12		9
Purchases of nuclear decommissioning and other trust assets			(206)		(229)
Proceeds from sales by nuclear decommissioning and other trusts			204		221
Increases in restricted cash			(32)		(34)
Decreases in restricted cash			44		49
Advances to unconsolidated affiliates			(9)		(20)
Repayments of advances to unconsolidated affiliates			9		74
Other			(6)		9
Net cash used in investing activities			(1,593)		(1,201)
CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid			(335)		(308)
Preferred dividends paid by subsidiary			(1)		(1)
Issuances of common stock			29		31
Repurchases of common stock			(54)		(66)
Issuances of debt (maturities greater than 90 days)			1,384		1,547
Payments on debt (maturities greater than 90 days)			(986)		(846)
Increase (decrease) in short-term debt, net			865		(339)
Net distributions to noncontrolling interests			(10)		(14)
Tax benefit related to share-based compensation			34		52
Other			(10)		(6)
Net cash provided by financing activities			916		50
Effect of exchange rate changes on cash and cash equivalents			8		(2)
Increase in cash and cash equivalents			213		66
Cash and cash equivalents, January 1			403		570
Cash and cash equivalents, June 30		$	616	$	636
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in millions)
		Six months ended June 30,
		2016		2015
		(unaudited)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized		$	279	$	260
Income tax payments, net of refunds			73		72
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Acquisition of business:
Assets acquired		$	―	$	10
Liabilities assumed			―		(2)
Accrued purchase price			―		(6)
Cash paid		$	―	$	2
Accrued capital expenditures		$	541	$	302
Financing of build-to-suit property			―		39
Redemption of industrial development bonds			―		79
Common dividends issued in stock			27		27
Dividends declared but not paid			195		178
See Notes to Condensed Consolidated Financial Statements.

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended June 30,				Six months ended June 30,
	2016		2015		2016		2015
	(unaudited)
Operating revenues
Electric	$	897	$	874	$	1,740	$	1,679
Natural gas		95		98		243		259
Total operating revenues		992		972		1,983		1,938
Operating expenses
Cost of electric fuel and purchased power		314		251		562		479
Cost of natural gas		25		31		64		85
Operation and maintenance		266		255		512		472
Depreciation and amortization		158		149		317		294
Franchise fees and other taxes		59		59		122		120
Plant closure adjustment		―		―		―		(21)
Total operating expenses		822		745		1,577		1,429
Operating income		170		227		406		509
Other income, net		13		9		27		18
Interest expense		(48)		(52)		(96)		(104)
Income before income taxes		135		184		337		423
Income tax expense		(48)		(54)		(120)		(142)
Net income		87		130		217		281
Losses (earnings) attributable to noncontrolling interest		13		(4)		12		(8)
Earnings attributable to common shares	$	100	$	126	$	229	$	273
See Notes to Condensed Consolidated Financial Statements.

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
		June 30,		December 31,
		2016		2015(1)
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	8	$	20
Restricted cash			17		23
Accounts receivable – trade, net			310		331
Accounts receivable – other			14		17
Due from unconsolidated affiliates			163		1
Income taxes receivable			33		1
Inventories			71		75
Regulatory balancing accounts – net undercollected			336		307
Regulatory assets			93		107
Fixed-price contracts and other derivatives			39		53
Other			42		69
Total current assets			1,126		1,004
Other assets:
Restricted cash			3		―
Deferred taxes recoverable in rates			938		914
Other regulatory assets			933		977
Nuclear decommissioning trusts			1,103		1,063
Sundry			335		301
Total other assets			3,312		3,255
Property, plant and equipment:
Property, plant and equipment			17,000		16,458
Less accumulated depreciation and amortization			(4,399)		(4,202)
Property, plant and equipment, net ($372 and $383 at June 30, 2016 and December 31, 2015, respectively, related to VIE)			12,601		12,256
Total assets		$	17,039	$	16,515
(1)	Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
		June 30,		December 31,
		2016		2015(1)
		(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt		$	54	$	168
Accounts payable			375		377
Due to unconsolidated affiliates			190		55
Interest payable			40		39
Accrued compensation and benefits			77		129
Accrued franchise fees			31		66
Current portion of long-term debt			191		50
Asset retirement obligations			63		99
Fixed-price contracts and other derivatives			37		51
Customer deposits			72		72
Other			88		101
Total current liabilities			1,218		1,207
Long-term debt ($298 and $303 at June 30, 2016 and December 31, 2015, respectively, related to VIE)			4,681		4,455
Deferred credits and other liabilities:
Customer advances for construction			50		46
Pension and other postretirement benefit plan obligations, net of plan assets			221		212
Deferred income taxes			2,523		2,472
Deferred investment tax credits			20		19
Regulatory liabilities arising from removal obligations			1,743		1,629
Asset retirement obligations			765		729
Fixed-price contracts and other derivatives			98		106
Deferred credits and other			406		364
Total deferred credits and other liabilities			5,826		5,577
Commitments and contingencies (Note 11)
Equity:
Common stock (255 million shares authorized; 117 million shares outstanding;
no par value)			1,338		1,338
Retained earnings			3,947		3,893
Accumulated other comprehensive income (loss)			(8)		(8)
Total SDG&E shareholder's equity			5,277		5,223
Noncontrolling interest			37		53
Total equity			5,314		5,276
Total liabilities and equity		$	17,039	$	16,515
(1)	Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Six months ended June 30,
	2016		2015
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	217	$	281
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		317		294
Deferred income taxes and investment tax credits		26		103
Plant closure adjustment		―		(21)
Fixed-price contracts and other derivatives		(1)		(2)
Other		(21)		(9)
Net change in other working capital components		―		(40)
Changes in other assets		(39)		(59)
Changes in other liabilities		9		3
Net cash provided by operating activities		508		550
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment		(602)		(600)
Purchases of nuclear decommissioning trust assets		(203)		(227)
Proceeds from sales by nuclear decommissioning trusts		204		221
Increases in restricted cash		(21)		(19)
Decreases in restricted cash		24		19
Increase in loans to affiliate		(172)		―
Net cash used in investing activities		(770)		(606)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of debt (maturities greater than 90 days)		498		388
Payments on debt (maturities greater than 90 days)		(128)		(105)
Decrease in short-term debt, net		(114)		(206)
Capital distributions made by VIE		(3)		(6)
Other		(3)		―
Net cash provided by financing activities		250		71
(Decrease) increase in cash and cash equivalents		(12)		15
Cash and cash equivalents, January 1		20		8
Cash and cash equivalents, June 30	$	8	$	23
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	92	$	99
Income tax payments, net		125		99
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Dividends declared but not paid	$	175	$	―
Accrued capital expenditures		124		118
See Notes to Condensed Consolidated Financial Statements.

SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended June 30,				Six months ended June 30,
	2016		2015		2016		2015
	(unaudited)
Operating revenues	$	617	$	780	$	1,650	$	1,828
Operating expenses
Cost of natural gas		147		196		400		463
Operation and maintenance		339		346		666		660
Depreciation and amortization		112		113		234		226
Franchise fees and other taxes		30		31		67		65
Total operating expenses		628		686		1,367		1,414
Operating (loss) income		(11)		94		283		414
Other income, net		6		9		16		17
Interest income		―		3		―		3
Interest expense		(24)		(19)		(46)		(38)
(Loss) income before income taxes		(29)		87		253		396
Income tax benefit (expense)		29		(16)		(58)		(111)
Net income		―		71		195		285
Preferred dividend requirements		(1)		(1)		(1)		(1)
(Losses) earnings attributable to common shares	$	(1)	$	70	$	194	$	284
See Notes to Condensed Financial Statements.

SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED BALANCE SHEETS
(Dollars in millions)
		June 30,		December 31,
		2016		2015(1)
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	211	$	58
Accounts receivable – trade, net			337		635
Accounts receivable – other			82		99
Due from unconsolidated affiliates			7		48
Income taxes receivable			6		―
Inventories			44		79
Regulatory assets			8		7
Other			35		40
Total current assets			730		966
Other assets:
Regulatory assets arising from pension obligations			732		699
Other regulatory assets			717		636
Insurance receivable for Aliso Canyon costs			679		325
Sundry			252		207
Total other assets			2,380		1,867
Property, plant and equipment:
Property, plant and equipment			14,910		14,171
Less accumulated depreciation and amortization			(4,934)		(4,900)
Property, plant and equipment, net			9,976		9,271
Total assets		$	13,086	$	12,104
(1)	Derived from audited financial statements.
See Notes to Condensed Financial Statements.

SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
		June 30,		December 31,
		2016		2015(1)
		(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable – trade		$	277	$	422
Accounts payable – other			63		76
Due to unconsolidated affiliate			25		―
Income taxes payable			―		3
Accrued compensation and benefits			123		160
Regulatory balancing accounts – net overcollected			120		34
Current portion of long-term debt			1		9
Customer deposits			72		76
Reserve for Aliso Canyon costs			117		274
Other			181		184
Total current liabilities			979		1,238
Long-term debt			2,981		2,481
Deferred credits and other liabilities:
Customer advances for construction			102		103
Pension obligation, net of plan assets			749		716
Deferred income taxes			1,637		1,532
Deferred investment tax credits			12		14
Regulatory liabilities arising from removal obligations			1,149		1,145
Asset retirement obligations			1,697		1,354
Deferred credits and other			437		372
Total deferred credits and other liabilities			5,783		5,236
Commitments and contingencies (Note 11)
Shareholders' equity:
Preferred stock			22		22
Common stock (100 million shares authorized; 91 million shares outstanding;
no par value)			866		866
Retained earnings			2,474		2,280
Accumulated other comprehensive income (loss)			(19)		(19)
Total shareholders' equity			3,343		3,149
Total liabilities and shareholders' equity		$	13,086	$	12,104
(1)	Derived from audited financial statements.
See Notes to Condensed Financial Statements.

SOUTHERN CALIFORNIA GAS COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Six months ended June 30,
	2016		2015
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	195	$	285
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		234		226
Deferred income taxes and investment tax credits		32		76
Other		7		(15)
Net change in other working capital components		190		(58)
Insurance receivable for Aliso Canyon costs		(354)		―
Changes in other assets		(54)		(30)
Changes in other liabilities		12		(1)
Net cash provided by operating activities		262		483
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment		(650)		(603)
Decrease (increase) in loans to affiliate, net		50		(279)
Net cash used in investing activities		(600)		(882)
CASH FLOWS FROM FINANCING ACTIVITIES
Preferred dividends paid		(1)		(1)
Issuances of long-term debt		499		599
Payments on long-term debt		(3)		―
Decrease in short-term debt, net		―		(50)
Other		(4)		(3)
Net cash provided by financing activities		491		545
Increase in cash and cash equivalents		153		146
Cash and cash equivalents, January 1		58		85
Cash and cash equivalents, June 30	$	211	$	231
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	43	$	36
Income tax payments, net		35		14
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITY
Accrued capital expenditures	$	140	$	143
See Notes to Condensed Financial Statements.

ASSETS HELD FOR SALE AT JUNE 30, 2016
(Dollars in millions)
		Termoeléctrica de Mexicali		EnergySouth Inc.
Cash and cash equivalents		$	1	$	1
Inventories			8		3
Other current assets			21		13
Regulatory assets			―		12
Goodwill			―		72
Other assets			17		53
Property, plant and equipment, net			250		203
Total assets held for sale		$	297	$	357
Accounts payable		$	1	$	9
Other current liabilities			6		12
Long-term debt			―		67
Deferred income taxes			13		38
Regulatory liabilities			―		22
Asset retirement obligations			4		12
Other liabilities			19		19
Total liabilities held for sale		$	43	$	179

INVENTORY BALANCES
(Dollars in millions)
		Natural gas					Liquefied natural gas				Materials and supplies				Total
		June 30, 2016			December 31, 2015		June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
SDG&E		$	1		$	6	$	―	$	―	$	70	$	69	$	71	$	75
SoCalGas(1)			―			49		―		―		44		30		44		79
Sempra South American
Utilities			―			―		―		―		43		30		43		30
Sempra Mexico			―			―		7		3		2		10		9		13
Sempra Renewables			―			―		―		―		3		3		3		3
Sempra Natural Gas			96			94		4		3		―		1		100		98
Sempra Energy
Consolidated		$	97		$	149	$	11	$	6	$	162	$	143	$	270	$	298
(1)	At both June 30, 2016 and December 31, 2015, SoCalGas' natural gas inventory for core customers is net of an inventory loss related to the Aliso Canyon natural gas leak, which we discuss in Note 11.

AMOUNTS ASSOCIATED WITH OTAY MESA VIE
(Dollars in millions)
	Three months ended June 30,				Six months ended June 30,
	2016		2015		2016		2015
Operating expenses
Cost of electric fuel and purchased power	$	(17)	$	(21)	$	(34)	$	(39)
Operation and maintenance		15		6		19		10
Depreciation and amortization		10		6		17		12
Total operating expenses		8		(9)		2		(17)
Operating (loss) income		(8)		9		(2)		17
Interest expense		(5)		(5)		(10)		(9)
(Loss) income before income taxes/Net (loss) income		(13)		4		(12)		8
Losses (earnings) attributable to noncontrolling interest		13		(4)		12		(8)
Earnings attributable to common shares	$	―	$	―	$	―	$	―

NET PERIODIC BENEFIT COST – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
	Pension benefits				Other postretirement benefits
	Three months ended June 30,
	2016		2015		2016		2015
Service cost	$	27	$	29	$	6	$	7
Interest cost		40		39		11		11
Expected return on assets		(41)		(44)		(18)		(17)
Amortization of:
Prior service cost		3		2		―		―
Actuarial loss		7		11		―		―
Regulatory adjustment		(28)		(30)		2		―
Total net periodic benefit cost	$	8	$	7	$	1	$	1
	Six months ended June 30,
	2016		2015		2016		2015
Service cost	$	55	$	59	$	11	$	14
Interest cost		80		78		22		23
Expected return on assets		(83)		(88)		(35)		(34)
Amortization of:
Prior service cost (credit)		6		5		―		(1)
Actuarial loss		13		19		―		―
Regulatory adjustment		(56)		(59)		4		―
Total net periodic benefit cost	$	15	$	14	$	2	$	2

NET PERIODIC BENEFIT COST – SDG&E
(Dollars in millions)
	Pension benefits				Other postretirement benefits
	Three months ended June 30,
	2016		2015		2016		2015
Service cost	$	8	$	8	$	1	$	2
Interest cost		11		10		2		2
Expected return on assets		(13)		(13)		(2)		(3)
Amortization of:
Prior service cost		1		1		1		1
Actuarial loss (gain)		2		2		(1)		―
Regulatory adjustment		(8)		(7)		(1)		(2)
Total net periodic benefit cost	$	1	$	1	$	―	$	―
	Six months ended June 30,
	2016		2015		2016		2015
Service cost	$	15	$	16	$	2	$	4
Interest cost		21		20		4		4
Expected return on assets		(25)		(27)		(5)		(6)
Amortization of:
Prior service cost		1		1		2		2
Actuarial loss (gain)		5		4		(1)		―
Regulatory adjustment		(15)		(12)		(2)		(4)
Total net periodic benefit cost	$	2	$	2	$	―	$	―

NET PERIODIC BENEFIT COST – SOCALGAS
(Dollars in millions)
	Pension benefits				Other postretirement benefits
	Three months ended June 30,
	2016		2015		2016		2015
Service cost	$	18	$	19	$	3	$	5
Interest cost		25		24		9		9
Expected return on assets		(27)		(27)		(14)		(14)
Amortization of:
Prior service cost (credit)		2		2		(1)		(2)
Actuarial loss		2		6		―		―
Regulatory adjustment		(20)		(23)		3		2
Total net periodic benefit cost	$	―	$	1	$	―	$	―
	Six months ended June 30,
	2016		2015		2016		2015
Service cost	$	35	$	38	$	7	$	10
Interest cost		50		49		17		18
Expected return on assets		(52)		(54)		(28)		(28)
Amortization of:
Prior service cost (credit)		4		4		(2)		(4)
Actuarial loss		5		11		―		―
Regulatory adjustment		(41)		(47)		6		4
Total net periodic benefit cost	$	1	$	1	$	―	$	―

BENEFIT PLAN CONTRIBUTIONS
(Dollars in millions)
	Sempra Energy
	Consolidated		SDG&E		SoCalGas
Contributions through June 30, 2016:
Pension plans	$	23	$	2	$	―
Other postretirement benefit plans		2		―		1
Total expected contributions in 2016:
Pension plans	$	123	$	4	$	77
Other postretirement benefit plans		6		2		1

EARNINGS PER SHARE COMPUTATIONS
(Dollars in millions, except per share amounts; shares in thousands)
		Three months ended June 30,					Six months ended June 30,
		2016		2015			2016		2015
Numerator:
Earnings/Income attributable to common shares		$	16	$	295		$	335	$	732
Denominator:
Weighted-average common shares
	outstanding for basic EPS(1)		250,096		248,108			249,915		247,916
Dilutive effect of stock options, restricted
	stock awards and restricted stock units		1,842		3,383			1,771		3,348
Weighted-average common shares
	outstanding for diluted EPS		251,938		251,491			251,686		251,264
Earnings per share:
Basic		$	0.06	$	1.19		$	1.34	$	2.95
Diluted			0.06		1.17			1.33		2.91
(1)	Includes 568 and 501 average fully vested restricted stock units held in our Deferred Compensation Plan for the three months ended June 30, 2016 and 2015, respectively, and 562 and 476 of such units for the six months ended June 30, 2016 and 2015, respectively. These fully vested restricted stock units are included in weighted-average common shares outstanding for basic EPS because there are no conditions under which the corresponding shares will not be issued.

CAPITALIZED FINANCING COSTS
(Dollars in millions)
		Three months ended June 30,				Six months ended June 30,
		2016		2015		2016		2015
Sempra Energy Consolidated:
AFUDC related to debt		$	8	$	7	$	15	$	13
AFUDC related to equity			30		31		57		58
Other capitalized interest			20		17		38		34
Total Sempra Energy Consolidated		$	58	$	55	$	110	$	105
SDG&E:
AFUDC related to debt		$	4	$	4	$	8	$	7
AFUDC related to equity			13		10		24		18
Total SDG&E		$	17	$	14	$	32	$	25
SoCalGas:
AFUDC related to debt		$	4	$	3	$	7	$	6
AFUDC related to equity			10		10		20		19
Total SoCalGas		$	14	$	13	$	27	$	25

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1)
SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
		Foreign						Total
		currency				Pension and other		accumulated other
		translation		Financial		postretirement		comprehensive
		adjustments		instruments		benefits		income (loss)
		Three months ended June 30, 2016 and 2015
2016:
Balance as of March 31, 2016		$	(514)	$	(221)	$	(86)	$	(821)
Other comprehensive income (loss) before
reclassifications			11		(48)		―		(37)
Amounts reclassified from accumulated other
comprehensive income			―		5		1		6
Net other comprehensive income (loss)			11		(43)		1		(31)
Balance as of June 30, 2016		$	(503)	$	(264)	$	(85)	$	(852)
2015:
Balance as of March 31, 2015		$	(384)	$	(145)	$	(84)	$	(613)
Other comprehensive (loss) income before
reclassifications			(43)		57		―		14
Amounts reclassified from accumulated other
comprehensive income			―		2		1		3
Net other comprehensive (loss) income			(43)		59		1		17
Balance as of June 30, 2015		$	(427)	$	(86)	$	(83)	$	(596)
		Six months ended June 30, 2016 and 2015
2016:
Balance as of December 31, 2015		$	(582)	$	(137)	$	(87)	$	(806)
Other comprehensive income (loss) before
reclassifications			79		(130)		―		(51)
Amounts reclassified from accumulated other
comprehensive income			―		3		2		5
Net other comprehensive income (loss)			79		(127)		2		(46)
Balance as of June 30, 2016		$	(503)	$	(264)	$	(85)	$	(852)
2015:							.
Balance as of December 31, 2014		$	(322)	$	(90)	$	(85)	$	(497)
Other comprehensive (loss) income before
reclassifications			(105)		3		―		(102)
Amounts reclassified from accumulated other
comprehensive income			―		1		2		3
Net other comprehensive (loss) income			(105)		4		2		(99)
Balance as of June 30, 2015		$	(427)	$	(86)	$	(83)	$	(596)
(1)	All amounts are net of income tax, if subject to tax, and exclude noncontrolling interests.

RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
			Amounts reclassified
Details about accumulated			from accumulated other						Affected line item on Condensed
other comprehensive income (loss) components			comprehensive income (loss)						Consolidated Statements of Operations
			Three months ended June 30,
			2016			2015
Sempra Energy Consolidated:
Financial instruments:
Interest rate and foreign exchange instruments			$	3		$	3		Interest Expense
Interest rate instruments				2			3		Equity Earnings (Losses), Before Income Tax
Interest rate and foreign exchange instruments				5			―		Equity Earnings, Net of Income Tax
Total before income tax				10			6
				(1)			(1)		Income Tax Expense
Net of income tax				9			5
				(4)			(3)		Earnings Attributable to Noncontrolling Interests
			$	5		$	2
Pension and other postretirement benefits:
Amortization of actuarial loss			$	2		$	2		See note (1) below
				(1)			(1)		Income Tax Expense
Net of income tax			$	1		$	1
Total reclassifications for the period, net of tax			$	6		$	3
SDG&E:
Financial instruments:
Interest rate instruments			$	3		$	3		Interest Expense
				(3)			(3)		Losses (Earnings) Attributable to Noncontrolling Interest
Total reclassifications for the period, net of tax			$	―		$	―
(1)	Amounts are included in the computation of net periodic benefit cost (see "Pension and Other Postretirement Benefits" above).

RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
			Amount reclassified
Details about accumulated			from accumulated other					Affected line item on Condensed
other comprehensive income (loss) components			comprehensive income (loss)					Consolidated Statements of Operations
			Six months ended June 30,
			2016		2015
Sempra Energy Consolidated:
Financial instruments:
Interest rate and foreign exchange instruments			$	7	$	9		Interest Expense
Interest rate instruments				5		6		Equity Earnings (Losses), Before Income Tax
Interest rate and foreign exchange instruments				6		―		Equity Earnings, Net of Income Tax
Commodity contracts not subject to
	rate recovery			(7)		(7)		Revenues: Energy-Related Businesses
Total before income tax				11		8
				(1)		―		Income Tax Expense
Net of income tax				10		8
				(7)		(7)		Earnings Attributable to Noncontrolling Interests
			$	3	$	1
Pension and other postretirement benefits:
Amortization of actuarial loss			$	4	$	4		See note (1) below
				(2)		(2)		Income Tax Expense
Net of income tax			$	2	$	2
Total reclassifications for the period, net of tax			$	5	$	3
SDG&E:
Financial instruments:
Interest rate instruments			$	6	$	6		Interest Expense
				(6)		(6)		Losses (Earnings) Attributable to Noncontrolling Interest
Total reclassifications for the period, net of tax			$	―	$	―
(1)	Amounts are included in the computation of net periodic benefit cost (see "Pension and Other Postretirement Benefits" above).

SHAREHOLDERS' EQUITY AND NONCONTROLLING INTERESTS – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
			Sempra Energy		Non-
			shareholders'		controlling		Total
			equity		interests(1)		equity
Balance at December 31, 2015		$	11,809	$	770	$	12,579
Comprehensive income			290		22		312
Preferred dividends of subsidiary			(1)		―		(1)
Share-based compensation expense			24		―		24
Common stock dividends declared			(377)		―		(377)
Issuances of common stock			56		―		56
Repurchases of common stock			(54)		―		(54)
Tax benefit related to share-based compensation			34		―		34
Equity contributed by noncontrolling interest			―		1		1
Distributions to noncontrolling interests			―		(11)		(11)
Balance at June 30, 2016		$	11,781	$	782	$	12,563
Balance at December 31, 2014		$	11,326	$	774	$	12,100
Comprehensive income			634		33		667
Preferred dividends of subsidiary			(1)		―		(1)
Share-based compensation expense			26		―		26
Common stock dividends declared			(347)		―		(347)
Issuances of common stock			59		―		59
Repurchases of common stock			(66)		―		(66)
Tax benefit related to share-based compensation			52		―		52
Equity contributed by noncontrolling interest			―		1		1
Distributions to noncontrolling interests			―		(16)		(16)
Balance at June 30, 2015		$	11,683	$	792	$	12,475
(1)	Noncontrolling interests include the preferred stock of SoCalGas and other noncontrolling interests as listed in the table below under "Other Noncontrolling Interests."

SHAREHOLDER'S EQUITY AND NONCONTROLLING INTEREST – SDG&E
(Dollars in millions)
		SDG&E		Non-
		shareholder's		controlling		Total
		equity		interest		equity
Balance at December 31, 2015	$	5,223	$	53	$	5,276
Comprehensive income (loss)		229		(13)		216
Common stock dividends declared		(175)		―		(175)
Distributions to noncontrolling interest		―		(3)		(3)
Balance at June 30, 2016	$	5,277	$	37	$	5,314
Balance at December 31, 2014	$	4,932	$	60	$	4,992
Comprehensive income		273		9		282
Distributions to noncontrolling interest		―		(8)		(8)
Balance at June 30, 2015	$	5,205	$	61	$	5,266

SHAREHOLDERS' EQUITY ― SOCALGAS
(Dollars in millions)
		SoCalGas
		shareholders'
		equity
Balance at December 31, 2015	$	3,149
Comprehensive income		195
Preferred stock dividends declared		(1)
Balance at June 30, 2016	$	3,343
Balance at December 31, 2014	$	2,781
Comprehensive income		285
Preferred stock dividends declared		(1)
Balance at June 30, 2015	$	3,065

OTHER NONCONTROLLING INTERESTS
(Dollars in millions)
		Percent ownership held by others
		June 30,		December 31,			June 30,		December 31,
		2016		2015			2016		2015
SDG&E:
Otay Mesa VIE		100	%	100	%	$	37	$	53
Sempra South American Utilities:
Chilquinta Energía subsidiaries(1)		23.2 – 43.4		23.5 – 43.4			21		21
Luz del Sur		16.4		16.4			175		164
Tecsur		9.8		9.8			4		4
Sempra Mexico:
IEnova		18.9		18.9			484		468
Sempra Natural Gas:
Bay Gas Storage Company, Ltd.		9.1		9.1			26		25
Liberty Gas Storage, LLC		23.3		23.2			14		14
Southern Gas Transmission Company		49.0		49.0			1		1
Total Sempra Energy						$	762	$	750
(1)	Chilquinta Energía has four subsidiaries with noncontrolling interests held by others. Percentage range reflects the highest and lowest ownership percentages among these subsidiaries.

REVENUES AND COST OF SALES FROM UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	Three months ended June 30,					Six months ended June 30,
	2016		2015			2016		2015
REVENUES
Sempra Energy Consolidated	$	5	$	8		$	10	$	16
SDG&E		―		2			3		5
SoCalGas		18		17			35		36
COST OF SALES
Sempra Energy Consolidated	$	20	$	30		$	50	$	49
SDG&E		16		13			30		18

OTHER INCOME, NET
(Dollars in millions)
		Three months ended June 30,				Six months ended June 30,
			2016		2015		2016		2015
Sempra Energy Consolidated:
Allowance for equity funds used during construction		$	30	$	31	$	57	$	58
Investment gains (losses)(1)			10		(2)		20		7
Losses on interest rate and foreign exchange instruments, net			(15)		(3)		(12)		(3)
Foreign currency transaction losses			(5)		(2)		(7)		(3)
Sale of other investments			1		6		2		6
Electrical infrastructure relocation income(2)			2		4		3		4
Regulatory interest, net(3)			1		1		3		2
Sundry, net			(1)		2		6		5
Total		$	23	$	37	$	72	$	76
SDG&E:
Allowance for equity funds used during construction		$	13	$	10	$	24	$	18
Regulatory interest, net(3)			1		1		3		2
Sundry, net			(1)		(2)		―		(2)
Total		$	13	$	9	$	27	$	18
SoCalGas:
Allowance for equity funds used during construction		$	10	$	10	$	20	$	19
Sundry, net			(4)		(1)		(4)		(2)
Total		$	6	$	9	$	16	$	17
(1)	Represents investment gains (losses) on dedicated assets in support of our executive retirement and deferred compensation plans. These amounts are partially offset by corresponding changes in compensation expense related to the plans.
(2)	Income at Luz del Sur associated with the relocation of electrical infrastructure.
(3)	Interest on regulatory balancing accounts.

INCOME TAX EXPENSE AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
			Income tax		Effective					Effective
			(benefit)		income			Income tax		income
			expense		tax rate			expense		tax rate
			Three months ended June 30,
			2016					2015
Sempra Energy Consolidated		$	(106)		95	%	$	98		25	%
SDG&E			48		36			54		29
SoCalGas			(29)		100			16		18
			Six months ended June 30,
			2016					2015
Sempra Energy Consolidated		$	36		10	%	$	261		26	%
SDG&E			120		36			142		34
SoCalGas			58		23			111		28

NET ENERGY DERIVATIVE VOLUMES
(Quantities in millions)
				June 30,	December 31,
Segment and Commodity			Unit of measure	2016	2015
California Utilities:
SDG&E:
Natural gas			MMBtu(1)	72	70
Electricity			MWh(2)	1	1
Congestion revenue rights			MWh	30	36
SoCalGas – natural gas			MMBtu	―	1
Energy-Related Businesses:
Sempra Natural Gas – natural gas			MMBtu	30	43
(1)	Million British thermal units
(2)	Megawatt hours

INTEREST RATE DERIVATIVES
(Dollars in millions)
		June 30, 2016			December 31, 2015
		Notional debt		Maturities	Notional debt		Maturities
Sempra Energy Consolidated:
Cash flow hedges(1)		$	377	2016-2028	$	384	2016-2028
Fair value hedges			―	―		300	2016
SDG&E:
Cash flow hedge(1)			310	2016-2019		315	2016-2019
(1)	Includes Otay Mesa VIE. All of SDG&E's interest rate derivatives relate to Otay Mesa VIE.

FOREIGN CURRENCY DERIVATIVES
(Dollars in millions)
		June 30, 2016			December 31, 2015
		Notional debt		Maturities	Notional debt		Maturities
Sempra Mexico:
Cross-currency swaps		$	408	2018-2023	$	408	2018-2023
Other foreign currency derivatives			550	2016		―	―

DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
		June 30, 2016
									Deferred
									credits
			Current				Current		and other
			assets:				liabilities:		liabilities:
			Fixed-price				Fixed-price		Fixed-price
			contracts		Other		contracts		contracts
			and other		assets:		and other		and other
			derivatives(1)		Sundry		derivatives(2)		derivatives
Sempra Energy Consolidated:
Derivatives designated as hedging instruments:
Interest rate and foreign exchange instruments(3)		$	1	$	―	$	(15)	$	(184)
Commodity contracts not subject to rate recovery			―		―		(5)		―
Derivatives not designated as hedging instruments:
Interest rate and foreign exchange instruments			―		―		(12)		―
Commodity contracts not subject to rate recovery			208		22		(227)		(17)
Associated offsetting commodity contracts			(199)		(13)		199		13
Associated offsetting cash collateral			―		―		30		1
Commodity contracts subject to rate recovery			18		52		(35)		(48)
Associated offsetting commodity contracts			(4)		(2)		4		2
Associated offsetting cash collateral			―		―		13		15
Net amounts presented on the balance sheet			24		59		(48)		(218)
Additional cash collateral for commodity contracts
not subject to rate recovery			14		―		―		―
Additional cash collateral for commodity contracts
subject to rate recovery			27		―		―		―
Total(4)		$	65	$	59	$	(48)	$	(218)
SDG&E:
Derivatives designated as hedging instruments:
Interest rate instruments(3)		$	―	$	―	$	(14)	$	(23)
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery			16		52		(32)		(48)
Associated offsetting commodity contracts			(3)		(2)		3		2
Associated offsetting cash collateral			―		―		12		15
Net amounts presented on the balance sheet			13		50		(31)		(54)
Additional cash collateral for commodity contracts
subject to rate recovery			26		―		―		―
Total(4)		$	39	$	50	$	(31)	$	(54)
SoCalGas:
Derivatives not designated as hedging instruments:
Commodity contracts not subject to rate recovery		$	―	$	―	$	(1)	$	―
Associated offsetting cash collateral			―		―		1		―
Commodity contracts subject to rate recovery			2		―		(3)		―
Associated offsetting commodity contracts			(1)		―		1		―
Associated offsetting cash collateral			―		―		1		―
Net amounts presented on the balance sheet			1		―		(1)		―
Additional cash collateral for commodity contracts
not subject to rate recovery			1		―		―		―
Additional cash collateral for commodity contracts
subject to rate recovery			1		―		―		―
Total		$	3	$	―	$	(1)	$	―
(1)	Included in Current Assets: Other for SoCalGas.
(2)	Included in Current Liabilities: Other for SoCalGas.
(3)	Includes Otay Mesa VIE. All of SDG&E's amounts relate to Otay Mesa VIE.
(4)	Normal purchase contracts previously measured at fair value are excluded.

DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
		December 31, 2015
									Deferred
									credits
			Current				Current		and other
			assets:				liabilities:		liabilities:
			Fixed-price				Fixed-price		Fixed-price
			contracts		Other		contracts		contracts
			and other		assets:		and other		and other
			derivatives(1)		Sundry		derivatives(2)		derivatives
Sempra Energy Consolidated:
Derivatives designated as hedging instruments:
Interest rate and foreign exchange instruments(3)		$	4	$	1	$	(15)	$	(156)
Commodity contracts not subject to rate recovery			13		―		―		―
Derivatives not designated as hedging instruments:
Commodity contracts not subject to rate recovery			245		32		(239)		(21)
Associated offsetting commodity contracts			(232)		(20)		232		20
Associated offsetting cash collateral			(6)		―		4		―
Commodity contracts subject to rate recovery			28		49		(61)		(64)
Associated offsetting commodity contracts			(2)		(2)		2		2
Associated offsetting cash collateral			―		―		28		26
Net amounts presented on the balance sheet			50		60		(49)		(193)
Additional cash collateral for commodity contracts
not subject to rate recovery			2		―		―		―
Additional cash collateral for commodity contracts
subject to rate recovery			28		―		―		―
Total(4)		$	80	$	60	$	(49)	$	(193)
SDG&E:
Derivatives designated as hedging instruments:
Interest rate instruments(3)		$	―	$	―	$	(14)	$	(23)
Derivatives not designated as hedging instruments:
Commodity contracts not subject to rate recovery			―		―		(1)		―
Associated offsetting cash collateral			―		―		1		―
Commodity contracts subject to rate recovery			27		49		(60)		(64)
Associated offsetting commodity contracts			(2)		(2)		2		2
Associated offsetting cash collateral			―		―		28		26
Net amounts presented on the balance sheet			25		47		(44)		(59)
Additional cash collateral for commodity contracts
not subject to rate recovery			1		―		―		―
Additional cash collateral for commodity contracts
subject to rate recovery			27		―		―		―
Total(4)		$	53	$	47	$	(44)	$	(59)
SoCalGas:
Derivatives not designated as hedging instruments:
Commodity contracts not subject to rate recovery		$	―	$	―	$	(1)	$	―
Associated offsetting cash collateral			―		―		1		―
Commodity contracts subject to rate recovery			1		―		(1)		―
Net amounts presented on the balance sheet			1		―		(1)		―
Additional cash collateral for commodity contracts
subject to rate recovery			1		―		―		―
Total		$	2	$	―	$	(1)	$	―
(1)	Included in Current Assets: Other for SoCalGas.
(2)	Included in Current Liabilities: Other for SoCalGas.
(3)	Includes Otay Mesa VIE. All of SDG&E's amounts relate to Otay Mesa VIE.
(4)	Normal purchase contracts previously measured at fair value are excluded.

FAIR VALUE HEDGE IMPACTS
(Dollars in millions)
			Pretax gain (loss) on derivatives recognized in earnings
			Three months ended June 30,				Six months ended June 30,
		Location	2016		2015		2016		2015
Sempra Energy Consolidated:
Interest rate instruments		Interest Expense	$	1	$	2	$	3	$	4
Interest rate instruments		Other Income, Net		(2)		(3)		(2)		(2)
Total(1)			$	(1)	$	(1)	$	1	$	2
(1)	There was no hedge ineffectiveness in either the three months or six months ended June 30, 2016 or 2015. All other changes in the fair value of the interest rate swap agreements are exactly offset by changes in the fair value of the underlying long-term debt and are recorded in Other Income, Net.

CASH FLOW HEDGE IMPACTS
(Dollars in millions)
		Pretax gain (loss)						Pretax (loss) gain reclassified
		recognized in OCI						from AOCI into earnings
		(effective portion)						(effective portion)
		Three months ended June 30,						Three months ended June 30,
		2016		2015			Location	2016		2015
Sempra Energy Consolidated:
Interest rate and foreign
exchange instruments(1)		$	1	$	6		Interest Expense	$	(3)	$	(3)
							Equity Earnings (Losses),
Interest rate instruments			(70)		89		Before Income Tax		(2)		(3)
Interest rate and foreign							Equity Earnings,
exchange instruments			(15)		―		Net of Income Tax		(5)		―
Commodity contracts not subject							Revenues: Energy-Related
to rate recovery			(5)		1		Businesses		―		―
Total(2)		$	(89)	$	96			$	(10)	$	(6)
SDG&E:
Interest rate instruments(1)(2)		$	(2)	$	―		Interest Expense	$	(3)	$	(3)
		Six months ended June 30,						Six months ended June 30,
		2016		2015			Location	2016		2015
Sempra Energy Consolidated:
Interest rate and foreign
exchange instruments(1)		$	(10)	$	(12)		Interest Expense	$	(7)	$	(9)
							Equity Earnings (Losses),
Interest rate instruments			(207)		11		Before Income Tax		(5)		(6)
Interest rate and foreign							Equity Earnings,
exchange instruments			(33)		―		Net of Income Tax		(6)		―
Commodity contracts not subject							Revenues: Energy-Related
to rate recovery			(4)		―		Businesses		7		7
Total(2)		$	(254)	$	(1)			$	(11)	$	(8)
SDG&E:
Interest rate instruments(1)(2)		$	(7)	$	(5)		Interest Expense	$	(6)	$	(6)
(1)	Amounts include Otay Mesa VIE. All of SDG&E's interest rate derivative activity relates to Otay Mesa VIE.
(2)	Amounts include negligible hedge ineffectiveness in the three months and six months ended June 30, 2016 and 2015.

UNDESIGNATED DERIVATIVE IMPACTS
(Dollars in millions)
			Pretax (loss) gain on derivatives recognized in earnings
			Three months ended June 30,				Six months ended June 30,
		Location	2016		2015		2016		2015
Sempra Energy Consolidated:
Foreign exchange instruments		Other Income, Net	$	(15)	$	(3)	$	(12)	$	(3)
Foreign exchange instruments		Equity Earnings,
		Net of Income Tax		―		―		2		(1)
Commodity contracts not subject		Revenues: Energy-Related
to rate recovery		Businesses		(24)		9		(29)		12
Commodity contracts not subject
to rate recovery		Operation and Maintenance		1		1		1		1
Commodity contracts subject		Cost of Electric Fuel
to rate recovery		and Purchased Power		40		(53)		28		(73)
Commodity contracts subject
to rate recovery		Cost of Natural Gas		(1)		―		(2)		1
Total			$	1	$	(46)	$	(12)	$	(63)
SDG&E:
Commodity contracts subject		Cost of Electric Fuel
to rate recovery		and Purchased Power	$	40	$	(53)	$	28	$	(73)
SoCalGas:
Commodity contracts not subject
to rate recovery		Operation and Maintenance	$	―	$	1	$	―	$	1
Commodity contracts subject
to rate recovery		Cost of Natural Gas		(1)		―		(2)		1
Total			$	(1)	$	1	$	(2)	$	2

RECURRING FAIR VALUE MEASURES – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
		Fair value at June 30, 2016
			Level 1		Level 2		Level 3		Netting(1)		Total
Assets:
Nuclear decommissioning trusts:
Equity securities		$	632	$	―	$	―	$	―	$	632
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies			52		52		―		―		104
Municipal bonds			―		163		―		―		163
Other securities			―		192		―		―		192
Total debt securities			52		407		―		―		459
Total nuclear decommissioning trusts(2)			684		407		―		―		1,091
Interest rate and foreign exchange instruments			―		1		―		―		1
Commodity contracts not subject to rate recovery			1		17		―		14		32
Commodity contracts subject to rate recovery			―		1		63		27		91
Total		$	685	$	426	$	63	$	41	$	1,215
Liabilities:
Interest rate and foreign exchange instruments		$	―	$	211	$	―	$	―	$	211
Commodity contracts not subject to rate recovery			32		5		―		(31)		6
Commodity contracts subject to rate recovery			1		37		39		(28)		49
Total		$	33	$	253	$	39	$	(59)	$	266
		Fair value at December 31, 2015
			Level 1		Level 2		Level 3		Netting(1)		Total
Assets:
Nuclear decommissioning trusts:
Equity securities		$	619	$	―	$	―	$	―	$	619
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies			47		44		―		―		91
Municipal bonds			―		156		―		―		156
Other securities			―		182		―		―		182
Total debt securities			47		382		―		―		429
Total nuclear decommissioning trusts(2)			666		382		―		―		1,048
Interest rate and foreign exchange instruments			―		5		―		―		5
Commodity contracts not subject to rate recovery			22		16		―		(4)		34
Commodity contracts subject to rate recovery			―		1		72		28		101
Total		$	688	$	404	$	72	$	24	$	1,188
Liabilities:
Interest rate and foreign exchange instruments		$	―	$	171	$	―	$	―	$	171
Commodity contracts not subject to rate recovery			5		3		―		(4)		4
Commodity contracts subject to rate recovery			―		68		53		(54)		67
Total		$	5	$	242	$	53	$	(58)	$	242
(1)	Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.
(2)	Excludes cash balances and cash equivalents.

RECURRING FAIR VALUE MEASURES – SDG&E
(Dollars in millions)
		Fair value at June 30, 2016
			Level 1		Level 2		Level 3		Netting(1)		Total
Assets:
Nuclear decommissioning trusts:
Equity securities		$	632	$	―	$	―	$	―	$	632
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies			52		52		―		―		104
Municipal bonds			―		163		―		―		163
Other securities			―		192		―		―		192
Total debt securities			52		407		―		―		459
Total nuclear decommissioning trusts(2)			684		407		―		―		1,091
Commodity contracts subject to rate recovery			―		―		63		26		89
Total		$	684	$	407	$	63	$	26	$	1,180
Liabilities:
Interest rate instruments		$	―	$	37	$	―	$	―	$	37
Commodity contracts subject to rate recovery			―		36		39		(27)		48
Total		$	―	$	73	$	39	$	(27)	$	85
		Fair value at December 31, 2015
			Level 1		Level 2		Level 3		Netting(1)		Total
Assets:
Nuclear decommissioning trusts:
Equity securities		$	619	$	―	$	―	$	―	$	619
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies			47		44		―		―		91
Municipal bonds			―		156		―		―		156
Other securities			―		182		―		―		182
Total debt securities			47		382		―		―		429
Total nuclear decommissioning trusts(2)			666		382		―		―		1,048
Commodity contracts not subject to rate recovery			―		―		―		1		1
Commodity contracts subject to rate recovery			―		―		72		27		99
Total		$	666	$	382	$	72	$	28	$	1,148
Liabilities:
Interest rate instruments		$	―	$	37	$	―	$	―	$	37
Commodity contracts not subject to rate recovery			1		―		―		(1)		―
Commodity contracts subject to rate recovery			―		67		53		(54)		66
Total		$	1	$	104	$	53	$	(55)	$	103
(1)	Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.
(2)	Excludes cash balances and cash equivalents.

RECURRING FAIR VALUE MEASURES – SOCALGAS
(Dollars in millions)
		Fair value at June 30, 2016
			Level 1		Level 2		Level 3		Netting(1)		Total
Assets:
Commodity contracts not subject to rate recovery		$	―	$	―	$	―	$	1	$	1
Commodity contracts subject to rate recovery			―		1		―		1		2
Total		$	―	$	1	$	―	$	2	$	3
Liabilities:
Commodity contracts not subject to rate recovery		$	1	$	―	$	―	$	(1)	$	―
Commodity contracts subject to rate recovery			1		1		―		(1)		1
Total		$	2	$	1	$	―	$	(2)	$	1
		Fair value at December 31, 2015
			Level 1		Level 2		Level 3		Netting(1)		Total
Assets:
Commodity contracts subject to rate recovery		$	―	$	1	$	―	$	1	$	2
Total		$	―	$	1	$	―	$	1	$	2
Liabilities:
Commodity contracts not subject to rate recovery		$	1	$	―	$	―	$	(1)	$	―
Commodity contracts subject to rate recovery			―		1		―		―		1
Total		$	1	$	1	$	―	$	(1)	$	1
(1)	Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.

LEVEL 3 RECONCILIATIONS
(Dollars in millions)
	Three months ended June 30,
	2016		2015
Balance as of April 1	$	11	$	102
Realized and unrealized gains (losses)		8		(60)
Allocated transmission instruments		―		1
Settlements		5		(1)
Balance as of June 30	$	24	$	42
Change in unrealized gains relating to
instruments still held at June 30	$	9	$	45

	Six months ended June 30,
	2016		2015
Balance as of January 1	$	19	$	107
Realized and unrealized gains (losses)		7		(54)
Allocated transmission instruments		―		1
Settlements		(2)		(12)
Balance as of June 30	$	24	$	42
Change in unrealized gains relating to
instruments still held at June 30	$	9	$	46

FAIR VALUE OF FINANCIAL INSTRUMENTS
(Dollars in millions)
		June 30, 2016
		Carrying			Fair value
		amount			Level 1		Level 2		Level 3		Total
Sempra Energy Consolidated:
Noncurrent due from unconsolidated affiliates (1)		$	179		$	―	$	94	$	77	$	171
Total long-term debt (2)(3)			13,811			―		14,933		572		15,505
Preferred stock of subsidiary			20			―		25		―		25
SDG&E:
Total long-term debt (3)(4)		$	4,677		$	―	$	5,055	$	310	$	5,365
SoCalGas:
Total long-term debt (5)		$	3,009		$	―	$	3,335	$	―	$	3,335
Preferred stock			22			―		27		―		27
		December 31, 2015
		Carrying			Fair value
		amount			Level 1		Level 2		Level 3		Total
Sempra Energy Consolidated:
Noncurrent due from unconsolidated affiliates (1)		$	175		$	―	$	97	$	69	$	166
Total long-term debt (2)(3)			13,761			―		13,985		648		14,633
Preferred stock of subsidiary			20			―		23		―		23
SDG&E:
Total long-term debt (3)(4)		$	4,304		$	―	$	4,355	$	315	$	4,670
SoCalGas:
Total long-term debt (5)		$	2,513		$	―	$	2,621	$	―	$	2,621
Preferred stock			22			―		25		―		25
(1)	Excluding accumulated interest outstanding of $13 million and $11 million at June 30, 2016 and December 31, 2015, respectively.
(2)	Before reductions for unamortized discount (net of premium) and debt issuance costs of $111 million and $107 million at June 30, 2016 and December 31, 2015, respectively, and excluding build-to-suit and capital lease obligations of $385 million and $387 million at June 30, 2016 and December 31, 2015, respectively. We discuss our long-term debt in Note 6 above and in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report.
(3)	Level 3 instruments include $310 million and $315 million at June 30, 2016 and December 31, 2015, respectively, related to Otay Mesa VIE.
(4)	Before reductions for unamortized discount and debt issuance costs of $47 million and $43 million at June 30, 2016 and December 31, 2015, respectively, and excluding capital lease obligations of $242 million and $244 million at June 30, 2016 and December 31, 2015, respectively.
(5)	Before reductions for unamortized discount and debt issuance costs of $28 million and $24 million at June 30, 2016 and December 31, 2015, respectively, and excluding capital lease obligations of $1 million both at June 30, 2016 and December 31, 2015.

NON-RECURRING FAIR VALUE MEASURES – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
		Estimated				Fair	% of	Inputs used to
		fair				value	fair value	develop	Range of
		value			Valuation technique	hierarchy	measurement	measurement	inputs
Investment in
Rockies Express		$	440	(1)	Market approach	Level 2	100%	Equity sale price	100%
(1)	At measurement date of March 29, 2016.

NUCLEAR DECOMMISSIONING TRUSTS
(Dollars in millions)
					Gross		Gross		Estimated
					unrealized		unrealized		fair
			Cost		gains		losses		value
At June 30, 2016:
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies(1)		$	99	$	5	$	―	$	104
Municipal bonds(2)			150		13		―		163
Other securities(2)			189		9		(6)		192
Total debt securities			438		27		(6)		459
Equity securities			221		416		(5)		632
Cash and cash equivalents			12		―		―		12
Total		$	671	$	443	$	(11)	$	1,103
At December 31, 2015:
Debt securities:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies		$	89	$	2	$	―	$	91
Municipal bonds			148		8		―		156
Other securities			194		1		(13)		182
Total debt securities			431		11		(13)		429
Equity securities			214		412		(7)		619
Cash and cash equivalents			15		―		―		15
Total		$	660	$	423	$	(20)	$	1,063
(1)	Maturity dates are 2017-2065.
(2)	Maturity dates are 2016-2115.

SALES OF SECURITIES
(Dollars in millions)
		Three months ended June 30,				Six months ended June 30,
		2016		2015		2016		2015
Proceeds from sales(1)		$	111	$	127	$	204	$	221
Gross realized gains			5		4		8		6
Gross realized losses			(3)		(3)		(11)		(7)
(1)	Excludes securities that are held to maturity.

EARNINGS IMPACTS FROM THE 2016 GRC FD RECORDED IN THE SECOND QUARTER OF 2016
(Dollars in millions)
		SoCalGas					SDG&E
		Pretax		After-tax			Pretax		After-tax
		earnings		earnings			earnings		earnings
		(charge)		(charge)			(charge)		(charge)
Retroactive revenue requirement increase
for the first quarter of 2016		$	20	$	12		$	15	$	9
Adjustments to revenue related to
tax repairs deductions:
Refund of 2015 memorandum account		$	(72)	$	(43)		$	(37)	$	(22)
True-up of 2012-2014 estimates to actuals			(11)		(6)			(15)		(9)
Total		$	(83)	$	(49)		$	(52)	$	(31)

MAJOR PROJECTS – UPDATES
Joint Utilities Projects
Southern Gas System Reliability Project (North-South Pipeline)
§	In July 2016, the CPUC issued a final decision which denies the California Utilities' request for a permit to construct.
§	In June 2016, SoCalGas recorded an after-tax impairment charge of $13 million for the development costs it had invested in the project. The pretax charge of $21 million is included in Operation and Maintenance on Sempra Energy's and SoCalGas' Condensed Consolidated Statements of Operations. We expect to make a filing to the CPUC seeking recovery of all or a portion of these costs.
Pipeline Safety & Reliability Project
§	SDG&E and SoCalGas filed an amended application with the CPUC in March 2016 providing detailed analysis and testimony supporting the proposed project. The revised request also presents additional information on the costs and benefits of project alternatives, safety evaluation and compliance analysis, and statutory and procedural requirements. SDG&E and SoCalGas seek approval to construct the proposed project, estimated at a cost of $633 million, and authority to recover the associated revenue requirement in rates.
SDG&E Projects
Cleveland National Forest (CNF) Transmission Projects
§	In March 2016, the U.S. Forest Service issued a final decision authorizing issuance of the CNF Master Special Use Permit renewing SDG&E's land rights and authorizing the construction, operation and maintenance of facilities located on national forest lands for the next 50 years, as well as approving the majority of the fire-hardening activities proposed by SDG&E.
§	In May 2016, the CPUC issued a final decision granting SDG&E a permit to construct. The project will be installed at an estimated cost of $680 million: $470 million for the various transmission-level facilities and $210 million for associated distribution-level facilities, including distribution circuits and additional undergrounding required by the final environmental impact statement. In July 2016, the Cleveland National Forest Foundation and the Protect Our Communities Foundation filed a joint application for rehearing of the final decision.
Sycamore-Peñasquitos Transmission Project
§	March 2016 final environmental impact report (EIR) recommended an alternative that undergrounds more of the project than originally proposed, and is viewed as environmentally superior. The CPUC may consider this alternative.
§	The recommended alternative in the EIR has an estimated cost of $250 million to $300 million, compared to the original project cost estimate of $120 million to $150 million, and would also delay the project schedule by approximately 10 months.
§	CPUC decision expected in the second half of 2016.
South Orange County Reliability Enhancement
§	CPUC issued its final EIR for the project in April 2016. The EIR concluded that an alternative project is considered environmentally superior to SDG&E's proposal. The final EIR states that the CPUC is not required to adopt the environmentally superior alternative if there are overriding considerations in favor of another alternative. The CPUC will consider the findings in determining whether to approve SDG&E's proposed project or an alternative to it.
§	Final CPUC decision expected in the second half of 2016.
Energy Storage Projects
§	SDG&E filed an advice letter with the CPUC in July 2016 seeking approval to own and operate two energy storage projects totaling 37.5 MW. The purpose of the two projects is to enhance electric reliability in the San Diego service territory.
§	We expect a CPUC resolution later in 2016.

SEGMENT INFORMATION
(Dollars in millions)
		Three months ended June 30,								Six months ended June 30,
		2016				2015				2016				2015
REVENUES
SDG&E		$	992	46	%	$	972	41	%	$	1,983	41	%	$	1,938	38	%
SoCalGas			617	29			780	33			1,650	35			1,828	36
Sempra South American Utilities			385	18			389	16			785	16			778	15
Sempra Mexico			147	7			152	6			285	6			315	6
Sempra Renewables			6	―			10	1			13	―			18	1
Sempra Natural Gas			90	4			155	7			220	5			352	7
Adjustments and eliminations			―	―			(1)	―			―	―			(1)	―
Intersegment revenues(1)			(81)	(4)			(90)	(4)			(158)	(3)			(179)	(3)
Total		$	2,156	100	%	$	2,367	100	%	$	4,778	100	%	$	5,049	100	%
INTEREST EXPENSE
SDG&E		$	48			$	52			$	96			$	104
SoCalGas			24				19				46				38
Sempra South American Utilities			11				8				20				13
Sempra Mexico			4				6				8				11
Sempra Renewables			―				1				―				2
Sempra Natural Gas			10				23				22				44
All other			74				65				146				128
Intercompany eliminations			(29)				(35)				(53)				(67)
Total		$	142			$	139			$	285			$	273
INTEREST INCOME
SoCalGas		$	―			$	3			$	―			$	3
Sempra South American Utilities			5				5				10				9
Sempra Mexico			1				2				3				4
Sempra Renewables			―				1				1				1
Sempra Natural Gas			17				25				33				44
Intercompany eliminations			(17)				(26)				(35)				(44)
Total		$	6			$	10			$	12			$	17
DEPRECIATION AND AMORTIZATION
SDG&E		$	158	50	%	$	149	48	%	$	317	49	%	$	294	48	%
SoCalGas			112	36			113	37			234	36			226	37
Sempra South American Utilities			14	4			12	4			27	4			25	4
Sempra Mexico			15	5			17	6			32	5			34	6
Sempra Renewables			2	1			1	―			3	1			3	―
Sempra Natural Gas			12	4			12	4			25	4			24	4
All other			1	―			3	1			4	1			4	1
Total		$	314	100	%	$	307	100	%	$	642	100	%	$	610	100	%
INCOME TAX EXPENSE (BENEFIT)
SDG&E		$	48			$	54			$	120			$	142
SoCalGas			(29)				16				58				111
Sempra South American Utilities			15				18				29				34
Sempra Mexico			(12)				5				29				13
Sempra Renewables			(9)				(11)				(21)				(28)
Sempra Natural Gas			(99)				27				(124)				29
All other			(20)				(11)				(55)				(40)
Total		$	(106)			$	98			$	36			$	261

SEGMENT INFORMATION (CONTINUED)
(Dollars in millions)
		Three months ended June 30,								Six months ended June 30,
		2016				2015				2016				2015
EQUITY EARNINGS (LOSSES)
Earnings (losses) recorded before tax:
Sempra Renewables		$	11			$	10			$	18			$	12
Sempra Natural Gas			3				17				(26)				34
Total		$	14			$	27			$	(8)			$	46
Earnings (losses) recorded net of tax:
Sempra South American Utilities		$	―			$	―			$	2			$	(1)
Sempra Mexico			33				22				48				38
Total		$	33			$	22			$	50			$	37
EARNINGS (LOSSES)
SDG&E		$	100			$	126			$	229			$	273
SoCalGas(2)			(1)				70				194				284
Sempra South American Utilities			43				45				81				86
Sempra Mexico			57				50				74				97
Sempra Renewables			12				19				25				32
Sempra Natural Gas			(149)				40				(185)				42
All other			(46)				(55)				(83)				(82)
Total		$	16			$	295			$	335			$	732
										Six months ended June 30,
										2016				2015
EXPENDITURES FOR PROPERTY, PLANT & EQUIPMENT
SDG&E										$	602	30	%	$	600	41	%
SoCalGas											650	32			603	41
Sempra South American Utilities											82	4			66	5
Sempra Mexico											140	7			120	8
Sempra Renewables											457	23			22	1
Sempra Natural Gas											68	3			28	2
All other											7	1			27	2
Total										$	2,006	100	%	$	1,466	100	%
										June 30, 2016				December 31, 2015
ASSETS
SDG&E										$	17,039	40	%	$	16,515	40	%
SoCalGas											13,086	30			12,104	29
Sempra South American Utilities											3,486	8			3,235	8
Sempra Mexico											3,925	9			3,783	9
Sempra Renewables											1,838	4			1,441	4
Sempra Natural Gas											5,396	13			5,566	13
All other											803	2			734	2
Intersegment receivables											(2,698)	(6)			(2,228)	(5)
Total										$	42,875	100	%	$	41,150	100	%
EQUITY METHOD AND OTHER INVESTMENTS
Sempra South American Utilities										$	(1)			$	(4)
Sempra Mexico											548				519
Sempra Renewables											827				855
Sempra Natural Gas											818				1,460
All other											75				75
Total										$	2,267			$	2,905
(1)	Revenues for reportable segments include intersegment revenues of a negligible amount, $18 million, $27 million and $36 million for the three months ended June 30, 2016; $3 million, $35 million, $54 million and $66 million for the six months ended June 30, 2016; $3 million, $17 million, $24 million and $46 million for the three months ended June 30, 2015; and $5 million, $36 million, $49 million and $89 million for the six months ended June 30, 2015 for SDG&E, SoCalGas, Sempra Mexico and Sempra Natural Gas, respectively.
(2)	After preferred dividends.

CALIFORNIA UTILITIES
	MARKET	SERVICE TERRITORY
SAN DIEGO GAS & ELECTRIC COMPANY (SDG&E) A regulated public utility; infrastructure supports electric generation, transmission and distribution, and natural gas distribution	§ Provides electricity to a population of 3.6 million (1.4 million meters) § Provides natural gas to a population of 3.3 million (0.9 million meters)	Serves the county of San Diego, California and an adjacent portion of southern Orange County covering 4,100 square miles
SOUTHERN CALIFORNIA GAS COMPANY (SOCALGAS) A regulated public utility; infrastructure supports natural gas distribution, transmission and storage	§ Residential, commercial, industrial, utility electric generation and wholesale customers § Covers a population of 21.6 million (5.9 million meters)	Southern California and portions of central California (excluding San Diego County, the city of Long Beach and the desert area of San Bernardino County) covering 20,000 square miles

SEMPRA INTERNATIONAL
	MARKET	GEOGRAPHIC REGION
SEMPRA SOUTH AMERICAN UTILITIES Develops, owns and operates, or holds interests in electric transmission, distribution and generation infrastructure	§ Provides electricity to a population of approximately 2 million (approximately 672,000 meters) in Chile and approximately 4.9 million consumers (approximately 1,053,000 meters) in Peru	§ Chile § Peru
SEMPRA MEXICO Develops, owns and operates, or holds interests in: § natural gas transmission pipelines and propane and ethane systems § a natural gas distribution utility § electric generation facilities, including wind § a terminal for the import of liquefied natural gas (LNG) § marketing operations for the purchase of LNG and the purchase and sale of natural gas	§ Natural gas § Wholesale electricity § Liquefied natural gas	§ Mexico

SEMPRA U.S. GAS & POWER
	MARKET	GEOGRAPHIC REGION
SEMPRA RENEWABLES Develops, owns, operates, or holds interests in renewable energy generation projects	§ Wholesale electricity	§ U.S.A.
SEMPRA NATURAL GAS Develops, owns and operates, or holds interests in: § natural gas midstream and LNG ▫ natural gas pipelines and storage facilities ▫ a terminal in the U.S. for the import and export of LNG and sale of natural gas ▫ marketing operations § natural gas distribution utilities (held for sale at June 30, 2016)	§ Natural gas § Liquefied natural gas	§ U.S.A.

SEMPRA ENERGY ADJUSTED EARNINGS AND ADJUSTED EARNINGS PER SHARE
(Dollars in millions, except per share amounts)
			Pretax amount		Income tax (benefit) expense(1)		After-tax amount		Diluted EPS
		Three months ended June 30, 2016
Sempra Energy GAAP Earnings						$	16	$	0.06
Excluded items:
Permanent release of pipeline capacity		$	206	$	(83)		123		0.49
SDG&E tax repairs adjustments related to 2016 GRC FD			52		(21)		31		0.12
SoCalGas tax repairs adjustments related to 2016 GRC FD			83		(34)		49		0.20
SDG&E retroactive impact of 2016 GRC FD for first-quarter 2016			(15)		6		(9)		(0.04)
SoCalGas retroactive impact of 2016 GRC FD for first-quarter 2016			(20)		8		(12)		(0.05)
Deferred income tax expense associated with TdM			―		2		2		0.01
Sempra Energy Adjusted Earnings						$	200	$	0.79
Weighted-average number of shares outstanding, diluted (thousands)									251,938
		Three months ended June 30, 2015
Sempra Energy GAAP Earnings						$	295	$	1.17
Excluded items:
Gain on sale of Mesquite Power block 2		$	(61)	$	25		(36)		(0.14)
Sempra Energy Adjusted Earnings						$	259	$	1.03
Weighted-average number of shares outstanding, diluted (thousands)									251,491
		Six months ended June 30, 2016
Sempra Energy GAAP Earnings						$	335	$	1.33
Excluded items:
Permanent release of pipeline capacity		$	206	$	(83)		123		0.49
SDG&E tax repairs adjustments related to 2016 GRC FD			52		(21)		31		0.12
SoCalGas tax repairs adjustments related to 2016 GRC FD			83		(34)		49		0.20
Impairment of investment in Rockies Express			44		(17)		27		0.11
Deferred income tax expense associated with TdM			―		26		26		0.10
Sempra Energy Adjusted Earnings						$	591	$	2.35
Weighted-average number of shares outstanding, diluted (thousands)									251,686
		Six months ended June 30, 2015
Sempra Energy GAAP Earnings						$	732	$	2.91
Excluded items:
Gain on sale of Mesquite Power block 2		$	(61)	$	25		(36)		(0.14)
SONGS plant closure adjustment			(21)		8		(13)		(0.05)
Sempra Energy Adjusted Earnings						$	683	$	2.72
Weighted-average number of shares outstanding, diluted (thousands)									251,264
(1)	Income taxes were calculated based on applicable statutory tax rates, except for adjustments that are solely income tax.

SEMPRA ENERGY EARNINGS (LOSSES) BY SEGMENT
(Dollars in millions)
		Three months ended June 30,				Six months ended June 30,
		2016		2015		2016		2015
California Utilities:
SDG&E		$	100	$	126	$	229	$	273
SoCalGas(1)			(1)		70		194		284
Sempra International:
Sempra South American Utilities			43		45		81		86
Sempra Mexico			57		50		74		97
Sempra U.S. Gas & Power:
Sempra Renewables			12		19		25		32
Sempra Natural Gas			(149)		40		(185)		42
Parent and other(2)			(46)		(55)		(83)		(82)
Earnings		$	16	$	295	$	335	$	732
(1)	After preferred dividends.
(2)	Includes after-tax interest expense ($44 million and $39 million for the three months ended June 30, 2016 and 2015, respectively, and $87 million and $77 million for the six months ended June 30, 2016 and 2015, respectively), intercompany eliminations recorded in consolidation and certain corporate costs.

EARNINGS (LOSSES) BY SEGMENT – CALIFORNIA UTILITIES

(Dollars in millions)

EARNINGS BY SEGMENT – SEMPRA INTERNATIONAL

(Dollars in millions)

EARNINGS (LOSSES) BY SEGMENT – SEMPRA U.S. GAS & POWER

(Dollars in millions)

UTILITIES REVENUES AND COST OF SALES
(Dollars in millions)
		Three months ended June 30,				Six months ended June 30,
		2016		2015		2016		2015
Electric revenues:
SDG&E		$	897	$	874	$	1,740	$	1,679
Sempra South American Utilities			365		363		743		726
Eliminations and adjustments			(1)		(2)		(3)		(4)
	Total		1,261		1,235		2,480		2,401
Natural gas revenues:
SoCalGas			617		780		1,650		1,828
SDG&E			95		98		243		259
Sempra Mexico			20		19		42		44
Sempra Natural Gas			18		18		56		60
Eliminations and adjustments			(17)		(17)		(35)		(37)
	Total		733		898		1,956		2,154
Total utilities revenues		$	1,994	$	2,133	$	4,436	$	4,555
Cost of electric fuel and purchased power:
SDG&E		$	314	$	251	$	562	$	479
Sempra South American Utilities			247		247		514		500
	Total	$	561	$	498	$	1,076	$	979
Cost of natural gas:
SoCalGas		$	147	$	196	$	400	$	463
SDG&E			25		31		64		85
Sempra Mexico			11		11		23		26
Sempra Natural Gas			4		5		15		20
Eliminations and adjustments			(4)		(4)		(8)		(9)
	Total	$	183	$	239	$	494	$	585

SDG&E
ELECTRIC DISTRIBUTION AND TRANSMISSION
(Volumes in millions of kilowatt-hours, dollars in millions)
		Six months ended June 30, 2016			Six months ended June 30, 2015
Customer class		Volumes	Revenue		Volumes	Revenue
Residential		3,111	$	603	3,227	$	610
Commercial		3,130		586	3,223		656
Industrial		1,007		156	985		162
Direct access		1,606		99	1,696		106
Street and highway lighting		37		7	41		8
		8,891		1,451	9,172		1,542
CAISO shared transmission revenue - net(1)				119			126
Other revenues				96			101
Balancing accounts				74			(90)
Total(2)			$	1,740		$	1,679
(1)	California Independent System Operator (CAISO).
(2)	Includes sales to affiliates of $3 million in 2016 and $4 million in 2015.

SDG&E
NATURAL GAS SALES AND TRANSPORTATION
(Volumes in billion cubic feet, dollars in millions)
		Natural gas sales			Transportation			Total
Customer class		Volumes	Revenue		Volumes	Revenue		Volumes	Revenue
Six months ended June 30, 2016:
Residential		16	$	191	―	$	1	16	$	192
Commercial and industrial		8		54	5		11	13		65
Electric generation plants		―		―	9		1	9		1
		24	$	245	14	$	13	38		258
Other revenues										20
Balancing accounts										(35)
Total(1)									$	243
Six months ended June 30, 2015:
Residential		14	$	175	―	$	2	14	$	177
Commercial and industrial		8		53	4		7	12		60
Electric generation plants		―		―	11		―	11		―
		22	$	228	15	$	9	37		237
Other revenues										21
Balancing accounts										1
Total(1)									$	259
(1)	Includes sales to affiliates of a negligible amount in 2016 and $1 million in 2015.

SOCALGAS
NATURAL GAS SALES AND TRANSPORTATION
(Volumes in billion cubic feet, dollars in millions)
		Natural gas sales			Transportation			Total
Customer class		Volumes	Revenue		Volumes	Revenue		Volumes	Revenue
Six months ended June 30, 2016:
Residential		113	$	1,117	1	$	7	114	$	1,124
Commercial and industrial		49		328	144		133	193		461
Electric generation plants		―		―	69		14	69		14
Wholesale		―		―	64		11	64		11
		162	$	1,445	278	$	165	440		1,610
Other revenues										87
Balancing accounts										(47)
Total(1)									$	1,650
Six months ended June 30, 2015:
Residential		102	$	1,036	2	$	10	104	$	1,046
Commercial and industrial		48		324	141		126	189		450
Electric generation plants		―		―	69		16	69		16
Wholesale		―		―	73		13	73		13
		150	$	1,360	285	$	165	435		1,525
Other revenues										90
Balancing accounts										213
Total(1)									$	1,828
(1)	Includes sales to affiliates of $35 million in 2016 and $36 million in 2015.

OTHER UTILITIES
NATURAL GAS AND ELECTRIC REVENUES
(Dollars in millions)
		Six months ended June 30, 2016			Six months ended June 30, 2015
		Volumes	Revenue		Volumes	Revenue
Natural Gas Sales (billion cubic feet):
Sempra Mexico – Ecogas		15	$	42	13	$	44
Sempra Natural Gas:
Mobile Gas (including transportation)		24		47	24		49
Willmut Gas		2		9	2		11
Total		41	$	98	39	$	104
Electric Sales (million kilowatt hours):
Sempra South American Utilities:
Luz del Sur		3,836	$	464	3,841	$	440
Chilquinta Energía		1,481		258	1,496		266
		5,317		722	5,337		706
Other service revenues				21			20
Total			$	743		$	726

ENERGY-RELATED BUSINESSES: REVENUES AND COST OF SALES
(Dollars in millions)
		Three months ended June 30,				Six months ended June 30,
		2016		2015		2016		2015
REVENUES
Sempra South American Utilities		$	20	$	26	$	42	$	52
Sempra Mexico			127		133		243		271
Sempra Renewables			6		10		13		18
Sempra Natural Gas			72		137		164		292
Intersegment revenues, eliminations and adjustments(1)			(63)		(72)		(120)		(139)
Total revenues		$	162	$	234	$	342	$	494
COST OF SALES (2)
Cost of natural gas, electric fuel and purchased power:
Sempra South American Utilities		$	4	$	7	$	8	$	16
Sempra Mexico			40		45		75		96
Sempra Natural Gas			77		87		151		192
Eliminations and adjustments(1)			(59)		(66)		(116)		(133)
Total		$	62	$	73	$	118	$	171
Other cost of sales:
Sempra South American Utilities		$	14	$	18	$	29	$	29
Sempra Mexico			3		4		5		9
Sempra Natural Gas			211		23		231		43
Eliminations and adjustments(1)			(2)		(3)		(4)		(4)
Total		$	226	$	42	$	261	$	77
(1)	Includes eliminations of intercompany activity.
(2)	Excludes depreciation and amortization, which are shown separately on Sempra Energy's Condensed Consolidated Statements of Operations.

INCOME TAX EXPENSE AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
			Income tax		Effective					Effective
			(benefit)		income			Income tax		income
			expense		tax rate			expense		tax rate
			Three months ended June 30,
			2016					2015
Sempra Energy Consolidated		$	(106)		95	%	$	98		25	%
SDG&E			48		36			54		29
SoCalGas			(29)		100			16		18
			Six months ended June 30,
			2016					2015
Sempra Energy Consolidated		$	36		10	%	$	261		26	%
SDG&E			120		36			142		34
SoCalGas			58		23			111		28

TRANSLATION IMPACT FROM CHANGE IN AVERAGE FOREIGN CURRENCY EXCHANGE RATES
(Dollars in millions)
						Second quarter 2016 compared to second quarter 2015		Year-to-date 2016 compared to year-to-date 2015
Lower earnings from foreign currency translation:
Sempra South American Utilities					$	4	$	9
Sempra Mexico						1		2
Total					$	5	$	11

TRANSACTIONAL GAINS (LOSSES) FROM FOREIGN CURRENCY AND INFLATION
(Dollars in millions)
					Transactional
					(losses) gains included
	Total reported amount				in reported amounts
	Three months ended June 30,
	2016		2015		2016		2015
Other income, net	$	23	$	37	$	(20)	$	(5)
Income tax (benefit) expense		(106)		98		23		7
Equity earnings, net of income tax		33		22		17		5
Earnings		16		295		17		6
	Six months ended June 30,
	2016		2015		2016		2015
Other income, net	$	72	$	76	$	(19)	$	(6)
Income tax expense		36		261		24		13
Equity earnings, net of income tax		50		37		18		6
Earnings		335		732		20		11

AVAILABLE FUNDS AT JUNE 30, 2016
(Dollars in millions)
		Sempra Energy
		Consolidated		SDG&E		SoCalGas
Unrestricted cash and cash equivalents(1)		$	616	$	8	$	211
Available unused credit(2)			2,589		696		750
(1)	Amounts at Sempra Energy Consolidated include $328 million held in non-U.S. jurisdictions that are unavailable to fund U.S. operations unless repatriated, as we discuss below.
(2)	Available credit is the total available on Sempra Energy's, Sempra Global's and the California Utilities' credit facilities that we discuss in Note 6 of the Notes to Condensed Consolidated Financial Statements herein. At June 30, 2016, borrowings on the shared line of credit at SDG&E and SoCalGas were limited to $750 million for each utility and a combined total of $1 billion.

CASH PROVIDED BY OPERATING ACTIVITIES
(Dollars in millions)
	Six months ended June 30, 2016		2016 change				Six months ended June 30, 2015
Sempra Energy Consolidated	$	882	$	(337)	(28)	%	$	1,219
SDG&E		508		(42)	(8)			550
SoCalGas		262		(221)	(46)			483

CONTRIBUTIONS TO PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
(Dollars in millions)
	Six months ended June 30, 2016
			Other
	Pension		postretirement
	benefits		benefits
Sempra Energy Consolidated	$	23	$	2
SDG&E		2		―
SoCalGas		―		1

CASH USED IN INVESTING ACTIVITIES
(Dollars in millions)
	Six months ended						Six months ended
	June 30, 2016		2016 change				June 30, 2015
Sempra Energy Consolidated	$	(1,593)	$	392	33	%	$	(1,201)
SDG&E		(770)		164	27			(606)
SoCalGas		(600)		(282)	(32)			(882)

CASH FLOWS FROM FINANCING ACTIVITIES
(Dollars in millions)
	Six months ended					Six months ended
	June 30, 2016		2016 Change			June 30, 2015
Sempra Energy Consolidated	$	916	$	866		$	50
SDG&E		250		179			71
SoCalGas		491		(54)			545

NOMINAL AMOUNT OF LONG-TERM DEBT(1)
(Dollars in millions)
		June 30, 2016						December 31, 2015
		Sempra Energy						Sempra Energy
		Consolidated		SDG&E		SoCalGas		Consolidated		SDG&E		SoCalGas
Utility fixed-rate		$	7,236	$	4,227	$	3,009	$	6,362	$	3,849	$	2,513
Utility variable-rate			450		450		―		455		455		―
Non-utility fixed-rate			5,972		―		―		6,780		―		―
Non-utility variable-rate			157		―		―		166		―		―
(1)	Excluding capital lease obligations, build-to-suit lease and interest rate swaps, and before reductions/increases for unamortized discount/premium and reductions for debt issuance costs.

	EXHIBIT 12 -- STATEMENTS RE: COMPUTATION OF RATIOS
	Sempra Energy
	12.1		Sempra Energy Computation of Ratio of Earnings to Combined Fixed Charges and Preferred
			Stock Dividends.
	San Diego Gas & Electric Company
	12.2		San Diego Gas & Electric Company Computation of Ratio of Earnings to Combined
			Fixed Charges and Preferred Stock Dividends.
	Southern California Gas Company
	12.3		Southern California Gas Company Computation of Ratio of Earnings to Combined Fixed
			Charges and Preferred Stock Dividends.
	EXHIBIT 31 -- SECTION 302 CERTIFICATIONS
	Sempra Energy
	31.1		Statement of Sempra Energy's Chief Executive Officer pursuant to Rules 13a-14 and 15d-14
			of the Securities Exchange Act of 1934.
	31.2		Statement of Sempra Energy's Chief Financial Officer pursuant to Rules 13a-14 and 15d-14
			of the Securities Exchange Act of 1934.
	San Diego Gas & Electric Company
	31.3		Statement of San Diego Gas & Electric Company's Chief Executive Officer pursuant to Rules
			13a-14 and 15d-14 of the Securities Exchange Act of 1934.
	31.4		Statement of San Diego Gas & Electric Company's Chief Financial Officer pursuant to Rules
			13a-14 and 15d-14 of the Securities Exchange Act of 1934.

	Southern California Gas Company
	31.5		Statement of Southern California Gas Company's Chief Executive Officer pursuant to Rules
			13a-14 and 15d-14 of the Securities Exchange Act of 1934.
	31.6		Statement of Southern California Gas Company's Chief Financial Officer pursuant to Rules
			13a-14 and 15d-14 of the Securities Exchange Act of 1934.
	EXHIBIT 32 -- SECTION 906 CERTIFICATIONS
	Sempra Energy
	32.1		Statement of Sempra Energy's Chief Executive Officer pursuant to 18 U.S.C. Sec. 1350.
	32.2		Statement of Sempra Energy's Chief Financial Officer pursuant to 18 U.S.C. Sec. 1350.
	San Diego Gas & Electric Company
	32.3		Statement of San Diego Gas & Electric Company's Chief Executive Officer pursuant to 18
			U.S.C. Sec. 1350.
	32.4		Statement of San Diego Gas & Electric Company's Chief Financial Officer pursuant to 18
			U.S.C. Sec. 1350.
	Southern California Gas Company
	32.5		Statement of Southern California Gas Company's Chief Executive Officer pursuant to 18
			U.S.C. Sec. 1350.
	32.6		Statement of Southern California Gas Company's Chief Financial Officer pursuant to 18
			U.S.C. Sec. 1350.
	EXHIBIT 101 -- INTERACTIVE DATA FILE
	Sempra Energy / San Diego Gas & Electric Company / Southern California Gas Company
	101.INS		XBRL Instance Document
	101.SCH		XBRL Taxonomy Extension Schema Document
	101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
	101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
	101.LAB		XBRL Taxonomy Extension Label Linkbase Document
	101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES
Sempra Energy:
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
	SEMPRA ENERGY, (Registrant)
Date: August 4, 2016	By:  /s/ Trevor I. Mihalik
	Trevor I. Mihalik Senior Vice President, Controller and Chief Accounting Officer

San Diego Gas & Electric Company:
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
	SAN DIEGO GAS & ELECTRIC COMPANY, (Registrant)
Date: August 4, 2016	By:  /s/ Bruce A. Folkmann
	Bruce A. Folkmann Vice President, Controller, Chief Financial Officer and Chief Accounting Officer

Southern California Gas Company:
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
	SOUTHERN CALIFORNIA GAS COMPANY, (Registrant)
Date: August 4, 2016	By:  /s/ Bruce A. Folkmann
	Bruce A. Folkmann Vice President, Controller, Chief Financial Officer and Chief Accounting Officer