SAN DIEGO GAS & ELECTRIC CO

We discuss herein SDG&E’s results of operations and significant changes in earnings, revenues and costs for the year ended December 31, 2025 compared to the year ended December 31, 2024. For a discussion of 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, refer to “Part II – Item 7. MD&A – Results of Operations” in our 2024 annual report on Form 10-K filed with the SEC on February 25, 2025.

RESULTS OF OPERATIONS

(Dollars in millions)

In 2025 compared to 2024, the decrease in SDG&E’s earnings of $328 million (37%) was primarily due to:

▪$432 million charge in 2025 from regulatory disallowances related to 2019 through 2024 associated with the 2024 GRC Track 2 FD, which we discuss in Note 4 of the Notes to Consolidated Financial Statements

▪$29 million higher net interest expense

▪$13 million lower income tax benefits primarily from flow-through items, including gas repairs tax benefits offset by the impacts from the election to accelerate self-developed software deductions

▪$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

▪$33 million higher CPUC base operating margin, net of operating expenses including higher depreciation, $32 million charge from regulatory disallowances associated with the 2024 GRC Track 2 FD related to 2025 and $19 million lower authorized cost of capital

▪$12 million higher net regulatory interest income

▪$6 million higher electric transmission margin

Electric Revenues and Cost of Electric Fuel and Purchased Power

In 2025 compared to 2024, SDG&E’s electric revenues increased by $255 million (6%) to $4.6 billion primarily due to:

▪$140 million increase in 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

▪$80 million higher revenues from incremental and balanced capital projects offset by lower authorized cost of capital

▪$36 million higher CPUC-authorized base revenues, net of $20 million lower authorized cost of capital

▪$31 million higher revenues from transmission operations

▪$22 million higher revenues from a $17 million cost in 2025 compared to a $5 million credit in 2024 for the non-service components of net periodic benefit cost, which fully offsets in other income, net

▪$115 million lower regulatory revenues from higher ITCs from standalone energy storage projects, which are offset in income tax benefit (expense)

▪$23 million lower regulatory revenues associated with refundable programs, which are fully offset in O&M

▪$21 million lower regulatory revenues associated with impacts from the election to accelerate self-developed software deductions, which are offset in income tax benefit (expense)

In 2025 compared to 2024, SDG&E’s cost of electric fuel and purchased power increased by $140 million (45%) to $448 million primarily due to:

▪$151 million higher purchased power primarily due to changes in excess capacity sales and tolling agreements

▪$55 million lower sales to the California ISO due to lower market prices

▪$62 million lower purchased power from the California ISO due to lower market prices and lower customer demand from departing load now served by CCAs

Natural Gas Revenues and Cost of Natural Gas

SDG&E’s average cost of natural gas per thousand cubic feet was $5.40 in 2025 and $5.41 in 2024. The average cost of natural gas sold at SDG&E is impacted by market prices, as well as transportation, tariff and other charges.

In 2025 compared to 2024, SDG&E’s natural gas revenues increased by $101 million (10%) to $1.1 billion primarily due to:

▪$62 million higher regulatory revenues associated with refundable programs, which are fully offset in O&M

▪$40 million higher CPUC-authorized base revenues, net of $6 million lower authorized cost of capital

▪$29 million higher revenues from incremental and balanced capital projects offset by lower authorized cost of capital

▪$37 million lower regulatory revenues primarily from the release of a regulatory liability in 2024 for gas repairs tax benefits as a result of the 2024 GRC FD

In 2025 compared to 2024, SDG&E’s O&M increased by $33 million (2%) remaining at $1.7 billion primarily due to:

▪$39 million higher expenses associated with refundable programs, which costs are recovered in revenue

▪$9 million lower non-refundable operating costs

Regulatory Disallowances

As we discuss in Note 4 of the Notes to Consolidated Financial Statements, the CPUC issued an FD in SDG&E’s 2024 GRC Track 2 request that disallowed recovery of certain WMP costs. In connection with the Track 2 FD, in the fourth quarter of 2025, SDG&E recorded a charge of $651 million ($464 million after tax), of which:

▪$605 million ($432 million after tax) relates to 2019 through 2024

▪$41 million ($28 million after tax) relates to the first nine months of 2025

▪$5 million ($4 million after tax) relates to the fourth quarter of 2025

Other Income, Net

In 2025 compared to 2024, SDG&E’s other income, net, increased by $16 million (18%) to $106 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

▪$17 million higher net interest income on regulatory balancing accounts

▪$31 million decrease from a $27 million cost in 2025 compared to $4 million credit in 2024 for the non-service components of net periodic benefit cost

In 2025 compared to 2024, SDG&E had an income tax benefit in 2025 compared to income tax expense in 2024 primarily due to:

▪$173 million income tax benefit in 2025 from regulatory disallowances related to 2019 through 2024 associated with the 2024 GRC Track 2 FD

▪higher income tax benefit in 2025 from higher ITCs from standalone energy storage projects

▪higher income tax benefit from flow-through items, including $26 million income tax benefit in 2025 from the election to accelerate self-developed software deductions, which we discuss in Note 8 of the Notes to Consolidated Financial Statements