SEMPRA

We discuss herein Sempra’s results of operations and significant changes in earnings (losses), revenues and costs by segment, as well as Parent and other, for the three months (Q3) and nine months (YTD) ended September 30, 2024 compared to the same periods in 2023. We also discuss herein the impact of foreign currency and inflation rates on Sempra’s results of operations.

Sempra California 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 and shares in millions, except per share amounts)

(1)Includes intercompany eliminations recorded in consolidation and certain corporate costs.

Sempra California

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

In the three months ended September 30, 2024 compared to the same period in 2023, the decrease in earnings of $43 million (15%) to $247 million was primarily due to:

▪$38 million lower income tax benefits primarily from flow-through items and the resolution of prior year income tax items

▪$19 million higher net interest expense

▪$5 million higher CPUC base operating margin, net of operating expenses, including higher authorized cost of capital. Sempra California recorded CPUC-authorized revenues based on 2023 authorized levels

▪$4 million higher net regulatory interest income

In the nine months ended September 30, 2024 compared to the same period in 2023, the decrease in earnings of $102 million (8%) to $1.1 billion was primarily due to:

▪$89 million lower income tax benefits primarily from flow-through items, which includes $25 million related to income tax benefits in 2023 for previously unrecognized income tax benefits pertaining to gas repairs expenditures

▪$45 million higher net interest expense

▪$21 million regulatory awards approved by the CPUC in 2023

▪$19 million higher CPUC base operating margin, net of operating expenses, including higher authorized cost of capital. Sempra California recorded CPUC-authorized revenues based on 2023 authorized levels

▪$12 million higher electric transmission margin

▪$9 million higher AFUDC equity

▪$8 million higher net regulatory interest income

Sempra Texas Utilities

In the three months ended September 30, 2024 compared to the same period in 2023, the decrease in earnings of $44 million (14%) to $261 million was primarily due to lower equity earnings from Oncor Holdings driven by:

▪higher interest expense and depreciation expense attributable to invested capital

▪higher O&M

▪higher revenues primarily attributable to:

◦rate updates to reflect increases in invested capital

◦updates to transmission billing units

◦customer growth

Offset by

◦lower customer consumption primarily attributable to weather

◦annual energy efficiency program performance bonus approved in 2023, but pending PUCT approval in 2024

In the nine months ended September 30, 2024 compared to the same period in 2023, the increase in earnings of $98 million (18%) to $646 million was primarily due to higher equity earnings from Oncor Holdings driven by:

▪higher revenues primarily attributable to:

◦rate updates to reflect increases in invested capital

◦updates to transmission billing units

◦customer growth

◦new base rates implemented in May 2023

Offset by

◦lower customer consumption primarily attributable to weather

◦annual energy efficiency program performance bonus approved in 2023, but pending PUCT approval in 2024

▪write-off of rate base disallowances in 2023 resulting from the PUCT’s final order in Oncor’s comprehensive base rate review

▪higher interest expense and depreciation expense attributable to invested capital

▪higher O&M

Sempra Infrastructure

In the three months ended September 30, 2024 compared to the same period in 2023, the increase in earnings of $7 million (3%) to $230 million was primarily due to:

▪$31 million favorable impact from foreign currency and inflation effects on our monetary positions in Mexico, comprised of a $67 million favorable impact in 2024 compared to a $36 million favorable impact in 2023

▪$18 million higher income tax benefit primarily from outside basis differences

▪$7 million favorable impact from $4 million net interest income in 2024 compared to $3 million net interest expense in 2023 primarily due to higher capitalization of interest expense on projects under construction

▪$12 million from the transportation business driven by lower revenues due to lower rates and higher O&M from a provision for expected credit losses on a customer's past due receivable balance

▪$9 million from the renewables business driven by lower volumes from wind power generation assets

▪$7 million from asset and supply optimization driven by lower natural gas prices, offset by unrealized gains in 2024 compared to unrealized losses in 2023 on commodity derivatives

▪$7 million from TdM driven by lower unrealized gains on commodity derivatives due to changes in power and natural gas prices

In the nine months ended September 30, 2024 compared to the same period in 2023, the decrease in earnings of $94 million (13%) to $652 million was primarily due to:

▪$401 million from asset and supply optimization driven by unrealized losses in 2024 compared to unrealized gains in 2023 on commodity derivatives due to changes in natural gas prices and lower LNG diversion fees

▪$74 million from the transportation business driven by lower equity earnings and revenues, including the cumulative impact of new tariffs going into effect in June 2023 for certain pipelines in Mexico and a customer’s early termination of firm transportation agreements in 2023

▪$28 million higher O&M and lower revenues from a provision for expected credit losses on a customer’s past due receivable balance

▪$11 million from the renewables business driven by lower volumes from wind power generation assets

▪$346 million favorable impact from foreign currency and inflation effects on our monetary positions in Mexico, comprised of a $179 million favorable impact in 2024 compared to a $167 million unfavorable impact in 2023

▪$61 million favorable impact from $10 million net interest income in 2024 compared to $51 million net interest expense in 2023 primarily due to higher capitalization of interest expense on projects under construction and $17 million net unrealized losses in 2023 on a contingent interest rate swap related to the PA LNG Phase 1 project

▪$29 million higher income tax benefit primarily from outside basis differences

Parent and Other

In the three months ended September 30, 2024 compared to the same period in 2023, the increase in losses of $3 million (3%) to $100 million was primarily due to:

▪$17 million income tax expense in 2024 from changes to a valuation allowance against certain tax credit carryforwards

▪$29 million favorable impact from $17 million net investment gains in 2024 compared to $12 million net investment losses in 2023 on dedicated assets in support of our employee nonqualified benefit plan and deferred compensation plan

In the nine months ended September 30, 2024 compared to the same period in 2023, the increase in losses of $43 million (17%) to $291 million was primarily due to:

▪$21 million from higher net interest expense

▪$17 million income tax expense in 2024 from changes to a valuation allowance against certain tax credit carryforwards

▪$5 million related to settlement charges from our non-qualified pension plan in 2024

▪$30 million favorable impact from $26 million net investment gains in 2024 compared to $4 million net investment losses in 2023 on dedicated assets in support of our employee nonqualified benefit plan and deferred compensation plan

The regulatory framework permits SDG&E and SoCalGas to recover certain program expenditures and other costs authorized by the CPUC (referred to as “refundable programs”).

Utilities: Natural Gas Revenues and Cost of Natural Gas

Our utilities revenues include natural gas revenues at Sempra California and Sempra Infrastructure, which includes Ecogas. Intercompany revenues are eliminated in Sempra’s Condensed Consolidated Statements of Operations.

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

(1)Excludes depreciation and amortization, which are presented separately on Sempra’s Condensed Consolidated Statements of Operations.

In the three months ended September 30, 2024 compared to the same period in 2023, Sempra’s natural gas revenues decreased by $293 million (20%) to $1.2 billion driven by Sempra California, which included:

▪$160 million decrease in cost of natural gas sold, which we discuss below

▪$87 million lower revenues associated with refundable programs, which are fully offset in O&M

▪$74 million lower regulatory revenues in 2024 from adopting a change in tax accounting method for gas repairs expenditures, which are offset in income tax benefit (expense)

▪$28 million higher revenues from incremental and balanced capital projects, including higher authorized cost of capital

▪$15 million higher CPUC-authorized revenues, including higher authorized cost of capital

In the three months ended September 30, 2024 compared to the same period in 2023, Sempra’s cost of natural gas decreased by $161 million to $99 million driven by Sempra California primarily due to lower average natural gas prices.

In the nine months ended September 30, 2024 compared to the same period in 2023, Sempra’s natural gas revenues decreased by $2.8 billion (37%) to $4.8 billion driven by Sempra California, which included:

▪$2.5 billion decrease in cost of natural gas sold, which we discuss below

▪$183 million lower regulatory revenues in 2024 from adopting a change in tax accounting method for gas repairs expenditures, which are offset in income tax benefit (expense)

▪$97 million lower revenues associated with refundable programs, which are fully offset in O&M

▪$53 million lower revenues from lower non-service components of net periodic benefit cost, which fully offsets in other income, net

▪$33 million lower franchise fee revenues

▪$29 million regulatory awards approved by the CPUC in 2023

▪$77 million higher revenues from incremental and balanced capital projects, including higher authorized cost of capital

▪$59 million higher CPUC-authorized revenues, including higher authorized cost of capital

▪$26 million lower regulatory revenues in 2023 from the recognition of previously unrecognized income tax benefits pertaining to gas repairs expenditures, which are offset in income tax benefit (expense)

In the nine months ended September 30, 2024 compared to the same period in 2023, Sempra’s cost of natural gas decreased by $2.5 billion to $790 million driven by Sempra California, which included:

▪$2.1 billion lower average natural gas prices

▪$356 million lower volumes driven by weather

Utilities: Electric Revenues and Cost of Electric Fuel and Purchased Power

Our utilities revenues include electric revenues at Sempra California, substantially all of which is at SDG&E. Intercompany revenues are eliminated in Sempra’s Condensed Consolidated Statements of Operations.

SDG&E operates under a regulatory framework that permits it to recover the actual cost incurred to generate or procure electricity based on annual estimates of the cost of electricity supplied to customers. The differences in cost between estimates and actual are recovered or refunded in subsequent periods through rates.

Utility cost of electric fuel and purchased power includes utility-owned generation, power purchased from third parties, and net power purchases and sales to/from the California ISO.

(1)Excludes depreciation and amortization, which are presented separately on Sempra’s Condensed Consolidated Statements of Operations.

In the three months ended September 30, 2024 compared to the same period in 2023, Sempra’s electric revenues decreased by $181 million (14%) to $1.1 billion driven by Sempra California, which included:

▪$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 benefit (expense)

▪$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, Sempra’s cost of electric fuel and purchased power decreased by $201 million to $(18) million driven by Sempra California, which included:

▪$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, Sempra’s electric revenues decreased by $62 million (2%) remaining at $3.3 billion driven by Sempra California, which included:

▪$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 benefit (expense)

▪$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, Sempra’s cost of electric fuel and purchased power decreased by $158 million (41%) to $227 million driven by Sempra California, which included:

▪$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

Energy-Related Businesses: Revenues and Cost of Sales

(1) Includes eliminations of intercompany activity.

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

In the three months ended September 30, 2024 compared to the same period in 2023, Sempra’s revenues from energy-related businesses decreased by $84 million (14%) to $512 million primarily due to:

▪$40 million from asset and supply optimization from contracts to sell natural gas and LNG to third parties, including:

◦$30 million driven by $12 million from lower natural gas prices offset by higher volumes and $8 million higher unrealized gains on commodity derivatives

◦$10 million from lower diversion fees due to lower natural gas prices

▪$23 million from TdM mainly due to lower power prices

▪$19 million from lower volumes from wind power generation assets

▪$10 million lower pipeline revenues

In the three months ended September 30, 2024 compared to the same period in 2023, Sempra’s cost of sales from energy-related businesses decreased by $29 million (18%) to $134 million primarily due to:

▪$17 million at TdM driven by lower natural gas prices

▪$9 million driven by lower natural gas purchases offset by higher LNG purchases related to asset and supply optimization

In the nine months ended September 30, 2024 compared to the same period in 2023, Sempra’s revenues from energy-related businesses decreased by $978 million (42%) to $1.4 billion primarily due to:

▪$897 million from asset and supply optimization from contracts to sell natural gas and LNG to third parties, including:

◦$780 million driven by $24 million unrealized losses in 2024 compared to $619 million unrealized gains in 2023 on commodity derivatives and $167 million primarily from lower natural gas prices offset by higher volumes

◦$108 million from lower diversion fees due to lower natural gas prices

▪$46 million lower transportation revenues primarily from a customer’s early termination of firm transportation agreements in the first quarter of 2023 and lower rates

▪$31 million lower pipeline revenues

▪$25 million from TdM mainly due to $59 million from lower power prices offset by $30 million from higher volumes

▪$19 million from lower volumes from wind power generation assets

In the nine months ended September 30, 2024 compared to the same period in 2023, Sempra’s cost of sales from energy-related businesses decreased by $140 million (32%) to $297 million primarily due to:

▪$83 million at TdM driven by $101 million from lower natural gas prices offset by $13 million from higher volumes

▪$51 million driven by lower natural gas purchases related to asset and supply optimization

In the three months ended September 30, 2024 compared to the same period in 2023, Sempra’s O&M decreased by $57 million (4%) to $1.3 billion primarily due to:

▪$98 million decrease at Sempra California due to:

◦$146 million lower expenses associated with refundable programs, which costs are recovered in revenue

◦$51 million higher non-refundable operating costs

▪$31 million increase at Sempra Infrastructure due to:

◦$18 million higher development costs and certain non-capitalized expenses from projects under construction

◦$10 million from a provision for expected credit losses on a customer’s past due receivable balance

▪$12 million increase at Parent and other primarily from deferred compensation expense in 2024 compared to a benefit in 2023

In the nine months ended September 30, 2024 compared to the same period in 2023, Sempra’s O&M decreased by $87 million (2%) to $3.9 billion primarily due to:

▪$190 million decrease at Sempra California due to:

◦$221 million lower expenses associated with refundable programs, which costs are recovered in revenue

◦$34 million higher non-refundable operating costs

▪$84 million increase at Sempra Infrastructure due to:

◦$35 million higher development costs and certain non-capitalized expenses from projects under construction

◦$35 million from a provision for expected credit losses on a customer’s past due receivable balance

◦$11 million higher purchased services

▪$20 million increase at Parent and other primarily from higher deferred compensation expense

Other Income, Net

In the three months ended September 30, 2024 compared to the same period in 2023, Sempra’s other income, net, increased by $62 million to $65 million primarily due to:

▪$48 million increase from $29 million net investment gains in 2024 compared to $19 million net investment losses in 2023 on dedicated assets in support of our employee nonqualified benefit plan and deferred compensation plan at Parent and other

▪$7 million higher net interest income on regulatory balancing accounts at Sempra California

▪$4 million higher AFUDC equity at Sempra California

In the nine months ended September 30, 2024 compared to the same period in 2023, Sempra’s other income, net, increased by $119 million to $194 million primarily due to:

▪$54 million lower non-service components of net periodic benefit cost primarily at Sempra California

▪$50 million increase from $48 million net investment gains in 2024 compared to $2 million net investment losses in 2023 on dedicated assets in support of our employee nonqualified benefit plan and deferred compensation plan at Parent and other

▪$12 million higher net interest income on regulatory balancing accounts at Sempra California

▪$9 million higher AFUDC equity at Sempra California

▪$10 million decrease from $4 million losses in 2024 compared to $6 million gains in 2023 from impacts associated with interest rate and foreign exchange instruments and foreign currency transactions at Sempra Infrastructure primarily due to cross-currency swaps in 2023 as a result of fluctuation of the Mexican peso

In the three months ended September 30, 2024 compared to the same period in 2023, Sempra’s interest expense increased by $16 million (5%) to $328 million primarily due to:

▪$17 million at Sempra California from higher debt balances from debt issuances

▪$7 million at Sempra Infrastructure from lower interest expense due to higher capitalization of interest expense on projects under construction

In the nine months ended September 30, 2024 compared to the same period in 2023, Sempra’s interest expense decreased by $51 million (5%) to $944 million primarily due to:

▪$127 million at Sempra Infrastructure from:

◦$59 million lower interest expense due to higher capitalization of interest expense on projects under construction

◦$47 million interest expense in 2023 comprised of $33 million net unrealized losses and $14 million settlement on a contingent interest rate swap related to the PA LNG Phase 1 project

▪$50 million at Sempra California from higher debt balances from debt issuances

▪$25 million at Parent and other from higher debt balances from debt issuances, offset by capitalization of interest expense in 2024 on projects under construction at Sempra Infrastructure

(1) We discuss how we recognize equity earnings in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

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

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

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

In the three months ended September 30, 2024 compared to the same period in 2023, Sempra’s income tax benefit increased by $53 million primarily due to:

▪$34 million higher income tax benefit from the resolution of prior year income tax items

▪$30 million income tax benefit in 2024 from an outside basis difference in a domestic partnership investment

▪$29 million from $78 million income tax benefit in 2024 compared to $49 million income tax benefit in 2023 from foreign currency and inflation effects on our monetary positions in Mexico

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

▪$414 million from $211 million income tax benefit in 2024 compared to $203 million income tax expense in 2023 from foreign currency and inflation effects on our monetary positions in Mexico

▪lower pretax income

▪higher income tax benefits from flow-through items, including an income tax benefit in 2024 from adopting a change in tax accounting method for gas repairs expenditures

▪$34 million higher income tax benefit from the resolution of prior year income tax items

▪$30 million income tax benefit in 2024 from an outside basis difference in a domestic partnership investment

▪$43 million income tax benefit in 2023 from the recognition of previously unrecognized income tax benefits pertaining to gas repairs expenditures

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

Equity Earnings

In the three months ended September 30, 2024 compared to the same period in 2023, Sempra’s equity earnings decreased by $25 million (5%) to $454 million primarily due to:

▪$44 million at Oncor Holdings driven by:

◦higher interest expense and depreciation expense attributable to invested capital

◦higher O&M

◦higher revenues primarily attributable to:

•rate updates to reflect increases in invested capital

•updates to transmission billing units

•customer growth

•lower customer consumption primarily attributable to weather

•annual energy efficiency program performance bonus approved in 2023, but pending PUCT approval in 2024

▪$15 million at IMG due to income tax benefit in 2024 compared to an income tax expense in 2023 primarily from foreign currency and inflation effects

In the nine months ended September 30, 2024 compared to the same period in 2023, Sempra’s equity earnings increased by $149 million (14%) to $1.2 billion primarily due to:

▪$98 million at Oncor Holdings driven by:

◦higher revenues primarily attributable to:

•rate updates to reflect increases in invested capital

•updates to transmission billing units

•customer growth

•new base rates implemented in May 2023

•lower customer consumption primarily attributable to weather

•annual energy efficiency program performance bonus approved in 2023, but pending PUCT approval in 2024

◦write-off of rate base disallowances in 2023 resulting from the PUCT’s final order in Oncor’s comprehensive base rate review

◦higher interest expense and depreciation expense attributable to invested capital

◦higher O&M

▪$73 million at IMG due to income tax benefit in 2024 compared to an income tax expense in 2023 primarily from foreign currency and inflation effects

▪$30 million at TAG Norte primarily from the cumulative impact of new tariffs going into effect in June 2023 offset by lower income tax expense

Earnings Attributable to Noncontrolling Interests

In the three months and nine months ended September 30, 2024 compared to the same periods in 2023, Sempra’s earnings attributable to NCI decreased by $12 million (10%) to $110 million and $110 million (25%) to $325 million, respectively, primarily due to a decrease in SI Partners’ net income.

IMPACT OF FOREIGN CURRENCY AND INFLATION RATES ON RESULTS OF OPERATIONS

Because our natural gas distribution utility in Mexico, Ecogas, uses its local currency as its functional currency, revenues and expenses are translated into U.S. dollars at average exchange rates for the period for consolidation in Sempra’s results of operations. We discuss further the impact of foreign currency and inflation rates on results of operations, including impacts on income taxes and related hedging activity, in “Part II – Item 7. MD&A – Impact of Foreign Currency and Inflation Rates on Results of Operations” in the Annual Report.

Foreign Currency Translation

Any difference in average exchange rates used for the translation of income statement activity from year to year can cause a variance in Sempra’s comparative results of operations. In the three months and nine months ended September 30, 2024 compared to the same periods in 2023, the change in our earnings as a result of foreign currency translation rates was negligible.

Transactional Impacts

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