SIGNIFICANT ACCOUNTING POLICIES AND OTHER FINANCIAL DATA

12 Months Ended

Dec. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Significant Accounting Policies And Other Financial Data

SIGNIFICANT ACCOUNTING POLICIES AND OTHER FINANCIAL DATA

PRINCIPLES OF CONSOLIDATION

Sempra

Sempra’s Consolidated Financial Statements include the accounts of Sempra Energy, a California-based holding company doing business as Sempra, and its consolidated entities. In the fourth quarter of 2021, we formed Sempra Infrastructure, a new segment that includes the operating companies of our subsidiary, SI Partners, as well as a holding company and certain services companies. Through an internal reorganization, we consolidated the assets of our LNG business (previously included in our Sempra LNG segment) and our ownership of IEnova (previously included in our Sempra Mexico segment) under Sempra Global (previously included in Parent and other), which was renamed SI Partners. This reorganization simplifies Sempra’s ownership and management of its non-utility, energy infrastructure assets in North America by consolidating them under a single platform. As a result, the Sempra LNG and Sempra Mexico segments no longer exist. Our historical segment disclosures have been restated to conform with the current presentation, so that all discussions of our reportable segments reflect the revised segment information of our four separate reportable segments, which we discuss in Note 17. All references in these Notes to our reportable segments are not intended to refer to any legal entity with the same or similar name.

SDG&E

SDG&E’s Consolidated Financial Statements include its accounts and the accounts of a VIE of which SDG&E was the primary beneficiary until August 23, 2019, at which time SDG&E deconsolidated the VIE, as we discuss below in “Variable Interest Entities.” SDG&E’s common stock is wholly owned by Enova, which is a wholly owned subsidiary of Sempra.

SoCalGas

SoCalGas’ common stock is wholly owned by PE, which is a wholly owned subsidiary of Sempra.

BASIS OF PRESENTATION

This is a combined report of Sempra, SDG&E and SoCalGas. We provide separate information for SDG&E and SoCalGas as required. References in this report to “we,” “our,” “us” and “Sempra” are to Sempra and its consolidated entities, collectively, unless otherwise stated or indicated by the context. We sometimes refer to SDG&E and SoCalGas collectively as Sempra California. SI Partners (formerly Sempra Global) is the holding company for our subsidiaries that are not subject to California or Texas utility regulation. We have eliminated intercompany accounts and transactions within the consolidated financial statements of each reporting entity.

Throughout these Notes, we refer to the following as Consolidated Financial Statements and Notes to Consolidated Financial Statements when discussed together or collectively:

▪the Consolidated Financial Statements and related Notes of Sempra;

▪the Consolidated Financial Statements and related Notes of SDG&E; and

▪the Financial Statements and related Notes of SoCalGas.

Use of Estimates in the Preparation of the Financial Statements

We have prepared our Consolidated Financial Statements in conformity with U.S. GAAP. This requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, including the disclosure of contingent assets and liabilities at the date of the financial statements. Although we believe the estimates and assumptions are reasonable, actual amounts ultimately may differ significantly from those estimates.

Discontinued Operations

We completed the sales of our equity interests in our Peruvian businesses in April 2020 and our Chilean businesses in June 2020. We determined that these businesses, which previously constituted the Sempra South American Utilities segment, and certain activities associated with these businesses, met the held-for-sale criteria upon our decision to sell them in January 2019. These

businesses are presented as discontinued operations, which we discuss further in Note 5. Our discussions in the Notes below relate only to our continuing operations unless otherwise noted.

Subsequent Events

We evaluated events and transactions that occurred after December 31, 2021 through the date the financial statements were issued, and in the opinion of management, the accompanying statements reflect all adjustments and disclosures necessary for a fair presentation.

REGULATED OPERATIONS

SDG&E’s and SoCalGas’ accounting policies and financial statements reflect the application of U.S. GAAP provisions governing rate-regulated operations and the policies of the CPUC and the FERC. Under these provisions, a regulated utility records regulatory assets, which are generally costs that would otherwise be charged to expense, if it is probable that, through the ratemaking process, the utility will recover those assets from customers. To the extent that recovery is no longer probable, the related regulatory assets are written off. Regulatory liabilities generally represent amounts collected from customers in advance of the actual expenditure by the utility. If the actual expenditures are less than amounts previously collected from ratepayers, the excess would be refunded to customers, generally by reducing future rates. Regulatory liabilities may also arise from other transactions such as unrealized gains on fixed price contracts and other derivatives or certain deferred income tax benefits that are passed through to customers in future rates. In addition, SDG&E and SoCalGas record regulatory liabilities when the CPUC or, in the case of SDG&E, the FERC, requires a refund to be made to customers or has required that a gain or other transaction of net allowable costs be given to customers over future periods.

Determining probability of recovery of regulatory assets requires judgment by management and may include, but is not limited to, consideration of:

▪the nature of the event giving rise to the assessment

▪existing statutes and regulatory code

▪legal precedents

▪regulatory principles and analogous regulatory actions

▪testimony presented in regulatory hearings

▪regulatory orders

▪a commission-authorized mechanism established for the accumulation of costs

▪status of applications for rehearings or state court appeals

▪specific approval from a commission

▪historical experience

Sempra Infrastructure’s natural gas distribution utility, Ecogas, also applies U.S. GAAP for rate-regulated utilities to its operations, including the same evaluation of probability of recovery of regulatory assets described above.

Our Sempra Texas Utilities segment is comprised of our equity method investments in Oncor Holdings, which owns an 80.25% interest in Oncor, and Sharyland Holdings, which owns 100% of Sharyland Utilities. Oncor and Sharyland Utilities are regulated electric transmission and distribution utilities in Texas and their rates are regulated by the PUCT and certain cities and are subject to regulatory rate-setting processes and earnings oversight. Oncor and Sharyland Utilities prepare their financial statements in accordance with the provisions of U.S. GAAP governing rate-regulated operations.

Our Sempra Infrastructure segment includes the operating companies of our subsidiary, IEnova, as well as certain holding companies and risk management activity. Certain business activities at IEnova are regulated by the CRE and meet the regulatory accounting requirements of U.S. GAAP. Pipeline projects currently under construction at IEnova that meet the regulatory accounting requirements of U.S. GAAP record the impact of AFUDC related to equity. We discuss AFUDC below in “Property, Plant and Equipment.”

FAIR VALUE MEASUREMENTS

We measure certain assets and liabilities at fair value on a recurring basis, primarily NDT and benefit plan trust assets and derivatives. We also measure certain assets at fair value on a non-recurring basis in certain circumstances.

A fair value measurement reflects the assumptions market participants would use in pricing an asset or liability based on the best available information. These assumptions include the risk inherent in a particular valuation technique (such as a pricing model) and the risks inherent in the inputs to the model. Also, we consider an issuer’s credit standing when measuring its liabilities at fair value.

We establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:

Level 1 – Pricing inputs are unadjusted quoted prices available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Our Level 1 financial instruments primarily consist of listed equities, short-term investments, and U.S. government treasury securities, primarily in the NDT and benefit plan trusts, and exchange-traded derivatives.

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including:

▪quoted forward prices for commodities

▪time value

▪current market and contractual prices for the underlying instruments

▪volatility factors

▪other relevant economic measures

Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument and can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Our financial instruments in this category include listed equities, domestic corporate bonds, municipal bonds and other foreign bonds, primarily in the NDT and benefit plan trusts, and non-exchange-traded derivatives such as interest rate instruments and over-the-counter forwards and options.

Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value from the perspective of a market participant. Our Level 3 financial instruments consist of CRRs and fixed-price electricity positions at SDG&E and the Support Agreement at Sempra Infrastructure.

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

Cash equivalents are highly liquid investments with original maturities of three months or less at the date of purchase.

Restricted cash includes:

▪for Sempra Infrastructure, funds denominated in Mexican pesos to pay for rights-of-way, license fees, permits, topographic surveys and other costs pursuant to trust and debt agreements related to pipeline projects

▪for Parent and other, funds held in a delisting trust for the purpose of purchasing the remaining publicly owned IEnova shares

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on Sempra’s Consolidated Balance Sheets to the sum of such amounts reported on Sempra’s Consolidated Statements of Cash Flows.

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(Dollars in millions)
	At December 31,
	2021		2020		2019
Cash and cash equivalents	$	559	$	960	$	108
Restricted cash, current	19		22		31
Restricted cash, noncurrent	3		3		3
Cash, cash equivalents and restricted cash in discontinued operations	—		—		75
Total cash, cash equivalents and restricted cash on the Consolidated Statements of Cash Flows	$	581	$	985	$	217

In Sempra’s Consolidated Statement of Cash Flows for the year ended December 31, 2020, the ending cash, cash equivalents and restricted cash balance in discontinued operations of $4.6 billion is considered to be cash, cash equivalents and restricted cash for continuing operations following the sales of the South American businesses.

CREDIT LOSSES

We are exposed to credit losses from financial assets measured at amortized cost, including trade and other accounts receivable, amounts due from unconsolidated affiliates, our net investment in a sales-type lease and a note receivable. We are also exposed to credit losses from off-balance sheet arrangements through Sempra’s guarantee related to Cameron LNG JV’s SDSRA, which we discuss in Note 6.

We regularly monitor and evaluate credit losses and record allowances for expected credit losses, if necessary, for trade and other accounts receivable using a combination of factors, including past-due status based on contractual terms, trends in write-offs, the age of the receivables and customer payment patterns, historical and industry trends, counterparty creditworthiness, economic conditions and specific events, such as bankruptcies, pandemics and other factors. We write off financial assets measured at amortized cost in the period in which we determine they are not recoverable. We record recoveries of amounts previously written off when it is known that they will be recovered.

In connection with the COVID-19 pandemic and at the direction of the CPUC, SDG&E and SoCalGas implemented certain measures to assist customers, including suspending service disconnections due to nonpayment for all customers (except for SoCalGas’ noncore customers), waiving late payment fees, and offering flexible payment plans. At the CPUC’s direction, SDG&E and SoCalGas are automatically enrolling residential and small business customers with past-due balances in long-term repayment plans.

As we discuss in Note 4, the CPUC authorized SDG&E and SoCalGas to track and request recovery of incremental costs, including uncollectible expenses, associated with complying with customer protection measures ordered by the CPUC related to the COVID-19 pandemic.

In connection with a separate CPUC decision addressing residential service disconnections, SDG&E and SoCalGas each established a two-way balancing account to record the uncollectible expenses associated with residential customers’ inability to pay their electric or gas bills, including as a result of the relief from outstanding utility bill amounts provided under the AMP, as we discuss in Note 4.

In 2021, SDG&E and SoCalGas applied, on behalf of their customers, for financial assistance from the California Department of Community Services and Development under the California Arrearage Payment Program, which provided funds of $63 million and $79 million for SDG&E and SoCalGas, respectively. In the first quarter of 2022, SDG&E and SoCalGas received and will apply the amounts directly to eligible customer accounts to reduce past due balances.

We provide below allowances and changes in allowances for credit losses for trade receivables and other receivables. SDG&E and SoCalGas record changes in the allowances for credit losses related to Accounts Receivable – Trade in regulatory accounts.

RECEIVABLES – ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
	Years ended December 31,
	2021		2020		2019
Sempra:
Allowances for credit losses at January 1	$	138	$	29	$	21
Incremental allowance upon adoption of ASU 2016-13	—		1		—
Provisions for expected credit losses	45		124		22
Write-offs	(47)		(16)		(14)
Allowances for credit losses at December 31	$	136	$	138	$	29
SDG&E:
Allowances for credit losses at January 1	$	69	$	14	$	11
Provisions for expected credit losses	23		65		10
Write-offs	(26)		(10)		(7)
Allowances for credit losses at December 31	$	66	$	69	$	14
SoCalGas:
Allowances for credit losses at January 1	$	68	$	15	$	10
Provisions for expected credit losses	22		59		12
Write-offs	(21)		(6)		(7)
Allowances for credit losses at December 31	$	69	$	68	$	15

Allowances for credit losses are included in the Consolidated Balance Sheets as follows:

ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
	December 31,
	2021		2020		2019
Sempra:
Accounts receivable – trade, net	$	94	$	111	$	7
Accounts receivable – other, net	39		27		22
Other long-term assets	3		—		—
Total allowances for credit losses	$	136	$	138	$	29
SDG&E:
Accounts receivable – trade, net	$	42	$	55	$	4
Accounts receivable – other, net	22		14		10
Other long-term assets	2		—		—
Total allowances for credit losses	$	66	$	69	$	14
SoCalGas:
Accounts receivable – trade, net	$	51	$	55	$	3
Accounts receivable – other, net	17		13		12
Other long-term assets	1		—		—
Total allowances for credit losses	$	69	$	68	$	15

As we discuss below in “Transactions with Affiliates,” we have loans due from unconsolidated affiliates with varying tenors, interest rates and currencies. On a quarterly basis, we evaluate credit losses and record allowances for expected credit losses on amounts due from unconsolidated affiliates, if necessary, based on credit quality indicators such as external credit ratings, published default rate studies, the maturity date of the instrument and past delinquencies. However, we do not record allowances for expected credit losses related to accrued interest receivable on loans due from unconsolidated affiliates because we write off such amounts, if any, through a reversal of interest income in the period we determine such amounts are uncollectible. In the absence of external credit ratings, we may utilize an internally developed credit rating based on our analysis of a counterparty’s financial statements to determine our expected credit losses. At December 31, 2021 and 2020, $1 million and $3 million, respectively, of expected credit losses are included in noncurrent Due From Unconsolidated Affiliates on Sempra’s Consolidated Balance Sheets.

As we discuss below in “Note Receivable,” Sempra loaned $300 million to KKR in exchange for an interest-bearing promissory note. We evaluate credit losses and record allowances for expected credit losses on this note receivable based on published default rate studies, the maturity date of the instrument and an internally developed credit rating. At December 31, 2021, $8 million of expected credit losses is included in Other Long-Term Assets on Sempra’s Consolidated Balance Sheet.

As we discuss below in Note 6, Sempra provided a guarantee for the benefit of Cameron LNG JV related to amounts withdrawn by Sempra Infrastructure from the SDSRA. At December 31, 2021, expected credit losses of $7 million related to this guarantee are included in Deferred Credits and Other on Sempra’s Consolidated Balance Sheet.

CONCENTRATION OF CREDIT RISK

Credit risk is the risk of loss that would be incurred as a result of nonperformance by our counterparties on their contractual obligations. We have policies governing the management of credit risk that are administered by the respective credit departments at each of our segments and overseen by their separate risk management committees.

This oversight includes calculating current and potential credit risk on a regular basis and monitoring actual balances in comparison to approved limits. We establish credit limits based on risk and return considerations under terms customarily available in the industry. We avoid concentration of counterparties whenever possible, and we believe our credit policies significantly reduce overall credit risk. These policies include an evaluation of:

▪prospective counterparties’ financial condition (including credit ratings)

▪collateral requirements

▪the use of standardized agreements that allow for the netting of positive and negative exposures associated with a single counterparty

▪downgrade triggers

We believe that we have provided adequate reserves for counterparty nonperformance in our allowances for credit losses.

When our development projects become operational, we rely significantly on the ability of suppliers to perform under long-term agreements and on our ability to enforce contract terms in the event of nonperformance. Also, the factors that we consider in evaluating a development project include negotiating customer and supplier agreements and, therefore, we rely on these agreements for future performance. We also may condition our decision to go forward on development projects on first obtaining these customer and supplier agreements.

INVENTORIES

SDG&E and SoCalGas value natural gas inventory using the last-in first-out method. As inventories are sold, differences between the last-in first-out valuation and the estimated replacement cost are reflected in customer rates. These differences are generally temporary, but may become permanent if the natural gas inventory withdrawn from storage during the year is not replaced by year end. SDG&E and SoCalGas generally value materials and supplies at the lower of average cost or net realizable value.

Sempra Infrastructure values natural gas inventory and materials and supplies at the lower of average cost or net realizable value, and LNG inventory using the first-in first-out method.

The components of inventories are as follows:

INVENTORY BALANCES AT DECEMBER 31
(Dollars in millions)
	Sempra						SDG&E						SoCalGas
	2021		2020		2019		2021		2020		2019		2021		2020		2019
Natural gas	$	164	$	118	$	110	$	—	$	—	$	1	$	114	$	94	$	90
LNG	27		7		9		—		—		—		—		—		—
Materials and supplies	198		183		158		123		104		93		58		59		46
Total	$	389	$	308	$	277	$	123	$	104	$	94	$	172	$	153	$	136

NOTE RECEIVABLE

In connection with the KKR Purchase Agreement, which we define and discuss below in “Noncontrolling Interests,” we entered into an accommodation and support agreement under which KKR issued a $300 million interest bearing promissory note to Sempra in exchange for cash. Loan-related transaction costs incurred by KKR totaled $5 million, which were reimbursed by Sempra per the terms of the agreement. The promissory note is due to be repaid in full no later than October 1, 2029 and bears compound interest at 5% per annum, which may be paid quarterly or added to the outstanding principal at the election of KKR. At December 31, 2021, Other Long-Term Assets includes $297 million of outstanding principal, net of allowance for credit losses, and Other Current Assets includes $3 million of interest receivable on Sempra’s Consolidated Balance Sheet.

WILDFIRE FUND

In July 2019, the Wildfire Legislation was signed into law. The Wildfire Legislation addresses certain issues related to catastrophic wildfires in the State of California and their impact on electric IOUs. Investor-owned gas distribution utilities such as SoCalGas are not covered by this legislation. The issues addressed include wildfire mitigation, cost recovery standards and requirements, a wildfire fund, a cap on liability, and the establishment of a wildfire safety board.

The Wildfire Legislation provided that SDG&E would not recover the ROE on its first $215 million of fire risk mitigation capital expenditures.

The Wildfire Legislation established a revised legal standard for the recovery of wildfire costs (Revised Prudent Manager Standard) and established a fund (the Wildfire Fund) designed to provide liquidity to SDG&E, PG&E and Edison to pay IOU wildfire-related claims in the event that the governmental agency responsible for determining causation determines the applicable IOU’s equipment caused the ignition of a wildfire, primary insurance coverage is exceeded and certain other conditions are satisfied. A primary purpose of the Wildfire Fund is to pool resources provided by shareholders and ratepayers of the IOUs and make those resources available to reimburse the IOUs for third-party wildfire claims incurred after July 12, 2019, the effective date of the Wildfire Legislation, subject to certain limitations.

An IOU may seek payment from the Wildfire Fund for settled or adjudicated third-party damage claims arising from certain wildfires that exceed, in aggregate in a calendar year, the greater of $1 billion or the IOU’s required amount of insurance coverage as recommended by the Wildfire Fund’s administrator. Wildfire claims approved by the Wildfire Fund’s administrator will be paid by the Wildfire Fund to the IOU to the extent funds are available. These utilized funds will be subject to review by the CPUC, which will make a determination as to the degree an IOU’s conduct related to an ignition of a wildfire was prudent or imprudent. The Revised Prudent Manager Standard requires that the CPUC apply clear standards when reviewing wildfire liability losses paid when determining the reasonableness of an IOU’s conduct related to an ignition. Under this standard, the conduct under review related to the ignition may include factors within and beyond the IOU’s control, including humidity, temperature and winds. Costs and expenses may be allocated for cost recovery in full or in part. Also, under this standard, an IOU’s conduct will be deemed reasonable if a valid annual safety certification is in place at the time of the ignition, unless a serious doubt is raised, in which case the burden shifts to the utility to dispel that doubt. The IOUs will receive an annual safety certification from the CPUC if they meet various requirements.

If an IOU has maintained a valid annual safety certification, to the extent it is found to be imprudent, claims will be reimbursable by the IOU to the Wildfire Fund up to a cap based on the IOU’s rate base. The aggregate requirement to reimburse the Wildfire Fund over a trailing three calendar year period is capped at 20% of the equity portion of an IOU’s electric transmission and distribution rate base in the year of the prudency determination. Based on its 2021 rate base, the liability cap for SDG&E is approximately $1.1 billion, which is adjusted annually. The liability cap will apply on a rolling three-year basis so long as future annual safety certifications are received and the Wildfire Fund has not been terminated, which could occur if funds are exhausted. Amounts in excess of the liability cap and amounts that are determined to be prudently incurred do not need to be reimbursed by an IOU to the Wildfire Fund. The Wildfire Fund does not have a specified term and coverage will continue until the assets of the Wildfire Fund are exhausted and the Wildfire Fund is terminated, in which case, the remaining funds, if any, will be transferred to California’s general fund to be used for fire risk mitigation programs.

In July 2021, the CPUC approved SDG&E’s 2021 Wildfire Mitigation Plan. In July 2021, the CPUC’s Wildfire Safety Division became the OEIS under the California Natural Resources Agency. As successor to the Wildfire Safety Division, the OEIS maintains the duties and responsibilities of the former Wildfire Safety Division with respect to Wildfire Mitigation Plans. The 2021 Wildfire Mitigation Plan is effective until the OEIS approves a new plan. In December 2021, SDG&E received its 2021 wildfire safety certification from the OEIS, which is valid for 12 months from the issue date.

The Wildfire Fund was initially funded up to $10.5 billion by a loan from the State of California Surplus Money Investment Fund. The loan is financed through a DWR bond, which was put in place on October 1, 2020 and is securitized through a dedicated surcharge on ratepayers’ bills attributable to the DWR. In October 2019, the CPUC adopted a decision authorizing a non-bypassable charge to be collected by the IOUs to support the anticipated DWR bond issuance authorized by AB 1054. The CPUC decision also determined that ratepayers of non-participating electrical corporations shall not pay the non-bypassable charge.

The Wildfire Fund was also funded by initial shareholder contributions from the IOUs totaling $7.5 billion. SDG&E’s share was $322.5 million. The IOUs are also required to make annual shareholder contributions to the Wildfire Fund with an aggregate value of $3 billion over a 10-year period starting in 2019. SDG&E’s share is $129 million. The contributions are not subject to rate recovery.

In a complaint filed in U.S. District Court for the Northern District of California in July 2019, plaintiffs seek to invalidate AB 1054 based on allegations that the legislation violates federal law. The district court and, subsequently, the U.S. Court of Appeals for the Ninth Circuit dismissed the complaint.

Wildfire Fund Asset and Obligation

In 2019, SDG&E recorded both a Wildfire Fund asset and a related obligation for its commitment to make shareholder contributions of $451.5 million to the Wildfire Fund, measured at present value as of July 25, 2019 (the date by which both Edison and SDG&E opted to contribute to the Wildfire Fund). SDG&E paid its initial shareholder contribution of $322.5 million to the Wildfire Fund in September 2019. SDG&E funded this contribution with proceeds from an equity contribution from Sempra. SDG&E expects to continue to make annual shareholder contributions of $12.9 million through December 31, 2028. SDG&E accretes the present value of the Wildfire Fund obligation until the liability is settled.

SDG&E is amortizing the Wildfire Fund asset on a straight-line basis over the estimated period of benefit, as adjusted for utilization by the IOUs. The estimated period of benefit of the Wildfire Fund asset is 15 years and is based on several assumptions, including, but not limited to:

▪historical wildfire experience of each IOU in the State of California, including frequency and severity of the wildfires

▪the value of property potentially damaged by wildfires

▪the effectiveness of wildfire risk mitigation efforts by each IOU

▪liability cap of each IOU

▪IOU prudency determination levels

▪FERC jurisdictional allocation levels

▪insurance coverage levels

The use of different assumptions, or changes to the assumptions used, could have a significant impact on the estimated period of benefit of the Wildfire Fund asset. SDG&E periodically evaluates the estimated period of benefit of the Wildfire Fund asset based on actual experience and changes in these assumptions. SDG&E recognizes a reduction of its Wildfire Fund asset and records a charge against earnings in the period when there is a reduction of the available coverage due to recoverable claims from any of the participating IOUs. Wildfire claims that are recoverable from the Wildfire Fund, net of anticipated or actual reimbursement to the Wildfire Fund by the responsible IOU, decrease the Wildfire Fund asset and remaining available coverage.

The following table summarizes the location of balances related to the Wildfire Fund on Sempra’s and SDG&E’s Consolidated Balance Sheets and Consolidated Statements of Operations.

WILDFIRE FUND
(Dollars in millions)
		December 31,
	Location	2021		2020		2019
Wildfire Fund asset:
Current	Prepaid Expenses	$	29	$	29	$	29
Noncurrent	Wildfire Fund	331		363		392
Wildfire Fund obligation:
Current	Other Current Liabilities	$	13	$	13	$	13
Noncurrent	Deferred Credits and Other	64		75		86
		Years ended December 31,
		2021		2020		2019
Amortization of Wildfire Fund asset	Operation and Maintenance	$	29	$	29	$	12
Impairment of Wildfire Fund asset	Impairment Losses(1)	3		—		—
Accretion of Wildfire Fund obligation	Operation and Maintenance	2		2		1

(1)    Included in O&M for SDG&E.

INCOME TAXES

Income tax expense includes current and deferred income taxes. We record deferred income taxes for temporary differences between the book and the tax basis of assets and liabilities. Investment tax credits from prior years are amortized to income by SDG&E and SoCalGas over the estimated service lives of the properties as required by the CPUC.

Under the regulatory accounting treatment required for flow-through temporary differences, SDG&E, SoCalGas and Sempra Infrastructure recognize:

▪regulatory assets to offset deferred income tax liabilities if it is probable that the amounts will be recovered from customers; and

▪regulatory liabilities to offset deferred income tax assets if it is probable that the amounts will be returned to customers.

When there are uncertainties related to potential income tax benefits, in order to qualify for recognition, the position we take has to have at least a more-likely-than-not chance of being sustained (based on the position’s technical merits) upon challenge by the respective authorities. The term “more-likely-than-not” means a likelihood of more than 50%. Otherwise, we may not recognize any of the potential tax benefit associated with the position. We recognize a benefit for a tax position that meets the more-likely-than-not criterion at the largest amount of tax benefit that is greater than 50% likely of being realized upon its effective resolution.

Unrecognized income tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect our ETR.

We accrue income tax to the extent we intend to repatriate cash to the U.S. from our continuing international operations. We currently do not record deferred income taxes for other basis differences between financial statement and income tax investment amounts in non-U.S. subsidiaries because they are indefinitely reinvested. We recognize income tax expense for basis differences related to global intangible low-taxed income as a period cost if and when incurred.

We provide additional information about income taxes in Note 8.

GREENHOUSE GAS ALLOWANCES AND OBLIGATIONS

SDG&E, SoCalGas and Sempra Infrastructure are required by AB 32 to acquire GHG allowances for every metric ton of carbon dioxide equivalent emitted into the atmosphere during electric generation and natural gas transportation. At SDG&E and SoCalGas, many GHG allowances are allocated to us on behalf of our customers at no cost. We record purchased and allocated GHG allowances at the lower of weighted-average cost or market. We measure the compliance obligation, which is based on emissions, at the carrying value of allowances held plus the fair value of additional allowances necessary to satisfy the obligation. SDG&E and SoCalGas balance costs and revenues associated with the GHG program through regulatory balancing accounts. Sempra Infrastructure records the cost of GHG obligations in cost of sales. We remove the assets and liabilities from the balance sheets as the allowances are surrendered.

RENEWABLE ENERGY CERTIFICATES

RECs are energy rights established by governmental agencies for the environmental and social promotion of renewable electricity generation. A REC, and its associated attributes and benefits, can be sold separately from the underlying physical electricity associated with a renewable-based generation source in certain markets.

Retail sellers of electricity obtain RECs through renewable energy PPAs, internal generation or separate purchases in the market to comply with the RPS Program established by the governmental agencies. RECs provide documentation for the generation of a unit of renewable energy that is used to verify compliance with the RPS Program. The cost of RECs at SDG&E, which is recoverable in rates, is recorded in Cost of Electric Fuel and Purchased Power on the Consolidated Statements of Operations.

PROPERTY, PLANT AND EQUIPMENT

PP&E is recorded at cost and primarily represents the buildings, equipment and other facilities used by SDG&E and SoCalGas to provide natural gas and electric utility services, and by the Sempra Infrastructure businesses in their operations, including construction work in progress. PP&E also includes lease improvements and other equipment at Parent and other. Our plant costs include labor, materials and contract services and expenditures for replacement parts incurred during a major maintenance outage of a plant. In addition, the cost of utility plant at our rate-regulated businesses and PP&E under regulated projects that meet the regulatory accounting requirements of U.S. GAAP includes AFUDC. The cost of PP&E for our non-regulated projects includes capitalized interest. Maintenance costs are expensed as incurred. The cost of most retired depreciable utility plant assets less salvage value is charged to accumulated depreciation. We discuss assets collateralized as security for certain indebtedness in Note 7.

PROPERTY, PLANT AND EQUIPMENT BY MAJOR FUNCTIONAL CATEGORY
(Dollars in millions)
	December 31,						Depreciation rates for years ended December 31,
	2021		2020		2019		2021		2020			2019
SDG&E:
Natural gas operations	$	3,200	$	2,805	$	2,534	2.55	%	2.51	%		2.47	%
Electric distribution	9,471		8,592		7,985		3.93		3.90			3.94
Electric transmission(1)	7,577		7,156		6,577		3.02		3.10			2.79
Electric generation	2,446		2,440		2,415		4.74		4.56			4.50
Other electric	2,100		1,743		1,492		7.23		6.92			6.61
Construction work in progress(1)	1,662		1,700		1,501		NA		NA			NA
Total SDG&E	26,456		24,436		22,504
SoCalGas:
Natural gas operations	21,894		19,961		18,370		3.65		3.63			3.60
Other non-utility	50		45		34		2.23		3.80			5.08
Construction work in progress	1,160		1,174		958		NA		NA			NA
Total SoCalGas	23,104		21,180		19,362
Sempra Infrastructure and parent(2):							Estimated useful lives				Weighted-average useful life
Land and land rights	291		283		278		16 to 50 years(3)					36
Machinery and equipment:
Pipelines and storage	3,698		3,482		3,596		5 to 50 years					42
Generating plants	1,659		1,288		1,154		11 to 30 years					27
LNG terminals	1,138		1,138		1,134		43 years					43
Liquid fuels terminals	420		—		—		37 years					37
Other	370		359		180		3 to 50 years					13
Construction work in progress	1,494		1,514		895		NA					NA
Other	310		248		226		4 to 50 years					21
	9,380		8,312		7,463
Total Sempra	$	58,940	$	53,928	$	49,329

(1)    At December 31, 2021, includes $542 in electric transmission assets and $5 in construction work in progress related to SDG&E’s 86% interest in the Southwest Powerlink transmission line, jointly owned by SDG&E with other utilities. SDG&E, and each of the other owners, holds its undivided interest as a tenant in common in the property. Each owner is responsible for its share of the project and participates in decisions concerning operations and capital expenditures. SDG&E’s share of operating expenses is included in Sempra’s and SDG&E’s Consolidated Statements of Operations.

(2)    Includes $211, $191 and $178 at December 31, 2021, 2020, and 2019, respectively, of utility plant, primarily pipelines and other distribution assets at Ecogas.

(3)    Estimated useful lives are for land rights.

Depreciation expense is computed using the straight-line method over the asset’s estimated composite useful life, the CPUC-prescribed period for SDG&E and SoCalGas, or the remaining term of the site leases, whichever is shortest.

DEPRECIATION EXPENSE
(Dollars in millions)
	Years ended December 31,
	2021		2020		2019
Sempra	$	1,833	$	1,646	$	1,551
SDG&E	884		797		757
SoCalGas	711		649		598

ACCUMULATED DEPRECIATION AND AMORTIZATION
(Dollars in millions)
	December 31,
	2021		2020		2019
SDG&E:
Accumulated depreciation:
Natural gas operations	$	919	$	870	$	832
Electric transmission, distribution and generation(1)	5,489		5,145		4,705
Total SDG&E	6,408		6,015		5,537
SoCalGas:
Accumulated depreciation:
Natural gas operations	6,845		6,422		6,023
Other non-utility	16		15		15
Total SoCalGas	6,861		6,437		6,038
Sempra Infrastructure and parent:
Accumulated depreciation – other(2)	1,777		1,473		1,302
Total Sempra	$	15,046	$	13,925	$	12,877

(1)    Includes $292 at December 31, 2021 related to SDG&E’s 86% interest in the Southwest Powerlink transmission line, jointly owned by SDG&E and other utilities.

(2)    Includes $55, $51 and $49 at December 31, 2021, 2020, and 2019, respectively, of accumulated depreciation for utility plant at Ecogas.

SDG&E and SoCalGas finance construction projects with debt and equity funds. The CPUC and the FERC allow the recovery of the cost of these funds by the capitalization of AFUDC, calculated using rates authorized by the CPUC and the FERC, as a cost component of PP&E. SDG&E and SoCalGas earn a return on the capitalized AFUDC after the utility property is placed in service and recover the AFUDC from their customers over the expected useful lives of the assets.

Pipeline projects under construction by Sempra Infrastructure that are both subject to certain regulation and meet U.S. GAAP regulatory accounting requirements record the impact of AFUDC.

We capitalize interest costs incurred to finance capital projects and interest at equity method investments that have not commenced planned principal operations.

The table below summarizes capitalized financing costs, comprised of AFUDC and capitalized interest.

CAPITALIZED FINANCING COSTS
(Dollars in millions)
	Years ended December 31,
	2021		2020		2019
Sempra	$	217	$	202	$	183
SDG&E	106		104		75
SoCalGas	64		55		47

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Goodwill is the excess of the purchase price over the fair value of the identifiable net assets of acquired companies measured at the time of acquisition. Goodwill is not amortized, but we test it for impairment annually on October 1 or whenever events or changes in circumstances necessitate an evaluation. If the carrying value of the reporting unit, including goodwill, exceeds its fair value, we record a goodwill impairment loss as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill.

For our annual goodwill impairment testing, we have the option to first make a qualitative assessment of whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount before applying the quantitative goodwill impairment test. If we elect to perform the qualitative assessment, we evaluate relevant events and circumstances, including but not limited to, macroeconomic conditions, industry and market considerations, cost factors and the overall financial performance of the reporting unit. If, after assessing these qualitative factors, we determine that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then we perform the quantitative goodwill impairment test. If, after performing the quantitative goodwill impairment test, we determine that goodwill is impaired, we record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill.

Goodwill of $1,602 million at December 31, 2021, 2020, and 2019 relates to the 2016 acquisitions of IEnova Pipelines and the Ventika wind power generation facilities at Sempra Infrastructure.

Other Intangible Assets

Other Intangible Assets included on Sempra’s Consolidated Balance Sheets are as follows:

OTHER INTANGIBLE ASSETS
(Dollars in millions)
	Amortization period (years)	December 31,
		2021		2020		2019
Renewable energy transmission and consumption permits	15 to 19	$	169	$	169	$	169
O&M agreement	23	66		66		66
ESJ PPA	14	190		—		—
Other	10 to indefinite	15		15		15
		440		250		250
Less accumulated amortization:
Renewable energy transmission and consumption permits		(40)		(32)		(24)
O&M agreement		(12)		(9)		(6)
ESJ PPA		(10)		—		—
Other		(8)		(7)		(7)
		(70)		(48)		(37)
		$	370	$	202	$	213

Other Intangible Assets at December 31, 2021 primarily include:

▪renewable energy transmission and consumption permits previously granted by the CRE at the Ventika wind power generation facilities, Don Diego Solar and Border Solar;

▪a favorable O&M agreement acquired in connection with the acquisition of DEN; and

▪the relative fair value of the PPA that was acquired in connection with the acquisition of ESJ in March 2021.

Intangible assets subject to amortization are amortized over their estimated useful lives. Amortization expense for intangible assets was $22 million, including $10 million recorded against revenues, in 2021 and $11 million in both 2020 and 2019. We estimate amortization expense for the next five years to be $26 million per year, including $13 million per year recorded against revenues.

LONG-LIVED ASSETS

We test long-lived assets for recoverability whenever events or changes in circumstances have occurred that may affect the recoverability or the estimated useful lives of long-lived assets. Long-lived assets include intangible assets subject to amortization, but do not include investments in unconsolidated entities. A long-lived asset may be impaired when the estimated future undiscounted cash flows are less than the carrying amount of the asset. If that comparison indicates that the asset’s carrying value may not be recoverable, the impairment is measured based on the difference between the carrying amount and the fair value of the asset. This evaluation is performed at the lowest level for which separately identifiable cash flows exist.

VARIABLE INTEREST ENTITIES

We consolidate a VIE if we are the primary beneficiary of the VIE. Our determination of whether we are the primary beneficiary is based on qualitative and quantitative analyses, which assess:

▪the purpose and design of the VIE;

▪the nature of the VIE’s risks and the risks we absorb;

▪the power to direct activities that most significantly impact the economic performance of the VIE; and

▪the obligation to absorb losses or the right to receive benefits that could be significant to the VIE.

We will continue to evaluate our VIEs for any changes that may impact our determination of whether an entity is a VIE and if we are the primary beneficiary.

SDG&E

SDG&E’s power procurement is subject to reliability requirements that may require SDG&E to enter into various PPAs that include variable interests. SDG&E evaluates the respective entities to determine if variable interests exist and, based on the qualitative and quantitative analyses described above, if SDG&E, and indirectly Sempra, is the primary beneficiary.

SDG&E has agreements under which it purchases power generated by facilities for which it supplies all of the natural gas to fuel the power plant (i.e., tolling agreements). SDG&E’s obligation to absorb natural gas costs may be a significant variable interest. In addition, SDG&E has the power to direct the dispatch of electricity generated by these facilities. Based on our analysis, the ability to direct the dispatch of electricity may have the most significant impact on the economic performance of the entity owning the generating facility because of the associated exposure to the cost of natural gas, which fuels the plants, and the value of electricity produced. To the extent that SDG&E (1) is obligated to purchase and provide fuel to operate the facility, (2) has the power to direct the dispatch, and (3) purchases all of the output from the facility for a substantial portion of the facility’s useful life, SDG&E may be the primary beneficiary of the entity owning the generating facility. SDG&E determines if it is the primary beneficiary in these cases based on a qualitative approach in which it considers the operational characteristics of the facility, including its expected power generation output relative to its capacity to generate and the financial structure of the entity, among other factors. If SDG&E determines that it is the primary beneficiary, SDG&E and Sempra consolidate the entity that owns the facility as a VIE.

In addition to tolling agreements, other variable interests involve various elements of fuel and power costs, and other components of cash flows expected to be paid to or received by our counterparties. In most of these cases, the expectation of variability is not substantial, and SDG&E generally does not have the power to direct activities, including the operation and maintenance activities of the generating facility, that most significantly impact the economic performance of the other VIEs. If our ongoing evaluation of these VIEs were to conclude that SDG&E becomes the primary beneficiary and consolidation by SDG&E becomes necessary, the effects could be significant to the financial position and liquidity of SDG&E and Sempra.

SDG&E determined that none of its PPAs and tolling agreements resulted in SDG&E being the primary beneficiary of a VIE at December 31, 2021, 2020 and 2019. PPAs and tolling agreements that relate to SDG&E’s involvement with VIEs are primarily accounted for as finance leases. The carrying amounts of the assets and liabilities under these contracts are included in PP&E, net, and finance lease liabilities with balances of $1,217 million, $1,237 million and $1,255 million at December 31, 2021, 2020 and 2019, respectively. SDG&E recovers costs incurred on PPAs, tolling agreements and other variable interests through CPUC-approved long-term power procurement plans. SDG&E has no residual interest in the respective entities and has not provided or guaranteed any debt or equity support, liquidity arrangements, performance guarantees or other commitments associated with these contracts other than the purchase commitments described in Note 16. As a result, SDG&E’s potential exposure to loss from its variable interest in these VIEs is not significant.

Otay Mesa VIE

Through October 3, 2019, SDG&E had a tolling agreement to purchase power generated at OMEC, a 605-MW generating facility owned by OMEC LLC, which is a VIE that we refer to as Otay Mesa VIE. SDG&E determined that it was the primary beneficiary of Otay Mesa VIE, and therefore, SDG&E and Sempra consolidated Otay Mesa VIE. On August 23, 2019, SDG&E and OMEC LLC executed an amended resource adequacy capacity agreement that resulted in SDG&E and Sempra deconsolidating Otay Mesa VIE. No gain or loss was recognized upon deconsolidation.

Sempra Texas Utilities

Our 100% interest in Oncor Holdings is a VIE that owns an 80.25% interest in Oncor. Sempra is not the primary beneficiary of this VIE because of the structural and operational ring-fencing and governance measures in place that prevent us from having the

power to direct the significant activities of Oncor Holdings. As a result, we do not consolidate Oncor Holdings and instead account for our ownership interest as an equity method investment. See Note 6 for additional information about our equity method investment in Oncor Holdings and restrictions on our ability to influence its activities. Our maximum exposure to loss, which fluctuates over time, from our interest in Oncor Holdings does not exceed the carrying value of our investment, which was $12,947 million, $12,440 million and $11,519 million at December 31, 2021, 2020 and 2019, respectively.

Sempra Infrastructure

Cameron LNG JV

Cameron LNG JV is a VIE principally due to contractual provisions that transfer certain risks to customers. Sempra is not the primary beneficiary of this VIE because we do not have the power to direct the most significant activities of Cameron LNG JV, including LNG production and operation and maintenance activities at the liquefaction facility. Therefore, we account for our investment in Cameron LNG JV under the equity method. The carrying value of our investment, including amounts recognized in AOCI related to interest-rate cash flow hedges at Cameron LNG JV, was $514 million at December 31, 2021, $433 million at December 31, 2020 and $1,256 million at December 31, 2019. Our maximum exposure to loss, which fluctuates over time, includes the carrying value of our investment and our obligation under the SDSRA, which we discuss in Note 6.

CFIN

As we discuss in Note 6, in July 2020, Sempra entered into a Support Agreement, which was amended in June 2021, for the benefit of CFIN, which is a VIE. Sempra is not the primary beneficiary of this VIE because we do not have the power to direct the most significant activities of CFIN, including modification, prepayment, and refinance decisions related to the financing arrangement with external lenders and Cameron LNG JV’s four project owners as well as the ability to determine and enforce remedies in the event of default. The conditional obligations of the Support Agreement represent a variable interest that we measure at fair value on a recurring basis (see Note 9). Sempra’s maximum exposure to loss under the terms of the Support Agreement is $979 million.

ECA LNG Phase 1

ECA LNG Phase 1 is a VIE because its total equity at risk is not sufficient to finance its activities without additional subordinated financial support. We expect that ECA LNG Phase 1 will require future capital contributions or other financial support to finance the construction of the facility. Sempra is the primary beneficiary of this VIE because we have the power to direct the development activities related to the construction of the liquefaction facility, which we consider to be the most significant activities of ECA LNG Phase 1 during the construction phase of its natural gas liquefaction export project. As a result, we consolidate ECA LNG Phase 1. Sempra Infrastructure consolidated $632 million and $207 million of assets at December 31, 2021 and 2020, respectively, consisting primarily of PP&E, net, and Accounts Receivable – Other attributable to ECA LNG Phase 1 that could be used only to settle obligations of this VIE and that are not available to settle obligations of Sempra, and $455 million and $49 million of liabilities at December 31, 2021 and 2020, respectively, consisting primarily of long-term debt, short-term debt and accounts payable attributable to ECA LNG Phase 1 for which creditors do not have recourse to the general credit of Sempra. Additionally, as we discuss in Note 7, Sempra and TotalEnergies SE have provided guarantees for the loan facility supporting construction of the liquefaction facility based on their respective proportionate ownership interest in ECA LNG Phase 1.

ASSET RETIREMENT OBLIGATIONS

For tangible long-lived assets, we record AROs for the present value of liabilities of future costs expected to be incurred when assets are retired from service, if the retirement process is legally required and if a reasonable estimate of fair value can be made. We also record a liability if a legal obligation to perform an asset retirement exists and can be reasonably estimated, but performance is conditional upon a future event. We record the estimated retirement cost using the present value of the obligation at the time the asset is placed into service, and recognize that cost over the life of the related asset by depreciating the asset retirement cost and accreting the obligation until the liability is settled. Our rate-regulated entities record regulatory assets or liabilities as a result of the timing difference between the recognition of costs in accordance with U.S. GAAP and costs recovered through the rate-making process.

We have recorded AROs related to various assets, including:

SDG&E and SoCalGas

▪fuel and storage tanks

▪natural gas transmission and distribution systems

▪hazardous waste storage facilities

▪asbestos-containing construction materials

SDG&E

▪nuclear power facilities

▪electric transmission and distribution systems

▪energy storage systems

▪power generation plants

SoCalGas

▪underground natural gas storage facilities and wells

Sempra Infrastructure

▪natural gas transportation and distribution systems

▪power generation plants

▪LNG facility

▪LPG terminal

The changes in AROs are as follows:

CHANGES IN ASSET RETIREMENT OBLIGATIONS
(Dollars in millions)
	Sempra						SDG&E						SoCalGas
	2021		2020		2019		2021		2020		2019		2021		2020		2019
Balance as of January 1(1)	$	3,289	$	3,083	$	2,972	$	876	$	866	$	874	$	2,368	$	2,177	$	2,063
Accretion expense	133		127		123		38		39		39		92		86		81
Liabilities incurred and acquired	20		2		2		2		—		—		—		—		—
Deconsolidation	—		—		(2)		—		—		(2)		—		—		—
Payments	(63)		(63)		(46)		(60)		(60)		(44)		(3)		(2)		(2)
Revisions(2)	159		140		34		34		31		(1)		125		107		35
Balance at December 31(1)	$	3,538	$	3,289	$	3,083	$	890	$	876	$	866	$	2,582	$	2,368	$	2,177

(1)    Current portion of the ARO for Sempra is included in Other Current Liabilities on the Consolidated Balance Sheets.

(2)    SDG&E’s increase in ARO in 2021 includes $22 million due to a revised estimate related to the decommissioning of SONGS, which is offset in noncurrent Regulatory Assets.

CONTINGENCIES

We accrue losses for the estimated impacts of various conditions, situations or circumstances involving uncertain outcomes. For loss contingencies, we accrue the loss if an event has occurred on or before the balance sheet date and if:

▪information available through the date we file our financial statements indicates it is probable that a loss has been incurred, given the likelihood of uncertain future events; and

▪the amount of the loss or a range of possible losses can be reasonably estimated.

We do not accrue contingencies that might result in gains. We continuously assess contingencies for litigation claims, environmental remediation and other events.

LEGAL FEES

Legal fees that are associated with a past event for which a liability has been recorded are accrued when it is probable that fees also will be incurred and amounts are estimable.

COMPREHENSIVE INCOME

Comprehensive income includes all changes in the equity of a business enterprise (except those resulting from investments by owners and distributions to owners), including:

▪foreign currency translation adjustments

▪certain hedging activities

▪changes in unamortized net actuarial gain or loss and prior service cost related to pension and other postretirement benefits plans

The Consolidated Statements of Comprehensive Income (Loss) show the changes in the components of OCI, including the amounts attributable to NCI. The following tables present the changes in AOCI by component and amounts reclassified out of AOCI to net income, excluding amounts attributable to NCI.

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1)
(Dollars in millions)
	Foreign currency translation adjustments		Financial instruments		Pension and other postretirement benefits		Total accumulated other comprehensive income (loss)
Sempra(2):
Balance as of December 31, 2018	$	(564)	$	(82)	$	(118)	$	(764)
Adoption of ASU 2018-02	—		(25)		(17)		(42)
OCI before reclassifications(3)	(43)		(116)		(18)		(177)
Amounts reclassified from AOCI(3)	—		8		36		44
Net OCI	(43)		(108)		18		(133)
Balance as of December 31, 2019	(607)		(215)		(117)		(939)
OCI before reclassifications(3)(4)	(102)		(163)		(26)		(291)
Amounts reclassified from AOCI(3)	645		47		38		730
Net OCI(4)	543		(116)		12		439
Balance as of December 31, 2020	(64)		(331)		(105)		(500)
OCI before reclassifications(4)	(34)		62		8		36
Amounts reclassified from AOCI(5)	19		113		14		146
Net OCI(4)(5)	(15)		175		22		182
Balance as of December 31, 2021	$	(79)	$	(156)	$	(83)	$	(318)
SDG&E:
Balance as of December 31, 2018					$	(10)	$	(10)
Adoption of ASU 2018-02					(2)		(2)
OCI before reclassifications					(5)		(5)
Amounts reclassified from AOCI					1		1
Net OCI					(4)		(4)
Balance as of December 31, 2019					(16)		(16)
OCI before reclassifications(3)					(4)		(4)
Amounts reclassified from AOCI(3)					10		10
Net OCI					6		6
Balance as of December 31, 2020					(10)		(10)
OCI before reclassifications					(1)		(1)
Amounts reclassified from AOCI					1		1
Net OCI					—		—
Balance as of December 31, 2021					$	(10)	$	(10)
SoCalGas:
Balance as of December 31, 2018			$	(12)	$	(8)	$	(20)
Adoption of ASU 2018-02			(2)		(2)		(4)
OCI before reclassifications			—		(4)		(4)
Amounts reclassified from AOCI(3)			1		4		5
Net OCI			1		—		1
Balance as of December 31, 2019			(13)		(10)		(23)
OCI before reclassifications(3)			—		(10)		(10)
Amounts reclassified from AOCI(3)			—		2		2
Net OCI			—		(8)		(8)
Balance as of December 31, 2020			(13)		(18)		(31)
OCI before reclassifications			—		(2)		(2)
Amounts reclassified from AOCI			—		2		2
Net OCI			—		—		—
Balance as of December 31, 2021			$	(13)	$	(18)	$	(31)

(1)    All amounts are net of income tax, if subject to tax, and exclude NCI.

(2)    Includes discontinued operations in 2020 and 2019.

(3)    Pension and Other Postretirement Benefits and Total AOCI include $6 in transfers of liabilities from SDG&E to SoCalGas and $3 in transfers of liabilities from SDG&E to Sempra in 2020 and $4 in transfers of liabilities from SoCalGas to Sempra in 2019 related to the nonqualified pension plans.

(4)    Total AOCI includes $28 of foreign currency translation adjustments and $16 of financial instruments associated with the IEnova exchange and cash tender offers in 2021. Total AOCI includes $4 of foreign currency translation adjustments and $3 of financial instruments associated with IEnova’s repurchases of NCI in 2020. We discuss these transactions below in “Other Noncontrolling Interests – Sempra Infrastructure.” These transactions do not impact the Consolidated Statements of Comprehensive Income (Loss).

(5)    Total AOCI includes $19 of foreign currency translation adjustments and $47 of financial instruments associated with the sale of NCI to KKR in 2021. We discuss this transaction below in “Other Noncontrolling Interests – Sempra Infrastructure.” This transaction does not impact the Consolidated Statements of Comprehensive Income (Loss).

RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
Details about accumulated other comprehensive income (loss) components	Amounts reclassified from accumulated other comprehensive income (loss)						Affected line item on Consolidated Statements of Operations
	Years ended December 31,
	2021		2020		2019
Sempra:
Foreign currency translation adjustments	$	—	$	645	$	—	Income from Discontinued Operations, Net of Income Tax
Financial instruments:
Interest rate instruments	$	—	$	—	$	10	Gain (Loss) on Sale of Assets
Interest rate instruments(1)	11		10		3		Interest Expense
Interest rate instruments	73		46		3		Equity Earnings(2)
Foreign exchange instruments	1		(1)		2		Revenues: Energy-Related Businesses
Foreign exchange instruments	—		—		2		Equity Earnings(2)
Interest rate and foreign exchange instruments	1		1		—		Interest Expense
	6		11		(9)		Other Income (Expense) , Net
Total before income tax	92		67		11
	(24)		(19)		(2)		Income Tax Expense
Net of income tax	68		48		9
	(2)		(1)		(1)		Earnings Attributable to Noncontrolling Interests
	$	66	$	47	$	8
Pension and other postretirement benefits(3):
Amortization of actuarial loss	$	8	$	8	$	12	Other Income (Expense), Net
Amortization of actuarial loss	—		6		1		Income from Discontinued Operations, Net of Income Tax
Amortization of prior service cost	4		4		3		Other Income (Expense), Net
Settlement charges	7		22		28		Other Income (Expense), Net
Total before income tax	19		40		44
	—		(2)		—		Income from Discontinued Operations, Net of Income Tax
	(5)		(9)		(12)		Income Tax Expense
Net of income tax	$	14	$	29	$	32
Total reclassifications for the period, net of tax	$	80	$	721	$	40
SDG&E:
Financial instruments:
Interest rate instruments(1)	$	—	$	—	$	3	Interest Expense
	—		—		(3)		Earnings Attributable to Noncontrolling Interest
	$	—	$	—	$	—
Pension and other postretirement benefits(3):
Amortization of actuarial loss	$	—	$	1	$	—	Other Income, Net
Amortization of prior service cost	1		1		1		Other Income, Net
Total before income tax	1		2		1
	—		(1)		—		Income Tax Expense
Net of income tax	$	1	$	1	$	1
Total reclassifications for the period, net of tax	$	1	$	1	$	1
SoCalGas:
Financial instruments:
Interest rate instruments	$	—	$	—	$	1	Interest Expense
Pension and other postretirement benefits(3):
Amortization of actuarial loss	$	1	$	1	$	1	Other Expense, Net
Amortization of prior service cost	1		1		—		Other Expense, Net
Total before income tax	2		2		1
	—		—		(1)		Income Tax Benefit (Expense)
Net of income tax	$	2	$	2	$	—
Total reclassifications for the period, net of tax	$	2	$	2	$	1

(1)    Amounts in 2019 include Otay Mesa VIE. All of SDG&E’s interest rate derivative activity relates to Otay Mesa VIE.

(2)    Equity earnings at our foreign equity method investees are recognized after tax.

(3)    Amounts are included in the computation of net periodic benefit cost (see “Net Periodic Benefit Cost” in Note 9).

NONCONTROLLING INTERESTS

Ownership interests in a consolidated entity that are held by unconsolidated owners are accounted for and reported as NCI.

SoCalGas Preferred Stock

The preferred stock at SoCalGas is presented at Sempra as NCI. Sempra records charges against income related to NCI for preferred dividends declared by SoCalGas. We provide additional information regarding SoCalGas’ preferred stock in Note 13.

Other Noncontrolling Interests

The following table provides information about NCI held by others in subsidiaries or entities consolidated by us and recorded in Other Noncontrolling Interests in Total Equity on Sempra’s Consolidated Balance Sheets.

OTHER NONCONTROLLING INTERESTS
(Dollars in millions)
	Percent ownership held by noncontrolling interests						Equity held by noncontrolling interests
	December 31,						December 31,
	2021		2020		2019		2021		2020		2019
Sempra Infrastructure:
SI Partners	20.0	%	—	%	—	%	$	1,384	$	—	$	—
SI Partners subsidiaries(1)	0.1 - 16.6		17.5 - 29.8		10.0 - 46.3		34		1,540		1,622
Parent and other:
PXiSE	—		20.0		20.0		—		1		1
Discontinued Operations:
Chilquinta Energía subsidiaries(1)	—		—		19.7 - 43.4		—		—		23
Luz del Sur	—		—		16.4		—		—		205
Tecsur	—		—		9.8		—		—		5
Total Sempra							$	1,418	$	1,541	$	1,856

(1)    SI Partners and Chilquinta Energía have subsidiaries with NCI held by others. Percentage range reflects the highest and lowest ownership percentages among these subsidiaries.

Sempra Infrastructure

Sale of NCI in SI Partners to KKR. On October 1, 2021, Sempra, its wholly owned subsidiary, SI Partners (formerly Sempra Global), and KKR consummated the transactions contemplated under a purchase and contribution agreement dated April 4, 2021 (as amended prior to closing, the KKR Purchase Agreement). Pursuant to the KKR Purchase Agreement, KKR acquired newly designated Class A Units representing a 20% NCI in SI Partners for a purchase price of $3.4 billion, including post-closing adjustments. As a result of this sale, we recorded a $1.3 billion increase in equity held by NCI and an increase in Sempra’s shareholders’ equity of $1.4 billion, net of $173 million in transaction costs and $490 million in tax impacts, including the tax effect of the sale and changes to a deferred income tax liability related to outside basis differences in SI Partners. Transaction costs include $149 million paid to KKR for reimbursement of certain expenses that KKR incurred in connection with closing the transaction.

Prior to the closing of the transactions contemplated under the KKR Purchase Agreement on October 1, 2021, we completed an internal legal reorganization to consolidate the assets of Sempra LNG Holding, LP and our ownership of IEnova under Sempra Global, which was renamed SI Partners. At closing, we owned 99.9% of the outstanding shares of IEnova. To the extent we later acquire additional shares of IEnova after the closing, such additional shares will be acquired by SI Partners and KKR will provide 20% of the funding.

Pursuant to the KKR Purchase Agreement, we have agreed to indemnify SI Partners for, among other things, certain losses arising from liabilities of SI Partners and its subsidiaries to the extent not primarily relating to the undertaking of the business of SI Partners, and we have agreed to indemnify KKR for losses attributable to pre-closing taxes.

At the closing of the sale of NCI in SI Partners to KKR, Sempra and KKR entered into a limited partnership agreement (the LP Agreement), which governs our and their respective rights and obligations in respect of our ownership interests in SI Partners. We maintain control of SI Partners as the 80% owner with KKR having certain minority protections commensurate with the size of its investment.

SI Partners has two authorized classes of units, designated as “Class A Units” (which are common voting units) and “Sole Risk Interests.” If KKR approves our request that a project not be pursued jointly, or if KKR decides not to participate in any proposed

project for which we nevertheless desire to make a positive final investment decision, we may proceed with such project either independently through a different investment vehicle or as a “Sole Risk Project” within SI Partners and receive Sole Risk Interests in respect thereof. Sole Risk Projects are separated from other SI Partners projects and are conducted at our sole cost, expense and liability and we receive, through the acquisition of Sole Risk Interests, any economic and other benefits from such projects. KKR is not entitled to any benefits or rights in respect of any Sole Risk Project. The Guaymas-El Oro segment of the Sonora pipeline currently constitutes a Sole Risk Project. Until a specified date, KKR has certain discretionary rights to cause the Guaymas-El Oro segment of the Sonora pipeline to cease to be a Sole Risk Project and be pursued jointly within SI Partners.

Under the LP Agreement, SI Partners is managed by a board of managers comprised of members designated by us and by KKR. Matters are generally decided by majority vote. The managers designated by us and the managers designated by KKR each, as a group, have voting power equivalent to the ownership percentage of their respective designating member. However, SI Partners and its controlled subsidiaries are prohibited from taking certain actions without the prior written approval of KKR (subject to KKR maintaining certain ownership thresholds in SI Partners).

The LP Agreement contains certain default remedies if we or KKR fails to fund any amounts required to be funded under the LP Agreement. The LP Agreement also requires that SI Partners distribute to us and to KKR at least 85% of distributable cash of SI Partners and its subsidiaries on a quarterly basis, subject to certain exceptions and reserves. Generally, distributions from SI Partners are made to us and KKR on a pro rata basis in accordance with our and their respective ownership interests in SI Partners. However, KKR is entitled to certain priority distributions in the event of material deviations between certain specified projected cash flows and actual cash flows. Additionally, KKR is entitled to certain priority distributions in the event a specified project that reaches a positive final investment decision does not have projected internal rates of return over a specified threshold or in the event we have not made a positive final investment decision by a certain date on specified LNG projects that are currently in development.

In addition, under the LP Agreement, both parties are granted customary registration rights in the event of an initial public offering of SI Partners, which is subject to certain consent rights of KKR.

At the closing of the transactions contemplated under the KKR Purchase Agreement, SI Partners entered into a management agreement with Sempra to engage Sempra for certain staffing and general and administrative services. The management agreement governs the services that Sempra provides to SI Partners and the charges associated with those services.

Pending Sale of NCI in SI Partners to ADIA. On December 21, 2021, Sempra entered into a purchase and sale agreement (the ADIA Purchase Agreement) with ADIA, and, solely for purposes of guaranteeing the obligations of ADIA, Infinity Investments S.A. and Azure Vista C 2020 S.à.r.l., each a wholly owned affiliate of Abu Dhabi Investment Authority, pursuant to which ADIA will acquire from Sempra, for an aggregate purchase price of $1.8 billion, subject to certain adjustments described below, a 10% NCI in SI Partners. Following the closing of the transaction pursuant to the ADIA Purchase Agreement, Sempra, KKR and ADIA will directly or indirectly own 70%, 20%, and 10%, respectively, of the outstanding Class A Units of SI Partners, which excludes the non-voting Sole Risk Interests held only by Sempra. As further described below, after the closing of the transactions under the ADIA Purchase Agreement, ADIA will have certain rights similar to those of KKR but subject to additional limitations and adjustments to take into account ADIA’s relative ownership percentage.

At December 31, 2021, SI Partners indirectly owned 99.9% of the outstanding shares of IEnova. Under the terms of the ADIA Purchase Agreement, there will be a proportional purchase price adjustment at the closing (i) for any remaining shares of IEnova that are not owned by SI Partners at the closing and (ii) that generally takes into account cash distributions made to, or capital contributions made by, the partners of SI Partners, from and after the date of the ADIA Purchase Agreement to the closing.

The closing of the transactions pursuant to the ADIA Purchase Agreement is subject to receipt of certain regulatory approvals, including from the Comisión Federal de Competencia Económica, FERC and DOE; certain other third-party approvals; the absence of a material adverse effect on the assets, businesses, properties, liabilities, financial condition or results of operations of SI Partners taken as a whole, subject to certain exceptions; and other customary closing conditions. Any party may generally terminate the ADIA Purchase Agreement if the closing has not occurred on or before September 30, 2022, subject to an automatic extension through December 21, 2022 if necessary to receive required regulatory approvals. We expect the transaction will close in the summer of 2022.

At the closing, Sempra and KKR and ADIA (the Minority Partners) will enter into a second amended and restated agreement of limited partnership of SI Partners (the Amended LP Agreement), which will govern their respective rights and obligations in respect of their ownership of SI Partners. Under the Amended LP Agreement, ADIA will have the right at the closing to designate one manager to the SI Partners board of managers. Matters are decided generally by majority vote and the managers designated by Sempra and the managers designated by each Minority Partner will each, as a group, have voting power equivalent to the ownership percentage of their respective designating limited partner. Sempra expects to maintain control of SI Partners as its 70%

owner on terms similar to those currently applicable at SI Partners. However, SI Partners and its controlled subsidiaries will be prohibited from taking certain limited actions without the prior written approval of the Minority Partners (subject to each Minority Partner maintaining certain ownership thresholds in SI Partners). The minority protections held by ADIA constitute a sub-set of the minority protections granted to KKR.

The terms of the Amended LP Agreement applicable to ADIA in relation to capital contributions and distributions are generally consistent with those granted to KKR, with adjustments and limitations to take into account ADIA’s relative ownership percentage, including limiting ADIA’s priority distribution rights to the failure of certain proposed projects to receive a positive final investment decision by a certain date or to achieve specified thresholds of projected internal rates of return or leverage. The transfer rights and restrictions and registration rights in the Amended LP Agreement applicable to ADIA are also generally consistent with those granted to KKR, with adjustments and limitations to take into account ADIA’s relative ownership percentage, including a general restriction on ADIA transferring its interests in SI Partners to third parties (other than pursuant to certain specified permitted transfers) for a specified period following its entry into the Amended LP Agreement.

SI Partners Subsidiaries. In May 2021, we acquired 381,015,194 publicly owned shares of IEnova in exchange for 12,306,777 newly issued shares of our common stock upon completion of our exchange offer launched in the U.S. and Mexico, which increased our ownership interest in IEnova from 70.2% to 96.4%. In addition to being traded on the NYSE, Sempra’s common stock is now also listed on the Mexican Stock Exchange under the trading symbol SRE.MX. We acquired the IEnova shares at an exchange ratio of 0.0323 shares of our common stock for each one IEnova share. In connection with the exchange offer, we recorded a $1.4 billion decrease in equity held by NCI and an increase in Sempra’s shareholders’ equity of $1.4 billion, net of $12 million in transactions costs.

In September 2021, we acquired 51,014,545 publicly owned shares of IEnova for 4.0 billion Mexican pesos (approximately $202 million in U.S. dollars) in cash upon completion of our tender offer launched in the U.S. and Mexico in August 2021, which increased our ownership interest in IEnova from 96.4% to 99.9%. We acquired these IEnova shares at a price of 78.97 Mexican pesos per share (approximately $3.95 per share in U.S. dollars). In connection with the cash tender offer, we recorded a $188 million decrease in equity held by NCI and a decrease in Sempra’s shareholders’ equity of $17 million, including $4 million in transaction costs.

As a result of the increase in our ownership interest in IEnova, we recorded an increase in Sempra’s shareholders’ equity of $72 million offset by a deferred income tax asset related to the outside basis difference in IEnova’s shares. Upon completing the sale of a 20% NCI in SI Partners to KKR in October 2021, which we discuss above, we recorded $72 million in net income tax expense related to the utilization of this deferred income tax asset.

Following the cash tender offer, IEnova’s shares were delisted from the Mexican Stock Exchange effective October 15, 2021. In connection with the delisting, we are maintaining a trust for the purpose of purchasing the 1,212,981 IEnova shares that remained publicly owned as of the completion of the cash tender offer for 78.97 Mexican pesos per share, the same price per share that was offered in our cash tender offer. The trust will be in place through the earlier of April 14, 2022 or the date on which we acquire all the remaining publicly owned IEnova shares. As of February 16, 2022, an aggregate of 629,784 of the remaining publicly owned IEnova shares had been acquired by such trust.

In 2020, IEnova repurchased 77,122,780 shares of its outstanding common stock held by NCI for approximately $231 million, resulting in an increase in Sempra’s ownership interest in IEnova from 66.6% to 70.2%.

In 2019, IEnova repurchased 2,620,000 shares of its outstanding common stock held by NCI for approximately $10 million, resulting in an increase in Sempra’s ownership interest in IEnova from 66.5% to 66.6%.

In 2020, Sempra Infrastructure purchased additional shares in ICM Ventures Holdings B.V. for $9 million, increasing its ownership interest from 53.7% to 82.5%. ICM Ventures Holdings B.V. owns certain permits and land where Sempra Infrastructure is building a terminal for the receipt, storage and delivery of liquid fuels. In July 2021, Sempra Infrastructure acquired the remaining 17.5% interest held by NCI in ICM Ventures Holdings B.V. for $7 million.

In 2020, an affiliate of TotalEnergies SE acquired a 16.6% ownership interest in ECA LNG Phase 1.

In 2020, Sempra Infrastructure purchased for $7 million the 24.6% minority interest in Liberty Gas Storage LLC, increasing Sempra Infrastructure’s ownership in Liberty Gas Storage LLC to 100%. Prior to the purchase, the minority partner converted $22 million in notes payable due from Sempra Infrastructure to equity. As a result of the purchase, we recorded an increase in Sempra’s shareholders’ equity of $2 million for the difference between the carrying value and fair value related to the change in ownership.

In 2019, Sempra Infrastructure purchased for $20 million the 9.1% minority interest in Bay Gas immediately prior to the sale of 100% of Bay Gas.

Parent and Other

As we discuss in Note 5, in December 2021, Parent and other sold its equity interest in PXiSE.

Discontinued Operations

As we discuss in Note 5, we completed the sales of our equity interests in our Peruvian and Chilean businesses in 2020. The minority interests in Luz del Sur and Tecsur were deconsolidated upon the sale of our Peruvian businesses in April 2020, and the minority interests in Chilquinta Energía and its subsidiaries were deconsolidated upon the sale of our Chilean businesses in June 2020.

REVENUES

See Note 3 for a description of significant accounting policies for revenues.

OPERATION AND MAINTENANCE EXPENSES

Operation and Maintenance includes O&M and general and administrative costs, consisting primarily of personnel costs, purchased materials and services, insurance, rent and litigation expense (except for litigation expense included in Aliso Canyon Litigation and Regulatory Matters).

FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

Our natural gas distribution utility in Mexico, Ecogas, and the majority of our former operations in South America (until our sale of these operations in 2020) use their local currency as their functional currency. The assets and liabilities of their foreign operations are translated into U.S. dollars at current exchange rates at the end of the reporting period, and revenues and expenses are translated at average exchange rates for the year. The resulting noncash translation adjustments do not enter into the calculation of earnings or retained earnings, but are reflected in OCI and in AOCI.

Cash flows of these consolidated foreign subsidiaries are translated into U.S. dollars using average exchange rates for the period. We report the effect of exchange rate changes on cash balances held in foreign currencies in Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash on Sempra’s Consolidated Statements of Cash Flows.

Foreign currency transaction (losses) gains in a currency other than Sempra Infrastructure’s functional currency were $(18) million, $(25) million and $21 million for the years ended December 31, 2021, 2020 and 2019, respectively, and are included in Other Income (Expense) , Net, on Sempra’s Consolidated Statements of Operations. Foreign currency transaction gains (losses) in a currency other than the functional currencies of our operations in South America are included in discontinued operations.

TRANSACTIONS WITH AFFILIATES

We summarize amounts due from and to unconsolidated affiliates at Sempra, SDG&E and SoCalGas in the following table.

AMOUNTS DUE FROM (TO) UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	December 31,
	2021		2020		2019
Sempra:
Total due from various unconsolidated affiliates – current	$	23	$	20	$	32
Sempra Infrastructure:
ESJ JV – Note due December 31, 2022, net of negligible allowance for credit losses at December 31, 2020(1)	$	—	$	85	$	—
IMG JV – Note due March 15, 2022, net of allowance for credit losses of $1 and $3 at December 31, 2021 and 2020, respectively(2)	637		695		742
Total due from unconsolidated affiliates – noncurrent	$	637	$	780	$	742
Sempra Infrastructure – TAG Pipelines Norte, S. de R.L. de C.V. – Note due December 20, 2021(3)(4)	$	—	$	(41)	$	—
Various affiliates	—		(4)		(5)
Total due to unconsolidated affiliates – current	$	—	$	(45)	$	(5)
Sempra Infrastructure(4):
TAG Pipelines Norte, S. de R.L. de C.V.:
Note due December 20, 2021(3)	$	—	$	—	$	(39)
5.5% Note due January 9, 2024(5)	(69)		(68)		—
5.5% Note due January 14, 2025(5)	(21)		—		—
5.5% Note due July 16, 2025(5)	(20)		—		—
TAG JV – 5.74% Note due December 17, 2029(5)	(177)		(166)		(156)
Total due to unconsolidated affiliates – noncurrent	$	(287)	$	(234)	$	(195)
SDG&E:
Sempra	$	(40)	$	(38)	$	(37)
SoCalGas	(48)		(21)		(10)
Various affiliates	(9)		(5)		(6)
Total due to unconsolidated affiliates – current	$	(97)	$	(64)	$	(53)
Income taxes due from Sempra(6)	$	19	$	—	$	130
SoCalGas:
SDG&E	$	48	$	21	$	10
Various affiliates	1		1		1
Total due from unconsolidated affiliates – current	$	49	$	22	$	11
Sempra	$	(36)	$	(31)	$	(45)
Various affiliates	—		—		(2)
Total due to unconsolidated affiliates – current	$	(36)	$	(31)	$	(47)
Income taxes due from (to) Sempra(6)	$	6	$	(37)	$	152

(1)    U.S. dollar-denominated loan at a variable interest rate based on 1-month LIBOR plus 196 bps (2.11% at December 31, 2020). At December 31, 2020, $1 of accrued interest receivable is included in Due from Unconsolidated Affiliates – Current. In March 2021, Sempra Infrastructure acquired the remaining 50% equity interest in ESJ that it did not already own, and ESJ became a wholly owned, consolidated subsidiary, resulting in the elimination of this note receivable.

(2)    Mexican peso-denominated revolving line of credit for up to 14.2 billion Mexican pesos or approximately $691 U.S. dollar-equivalent at December 31, 2021, at a variable interest rate based on the 91-day Interbank Equilibrium Interest Rate plus 220 bps (8.06% at December 31, 2021), to finance construction of a natural gas marine pipeline. At both December 31, 2021 and 2020, $2 of accrued interest receivable is included in Due from Unconsolidated Affiliates – Current. At December 31, 2021, we classified this revolving line of credit as noncurrent because we expect to extend the maturity date on a long-term basis prior to its stated maturity date.

(3)    U.S. dollar-denominated loan at a variable interest rate based on 6-month LIBOR plus 290 bps (3.16% at December 31, 2020).

(4)    Amounts include principal balances plus accumulated interest outstanding.

(5)    U.S. dollar-denominated loan at a fixed interest rate.

(6)    SDG&E and SoCalGas are included in the consolidated income tax return of Sempra, and their respective income tax expense is computed as an amount equal to that which would result from each company having always filed a separate return.

The following table summarizes income statement information from unconsolidated affiliates.

INCOME STATEMENT IMPACT FROM UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	Years ended December 31,
	2021		2020		2019
Sempra:
Revenues	$	31	$	37	$	52
Cost of sales	11		45		50
Interest income	50		56		74
Interest expense	15		14		2
SDG&E:
Revenues	$	11	$	6	$	6
Cost of sales	103		79		74
SoCalGas:
Revenues	$	98	$	88	$	69
Cost of sales(1)	1		—		8

(1)    Includes net commodity costs from natural gas transactions with unconsolidated affiliates.

Sempra California

Sempra, SDG&E and SoCalGas provide certain services to each other and are charged an allocable share of the cost of such services. Also, from time-to-time, SDG&E and SoCalGas may make short-term advances of surplus cash to Sempra at interest rates based on the federal funds effective rate plus a margin of 13 to 20 bps, depending on the loan balance.

SoCalGas provides natural gas transportation and storage services for SDG&E and charges SDG&E for such services monthly. SoCalGas records revenues and SDG&E records a corresponding amount to cost of sales.

SDG&E and SoCalGas charge one another, as well as other Sempra affiliates, for shared asset depreciation. SoCalGas and SDG&E record revenues and the affiliates record corresponding amounts to O&M.

The natural gas supply for SDG&E’s and SoCalGas’ core natural gas customers is purchased by SoCalGas as a combined procurement portfolio managed by SoCalGas. Core customers are primarily residential and small commercial and industrial customers. This core gas procurement function is considered a shared service; therefore, revenues and costs related to SDG&E are presented net in SoCalGas’ Statements of Operations.

SDG&E has a 20-year contract for up to 155 MW of renewable power supplied from the ESJ wind power generation facility. Prior to March 2021, ESJ was a 50% owned and unconsolidated JV of Sempra Infrastructure. In March 2021, Sempra Infrastructure completed the acquisition of the remaining 50% interest in ESJ and ESJ became a wholly owned, consolidated subsidiary of Sempra. A second 20-year contract between SDG&E and ESJ for up to 108 MW of renewable power supplied from the same facility commenced in January 2022.

Sempra Infrastructure

Sempra Infrastructure, through its indirect wholly owned subsidiaries, DEN and IEnova Pipelines, provides operating and maintenance services to TAG Pipelines Norte, S. de. R.L. de C.V., and also provides personnel under an administrative services arrangement to TAG Pipelines Norte, S. de. R.L. de C.V. and TAG JV.

Sempra Infrastructure provides certain business services to Cameron LNG JV. Sempra Infrastructure had an agreement to provide transportation services to Cameron LNG JV for capacity on the Cameron Interstate Pipeline through August 2020, when Cameron LNG JV achieved commercial operations of Train 3 of its Phase 1 project.

Sempra provided guarantees related to Cameron LNG JV’s construction-period debt, which were terminated in March 2021, as well as guarantees related to Cameron LNG JV’s SDSRA and CFIN’s Support Agreement, which remain outstanding. We discuss these guarantees in Note 6.

RESTRICTED NET ASSETS

Sempra

As we discuss below, SDG&E, SoCalGas and certain other Sempra subsidiaries have restrictions on the amount of funds that can be transferred to Sempra by dividend, advance or loan as a result of conditions imposed by various regulators. Additionally,

certain other Sempra subsidiaries are subject to various financial and other covenants and other restrictions contained in debt and credit agreements (described in Note 7) and in other agreements that limit the amount of funds that can be transferred to Sempra. At December 31, 2021, Sempra was in compliance with all covenants related to its debt agreements.

At December 31, 2021, the amount of restricted net assets of consolidated entities of Sempra, including SDG&E and SoCalGas discussed below, that may not be distributed to Sempra in the form of a loan or dividend is $19.3 billion. Additionally, the amount of restricted net assets of our unconsolidated entities is $13.2 billion. Although the restrictions cap the amount of funding that the various operating subsidiaries can provide to Sempra, we do not believe these restrictions will have a significant impact on our ability to access cash to pay dividends and fund operating needs.

As we discuss in Note 6, $1.5 billion of Sempra’s retained earnings represents undistributed earnings of equity method investments at December 31, 2021.

Sempra California

The CPUC’s regulation of SDG&E’s and SoCalGas’ capital structures limits the amounts available for dividends and loans to Sempra. At December 31, 2021, Sempra could have received combined loans and dividends of approximately $798 million from SDG&E and approximately $445 million from SoCalGas.

The payment and amount of future dividends by SDG&E and SoCalGas are at the discretion of their respective boards of directors. The following restrictions limit the amount of retained earnings that may be paid as common stock dividends or loaned to Sempra from either utility:

▪The CPUC requires that SDG&E’s and SoCalGas’ common equity ratios be no lower than one percentage point below the CPUC-authorized percentage of each entity’s authorized capital structure. The authorized percentage at December 31, 2021 is 52% at both SDG&E and SoCalGas.

▪SDG&E and SoCalGas each have a revolving credit line that requires it to maintain a ratio of consolidated indebtedness to consolidated capitalization (as defined in the agreements) of no more than 65%, as we discuss in Note 7.

Based on these restrictions, at December 31, 2021, SDG&E’s restricted net assets were $7.5 billion and SoCalGas’ restricted net assets were $5.0 billion, which could not be transferred to Sempra.

Sempra Texas Utilities

Sempra owns an indirect, 100% interest in Oncor Holdings, which owns an 80.25% interest in Oncor. As we discuss in Note 6, we account for our investment in Oncor Holdings under the equity method. Significant restrictions at Oncor that limit the amount that may be paid as dividends to Sempra include:

▪In connection with ring-fencing measures, governance mechanisms and commitments, Oncor may not pay any dividends or make any other distributions (except for contractual tax payments) if a majority of its independent directors or a minority member director determines that it is in the best interests of Oncor to retain such amounts to meet expected future requirements.

▪Oncor must remain in compliance with its debt-to-equity ratio established by the PUCT for ratemaking purposes and may not pay dividends or other distributions (except for contractual tax payments) if that payment would cause it to exceed its PUCT authorized debt-to-equity ratio. Oncor’s authorized regulatory capital structure is 57.5% debt to 42.5% equity at December 31, 2021.

▪If the credit rating on Oncor’s senior secured debt by any of the three major credit rating agencies falls below BBB (or the equivalent), Oncor will suspend dividends and other distributions (except for contractual tax payments), unless otherwise allowed by the PUCT. At December 31, 2021, all of Oncor’s senior secured ratings were above BBB.

▪Oncor’s revolving credit line and certain of its other debt agreements require it to maintain a consolidated senior debt-to-capitalization ratio of no more than 65% and observe certain affirmative covenants. At December 31, 2021, Oncor was in compliance with these covenants.

Based on these restrictions, at December 31, 2021, Oncor’s restricted net assets were $12.6 billion, which could not be transferred to Sempra.

Sempra owns an indirect, 50% interest in Sharyland Holdings, which owns a 100% interest in Sharyland Utilities. Significant restrictions related to this equity method investment include:

▪Sharyland Utilities may not pay dividends or make other distributions (except for contractual payments) without the consent of the JV partner.

▪Sharyland Utilities must remain in compliance with the capital structure established by the PUCT for ratemaking purposes and may not pay dividends or other distributions (except for contractual tax payments) if that payment would cause its debt to exceed 60% of its capital structure.

▪Sharyland Utilities has a revolving credit line and a term loan credit agreement that require it to maintain a consolidated debt-to-capitalization ratio of no more than 70% and observe certain customary reporting requirements and other affirmative covenants. At December 31, 2021, Sharyland Utilities was in compliance with these and all other covenants.

Based on these restrictions, at December 31, 2021, Sharyland Utilities’ restricted net assets were $103 million, which could not be transferred to its owners.

Sempra Infrastructure

Significant restrictions at Sempra Infrastructure include:

▪Partnerships and JVs at Sempra Infrastructure may not pay dividends or make other distributions (except for contractual payments) without the consent of the partners.

▪The ADIA Purchase Agreement has certain covenants that require SI Partners to operate its business in ordinary course, including limitations on the ability to liquidate all or substantially all of the company’s assets or to sell or dispose of certain assets, from December 21, 2021 through closing or termination of the ADIA Purchase Agreement. Under these restrictions, net assets of SI Partners totaling $6.8 billion, including the $193 million minimum legal reserves and $20 million restricted cash that we describe below, are restricted at December 31, 2021.

▪Sempra Infrastructure has an equity method investment in Cameron LNG JV, which has debt agreements that require the establishment and funding of project accounts to which the proceeds of loans, project revenues and other amounts are deposited and applied in accordance with the debt agreements. The debt agreements require the JV to maintain reserve accounts in order to pay the project debt service, and also contain restrictions related to the payment of dividends and other distributions to the members of the JV. We discuss Cameron LNG JV’s debt agreements and the associated Sempra guarantees in Note 6. Under these restrictions, net assets of Cameron LNG JV of approximately $395 million are restricted at December 31, 2021.

▪Mexico requires domestic corporations to maintain minimum legal reserves as a percentage of capital stock, resulting in restricted net assets of $193 million at Sempra Infrastructure’s consolidated Mexican subsidiaries at December 31, 2021

▪IEnova has restrictions under trust and debt agreements related to pipeline projects to pay for rights-of-way, license fees, permits, topographic surveys and other costs. Under these restrictions, net assets totaling $20 million are restricted at December 31, 2021.

▪TAG JV, a 50% owned and unconsolidated JV of Sempra Infrastructure, has a long-term debt agreement that requires it to maintain a reserve account to pay the projects’ debt. Under these restrictions, net assets totaling $66 million are restricted at December 31, 2021.

OTHER INCOME (EXPENSE), NET

Other Income (Expense), Net on the Consolidated Statements of Operations consists of the following:

OTHER INCOME (EXPENSE), NET
(Dollars in millions)
	Years ended December 31,
	2021		2020		2019
Sempra:
Allowance for equity funds used during construction	$	133	$	128	$	94
Investment gains, net(1)	50		41		61
(Losses) gains on interest rate and foreign exchange instruments, net	(28)		(67)		34
Foreign currency transaction (losses) gains, net(2)	(18)		(25)		21
Non-service component of net periodic benefit cost	(67)		(102)		(132)
Interest on regulatory balancing accounts, net	6		14		14
Sundry, net	(18)		(37)		(15)
Total	$	58	$	(48)	$	77
SDG&E:
Allowance for equity funds used during construction	$	81	$	79	$	56
Non-service component of net periodic benefit cost	(13)		(20)		(20)
Interest on regulatory balancing accounts, net	6		9		13
Sundry, net	(10)		(16)		(10)
Total	$	64	$	52	$	39
SoCalGas:
Allowance for equity funds used during construction	$	48	$	41	$	34
Non-service component of net periodic benefit cost	(40)		(54)		(72)
Interest on regulatory balancing accounts, net	—		5		1
Sundry, net	(22)		(20)		(18)
Total	$	(14)	$	(28)	$	(55)

(1)    Represents net investment gains on dedicated assets in support of our executive retirement and deferred compensation plans. These amounts are offset by corresponding changes in compensation expense related to the plans, recorded in O&M on the Consolidated Statements of Operations.

(2)    Includes losses of $23 in 2021, losses of $42 in 2020 and gains of $30 in 2019 from translation to U.S. dollars of a Mexican peso-denominated loan to IMG JV, which are offset by corresponding amounts included in Equity Earnings on the Consolidated Statements of Operations.