2.2.0.7 false COMMITMENTS AND CONTINGENCIES 011000 - Disclosure - COMMITMENTS AND CONTINGENCIES true false false false 1 USD false false Shares Standard http://www.xbrl.org/2003/instance shares xbrli 0 USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 $ 2 Notes to Consolidated Financial Statements [Abstract] 0 sre_NotesToConsolidatedFinancialStatementsAbstract sre false na duration No definition available. false false false false false true false false false false false false 1 false false false false 0 0 false false false xbrli:stringItemType string No definition available. false 3 Commitments and Contingencies 1 us-gaap_CommitmentsAndContingenciesDisclosureTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false false 1 false false false false 0 0 NOTE 10. COMMITMENTS AND CONTINGENCIESLEGAL PROCEEDINGSWe record loss reserves for legal proceedings when it is probable that a loss has been incurred and the amounts of the loss can be reasonably estimated. However, the uncertainties inherent in legal proceedings make it difficult to estimate with reasonable certainty the costs and effects of resolving these matters. Accordingly, actual costs incurred may differ materially from reserved amounts, may exceed applicable insurance coverages and could materially adversely affect our business, cash flows, results of operations, and financial condition.At September 30, 2010, Sempra Energy's reserves for material legal proceedings, on a consolidated basis, were $619 million, of which $150 million is offset by an insurance receivable for wildfire litigation and $102 million is for previously resolved matters. At September 30, 2010, these reserves for SDG&E and SoCalGas were $345 million (also offset by the $150 million insurance receivable) and $13 million, respectively. We provide additional information about previously resolved matters in Note 17 of the Notes to Consolidated Financial Statements in the Annual Report.SDG&E 2007 Wildfire LitigationIn October 2007, San Diego County experienced several catastrophic wildfires. Reports issued by the California Department of Forestry and Fire Protection (Cal Fire) concluded that two of these fires (the Witch and Rice fires) were SDG&E "power line caused" and that a third fire (the Guejito fire) occurred when a wire securing a Cox Communications' fiber optic cable came into contact with an SDG&E power line "causing an arc and starting the fire." Cal Fire reported that the Rice fire burned approximately 9,500 acres and damaged 206 homes and two commercial properties, and the Witch and Guejito fires merged and eventually burned approximately 198,000 acres, resulting in two fatalities, approximately 40 firefighters injured and approximately 1,141 homes destroyed.A September 2008 staff report issued by the CPUC's Consumer Protection and Safety Division reached substantially the same conclusions as the Cal Fire reports, but also contended that the power lines involved in the Witch and Rice fires and the lashing wire involved in the Guejito fire were not properly designed, constructed and maintained. In November 2008, the CPUC initiated proceedings to determine if any of its rules were violated and in October 2009, SDG&E and the Consumer Protection and Safety Division entered into a settlement agreement, approved by the CPUC in April 2010, that resolves these proceedings by SDG&E's payment of $14.75 million. Numerous parties have sued SDG&E and Sempra Energy in San Diego County Superior Court seeking recovery of unspecified amounts of damages, including punitive damages, from the three fires. These include owners and insurers of properties that were destroyed or damaged in the fires and public entities seeking recovery of firefighting, emergency response, and environmental costs. They assert various bases for recovery, including inverse condemnation based upon a California Court of Appeal decision finding that another California investor-owned utility was subject to strict liability, without regard to foreseeability or negligence, for property damages resulting from a wildfire ignited by power lines. In October 2010, the court of appeal affirmed the trial court's ruling that these claims must be pursued in individual lawsuits (rather than as class actions on behalf of all persons who incurred wildfire damages). SDG&E has filed cross-complaints against Cox Communications seeking indemnification for any liability that SDG&E may incur that relates to the Guejito fire, two SDG&E contractors seeking indemnification in connection with the Witch fire, and one SDG&E contractor seeking indemnification in connection with the Rice fire. The court has scheduled a Guejito fire trial for two individual plaintiffs to begin in March 2011.SDG&E has settled substantially all of the 19,000 claims of homeowner insurers relating to the three fires, including claims for payment by the insurers to their policyholders for approximately 1,000 of the 1,300 houses, mobile homes, and apartment units identified in public records as having been destroyed. Under the settlement agreements, SDG&E has paid or will pay 57.5 percent of the approximately $1.6 billion paid or reserved for payment by the insurers to their policyholders and received an assignment of the insurers' claims against Cox Communications and other parties potentially responsible for the fires. The wildfire litigation also includes claims of non-insurer plaintiffs for damage to uninsured and underinsured structures, business interruption, evacuation expenses, agricultural damage, emotional harm, personal injuries and other losses. SDG&E has settled the claims of approximately 450 of these plaintiffs. Of the approximately 2,500 remaining plaintiffs, approximately 1,200 have thus far submitted settlement demands or damage information. Individual and business claims total approximately $825 million and government entity claims total approximately $150 million. SDG&E expects to receive additional settlement demands and damage estimates as settlement negotiations continue.SDG&E's settlements and defense costs have exceeded its $1.1 billion of liability insurance coverage. SDG&E has established reserves for its estimated cost of resolving the remaining claims for damages of approximately 1,300 plaintiffs. It expects that its wildfire reserves and amounts paid to resolve wildfire claims will continue to increase as it obtains additional information and is unable to reasonably estimate the amount or timing of recoveries from other potentially responsible parties.SDG&E has concluded, however, that it is probable that it will be permitted to recover from its utility customers substantially all reasonably incurred costs of resolving wildfire claims in excess of its liability insurance coverage and any amounts recovered from other potentially responsible parties. Accordingly, although recovery from utility customers will require future regulatory actions as we discuss in Note 9, SDG&E has recorded a regulatory asset in an amount substantially equal to the aggregate amount it has paid or reserved for payment for the resolution of wildfire claims and related costs in excess of its liability insurance coverage. SDG&E will increase the amount of the regulatory asset as additional amounts are paid or reserves are recorded and reduce it by any amounts recovered from other potentially responsible parties. As of September 30, 2010, the amount of the regulatory asset was $311 million.Consequently, Sempra Energy and SDG&E expect no significant earnings impact from the resolution of the remaining wildfire claims. However, SDG&E's cash flow will be adversely affected by timing differences between the resolution of claims and recoveries from other potentially responsible parties and utility customers, which may extend over a number of years. Also, recovery from customers will require future regulatory actions, and a failure to obtain recovery, or any negative assessment of the likelihood of recovery, would likely have a material adverse effect on Sempra Energy's and SDG&E's cash flows and results of operations.SDG&E will continue to gather information to evaluate and assess the remaining wildfire claims and the likelihood, amount and timing of related recoveries from other potentially responsible parties and utility customers and will make appropriate adjustments to wildfire reserves and the related regulatory asset as additional information becomes available.Sempra LNG Sempra LNG has been engaged in a long-running land dispute relating to property adjacent to its Energía Costa Azul liquefied natural gas (LNG) receipt terminal near Ensenada, Mexico. The adjacent property is not required by environmental or other regulatory permits for the operation of the terminal. A claimant to the adjacent property has nonetheless asserted that his health and safety are endangered by the operation of the facility. In June 2010, a Mexican federal appeals court revoked a district court order, issued at the behest of the claimant, directing Mexican regulatory authorities to provisionally suspend authorizations for the operation of the LNG terminal. No terminal permits were affected as a result of these proceedings and the terminal has continued to operate normally. The Mexican district court is expected to conduct additional proceedings regarding the claimant's assertions and whether the terminal's permits should be modified or revoked. The property claimant has also filed a lawsuit in U.S. district court in San Diego seeking compensatory and punitive damages and earnings from the Energía Costa Azul LNG terminal based on his allegations that he was wrongfully evicted from the adjacent property and that he has been harmed by other allegedly improper actions. Energy Crisis Litigation SettlementSempra Energy, RBS Sempra Commodities and Sempra Generation have reached a comprehensive settlement to resolve substantially all of their remaining energy crisis litigation for a total payment of $410 million. Described in more detail below, the matters resolved by the settlement include the multiple actions brought by the California Department of Water Resources (DWR) and other parties with respect to the validity, pricing and operation of Sempra Generation's contract with the DWR and the FERC refund and manipulation proceedings against RBS Sempra Commodities. Two settlement agreements were submitted in October 2010 to the FERC for its approval. We anticipate that the FERC will act on the settlements in the first quarter of 2011.We expect the settlement of $410 million to be funded largely from previously recorded reserves and receivables at RBS Sempra Commodities. Sempra Energy has also recorded an additional pretax charge of $159 million in the first quarter of 2010 to provide for the remainder of the settlement, including $139 million at Sempra Generation and $20 million at Sempra Commodities.DWR ContractAmong other relief from existing and potential disputes, under the terms of the settlement reached on the DWR contract, all claims, appeals and proceedings related to the DWR contract will be dismissed. These matters include the 2002 challenge brought by the California Energy Oversight Board (CEOB) and the CPUC at the FERC asserting that the DWR contract with Sempra Generation contained unjust and unreasonable rates; the DWR's appeal in response to the denial of its 2002 claims for misrepresentation and breach of contract in San Diego Superior Court; and the 2008 arbitration proceedings in which the DWR asserted that Sempra Generation had breached the parties' agreement in various operational respects, and violated the order issued by an earlier arbitration panel relating to the amount refunded to the DWR and the manner in which Sempra Generation operates.FERC Refund ProceedingsThe settlement involving RBS Sempra Commodities includes, among other things, resolution of the following matters: the FERC's investigation of prices charged by various electric suppliers to buyers in the California Power Exchange (PX) and Independent System Operator (ISO) markets; a complaint involving short-term bilateral sales up to one month in the Pacific Northwest (the settlement resolves the sales between the DWR and Sempra Commodities); the California Attorney General's complaint that electricity sellers had failed to comply with the FERC's quarterly reporting requirements; and the California Attorney General's complaint seeking to collect for alleged overcharges related to all short-term bilateral transactions between sellers and the DWR from January 18, 2001 through June 20, 2001.FERC Manipulation InvestigationThe settlement involving RBS Sempra Commodities also includes resolution of the FERC's separate investigation into whether there was manipulation of short-term energy markets in the western United States that would constitute violations of applicable tariffs and warrant disgorgement of associated profits.Sempra Energy and RBS Sempra Commodities have recorded reserves for the full amount of the settlement and other litigation. Pursuant to the agreements related to the formation of RBS Sempra Commodities, we have indemnified RBS should the liability from the final resolution of these matters be greater than the reserves related to Sempra Commodities. Pursuant to our agreement with the Noble Group as we discuss in Note 4, we have also indemnified Noble Americas Gas & Power Corp. and its affiliates for all losses incurred by such parties resulting from these proceedings as related to Sempra Commodities.Other LitigationSempra Energy and several subsidiaries, along with three oil and natural gas companies, the City of Beverly Hills, and the Beverly Hills Unified School District, are defendants in a toxic tort lawsuit filed in Los Angeles County Superior Court by approximately 1,000 plaintiffs. This lawsuit claims that various emissions resulted in cancer or fear of cancer. We have submitted the case to our insurers, who have reserved their rights with respect to coverage. In November 2006, the court granted the defendants' summary judgment motions based on lack of medical causation for the 12 initial plaintiffs scheduled to go to trial first. The court also granted summary judgment excluding punitive damages. The court has stayed the case as to the remaining plaintiffs pending the appeal of the rulings. A mediation occurred in June 2010, after which the plaintiffs' counsel agreed to recommend a settlement of the lawsuits as to Sempra Energy and its subsidiaries for an amount that is not significant. Any such settlement will require approval by each of the plaintiffs. If approval is obtained, finalization of the settlement is expected to occur within six months.We are also defendants in ordinary routine litigation incidental to our businesses, including personal injury, product liability, property damage and other claims. California juries have demonstrated an increasing willingness to grant large awards, including punitive damages, in these cases.Wildfire Reserves and Insurance ReceivablesIn 2009 and 2010, as liabilities for wildfire litigation have become reasonably estimable, SDG&E has recorded related reserves as a current liability. The impact of this liability is offset by a current receivable resulting from SDG&E's liability insurance and, for reserves in excess of the insurance coverage, the recognition of a regulatory asset, as discussed above. There was no effect on SDG&E's or Sempra Energy's 2009 earnings from the recording of the reserves. The impact on their 2010 earnings was $7 million and $17 million in the three months and nine months ended September 30, 2010, respectively. At September 30, 2010, wildfire litigation reserves were $344 million and the receivable from SDG&E's insurers was $150 million. NUCLEAR INSURANCESDG&E and the other owners of San Onofre Nuclear Generating Station (SONGS) have insurance to cover claims from nuclear liability incidents arising at SONGS. This insurance provides $375 million in coverage limits, the maximum amount available, including coverage for acts of terrorism. In addition, the Price-Anderson Act provides for up to $12.2 billion of secondary financial protection (SFP). If a nuclear liability loss occurring at any U.S. licensed/commercial reactor exceeds the $375 million insurance limit, all nuclear reactor owners could be required to contribute to the SFP. SDG&E's contribution would be up to $47 million. This amount is subject to an annual maximum of $7 million, unless a default occurs by any other SONGS owner. If the SFP is insufficient to cover the liability loss, SDG&E could be subject to an additional assessment.The SONGS owners, including SDG&E, also have $2.75 billion of nuclear property, decontamination, and debris removal insurance. In addition, the SONGS owners have up to $490 million insurance coverage for outage expenses and replacement power costs due to accidental property damage. This coverage is limited to $3.5 million per week for the first 52 weeks, then $2.8 million per week for up to 110 additional weeks. There is a 12-week waiting period deductible. These insurance coverages are provided through a mutual insurance company. Insured members are subject to retrospective premium assessments. SDG&E could be assessed up to $8.5 million.The nuclear property insurance program includes an industry aggregate loss limit for non-certified acts of terrorism (as defined by the Terrorism Risk Insurance Act). The industry aggregate loss limit for property claims arising from non-certified acts of terrorism is $3.24 billion. This is the maximum amount that will be paid to insured members who suffer losses or damages from these non-certified terrorist acts.CONTRACTUAL COMMITMENTSSempra Energy ConsolidatedIn the first nine months of 2010, significant increases in commitments at Sempra Energy were<ul><li style="margin-left:9.35px;list-style:square;">the issuance of $250 million of 5.35-percent first mortgage bonds and $500 million of 4.50-percent first mortgage bonds maturing in 2040 at SDG&E;</li><li style="margin-left:9.35px;list-style:square;">$453 million for purchased-power contracts at SDG&E;</li><li style="margin-left:9.35px;list-style:square;">$223 million for costs associated with nuclear fuel fabrication at SONGS;</li><li style="margin-left:9.35px;list-style:square;">$133 million at SDG&E for engineering, material procurement and construction costs associated with the Sunrise Powerlink project;</li><li style="margin-left:9.35px;list-style:square;">$54 million at SDG&E for electric distribution systems, advanced metering infrastructure, and electric generation plant and equipment;</li><li style="margin-left:9.35px;list-style:square;">$52 million for construction and infrastructure improvements for gas transmission and distribution operations at SoCalGas; and</li></ul><ul><li style="margin-left:9.35px;list-style:square;">$315 million at Sempra Pipelines & Storage and Sempra LNG for natural gas contracts.</li></ul>The future payments for the contractual commitments listed above are expected to be $280 million for 2010, $187 million for 2011, $151 million for 2012, $135 million for 2013, $112 million for 2014 and $2.2 billion thereafter. These amounts include expected interest payments on the first mortgage bonds using the stated interest rates. Reserves for Sempra Energy and SDG&E related to wildfire litigation are discussed above in “SDG&E 2007 Wildfire Litigation.” Reserves for Sempra Energy related to the FERC and DWR contract settlement litigation are discussed above in “Energy Crisis Litigation Settlement.” Changes to SoCalGas' natural gas purchase and pipeline capacity commitments and Sempra LNG's natural gas purchase and transportation commitments are discussed below.At December 31, 2009, Sempra LNG had LNG purchase agreements with Tangguh PSC Contractors and Ras Laffan Liquefied Natural Gas Company. We discuss these agreements further in Note 17 of the Notes to Consolidated Financial Statements in the Annual Report. In April 2010, Sempra LNG entered into an LNG supply option agreement with Gazprom Global LNG Limited (GGLNG), a subsidiary of OAO Gazprom. The multi-year agreement, which commenced in June 2010, allows GGLNG to deliver and sell up to two LNG cargoes per month to Sempra LNG at its Cameron receipt terminal. GGLNG pays Sempra LNG a fee for the right to deliver and sell the LNG cargoes using a predetermined pricing formula based on a market index.Sempra LNG's commitments under all LNG purchase agreements, reflecting the additional recent agreement with GGLNG, changes in forward prices since December 31, 2009, and actual transactions for the first nine months of 2010, are expected to decrease by $1.4 billion in 2010 and $2 million in 2011, to increase by $121 million in 2012, and to decrease by $81 million in 2013, $254 million in 2014 and $4.4 billion thereafter compared to December 31, 2009.The LNG commitment amounts above are based on Sempra LNG's commitment to accept the maximum possible delivery of cargoes under the agreements. Actual LNG purchases for the nine months ended September 30, 2010 have been significantly lower than the maximum amounts possible.Sempra LNG has a natural gas transportation agreement to provide service from the U.S./Mexico border to Southern California and Arizona. At September 30, 2010, Sempra LNG's remaining commitment on this contract, which runs through August 2022, is $226 million.SDG&EIn the first nine months of 2010, significant increases to contractual commitments at SDG&E were the issuance of $250 million of 5.35-percent first mortgage bonds maturing in 2040, the issuance of $500 million of 4.50-percent first mortgage bonds maturing in 2040, $453 million for purchased-power contracts, $223 million for costs associated with nuclear fuel fabrication at SONGS, $133 million for engineering, material procurement and construction costs associated with the Sunrise Powerlink project and $54 million for electric distribution systems, advanced metering infrastructure, and electric generation plant and equipment.The future payments for these contractual commitments are expected to be $180 million for 2010, $143 million for 2011, $120 million for 2012, $107 million for 2013, $93 million for 2014 and $2 billion thereafter. These amounts include expected interest payments on the first mortgage bonds using the stated interest rates. SoCalGasIn the first nine months of 2010, significant increases to contractual commitments at SoCalGas were $52 million for construction and infrastructure improvements for gas transmission and distribution operations. The future payments for these contractual commitments are expected to be $39 million for 2010 and $13 million for 2011. SoCalGas' natural gas purchase and pipeline capacity commitments have decreased by $682 million since December 31, 2009. The decrease, primarily due to a reduction of $1.1 billion based on lower natural gas forward prices and actual transactions for the first nine months of 2010, is offset by new natural gas purchase and pipeline capacity contracts of $415 million. Net future payments are therefore expected to decrease by $903 million for 2010 and to increase by $124 million for 2011, $52 million for 2012, $29 million for 2013, $14 million for 2014 and $2 million thereafter compared to December 31, 2009. CAPITAL LEASESSDG&E has two power purchase agreements with peaker plant facilities that went into commercial operation in June 2010 and are accounted for as capital leases. As of September 30, 2010, capital lease obligations for these leases, each with a 25-year term, were $181 million. At September 30, 2010, the future minimum lease payments and present value of the net minimum lease payments under these capital leases for both Sempra Energy Consolidated and SDG&E were as follows:  <div><table style="border-collapse:collapse;margin-top:20px;"><tr style="height: 16px"><td colspan="2" style="width: 360px; border-bottom-style:solid;border-bottom-width:1px;text-align:left;border-color:#000000;min-width:360px;">(Dollars in millions)</td><td colspan="2" style="width: 83px; border-bottom-style:solid;border-bottom-width:1px;text-align:center;border-color:#000000;min-width:83px;"> </td></tr><tr style="height: 16px"><td style="width: 33px; border-top-style:solid;border-top-width:1px;text-align:center;border-color:#000000;min-width:33px;"> </td><td style="width: 327px; border-top-style:solid;border-top-width:1px;text-align:left;border-color:#000000;min-width:327px;">2010</td><td style="width: 19px; border-top-style:solid;border-top-width:1px;text-align:left;border-color:#000000;min-width:19px;">$</td><td style="width: 64px; border-top-style:solid;border-top-width:1px;text-align:right;border-color:#000000;min-width:64px;"> 6</td></tr><tr style="height: 16px"><td style="width: 33px; text-align:center;border-color:#000000;min-width:33px;"> </td><td style="width: 327px; text-align:left;border-color:#000000;min-width:327px;">2011</td><td style="width: 19px; text-align:left;border-color:#000000;min-width:19px;"> </td><td style="width: 64px; text-align:right;border-color:#000000;min-width:64px;"> 24</td></tr><tr style="height: 16px"><td style="width: 33px; text-align:center;border-color:#000000;min-width:33px;"> </td><td style="width: 327px; text-align:left;border-color:#000000;min-width:327px;">2012</td><td style="width: 19px; text-align:left;border-color:#000000;min-width:19px;"> </td><td style="width: 64px; text-align:right;border-color:#000000;min-width:64px;"> 24</td></tr><tr style="height: 16px"><td style="width: 33px; text-align:center;border-color:#000000;min-width:33px;"> </td><td style="width: 327px; text-align:left;border-color:#000000;min-width:327px;">2013</td><td style="width: 19px; text-align:left;border-color:#000000;min-width:19px;"> </td><td style="width: 64px; text-align:right;border-color:#000000;min-width:64px;"> 24</td></tr><tr style="height: 16px"><td style="width: 33px; text-align:center;border-color:#000000;min-width:33px;"> </td><td style="width: 327px; text-align:left;border-color:#000000;min-width:327px;">2014</td><td style="width: 19px; text-align:left;border-color:#000000;min-width:19px;"> </td><td style="width: 64px; text-align:right;border-color:#000000;min-width:64px;"> 24</td></tr><tr style="height: 16px"><td style="width: 33px; text-align:center;border-color:#000000;min-width:33px;"> </td><td style="width: 327px; text-align:left;border-color:#000000;min-width:327px;">Thereafter</td><td style="width: 19px; border-bottom-style:solid;border-bottom-width:1px;text-align:left;border-color:#000000;min-width:19px;"> </td><td style="width: 64px; border-bottom-style:solid;border-bottom-width:1px;text-align:right;border-color:#000000;min-width:64px;"> 489</td></tr><tr style="height: 16px"><td style="width: 33px; text-align:center;border-color:#000000;min-width:33px;"> </td><td style="width: 327px; text-align:left;border-color:#000000;min-width:327px;">Total minimum lease payments(1)</td><td style="width: 19px; border-top-style:solid;border-top-width:1px;text-align:left;border-color:#000000;min-width:19px;"> </td><td style="width: 64px; border-top-style:solid;border-top-width:1px;text-align:right;border-color:#000000;min-width:64px;"> 591</td></tr><tr style="height: 20px"><td style="width: 33px; text-align:center;border-color:#000000;min-width:33px;"> </td><td style="width: 327px; text-align:left;border-color:#000000;min-width:327px;">Less: estimated executory costs</td><td style="width: 19px; text-align:left;border-color:#000000;min-width:19px;"> </td><td style="width: 64px; text-align:right;border-color:#000000;min-width:64px;"> (97)</td></tr><tr style="height: 20px"><td style="width: 33px; text-align:center;border-color:#000000;min-width:33px;"> </td><td style="width: 327px; text-align:left;border-color:#000000;min-width:327px;">Less: interest(2)</td><td style="width: 19px; border-bottom-style:solid;border-bottom-width:1px;text-align:left;border-color:#000000;min-width:19px;"> </td><td style="width: 64px; border-bottom-style:solid;border-bottom-width:1px;text-align:right;border-color:#000000;min-width:64px;"> (313)</td></tr><tr style="height: 21px"><td style="width: 33px; border-bottom-style:solid;border-bottom-width:2px;text-align:center;border-color:#000000;min-width:33px;"> </td><td style="width: 327px; border-bottom-style:solid;border-bottom-width:2px;text-align:left;border-color:#000000;min-width:327px;">Present value of net minimum lease payments(3) </td><td style="width: 19px; border-top-style:solid;border-top-width:1px;border-bottom-style:solid;border-bottom-width:2px;text-align:left;border-color:#000000;min-width:19px;">$</td><td style="width: 64px; border-top-style:solid;border-top-width:1px;border-bottom-style:solid;border-bottom-width:2px;text-align:right;border-color:#000000;min-width:64px;"> 181</td></tr><tr style="height: 21px"><td style="width: 33px; border-top-style:solid;border-top-width:2px;text-align:center;border-color:#000000;min-width:33px;">(1)</td><td colspan="3" style="width: 410px; border-top-style:solid;border-top-width:2px;text-align:left;border-color:#000000;min-width:410px;">This amount will be recorded over the lives of the leases as Cost of Electric Fuel and Purchased Power on Sempra Energy's and SDG&E's Condensed Consolidated Statements of Operations. This expense will receive ratemaking treatment consistent with purchased-power costs.</td></tr><tr style="height: 21px"><td style="width: 33px; text-align:center;border-color:#000000;min-width:33px;">(2)</td><td colspan="3" style="width: 410px; text-align:left;border-color:#000000;min-width:410px;">Amount necessary to reduce net minimum lease payments to present value at the inception of the leases. </td></tr><tr style="height: 20px"><td style="width: 33px; text-align:center;border-color:#000000;min-width:33px;">(3)</td><td colspan="3" style="width: 410px; text-align:left;border-color:#000000;min-width:410px;">Includes $7 million in Current Portion of Long-term Debt and $174 million in Long-term Debt on Sempra Energy's and SDG&E's Condensed Consolidated Balance Sheets at September 30, 2010.</td></tr></table></div> NOTE 10. 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