SEMPRA

We discuss herein SDG&E’s results of operations and significant changes in earnings, revenues and costs for the three months (Q3) and nine months (YTD) ended September 30, 2024 compared to the same periods in 2023.

SDG&E recorded CPUC-authorized base revenues in the three months and nine months ended September 30, 2024 based on 2023 levels authorized under the 2019 GRC because a final decision in the 2024 GRC remains pending.

RESULTS OF OPERATIONS

(Dollars in millions)

In the three months ended September 30, 2024 compared to the same period in 2023, the decrease in earnings of $13 million (5%) to $261 million was primarily due to:

▪$24 million lower income tax benefits primarily from flow-through items and the resolution of prior year income tax items

▪$10 million higher net interest expense

▪$18 million higher CPUC base operating margin, net of operating expenses, including higher authorized cost of capital. SDG&E recorded CPUC-authorized revenues based on 2023 authorized levels

In the nine months ended September 30, 2024 compared to the same period in 2023, the decrease in earnings of $46 million (6%) to $670 million was primarily due to:

▪$32 million lower income tax benefits primarily from flow-through items and the resolution of prior year income tax items

▪$25 million higher net interest expense

▪$7 million lower AFUDC equity

▪$12 million higher electric transmission margin

▪$6 million lower Wildfire Fund amortization

Electric Revenues and Cost of Electric Fuel and Purchased Power

In the three months ended September 30, 2024 compared to the same period in 2023, SDG&E’s electric revenues decreased by $181 million (14%) to $1.1 billion primarily due to:

▪$205 million lower cost of electric fuel and purchased power, which we discuss below

▪$59 million lower revenues associated with refundable programs, which are fully offset in O&M

▪$29 million higher revenues from incremental and balanced capital projects, including higher authorized cost of capital

▪$20 million lower ITCs from standalone energy storage projects, which are offset in income tax (expense) benefit

▪$20 million higher CPUC-authorized revenues, including higher authorized cost of capital

▪$6 million higher revenues from transmission operations

In the three months ended September 30, 2024 compared to the same period in 2023, SDG&E’s cost of electric fuel and purchased power decreased by $205 million to $(5) million primarily due to:

▪$227 million lower purchased power primarily due to change in excess capacity sales

▪$34 million lower purchased power from the California ISO due to lower market prices

▪$56 million lower sales to the California ISO due to lower market prices

In the nine months ended September 30, 2024 compared to the same period in 2023, SDG&E’s electric revenues decreased by $61 million (2%) remaining at $3.3 billion primarily due to:

▪$165 million lower cost of electric fuel and purchased power, which we discuss below

▪$124 million lower revenues associated with refundable programs, which are fully offset in O&M

▪$13 million lower revenues from a $4 million credit in 2024 compared to a $9 million cost in 2023 for the non-service components of net periodic benefit cost, which fully offsets in other income, net

▪$108 million lower ITCs from standalone energy storage projects, which are offset in income tax (expense) benefit

▪$95 million higher revenues from incremental and balanced capital projects, including higher authorized cost of capital

▪$36 million higher revenues from transmission operations

▪$25 million higher CPUC-authorized revenues, including higher authorized cost of capital

In the nine months ended September 30, 2024 compared to the same period in 2023, SDG&E’s cost of electric fuel and purchased power decreased by $165 million (37%) to $277 million primarily due to:

▪$230 million lower purchased power primarily due to change in excess capacity sales

▪$219 million lower purchased power from the California ISO due to lower market prices

▪$84 million lower utility-owned generation costs

▪$270 million lower sales to the California ISO due to lower market prices

▪$86 million from realized losses in 2024 compared to realized gains in 2023 on derivative contracts for fixed-price natural gas, which are entered into to hedge the cost of electric fuel

Natural Gas Revenues and Cost of Natural Gas

In the three months ended September 30, 2024 and 2023, SDG&E’s average cost of natural gas per thousand cubic feet was $5.61 and $6.33, respectively. In the nine months ended September 30, 2024 and 2023, SDG&E’s average cost of natural gas per thousand cubic feet was $5.19 and $12.10, respectively. The average cost of natural gas sold at SDG&E is impacted by market prices, as well as transportation, tariff and other charges.

In the three months ended September 30, 2024 compared to the same period in 2023, SDG&E’s natural gas revenues decreased by $18 million (10%) to $170 million primarily due to:

▪$23 million lower regulatory revenues in 2024 from adopting a change in tax accounting method for gas repairs expenditures, which are offset in income tax (expense) benefit

▪$7 million decrease in cost of natural gas sold, which we discuss below

▪$11 million higher revenues from incremental and balanced capital projects, including higher authorized cost of capital

In the three months ended September 30, 2024 compared to the same period in 2023, SDG&E’s cost of natural gas decreased by $7 million (16%) to $38 million primarily due to lower average natural gas prices.

In the nine months ended September 30, 2024 compared to the same period in 2023, SDG&E’s natural gas revenues decreased by $319 million (31%) to $695 million primarily due to:

▪$285 million decrease in cost of natural gas sold, which we discuss below

▪$48 million lower regulatory revenues in 2024 from adopting a change in tax accounting method for gas repairs expenditures, which are offset in income tax (expense) benefit

▪$23 million higher revenues from incremental and balanced capital projects, including higher authorized cost of capital

In the nine months ended September 30, 2024 compared to the same period in 2023, SDG&E’s cost of natural gas decreased by $285 million to $177 million primarily due to:

▪$236 million lower average natural gas prices

▪$49 million lower volumes driven by weather

In the three months ended September 30, 2024 compared to the same period in 2023, SDG&E’s O&M decreased by $43 million (9%) to $420 million due to:

▪$58 million lower expenses associated with refundable programs, which costs are recovered in revenue

▪$18 million higher non-refundable operating costs

In the nine months ended September 30, 2024 compared to the same period in 2023, SDG&E’s O&M decreased by $110 million (8%) to $1.3 billion due to:

▪$125 million lower expenses associated with refundable programs, which costs are recovered in revenue

▪$18 million higher non-refundable operating costs

Other Income, Net

In the nine months ended September 30, 2024 compared to the same period in 2023, SDG&E’s other income, net, increased by $11 million (15%) to $86 million primarily due to:

▪$18 million increase from a $4 million credit in 2024 compared to $14 million cost in 2023 for the non-service components of net periodic benefit cost

▪$7 million lower AFUDC equity

In the three months and nine months ended September 30, 2024 compared to the same periods in 2023, SDG&E’s interest expense increased by $5 million (4%) to $131 million and $23 million (6%) to $390 million, respectively, from higher debt balances from debt issuances.

In April 2023, the IRS issued Revenue Procedure 2023-15, which provides a safe harbor method of accounting for gas repairs expenditures. SDG&E elected this change in tax accounting method in Sempra’s consolidated 2023 income tax return filing and has applied this methodology in the calculation of its 2024 forecasted ETR.

SDG&E records regulatory liabilities for benefits that will be flowed through to customers in the future.

In the three months and nine months ended September 30, 2024 compared to the same period in 2023, SDG&E had an income tax expense in 2024 compared to income tax benefit in 2023 primarily due to:

▪higher pretax income

▪$9 million higher income tax benefit from the resolution of prior year income tax items