SEMPRA

We discuss herein SoCalGas’ 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 SoCalGas’ 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 increase in SoCalGas’ earnings of $144 million (18%) to $955 million was primarily due to:

▪$184 million higher income tax benefits primarily from flow-through items, including higher gas repairs tax benefits, offset by $25 million related to income tax benefits in 2023 from previously unrecognized income tax benefits pertaining to gas repairs expenditures

▪$18 million higher AFUDC equity

▪$11 million higher net regulatory interest income

▪$28 million higher net interest expense

▪$18 million lower CPUC base operating margin authorized for 2024, net of operating expenses, offset by higher authorized cost of capital

▪$15 million impairment from disallowed capital costs in the 2024 GRC FD

▪$5 million lower regulatory awards approved by the CPUC

Natural Gas Revenues and Cost of Natural Gas

SoCalGas’ average cost of natural gas per thousand cubic feet was $3.28 in 2024 and $10.47 in 2023. The average cost of natural gas sold at SoCalGas is impacted by market prices, as well as transportation and other charges.

In 2024 compared to 2023, SoCalGas’ natural gas revenues decreased by $2.1 billion (25%) to $6.2 billion primarily due to:

▪$2.3 billion decrease in cost of natural gas sold, which we discuss below

▪$230 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

▪$90 million lower revenues associated with refundable programs, which are fully offset in O&M

▪$24 million lower franchise fee revenues

▪$7 million lower regulatory awards approved by the CPUC

▪$317 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

▪$253 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

▪$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 (expense) benefit

▪$6 million higher revenues from higher non-service components of net periodic benefit cost, which fully offsets in other income (expense), net

In 2024 compared to 2023, SoCalGas’ cost of natural gas decreased by $2.3 billion to $959 million primarily due to:

▪$2.1 billion lower average natural gas prices

▪$201 million lower volumes driven by weather

In 2024 compared to 2023, SoCalGas’ O&M decreased by $30 million (1%) remaining at $2.8 billion due to:

▪$90 million lower expenses associated with refundable programs, which costs are recovered in revenue

▪$40 million higher non-refundable operating costs

▪$20 million impairment from disallowed capital costs in the 2024 GRC FD

Other Income (Expense), Net

In 2024 compared to 2023, SoCalGas’ other income, net, was $25 million compared to other expense, net, of $4 million primarily due to:

▪$18 million higher AFUDC equity

▪$15 million higher net interest income on regulatory balancing accounts

▪$6 million higher non-service components of net periodic benefit cost

In 2024 compared to 2023, SoCalGas’ interest expense increased by $38 million (13%) to $323 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. SoCalGas elected this change in tax accounting method in Sempra’s consolidated 2023 income tax return filing.

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

In 2024 compared to 2023, SoCalGas had an income tax expense in 2024 compared to income tax benefit in 2023 primarily due to:

▪higher pretax income

▪$40 million higher income tax benefit from the resolution of prior year income tax items

▪higher income tax benefits from flow-through items, including higher gas repairs tax benefits, offset by $43 million income tax benefit in 2023 from the recognition of previously unrecognized income tax benefits pertaining to gas repairs expenditures