1.0.0.3 false VARIABLE INTEREST ENTITIES false 1 $ false false 2 Notes to Consolidated Financial Statements 0 sre_NotesToConsolidatedFinancialStatementsAbstract sre false na duration string No definition available. false false false false false true false false false 1 false false 0 0 false false No definition available. false 3 Variable Interest Entities Disclosure 1 us-gaap_ScheduleOfVariableInterestEntitiesTextBlock us-gaap true na duration string No definition available. false false false false false false false false false 1 false false 0 0 <div style="font-size:12pt">Variable Interest Entities We consolidate a variable interest entity (VIE) if we are the primary beneficiary of the VIE’s activities. Our determination of whether we are the primary beneficiary is based upon qualitative and quantitative analyses, which assess <ul><li>the purpose and design of the VIE; </li><li>the nature of the VIE's risks and the risks we absorb; and </li><li>whether the variable interest holders will absorb a majority of the VIE's expected losses or receive a majority of its expected residual returns (or both). </li></ul>Otay Mesa VIE SDG&E has a 10-year agreement to purchase power to be generated at the Otay Mesa Energy Center (OMEC), a 573-megawatt (MW) generating facility that began commercial operations in October 2009. SDG&E supplies all of the natural gas to fuel the power plant and purchases its electric generation output (i.e., tolling). The agreement provides SDG&E with the option to purchase the power plant at the end of the contract term in 2019, or upon earlier termination of the purchased-power agreement, at a predetermined price subject to adjustments based on performance of the facility. If SDG&E does not exercise its option, under certain circumstances, it may be required to purchase the power plant at a predetermined price. The facility owner, Otay Mesa Energy Center LLC (OMEC LLC), is a VIE (Otay Mesa VIE), of which SDG&E is the primary beneficiary. SDG&E has no OMEC LLC voting rights and does not operate OMEC. Based upon our analysis, SDG&E absorbs the majority of risk from Otay Mesa VIE under the combination of the tolling agreement and the put option. Accordingly, Sempra Energy and SDG&E have consolidated Otay Mesa VIE since the second quarter of 2007. The CPUC has approved an additional financial return to SDG&E to compensate it for the effect on its financial ratios from the requirement to consolidate Otay Mesa VIE. Otay Mesa VIE's equity of $146 million and $128 million is included on the Consolidated Balance Sheets in Other Noncontrolling Interests for Sempra Energy and in Noncontrolling Interests for SDG&E at December 31, 2009 and 2008, respectively. OMEC LLC has a loan outstanding of $375 million at December 31, 2009, the proceeds of which were used for the construction of OMEC. The loan is with third party lenders and is secured by property, plant and equipment. SDG&E is not a party to the loan agreement and does not have any additional implicit or explicit financial responsibility to Otay Mesa VIE. The loan matures in April 2019 and bears interest at rates varying with market rates. In addition, OMEC LLC has entered into interest-rate swap agreements to moderate its exposure to interest-rate changes. We provide additional information concerning the interest-rate swaps in Note 11. Orange Grove VIE SDG&E has a 25-year agreement to purchase power to be generated by Orange Grove Energy L.P. (Orange Grove), at its 94-MW generating facility located in San Diego County, California. The facility is currently under construction, and we expect it to be available for commercial operation during the second quarter of 2010. Orange Grove is a VIE (Orange Grove VIE) of which SDG&E is the primary beneficiary. During the third quarter of 2009, all of the conditions precedent in the purchased-power agreement were satisfied, therefore, effective on September 30, 2009, Sempra Energy and SDG&E have consolidated Orange Grove VIE. Orange Grove has credit facilities that provide for a total of $100 million for construction of the generating facility. These credit agreements are with a third party lender and are secured by Orange Grove's assets. SDG&E is not a party to the credit agreements and does not have any additional implicit or explicit financial responsibility to Orange Grove. When Orange Grove completes construction of the generating facility, or on June 30, 2010 if construction is not completed by that date, the credit facilities will convert to a term loan that matures in June 2035. Borrowings under the credit facilities bear interest at rates varying with market rates. At December 31, 2009, Orange Grove had $87 million of outstanding borrowings under the credit facilities and $3 million of letters of credit supported by the facilities. In addition, Orange Grove has a short-term loan outstanding of $33 million. The Consolidated Financial Statements of Sempra Energy and SDG&E include the following amounts associated with Otay Mesa VIE and Orange Grove VIE, which are net of eliminations of transactions between SDG&E and the VIEs:<table style="border-collapse: collapse; margin-top: 20px;"><tr><td width="612" align="left" colspan="10" style="border-top: 1px solid #000000;" height="19">AMOUNTS ASSOCIATED WITH VARIABLE INTEREST ENTITIES</td></tr><tr><td width="612" align="left" height="19" colspan="10">(Dollars in millions)</td></tr><tr><td width="236" align="left" height="14" colspan="2"> </td><td width="94" align="center" height="14" colspan="2"> </td><td width="94" align="center" height="14" colspan="2"> </td><td width="188" align="center" colspan="4" style="border-bottom: 1px solid #000000;" height="14">December 31,</td></tr><tr><td width="236" align="left" colspan="2" style="border-bottom: 1px solid #000000;" height="14"> </td><td width="94" align="center" colspan="2" style="border-bottom: 1px solid #000000;" height="14"> </td><td width="94" align="center" colspan="2" style="border-bottom: 1px solid #000000;" height="14"> </td><td width="94" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="14">2009 </td><td width="94" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="14">2008(1)</td></tr><tr><td width="424" align="left" colspan="6" style="border-top: 1px solid #000000;" height="16">Cash and cash equivalents</td><td height="16" style="border-top: 1px solid #000000;" align="right" width="26">$</td><td height="16" style="border-top: 1px solid #000000;" align="right" width="68"> 7 </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="26">$</td><td height="16" style="border-top: 1px solid #000000;" align="right" width="68"> 11 </td></tr><tr><td width="236" align="left" height="16" colspan="2">Restricted cash</td><td height="16" width="26" align="left"> </td><td height="16" width="68" align="left"> </td><td height="16" width="26" align="left"> </td><td height="16" width="68" align="left"> </td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> 8 </td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> - </td></tr><tr><td width="236" align="left" height="16" colspan="2">Accounts receivable - trade</td><td height="16" width="26" align="left"> </td><td height="16" width="68" align="left"> </td><td height="16" width="26" align="left"> </td><td height="16" width="68" align="left"> </td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> - </td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> - </td></tr><tr><td width="236" align="left" height="16" colspan="2">Accounts receivable - other</td><td height="16" width="26" align="left"> </td><td height="16" width="68" align="left"> </td><td height="16" width="26" align="left"> </td><td height="16" width="68" align="left"> </td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> 1 </td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> 23 </td></tr><tr><td width="424" align="left" height="16" colspan="6">Inventories</td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> 2 </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> - </td></tr><tr><td width="424" align="left" height="16" colspan="6">    Total current assets</td><td height="16" style="border-top: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="68"> 18 </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="68"> 34 </td></tr><tr><td width="424" align="left" height="16" colspan="6">Sundry</td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> 10 </td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> 8 </td></tr><tr><td width="424" align="left" height="16" colspan="6">Property, plant and equipment</td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> 644 </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> 464 </td></tr><tr><td width="424" align="left" height="16" colspan="6">    Total assets</td><td height="16" style="border-top: 1px solid #000000;border-bottom: 3px solid #000000;" align="right" width="26">$</td><td height="16" style="border-top: 1px solid #000000;border-bottom: 3px solid #000000;" align="right" width="68"> 672 </td><td height="16" style="border-top: 1px solid #000000;border-bottom: 3px solid #000000;" align="right" width="26">$</td><td height="16" style="border-top: 1px solid #000000;border-bottom: 3px solid #000000;" align="right" width="68"> 506 </td></tr><tr><td width="424" align="left" height="16" colspan="6"> </td><td height="16" style="border-top: 3px solid #000000;" align="left" width="26"> </td><td height="16" style="border-top: 3px solid #000000;" align="right" width="68"> </td><td height="16" style="border-top: 3px solid #000000;" align="left" width="26"> </td><td height="16" style="border-top: 3px solid #000000;" align="left" width="68"> </td></tr><tr><td width="236" align="left" height="16" colspan="2">Short-term debt</td><td height="16" width="26" align="left"> </td><td height="16" width="68" align="left"> </td><td height="16" width="26" align="left"> </td><td height="16" width="68" align="left"> </td><td height="16" width="26" align="right">$</td><td height="16" width="68" align="right"> 33 </td><td height="16" width="26" align="right">$</td><td height="16" width="68" align="right"> - </td></tr><tr><td width="424" align="left" height="16" colspan="6">Accounts payable</td><td height="16" width="26" align="left"> </td><td height="16" width="68" align="right"> - </td><td height="16" width="26" align="left"> </td><td height="16" width="68" align="right"> 35 </td></tr><tr><td width="424" align="left" height="16" colspan="6">Current portion of long-term debt</td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> 40 </td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> 2 </td></tr><tr><td width="424" align="left" height="16" colspan="6">Fixed-price contracts and other derivatives</td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> 17 </td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> 13 </td></tr><tr><td width="424" align="left" height="16" colspan="6">Other </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> (13)</td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> - </td></tr><tr><td width="424" align="left" height="16" colspan="6">    Total current liabilities</td><td height="16" style="border-top: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="68"> 77 </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="68"> 50 </td></tr><tr><td width="424" align="left" height="16" colspan="6">Long-term debt</td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> 422 </td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> 254 </td></tr><tr><td width="424" align="left" height="16" colspan="6">Fixed-price contracts and other derivatives</td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> 26 </td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> 73 </td></tr><tr><td width="424" align="left" height="16" colspan="6">Deferred credits and other</td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> 1 </td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> 1 </td></tr><tr><td width="424" align="left" height="16" colspan="6">Other noncontrolling interests</td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> 146 </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> 128 </td></tr><tr><td width="424" align="left" colspan="6" style="border-bottom: 3px solid #000000;" height="16">    Total liabilities and equity</td><td height="16" style="border-top: 1px solid #000000;border-bottom: 3px solid #000000;" align="right" width="26">$</td><td height="16" style="border-top: 1px solid #000000;border-bottom: 3px solid #000000;" align="right" width="68"> 672 </td><td height="16" style="border-top: 1px solid #000000;border-bottom: 3px solid #000000;" align="right" width="26">$</td><td height="16" style="border-top: 1px solid #000000;border-bottom: 3px solid #000000;" align="right" width="68"> 506 </td></tr><tr><td height="16" style="border-top: 3px solid #000000;" align="left" width="21"> </td><td height="16" style="border-top: 3px solid #000000;" align="left" width="215"> </td><td height="16" style="border-top: 3px solid #000000;" align="left" width="26"> </td><td height="16" style="border-top: 3px solid #000000;" align="left" width="68"> </td><td height="16" style="border-top: 3px solid #000000;" align="left" width="26"> </td><td height="16" style="border-top: 3px solid #000000;" align="left" width="68"> </td><td height="16" style="border-top: 3px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 3px solid #000000;" align="right" width="68"> </td><td height="16" style="border-top: 3px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 3px solid #000000;" align="right" width="68"> </td></tr><tr><td height="14" width="21" align="left"> </td><td height="14" width="215" align="left"> </td><td height="14" width="26" align="left"> </td><td height="14" width="68" align="left"> </td><td width="282" align="center" colspan="6" style="border-bottom: 1px solid #000000;" height="14">Years ended December 31,</td></tr><tr><td width="236" align="left" colspan="2" style="border-bottom: 1px solid #000000;" height="14"> </td><td height="14" style="border-bottom: 1px solid #000000;" align="left" width="26"> </td><td height="14" style="border-bottom: 1px solid #000000;" align="left" width="68"> </td><td width="94" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="14">2009 </td><td width="94" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="14">2008(1)</td><td width="94" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="14">2007(1)</td></tr><tr><td width="330" align="left" colspan="4" style="border-top: 1px solid #000000;" height="16"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;" align="left" width="68"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;" align="left" width="68"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;" align="left" width="68"> </td></tr><tr><td width="330" align="left" height="16" colspan="4">Operating revenues - electric</td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26">$</td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> (1)</td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26">$</td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> - </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26">$</td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> - </td></tr><tr><td width="330" align="left" height="16" colspan="4">Operating expenses</td><td height="16" style="border-top: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="68"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="68"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="68"> </td></tr><tr><td height="16" width="21" align="left"> </td><td width="309" align="left" height="16" colspan="3">Cost of electric fuel and purchased power</td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> (13)</td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> - </td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> - </td></tr><tr><td height="16" width="21" align="left"> </td><td width="335" align="left" height="16" colspan="4">Operation and maintenance</td><td height="16" width="68" align="right"> 7 </td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> - </td><td height="16" width="26" align="right"> </td><td height="16" width="68" align="right"> - </td></tr><tr><td height="16" width="21" align="left"> </td><td height="16" width="215" align="left">Depreciation and amortization</td><td height="16" width="26" align="left"> </td><td height="16" width="68" align="left"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> 7 </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> - </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> - </td></tr><tr><td height="16" width="21" align="left"> </td><td height="16" width="215" align="left">   Total operating expenses</td><td height="16" width="26" align="left"> </td><td height="16" width="68" align="left"> </td><td height="16" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="right" width="68"> 1 </td><td height="16" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="right" width="68"> - </td><td height="16" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="right" width="68"> - </td></tr><tr><td width="236" align="left" height="16" colspan="2">Operating income</td><td height="16" width="26" align="left"> </td><td height="16" width="68" align="left"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="68"> (2)</td><td height="16" style="border-top: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="68"> - </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="68"> - </td></tr><tr><td width="236" align="left" height="16" colspan="2">Other income (expense), net</td><td height="16" width="26" align="left"> </td><td height="16" width="68" align="left"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> 26 </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> (54)</td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> (17)</td></tr><tr><td width="236" align="left" height="16" colspan="2">Net income/Income before income taxes</td><td height="16" width="26" align="left"> </td><td height="16" width="68" align="left"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="68"> 24 </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="68"> (54)</td><td height="16" style="border-top: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-top: 1px solid #000000;" align="right" width="68"> (17)</td></tr><tr><td width="330" align="left" height="16" colspan="4">(Earnings) losses attributable to noncontrolling interests</td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> (24)</td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> 54 </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="26"> </td><td height="16" style="border-bottom: 1px solid #000000;" align="right" width="68"> 17 </td></tr><tr><td width="330" align="left" colspan="4" style="border-bottom: 3px solid #000000;" height="16">    Earnings</td><td height="16" style="border-top: 1px solid #000000;border-bottom: 3px solid #000000;" align="right" width="26">$</td><td height="16" style="border-top: 1px solid #000000;border-bottom: 3px solid #000000;" align="right" width="68"> - </td><td height="16" style="border-top: 1px solid #000000;border-bottom: 3px solid #000000;" align="right" width="26">$</td><td height="16" style="border-top: 1px solid #000000;border-bottom: 3px solid #000000;" align="right" width="68"> - </td><td height="16" style="border-top: 1px solid #000000;border-bottom: 3px solid #000000;" align="right" width="26">$</td><td height="16" style="border-top: 1px solid #000000;border-bottom: 3px solid #000000;" align="right" width="68"> - </td></tr><tr><td width="612" align="left" colspan="10" style="border-top: 3px solid #000000;" height="18">(1) As adjusted for the retrospective adoption of ASC 810 (SFAS 160) discussed in Note 2.</td></tr></table>Other contracts under which SDG&E acquires power from generation facilities otherwise unrelated to SDG&E could also result in a requirement for SDG&E to consolidate the entity that owns the facility. In accordance with the current GAAP provisions governing variable interest entities, SDG&E continues the process of determining if it has any such situations and, if so, gathering the information that would be needed to perform the consolidation. However, such information has not been made available to us and an evaluation of variable interests has not been completed for these entities that are grandfathered pursuant to current GAAP guidance. The effects of any required consolidation are not expected to significantly affect the financial position, results of operations or liquidity of SDG&E. </div> Variable Interest EntitiesWe consolidate a variable interest entity (VIE) if we are the primary beneficiary of the VIE’s activities. Our determination of false false No definition available. No authoritative reference available. false false 1 2 false UnKnown UnKnown UnKnown false true