SEMPRA

We discuss herein SDG&E’s results of operations and significant changes in earnings, revenues and costs for the year ended December 31, 2024 compared to the year ended December 31, 2023. For a discussion of SDG&E’s results of operations and significant changes in earnings, revenues and costs for the year ended December 31, 2023 compared to the year ended December 31, 2022, refer to “Part II – Item 7. MD&A – Results of Operations” in our 2023 annual report on Form 10-K filed with the SEC on February 27, 2024.

RESULTS OF OPERATIONS

(Dollars in millions)

In 2024 compared to 2023, the decrease in SDG&E’s earnings of $45 million (5%) to $891 million was primarily due to:

▪$89 million charge in 2024 for amounts relating to the FERC order finding that the TO5 adder refund provision has been triggered, requiring SDG&E to refund customers the California ISO adder retroactively from June 1, 2019

▪$32 million higher net interest expense

▪$6 million lower AFUDC equity

▪$33 million higher income tax benefits primarily from flow through items, including higher gas repairs tax benefits

▪$27 million higher CPUC base operating margin authorized for 2024, net of operating expenses, including higher authorized cost of capital

▪$12 million higher electric transmission margin

▪$10 million lower Wildfire Fund amortization

Electric Revenues and Cost of Electric Fuel and Purchased Power

In 2024 compared to 2023, SDG&E’s electric revenues decreased by $36 million (1%) remaining at $4.3 billion primarily due to:

▪$176 million lower revenues associated with refundable programs, which are fully offset in O&M

▪$137 million lower cost of electric fuel and purchased power, which we discuss below

▪$94 million charge in 2024 for amounts relating to the FERC order finding that the TO5 adder refund provision has been triggered, requiring SDG&E to refund customers the California ISO adder retroactively from June 1, 2019

▪$18 million lower revenues from a $5 million credit in 2024 compared to a $13 million cost in 2023 for the non-service components of net periodic benefit cost, which fully offsets in other income, net

▪$9 million lower franchise fee revenues

▪$178 million lower ITCs from standalone energy storage projects, which are offset in income tax (expense) benefit

▪$110 million higher CPUC-authorized revenues in 2024, including certain incremental and balanced capital projects that are now in CPUC-authorized revenues as a result of the 2024 GRC FD and higher authorized cost of capital

▪$82 million higher revenues from incremental and balanced capital projects, including higher authorized cost of capital, offset by certain projects that are now in CPUC-authorized revenues as a result of the 2024 GRC FD

▪$42 million higher revenues from transmission operations

In 2024 compared to 2023, SDG&E’s cost of electric fuel and purchased power decreased by $137 million (31%) to $308 million primarily due to:

▪$276 million lower purchased power primarily due to change in excess capacity sales

▪$242 million lower purchased power from the California ISO due to lower market prices

▪$105 million lower utility-owned generation costs

▪$331 million lower sales to the California ISO due to lower market prices

▪$129 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

SDG&E’s average cost of natural gas per thousand cubic feet was $5.41 in 2024 and $11.05 in 2023. The average cost of natural gas sold at SDG&E is impacted by market prices, as well as transportation, tariff and other charges.

In 2024 compared to 2023, SDG&E’s natural gas revenues decreased by $220 million (18%) to $1.0 billion primarily due to:

▪$290 million decrease in cost of natural gas sold, which we discuss below

▪$38 million lower revenues from incremental and balanced capital projects that are now in CPUC-authorized revenues as a result of the 2024 GRC FD, offset by higher authorized cost of capital

▪$7 million lower franchise fee revenues

▪$57 million higher regulatory revenues primarily from the release of a tax regulatory liability for gas repairs expenditures as a result of the 2024 GRC FD

▪$55 million higher CPUC-authorized revenues in 2024, including certain incremental and balanced capital projects that are now in CPUC-authorized revenues as a result of the 2024 GRC FD and higher authorized cost of capital

▪$11 million higher revenues associated with refundable programs, which are fully offset in O&M

In 2024 compared to 2023, SDG&E’s cost of natural gas decreased by $290 million to $242 million primarily due to:

▪$252 million lower average natural gas prices

▪$38 million lower volumes driven by weather

In 2024 compared to 2023, SDG&E’s O&M decreased by $154 million (8%) to $1.7 billion due to:

▪$165 million lower expenses associated with refundable programs, which costs are recovered in revenue

▪$14 million higher non-refundable operating costs

Other Income, Net

In 2024 compared to 2023, SDG&E’s other income, net, decreased by $7 million (7%) to $90 million primarily due to:

▪$26 million charge in 2024, comprised of $7 million of AFUDC equity and $19 million of net regulatory interest, relating to the FERC order finding that the TO5 adder refund provision has been triggered, requiring SDG&E to refund customers the California ISO adder retroactively from June 1, 2019

▪$6 million lower AFUDC equity

▪$23 million increase from a $4 million credit in 2024 compared to $19 million cost in 2023 for the non-service components of net periodic benefit cost

In 2024 compared to 2023, SDG&E’s interest expense increased by $28 million (6%) to $525 million 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.

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

In 2024 compared to 2023, SDG&E had an income tax expense in 2024 compared to income tax benefit in 2023 primarily due to lower income tax benefit in 2024 from lower ITCs from standalone energy storage projects under the IRA and higher pretax income.