SAN DIEGO GAS & ELECTRIC CO

We discuss herein SoCalGas’ 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 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, 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 SoCalGas’ earnings of $90 million (9%) was primarily due to:

▪$146 million lower income tax benefits primarily from flow-through items including gas repairs tax benefits, offset by the resolution of prior year income tax items and impacts from the election to accelerate self-developed software deductions

▪$34 million higher net interest expense

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

▪$8 million lower net regulatory interest income

▪$6 million lower regulatory award approved by the CPUC

▪$115 million higher CPUC base operating margin, net of operating expenses including higher depreciation and $25 million lower authorized cost of capital

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

Natural Gas Revenues and Cost of Natural Gas

SoCalGas’ average cost of natural gas per thousand cubic feet was $3.92 in 2025 and $3.28 in 2024. The average cost of natural gas sold at SoCalGas is impacted by market prices, as well as transportation and other charges.

In 2025 compared to 2024, SoCalGas’ natural gas revenues increased by $82 million (1%) to $6.3 billion primarily due to:

▪$162 million higher CPUC-authorized base revenues, net of $34 million lower authorized cost of capital

▪$139 million increase in cost of natural gas sold, which we discuss below

▪$59 million higher revenues from incremental and balanced capital projects offset by lower authorized cost of capital

▪$129 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

▪$54 million lower regulatory revenues associated with impacts from the election to accelerate self-developed software deductions, which are offset in income tax benefit (expense)

▪$44 million lower regulatory revenues associated with refundable programs, which are fully offset in O&M

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

▪$9 million lower regulatory award approved by the CPUC

In 2025 compared to 2024, SoCalGas’ cost of natural gas increased by $139 million (14%) to $1.1 billion due to:

▪$181 million higher average natural gas prices

▪$42 million lower volumes driven by weather

In 2025 compared to 2024, SoCalGas’ O&M decreased by $102 million (4%) to $2.7 billion due to:

▪$44 million lower expenses associated with refundable programs, which costs are recovered in revenue

▪$38 million lower non-refundable operating costs

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

Other (Expense) Income, Net

In 2025 compared to 2024, SoCalGas’ other expense, net, was $6 million compared to other income, net, of $25 million primarily due to:

▪$13 million higher non-service components of net periodic benefit cost

▪$11 million lower net interest income on regulatory balancing accounts

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

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

▪lower pretax income

▪higher income tax benefit from flow-through items, including $47 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