SAN DIEGO GAS & ELECTRIC CO

We discuss herein Sempra’s results of operations and significant changes in earnings, revenues and costs by segment, as well as Parent and other, for the year ended December 31, 2025 compared to the year ended December 31, 2024. For a discussion of our 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. We also discuss herein the impact of foreign currency and inflation rates on Sempra’s results of operations.

RESULTS OF OPERATIONS

(Dollars and shares in millions, except per share amounts)

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 Consolidated Financial Statements.

In 2025 compared to 2024, the decrease in earnings of $418 million (23%) 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

▪$159 million lower income tax benefits primarily from flow-through items, including gas repairs tax benefits, offset by impacts from the election to accelerate self-developed software deductions and the resolution of prior year income tax items

▪$63 million higher net interest expense

▪$25 million charge in 2025 from disallowed regulatory recovery of COVID-19 costs

▪$148 million higher CPUC base operating margin, net of operating expenses including higher depreciation, $44 million lower authorized cost of capital and a $32 million charge from regulatory disallowances associated with the 2024 GRC Track 2 FD related to 2025

▪$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

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

In 2025 compared to 2024, the increase in earnings of $80 million (10%) was primarily due to higher equity earnings from Oncor Holdings driven by:

▪overall higher revenues primarily attributable to:

◦the establishment of the UTM

◦rate updates to reflect increases in invested capital

◦customer growth

◦higher annual energy efficiency program performance bonus

▪higher interest expense and depreciation expense associated with increases in invested capital

▪higher O&M

In 2025 compared to 2024, losses were $160 million compared to earnings of $911 million primarily due to:

▪$703 million income tax expense in 2025 as a result of management’s decision to classify SI Partners and Ecogas as held for sale, comprised of the following:

◦$693 million income tax expense to adjust deferred income tax liabilities primarily related to outside basis differences in our investment in SI Partners

◦$10 million income tax expense due to the recognition of a deferred tax liability on our outside basis difference in Ecogas

▪$445 million unfavorable impact from foreign currency and inflation effects on our monetary positions in Mexico, comprised of a $181 million unfavorable impact in 2025 compared to a $264 million favorable impact in 2024

▪$43 million lower income tax benefit primarily from outside basis differences and the remeasurement of certain deferred income taxes

▪$30 million unfavorable impact in interest expense from unrealized gains in 2024 on interest rate swaps related to the PA LNG Phase 1 project

▪$27 million unfavorable impact related to a customer’s early termination of firm transportation agreements, including interest expense

▪$21 million from TdM driven by lower volumes and lower power prices and unrealized losses in 2025 compared to unrealized gains in 2024 on commodity derivatives due to changes in power prices

▪$52 million from asset and supply optimization driven by higher optimization of transport and storage contracts, higher LNG diversion fees and lower unrealized losses on commodity derivatives due to changes in natural gas prices

▪$38 million lower O&M in 2025 primarily from lower provisions for expected credit losses

▪$37 million lower depreciation expense as a result of management's decision to classify SI Partners and Ecogas as held for sale

▪$31 million higher revenues driven by satisfaction of performance obligations related to customer payments received in advance from a contract modification in December 2024 on an LNG storage and regasification agreement that ended in December 2025

▪$13 million higher net interest income primarily from a change in the fair value of the Support Agreement

Parent and Other

In 2025 compared to 2024, the decrease in losses of $388 million was primarily due to:

▪$252 million from $78 million income tax expense in 2025 compared to $330 million income tax expense in 2024 from changes to a valuation allowance against foreign tax credits that were carried forward from the implementation of the TCJA

▪$191 million net income tax benefit in 2025 from changes to a valuation allowance against certain tax credit carryforwards offset by changes in state income tax apportionment as a result of management’s decision to classify SI Partners as held for sale

▪$22 million income tax benefit in 2025 from the impacts of the OBBBA

▪$19 million higher net investment gains on dedicated assets in support of our employee nonqualified benefit plan and deferred compensation plan

▪$15 million lower preferred dividends

▪$92 million higher net interest expense

▪$16 million equity earnings in 2024 related to our investment in RBS Sempra Commodities LLP from the substantial dissolution of the partnership

▪$11 million preferred deemed dividends related to the redemption of series C preferred stock in 2025

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”), which may be subject to reviews for reasonableness.

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 Consolidated Statements of Operations.

SDG&E and SoCalGas operate under a regulatory framework that permits the cost of natural gas purchased for core customers 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.

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

In 2025 compared to 2024, Sempra’s natural gas revenues increased by $178 million (2%) driven by Sempra California, which included:

▪$202 million higher CPUC-authorized base revenues, net of $40 million lower authorized cost of capital

▪$146 million increase in cost of natural gas sold, which we discuss below

▪$88 million higher revenues from incremental and balanced capital projects offset by lower authorized cost of capital

▪$18 million higher regulatory revenues associated with refundable programs, which are fully offset in O&M

▪$166 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

▪$57 million lower regulatory revenues associated with impacts from the election to accelerate self-developed software deductions, which are offset in income tax expense

▪$29 million lower revenues in 2025 from disallowed regulatory recovery of COVID-19 costs

In 2025 compared to 2024, Sempra’s cost of natural gas increased by $150 million (13%) driven by Sempra California, which included:

▪$193 million higher average natural gas prices

▪$47 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 are at SDG&E. Intercompany revenues are eliminated in Sempra’s 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 Consolidated Statements of Operations.

In 2025 compared to 2024, Sempra’s electric revenues increased by $256 million (6%) driven by Sempra California, which included:

▪$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 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 expense

In 2025 compared to 2024, Sempra’s cost of electric fuel and purchased power increased by $140 million driven by Sempra California, which included:

▪$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

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 Consolidated Statements of Operations.

In 2025 compared to 2024, Sempra’s revenues from energy-related businesses increased by $83 million (5%) primarily due to:

▪$63 million higher revenues driven by satisfaction of performance obligations related to customer payments received in advance from a contract modification in December 2024 on an LNG storage and regasification agreement that ended in December 2025

▪$59 million from asset and supply optimization from contracts to sell natural gas and LNG to third parties, including:

◦$54 million primarily from higher diversion fees due to higher natural gas prices

◦$36 million driven by higher natural gas prices and higher volumes associated with optimization of transport and storage contracts

◦$31 million higher unrealized losses on commodity derivatives

▪$15 million higher revenues in 2025 due to the commencement of commercial operations at the Topolobampo marine terminal in June 2024

▪$30 million lower transportation revenues driven by a customer’s early termination of firm transportation agreements

▪$14 million from TdM mainly due to lower volumes and lower power prices

In 2025 compared to 2024, Sempra’s cost of sales from energy-related businesses decreased by $13 million (3%) primarily due to:

▪$27 million driven by lower LNG purchases offset by higher natural gas purchases related to asset and supply optimization

▪$10 million higher purchased power due to higher power capacity sales

(1) Includes eliminations of intercompany activity.

In 2025 compared to 2024, Sempra’s O&M decreased by $55 million (1%) primarily due to:

▪$83 million decrease at Sempra California due to:

◦$61 million lower non-refundable operating costs

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

◦$5 million lower expenses associated with refundable programs, which costs are recovered in revenue

▪$20 million increase at Parent and other primarily due to non-recoverable insurance claims in 2025

▪$7 million increase at Sempra Infrastructure due to:

◦$42 million primarily due to higher maintenance expenses and higher expenses in 2025 in advance of ECA LNG Phase 1 commencing commercial operations

◦$38 million higher development costs and certain non-capitalized expenses from projects under construction

◦$73 million lower provisions for expected credit losses

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

Depreciation and Amortization

In 2025 compared to 2024, Sempra’s depreciation and amortization increased by $126 million (5%) to $2.6 billion primarily due to:

▪$199 million higher at Sempra California due to higher utility plant rate base

▪$71 million lower at Sempra Infrastructure due to:

◦$81 million lower as a result of management's decision to classify SI Partners and Ecogas as held for sale

◦$11 million higher due to the commencement of commercial operations at Gasoducto Rosarito pipeline expansion in December 2024 and Topolobampo marine terminal in June 2024

Other Income, Net

In 2025 compared to 2024, Sempra’s other income, net, increased by $33 million (24%) to $169 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

▪$25 million from $11 million gains in 2025 compared to $14 million losses in 2024 driven by foreign currency transactional effects primarily at Sempra Infrastructure

▪$17 million higher AFUDC equity primarily at Sempra Infrastructure

▪$16 million higher net investment gains on dedicated assets in support of our employee nonqualified benefit plan and deferred compensation plan at Parent and other

▪$41 million higher non-service components of net periodic benefit cost primarily at Sempra California

▪$7 million reduction in regulatory interest in 2025 from disallowed regulatory recovery of COVID-19 costs at Sempra California

We provide further details of the components of other income, net, in Note 1 of the Notes to Consolidated Financial Statements.

Interest Income

In 2025 compared to 2024, Sempra’s interest income increased by $42 million to $103 million primarily due to:

▪$33 million higher interest from interest bearing cash accounts primarily at Sempra Infrastructure

▪$14 million change in the fair value of the Support Agreement at Sempra Infrastructure

Interest Expense

In 2025 compared to 2024, Sempra’s interest expense increased by $483 million (46%) to $1.5 billion primarily due to:

▪$271 million at Sempra Infrastructure from:

◦$241 million unfavorable impact in interest expense from interest rate swaps related to the PA LNG Phase 1 project comprised of:

•$215 million from $3 million unrealized losses in 2025 compared to $212 million unrealized gains in 2024

•$29 million settlement in 2024 from the termination of interest rate swaps

◦$17 million higher interest expense related to a customer’s early termination of firm transportation agreements

▪$134 million at Parent and other from higher debt balances from debt issuances offset by higher capitalization of interest expense in 2025 from projects under construction at Sempra Infrastructure

▪$78 million at Sempra California from higher debt balances from debt issuances

(1) We discuss how we recognize equity earnings in Note 5 of the Notes to Consolidated Financial Statements.

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 2025 compared to 2024, Sempra’s income tax expense increased by $482 million primarily due to:

▪$576 million from $240 million income tax expense in 2025 compared to $336 million income tax benefit in 2024 from foreign currency and inflation effects on our monetary positions in Mexico

▪$516 million net income tax expense in 2025 as a result of management’s decision to classify SI Partners and Ecogas as held for sale, comprised of the following:

◦$693 million income tax expense to adjust deferred income tax liabilities primarily related to outside basis differences in our investment in SI Partners

◦$153 million income tax expense for changes in state income tax apportionment

◦$14 million income tax expense due to the recognition of a Mexican deferred tax liability on our outside basis differences in Ecogas

◦$344 million income tax benefit from changes to a valuation allowance against certain tax credit carryforwards

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

▪$252 million from $78 million income tax expense in 2025 compared to $330 million income tax expense in 2024 from changes to a valuation allowance against foreign tax credits that were carried forward from the implementation of the TCJA

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

▪lower pretax income

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

▪higher income tax benefit from flow-through items, including $73 million income tax benefit in 2025 from the election to accelerate self-developed software deductions

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 Notes 1 and 8 of the Notes to Consolidated Financial Statements for further details about our accounting for income taxes and items subject to flow-through treatment.

Equity Earnings

In 2025 compared to 2024, Sempra’s equity earnings decreased by $5 million remaining at $1.6 billion primarily due to:

▪$93 million at IMG due to an income tax expense in 2025 compared to an income tax benefit in 2024 primarily from foreign currency and inflation effects

▪$19 million in 2024 related to our investment in RBS Sempra Commodities LLP from the substantial dissolution of the partnership

▪$82 million at Oncor Holdings driven by:

◦overall higher revenues primarily attributable to:

•the establishment of the UTM

•rate updates to reflect increases in invested capital

•customer growth

•higher annual energy efficiency program performance bonus

◦higher interest expense and depreciation expense associated with increases in invested capital

◦higher O&M

▪$37 million at Cameron LNG JV primarily from lower interest expense, higher revenues from excess LNG and higher maintenance revenues

Earnings Attributable to Noncontrolling Interests

In 2025 compared to 2024, Sempra’s earnings attributable to NCI decreased by $400 million to $238 million primarily due to a decrease in SI Partners subsidiaries’ net income driven by foreign currency and inflation effects on our monetary positions in Mexico and unrealized losses in 2025 compared to unrealized gains in 2024 from interest rate swaps related to the PA LNG Phase 1 project.

IMPACT OF FOREIGN CURRENCY AND INFLATION RATES ON RESULTS OF OPERATIONS

Because Ecogas, our natural gas distribution utility in Mexico, uses the Mexican peso as its functional currency, its revenues and expenses are translated into U.S. dollars at average exchange rates for the period when included in Sempra’s results of operations. Year‑over‑year differences in average exchange rates used to translate Ecogas’ income statement activity can therefore create variances in our comparative results of operations. In 2025 compared to 2024, the impact of changes in average foreign currency translation rates on our earnings was $1 million.

Although the functional currency for most of our Mexican subsidiaries and equity method investees is the U.S. dollar, certain transactions are denominated in the local currency. These local currency transactions are remeasured into U.S. dollars, which results in transactional gains and losses recognized in other income, net, for consolidated entities and in equity earnings for equity method investments.

We may utilize cross-currency swaps to convert Mexican peso-denominated principal and interest payments into U.S. dollars and swap Mexican fixed interest rates for U.S. fixed interest rates. The effects of these cross-currency swaps are initially recorded in OCI and are reclassified from AOCI into earnings through other income, net, and interest expense as settlements occur.

Certain of our Mexican pipelines (namely Los Ramones I and San Fernando at IEnova Pipelines and Los Ramones Norte at TAG Pipelines) generate revenue based on government-regulated tariffs with contracts denominated in Mexican pesos that are indexed to the U.S. dollar and adjusted annually for inflation and exchange rate movements. As a result, remeasurement of these peso-denominated amounts into U.S. dollars gives rise to foreign currency gains and losses. These impacts, together with the offsetting gains and losses from the settlement of related foreign currency forwards and swaps, are recorded in revenues: energy-related businesses or equity earnings.

In addition, our Mexican subsidiaries hold U.S. dollar-denominated cash balances, receivables, payables and debt (monetary assets and liabilities) that are subject to Mexican currency exchange rate movements for Mexican income tax purposes. These subsidiaries also have significant deferred income tax assets and liabilities denominated in Mexican pesos that must be translated into U.S. dollars for financial reporting. Moreover, Mexican tax law requires monetary assets and liabilities and certain nonmonetary assets and liabilities to be adjusted for inflation. As a result, fluctuations in both the currency exchange rate for the Mexican peso against the U.S. dollar and Mexican inflation can cause volatility in income tax expense, other income, net, and equity earnings. We may use foreign currency derivatives to help manage exposure to exchange rate movements on monetary assets and liabilities, with derivative impacts reflected in other income, net. However, we generally do not hedge our deferred income tax assets and liabilities, which makes us susceptible to volatility in income tax expense caused by exchange rate and inflationary changes.

The impact from fluctuations in foreign currency exchange rates and Mexican inflation on our results of operations is summarized in the following table.

At December 31, 2025, SI Partners, which holds our foreign operations, is classified as held for sale. Upon completion of the sale, which we expect to occur in the second or third quarter of 2026, we will deconsolidate SI Partners and account for our remaining 25% interest under the equity method, thereby reducing volatility in our results of operations associated with foreign currency exchange rate fluctuations and Mexican inflation.